I am glad you liked the "dog and boy" movie link I posted.
You are correct in that it looks like a little bear.
You can find more weird movies at www.joecartoon.com.
Most of the downloadable programs there are passed around my office. They help to brighten up what can be a boring and tedious day.

Additional:
Regarding PETA and vegatarians. My favorite quote goes something like this: "I didn't fight my way to the top of the food chain to be a vegetarian!"


Regarding Gold:
Went to the coin dealer to pick up two Krugerands I ordered. Coin dealer asked me if i wanted to buy more coins. I told him sure if i get some more money, would have to sell what stocks I have to get it though. He asked me if i was putting everything into one basket. I replied I pretty much was.
I think I may have purchased my last gold coin though. Need to start getting more food packed away in case Y2K is bad. Two week supply of Top Rammen noodles, a half case of tuna, and some beef jerky just won't cut it for me. Looking now to get a bicycle if gas pumps don't work (alternative transportation). Also just bought one of those portable camping water purifiers (not one of those filter ones). I try to always be prepared, and usually don't buy anything unless i can find two uses for it.

Thanks Peter.

2a EDT Sunday, August 1, 1999

Dear Friend of GATA and Gold:

Here's an interesting editorial from The Northern
Miner. It mentions GATA and is more evidence that
GATA's complaint about the gold market has become
mainstream.

Thanks to egroup member Michel Paulin for calling it to
my attention.

Please post this as seems useful.

With good wishes.

CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.

* * *

Rumours swirl around gold sales -- fair or foul?

An editorial from The Northern Miner
Edition of August 2, 1999

Tony Blair is probably the toniest prime minister Great
Britain has ever had. He's Britain's answer to Bill
Clinton, equally polished and urbane, and equally eager
to build that proverbial bridge into the next century.
But in his rush to be modern and hip, some believe he's
turning his back on what has made Britain great.

More than a year ago, the U.S. news program 60 Minutes
poked fun at Blair's fascination with ultra-modernism.
To attract more high-tech ventures to the country, he
began playing down the historical traditions and
financial prudence that put the tiny island on the map
as a world power. Bowler-and-brolly conservatism was
being tossed out the window in favour of Cool
Britannia, represented by the Spice Girls and The Full
Monty.

Some argue that London's status as a world financial
centre has suffered as a result of this trend toward
trendiness. And the most powerful trends in financial
markets today are the "monetization" of hard and
tangible assets, whether they be gold or other
commodities, to create new financial "instruments" such
as derivatives, and currency and commodity speculation.

The proliferation of hedge funds engaged in such
activities is a testament to this global, non-
investment-grade financial spree.

Great Britain's announcement that it will sell more
than half of its gold reserves is viewed by many as
symbolic of Blair's efforts to lead his nation away
from investment-grade conservatism and into shark-
infested speculative waters. For these old-fashioned
types, the Barings Bank disaster is still too recent
and painful a memory. Some see a more sinister motive
at work, a conspiracy in which the gold price is held
down to benefit financial institutions that were short
hundreds of tons of borrowed gold.

It's difficult to know what to make of such theories,
particularly when they involve the murky world of
currency and commodity speculators. But the timing of
Britain's announcement, and its subsequent negative
effect on the gold price, has people wondering if there
may indeed be substance to such murmurings.

As Peter Munk, chairman of Barrick Gold, pointed out
during his speech at the World Economic Forum more than
a year ago, funds of all sizes have found shorting gold
to be a risk-free way to make millions. "All you have
to do is sell gold ounces and buy U.S. treasuries; you
have a positive spread of 3 percent because all you
have to pay to borrow gold is 2 percent, and collect
from the U.S. treasury 5 percent before you unwind the
contract to collect your additional capital gain."

That there has been a rush to short gold is without
question; how organized the rush is remains debatable.
There is no shortage of conspiracy rumours; indeed,
they are increasing in intensity and have sparked
debate in the British House of Commons.

Last June, opposition member Quentin Davis commented on
a persistent rumour concerning gold sales and the
position of international investment banks. "We cannot
allow the rumours to grow," he stated, "because they
are extremely dangerous to public confidence. It has
been suggested that the market is very short of gold,
that the short positions may be a substantial multiple
of the total amount of gold currently held by the Bank
of England, and that the bank's real motive is to save
the bacon of the firms that are running these short
positions. Has the government's whole plan been simply
to drive down the gold price by whatever means, fair or
foul, to save the position of certain figures in the
city which, apparently, are so such and potentially in
such trouble?" These insinuations have prompted some of
the world's leading gold producers to pester the
British government to issue a public denial or to
investigate them publicly. So far, mum's the word. In
the United States, the Gold Anti-Trust Action Committee
has retained a legal firm to assist in its
investigation of alleged manipulation of the gold
market.

An investigation into the matter is clearly warranted.
But equally worrisome is that, in today's
"sophisticated" financial markets, about half of all
bank profits result from trading (read gambling),
whether in currencies or stocks or derivatives.

Risky business, to be sure, but the banks don't appear
to be worried. And why should they be? The good times
are rolling and, through direct and indirect subsidies
enacted by law, ordinary citizens effectively guarantee
the banking system's balance sheet.

On the other hand, citizens would do well to remember
the savings and loan fiasco and the junk bond spree of
Ivan Boesky and Michael Milken in the 1980s. The good
times rolled then too, until the party came to a
screeching halt and the big boys ran off without paying
the bill.

-END-

Peter, you are right. There will be parallels but what awaits is a new paradigm from which new computer simulation models will eventually be created! Regarding my post from last night, what I am trying to resolve for my peace of mind is have I done all that I can do while preparing for the worst and hoping for the best as MK would say. Do I own enough gold? Should I short the market in my IRA or sell and take the penalty? Do I have enough food, water etc. Should I prepare to help family members in case of turmoil. On the subject of gold, if the goldhearts are vanquished from the field, I might have made a terrible blunder! If not, have I enough? These are tough questions with no easy answers I know. Enjoy your posts and wisdom. Good day.

This is post is dedicated to Koan who has helped me see the light.

The thought occured to me that the Bullion Banks and Hedge Funds may have sold their short positions to an unsuspecting public. Consider the following.

Say you are a bullion bank sitting there with hundreds of millions of dollars worth of golden shorts. Not being an idiot, you see that you can't unload your shorts (called taking a dump). Feeling constipated you get creative.

Perhaps, you say, there are others who would love to own this paper and so you find a group of cash rich drug dealers who would love to trade their currency for paper gold.

The sale completed and cash in hand you become overwhelmed with greed. You take your mountain of cash and buy physical gold! As the POG goes up you then unload some of it to the very folks who have to cover their shorts.

With the remainder of the physical gold, and a new identity, you then skip town and go to your private bear infested y2k retreat in the mountains to watch the millenium arrive.

All of the world's great fortunes began with nothing but a dream. If I were you, I would talk to a wealthy person whose judgement you respect. Ask him who his broker is. Then go talk to his broker. At least once in your life you ought to get some personal professional help. Be prepared to open up about what your circumstances and objectives are, and then see what he says. If he's not interested in your circumstances and objectives, try somebody else. Remember, we are just talking about interviews. You don't have to hire anybody, and you will not be charged for anything unless you do.

If you don't know someone who can refer you, call an office manager, explain that you are shopping for a broker who relates to long-term planning. Ask for someone who will take the time to help you get oriented.

One more thing: stop fretting about y2k. Whatever happens, it will be over with in a few months, and such event-related tactical maneuvering is no substitute for having a clear vision and a plan capable of producing success.

The road to wealth is Rte.72.

"stop fretting about y2k. Whatever happens, it will be over with in a few months, and
such event-related tactical maneuvering is no substitute for having a clear vision and a plan capable
of producing success."

Could not agree more with the latter; could not agree less with the former. Y2K is ***NOT*** an event, it is a process! Might not even get up a head of steam until late spring of 2000; in fact, this is a lot more likely than dramatic breakdown the first week of the year. For one interesting scenario (one of many possible futures), see:

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=0019U7

ps: see also the latest DC Y2K Weather Report
(Cory Hamasaki newsletter):

1. Steve Heller's (scary) piece "How Bad", and

2. Bud Hamilton's piece on "Small Business"

... first two items of the newsletter, at:

http://www.kiyoinc.com/WRP127.HTM

Leigh,

I have a couple of books concerning strategic location that you may be interested in. I can fax some critical pages or just give you the titles. They are readily available via amazon.com. So expect a couple of weeks shipping. I believe you are from Ct. I reside in New Hamsphire, my son happens to go to UCONN so in emergengy YOU are his new friend. lol
Just kidding. I am planning a trip to one area that I view to be safer very shortly....I love where I live but I believe in checking everything out.

All:

The severity of y2k computer breakdowns means nothing without the people factor. We tend to spend the majority of time researching whether computer's will fail. While this is important, what we should really examine is what will the populace in your area do if there is any type of disruption to THEIR lives.

Let us say that you live in a wonderful crime free area. Let us say that the vast majority of people in your area prepare for danger. Let us say that living supplies will get you thru the time it takes for supplies and breakdowns to be repaired. That would be the much talked about BUMP IN THE ROAD.

Now I won't bore this audience with what most of you would see as scenarios that you all have already thought about. But anything less than that BUMP IN THE ROAD created by the people surrounding YOU and your FAMILY is potentially life threatening.

I participate in this forum to learn what I do not know. This forum (thank you Michael) is part of not only my y2k preparations but my and my families financial preparations.

http://www.financialweb.com/investoons/sluggables/greenspan.asp1.Abort the shockwave install if you already have it
2.Wait till AG loads
3.Click on START MATCH press X or Y keys to hit back.

Have fun 18K

Thanks, Peter, for the advice (buy other currencies - marks are a good bet - and gold). I agree with you, but I'm under orders not to buy any more gold! I wish there were a way I could get a certified check or a money order or something from a bank which would be a guaranteed promise to pay even if there were banking foul-ups.

I also agree about buying rural land. It's always been our dream to have a farm, and we hope to get a little farmette this year. Our problem is timing. My husband officially gets transferred in January, and there is always the chance that where we think we'll be going might not happen. That, as well as the fact that my husband and dad are Y2K nonbelievers, is why we haven't gone ahead and bought a place in our new location already. (Speaking of Y2K, just recently I was taking my husband in to the base, and a huge truckload of generators was turning in the gate ahead of us. Me: "See, honey, see those generators? If Y2K isn't going to happen, why is the base bringing in generators?" Him: "It's not going to happen! It's not going to happen! Those embedded chips don't have clocks in them, and they won't know and won't care what date it is!" Oh well, who know who's right; we'll see what happens next year.)

Al, I'd like to see the list of books - I'm trying so hard to be prepared for Y2K, and any new piece of information is very helpful. Thanks! UCONN is halfway across the state (though that means it's only about an hour away), but I'll be glad to do anything I can for him.

I have searched www.dogpile.com, which searches most all popular websites for references to the Jamaica Accord(s). Nada, zip, nothing.

Perspective. If this is the gold for oil contract to provide cheap oil in turn for cheap gold then this is THE document to read, yet nada, zip, nothing. Thoughts?

In January 1976, the IMF convened a monetary summit in Jamaica to reach some agreement on a new monetary system. The Jamaica Accords formally recognized the managed floating system and allowed nations the choice of a foreign exchange regime as long as their actions did not prove disruptive to trade partners and the world economy. Gold was demonetized as a reserve asset. The Jamaica Accords were ratified in April 1978.

... last night.

Where to start on the responses ... that is the question. Stranger, you'll find responses to your many fine points woven throughout this post, so I'll only single out a few others for direct comments.

Someone (wish I could give credit where it's due) here at the Forum posted several months ago their recommendation to read The Creature From Jekyll Island by G. Edward Griffin. It's the best I've found at tying together economic theory with the manifestations of our current corrupt system, in a historical context, and in simple language.

Koan, regarding your comment: >these are different times, we know much more than we did even 25 years ago and we, the human species, is getting pretty good at this money manipulation thing< . Yes, good at blowing it up.

And: >and secondly, we are taking risks with "fiat money" for a reason, and that reason, that many are not considering, is flexability in monetary policy to help
everyone. And you have to admit it seems to be working. Well, maybe you don't have to admit that. At no time in history have we appeared to be better off.< The key word is 'appeared'. Your faith in the controlling elite might be shaken with a read of the book previously referenced, and barring that, it's likely to be shaken soon by events.

A quote from The Creature ... "Even though the Fed may try to pump money into the economy by making it abundantly available, the public can thwart that move simply by saying no, thank you. When this happens, the old debts that are being paid off are not replaced by new ones to take their place, and the entire amount of consumer and business debt will shrink. That means the money supply also will shrink, because, in modern America, debt IS money. And it is this very expansion and contraction of the monetary pool - a phenomenon that could not occur if based on the laws of supply and demand - that is at the very core of practically every boom and bust that has plagued mankind throughout history."

He just described deflation --- money destruction. There are no set laws of nature that say commodity and asset prices have to behave a certain way depending on whether the money supply is inflating or contracting. During this particular cycle of world deflation, commodity prices of imports have risen in the fallen countries due to the collapse of that local currency. However it plays out, it has already been shown that once the money destruction gains momentum it can't be stopped. Same thing happened post '29 Crash. Murray Rothbard, in America's Great Depression, explained in excruciating detail, as has been noted here on more than one occasion, that the Fed desperately tried to reinflate ... but couldn't. It's the ol' pushing-on-a-string syndrome. The money supply won't expand if people won't/can't borrow.

It's set up by the banking cartel's practice of fractional reserve fraud. While the reserve requirement is 10%, numbers (as reported in a recent issue of News & Views) show that, with 1.16% of actual deposits on hand, the ratio is actually about 1%. That's the multiplier effect at work ... one dollar deposited becomes $100. Now consider what happens when the multiplier effect is thrown into reverse, say, by a mkt crash. $1 destroyed destroys $100. No matter how fast the Fed could crank up the printing presses (assuming they could push the cash out if they had it) they can't create cash faster than money that never existed can disappear.

As for the computer models of LTCM and MA, what about the computer models of the Fed ?? Think they're any better ??

I always hesitate to quote Robert Prechter. It's a shame he's undermined his own reputation by missing the calls of a top several times in one particular market. It's a shame others ignore his timing successes. It's tragic that many have disregarded, timing aside, his remarkably accurate description of how events would play out once set in motion. But it's not my place to defend him ... I don't get any kickbacks. I just feel fortunate to have picked up his book during the course of my self-study, which is ongoing.

Now, IF those who have so accurately predicted this deflation cycle are missing something, it's my belief that it MAY be in how the gold market plays out. Using past deflations as a guide, history indicates that cash dollars will get stronger as the credit part of the money supply (99% of it today) disappears. Assets such as gold sell off as well in that flight to liquidity. So far so good ... that's the way it's been happening so far in America as much of the world deflates. But one just has to take a cursory look at the charts of the SE Asian, Russian, and Brazilian deflations to see that the currencies fell immediately with the stock/bond markets, with gold spiking inversely. It's my belief that, whether or not the majority of world investors believe in a gold std, they understand that no currency has any collateral behind it ... so they're not wasting any time disposing of it when a local economy implodes. Therefore, and this started happening last fall in the US before the Fed successfully arrested it by dumping more credit into the market, my best guess is that when the US markets finally tank, the dollar is going to tank right along with them, and gold is going to blast off ... and those who don't have it ahead of time will be SOL. Maybe it won't turn out that way ... maybe the analysts calling for the same deflation patterns as in the past will be right and we'll see one mass liquidation of gold ... causing its dollar price to plummet ... but I'm not waiting to see ... I'm preparing for both scenarios.

My expections can be summarized as follows: I expect to see the unsettling spectacle of Americans scrambling for scarce paper dollars that are rapidly losing purchasing power on an international basis.

Cavan Man, judging by your post this morning you don't need any input from me ... afterall, no one really knows what's actually going to happen ... it's too bad there's not someone to ask who can tell us how to prepare for the end of an unprecedented mania ... as you obviously know, there's no substitute for thinking for ourselves. I hope my preparations, in order, 1) save my ass-ets and 2) catapult my std of living. It seems prudent to me to have a healthy diversification into both cash (the kind you can hold in your hand) and gold. If I had a house I'd probably stock up on food ... maybe I'll buy one ... I hear there's going to be a firesale soon.

SteveH, I guess by now, if you've hung in there on this long post, you've figured out that I'm expecting what Stack calls Type I deflation.

Your brother's dilemma is much the same as mine. Here's my way of handling it (but I'm open to suggestions): First, I borrowed the max 50% of my 401K in order to get it in my hands and diversify it my way. Of course that means automatic payroll deductions to pay myself back. But who cares if I default to myself ?? Second, the balance went into the plan's money market option , but I'm not happy with that because many of their bond holdings are corporate (the cash in my brokerage acct has been placed in a Treasury-only MMF). Third, I'm considering using the balance as collateral to take out a bank loan that I can use to diversify the remainder. I plan on cashing out my plan soon anyway, regardless of what transpires.

Yes, Stranger, we'd better get that beer soon ... I got a jump start last night ... sorry, couldn't wait ... but there was more where that came from.

http://cyberchat.uml.edu/faculty/dalewis/66.435/intmoney.htmINTERNATIONAL MONITARY SYSTEMS


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

HISTORICAL PERSPECTIVE

BEFORE 1900: BASED ON GOLD STANDARD

CHANGED AFTER 1945: COUNTRIES PRINTED MONEY NOT BACKED BY GOLD

FIXED RATE VS. US DOLLAR

1976: FLOATING CURRENCY ALLOWED

BASED ON SUPPLY AND DEMAND

SMALLER MARKETS: TIE TO MAJOR CURRENCY

CONTROLLED ECONOMIES: FIXED RATE SET BY GOVERNMENT.

LEADS TO BLACK MARKET

FIXED VERSUS FLOATING RATES

FLOATING RATES CONSTANTLY CHANGING. RISK OF CURRENCIES GOING IN UNFAVORABLE DIRECTION
FIXED RATES CAN CHANGE DRAMATICALLY IF CURRENCY IS ADJUSTED
FLOATING RATES REACT TO MARKET PRESSURES
FIXED RATES GIVE SOME SECURITY SINCE CONTROLLED BY GOVERNMENT
CURRENCY RATES

SUPPLY AND DEMAND, LIKE OTHER GOODS
FIXED VALUE DIFFERENT THAN MARKET VALUE, BLACK MARKET
OVERVALUATION MEANS THE PRICE OF THE CURRENCY IS TOO HIGH RELATIVE TO OTHER CURRENCIES
RESULTS OF OVEREVALUATION/UNDEREVALUATION
Still looking but I found this interesting tidbit.


CURRENCY OVERVALUED WILL

DECREASE EXPORTS
DEFICIT TRADE BALANCE
DECREASED INVESTMENT BY FOREIGNERS
INCREASED UNEMPLOYMENT
INCREASED LIKELIHOOD OF BLACK MARKET
CURRENCY UNDERVALUED WILL

INCREASE EXPORTS
SURPLUS TRADE BALANCE
DECREASED PURCHASE OF FOREIGN GOODS
TRADE SURPLUS RESENTED BY FOREIGNERS
INCREASED INFLATION
INCREASED INVESTMENT BY FOREIGNERS
CURRENCY STRENGTH

http://www.cba.uh.edu/~rsusmel/7386/ln1.htmInteresting read. Buried in here is the reference to Jamaica Accords.

http://www.usagold.com/bullionbanksturk.htmlOnce again, the well-considered commentary of James Turk has been made available to USAGOLD for reproduction at The Guilded Opinion. Today's addition, where Mr. Turk delves into world of Bullion Banks, is a good follow-up to his commentary that was posted yesterday. Click the link above to see more of this:

"There is a good reason why the central banks may be withdrawing deposits from the bullion banks. Perhaps the central banks see the increased risk in the bullion banks, and are therefore pulling out their Gold from the bullion banks for safety reasons. I'm sure the central banks remember how the central bank of Portugal lost 17 tonnes of Gold that it had on loan to Drexel Burnham when that firm went under. The risk of the bullion banks is clear because as the Gold price falls, the mine cash-flow drops and the mines that the bullion banks had financed become vulnerable....A couple of weeks ago, Peter Fava the head of the bullion banking operation of HSBC and also the Chairman of the LBMA, said that some central banks were withdrawing Gold deposits from bullion banks because of Y2K concerns. Maybe there are also other concerns that he didn't mention."

To see a convenient index of The Gilded Opinion topics, wander over to the USAGOLD HomePage, and click on "The Gilded Opinion," or gain instant access with this address:
http://www.usagold.com/thegildedopinion.html

http://www.michaelhyatt.com/"If you think that Y2K has been all but solved, think again. Even the officials spouting the good news don't really believe it. Forget what they are saying. If you want to know what they believe, take a look at what they are doing."

A perspective to help you think for yourself. And when you get right down to it, isn't that how things should be?

Thank you my kind friend. Your advice is very sound and you are right; I do need professional (financial i.e.)help. I don't have the experience or the time to figure it out. I completely agree with your views about inflation although I think the deflation monster still lurks. Say, when we talk about inflation, we generally think of the CPI for example. But, what about the inflating of real estate, education and other items which have become so expensive? Is that inflation and if so, what type; asset? Can you explain.

I will make just a few comments about your post. (Unfortunately, I can't do this without thinking of us running around in circles and winding up in Peter Asher's butt.)

Herein the term "inflation" shall be used to mean a loss in the buying power of a currency.

First: " There are no set laws of nature that say commodity and asset prices have to
behave a certain way depending on whether the money supply is inflating or contracting."
In a free market, when the price of a particular commodity or asset rises or falls independent of macro economic conditions, it does so as a function of the law of supply and demand as it pertains to that particular asset or commodity. But when prices for commodities or assets rise or fall SYSTEMICALLY, they do so because of the law of supply and demand as it applies to the currency in question.
What you propose, turbohawg, is that, in a collapse, people will not respond to efforts by the government to make them whole. Yet, we have a perfect example in 1989 with the Savings and Loan fiasco of how people did that very thing.

Second: "Murray Rothbard, in America's Great Depression, explained in excruciating detail, as has been noted
here on more than one occasion, that the Fed desperately tried to reinflate ... but couldn't."
The Fed did no such thing. They provided a sudden burst of liquidity after the first market shock in 1929, but after that, they essentially sat on their hands until 1933. And guess what! That is when the bull market of the thirties began. If recovery was slow, it was partly because severe structural harm had already been done(which isn't the case today). Furthermore, Roosevelt made a mistake in trying to run things from the oval office. He even proposed achieving reflation by asking corporate America to reduce capacity through the deliberate destruction of factories and equipment. Thank goodness nobody did. As to the Fed, before 1933 they even allowed banks to close down and leave depositors emptyhanded. They could easily have kept those banks open, they could have made depositors whole, ala 1989. They chose not to. In the early days of the depression, they thought they were dealing with something temporary and didn't want to disturb the free market.

Third: " It's the ol' pushing-on-a-string
syndrome. The money supply won't expand if people won't/can't borrow." Pushing on a string applies to creating economic recovery, not inflation. Ever heard of STAGflation? Latin America, for example, has a long history of creating inflation without growth.

Fourth: " But one just has to take a cursory
look at the charts of the SE Asian, Russian, and Brazilian deflations to see that the currencies fell immediately with the
stock/bond markets, with gold spiking inversely."
What deflations? Turbohawg, when currencies fall, that is INflation. Indonesia, Russia, Brazil - those countries' currencies didn't gain value, they lost it! BIG TIME, too. In fact, Brazil's inflation has lately been creating friction with Argentina, because Argentina has maintained parity with the dollar and now has to compete with a neighbor who didn't.

FIFTH: " my best guess is that when the US markets finally tank, the dollar is going to tank right
along with them, and gold is going to blast off"
What is a tanking dollar? Do you mean the dollar will lose value? What on earth is that if not inflation?

As to Prechter, if the man has a dime left to his name it can only be because people persist in buying his advice. Unfortunately, there is no one who has been more consistently and spectacularly wrong in the last 20 years that I know of.

Turbohawg, I am sorry to have gone after you point for point like that. I admire your knowledge and your wisdom. I just don't think mistaken notions should stand uncontested when some people who are reading may be seeking guidance. I enjoy your posts and respect you enormously.

Stranger: good advice to Cavan man and I agree with you about y2k; in fact I agree with most of your stuff. If people want to fret about something let them fret about a disintegrating Russia with all of those nuclear warheads or China's hedgemony. Now those two issues are worth worrying about.
Tom Cat, I am glad you figured out the drug trade. Its hard to know those things if you don't spend much time in the streets.
Turbohawg: you forgot to mention interest rates. I think the difference between our thinking is I give more credit to modern knowledge. We have learned a lot of stuff in the last fifty years. What is most frustrating is everyone who says: "its gonna happen" how in the heck do we ever win. Everyone can just keep saying "just you wait - next year" - good grief. That is the nice thing about y2k it has a deadline! And I want to make it clear right now that when it turns out to be no worse than a bad hurricane that the Stranger and I get to say: WE TOLD YOU SO!

Hi Cavan Man
I found what seems to be a precious moment of free time to drop by the Forum before stepping out for a bite of something. Looks like I've got some serious catching up to do when I return.
Your question about what type of inflation is higher costs for real estate or education raises a very important issue that I tried to champion several months ago. Definitions.

In truth, what you've described should not be called "inflation," but should be called "higher prices." The terms inflation and deflation in the purest sense apply only to the money supply.

BUT...I realize there are some people who feel that those terms are perfectly suited to prices, and I am wise enough to choose my battles, and that is one that I will not engage in. The only compromise I seek is that anyone using the terms inflation or deflation should specify whether they are referring to currecny supply or to prices, and further, whether they are referring to global or local effects.

For example, I tend to side with turbohawg on many of his ideas, yet without clarification of terms, neither he nor I would know this to be the case. As it is, we both see a threatening global deflation of the key currency supply (dollar), which is wrecking a lot of local economies. Despite this global deflation, there is enough dollars abroad that if they were to find their way home, we would have a concentrated dollar supply inflation here in America.
Further, even if these same foreign-held dollars stay abroad, if people suddenly go on a Y2K shopping spree, we quickly see higher prices, which some people would call "inflation," but you'll admit, it would be clearer to call it "price inflation." I call it higher prices. Keep it simple.

Gotta go for now.
Gold. Get you some. ---Aristotle

You know, I completely lucked into meeting MK (and the forum posters). I have interviewed a handful of professional money managers with no luck in finding anyone who was not completely rabid about equities. I need equities in my asset allocation mix and I realize that but, finding someone who is as wise as some of the contributors here with a good mind for long term planning and who will consider the full range of investment opportunities is difficult. Any thoughts?

Thanks, Cavan Man.

The dictionary definition of inflation describes it as an increase in the supply of money. In common usage, of course, it has come to mean rising prices. Yes, rising real estate prices are a good example of what would be called asset inflation. So is the stock market. Neither is truthfully reflected in the CPI, however. In the case of real estate we are talking about what one must pay for shelter. By the latest figures, that is up 4.2% nationwide over last year. In the case of the stock market we are talking about what one must pay to buy a dollar of corporate earnings. That number is now beyond all American historical experience.

One asset which has experienced no inflation of late is, of course, gold. This is why I, for one, regard it as an outstanding value.

come 1/1/00 (1/1/2000) will I want any assets in paper? I don't think so. Will Nov. be early enough to cash out or should I begin in Sept.

Cavan Man - In truth, equities have the best long-term track record of any investment category. This may be because, with an equity, you not only get the assets of the company, you also share in the fruits of many other people's labor. When you own an equity, you own a company. Look around you. That is what rich people own - companies.

If you are not getting a good grounding from people you have spoken to, you may wish to go the library. Find out what is meant by "the rule of 72" and "the magic of compound interest." When I was 35, I read "The Richest Man in Babylon". It was kind of a silly little book. I read it in an afternoon. But it taught me how ANYBODY can be rich with very little effort and that everybody ought to be.

Koan, thanks for the endorsement. Same to you, Gandalf(last night). You guys are kind to comment the way you sometimes do.

Ari, great to see you again, pal. I wish I didn't have to go now, but my wife will kill me if I don't spend some time with her in the real world.

I agree with you on gold certainly. Then, a question; given current POG and collateral current events, what is a good % of assest allocation not depending on NW. You can assume that the individual investor knows the subject and that the investor is "comfortable" with owning PM. Also, regarding compounding, rule of 72 etc., I completely understand and have understood for some four-five years or so. The question (for me) is, what to do now and that ties in with the above. Thanks

Leigh,

the two books are STRATEGIC RELOCATION by Joel M. Skousen (lots of good stuff in here for common sense planning), and LIFE AFTER DOOMSDAY by Bruce D. Clayton (this one was written in 1980 at the height of Carter Administration disarmament philosophy. I prefer the first book (wriiten in 1998) but the second is a real good tool and adds to the information of the first.
Take it for what it is worth. I would not recommend a life change based on these books but they help you look at a facet of your life that is usually reserved for politicians, generals and civil defense types.

To the Forum....I am constantly amazed at those who spout that y2k is overblown. You are the same people who watch Jay Leno ask people in LA questions like "who is AL GORE?" and "who was our first president" andlaugh and fall asleep when they don't answer even closely. I laugh too. But these people and those that are more dangerous are time bombs. You cannot turn your eyes away and pretend that these people will not affect you in times of emergency. I, too, hope that y2k is nothing, but in this day and age of suitcase bombs containing nuclear devices, a host of enemies from within and without, you had better hope that y2k is nothing. How can anyone sit by and be smug about such a thing? Has anyone ever lost a lot of important information after a compte crash? I have. Do you want to wait to find out if the ethical computer programmer had no financial or
marital problems the day he CURED a y2k program? To those that will do nothing or think that this the latest doomsday scenario, I say don't do anything...let me be able to buy my supplies and my pm's at a reasonable price. I thank you....perhaps you will work for me someday. The funny thing is some of you talk about purchasing physical precious metals to protect yourselves against what? Against people who mess with our paper money, perhaps? Maybe people who lacked foresight in areas such as computers too? Maybe people who are lying to you now about how the problem is being cured around the world? One of you tell me that Saudi Arabia will be shipping us all the oil we request.Guaranteed.

If you think y2k is nothing then why is the world spending billions to fix it? And are they smart enough to fix it in time? Hopefully, but I intend to be a have and not a have not. Do what you want. That is what helps those who prepare.

Good one!

Koan: I didn't say anything about Y2K.

Stranger: thanks for going point for point ... that's how erroneous info gets cleared up. As I've tried to make pretty clear in most of my posts on the inflation/deflation topic, I define inflation as expansion in the money supply and deflation as destruction, ie. contraction, in the money supply. That's how those who study the Austrian school of economics have defined it and, I think, defining it any other way is what leads to all the convoluted notions. Define it like that and a lot of the nebulous world of economics starts clearing up.

If you go back and re-read my last post with that frame of mind, I think you'll probably discover that there's a lot we agree on regarding the expected practical effects of upcoming events, and has us continually up Peter's butt. (Sorry you've been brought into this in such a, uh, dignified manner, Peter.) Still, I see no way we can agree on the omniscience of the Fed until we have an accurate read on historical precedence, or until events play themselves out. So, in the interests of setting the record straight, you've forced me again to reveal my "bookish" nature.

From The Bear Book by John Rothschild (this is really an entertaining read), "The part about the Fed causing the Great Decline by raising rates when it should have lowered them is only half true. The Fed did raise rates in 1929, to counteract several years of easy money, which resulted in the exuberant market that was sobered up in the Crash. But after the Crash, in 1930, the Fed lowered rates (six times, no less) just as the modern Fed would (and did) after the Crash of 1987. The Fed bankers of the day weren't as clueless in emergencies as they've been made to seem."

Moving along ... "In 1929, the Fed turned off the pump and opened the drain, and the stock market crashed. In 1930-31, it closed the drain and started pumping to lift the economy out of recession. This rescue failed."

Ok, back to Rothbard for more excruciating details ... "But early in 1930, the government instituted a massive easy money program. Rediscount rates of the New York Fed fell from 4 1/2% in February to 2% by the end of the year .... During the entire year, 1930, total member bank reserves increased by $116 million. Controlled reserves rose by $209 million; $218 million consisted of an increase in government securities held. Gold stock increased by $309 million, and there was a net increase in member bank reserves of $116 million. Despite this increase in reserves, the total money supply (including all money substitutes) remained almost constant during the year ..."

Regarding 1931 ... " The American monetary picture remained about the same until the latter half of 1931 ... The sharp deflation occurred in the final quarter, as a result of the general blow to confidence caused by Britain going off the gold standard. From the beginning of the year until the end of September, total member bank reserves fell by $107 million. The Federal Government had tried hard to inflate, raising controlled reserves by $195 million - largely in bills bought and bills discounted, but uncontrolled reserves declined by $302 million, largely due to a huge $356 million increase of money in circulation. Normally, money in circulation declines in the first part of the year, and then increases around Christmas time. The increase in the first part of this year reflected a growing loss of confidence by Americans in their banking system - caused by the bank failures abroad and the growing numbers of failures at home. Americans should have lost confidence ages before, for the banking institutions were hardly worthy of their trust. The inflationary attempts of the government from January to October were thus offset by the people's attempts to convert their bank deposits into legal tender ... But the public, at home and abroad, was now calling the turn at last ... Money in circulation therefore rose by $400 million in these three months. Hence, the will of the public caused bank reserves to decline by $400 million in the latter half of 1931, and the money supply, as a consequence, fell by over 4 billion dollars in the same period."

You are right about FDR screwing up. His Raw Deal was an extension of Hoover's govt interventionist policy in the economy that turned what could have been a short depression like others had been into the Great Depression.

Lots more good stuff where this came from.

Thanks for responding in such a detailed manner !!

The history of the Great wall has some facinating lessons on the behavior of govt's when threatened, and many examples of the intersection of the mendacity/stupidity curve causing their defeat by "less" sophisticated enemies(the Tibetans).A top general even opened the doors to the horde because of some chick.Sound familiar?Let's not mince words. People who work for the Govt's are idiots, biding the time until retirement.Whether by inflation or deflation it's going to be acedemic. There is one idiot somewhere who is going to fail,period.At that point the macro-economic events that unfold will be beyond the predictive powers of USAgold followers. Building a 3000 mile wall merely forestaled the inevetable over-running by a horde(us)of extremely angry people(tax payers, etc).I would love to be a fly on the wall at the high level "how to stop offshore banking" meetings furiously taking place in some office in Washington or Ottawa. Obviously the BOE sale was close to if not "the" desperation move a lot have expected and in retrospect will be viewed as the beginning of the paper slide of 2000 although the 'Great Wall' of devalued currency could wipe out that distinction.

I see that I have to re-post that quip from my youth: "We are in danger of running around in ever decreasing circles at an every increasing rate of speed, until we run up OUR OWN --- ----, and disappear."

http://ttg.sba.dal.ca/~imagemap/g7?320,35Found your site. Good find. Read it. Lots there. That is only reference so far to J.A. Found this though at above site:

1975: Versailles Economic Summit, November 15 - 17
1976: Puerto Rico Economic Summit, June 28, 1976
1977: London Economic Summit, May 7 - 9
1978: Bonn Economic Summit, July 16 - 18
1979: Tokyo Economic Summit, June 27 - 29
1980: Venice Economic Summit, June 22 - 23
1981: Ottawa Economic Summit, July 20 - 21
1982: Versailles Economic Summit, June 6
1983: Williamsburg, VA Economic Summit, May 28 - 30
1984: London Economic Summit, June 7 - 9
1985: Bonn Economic Summit, May 2 - 4
1986: Tokyo Economic Summit, May 5
1987: Venice Economic Summit
1988: Toronto Economic Summit
1989: Paris Economic Summit
1990: Houston Economic Summit
1991: London Economic Summit
1992: Munich Economic Summit, July 6 - 8
1993: Tokyo Economic Summit
1994: Naples Economic Summit
1995: Halifax Economic Summit, June 16 - 18

Your sobriquet is no reference to a key component of a microwave I presume? So then, what percent of portfolio should a thinking person allocate to PM (metal) ownership?

http://www.sunday-times.co.uk/news/pages/Sunday-Times/frontpage.html?999Business chiefs sign up for single currency


Eben Black





A POWERFUL coalition of business leaders led by the design and restaurant guru Sir Terence Conran today throws its weight behind readying Britain to join the European single currency.
In a letter to The Sunday Times, 30 top-flight company heads, representing a cross-section of British commerce and industry, give their formal backing to Tony Blair after his decision to put himself at the forefront of the Britain in Europe campaign.

Conran told The Sunday Times last night: "The prime minister has got it right on Europe and business is coming out fighting."

Blair's announcement last week brought an immediate response from the former Conservative chancellor Kenneth Clarke, who pledged to work for the campaign under the prime minister.

Blair had been due to make his statement that he would lead the Britain in Europe campaign in June but held off, according to political pundits, until after the European elections, which saw a Conservative resurgence.

Senior political figures, including Michael Heseltine, the former Conservative deputy prime minister, and Sir Ken Jackson, leader of the AEEU union, are also expected to join a formal "coalition" launch in the autumn.

The signatories insist they are not arguing for immediate entry into the euro, but believe that Britain must continue to be positively involved in Europe and prepare to join the single currency if the economic conditions are right, in line with Blair's thinking.

They point out the "significant advantages" that joining the single currency could bring to Britain.

Their letter, in today's paper, is the largest showing of support for Blair's approach since the start of the euro debate. Along with Conran, the leading signatories include Ian McAllister, chairman of Ford, Alan Harris, president of Kellogg Europe, Lord Simpson of Dunkeld, managing director of General Electric Company, Sir Richard Evans, chairman of British Aerospace, and Sir Colin Chandler, chairman of Vickers. Lord Marshall, chairman of British Airways and chairman of Britain in Europe, is also a signatory

Your right, I didn't mean to address it to you, I wasn't careful enough. Sorry for the mistake.

the people who read and communicate through this board are, I believe, way smarter than the average bear and can see the potential disaster coming. PM ownership is going to ultimately be very fruitful. My posting wasn't saying it's pointless to buy it but that things are going to get very ugly at some point.Even if you own gold day to day life won't be a picnic with hundreds of thousands of gov't un-employee's running around without money, and more tax payers extremely pissed about their savings.

There is speculation that a "large swiss based buyer" was taking a large position in silver. Tomorrow should be interesting. If gold has bottomed, as I think, then where does the gold carry trade have to go? And the comex silver and gold stocks get curiouser and curiouser. If we are at the beginning of a bull mkt then the trading around will be fun to do and to watch.

"....smarter than the average bear...."; that is one of my favorite expressions. I picked it up many years ago from a real character in Southern Illinois. Yeah, I don't disagree. Everything I have been exposed to here during the last three months just makes too much sense; too logical. However, do you think there is any possibility the group here, though way smarter than the average BEAR might just have it wrong? Maybe it is just a predisposition to liking tangible assests? I might fall into that category.

"All of the world's great fortunes began with nothing more than just a dream". I have read that same sentiment expressed by others. Still, your quote is no less profound.
I am posting that on my desktop if you don't mind. What do you make of the debasement of currency theory vis a vis the sound money argument?

Hey Al - good to see you hanging around. Your points about y2k are well taken.

You wrote in part;

"If you think y2k is nothing then why is the world spending billions to fix it? And are they smart
enough to fix it in time? Hopefully, but I intend to be a have and not a have not. Do what you want.
That is what helps those who prepare."

Yes - since my initial 'awareness' of y2k and it's possible ramifications I've done my best to seek out the truth. I've literally spent 30 hours a week for the last few years (my wife would say more!) reading everything available on the subject. I can tell you now that most people (90%?), do not understand the relationship between y2k and the overall economic situation. First, there has been little coverage in the media concerning the actual nature and extent of the problem and secondly, people in general do not understand the current monetary system. I believe this is the reason many find the issue so easy to dismiss. Furthermore, it is always easier to deny a problem exists that as of yet hasn't had any effect on most. This is true of y2k and the monetary system.

Not to pick on any particular views here but I also find it incredible that people can so blithely disregard a known problem with a fixed deadline. The track record of success in the IT profession does not lead one to the conclusion that all will be repaired as many predict. As a matter of fact, the opposite conclusion probably stands a much greater chance. Although I do not believe the infrastructure of most of the world will go down in flames, I do suspect an already tenuous economic situation will be exposed for what it is by y2k. The economic situation in the world requires confidence to stand and I see little in the y2k situation that will engender great levels of confidence. More likely, y2k will produce a great cynicism of both technology and government.

More to the point, liquidity of the monetary system is what is really at the greatest risk. I can imagine all kinds of problems from y2k but this problem will be the toughest to overcome. Stranger's view that inflation is about to wreak havoc in the world I believe is correct because the monetary system is collapsing and the only hope for governments is to reflate. I don't agree with his conclusion that this can be accomplished in light of y2k. Turbo is correct that sometimes people won't or can't borrow. Usually these coincide with periods of little confidence. I do believe we are entering one of these periods and it is being triggered by the fear of y2k and will be exascerbated by the actual ramifications of y2k.

I do hope some of you 'non-believers' out there think 'long and hard' about this. If nothing more, read your own government's assessments. They are not rosy. Along with Al, I also hope that most will not be adversely affected by y2k but I'm surely not planning on that outcome.

ET

history is repleat with people who wanted something for nothing and to that kind of mind paper assets must seem like a dream come true.Holding hard assets requires hard work and mental toughness, not the kind of attributes commonly found in today's 'somebody's fault'world. People who own or want to own gold and property have always understood the value of assets and how some numbskull can devalue them. Gold was the creation of an event of astrophysical proportions, not a Socialist eco-chondriac hoping for a grant. We will be proven right. The laws of physics can't be over-riden no matter what Alan Greenspan and L.Ron Hubbard think

just some off the cuff thoughts on this one, we may all get a glimpse of things to come on 9 Sept '99 (9-9-99), is this not a default error code imbedded into all computers? Comments anyone..........

I lived in the greater NY area in the mid-60's. I remember the power outage; riots ensued. I just can't believe that there will not be similar disturbances. Thirty years ago this was a kinder and gentler planet if only by a matter of deegrees. Thanks.

From Frank Herbert's Sci- Fi- Philosophical 'Dune' trilogy: --- "Fear is the mind killer." Look at what you know to be true and do not let fear and worry cause doubt.

Will Rogers said, "Buy land, they're not making any more of it" --- Of course a lot of land these days is trashed, polluted, or inflated by development potential, but as I keep harping on, clean farmland or a growing timber crop are immutable assets. With commodity prices depressed, there is little inflation factored in and post Y2K can only be better. Timber for example has been depressed for a couple of years due to global village factors. If the economy becomes more localized, values can only go up.

I say this to you (and to Leigh) because you have reservations or constraints on a heavy Gold position to ride things out with. Ask yourself these two questions 1) if there was no money around what would I most like to have? And 2) What can I buy now that can not possibly be worth less after a mild, or disastrous, Y2K?

Whatever might happen in Y2K the government is going to up to it's a� in so many alligators they won't even have Gold confiscation on their list. IMO!

Gold, Timberland, Cropland: Out of favor and needed forever. Until we have the technology to obtain, and trade in, Iron/platinum asteroids, that's how I see it.

Turbohawg - You either are a student of the Great Depression or the best read critter I've ever run across. If it is the former, which I suspect to be true, then you need to watch that your whole lifetime of investing isn't biased towards your expectation that history will repeat. To a man with a hammer, everything begins to look like a nail.

You and I both know that the nation's money supply shrank by more than 30% between 1929 and 1932. Your read is that this happened despite a valiant effort not to let it be so. I say, hogwash. Weimar Germany managed to make their currency worth less, and I say our idiots are just as good as their's are.

I know little of Rothbard, but I do know that for much of his life he was an outspoken libertarian. In fact, even you might agree that his views were borderline anarchist. As such, it does not surprise me that he said the things you quote. If he saw it that way, then so be it. I do not.


Anyway, it is a joy to debate you once again. How we take such diverse routes and both wind up advocating gold is beyond me, but what a pleasure it is just to encounter someone like you.

Cavan Man - let's not get too theoretical. You will uncover my limitations in a hurry if we do. But, let me ask you this: Are your financial goals numerically specific? For example, do you know how much wealth you intend to have at various stages in your life?

Peter - I know you posted something, but it is so dark up here, I couldn't make it out. Say, what did you have for lunch, anyway?

That's really gross, yuk!! --- Go to your room!

Peter, that's teriffic. I think if I knew you personally I would like you immensely. Do you know of an online resource where one might shop timber and farmland? Of course, I will check locally.

$258.40. Bids strong.

http://cnniw.news-real.com/osform/NewsService?osform_template=pages/cnniwStory&ID=cnniw&storypath=News/Story_1999_07_30.NRdb@2@15@3@387&path=News/Category.NRdb@2@12@2@4I can dig it.

Mr. Insider told me on Friday that Marc Rich is in the silver market. That would be your Swiss based buyer. Mr. Insider reminds me that Marc Rich is a player. What he buys he will sell and, unlike Warren Buffet's position, it is all on paper -- no physical.

Thank you for asking. I have a very specific objective I put in writing that is not unreasonable but one that will require a fair amount of success financially. I am thinking the best path for me to get there is by owning a successful business and there are other reasons for that path as well.

If I invested $100K today, I would expect to double in 3-4 years, keep rolling over and doubling. We live modestly. I need to educate three very bright girls and would like to take up a part time occupation in fifteen years.

Yes, you're quite right IMHO. You know, I do know an equal number of people who are quite wealthy and have never owned a paper asset in their lives. That post sounds like something MK said to me once before.

Turbohawg- enjoyed the history lesson. Facts speak louder than words in any debate and am enjoying ongoing debate with you and Stranger.I would have to throw my hat onto the side of what I would call destructive deflation which would
then have the effect of causing the system to bleed inflation. Truly, the world has never quite been in the place it finds itself today (esspecially the last 30yrs (Aproximately)I agree with you that the facts appear to point to a real effort back then to save the economy.I Have read that during that time they did lower interest rates much like Japanese in the 90's to a similar resultin the end .They did not add liquidity (harder on the gold standard) and the pursuing collapse arrived.As a result of a loss of confidence by americans (a correct response) the economy spiralled downward.FDR raised the price of gold to try and add liqidity but it was too late. I'v struggled over the years on how I'v felt about his response in raising the price of gold.It seems close to what we await in the markets as to the real pricing of gold as the king currency and natural reserve of real wealth.
We might also add into the discussion about the great wealth that ended up in the hands of Big Banks (Fed) and local governments (tax defaults) because of the deflation
It seems to me that they seem to get the hang of things after this happened and the wealth of past generations was transfered into their hands. The process then started all over again and those who lost a house with only a a small amount left on their mortgage lost all those years of labor.
We can hope that is not going to happen again . With all the easy money finding safety in real estate (hard asset) thru mortgages and refinancing it makes me wonder. History never Quite repeats itself exactly but it seems to rhyme a lot.

Steve H- enjoying your posts


FOA Some thoughts later on your post

Try:"1929 the Year of the Great Crash" by Wm. K. Klinaman,ISBN 0-06-016081-0......the author is a historian...he "tells" what was going on in people's lives....from the working stiff to the young "retirees" (those who were living off their trading profits) to the boyz on Wallstreet....lot's of same names we talk about today....real interesting book....the same thing that drove the market in the late 20's is the same thing that in driving the market today (RCA - the new communication industry vs. MSFT today and the computer industry..?)..the book made it easy or should I said easier to TRY to understand "people" and the fear and greed factor that drives their investment decisions.......

Anyway enough of me giving my view point...tell me what you learned after you read it.....real "easy" reading makes it one of those book one reads in a couple of nights...

Hey watcher - enjoy your comments.

You wrote in part;

"We might also add into the discussion about the great wealth that ended up in the hands of Big
Banks (Fed) and local governments (tax defaults) because of the deflation
It seems to me that they seem to get the hang of things after this happened and the wealth of past
generations was transfered into their hands. The process then started all over again and those who
lost a house with only a a small amount left on their mortgage lost all those years of labor.
We can hope that is not going to happen again . With all the easy money finding safety in real estate
(hard asset) thru mortgages and refinancing it makes me wonder. History never Quite repeats itself
exactly but it seems to rhyme a lot."

Yes - but it will happen again. If you don't own it, it belongs to someone else. This is what makes banking/government such a great business. No wonder it's gotten so big.

What is interesting about this is that everyone actually can choose not to participate by refusing to borrow money. I know this sounds radical but it's an idea that might catch on.

Thanks for your thoughts watcher.

ET

If there is anyone at our distinguished roundtable who has investigated Y2k and has come to the conclusion that it will not bring on a strong recession or a depression, then I would really like to hear how you came to this conclusion. This is not a challange or invitation to debate but a sincere interest in learning your thought process and how you have drawn your conclusions.

Stranger: The pleasure of once again engaging in truth seeking with you is all mine. You're right about Rothbard (I don't know the political leanings of Rothchild or Griffin). It's no coincidence that he's someone I would look to for info to cut through what I see as the statist revisionism one finds so often in our society. It just so happens that he backed up his work with hard numbers.

I'm not the student of the Depression that it may seem. I had a specific focus in mind in studying it, as I have with my other studies, and other things just kind of fell into my head along the way.

>How we take such diverse routes and both wind up advocating gold is beyond me< Man, isn't that the truth !!

watcher: I appreciate your comments. Your point, which Stranger made too, but slightly differently with his hammer and nail metaphor, > History never Quite repeats itself exactly but it seems to rhyme a lot.< is well taken and I agree 100%. Hopefully, my original point that this time IS different didn't get lost in the Depression tangent we went on.

The thrust of my whole argument has been that the US finds itself in a similar position as those countries that have already collapsed, with the outcome, in my opinion, likely to be similar. I've attempted to back up my opinion with some supporting evidence. It really isn't any far out notion apparently ... Mr Yen made statements along those same lines awhile back.

megatron: great Great Wall analogy !! Say, didn't you battle Godzilla a few years ago ??

Hey CM - thanks for your comments. Y2k seems to have turned into a people problem as much as a technical problem. The problems with the current monetary system will undoubtedly be exposed as more and more learn the situation. I don't have a clue how this will ultimately turn out but I hold no faith in this system of money surviving with it's purchasing power intact. I can't see in any scenario how purchasing power will increase. Buying the stuff to get by in hard times doesn't cost much in today's money. The cost of preparing is cheap and holds little risk (except to one's ego, of course, if they've failed to evaluate the situation correctly), while the cost of not preparing is even cheaper but holds great risk (unfortunately, not limited to one's ego). This is the insurance companies argument, isn't it?

Those that riot are the criminal and the unprepared. It's disappointing to me that governments haven't made a greater effort in informing the public of the problem. It will likely go down in history as one of the greatest political mistakes of all time. I would suppose it's that banking interest which has hindered efforts at awareness. Maybe watcher has this pegged.

ET

Thank you for the gratuitous acknowledgment. I don't know any online source of that data but I have accumulated intense personal knowledge of the workings, valuations, and strategies of timber growing, harvesting and land purchase. We live on and in timber country and I have subsidized our regular income consistently from our own land.

E-Mail me at--peter@peterasher.com

Y2K poll

No Y2K Guarantee For Banks

I don't recall seeing this posted, better twice than none.

http://www.washingtonpost.com/wp-srv/WPlate/1999-07/23/090l-072399-idx.html

... but not very scientific.

A friend of mine works as a manager for a company in the business of storing and moving currencies and precious metals between banks, businesses, coin dealers, etc.

Last year, gold moved fairly well until the fall. When the US stock market started selling off, NO gold moved for a couple of months or so. He asked a coin dealer first chance he had what was going on. The dealer replied that no one was selling.

Since then, movement has been slow. The supply of gold and silver that they had in the vault mostly sat there until about 2 months ago when the bulk of the gold (~ $2 million) left for the Northeast (from here in the South). My friend was told that it was going directly to two individuals.

The other day, the remainder of the gold and silver went out the door ... none left in the vault. My friend was told by the people picking up the silver (at least some of which was in the form of coins) that it was going to be melted down and used for creating some product (can't remember what).

On its own, this little anecdote probably has little significance, but tied together with other events it may help provide a window of insight into the market.

Cavan - I am a little embarrassed now that I sought to advise you. You are already well ahead of most people one encounters, that is if your plans are in motion, anyway. I hope you will forgive me if you felt underestimated.

Tomcat - I don't know if this will make sense, but I'll give it a try. Whatever happens with y2k, investing for it appears to me to be a losing proposition. Ask yourself this question: what can I buy today that I can sell at a profit next year? Gold? Okay, but if that is the case, won't many who buy gold today also intend to sell it next year? And what will people pay me for it next year when the crisis is already underway or, even worse, over? For someone else to feel motivated to pay me top dollar for it, won't he have to believe that it will make him rich? And how will I get him to do that if this important y2k "process", as AEL calls it, is already a fait accompli?

Whatever happens with y2k, most of us will survive. In fact, a little shared hardship, were it to happen, might even be good for a lot of us in this modern world. We have already seen numerous y2k snafus, as you well know. Most of them have been humorous, a woman born in 1891 getting summoned to start kindergarten for example, or a shipment of tuna being returned to South America because a computer thought it was 100 years old. You see, y2k has already started as far as I am concerned.

Will it get worse? Perhaps, particularly if people overreact out of fear. But, so far, I think most are approaching the matter rationally. I can't imagine sudden pandemoneum breaking out on Dec.15, for example. It is the events we never expected that cause panics. This one has been too widely advertised.

So, here is what I recommend. Instead of organizing your affairs out of fear or ignorance of y2k, make an honest effort to appraise the bigger picture and invest accordingly. That way, once the reality of y2k, whatever that is, is old news, you won't be struggling to find new direction while the plans of others are already well in place.

There is a much bigger reason for owning gold than Y2K. Trust me!

http://www.y2ksafeminnesota.com/New%20Rich%20In%202000.htmSure is pro gold!

Gee, you don't supose that buyer in the northeast was those GS people do you?

From: (Steve Heller)This is one of the main reasons that I am so pessimistic about Y2K.
>
> On Fri, 23 Jul 1999 19:58:20 -0700, "J.R. Whipple"
> wrote:
>
> [snip]
> >I have came to the realization that it's a lot worse than my first
> >impressions. Nearly all commercial buildings, even single story
> buildings,
> >have a *wet* sprinkler system for fire protection. A wet system, is one
>
> >where the pipes are full of water. So we now have a situation where
> nearly
> >all buildings, business and apartments, have three sets of water filled
>
> >pipes. Hot water pipes and cold water pipes for potable wash and
> flushing
> >water, and a third set of pipes charged with water to quench fires.
> >
> >My initially thought it wouldn't be too big of deal to open a few
> faucets,
> >on the higher floors, and a few valves at the bottom to drain the
> system,
> >and save the building from burst pipes. Then it hit me two-fold.
> First:
> >There are just is not enough building engineers (maintenance folks) to
> drain
> >the potable systems in the time allowed, and, Second: Fire systems
> can't be
> >drained for both physical and legal reasons. Do you think any insurance
>
> >company would pay-off if your multi-million-dollar building burned down
> and
> >they found that the fire suppression system had been compromised?
> >
> >If the power goes down for more than just a few hours, the fire
> departments
> >are going to get two hits, days or weeks after the big day. After the
> water
> >pipes burst it will be at the ice point so no, or little, damage will
> occur
> >till the weather warms, or the power comes back on. Then all hell will
> break
> >loose. Assuming there is still water pressure, water will start to flow
>
> >through the burst sprinkler pipes, and assuming the automatic fire
> alarm
> >systems are still working, hundreds, if not thousands, of bogus alarms
> will
> >come into the fire stations. (Water flowing through a sprinkler system
> trips
> >the fire alarms). With thousands of open pipes what little water
> pressure
> >there is will be going down the drain. So, for the real fires, will
> there be
> >any water left?
> >
> >In the centers of the big cities, hundreds of buildings pouring water
> down
> >through their floors and into their basements and into the electrical
> vaults
> >will mean the end of their electricity. So� back into the deep
> freeze!
> >
> >This could be a real mess for those north of the freeze line. Throw in
> a few
> >cold, hungry, unpaid welfare recipients with a can of gas and a match,
> and
> >well� Do I need go on?
> >
> >We better all pray, plead or beg that the power stays up! Just what
> is the
> >average temp in the northern states, including Alaska and Canada, on
> Jan 1
> >of any given year? Let's hope that January of next year is an
> unseasonably
> >warm month.
>
> --
> Steve Heller, WA0CPP
> PGP public key available from http://pgpkeys.mit.edu:11371
> http://www.koyote.com/users/stheller/homepage.html

Lunch turned into an extended outing...great day to get some things done that needed doing. A very good friend once said something to me several years ago that really stuck with me, though the advice (if that's the right thing to call it) seems obvious enough that it seems almost silly to have to say it out loud as a reminder to people. He said:
"There is nobody who wakes up each and every morning and asks himself what he can do that day to make life better for Aristotle unless that person is Aristotle himself. And if Aristotle isn't asking that question, on what basis can Aristotle expect to see improvements?"

Take charge of your own lives, folks. Nobody else is out there assigned to you and your personal plight as you wend your way through life on Earth.

C'mon, you regular cats, you gotta do better at helping these tiny voices from the corner of the room:

Aggie (8/1/99; 12:57:33MDT - Msg ID:10077)
"come 1/1/00 (1/1/2000) will I want any assets in paper? I don't think so. Will Nov. be early enough to cash out or should I begin in Sept."

Hey Aggie, this question may help you assess your situation to arrive at an answer you can live with. Ask yourself, "What will you possibly gain by waiting the extra month to begin your preparations? I mean, at some point, it will be clear in hindsight that on such-and-such a date it was "too late." Why take the risk? Right now is NOT too late. Next week may be, or the week after, etc. We don't know. So, again, why take the risk? What will you be gaining during this extra month or two by staying in paper? If the returns you expect are huge, only you know those details, so only you can assess the risk/reward scenario.

Gold. Why wait? ---Aristotle

I had to send that batch through the printer...worthy of time and space on the ol' coffee table right here. Thanks, good Sir!

Gold. Worthy of intelligent conversation and acquisition. ---Aristotle

Me too, I was with a friend who wanted to shop at Bloomingdale's and we had just exited the store when the lights went out. Close call; I would not have enjoyed the sixth floor of a city block sized building in a blackout.

I had a little Honda #250 so we were able to get back to the village through the gridlock. People were in good form in Manhattan. Ordinary citizens almost immediately appeared at many intersections voluntarily directing traffic.

As you say though, it was a kinder and gentler time.

FRANKFURT, Germany - Former German Chancellor Helmut Schmidt said in
remarks published Sunday that U.S. share prices were being driven to unsustainable
heights by ''psychopaths'' on Wall Street and that a slump was inevitable.

Schmidt told Welt am Sonntag newspaper that the United States, despite being
presented as a shining economic example to Germany, had a private savings ratio
below zero and was creating an underclass of the working poor.

``Many people are enthusiastic about the United States at the moment. But people
don't realize that the share price boom is totally overvalued and that psychopaths are
driving the prices up,'' said the Social Democrat who was West German chancellor
from 1974-1982.

``It's only a matter of time before the boom ends and prices tumble down again -- just
as it happened in Japan,'' he said.

Schmidt, 80, said that by psychopaths he was referring to ''the young 30-year-old
dealers and 40-year-old fund managers who with their daily and hourly fund allocations
have no other aim than to get the best possible performance.''

``These people lack an overview of the world and world economy and also of the
responsibility that entails.''

Schmidt added the euro's depreciation by as much as 15 percent this year did not
signify that the new currency was weak. He said he had witnessed the dollar trading at
3.47 marks and at 1.36 marks in the space of 1-1/2 years.

``No one ever got the idea that that meant the mark was weak,'' he said.

My editor has, like ET, been spending 30 hours a week on Y2K and has not had a moment to proof read my posts lately. She has just informed me that I made a major faux-pax in using the word "gratuitous", when I meant gracious. Seems they're antonyms, not synonyms. And here I thought a spoke a well English!

Hope you got the right meaning anyway.

A few years ago I had pretty good infusion of cash. As I wanted to shelter it from taxes I dumped it into a fixed rate mutual fund based on the stock market. Now I want out and put my money elsewhere. When the local planner who set up the mutual fund found out what my plans were, the reaction was as if I planned to cut off an arm. I was given every reason not to (except loss of commissions) and was even offered to roll the money over into an aggressive stock plan! I'm out of the market but still into a sheltered and insured program.
These money planners really yelp when you take the money and run.

watcher (07/28/99; 18:49:08MDT - Msg ID:9796)
"I've been waiting for fed reserve to fix the price of gold for years at a determined amount.If we for discussions sake say they were to fix the price at 450 to 500 USD what would the implications be for the existing market in gold be? Could they pull this off with off market transactions and other tricks at their disposal? I would like to invite all for their input . Special invitation for Sir Aristotle and all who would venture to expand on this thought."
-------------
Normally, I wouldn't even try to crack this particular nut, leaving it to others more qualified to answer, but since you specifically mentioned me in your request, I guess I'd better tell you what little I have on the matter, building upon what I know and bridging the gaps as seems appropriate.

First, just because the U.S. can SAY it is so ("fix the price at 450 to 500 USD"), doesn't by itself MAKE it so. There would be the follow-on obligations for convertibility -- to the Treasury I'd say, "Good luck!" FOA's mention of the Jamaica Accords (and explained very well in few words by Cage Rattler (8/1/99; 9:26:55MDT - Msg ID:10065)) was very timely in regard to this answer I'm attempting to give you. Following this legalization of floating currency exchange rates with an ironclad provision that they need never go back to par values (that is, currencies fixed to Gold), the participating nations of the world entered a period of limbo with respect to price of Gold. Under the second amendment of the IMF Articles of Agreement, the member nations would collaborate with the IMF to promote a stable system of exchange rates, which would essentially be fostered by national stability of underlying economic conditions as determined by formal surveillance of each country's policies by the IMF. The three dollars (American, Canadian, and Australian), the British pound, and the Japanese yen were allowed to float freely, while other currencies chose to peg to the dollar (or a basket of major currencies), and most of the European currencies maintained a link with each other through an informal "snake"--a range of acceptable rate variation. By general agreement, they were all in the same boat--and Gold's price would help or hurt them all in kind. Over time, exchange rates have failed to reflect the element of national money supply, while giving more weight to the somewhat arbitrary notion of "underlying economic conditions."

For the U.S. to fix the dollar to Gold as you've indicated, IMF Articles of Agreement would have to be altered as this would put international exchange on something of a de facto Gold standard, and the focus would necessarily shift away from the national "underlying economic conditions" to the oustanding currency supply. Under the first scenario focused on economic conditions, the U.S. dollar fares pretty well as we see even today. Under the second scenario focused on money supply, the dollar is toast due to the supply inflation that has already occurred and is held in accounts globally. If the dollar were fixed, you can bet that this foreign-held cash would seize upon this redemption opportunity until either they ran out of dollars or we ran out of Gold. The rate at which the dollar is fixed would determine which condition would occur first. If Alan Greenspan can be believed, the U.S. has no burning desire to see all of its Gold shipped out of country. Were the U.S. and IMF to take such a direction, you can be assured that if such a thing were made possible, the fixed price would be very very high. Of course, the open market could do this same revaluation through non-official channels, but we all know how and why that avenue has been put on hold.

Gold. Get you some while the gettin' is good. ---Aristotle

This is my first post on this forum . KIORA from the Land of the Long White Cloud.
I truly enjoy the informative articles, opinions,conspiracies,and humour available on this forum.
And hello fellow Kiwi,Andrew.[You are not alone down under]
Beesting this is one you might be interested in, [GOLD SHORTAGE].Whenever we decide to buy gold, a group of us pool as much money together as possible.In doing so can usually get a reduction in the price.
Approached our usual supplier,Morris and Watson Ltd."No Gold". 34 oz I wanted.Not only that, but I couldn't even order any as they said ,we don't know when we will be receiving new supplies.As they are not only dealers but refiners,fabricators,casters, chain manufacturers and distributors,I was left a little surprised.
The only 2 realistic conclusions I could come to was
1 A shortage
2 An expected price increase, therefore holding onto what they have.
So I rang Walker and Hall,told there had been a run on Gold and I would have to wait a week for new supplies.At least we were able to purchase some [we hope].
People down here are starting to get nervous, as we hear of more and more people starting to remove their money from Banks.An article in todays NZ Herald.Insurance Companies
worried about the fact of large amounts of cash and petrol being horded in homes.
9-9-99 is a worry to a lot of New Zealanders, which I believe is one of the reasons for the above.Talking to 2 ex-programmers.They stated -It was common practise to terminate programmes in 9-9-99.In fact it was second nature.No one knows what's going to happen ,but we soon will.In the mean time I know where my money is and it ain't in any Bank.

I may understand what to do but the HOW is the tricky part. I was asking and hoping you would respond with an answer to what to do with $100K today. I don't think common stocks is the right answer. Do you agree? Thanks.

Thanks for all the input yesterday. I leave you with this for today and always;

Plans are established by taking advice; wage war by following wise guidance. Proverbs 20-18

http://www.thisislondon.co.uk/dynamic/news/business_story.html?in_review_id=160456∈_review_text_id=129583It dates back to Ancient Rome,where the Forum contained a
market in shares, companies,farms, slaves and cattle, and
was common in the markets of Italy, Holland and Britain in
the 17th century. A new book, Devil Takes the Hindmost by
Edward Chancellor (Macmillan, �20),describes more than a
dozen major bubbles, including the Dutch Tulip Mania of the
1630s, the South Sea Bubble of 1720, the Railway Mania of
1845, the Great Crash of 1929, the Kuwaiti bubble of the
early 1980s and the Japanese Bubble Economy of the late
1980s.

Gap down with the interest rate going from 6.1 to 6.175! --- Where ae you TC ?
<;-)

ET said,"I do believe we are entering one of these periods and it is being triggered by the fear of y2k and will be exascerbated by the actual ramifications of y2k."

Please allow me to explain my position and I believe it may follow many others. I want to filthy, stinking rich. I want never to be worried about money again. How am I going to do this? I am going to make a fortune in gold. My belief, and perhaps others is that Y2K is going to cause unbelievable shock waves through the economic system starting abroad then quickly filtering down to North America. Many big corporations have spent huge dollars 'industrializing' countries that only a few years ago were still in the stone age. When these countries, still in their infancy of modernization, vaporize with Y2K, the impact will immediately roll down to the big players investing in their
advancement. The financial domino effect will be frightening. I hope that no one gets hurt, physically, emotionally or financially.

I respect all the 'big guns' on the forum. I am tickled pink with amusement when a disagreement breaks out, the Knights of the table round are very pleasant when they bicker. I wish I could join in but unfortunately my knowledge of ecomonics is not in the required leagues, YET.

Getting back to Sir ET's remarks ... If Y2K is a sinister demon, it will be the 'trigger' of mass mayhem. People are stocking up on food and are buying gold. We shall see what unfolds very soon.

A month or so ago I asked Sir Aristotle if he believed more CB gold would enter the populace and he replied, "We shall see." Perhaps the non-introduction of supply can be related to concern of Y2K??

I revert back to the 'timid lurker' role, but leave with one last comment. A week or two ago there was a post whereby a respected market analyst was quizzed as to his holdings and the reply was "I'M 90% CASH", gee, I wonder what he's worried about!!

Jim Brady made his fortune in diamonds so why not you and gold right? Don't be afraid to post here. I for one make a fool of myself each time out and still feel like I contribute something.

Do I know enough about you, your plans, your risk tolerance, etc. to give you good advice?

If I tell you what to buy, will I be there to tell you when to sell?

Is it appropriate for me to promote investments when our host does so professionally and pays the bills around here?

The answer to all these questions is "no". But I will tell you that my biggest positions are Newmont Mining (NEM) and Japan Webs (EWJ). I believe in reinflation. I believe in Japanese recovery. I believe U.S. LONG (emphasis intended) rates are going still higher. I believe the best way to stop the serial failure of other currencies is to weaken the dollar itself. Until dollar commodity prices enter a well- established uptrend, I believe Fed policy will be "speak loudly but carry a small stick". I do not see a broad collapse of stock prices yet, but at some point rates may convince me otherwise.

Whatever I would do, I would never cash out of an IRA, unless I had to. The non-taxability of an IRA is a gift that raises the compounding rate by a degree that will make an ENORMOUS difference in your standard of living some day. It also grants you the flexibilty to buy and sell whenever you want without having to consider tax ramifications.

Does that help any?

MARKET REPORT (8/2/99): Gold opened the new week and month weaker. The
London market reports solid physical demand continuing in gold but paper selling capping
any attempt to break out of this range. Friday's Commodity Futures Trading Commission
commitment of traders report showed that gold still sees heavy speculative short positions.
Short positions were down 7,256 contracts from the last commitment report two weeks ago
but still totaled a massive 81,518 contracts (or 8.15 million ounces) compared to only
13,624 longs. Gold lease rates continue to edge up reflecting tightness in the gold market.
Another indicator of tightness in the physical supply cropped up late last week when the
U.S. Mint again raised its premium on one ounce Eagles a full per cent. The Mint blamed
the increase on its rejecting planchets for the gold coin -- an explanation met with skepticism
among gold traders.

Bridge News reports Japanese forex reserves at all time highs, the result of intervention in
the markets to buoy the dollar and soften the yen. Speculators were on the sideline in the
early trading to see if the Bank of Japan would continue its defense of the dollar but given
the high level of dollar reserves, BOJ might be inclined to stay out of the market for the time
being.

Reuters reports a mixed bag from Japan on the currency issue:

"'As the dollar has broken below 115 yen, any accelerated falls from here on raises the
possibility of concerted intervention,' said Naoto Oonuma, a manager in the foreign
exchange department at Mitsubishi Corp. 'A free-falling dollar would deal a severe blow to
U.S. financial markets,' he added. Meanwhile, a former senior Japanese policy-maker said
in a newspaper article on Monday that Japan should drop its decades-old aversion to a
strong yen."

That's it for today, fellow goldmeisters.

http://cnniw.news-real.com/osform/NewsService?osform_template=pages/cnniwStory&ID=cnniw&storypath=News/Story_1999_07_31.NRdb@2@8@3@145&path=News/Category.NRdb@2@12@2@4Maybe.

http://biz.yahoo.com/rf/990802/q6.htmlNews in a nutshell.

(T-bond continues its sliding trend, but off lows as the NAPM revealed nothing startlingly unexpected)

http://biz.yahoo.com/rf/990802/r7.htmlA chief economist for an investment firm said, "The dollar was weakening against the yen. The fact the dollar has weakened ... simply means Treasury bonds no longer will benefit from declining inflation."

Golly, what's a boy to do when his native currency starts to head south? William Jennings Bryan should have made a speech "We should not be crucified on a cross of paper. Head North, young man, on a wagon of gold!"
(I love re-writing history)

The fall in the POG continues. Almost all Thursday's gains have been snuffed out. Will it never end?!

The DOW was popped by a S&P futures move from less than 6.0 to greater than 12.0 at 10:01 !!! The long Bond was also rebounded from the opening 6.175 back to yesterday's close level, BUT let's see if the PPT can hold this at the close.
I am betting against it! --- Things are looking scary.
<;-)

"Meanwhile, a former senior Japanese policy-maker said
in a newspaper article on Monday that Japan should drop its decades-old aversion to a strong yen."

He is right, of course. In fact, BOJ is already backing away from supporting the dollar, obviously. They will find the result far less painful than they expect. First, Americans WILL accept higher import prices, and second, any loss in Japanese exports will be more than offset by resurgent consumer demand within the Land of the Rising Sun.

Anyway, they don't have much of a choice.

I wouldn't worry too much. The CRB is powering higher this morning and is very close to an important trend-reversing breakout. Also, American stock indices are up strongly but on negative breadth. I would ascribe this to a favorable Purchasing Manager's report which will be all but forgotten by tomorrow.

http://biz.yahoo.com/rf/990802/p5.htmlThis is one of the larger operations I recollect seeing throughout the past. Is it a sign that depositors have been withdrawing their precious deposits (cash reserves) from mainstreet banks?

http://biz.yahoo.com/rf/990802/tw.htmlToday's numbers that drive or fail to drive the markets.
Spending on U.S. construction projects rebounded in June after two straight months of decline.

test

Does anyone know what the low for spot was on closing basis???

Just a few thoughts concerning Y2K, and just a few because this subject could fill volumes. What will happen when the masses begin to become concerned about potential Y2K problems? Or will they even become concerned? Ignorance is bliss. If the general public becomes concerned about Y2k, then perceptions and panic may be more destructive to life as we know it than the actual event itself. Consider if you will that a recent survey revealed that 44% of US companies have already experienced a Y2K failure.

Some examples:

1) A grocery store in Warren, Michigan experienced a Y2K failure when a cashier swiped a credit card bearing a 2000 expiration date and crashed the entire computer system.
2) The Pentagon Global Command Control System computers failed during a Y2K test last summer.
3) In 1989 the Social Security Administration computer system crashed when a district office setup a routine payment schedule into the next century. SSA computers are still not Y2K compliant. Also, if the Treasury Dept. computers aren't compliant, then SSA checks will get printed.
4) Coff's Harbour, Australia did a Y2K simulation on the local water treatment facility. When the roll-over to year 2000 occurred enough toxic chemicals would have been released into the water supply to kill the entire population.
5) A Y2K test on a temperature control system at a power plant in the UK failed. The control system clock was set prior to midnight Dec. 31, 1999. 20 seconds later the unit tripped on the high generator temperature. The process valve for the control valve for generator cooling is integrated over time for smoothing. When the date moved from 1999 to 2000, the process valve was integrated to infinity and the valve closed. This system is common throughout Europe.
6) IRS computer systems look to be in bad shape (this could be good unless you expect a refund). Since 1986 the IRS has been working to upgrade their computers. In 1997 (11 years and $4 billion later) the IRS admitted defeat before congress. This upgrade project did not even address the Y2K problem. IRS commissioner Charles Rossotti said that there is no contingency plan for Y2K.

As of June, 1999, large US companies reported Y2K progress to the SEC. Only 42% had completed inventories of critical computer systems. The next phase is to determine how pervasive Y2K problems are, and then to decide whether to hire outside consultants and then begin repairs. It's already August 1999!

There are over 600 computer languages in the world with several hundred billion lines of code with multiple links. If one link is "broken", then like a string of Christmas lights, the system breaks down. All this code survived through various forms and much was altered for different applications. A "fix-program" can not possibly scan this code and it's numerous variants. Many programmers of these older codes often used their own style as well. Not to mention there are over 3.3 billion microprocessors, besides there are not enough programmers that have experience with old programs to "fix" the code before Y2K. It's possible that it wouldn't makes a lot of difference anyway. There are over 50 billion embedded chips (as many as 1 billion are date sensitive). There is also the problem of "Backward Compatibility". Computer companies realized early on that they could not expect that clients would continually upgrade their software every time a new version was developed, so they made each subsequent model compatible with early versions thereby propagating the Y2K bug into newer systems.

The Gartner Group, a computer consulting firm in Conn. claims that there will be Y2K problems over a 30 month period. Their projections are: 10% failure in the first 2 weeks of 2000, with 25% failure in 1999, 55% failure in 2000, and 15% failure 2001. The other 5% failure occurred before 1999. During 1999, programs that look forward to 2000 will be a source of failure. Efforts to fix Y2K could be further sources of failure by introducing software errors and corrupting data.

The biggest problem could be the date sensitive embedded chips. Chips that are based on SCADA (Supervisory Control And Data Acquisition systems) are used extensively in the Petroleum sector. Many chips are in systems in the subsurface or under water. Many chips are no longer made, others are built so the entire units must be replaced. These chips are used in drill-rig platforms (over 10,000 embedded chips in the average off-shore platform), refineries, and pipeline distribution systems. If there are Y2K failures in the any of these areas, the implications are obvious. Most goods are created or supplied to the market based on "Just in Time" inventory (JIT) so as to reduce inventory taxes. A disruption in petroleum supplies could create a lot of havoc. Goods would be difficult to supply to the market. Supermarkets plan on a 3 day turn around on deliveries. Petroleum production is roughly balanced to demand (again, to reduce inventory taxes). Fuel could be in short supply in a Y2K crisis.

What will happen at Y2K? I don't know. I don't think anyone knows for sure. But hope for the best, and prepare for the worst. Keep good records of important documents, get a minimum of a few weeks worth of food, water and other necessities. Most people have insurance for life, health, auto, home, etc. But in a worse case scenario be sure to have portfolio insurance. Buy gold and silver (physical and even mining stock).

Do you think that all will be OK come Y2K? Perhaps, but what if��..

Something like thirty two ipo's coming to market today...some kind of record...unusual for august...guess what? most of them internet related...who would of thunk...qtr refunding numbers will be released on wednesday...expected-35 bil...

I may be wrong, but the $/yen is approaching a crucial point within the next 36 hours. Various long term cycles have targeted Aug 4 as a key date. We shall wait and see.

The Stranger,

Thank you for your reply. I have great respect for your opinions, and your reply had somewhat of a calming effect on me <>.

It seems all the "surrounding events" and the foundation for a gold rally are in place; do you have any opinion as to when the actual gold rally will occur? I note that Bill Murphy of GATA has posted the "heat" will soon be on the bullion banks for their collusion, so hopefully that drag on the POG will soon be removed. Koan's excellent posts have drawn me into the silver market. Have you any opinion on the prospects for silver and silver stocks generally?

Thank You,
canamami.

http://biz.yahoo.com/rf/990802/1c.htmlHere's one for you tecnical trader-types to jump in and compare notes. In this article, chartists point to several factors for their cautious outlook for Wall St.

http://biz.yahoo.com/rf/990802/1g.htmlWelcome to the monetary world of the IMF...
The IMF economic review took place on the day that the fund effectively rolled over Russia's debts to the IMF with a new $4.5 billion loan.

The IMF released $640 million from this credit immediately, but the money will go straight into an account at the IMF and will never actually reach Russia.

The IMF simply will not suffer itself to sit idly by and watch old debts fail in default. Keep 'em rolling, boys!

http://www.smh.com.au/news/9908/02/business/index.htmlYou've got to read the first five paragraphs...the "scam" which is internet IPO's.

http://www.smh.com.au/news/9908/02/business/index.htmlManaging the frontier where technology meets humanity.

http://www.cba.uh.edu/~rsusmel/7386/ln1.htmAristotle (8/2/99; 0:04:57MDT - Msg ID:10122)
FOA thanks for your Saturday effort!

Aristotle,
If you have read my Saturday #10016/10020, I want to add on to that line of thinking. SteveH asked where it all started so I told him "Jamaica Accords". In good order, Cage Rattler #10065, found a nice rundown about the entire evolution of the world monetary system. The link is above.
Everyone here should read all of it because it helps put into perspective much of the Historical material that we analyze.

In section, 2.B Bretton Woods Agreements (1944-1973), it gets right into the breakdown of the money system. --------- "In January 1976, the IMF convened a monetary summit in Jamaica to reach some agreement on a new monetary system. The Jamaica Accords formally recognized the managed floating system and allowed nations the choice of a foreign exchange regime as long as their actions did not prove disruptive to trade partners and the world economy. Gold was demonetized as a reserve asset. The Jamaica Accords were ratified in April 1978." --------

This is where many investors lose the concept and start declaring "manipulation"! Right here, our leaders agreed in writing to a "managed floating system". I guess it needed to be clarified further in the form of "manipulated floating system". Nothing here about moving the currency markets in response to "free world supply and demand" is there?
Next, it gave an open hand to using whatever a country thought was best as a currency or reserve. This item, "allowed nations the choice of a foreign exchange regime" was hotly debated, I know! Because everyone knew what it meant. It was aimed directly at the "new" gold market. Buy on the market all that you want, but be prepared for the price to soar. If anyone, just had to get rid of their dollars quickly (in a year or so), you were not going to get a deal.

Their purpose was to sell gold over time (many years), so as to allow the markets to balance themselves. To do this, they didn't "demoneyize" gold as everyone on the planet has said they did. The Europeans and the oil countries would have dropped the dollar right then and there. They only demonetized gold as a "reserve asset", repeat, a "reserve asset"! This was the only way to unlock gold for delivery and or modern day trading without driving up it's price.

Notice that these accords were not ratified until April 78. Right after that , in the fall, the US started selling gold in a "controlled burn" (because it was no longer a reserve asset) to satisfy those who wouldn't wait. Don't get me wrong, everyone bid on it because no one knew if the
accords would work "over time"! Price inflation was to be the balancing mechanism until gold could again be sold into the sea of foreign dollars.

A big agenda for the US in all of this was to get the price of oil up! If this action didn't accomplish that, every US producer was going to run out of oil reserves because of our high cost production. The Middle east could, and still can, produce for almost nothing compared to us. But that's Another story.

We suffered through most of the 80s waiting for more gold to be sold. Europe (and oil) got tired of waiting and proceeded to build the Euro out of the EEU. Isn't it interesting how quickly the LBMA was born to market gold, in the late 80s in response to this new initiative. Their first
purpose was to create a paper gold market to trade commitments of CB gold. The dollar price of oil has been falling in fits and starts, right along with this new liquidity in the gold market.

This rough explanation brings us into the 90s. But that is where things started to change. SteveH is asking (hi Steve) for a look at a written agreement. The real contracts are written in the LBMA commitments. As for a international or heads of government signed accords, the Jamaica is a close as you will ever see. Often, in politics, protocols are but forced standoffs. Just like when two armies stop shelling each other. Someone makes the wise observation that "the generals must have come to an agreement to stop fighting". Yet, a reporter, trying to make a "responsible"
assessment to the public, asks "when will we see a copy of the contract?"! My friend, the observer exclaims, "the events and the actions are the agreement"!

Going back to my earlier posts:
Aristotle, when the dollar went off the gold exchange standard in 71, it was the modern day equivalent of destroying the gold market. Back then, all dollars were "gold loans" in every sense of the word! The world dollar market was the gold market that everyone used. When that market failed, because there wasn't enough gold to deliver against the "gold loans", everyone was left holding "empty gold loans" in the form of dollars!

Yet, today, tell people that the gold derivative markets that represents 90% of the entire gold market is going to fail from non delivery, and they don't conceive it can happen! This is an arena that isn't even a government treasury production, as the dollar was back then.

Every mining company in the world is required by their local governments to sell their gold for currency. None of them are allowed to barter that gold for goods and services. If the present world gold market fails as the dollar did in 71, the price of gold will continue to be established
through trading on this same "discounted" derivatives market. Just as people kept trading and using "discounted" dollars after it failed in 71 as a contract for gold. Yes another physical market will no doubt develop, but no new "from the ground" production will be allowed to trade "off the established exchange". Just as US "savings and loan banks" continued to operate as viable institutions, even though they were worthless, so to will the LBMA be propped up by the US/IMF because it is too big to fail.

This entire play will be acted out during the confines of a transition of currency power. The final evolution of the dollar from world reserve currency into the Euro as reserve currency. I suspect that an alternative physical gold market in Euros will begin to show this destruction.

Everyone should read Mr. James Turk "What Does It All Mean" to grasp just how "non-typical" this market truly is. Many of the old accepted actions of gold, in response to "usual" events are being invalidated. Through out the net, gold thinkers continue to look for a return of "inflation" to bring back the "good old days" of "bunker Hunt silver" and "fast rising comex gold"! The future may not repeat the past. We shall see. In the days to come, we will do well to consider following in "The Footsteps Of Giants" as they continue to lead in a direction of "physical only"
gold. FOA

http://www.usagold.comFOA, you state:
Every mining company in the world is required by their local governments to sell their gold for
currency. None of them are allowed to barter that gold for goods and services. If the present world
gold market fails as the dollar did in 71, the price of gold will continue to be established
through trading on this same "discounted" derivatives market. Just as people kept trading and using
"discounted" dollars after it failed in 71 as a contract for gold. Yes another physical market will no
doubt develop, but no new "from the ground" production will be allowed to trade "off the established
exchange".
FOA, On what basis do you make this statement? Is your basis the same as is true of any business or individual? That is, any government which taxes, taxes in its currency. That is the oldest and surest way to make sure a currency is used. (For example when one country conquers another.) There isn't any prohibition that I know of against disposing of goods and services in anyway you please including barter in the USA for example. It's just that your government will require you to value those goods in terms of the currency in which you are taxed. Is there some other explicit restraint that applies directly to gold mines? Carl

Thanks for the compliment. It means a lot coming from one of my heroes.

I don't know silver at all. Period.

As to the gold market, I feel pretty secure right now. If you were to look at a chart of the Philadelphia Gold and Silver Stock Index (XAU) you might be surprised to learn that it is higher today than it was a year ago. For that matter, it is higher today than it was a year and a half ago. Even bullion prices are down only about 10% in the last eighteen months, this while precious metals endured the worst character assassination of any investment asset class in years.

The point is, there isn't enough negative momentum to indicate more downside here. Furthermore, we have the most compelling value story in the markets. So things are clearly in place. It is just that anybody who is on the internet as often as you and I are, is probably watching too closely and making himself miserable.

Last week, repeated newscasts were reporting a nasty drought in much of the U.S. Yet grain prices hardly responded. I couldn't figure it out. Finally, today, they go nuts.
Obviously, important market changes require important psychology changes, and important psychology changes just take time. That's all.

Forgive me for repeating a metaphor I used over the weekend, but the only thing you can make with a recipe for soup is soup. And that is what we have here, cananami, a recipe for soup. In no time at all the soup will be on the table.

Cavan Man (07/31/99; 20:32:03MDT - Msg ID:10028)
FOA
I understand your reasoning, I think. You are presuming that the Euro will replace the dollar as the world requires a reserve currency. "Europe" has never been in the lead nor has any European country been a dominant player in geo politics since Hitler. I discount Russia because, IMHO, the
Russians are not Europeans. I discount Britain because I really don't believe the British are or were Europeans and I believe they believe the same. The Euro must be forced into a role of monetary dominance yes? Is this the oil position? Also, I ask you and Another for a third or perhaps fourth time now; why would the rest of the world let the economy of the strongest nation on earth ( debatable I agree)go into the tank? Yes, there is a penalty for sin even with repentance but why level the US economy? Can't it be saved? Please elaborate. Thanks.

Cavan Man,
When a currency dominates the world, it usually isn't forced into that position. It evolves there from forces governments cannot stop! Did you think the entire world wanted the dollar to be on top from long ago? A quick history read will show that other governments tried to prevent it, but couldn't. Just as the British Pound fell from dominance, they didn't want it to happen either, but
couldn't stop it.

Understand, the dollar isn't being forced out of position because it's getting better. It's building so much debt that it's destroying the current world economy. If you think it's been doing a good job, then please read the history of Foreign Exchange (in the link I provided earlier). My friend, battle after battle has been fought to save the dollar, not destroy it! Did you think Nixon took it
off the gold standard to "kill it"? No, they were trying to patch it back into some useful form, as nothing else was available.

The world economy will demand a useful currency as the dollar further fails to do it's job. They will go to the Euro for the same reason they have stayed with the dollar all these years, "there isn't anything else"! As this modern world has evolved well past the use of physical gold as a
circulating currency, a "free world gold market", not based upon any government will provide the "mark to the market" valuations governments need to measure paper money in trade. The Euro will indeed be held against gold, but not as a gold loan (as in contract currency at $35 to the ounce) standard of the past. That system clearly failed as the present dollat/IMF gold market shows.

Does Europe want this position? I doubt it, but given what is coming down the pipe for the dollar, they will most likely be glad for it.

My friend, I (as taken from Another) use the term "western view" because it is a clouded perception of how the world sees the dollar. For the dollar countries, it buys much at the expense of others. The very strong dollar that "bulls your stock markets" does not clearly represent the
value of the foreign goods it is exchanged for. Your view is to save the dollar and the US economy because it is holding up the rest of the world. That is the very problem, as only on a dollar based reserve system does this occur. Instead of using a currency based upon only one countries interest, the USA, use a currency based upon the "conflicting" interest of many nations, the Euro! Under such a system, world trade and exchange rates will balance more fairly. Would you still find fault if the rest of the world economies were holding up the US as opposite from what you suggest? A positive trade deficit for the US in their dollars would indeed "prod your perception", I believe. Let us see if this great economy can stand on it's own feet with the yoke of paying it's debts from "real production"? We may indeed get an answer to this dilemma.
FOA

Carl (8/2/99; 13:38:54MDT - Msg ID:10157)
@FOA on forced selling in currency by mines

FOA, On what basis do you make this statement?
Carl,
On the contrary, can you name one major mine in the US that "has" bartered it's gold production? I would like to see that dynamic in action. A large mining operation, with perhaps hundreds or thousands of employees, bartering gold directly onto the market during a full blown currency crisis. Foreign exchange controls and restricted movement of currencies would be enacted in about , oh let's see, 8 hours? Just in case you don't think your government classifies gold as a currency, wait until a banking crisis begins. The truth will be on the front page of your news paper the next day. When a Gold loan crisis threatens to collapse the world dollar based banking system, do you really think trading in gold will be open and free? If yes, you should follow your spirit.

Carl, the context from where I speak is not during these tranquil times. When you need the value that gold provides, to compensate for "other loses", gold in the ground will be "quickly" held in place as "necessity" changes the rules of engagement. Your government will not confiscate gold again, as long as it retains the use of the US dollar as legal tender, but it will, in an emergency block the movement of all gold until it's value can be shared through taxes. thanks FOA

http://www.usatoday.com/money/charts.htmClick the link above for a rather ugly looking collection of charts.
The DOW, Nasdaq, and S&P all gave back large intraday gains to settle
with moderate losses. Only a mad-man would suggest that this single
day marked a key reversal in the markets, but I like the sound of the
term and wanted to work it into a sentence. Following last week's
dismal stock market performance, and in light of the semi-benign NAPM
report, one might have expected the equities to eke out some small
gain. It didn't happen. The long bond reflected the sentiment of a
weaker dollar, and closed down 3/32 in price (after an overnight
whipping), driving the yield up to 6.119%. In one step closer to
the real economy, the CRB closed up 1.6%, the first time it has
ventured above the 200-day moving average since November 1997.

In the gold markets, the December gold contract (GCZ9) drifted down
one dollar as the DOW surged ahead at midday. The gold trading closed
at $257.8, only minutes before the DOW went into its 100 point freefall
to end the day. I guess we'll have to wait and see what reaction
tomorrow may bring. The Dec contract range today was $258.8-256.60, while
spot gold closed in NY at $254.10.

Describing the London gold market today, "It's just been so quiet," said
one London dealer. We wonder if this is evidence of buyers walking away
from the paper market as has been discussed by some here at the Round Table.

Two responses from a Reuters poll of analysts seemed worthy of passing
along:
First, from Salomon Smith Barney, "In the face of massively negative
sentiment, we remain unrepentant bulls. Indeed, the longer prices remain
entrenched at historically low levels the more convinced we are that the
rebound -- when it comes -- will be more explosive than our 2000 estimate
of $350 per ounce suggests."

And finally, "I am very firmly of the view that if gold stays at current
levels or sinks lower, there is going to be a strong supply side response,
that is, closures and corporate stress," said Greg Foulis, a resource
analyst at Deutsche Bank Australia.
This is borne out by a Bridge News report of the National Statistical
Institute (Inegi) indicating that Mexico's May gold output was down 32.5%
compared to a year ago. That's one-third. A substantial amount, in my book.

The Financial Times reports that an economist at Warwick University has
concluded that if the UK is to join the European Monetary Union without
causing considerable damage to the economy, the pound needs to depreciate
by more than 20%. If I had a sterling savings account, I believe I'd be
changing my color to gold.

And in oil news from Vienna, Bridge reports that Iranian Oil Minister
Bijan Namdar Zanganeh said OPEC's market monitoring committee would
recommend that OPEC retain its current output cut pledges "at least"
until the expiry date in March 2000, and that the policy was necessary
to ensure the rise of average oil prices is sustainable.

And that's the view from here...after the close.

I thank you for taking valuable time to answer my questions Sir FOA. I will need to read at least twice to be able to absorb the comprehensive impact of what you suggest.

Where can I buy Euros? Thanks!

http://biz.yahoo.com/rf/990802/zd.html>``You certainly have illiquidity and people not wanting to hold positions,'' said a swaps dealer for a major U.S. bank. "While we don't have a credit crunch, we certainly have people who don't want to be in credit product, and swaps is just one avenue for them to get short risk that they otherwise can't necessarily get short."<

More evidence, Townie ??

http://news.bbc.co.uk/hi/english/world/africa/newsid_409000/409861.stmThe main countries to which Mozambique owes money have agreed to reschedule the country's international debt, with the Paris Club agreeing to write off $112m, etc.

Would anyone care to comment whether they feel this type of write-off is deflationary to the world money supply?

The subject of gold is so complex in its reachings, touching the past present and certainly the future of not only economical, but sociological standards, changing even borders of countries and peoples because of its natural value and by its comparison to all other things that make a claim on value. Gold has been the timeless standard because while civilizations come and go( and currency) it remains to become the building block of the next future and in the end men cannot be trusted to do the right thing especially when it comes to money.
Aristotle - thank you for your input.It is not easy to see what the future may hold for us during stable and good times . What we are facing in our future is perhaps hard to see because the "fire" ANOTHER refers to has not started in its totallity and the landscape of financial assets will be entirely different because of it.
I believe it to be reasonable that the fed is aware of this coming blaze and will try to at least try to have a controlled burn. We'll have to see how hot it gets and if they lose control then it will be difficult to know where we will end up. If that happens and extreme times then will call for extreme measures it will give control to them
to do extreme things ,that we can't even see, until we are there. got gold

One area of the NAPM numbers that was not reported by mainstream media...the backup in deliveries...there are bottlenecks in the grand ole supply system...that's new...

http://news.bbc.co.uk/hi/english/business/the_economy/newsid_409000/409904.stmDespite tough talk by the Japanese government, the dollar is gathering no moss these days.

Yes, turbo, methinks we have a rolling stone, falling down Mt. Fuji.

http://www.usagold.comMy Dear FOA, Your words touch on so many things, they make my simple head spin. I have little knowledge and must depend on logic and simple consistency with what I do know in order to find my way.

FOA, When the illusion was dropped that you could get an ounce of gold for $35, was it not the $ that reduced its price relative to gold? When the time comes that people holding paper claims on gold wish to or need to lay claim to gold, is it not likely that existing claims will "burn", as ANOTHER puts it? So, if this "currency" continues to be used to purchase gold production, isn't it going to take more of it to purchase an ounce of production just as it takes more than $35 to trade for an ounce of gold today? And if governments try to legislate how and where and what mines can trade for their production isn't this likely to be a time consuming and contentious enterprise affecting many countries and conflicting interests? As for trading, one doesn't need to even mine gold in the ground in order to trade it. Companies can exchange reserves as well as total ownership of assets with others. Maybe gold reserves for oil? Just kidding, Carl

I swiped this post from Yourdon's forum. I can't access the original.

Post follows;

"Here's what I put together about this Wall Street Journal article for today's Sanger's
Review. This smells like a major power play. This was announced on Friday afternoon,
(traditionally when news like this is announced, because nobody's paying attention) and
I haven't seen reference to it anywhere else. Anybody want to take a stab at this?
Andy? Mr. Decker?

-- This looks like pretty big news. While I'll admit that I don't understand all the
specifics, the broader implications are clear.

"In a bid to protect London's markets from year-2000-related computer problems, the
Bank of England will increase the pool of securities it will accept from banks as
collateral by about 2 trillion pounds ($3.23 trillion), a whopping sevenfold increase...
Some market economists also said the change -- particularly since the additional
securities will be denominated in euros -- would enhance London's position as
Europe's main financial center." Tony Norfield, global head of treasury research at
ABN Amro Bank said, "It looks as if [Britain's central bankers] are setting themselves
up to be a major liquidity provider in the major foreign-exchange financial center in the
world... Despite the fact that Britain is outside the [European economic and monetary
union], the Bank of England has made it clear that London financial markets won't be
marginalized simply because the U.K." isn't a member of the 11-nation bloc that shares
the common euro currency. The article then goes on to discuss the "range of
Euro-demoninated securities" that it will accept, "repo operations" and "swap spreads,"
and other economic arcana. Based on all of this, George Magnus, chief economist at
Warburg Dillon Read said, "People will draw the conclusion that the bank stands ready
to stand behind the system."

The original can be found at:

U.K. Central Bank Widens Pool of Securities to Boost Liquidity. If you don't have a
subscription to the WSJ site, and would like to read the entire thing, e-mail me, and I'll
send it to you as an attachment.

-- pshannon (pshannon@inch.com), August 02, 1999"

-- end post

ET

I also have a question for you and/or someone who posts on your forum. I was speaking to a good friend of mine last night, and he raised the question as to whether the USA$ was actually off the gold Standard. He was of the opinion that in 1971, the USA did not remove the gold backing of the
USA$. He was implying that the government document (Bill or ?) did not actually state that, but was interpreted that way. Would you have a site location where I can find this document to read for myself? SS

--------
Can anyone help SS?

http://www.year2000.com/y2kcurrent2.html
Here is a well-balanced assessment of the power industry in North America and how it might be affected come the end of the year. A good read.

ET

http://www.alltexas.net/news/bastrop.html... for the chrispiracists (where you at, Christine ??). Links to pictures are included at the site.

>Bastrop.. AllTexas News� Nestled behind a hillside, just out of sight from busy Highway 95 in Bastrop County, Texas, lies a growing fleet of nearly a thousand showroom-new SUVs, 4WD pickups, suburbans and vans.� These vehicles are not overflow storage for an overstocked dealer.� This fleet is owned by the federal government.

All the vehicles are U.N. White.<

http://www.insightmag.com/articles/story4.htmlfor those interested in what Congressman Ron Paul has been up to.

for still more info on his activities, follow the link embedded in the article to the Liberty Study Committee, an organization he's put together.

From your earlier post

Cavan Man (8/1/99; 6:28:07MDT - Msg ID:10056)

"Regarding my post from last night, what I am trying to resolve for my peace of mind is have I done all that I can do while preparing for the worst and hoping for the best as MK would say. Do I own enough gold? Should I short the market in my IRA or sell and take the penalty?"

Good heavens, there's no need to take the penalty if it is Gold you're after with your IRA. Give Michael right here at USAGOLD a call. He can work with you to roll your IRA right into physical Gold holdings without the tax penalty of withdrawal...you can keep the whole thing as Gold if you wish, or transfer whatever fraction you deem necessary for peace of mind.
And as a bonus, how's this for peace of mind--you get all of us steadfast knights as guards for your IRA treasury! ...well, sorta.

Give MK a call, I think he can help you sort some of that business out. Good luck!

Gold. Get you some. ---Aristotle

Carl (8/2/99; 15:51:56MDT - Msg ID:10168)
Reply to FOA

My Dear FOA, Your words touch on so many things, they make my simple head spin. I have little knowledge and must depend on logic and simple consistency with what I do know in order to find my way.
FOA, When the illusion was dropped that you could get an ounce of gold for $35, was it not the $ that reduced its price relative to gold? When the time comes that people holding paper claims on gold wish to or need to lay claim to gold, is it not likely that existing claims will "burn", as
ANOTHER puts it?

Carl,
In the real world there are two kinds of dollars, ones held by persons living within the US and ones held by persons outside the US. Under normal conditions, these same dollars can buy any item in any country through out the world. In Japan you trade them for Yen, then buy a car. In
Britain you trade them for pounds and buy a TV. One can even live in Germany and send the dollars back into the US, without conversion and buy a computer. In these "normal" times, most of these "overseas" dollars stay overseas and circulate around, constantly being exchanged for other native currencies to buy goods.

This vast block of US currency, once termed Eurodollars, floats "with value" outside the US for two reasons:

1. The "confidence" that they can be sent back into the US to buy goods. Without this ability, they are worthless as every other nation has it's own money for local trade. That is why an Englishman (as example) usually has to "exchange" his dollar holdings for pounds before buying in Britain.

2. The world CBs make a vast inter bank market in dollars because they hold them as trapped reserves. They were trapped into these holdings a long time ago when they held these dollars as "gold loans". Before they could exchange them back into gold from the US, it negated these gold loans. In order to maintain the world monetary system, once based on this contract currency, the dollar, all CBs simply continued supporting (trading) the dollar. So the vast block of overseas dollars continued to grow. With the US having trade deficits all the time, these dollar holdings
have now grown into a huge proportion.

These foreign dollars can never come back into the US to buy real goods. There are simply too many of them. We could never create enough real things to sell for these dollars. Besides, much of them are held as "assets" for savings, and not seen as earnings to spend on daily bread. So, without the above two items in play, we see why the dollar value of gold is so important, "overseas"!! The gold price in local US terms is meaningless to most here because, being a local
currency one can spend his savings on local goods.

So in real life, a war, a financial upheaval or even natural disasters (California sliding into the sea) can create a situation where the "open door" for dollars to return home to find value, could be closed! Often referred to as "external foreign exchange controls". In this light, countries that run massive balance of trade surpluses with the US (many dollars flowing into their banks from the US) must look at the dollar in terms of what it used to be, a "gold loan" contract currency. Truly, in the larger sense, for overseas dollars, the amount of gold it can buy is still it's only true value. A local in the US would not perceive this threat as the door would not be closed upon his
holdings! Now you know why a falling price of gold makes the overseas holdings of dollars "strong" in reality if not perception! We have never moved that far from Bretton Woods. In gold value, yes. In concept, no.

What does this have to do with our original discussion? A failure of the world gold market would create a massive run to unload "foreign held dollars" for anything real. Gold first, everything else second. The flood of money into the US would bring absolutely solid exchange controls upon
dollars entering the country. Every other country would respond in kind. Any form of paper gold would be discounted in price to reflect it's slim chance of having gold delivered against it. The local US paper gold market (comex), would see it's dollar price fall to but a fraction of the value that trade for physical gold would bring. No one within the US could trade any gold inside or outside the country (where the dollar price would soar) because of the money flow controls (for reasons I stated in earlier post). To bring order to the system, the government could sell it's
treasury gold to the comex at a discounted price. Or they could demand the local mines to sell gold to Comex, the only market for them to sell into.

What about the value of gold mines outside the US. They would face the same problems as they would be blocked by their local governments from selling gold for dollars. They would have to also sell in local currency.

Or all trading in gold could be blocked for a while, worldwide. Sure, there would be a huge black market. Only big gold mines are "very obvious" traders and can't move their mines to hidden places.

Carl, none of this may happen. I do not consider you as simple a thinker as your post offered. I can only say that the Giants do not need mines or the problems they may present during these troubled times. Besides, when the dust clears, physical gold will offer more than enough return for
the average person. I expect a true world free market for physical gold to be coming. We have plenty of gold already produced and circulating to trade in this arena. Only, this time the currency price will not only reflect gold's value as money, it will allow a vast liquid pool for savers to hold their long term wealth. Unfortunately, the governments will most likely be attracted to using unmined gold for national expenditures. FOA

Good idea! I met MK a couple of months ago and asked about an IRA rollover into PM. I reviewed the data and then filed it. Here's my personal conundrum; my timing for investments is typically not too good so although my intuition and the education obtained here telss me "DO IT", I am having great difficulty pulling the trigger.

By the way, I can't speak highly enough about our host though he's is much shorter than I imagined.

Keep those lessons coming.

Hey FOA - thanks for your continued presence here. That was a wonderfully cogent explanation of the contrasting views of the dollar depending upon where you sit. Given your explanation, do you think that perceptions of possible problems surrounding the y2k issue might precipitate this 'closing' of the dollar door? I posted something earlier about the BOE and their apparent attempt to become very liquid come the end of the year. It is interesting that they intend to denominate this increase in liquidity in Euros, not pounds or dollars. Is this the first public shot across the bow of the US dollar?

ET

http://www.gold-eagle.com/editorials_99/rc062199.html"Oil and Natural Gas: Are They the Real Problems in Y2K?"

After reading this article, try to make a case for the idea that Y2K is no big deal, to be fixed in a few weeks, and then back to "normal". Go ahead. Dare ya.

http://www.gold-eagle.com/editorials_99/rc062199.html"Oil and Natural Gas: Are They the Real Problems in Y2K?"

After reading this article, try to make a case for the idea that Y2K is no big deal, to be fixed in a few weeks, and then back to "normal". Go ahead. I dare ya.

Sir Towncrier, msg 10167,

"...a rock is falling down Mt. Fuji..." Does this imply that the US$ is in trouble or the Japanese economy is still in trouble or both?

Sir Watcher and Sir Black Blade msg: 10165 & 10148 respectively,

I agree that the 'economics of gold' is a difficult study. When I began my research 1 year ago I assumed that the POG was simply in a reverse relationship with the price of money, ie market confidence, rate of currency and the general confidence of the economy. The POG, the value of gold, the confidence of gold is so difficult to read and understand almost makes me 'nuts'. I should have been a farmer, pigs et al, invested in wheat or something. On the other side of the coin, I have noticed an inverse relationship with the POG and the DJIA and Nasdaq lately. Am I wishfully thinking or is my earlier statement correct at its simplest form?

I think the Y2K issue to be highly relevant in all gold discussions at this junctor in time. Sir ET , in his ultimate wisdom said, "....the fear of Y2K is of greatest concern and the final outcome of 'IT' SHALL determine direction... "

(ET; please talk more of Y2K; your theories may enlighten
the dozens who post and the hundreds who 'lurk').

The issue of Y2K is twofold. The psychology of it and the technical side. The technical side of it is easy to explain. Computers will fail if not remedied of any 'time scheduled programs'. That statement is a generality. I work in the Y2K field, I fix voicemail/I.V.R. systems. Voicemail/IVR systems have time dependant programs and they require 'working', some are easy to fix, some of them are 'written off' because the repair is more than their worth. A new system is installed. The point is many computers have to be fixed. The Y2K problem is, in a nutshell, a) are the correct computer and computer systems going to be fixed and b) are they going to be fixed in time?

The answer to a) and b) is no (ie NO). There is no shade of colour in that statement, the answer is NO. One hundred percent of the computers on this planet are working at this instant (for arguments sake). Is there a man\woman on this planet who can tell me 100 % of the computers are going to work in Jan. 2000. NO. Therefore, some computers and computer systems will fail and today's discussion revolves around how many will fail. I am going to go out on a limb and say of the 200 trillion computers on the planet 1 billion will fail, that's 0.5%, one-half of 1 %. Insignificant, I don't think so given that every single was working today. Where do I get these numbers, nowhere, I made them up. The point is , computers will fail, the outcome is unknown. Or is it, my belief is the more complex the computer, the older it is, the more date sensitive it is, the more apt it is to fail. If one billion very important computer systems fail we are up to our eyeballs in excrement.

The psychology of Y2K is problem #2 and probably more open for debate. Some people have not heard of Y2K and consequently don't know, some people have heard and don't want to listen, some people have heard and deny any possibilty of a mayhem. Let's say , for discussion sake that 60% of people fall into the above crowd. That leaves 40% of people that realize that Y2K will have an impact on life. Of that 40% (the original 40%) perhaps one-half believes there will be 'a bump in the road', 10% believes there will be substantial screw-ups and the remaining 10% believes there will be mass chaos. If the 10% mass chaos crowd gains momentum in the last 22 weeks (and you haven't heard that expression yet) look out for fireworks. I feel the 60-90 year old people are vulnerable to the 'psychology' effect, "...my great grandson told me the banks are going to go bankrupt ... I'm getting my money out of there tommorrow...". My mother is 63 years old and doesn't know a telephone from a television, if I told her tommorrow of the 'impending doom' she'd tell 25 of her gizer friends and her little town bank would be stripped clean, that's all it would take. My point is, if Y2K starts to get a negative roll, a negative spin to it, the media will hype it to the limit, and I bet it will happen, and the 'psychology' of Y2K will be an issue. We, in North America have seen the effects of the media over the last 10-20 years. I watched the O.J. spectacle from north of New York state and I curse the media.

In summary, Y2K from a technical standpoint and from a psychological point-of-view will dictate 'direction' in the last 22 weeks. And last but not least, who believes the Y2K hit will coincide with the 'bubble burst'; in my opinion it has to, the non-confidence of the 2 issues, albeit different will cast the same outcome.

each having to give their own twist as to what they heard. I did send this to a friend.

Leroy,

Forgive the lengthy post. If Mr. FOA and A are anything, they are
prolific. Gone are the days of their innuendos and parables. Here are
their days of direct statement, no matter how hard it is for us to
swallow them as Americans or Canadians. The message is important,
whether they are 100% correct or just 25% correct. The point they make
is that the US is in tremendous debt and now has competition vis-a-vis
the Euro for reserve status. Further, they hold that gold is THE MOST
IMPORTANT money in the world, simply because 1) the major oil country of
the world believes this and is taking delivery on physical gold for its
oil and 2)the vast amount of dollars held in reserve world-wide view the
gold in Fort Knox as the ultimate exchange for dollars. It does not
matter, according to them, that the dollar price of gold has continually
fallen from 1979-80. They say that this was planned at the Jamaica
Accords by the nations of the world in order to demonetize gold and to
put gold into the hands of many. Some gold found its way out of the
Central Banks of the world but for the most part, little physical gold
and much paper gold has been sold: to the tune of 14,000 metric tons. In
other words, paper commitments for seven years of production has been
committed.

Sadly, A/FOA subscribe to the notion that through the trading at the
LBMA (London Bullion Market Association) -- a hidden or non-transparent
market -- and the COMEX in New York -- a much smaller market but one
that sets the price for gold without actually delivering much physical
gold, a transparent market -- paper gold is now in immediate danger of
defaulting. That's right, defaulting: the LBMA and COMEX is a game of
musical chairs with very few chairs. The music is kept playing because
of the broad impact silence would bring. The Bank of England auction,
the negative press on gold, the negative statements by high ranking
members of the US and England are all new songs to keep the Bullion
Banks and Hedge funds from rioting for the few physical seats of gold.

The importance of the gold market to world economics is vital to its
continued operation as anywhere but in America, where Americans under
the age of 35 have probably never seen 24kt gold, gold is viewed as the
ultimate money. When the paper gold market music stops and the 14,000
tons of paper gold stop, two things seem likely to happen. First, no one
will want paper gold any longer. Second, confidence in the dollar may
tank because there will less and less buyers of US denominated gold
paper. Either the contracts will be settled in gold, or when that runs
out, in Euros -- the competition to the dollar.

During this period, the price of gold in dollars may actually drop to
$100 per ounce on COMEX. Actual physical will not be available for any
price close to this. FOA even suggests that the Europeans may actually
start a gold trading association for gold and contracts that will show
physical and paper gold at a much higher premium.

Obviously, the English and US central banks have lots of physical to
protect these gold paper contracts but not to the amount of 14,000 tons.
Further, one must ask at one point in the protection of the LBMA and
COMEX paper market will the BOE and the US stop providing gold as it
would likely become obvious a losing battle. Ultimately, the 263,000,000
ounces of US gold in Fort Knox represent the true value of the dollar
and to sell or give it away to protect the paper markets may further
weaken any positive role this gold would bring to bear on this
world-wide golden chess match.

In summary, you have been misled as to the role gold plays in world
finance. No longer should one believe the lie that gold is dead. Gold is
alive, and well, and living in all but the US and England. The proof is
in negative energy put into anti-gold propaganda. The more negative the
press on gold (which has been extremely negative as it only holds a 14%
popularity now per Steve Kaplan) the greater importance it really has.
Why even talk about something that doesn't matter? Gold matters and we
better not be the ones without a seat when the music stops: there are 14
thousand reasons and only about 475 seats.

SteveH

http://www.usagold.comFOA, Thank you for your responses. Now I must think. Carl

Hey AEL - how ya doing? The article you cite has been up for awhile. Did you catch any of the debate at csy2k? The biggest problem with this report is the exclusive use of anonymous sources and to top it off, an anonymous reporter. The report is also full of inaccuracies and his logic is faulty. In the first section on wells, he cites the 'fact' that many embedded systems are inaccessible and therefore cannot be tested. Aside from the known fact that wells must be maintained and if his scenario were correct this would be impossible. He makes the same argument concerning pipelines and refineries. He goes on further to conclude that because they 'cannot' be tested they will likely fail. Pretty big leap in logic if you ask me. He also seems to forget that any particular failure isn't necessarily fatal. It may be inconvenient and require some kind of workaround but to assume that the oil and gas business will not be able to produce and distribute product seems a great leap to me.

This is not to say I believe the situation is any more rosy than any other business but this article has not convinced me of anything. It seems to me that the more likely areas of concern would be overall control systems and business systems. The embedded systems programmers I've read seem to think the vast majority of embedded systems will experience no problems with the rollover and of those that might or will are not necessarily going to cause the process to fail. Most can be worked around if they haven't been replaced in time. That still leaves a significant number of possible problem systems and they could cause some real life problems. It seems like a crapshoot as to whether the process you might depend upon is one that is affected. Of course, if this guy is right and a significant number of failures do occur in the oil and gas business and they can't be worked around, then we would be up the proverbial creek. All in all, I'd like to see more evidence before buying this reporter's view.

BTW - have you caught ESPN's y2k ad for Sportscenter? They've got McGwire fending people off and bunches of candles on the desk as they do the broadcast. Absolutely hilarious!

ET

FOA,

A fine and magnificent post - very clearly stated, and it contributed to a shift in my "understanding curve", as opposed to mere movement along the curve. One quick caveat: Does not a portion of the $US value and importance stem, not merely from the US goods it can buy, but from the US' political stability, the rule of law, advanced securities regulation, fair treatment of foreign investors, immunity from direct military attack, etc. - in sense, is not the role and value of the $US based partly on the public sector or international relations equivalent of the accounting entry "goodwill"? Alternatively, could not economic/political/military stability and the rule of law, etc., be conceptualized as a US "export" which can be contra-accounted against the US trade deficit?

Thank You,
canamami.

Gold showing some continued weakness in overnight trading. When will the goldbug cavalry of whatever origin ride to the rescue?

Canuck, I think that you "hit the nail on the head" so to speak. I was on a flight to Hong Kong recently and was seated next to a worker on an offshore drill-rig platform. He said that his company really had no clue what was going to happen at Y2K. He said that the company's computer gurus have been testing his rig and others in the region for about a year and they still don't know. They have a "fix on failure" policy if any thing should happen. This certainly doesn't should encouraging. I don't know how serious things will get, but I prepare for any eventuality that I can think of. Perhaps a good corollary for the mass hysteria aspect would be to look at our recent past. When the US was under threat from the Cuban missile crisis, people in Florida began to stock up on perishables and store were stripped bare. Some began to travel out of state. Some began to dig bomb shelters. Yet others were quite complacent. This crisis only lasted a few days. If only a few percent of people begin to take Y2K seriously enough, warranted or not, then we could have a rather serious problem in the markets and local stores of goods. If such a crisis were to persist for any real length of time, well your guess is as good as mine. I really don't know the answers to Y2K but it may only be a "bump in the road". I for one am not chancing it. I have seen the third world up close, and if we in the US are not really prepared, certainly these other countries are not. Much of our raw materials and even manufactured goods come from these countries. I worked on a project for one company in the US while they were upgrade their computers and it took several months and this was just a small mine, not the a major part of the company. Many companies haven't even considered the possibility of Y2K problems. I guess it is like Aesop's fable of the grasshopper and the ant. The ant prepared for winter and the grasshopper didn't.

Hey Canuck - your words are most kind, thanks. It's funny, you quoted something I apparently wrote but I frankly don't remember it. Time seems to be compressing for me these days as so many different events seem to be converging. Great time to be alive, huh?

For someone that was returning to lurker mode, you seem to have hit the nail on the head. I believe your analysis of the situation is very accurate. It is a multipart problem. I came to this group to answer this question in my mind. The situation today is very complex. With all the events on the table, it is difficult to determine the correct path one should take with regards to furthering one's interests. Fortunately, because of the many different discussions here, it has become apparent to me that the argument for holding physical gold and other hard assets is likely the best for a variety of reasons.

As far as y2k in general Canuck, I still primarily see it as an economic problem. Death from a thousand cuts, so to speak. I don't expect any single or several catastrophic events to be the big problem. I do believe people are pretty resilient. I would expect in the end that the current monetary system will not survive as we know it today. I do believe dollar based assets are in for a big fall and that is the main problem those that depend on the dollar will have to deal with. Hence, any non-dollar based asset looks better and hard assets look better than that. I think we are seeing the first signs in the market that this view is gaining some credence. Y2k just seems to be the catalyst for this change. I do believe the shift in money will create more problems than y2k itself.

I appreciate your input here Canuck. Trying to draw useful conclusions from all the data around us is difficult. I hope through this medium we are able to come to correct assessments. This predicting the future stuff is hard.

Thanks

ET

http://www.fame.org/research/library/Pubs.htmI found the above URL to be most helpful in researching past histories on the topic of Gold. Unfortunately, for the last few days I keep getting an error 404 when I try to access it. (early Y2K problems?)
One of the articles at the above site did state: "It is illegal to buy or sell or use Gold in every day commerce in the U.S."

Which brings up a VERY important point IMHO! Underground economies have always flourished where Government decree has tryed to stifle popular sentiment, by passing unpopular laws. Has the war on drugs worked? NO!

In person to person commerce Gold exchanges may still be going on in the U.S. and worldwide. It's called; "THE BLACKMARKET". The current perceived worldwide shortage of physical Gold in all forms, along with worries about Y2K, may bring this Gold market into the open, especially if mainstream news ever figures out the "SPOT" Gold market is mostly a paper market, and may be presently in trouble.

Now all that brings up another point;
USAGOLD please correct me if I'm wrong about this.
Ever since it was made legal for Americans to own Gold(early 1970's) the world "SPOT" price has regulated the price consumers pay for Gold, dealers also get a premium.
If the Gold retail business was like most other businesses,--(where the owner of the business purchases product at wholesale prices,and sells at retail)--because of the ever declining price of Gold since the 1980's--they're would presently be NO Gold buying or selling establishments. Any business has to have profit to stay in business, and purchase inventory to stay alive.

IMHO Governments who issue Gold coins have been very clever to not make standard amounts of Gold content in the coins issued. Why!-- So the holders of these coins cannot assess true value in relation to other products or services, without the help of knowing the "SPOT" price of Gold, which is a different market(paper Gold derivatives). If one Gold coin is ever accepted in trade worldwide....Watchout!! we're on a Gold standard.(The new $100 Gold Euro??)

Is the U.S. actually off the Gold standard?? Mr. SS, ask the established coin dealers how they do business with each other. I would personally sell my own stuff for Gold. I think many reading this would sell personal stuff for Gold.Hope this helps.....beesting

http://www.egroups.com/group/gata/174.html?Bill Murphy's latest commentary.

Thank you for share-ing first hand knowledge of the domestic Gold market in New Zealand.Hope to hear much more from you.

LEIGH Msg.#10009. Glad you had a pleasent trip to Rhode Island. Eat a few "CLAM CAKES" for me.......beesting

As I said yesterday, we're entering a crucial period for yen. As predicted, the $/yen has risen quite a bit this morning in Tokyo. Will be interesting to watch this from now on.

Picasso was once asked "what do you think of modern art" and Picasso replyed: "it is fine, but first show me you can draw a horse". There is a great deal of esoteria on the net. I won't use the word pedantic, I will just think it, besides esoteric is often times a euphemism for pedantic anyway. The one poster, more than any other to me that is trying to teach us all how to draw a horse a little better, is The Stranger. The kids who are lurking should pay attention, he is trying to teach us something. And Stranger, you can crtique my stuff anytime, I would appreciate it. If I am wrong I want to know it. I got the horse in there - too bad it wasn't a bear.

Turbohawg, I want to apologize again for being rude the other day. I enjoy your posts and read them all. There is no excuse for being rude- well maybe sometimes, but not in your case. I hope you won't hold it against me. I was just cranky, tough week for me.

This just might be a kitco glitch but the difference between the "Bid and Ask" price is now $0.80 it was $o.50 for the longest time. I don't know if this means anything or if i,am out to lunch, but i thought i'd mention it.
Howdy STRANGER i still haven't thanked you yet for your replies to some of my questions a couple of days back. I became busy with my work. So here it goes Thankyou, Thankyou Thankyou, and Thankyou!!! Sure is great to have a man of your caliber around here, not to mention one of caring and experience. Not to mention your posts are always Salutary!
Thanks again G.T

$258.50, up from NY close yesterday.

This just in from GATA:

12:01a Tuesday, August 3, 1999

Dear Friend of GATA and Gold:

You'll enjoy this commentary by Bill "Midas" Murphy,
GATA chairman, just posted at www.lemetropolecafe.com.

Please post this as seems useful.

CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.

* * *

By Bill Murphy

August 2, 1999
Spot Gold $254.70 down $1
Spot Silver $5.36 down 7 cents

A Conversation between Peter Fisher of the New York Fed
and "Hannibal Lechter," the infamous bullion dealer.

Patterned after the Wall Street Journal article by
Jacob M. Schlesinger on Nov. 2, 1988 entitled, "Long-
Term Capital Bailout Spotlights a Fed 'Radical.'" For
reference, this article may reviewed in the library at
the Dos Passos Table dated May 26, 1999.



PETER FISHER: Hello, Hannibal. This is Peter. How are
you?

HANNIBAL LECHTER: Fine, Pete. Nice to hear from you.
This is the same secured line that you always call me
on, correct?

PETER FISHER: Of course, Hannibal. I would never call
you on an unsecured line. Thought I had better touch
base with you again. Seems like the markets are acting
up a bit and making our gold scheme a bit more
difficult to control. Also, I thought I had better
relay to you some feedback that my intelligence sources
are filtering to me.

The day started out poorly for us with interest rates
going up in Europe and Japan. We already have 6.12
percent long bond rates and don't need that to be
aggravated by rates going up all over the world due to
increased economic activity in so many countries. It
got worse as the day went on. Yes, I know the National
Association of Purchasing Managers July report showed
that manufacturing growth was less than expected, and
that gave our bond market a big boost after it was in
the weeds due to the overseas markets. But then
analysts saw that the prices-paid component was up more
than expected and the bonds gave up all their gains,
plus some.

Hannibal, I have a big concern. We actually skated
through the day today. Did you see the commodity
markets? The CRB closed above its 200-day moving
average and made six-month highs, and all technical
indicators on the CRB will turn bullish on a close
above 194. Soybeans were limit-up, soybean oil was
limit-up, soybean meal was limit-up, corn was limit-up,
hogs were limit-up, lumber was limit-up, and wheat was
almost limit-up (19 cents higher). That put the CRB
Index at 193.52 -- up a whopping 3.16 today -- with a
half-dozen markets locked limit bid! That does not bode
well for tomorrow.

Fortunately, we have done such a job on this gold
market that it closed lower. We have succeeded in
taking gold off the radar screen for the moment as a
reasonable investment vehicle, but I do not think we
can hold out much longer.

Today on CNBC some analyst from R.J. O'Brien (out of
Chicago, no less) pointed to gold's closing lower as a
sign that there are no inflation worries. We have
really pulled this one off so far, suckered the press
and analysts to believe that the bearish research of
your fellow Hannibals is relevant and the price action
of gold is all-telling; that is, "price" is analysis
and truth telling.

But the general world cannot stay so ignorant and naive
for much longer. This is not the "Gong Show," you know.
If the outside markets keep acting the way they have
been recently, they are going to realize they have been
duped.

HANNIBAL LECHTER: Peter, you read my mind. We have been
very nervous lately and have been trying to figure our
way out of this. That is why we have been aggressively
buying the last couple of weeks. We bought a couple of
thousand contracts on the Comex alone today. And we had
a conference call with our clients telling them that we
thought the price would be going up from here. We
realize that the spotlight on our manipulation is
growing. And, as you point out, all the normal factors
that drive the price of gold higher are in place and
occurring, so it is raising great suspicions as to why
the price of gold goes down on a day like this. I think
what we have done is a bit out of control and attracted
some panic selling at these levels.

Clients call us up and say, "What about gold? It is so
cheap." They then point out how the dollar looks like
it has topped, yen intervention has failed, oil is
trading at $20 to $21 per barrel, and now the grains
are on fire. They do not understand why the price of
gold is not $100 higher than at present. We have
buffaloed them until now with our stories of central
bank selling, gold is dead, etc. But the stories about
Congress killing the IMF gold sales and the stories
circulating about how the Swiss will not sell their
gold are having their effect. We can't spout off our
propaganda so easily now.

And Peter, have you caught the flack that Tony B is
getting in London from all the African countries about
the Bank of England gold sale? He is also hearing it in
spades from the Tories in the House of Commons. And
stories are surfacing about who was behind the decision
and why it was made. You know this silly GATA group has
let everyone know of the Hannibal connections to the
Bank of England -- and people are publishing it. Drats
to those people. They even sent a 21-page document to
Senator Phil Gramm, chairman of the Senate Banking
Committee, about what they have somehow found out about
our operations.

PETER FISHER: Well, Hannibal, yes, unfortunately, I
have heard of that letter. It is being circulated. Much
to my regret, it will be very hard to deny what they
have to say. If we ever get subpoenaed on this, we have
problems. I received a phone call today that said the
CFTC has started an investigation into certain bullion
dealers and brokerages about manipulating the gold
market. This came out of nowhere and it makes me a bit
nervous. You know those GATA clunkers sent their
document to Phil Gramm. Wendy Gramm, his wife, used to
be chairman of the CFTC."

HANNIBAL LECHTER: What do you make of that?

PETER FISHER: You see, Hannibal, she and Brooksley
Born, the recently resigned CFTC chairman, respected
each other as dames and respect each other as
colleagues, as they held the same position. You
remember how Brooksley was fighting for greater market
transparency and was rebuffed by my administration and
Secretary Rubin? She just would not stop pushing for
what she believed was good for the country and needed
to be done. So Secretary Rubin had her canned. End of
her efforts and her CFTC chairmanship. You know what
happens to those that oppose Bill. She got hers!

Problem is, Wendy Gramm knows Brooksley got a raw deal
that should never have happened. She goes and tells her
powerful husband that something is very wrong -- and
that Brooksley was wronged. Then these GATA chumps send
him this well-documented bit of information. Next thing
we know rumors are circulating about a CFTC
investigation. One of my moles at the CFTC called to
tell me today that a wire service called them to
inquire about the rumors, but they did not respond as
of yet. They also told a newspaper editor in
Connecticut that they would get back to him within a
half hour, but haven't responded to him either.

PETER FISHER: This is what I mean, Hannibal. The heat
is turning up.

HANNIBAL LECHTER: Geez, Peter, you are right, this is
not good. I have something to tell you too. The word is
getting out about Tiger, the hedge fund that GATA
thinks you helped bail out. The secret banking meeting
in Philadelphia, the rumor of the emergency Fed
meeting, and the rumors about Tiger's redemptions are
all resurfacing. My sources are telling me that GATA
has been informed that Tiger is short more than 10
million ounces of gold and they are telling people
Tiger borrowed much of the gold around the time of the
Bank of England's announcement to help them out of the
jam they were in. This is not good for us, to have this
get out, because our firm sold practically every day
after the BOE announcement. Many thought we were
selling for you. Now they will think it was for Tiger!

And word is out all over London about our 1,000-tonne
short position. They say it was revealed to some very
prominent Brits, and they are telling others about it.
Even the Financial Services Authority in London is on
our case. Naturally, it is suspected that part of that
1,000-tonne position is for Tiger and, as I just said,
for you, Peter.

What troubles me is what some smart types are thinking.
Astute market people know that Julian Robertson,
Tiger's main man and hedge fund guru, is no dummy. He
got beat up trying to get out of his yen carry trade
position last year. Certainly, knowing commodities as
he does, he would not make the same mistake in gold too
-- unless, of course, he was assured that the price of
gold would not go beyond a certain point so his gold
borrowings would not go under water and jeopardize his
entire business. That reflects on you, Peter, if you
know what I mean.

PETER FISHER: Hannibal, you know as well as I that he
needed big help, and the gold borrowing position he
took helped him out of a big hole -- and helped keep
the gold carry positions of you and your cousins safe
for a while. Good for Tiger, good for us. Good for the
overall markets. And everyone has kept their mouth
shut. Besides, it saved us a market panic. Who wants
that?

HANNIBAL LECHTER: Yes, but it is not just these GATA
folks that are stirring the pot about Tiger. At the
Diggers and Dealers Conference in Australia, word was
circulated that Tiger is short 200 tonnes, not the 10
million ounces coming from GATA's sources, but still a
lot of gold. This could be a nightmare for us if this
story gets any more legs.

PETER FISHER: I have bad news for you, Hannibal. It
gets worse. These GATA clowns want to blow the whistle
on this one. They have found out that Tiger has a $250
million or so investment in Normandy Mining Ltd. in
Australia. That would give them about a 10 percent
stake in the firm and for some odd reason they have
claimed insider status. GATA has a Reuters story from
Adelaide that includes, from their point of view, some
of the strangest comments of all time from the chairman
of a gold producing company, in this case Robert
Champion de Crespigny, who said: "The Bank of England
gold sales could have a positive impact for the
precious metal, accelerating the closure of weaker
high-cost mines around the world.... This gold will
keep on coming out, it will come out at market price,
and the worst of production will drop off.... The
commentators that are saying they expected someone to
bid above gold, that's an absurd thing for this amount
of gold. It is very much in line with what you would
expect if you knew the industry or this quantity."

"He also was not opposed to the Bank of England's
method of sale, a pre-announced auction, saying the
gold price was strongly affected by sentiment and could
be badly hit by sudden and unannounced large selloffs."

"We need time to get used to this bidding type process,
which I think it is not a bad way to go because it is
exactly the same as the government sells treasury
bonds.... I don't see (the Bank of England's selloff)
as a disaster at all." That's what Champion de
Crespigny said.

PETER FISHER: Hannibal, GATA is trying to make the case
that Tiger's redemption problems, its short gold
position, the peculiar, reckless comments of Champion
de Crespigny, and the secret banking meeting in
Philadelphia are all related. It is this association
that has so many newcomers talking of conspiracies.

PETER FISHER: Good friend, Hannibal, I must tell you
something else that my vast Fed network sources have
brought to my attention. It could cause us big trouble
because it fits this GATA story stuff.

I know for a fact that a highly respected man in the
gold industry wanted to promote a millenium coin to
sell millions of gold coins and promote gold sales.
GATA has learned that Normandy Mining and Barrick Gold
shot down the idea. GATA is convinced that Normandy and
Barrick, major producers, are part of the problem and
in fact in on our deal. GATA has been very patient
trying to get them to change their ways, but for the
obvious reasons we know, they got noplace. But my guys
tell me that they are now going on the offensive about
these two companies and are going to expose what
devastation companies such as these are causing the
gold community. GATA has laid off our friend, Peter
Munk, but is about to launch an offensive against
Barrick. You know our Peter. He is such a PR-conscious
guy, and GATA is planning to give him all the PR he can
handle - him and Champion de Crespigny. Just thought
you should know."

HANNIBAL LECHTER: Let them yap all they want, Peter.
You are the Fed. Alan has known all about this and we
have his blessing, as you well know. Yes, Robert is out
of the Treasury, and the Goldman Sachs IPO was
remarkably consummated at the top of the stock market
mania, but Larry Summers is a good man and he can carry
out the deal at Treasury now.

We can pull this off. The public are a bunch of
dummies. So what if the gold loans are now more than
10,000 tonnes and mine supply is only 2,529 tonnes per
year? They have fallen for our routine so far and as
long as the mainstream press is too lazy or scared to
look into what we are doing, nothing will change. You
know we are following this GATA and we had one of the
premiere anti-trust defense attorneys in the United
States go to their presentation at the New York Gold
Show. Unfortunately, GATA's lawyer, Merrill Davidoff of
Berger & Montague in Philadelphia, spotted him and
confronted him as to what he was doing. Yes, we know
GATA gets all kinds of press outside the United States,
but the U.S. press won't touch them with a 10-foot
pole. They are too afraid of us. You know that!

PETER FISHER: That may be so, but we can fool most of
the people most of the time, but not all of the time.
Look at what just crossed my desk. Yes, this guy is an
old goat, but he is one smart old goat. Some people say
we have been messing with our stock market -- you know,
stories about the Plunge Protection Team going amok --
that we have prevented any serious corrections so as to
reduce market risk concerns.

>From Reuters: "Frankfurt, Germany -- Former German
Chancellor Helmut Schmidt said in remarks published
Sunday that U.S. share prices were being driven to
unsustainable heights by "psychopaths" on Wall Street
and that a slump was inevitable.

"Schmidt told Welt am Sonntag newspaper that the United
States, despite being presented as a shining economic
example to Germany, had a private savings ratio below
zero and was creating an underclass of the working
poor.

"`Many people are enthusiastic about the United States
at the moment. But people don't realize that the share
price boom is totally overvalued and that psychopaths
are driving the prices up,' said the Social Democrat
who was West German chancellor from 1974-1982.

"`It's only a matter of time before the boom ends and
prices tumble down again -- just as it happened in
Japan,' he said.

"Schmidt, 80, said that by `psychopaths' he was
referring to `the young 30-year-old dealers and 40-
year-old fund managers who with their daily and hourly
fund allocations have no other aim than to get the best
possible performance.'

`These people lack an overview of the world and world
economy and also of the responsibility that entails.'

"Schmidt added the euro's depreciation by as much as 15
percent this year did not signify that the new currency
was weak. He said he had witnessed the dollar trading
at 3.47 marks and at 1.36 marks in the space of 1 1/2
years.

"`No one ever got the idea that that meant the mark was
weak,' he said."

PETER FISHER: We know what we have done here, Hannibal.
The clock is ticking. I hate to agree with Herr
Schmidt, but we are running out of bullets -- we cannot
influence these market psychopaths much longer. You
know that and that is why you have been buying lately.
The problem is we have to cap rallies for a while or
you and your cousins will not be able to fully cover
your shorts. That could cause big, big problems and we
have to protect against that. Let us cover here, let
the market rally $20-$25 -- get the heat off, and then
slam the dummies again for a while. What do you think?

HANNIBAL LECHTER: Yes, I know that is the plan, but
what if all the other markets are going in the soup and
our brethren panic and the central banks start calling
the gold loans in with excessive interest due to
liquidity fears? What if we can't stop the rally at
$275 to $285?

PETER FISHER: Then, Hannibal, my friend, find a better
lawyer than GATA has, because when this all breaks --
and I am more nervous now than I ever could have
imagined because of the outside market action -- there
will be hell to pay. Especially if the stock market
dives and all those so-called long-term investors bail
out on a 50 percent correction. They will want scalps
and GATA will be sending them our way. We might have to
practice ducking.

HANNIBAL LECHTER: Life has been so good, Peter. Do you
really think we could have such problems? After all,
look who we are.

PETER FISHER: Well, who knows? But one bit of advice
for you, my friend. When you start your exit, remember
Sodom and Gomorrah. Don't look back!

-END-

What better smoke screen to move British assets to Euros. Somehow I believe this is significant but why do I suspect Y2K isn't the real reason?

from gold-eagle:

Surprise, surprise, BOE offers to provide Y2k "liquidity" in exchange for Euro "assets"...
(Mr_Bubble) Aug 03, 01:54

U.K. Central Bank Widens Pool of Securities to Boost Liquidity (Michael R. Sesit, Wall Street Journal/Dow Jones Newswires -- requires paid registration)

http://interactive.wsj.com/bin/login?Tag=/&URI=/archive/retrieve.cgi%253Fid%253DSB933539150816014345.djm&;

In a bid to protect London's markets from year-2000-related computer problems, the Bank of England will increase the pool of securities it will accept from banks as collateral by about 2 trillion pounds ($3.23 trillion), a whopping sevenfold increase...

Some market economists also said the change -- particularly since the additional securities will be denominated in euros -- would enhance London's position as Europe's main financial center." Tony Norfield, global head of treasury research at ABN Amro Bank said, "It looks as if [Britain's central bankers] are setting themselves up to be a major liquidity provider in the major foreign-exchange financial center in the world...

Despite the fact that Britain is outside the [European economic and monetary union], the Bank of England has made it clear that London financial markets won't be marginalized simply because the U.K." isn't a member of the 11-nation bloc that shares the common euro currency. The article then goes on to discuss the "range of Euro-demoninated securities" that it will accept, "repo operations" and "swap spreads," and other economic arcana. Based on all of this, George Magnus, chief economist at Warburg Dillon Read said, "People will draw the conclusion that the bank stands ready to stand behind the system."

NEW YORK, Aug 2 (Reuters) - Goldman Sachs market strategist Abby Joseph Cohen said on Monday the stock market may see more modest gains in the near future after a strong wave of buying has lifted stock prices to fair levels, based on their bottom lines.
"The Standard & Poor's 500 Index has reached fair value territory, suggesting that future price gains will likely occur in a more moderate fashion," Cohen said in a research note.
"We expect the staircase pattern to reassert itself, in which sharp price gains are followed by a trading range."
Cohen, one of Wall Street's most respected stock forecasters, made the comments to Goldman clients last week, the bank said, as part of its World Investment Strategy Highlights (WISH) summarized and published on Monday.
She said sharp price gains in stocks have been based on strong profits, "muted" inflation and growing confidence in what she termed the "durability of economic expansion".
The S&P 500 Index, which Cohen monitors closely, is up eight percent in 1999. For the same period, the Dow Jones industrial average has gained more than 1,000 points, adding nearly 16 percent despite the past two weeks' solid losses.
Cohen said non-U.S. stocks could benefit if the trend toward higher-risk stocks like small-caps and cyclicals remains intact. The recent surge in cyclicals is cited as one reason behind the Dow's outperformance of the broad S&P500 index.
She said the market's recent rally looks much like a period of strength in 1997, which led to gains in non-U.S. issues before the currency and banking crises in Asia brought the rally to an abrupt halt. She based her comparison on productivity, gross domestic product, inflation and profit trends.
In 1999, she said, conditions that would predict a bear market do not seem to be in place.
"Previous bear markets were generally preceded by noteworthy overvaluation and catalyzed by deterioration in economic performance, such as a significant rise in inflation or weakness in corporate results. We don't believe that either condition is in place," she said in the note.
She downplayed the threat of higher interest rates, which have been weighing on stock prices recently, saying the long end of the bond market may have already discounted a tightening when the Fed's policy arm meets later this month.
Any rate hike, she said, should be seen "as a reversal of actions taken in 1998 during a time of global distress, rather than a major salvo against (still quiescent) domestic inflation."
"It may well be that the U.S. bond yields have already experienced much of their excitement for the year," she said.

http://econ161.berkeley.edu/TCEH/Slouch_Crash14.htmlturbohawg - this is excerpted Slouching Towards Utopia?: The Economic History of the Twentieth
Century

-XIV. The Great Crash and the Great Slump-

J. Bradford De Long
University of California at Berkeley and NBER

February 1997from:


"By 1928 and 1929 the Federal Reserve was worried about the high level of the stock market.
It feared that the "bubble" component of stock prices might burst suddenly. It seemed better to the Federal Reserve in 1928 and 1929 to try to "cool off" the market
by making borrowing money for stock speculation difficult and costly by raising interest rates.
They accepted the risk that the increase in interest rates might bring on the recession that they
hoped could be avoided if the market could be "cooled off": all policy options seemed to have
possible unfavorable consequences."

And Further:

"The Federal Reserve did not use open market operations to keep the money supply
from falling. Instead the only significant systematic use of open market operations was in the
other direction: to raise interest rates and discourage gold outflows after the United Kingdom
abandoned the gold standard in the fall of 1931. The Federal Reserve thought it knew what it
was doing: it was letting the private sector handle the Depression in its own fashion. It saw the
private sector's task as the "liquidation" of the American economy. And it feared that
expansionary monetary policy would impede the necessary private-sector process of
readjustment."

Stranger's Note: Deflation happened in the 1930s because it was ALLOWED to happen. Given the money growth of the past year, I hope we can agree that the monetary ingredients for the type of liquidity trap you are forecasting simply do not presently exist.

"Any rate hike," she said, should be seen "as a reversal of actions taken in 1998 during a time of global distress, rather than a major
salvo against (still quiescent) domestic inflation."

Stranger's Note: Stay tuned, Abbey.

SteveH, your recent posts have been great. Especially your letters to your friends.

Regarding you BOE post this morning. Part of it read:

"In a bid to protect London's markets from year-2000-related computer problems, the Bank of England will increase
the pool of securities it will accept from banks as collateral by about 2 trillion pounds ($3.23 trillion), a whopping sevenfold increase... "

Does this mean that the BOE will accept stocks, derivatives, paper gold etc. from member banks as collateral for bank loans to keep these banks liquid (handle runs on currency)? Is this how you interpret the statement? If so, I agree with you that this is really significant. It looks like a Ponzi inflation machine being built to liquify the planet!

http://biz.yahoo.com/rf/990803/lh.htmlArticle is so-so. The key is the headline. I wanted to remind everyone that the so-called "gold overhang" in central banks is nothing compared to the "paper overhang" of dollars and bonds. At what point does this paper overhange get priced into the market value of dollars?

Stranger: your research efforts are commendable. Thanks for providing the link, for throughout that article De Long demonstrates the collectivist mindset toward policy that made the depression Great. Perhaps he should pick up a copy of Rothbard's work to clear up his illusions. A quick read of his article reveals that at least some of his 'remedies' to handling a Depression have already been tried, and failed, in this cycle.

I'll be happy to pick though it if you insist ... but right now I'm pressed for time as I must prepare for a trip to the dentist.

I suggest that it might be more productive to focus on what is currently happening, as the urgency of preparatory action increases.

Regarding > Given the money growth of the past year, I hope we can agree that the monetary ingredients for the type of liquidity trap you are forecasting simply do not presently exist.<

I have to disagree ... they are manifesting themselves as we speak (see link I post yesterday entitled 'widening spreads'). If we wait till they hit us in the face then we will be at a severe disadvantage. The good news is that it appears that those who already hold gold will be at least somewhat insured.

Before I go, I'll leave a quote from market analyst Dan Ascani: In reference to the Asian Contagion, Ascani says,"It seems like inflation, but it's really a symptom of deflation in a fiat currency system."

Koan: no offense taken. My views are what they are ... they'll rise or fall on their own merits ... they are certainly not drawn from the world of conventional-think. You'll note that evidence has been offerred to support my conclusions. Perhaps my interpretation of that evidence will turn out to be in error. Thanks for providing your own insights to the Forum.

http://biz.yahoo.com/apf/990803/japan_us_c_1.html"Sudden changes in foreign exchange rates are undesirable, as they have an impact on the economy. In more ways than one, we are speaking with the U.S., and basically, we've agreed that sudden changes are undesirable. If necessary, we must respond," Finance Minister Kiichi Miyazawa said in parliament.

Echoes of the IMF Jamaica Accords. Does it strike anyone as particularly pertinent or somewhat revealing that Japan and the U.S. seem to be the only nations focused on exchange rate stablization? The euro members have been content to sit back and let nature take its course. A clear sign that they are stepping away from the IMF structure? I think so...

http://biz.yahoo.com/rf/990803/qk.htmlFollows yesterday's action of over $7 billion. Money on the move...

http://biz.yahoo.com/rf/990803/om.htmlMore background info on the dollar and yen, plus other currencies tossed in like salad greens.

http://biz.yahoo.com/rf/990803/no.htmlThis article preceeded in time the one I've already posted that indicated the level of system repos at $5 billion, up from the expected $3 billion.

This gives good background info, and may be the most significant article you'll read all day. "...Fed may opt to get a head start on taking care of a rising add need next week by executing multi-day repos of up to nine days."

Why do you think there is a need to add reserves so aggressively? Y2K, yes?
No...I'm sure it is due to early Christmas shopping...yeah, that's it.

Old hands in the forex market are saying that the Japanese are putting a typical 'smoke and mirrors' spin on their 'consultations' with the US.

ET (8/2/99; 20:34:19MDT - Msg ID:10178)
FOA

Hey FOA - thanks for your continued presence here. That was a wonderfully cogent explanation of the contrasting views of the dollar depending upon where you sit. Given your explanation, do you think that perceptions of possible problems surrounding the y2k issue might precipitate this
'closing' of the dollar door? I posted something earlier about the BOE and their apparent attempt to become very liquid come the end of the year. It is interesting that they intend to denominate this increase in liquidity in Euros, not pounds or dollars. Is this the first public shot across the bow of the US dollar?

ET,
Thank you for the compliment. I also enjoy all of the other presentations offered here, including yours. I'm always impressed to see everyone display their own perspectives in written form, and then hint at how they intend to put those thoughts to work. Some posters are into silver, others in mining stocks and others buy gold or options. For most of us, these pronouncements not only
openly display our view of the future but indicate our actions and how it will impact out wealth to a great extent.

I have often found that people will "bet" a great deal of their money to make a return. However, most never would "place" as much money in an effort to maintain their "wealth". This concept has grown right along with the current global expansion of the last 50 years or so. It's
easy to understand, because seldom does the world experience massive wealth destruction. Consequently, in those few times that this occurs, everyone is usually "betting" on a percentage return "on their wealth" not "a return of their wealth". They are caught in a once in a thousand year change, just as may befall the world from Y2K. If something is unseen over several lifetimes, it cannot happen, right? The constant successful repeat of an economic function creates a "common belief" among people groups that is hard to refuse.

If Another has not read the minds and actions of leaders correctly and I am completely wrong, I'm not going to increase my wealth very much. However, if the life cycle of our world monetary system is coming to an end, those that are expecting a repeat of the past will lose a great deal.
Even those that position themselves in expectation of similar "currency crisis" as in the past will lose. A line of thinking I have presented here recently.

Yet, for me to actually "lose" wealth, the entire history of human nature would have to be repealed. Gold would be pushed into the background as everyone made good on their debts. This is why I "place" my wealth in the "no return on investment" position. Gold rose 32% during the 1929 contraction, while most people lost "everything. Even though that gain was not a return from investment, it was an increase in value from the falling price of everything else.

There are truly many financial giants that currently walk this earth. Some "bet" on silver, some "bet" on gold, but most of them all position these "bets" to function within the framework of this present system. The giants I follow have "placed" a good portion of their wealth in a position for change.

Truly, there is so much more in life than loss or gain. We gather here to learn, to understand and share our perspectives in this changing world.

Yes, ET,
The BOE is sliding into the Euro arena as we speak. They cannot stand on both sides of the fence. Like it or not, the IMF/dollar and the london gold market that gives it value are failing. They sold their gold to back up a few survivor banks for entry into the EMU. The signal is loud and clear, England is NOT running to the Euro, they are running "FROM" the dollar! No wonder oil money is leaving London. I don't care what the odds are, the British pound is history and
Michael K. is going to owe me one US dollar! With all his millions of tons of gold, I'm sure he can afford it! (smile) FOA

This week the commodity rally enters its sixth month, as the grains join oil and industrial metals in their march to higher ground. To make matters worse (or better, if you own gold), the Wall Street Journal carried another article yesterday about the developing nationwide shortage of electric power. Too many companies have delayed capacity additions to the point where America will need a effect a major costruction boom before next summer just to avoid even worse brownouts and blackouts. Will there be rate increases? What do you think?

Anybody using CPI data to forecast inflation is now driving by his rearview mirror.

XAU now up 2.40. Big Day!

Have fun at the dentist, turbohawg. When you get back, I will be waiting.

Re: "In a bid to protect London's markets from year-2000-related computer problems, the Bank of England will increase
the pool of securities it will accept..."

Stranger's Note: The world continues to prepare for Y2K in an orderly and responsible manner.

MARKET REPORT (8/3/99): Gold turned firmer this morning in a trend that started in
Asia and European trade overnight. Some weeks ago we mentioned that if there were a
change in U.S. dollar policy, from strong to weak, then foreigners would begin repatriating
capital and the U.S. stock and bond markets. It seems that process has begun particularly
with with Japan leading the way.

Bank of Japan governor Masaru Hayami told Japan's parliament yesterday that "capital
flows into Japan have exceeded capital outflows." Much of this he warned is the result of
hedge funds unwinding the yen carry trade. U.S. Treasury Secretary Summers and his
Japanese counterpart Kiichi Miyazawa have been on the phone to each and you can be sure
the subject reaches beyond Hillary's latest revelations about husband Bill in Talk magazine.
No, they were probably talking about intervention to keep the yen down -- a fervent prayer
of the Japanese and a policy that might be at odds with the U.S. Treasury where pressure is
mounting to do something about the enormous trade deficits that are driving domestic
producers and manufacturers to the wall. With an election coming up, the Democratic
administration does not want to create an issue that ties the trade deficits problems in those
sectors of the American economy and voters who might have their jobs threatened as a
result.

We will be watching with great interest how this latest round of currency diplomacy
unwinds. Summers could always point out to Mizawa the grand performance of the U.S.
economy under a strong currency regime and persuade Japan that if it really wants to
become the heart of the Asian economy, it ought to look at opening its doors to import
opportunities. But sadly Japan doesn't see it that way, so we are back to the hedge funds
pushing currencies one way or another while governments stand around and watch, or
respond with a token intervention or two to make it look like they are still in charge.
Miazawa can always point out that Japan holds a mountain of U.S. debt and there is always
the chance of a liquidation which would not go over well with U.S. based bond investors.
That last time these cards appeared on the table, Japan threatened to sell bonds and put those
funds into gold. We do live in interesting times.

This penchant for covering the carry trade spread mildly to gold this morning as
short-covering appeared in Tokyo first overnight, followed by more in Europe. Reuters
reports strong physical demand for the yellow metal in Europe and the Far East overnight as
we inch ever closer to the year 2000. Gold lease rates continue high and with the length of
time they have remained high it appears that this shortage of gold may not be a temporary
phenomena.

The dollar is improving against the yen as we go to fetch this over. That's it for today,
fellow goldmeisters. Have a good day.

If this type of analysis interests you, you might like our monthly newsletter -- News &
Views: Forecasts, Commentary & Analysis on the Economy and Precious
Metals. We are offering a trial subscription to potential gold buyers along with our
standard information package -- both of which will add greatly to your knowledge of an
asset sorely abused by the mainstream press, government bureaucrats, and Wall Streeters.
If you have a different view, and we happen to know that many of you do, then please
contact us to get the other side of the gold story.

Call 800-869-5115 if you have an interest. Ask for Mary Conway.

I don't know, FOA. I think you are still on shaky ground.
If Britain hurries it can still get into the Union before the next election and vote for their new president. (A smile in return.) MK

We need more cheerleaders! $260.00 Gold today??...beesting

Looks like someone is playing games with the P.O.G in the last 10min. What do you guys think??? G.T

http://www.usatoday.com/money/charts.htmOh, and the Amex is on the positive side of paper, too.

http://news.bbc.co.uk/hi/english/sci/tech/newsid_410000/410763.stmIs this a sign? Nature's way of ushering in the new paradigm of an ever-stinking stock market?
Don't pin this one on your lapel.

test

http://news.bbc.co.uk/hi/english/business/the_economy/newsid_410000/410125.stmA repeat of the 1970's USA-style. Goodbye pound, hello gold.
If you think about it, taking out a long-term fixed-rate mortgage is essentially akin to "shorting" your native currency.

http://news.bbc.co.uk/hi/english/business/the_economy/newsid_410000/410750.stmHat in hand, thank you Paris Club. Next stop: London Club!
"Brother, can you spare a dime (or at least admit that this "debt" business is never going to go away on its own...you can't pay off debt with debt, SOMEBODY is always left holding the bag.)"

Pretty exciting day. Seems to confirm the key reversal, and the PM's are following the fundamentals just as they should, i.e. they are doing what would be expected based on the other fundamental variables that generally correlate with the metals; and other predictors like oversold gold, and long /short positions by commercials and speculators. I guess that has been my point all along. We have been witnessing a sort of historic period of time here when gold may have made an historic double bottom as well as the other financial stories of equal interest i.e. overbought sotck mkt and dollar and historic lows in crb and things like beans, historic key reversal in oil; and while this historic event was taking place many were watching the wrong game. This was the game, this was the headline news. I kept feeling our eyes and discussion was not on this amazing series of events unfolding before our eyes, which was not nearly as important and certainly not as rewarding from a financial standpoint. Anyone who went long beans in the low $4 range or long gold at $252 or anyone of myriad other watersheds did very well - and this event has been staring us in the face for some time; and I think it is just getting started.

Ive been on a work/ sleep binge and am just caught up as far as your post. That is an emaculate synopsis of the impending crises. Perfectly stated,all wheat and no chaff.

I think you and I are on much the same wavelength.

By the way, did anybody notice the Queen of the Internets (AOL) breaking major support today? It has now lost about half its market cap. I guess value does matter eventually.

USAGOLD (07/31/99; 12:13:32MDT - Msg ID:10000)
Koan & all -- The pound sterling
Do you think the British pound's been targeted by the speculators? As you know it cratered after the May 7 announcement. In the past few days it's had some sharp increases. I was thinking at first it was short covering. They I started wondering if perhaps BOE was in the market trying to stabilize it. Then the Blair speech and the Clinton/Wolfson dinner for two......Interesting how you could put a nice neat ribbon and bow around this package. Do you remember when Soros went after the Pound a few years back? Is this Soros 2? I've heard that he's in trouble. Maybe this is the trade that he hopes will save him.

Just thought I'd stir the proverbial kettle a little on a hot Saturday afternoon 'cross the fruited plain.........

I'm surprised it passed with no fanfare (we all know how much MK hates the fanfare). Fitting that USAGOLD had the honor of the landmark post. Hey, MK, did you realize this at the time, or is this the first it came to your attention?

Give yourself a shiny Austrian Philharmonic coin for the effort!

There has been much comparison and contrast of late between 1929 and now, but I have not seen mention of the KEY difference. In 1929 they were buying on 10% margin. Margin calls are issued before all the covering capital is wiped out, so it didn't take much movement to set off the chain reaction.

Now we have, instead, 80% of the investing public thinking that their stock certificates are "savings". They haven't a clue that their 'money' is in fact someone else's future earnings. When the figure it out, the effect will be similar to the 10% margin calls of yesteryear.

Personally, I think we are on the brink of a major sell off right now. Unexplained sell-offs of good news rallies are, IMO, the harbinger of a bear market.

I regard Abbey J. Cohen as the "Stepford wife" of The Federal reserve. Her current analysis is pure programed fantasy!

Gotta go do slave duty, see you all tonight.

Peter A.

canamami (8/2/99; 21:42:28MDT - Msg ID:10185)
Reply to FOA #10175
FOA,

A fine and magnificent post - very clearly stated, and it contributed to a shift in my "understanding curve", as opposed to mere movement along the curve. One quick caveat: Does not a portion of the $US value and importance stem, not merely from the US goods it can buy, but from the US'
political stability, the rule of law, advanced securities regulation, fair treatment of foreign investors, immunity from direct military attack, etc. - in sense, is not the role and value of the $US based partly on the public sector or international relations equivalent of the accounting entry "goodwill"? Alternatively, could not economic/ political/military stability and the rule of law, etc., be
conceptualized as a US "export" which can be contra-accounted against the US trade deficit?

canamami,
Thank you. I have to say yes to all that you pointed out. But we have to acknowledge that the world has always functioned with these problems. There has always been a "strong country" where people held wealth. The problem is in the question: "what price am I paying for all of this?"
Conversely, of what value are these attributes if a crisis blocks my use of the "strong nations" money? Also, why do we have to hold dollars to obtain these benefits? Why not just sell us the gold? We can always sell the gold back to the US for dollars, can we not? Are we left to assume that no other country or group of countries could perform this same function? Indeed, the early US was also looked at as a "ragtag", "rebel" country, that could not be trusted with "my money". Besides, they didn't honor their gold loans at $35. How do I know when the "goodwill" will not be dishonored also?
canamami, I am American and to war I would go if needed. But these are real views that must be factored in, if we are to understand the unfolding problem.
thanks FOA

Also, SteveH and TownC thanks to both of you for so much work.

... from the dentist with a clean bill of health and sparkling white teeth.

So kind of you to wait, Stranger. I'm glad to see nothing unexpected has happened in my absence.

Peter, excellent point !! InvesTech's Jim Stack reported in his June 4 issue that:

"In the month of April alone, margin debt soared by $16.44 billion. That's the same as the increase in margin debt from Dec 1990 through Feb 1993. On a percentage basis, margin debt has increased over 22% in the most recent two months - the largest such increase in 50 years."

His chart shows margin debt on the order of twice GDP !! And that doesn't take into account what is effectively margin debt, money borrowed on credit cards and put into the market or the outrageous derivative positions outstanding.

The times, they are a-changin'.

"Did you catch any of the debate at csy2k?"

No, I gave up on them earlier this year. I know there is a lot of
value there; but the volume (and noise level) got to me.

"The biggest problem with this report is the exclusive use of anonymous
sources and to top it off, an anonymous reporter."

I agree, almost. We are in this terrible situation where if we rely
entirely on what can be clearly documented (as with the gold situation),
we are almost certainly getting an effectively misleading fraction of
the total picture; while if we pay attention to anonymous sources (etc.)
we run the risk of overreaction based on stuff that may turn out to have
been false.

Most (not all) of the points he and his sources made are consistent with
the known facts, and are quite plausible extrapolations from them. Not to
be taken too seriously, but not either to be dismissed, IMHO.

"The report is also full of inaccuracies and his logic is faulty. In the
first section on wells, he cites the 'fact' that many embedded systems are
inaccessible and therefore cannot be tested."

He said that engineers had indicated to him that some systems were
inaccessible or not easily accessible -- much different than presenting
something as incontrovertable "fact".

Of course, "not easily accessible" is vastly more representative of
reality than is "inaccessible". Almost nothing on this earth is truly
inaccessible. Everything can be accessed, depending on how much
energy/time you have and are willing to devote to accessing it. And this
is indeed the crux of much of the Y2K situation: It can all be fixed,
but when, how fast, at what cost, and while leaving which other things
("temporarily") unfixed? Could easy be, as Ed Yourdon put it, "A year of
disruptions, a decade of depression".

"He goes on further to conclude that because they 'cannot' be tested they
will likely fail. Pretty big leap in logic if you ask me."

He does? He mentioned various percentage fail rates (from .1% to 25%) as
possibilities; this is a lot different than talking about systems being
"likely" to fail. That 25% figure sounds extremely (indeed, incredibly)
high to me. I am worried about the possibility of a 1% fail rate, which
would constitute a minor disaster, especially in concert with a
multiplicity of failures in other areas, simultaneously.

"He also seems to forget that any particular failure isn't necessarily
fatal. It may be inconvenient and require some kind of workaround but to
assume that the oil and gas business will not be able to produce and
distribute product seems a great leap to me."

He outlined several scenarios including an optimistic one in which "there
may be only a small drop in crude supplies, and little or no refining
disruptions." He also outlined a couple of severe scenarios, with the
absolute worst case being the inability of the oil and gas people to
deliver product at all for a prolonged period. This is a possible outcome.
Very unlikely, but possible. The mid-range scenarios -- which are quite
bad enough, thank you -- are much more likely.

"This is not to say I believe the situation is any more rosy than any other
business but this article has not convinced me of anything."

Has not convinced me of anything, either; his piece was not a scholarly
documentary. He connected dots and painted the broad-brush picture rather
well, however, IMHO.

"The embedded systems programmers I've read seem to think the vast majority
of embedded systems will experience no problems with the rollover and of
those that might or will are not necessarily going to cause the process to
fail. Most can be worked around if they haven't been replaced in time. That
still leaves a significant number of possible problem systems and they
could cause some real life problems. It seems like a crapshoot as to
whether the process you might depend upon is one that is affected."

Yes, very much a crapshoot -- my favorite metaphor.

Yes, anything can be worked around, done manually, jerry-rigged, etc.,
etc. ANY-thing can be done... but not EVERY-thing can be done -- at
least not in a timely manner. There is not enough time and energy, not
enough hours in the day, not enough talented people, etc., etc. For
example, Chevron formally announced some months back -- in a remarkable
display of candor -- that they were not going to make the deadline...
because, I submit, although they can do ANYthing, they cannot do
EVERYthing. It might take them years to solve their Y2K problems, and I
would bet more than I could afford to lose that that same situation
obtains at many other large firms.

Further, of what can be done, what is actually being done? The figures
on Y2K remediation budgets allocated versus spent are disturbing.

"Of course, if this guy is right and a significant number of failures do
occur in the oil and gas business and they can't be worked around, then we
would be up the proverbial creek."

... without paddle, boat or scuba gear!

The crapshoot, again. This guy does not need to be more than 10% right
for serious problems to become evident (that is, serious oil supply
problems -- not counting the direct effects of any of the other breakdowns
that may be occuring).

For those interested, I recommend Mark Frautschi's detailed writeup on
embedded systems: http://www.tmn.com/~frautsch/y2k2.html. Sample, re
petroleum: "Shell estimates that a typical offshore oil rig uses
approximately ten thousand embedded chips [37] of which approximately 12%
are not Year-2000-compliant. Some fraction of these chips are installed
below the surface or in other regions of limited accessibility."

Below, a few snippets from more crediblee sources -- Senator Dodd, and a
United Nations working group. If you read even a tad between these
documents' lines, I think you will agree that "RC's" worst-case scenarios are, though
gloomy, easily within the realm of the possible.

-- AEL

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

http://www.senate.gov/~y2k/news/pr042299.html

FOR IMMEDIATE RELEASE, APRIL 22, 1999

STATEMENT OF SENATOR CHRISOPHER J. DODD HEARING ON YEAR 2000 AND OIL
IMPORTS: WILL Y2K BRING BACK THE GAS LINES?

Mr. Chairman, thank you for holding this hearing today.

The world oil supply faces a series of Y2K risks from the well in the
ground to the gas station in your neighborhood. In addition to the
immediate Y2K problems that oil companies face, the readiness of the
shipping industry and international ports presents an even more difficult
challenge. A breakdown in the international shipping industry could have a
crippling effect on the oil industry. More than 80,000 visits are made to
U.S. ports by over 7,000 foreign vessels in any given year. And yet we have
little information on the readiness of these ships and foreign ports.

Like other global sectors the Committee has examined, we find that the oil
industry is highly dependent upon maritime shipping. Oil tankers for
example depend on reliable on-board navigation, communication and safety
systems, all of which are vulnerable to Y2K problems. In 1998, Shell Oil
examined one of its crude carriers, which was built in 1996. Y2K testing
revealed failures in seven areas, including radar system mapping, ballast
monitoring and ship performance monitoring. According to Shell, "Not one of
these failures would stop the ship, but they might if they all happened
together." Overall, when Shell assessed their fleet, it found approximately
3,000 embedded chips on its 50 vessels. Embedded microchips play an
important economic role in modern shipping because they allow even the
largest tankers to operate with very small crews. The highly automated
functions make it difficult for a small crew to manually operate the ship
in an emergency.

Even if oil tanker crews can "work around" their Y2K problems, the crews
could quickly become overworked, compromising safety. Passenger cruise and
container ships are more reliant on technology than oil tankers. Y2K
failures on these ships would be even more difficult to correct.

Ships that experience Y2K-related failures could begin to clog ports,
denying accessibility to other ships and creating serious logistical
problems.

With the exception of North America and Northern Europe, the actual Y2K
readiness of the international ports remains a virtual unknown. When a ship
arrives in port, Y2K related failures could prevent cargo from being
unloaded and oil from being pumped out of tankers. Y2K difficulties in
ports could include the failure of the giant cranes used to offload
containers from ships and could also create congestion. According to the
International Energy Agency, one oil company found that a dockside crane
refused to operate because an embedded chip determined that it was overdue
for a technical inspection. . . . . . .

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

UN WORKING GROUP ON INFORMATICS

http://www.un.org/members/y2k/y2k2nd/iea.htm

Update on the IEA's Y2K Activities

Although the December 31st "rollover" represents the most obvious
manifestation of the Y2K problem, industry experts at the IEA's seminars
have drawn attention to the fact that other trigger dates and events occur
before and after December 31st 1999. Ripple effects may continue into the
second quarter of 2000. . . .

It is important that the public understand that some problems are
inevitable. In such a dynamic IT domain, even the most careful inventory
will omit some computer systems and software that may be susceptible to the
problem. Furthermore, independent testing of systems that have reportedly
been corrected has repeatedly uncovered additional Y2K problems. . . .

It is important to realise that ripple effects caused by several seemingly
innocuous glitches have a potentially greater impact than discrete
"show-stopping" failures where the root cause is easily identified.
Problems in some sectors have the potential to ripple through the economic
system. Faulty payment procedures are such an example. An oil tanker might
not encounter any "show-stopping" engine or navigational failures
physically preventing it from leaving port, but a problem in a telex system
generating letters of credit thousands of miles away could prevent it from
loading or sailing. . . .

Most potential problems lie in pipeline control and monitoring systems and
a vulnerability to disruptions in the electricity supply. An example of
this vulnerability was demonstrated in Iraq earlier this year. A missile
destroyed a single repeater station used to pass flow and pressure
information to the control centre on the Kirkuk - Ceyhan pipeline. Although
the pipeline itself was reportedly undamaged, this "blinding" of the
control centre resulted in the closure of this major export line for a
week. The financial consequences of such closures are obvious. . . .

Refineries have very high current utilisation rates throughout the world,
often greater than 100% of the nameplate capacity, so even small problems
can have a global impact. Most refineries operate highly complex and
integrated production systems. As a result they face probably the highest
risk of Y2K failure of any link in the oil supply chain. The ripple effect
of refinery failures has the potential to affect regional oil product
markets and eventually the crude oil market itself. . . .

Offshore oil production is generally at greater risk than onshore
production because of the accessibility problems encountered when testing
subsea equipment. Checking subsea equipment is both expensive and time
consuming. Problems in safety systems are of particular concern as they may
precipitate platform shutdowns. Interdependence between oil and gas
production is also of concern. Failures in onshore gas processing
facilities would not only close offshore gas production platforms but also
those oil platforms where associated gas was produced. . . .

In the case of the oil supply chain the net impact is only likely to be
negative, as it is difficult to imagine problems in the supply chain that
would lead to more oil being produced than is normally the case. The oil
supply chain is extremely complex and heavily dependent on other sectors
such as shipping, telecom, electricity, water, banking and labour. Problems
in these other sectors could quickly ripple through the oil supply chain,
resulting in less oil reaching consumers. The Y2K readiness of these
interdependent sectors is crucial to the oil industry's preparedness for
the rollover date. . . .

Among many academics John Keneth Galbraith is consider to have wriiten the definitive analysis of the 1929 crash. It has been 20 years since I have read it, but I believe his thesis was that there was a pyramiding situation whereby people were starting companies with nothing but stock of other companies, so you can see what a house of cards was built.

A most interesting day. Silver has a tendency, if the day is positive to close on an upsurge and the traders all know this, so self fulfilling prophesy. Perfect example today, silver started out strong, weakend in the middle and finished strong. All the major silver stocks are making good gains with old Hecla making the strongest % gain. A lot of the old timeers don't even know there are other silver stocks. Juniors and pennies are doing nothing, but should start playing cath up tomorrow. Look at beans go. Also I forgot to mention in my last post what a good short bonds would haver been. This story is just starting, so keep your eye on the ball, unless you are so rich you can afford to spend your time in more esoteric pursuits.

http://biz.yahoo.com/rf/990803/4z.htmlClear evidence that the market top is upon us...they are now tapping into the final remaining vein to squeeze out the last drop of cash.

US CFTC Contacts Big Gold Players Part of Normal Surveillance

Discuss this story / Free quotes and charts

Aug. 3-MAR--

[B] US CFTC contacts big gold players; part of normal surveillance
By Cristine Denver, Bridge News
New York--Aug 3--The US Commodity Futures Trading Commission has been
in contact with major gold market players recently, but that is just part
of the agency's normal surveillance, said a commission spokesman. The CFTC
is aware of the market fundamentals and feel recent developments in the
gold market are reflective of supply and demand, he said.
* * *
Some industry sources had speculated recently that the CFTC was
investigating the gold market. While the CFTC typically cannot say if
there is an ongoing investigation, it has commented from time to time if
there is "heightened surveillance" of a particular market.
Recent actions by the CFTC would not accurately be described as
"heightened surveillance," said the spokesman. He noted that the CFTC
conducts routine surveillance of commodities market and said that recent
calls to major gold market players were part of routine surveillance.
The CFTC did not give details of its conversations with the gold
players.
End

Man is he good. From kitco:

Date: Tue Aug 03 1999 15:05
ORO (@Isure - post of Fed papers - Merton Scholes Markovitz and Sharpe in action) ID#71231:
Copyright � 1999 ORO All rights reserved
As an illustration of misapplication of a weak theory guiding the CBs I want to show the following Federal reserve paper and the intro to the analysis that underlies its findings. First a quick critique.
1. The obvious fact that gold is money - a competing currency - is being ignored in the paper. Particularly the role of money as a portable store of value is ignored i.e. the non-working asset aspect of money. This aspect has never been addressed by the "great minds" above.
2. Ignored as well, is the actual cost structure and economic dynamics of the gold mining industry.
3. The paper, by ignoring ( 1 ) above compounds the error with a reverse interpretation of the vast majority of private gold holdings, referred to as "service stocks" in the paper. The paper views the private stock as a direct financial investment that is justified by the returns achieved through capital gains on a continuous basis and a return on the lent asset. The financial "insurance" value of private gold holdings is not taken into consideration at all.
4. Furthermore, by ignoring the latter aspect ( 3 ) , the gold demand is estimated incorrectly, since they do not see that anyone with their heads outside the "asset pricing model" would happily buy "insurance" at a growing discount, and would buy the store-of-value equivalent of the Mona Lisa at a distressed price.
5. The hooey and baloney conclusions as to maximizing the private sector and CB ( government ) benefits through the lending of CB gold stocks with an eye to reducing "excess current production of a depleting resource" ignores ( 2 ) ( 3 ) and ( 1 ) . The accumulation of store-of-value gold in private hands is a one way street, only a tiny portion of it comes back into the market, and then only at exponentially higher real prices. The practice of high grading has reduced possible future production and availability of gold at any future price, thus voiding the desired results for the private depletion uses.
6. The investment return model is extremely flawed because of two flaws, first is the assumption that any substantial amount of gold at all will be returned to the lending CB; second is that the selling CB will not find itself buying gold in the market at the substantially higher price due to much reduced future supply.
7. Ignorance of ( 1 ) and ( 3 ) leads to a further misunderstanding of gold demand dynamics whereby the demand rises at a greater than linear rate with the falling price, and rises steeply when economic or political turmoil makes the financial markets doubt CB actions would be responsible, or political unrest eliminates all value of the currency of the country at risk.
8. Market dynamics, though addressed in a light fashion, are presented incorrectly, since the purely financial aspect of artificially low gold lease rates encourages a carry trade that must end with default since supply breaks down and the investment consumption is not returned to market. Thus the impact on the private market and CBs of the damage to the banking system as a result of the inevitable default is not considered.

The leasing scheme suggested as a way of both eating most of the cake and keeping most of the cake is most likely to result in loosing all of the cake and eating none of it.

Wayne Angel's remarks of late concerning gold seem to be based on the line of thinking presented in this paper. He will be pilloried if he had a hand in putting together this disaster in the making.

-for charts and complete text view
http://www.federalreserve.gov/pubs/ifdp/1997/582/ifdp582.pdf>http://www.federalreserve.gov/pubs/ifdp/1997/582/ifdp582.pdf

We seem to have a tight physical situtation in both gold and silver and this has developed without speculation. Speculation is what can really get these mkts going. I have seen this situation before in the early 80's. If comex is not being manipulated ( I think the goings on there are suspicious ) then we should start to see draw downs in the inventories, because as the price rises speculation should increase. I do think y2k will increase demand and I think afterwards people will mostly hang on to what they have and dishoard slowly, keeping supply thin. also, we have a situation where mines are being shut down just as demand is picking up. Just as it takes a large ship a long time to turn around, it takes even longer to reverse itself.

http://www.usatoday.com/money/charts.htmThe DOW had a seesaw day but managed to finish in the black, while
margin calls were par for the course on the Nasdaq, finishing down
offer 35 points as the selloff continues. Speaking of selloff, the
30-Year Treasury Bond shed 15/32 in price, mostly in the final moments
of trading, with the yeild, now at 6.17% reaching toward the year's high.

Our thoughts always turn to gold, so without further adieu, the
December gold contract at Comex (GCZ9) ended the day at $258.5,
up 70c after a trading range of $259.6-257.50. Spot gold finished up nicely at $255.90.

As the trading day shifted over the Atlantic, there seems to be
further evidence that the paper trading in London is drying up.
This is quote today from the London desk is similar to sentiment
expressed yesterday. "Volumes are very thin, there's not a lot about."
We'll keep our eye on this.

Bridge News offered this summary of the gold market:
"Gold was up on a technical move," said one trader. "We've typically had
some bargain hunting in Asia but that has been offset by other overnight selling
from Australia," he said. He noted that firming in the lease rates could be
putting pressure on some short sellers.
Some traders also pointed out that a 1,200 to 1,300 EFP (exchange for
physical) was transacted today in gold, but details were sketchy.

Also, see SteveH's offering of notable the CFTC report at SteveH (8/3/99; 14:35:05MDT - Msg ID:10232)

It was only a matter of time before the financial obsession with paper
turned to real things, and the following excerpt from Bridge comes as
no surprise: "It's not a question this morning of what will push the
Commodity Research Bureau Index higher, but what won't. Almost all the
commodities listed in the index, with the sole exception of cotton, are called
unchanged or higher following Monday's all-out extravaganza. The CRB trampled
its 200-day moving average and hit its highest point since May 6."
Indeed, its not difficult to appreciate the importance and therefore a natural
focus on real things. For example, CME pork belly futures were locked at limit-up
levels in midday trade today.

It is nice to be getting a partial confession from the IMF on its initiative
of debt-relief to Heavily Indebted Poor Countries. Anthony Boote of the IMF's
official financing operations division admits, "There is a major challenge
to us ahead of the annual meetings to secure full funding." Anc continues,
"Even if there were 10 million ounces of gold sales, there would still be a
shortage of funds (for the IMF's share) of about $1 billion." Is he maneuvering
for raise the spectre of yet additional gold sales (and additional denials),
or is he clearing his conscience that the whole sceme was only half-baked to
begin with?

And finally, in oil news, for those who have been following the case that
charges Saudi Arabia, Mexico, Venezuela, and Iraq with dumping cheap oil
on American consumers, we offer this report by Robert L. Schroeder Jr.,
Bridge News:

Washington--Aug 3--In an announcement that could bode ill for a
"dumping" case against 4 oil-producing nations, the US Commerce Department
today said it has received letters from 20 domestic crude oil producers
opposing the case.
Those producers appear to represent about 50% of total oil production in
certain states, a critical figure required to move ahead with the trade
case, the department said.

In order for the dumping case--brought against Mexico, Saudi Arabia,
Venezuela and Iraq by Save Domestic Oil, Inc.--to proceed, Commerce must
determine on Aug 9 if the coalition of independent domestic oil producers
represents 25% of domestic oil production and if their petition has the
support of 50% of industry that comments on the matter.
Commerce has already begun contacting producers and expects to meet
the Aug 9 ruling deadline, a spokeswoman said today.

SDO is seeking duties of up to 178% on crude from the named countries,
plus a $6.18 tariff on each barrel of oil imported from the 4 countries.
SDO charges the 4 countries with "dumping" oil in the US mark et during
1998 and 1999, as well as with unfair subsidization of its crude exports.
US Energy Secretary Bill Richardson has opposed the case on the
grounds it disrupts commercial relations with US trading partners.
Richardson has met with Save Domestic Oil, but has apparently not
persuaded the group to drop its case. ***
(c) Copyright 1999 FWN Reprinted at USAGOLD with permission. For details please go to:
http://www.futuresource.com/internet.shtml
No further reproduction without written permission from FWN

And that's the view from here...after the close.

http://us.history.wisc.edu/hist102/lectures/lecture18.htmlThis comes from Stanley K. Schultz, Professor of History
William P. Tishler, Producer
Shane Hamilton, Web Editor

Lecture 18
[Text Only]

The Crash and the Great Depression "Another problem with economic practices of the day was the commitment of the Hoover administration to remain on
the international gold standard. Many suggested increasing the money supply and devaluing the dollar by printing paper money not
backed by gold, but Hoover refused."

Stranger Note: No evidence of Pushing on a string here. BTW,
if anybody is starting to believe me yet, please say so, so that I can stop researching this. Thanks.

Hey, I noticed an error that I must correct regarding margin debt. The quote from Stack was correct, but his chart does NOT show margin debt at 200% of GDP, but about 2% or so ... sorry if that stood your hair straight up.

On my mind was total stock market capitalization vs GDP, which is 150%+, topping the previous '29 high of 80%, with the avg at about 49%. Imagine if the market corrects back to the average ... and when has a market stopped correcting at the average ??

I just caught this on the ABC evening news: "Today the average rate of a 30 year mortgage rose abov 8% for the first time in two years."

They went on to say that the monthly payment on a $150,000 mortgage is now $1,099.67, up from $992.00 just a few weeks ago. "Because of this rise in rates," the report went on to say, "between 400 and 500 thousand Americans now cannot afford a home. Yet, it is expected that sales will actually increase this month as buyers rush to get ahead of further rate increases."

Ah, shades of the 1970s. Just wait until next month when they make the boss give them a raise to pay for all this.

Test

TC, The Hobbits have ESP but need you to help with this EFP thingie that you came up with today. Can someone explain what EFP is and how it works ? Thanks
<;-)

Hey there Stranger, are you seeing INFLATION in the financing of new homes ?
<;-)

... Stranger, we could go around and around on this for days and still be up, well, you know. Your research efforts are proving to be quite impressive, indeed, but I know you have more important things to spend time on, as do I.

Even if we arrived at an answer that we agreed on, which I doubt is going to happen, this particular topic is distracting from the reasons we hold for forming our inflation/deflation conclusions.

I want to flush out those conclusions and will be back later tonight or tomorrow with some questions for you and some comments.

By the way, in chatting with Marie at CPM today (hi Marie) I couldn't help but comment on how fortunate we are to have the internet and places like the USAGOLD Forum that allow debate such as this, where some un-famous (thankfully) regular guy off the street like me can discuss these important matters with an exalted ex- Wall Steet exec.

Yes. As I said in a recent post, higher rates are initially inflationary in a strong economy. People are now paying more for gasoline and more for homes (effectively 10% more using ABC's example). Employers are short-handed and will be pressed for raises in the months to come.

before my departure, Stranger, you know the temptation to comment on the bid up in home prices is too much. It fits so perfectly into the scenario posted the other day by me (and as specifically noted in a follow up post) cautioning about getting wrapped up in the CPI, home price, or other rising-price figures, effects which are a result of the expansion in the money supply, i.e. in the credit supply, that has already occurred and that, when the bubble bursts, will most likely lead to spiraling money (credit) contraction, deflation.

Seeing today the result of what happened yesterday does not equate with seeing what's going to happen tomorrow. Tomorrow is where my planning is focused.

Thanks. But please don't think of me as an exalted executive. Like most industries, Wall Street hands out lots of titles. I only revealed my ID because I was challenged for raising the issue of unaccountability with another poster.

As for you, you may be unfamous, but you are no potted plant either. I made my first post on Jan.14, and you first called me to terms on Jan.15. You have been on my _ _ _ , off and on, ever since. In fact if it weren't for you, I don't think I would have posted nearly as much as I have. It has been a great debate, and you are a terrific opponent.

I also think it has been an important debate that goes beyond just two Knights brandishing their egos. As you well know, monetary policy largely dictates the value of the dollar. And the value of the dollar largely dictates the POG.

I Have enjoyed this forum for many months. The insight here is amazing when viewed against the backdrop of the daily drivel expoused by the talking heads. I often wonder how many "experts" on the financil talk shows have quietly pulled their stakes off of the table,while raving all the while about the new paradigm.
I believe the weakness in the dollar is based on this: The dollar is backed by the "full faith and credit" of a people who allow their government to run by a lying, cowardly, rapist. We had our chance to right this wrong, but we backed down from impeachment. Some US citizens and all the rest of the world know this. Trade of any kind is based on trust. After the mess in Kosovo, is there anyone left from Asia to Africa who trusts this government?
I don't know which paper currencies will eventually succeed or fail. History teaches us that almost certainly, one will. The question for anyone dealing in dollar denominated assets then becomes, how do you "carry over" your wealth into this new currency? Commodities are the safest answer, for they are hard currency. The whole family of hard assets will likely be better than the dollar. But some will "carry over" much better than others. Which ones are not perishable? Which are readily accepted as money? The list grows shorter..... Which are selling at historic lows?.....
And you all know the answer my friends, for by leading this discussion and placing your money where your reason has led you, you have chosen wisely.
Gold, it's the BONEDADDY of the whole currency tribe.

http://www.gold-eagle.com/gold_digest_99/joubert080299.html"...The one negative is that the story told in these long term charts -- great upside potential for gold, substantial weakness for the dollar before support is found, steeply rising US bond yields with 10% as a first target for the yield on the US 30 year Tbond, and of course a POG probably moving well above $1000/oz -- will not take place without great hardship and even catastrophe for many people riddled with debt and with whatever assets they retain stuck in rapidly declining markets...."

down 81,125 to 77, 500,000. This is not much, but at least it is in the right direction. I think we have been as low as 74,000,000 and change recently. But we seem to be right on the edge, so each day is fun to watch; and if these prices hold there should be more drawdown from speculatiors.

I don't know how this trade deficit problem is going to be handled because I always thought a softer dollar would worsen the trade deficit? So here we have a record trade deficit with a strong dollar. Also, these big oil prices, which I think are going to continue, are really going to be tough too deal with considering how much we oil we import; and if other commodity prices go up won't that compound the problem, or will our exporting of commodities neutralize that equation. Tough to figure. These are sure interesting times for economic variable junkies.

Please forgive me if the questions you asked in #10249 were only meant to be rhetorical. I would like to respond in part at least.

The strong dollar drove UP the trade imbalance. (America's ability to import from others was greater than their ability to import from us.)

Importing from others is helping to recover others' economies.

Their recovering economies are attracting investments again (Asia/Japan in particular) which causes investors to switch from the overpriced U.S., trading in their dollars as they leave.

Lower dollars, along with worldide recovery, should drive up dollar-denominated commodity prices (including gold) and U.S.import prices (inflation).

The consolation for Americans is that a lower dollar will begin to reverse our trade imbalance. We are going to see rising exports very soon. This is the point I think the alarmists are missing. The world isn't ending, for crying out loud. It is just changing.

Investment conclusions:
1. Buy cyclical American multinational companies. Their export business is picking up and they are going to make out double when they convert their profits back into cheaper dollars.

2. Buy Japan and any other bedraggled economy you see starting to recover. Values here are still compelling.

3. Buy gold. If EVER all the cards were stacked in gold's favor, it is right now. If you like to get caught up in topical issues (not you, koan, but anyone) like Y2K or central bank manipulation, fine. But don't miss the big picture!

Wanted you to know, as a new poster, that I enjoyed
your views very much, and would like to have more.

Also read the Frautchi long message on embeddeds, and
agree with a lot of what both you and he had to say.
However there are always the unforeseen and unexpected,
and the sheeple's reactions(like panic) is one of them.

There are too many ifs, to satisfy me, as to a likely
scenario, and proper preparations(each to his/her own)
is IMO, is the only way to go.

As for the PMs, and the other markets, the Gold-Eagle
article on long term charts, I also thought was well
written and well presented.

Unknown Economist #33 (7/18/99; 21:15:29MDT - Msg ID:9143)
Gold is a Commodity-Currency is Labor

Mr. Economist,
Your words and my comments:

------First , Gold is a Commodity, and it always has been. It has had its ups and downs for literally thousands of years. As has silver, copper, corn, wheat, meat, & even water.--------

Agree. In addition, gold is also money. Fact: If you review history, it will show that gold has been money for over 90% of the time span that humans have used money.

------ Currency is not a commodity. ---------

Agree. Facts will also indicate that currencies have been used as receipts or "contract currencies" for precious metals during the majority of their existence.

------(currency) It can be in many forms, yet it is always the same, it is Labor. Currency is 'shorthand' for service rendered. It is something accepted by at least two persons toaid in exchange of wanted commodities. I serve you, you pay me, I trade it for what I need. If I buy more than I need , then I have 'stored my labor'. It could be a barrel of oil or anything.-------

Agree. What you have described above is also equally applied to gold. As I pointed out in the first item, gold has been used in this very application far longer than any currency has. It is a tribute to the ingenuity of the human race to equate the use of "currency receipts for gold" in this
same fashion. It promoted the ease of commerce and speed of settlement. It is to the disgrace of dignity that governments embarked upon using currency, by itself as a receipt for labor. If not for the ages old cheating nature of mankind, it could have worked.

---------If you are a trader, a Real Trader, you do not become attached to any commodity in an emotional way. The commodity will gain or lose value in only way anything gains in value, by the pressures of supply and demand.------------

Agree. Because you are a "real trader", you must certainly know that anything can be traded if and only if it can be measured accurately. Man can equate no value to anything without a constant rule of measurement. Being bound to earthly things, said measurements can only be in the form of
real things to be honest. We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way! Truly, gold has a supply and demand, while the modern dollar is like the air of your breath. Always expanding and contracting.

-----------This year, Gold is in a downturn. Despite exciting reports of 'coin shop gold sales' it is
continuing to be priced lower because of lower demand and higher supply than what is sought in the world marketplaces. Period.--------

No, a "True Trader" would recognize that it is the dollar that is in an "upturn"! The emotions of traders can play tricks on their judgment. Tulips were once in high demand yet supply was infinite. Double Period

-------Despite all the distress expressed by many here , despite the anger felt for the Bank of England or the Swiss Nation itself, the hate felt for the 'short-sellers', whoever these dastardly persons may be, and the pleading for help to support the price of gold, the Truth is that gold is
Not In Favor and the short-sellers are the Real Traders. If you held a commodity, any commodity, and its value was sliding with little let-up, then you would be a fool to buy more! As a horse race progresses and your horse is losing ground yard by yard, do you bet it to win or to lose?---

--------------and the rest of your post----------

As Mr. Another said, "time will prove all things".
As I say, "Your experience with life has but only time to make wisdom sing"
Follow your spirit my friend, your path is indeed, before you!

FOA

http://www.iht.com/IHT/TODAY/WED/IN/edkevin.2.html------------If America's Wealth Bubble Bursts


By Kevin Phillips Los Angeles Times Service

WASHINGTON - The United States is approaching the millennium with a lotus-eating culture and e.commerce that some insist have banished the bad old business downturn. But what if it is actually living in its first major example of an aging economic cycle on the financial steroids of a ''wealth
effect''?

The next business cycle and politics could easily bring the reverse of today's giddiness: an ''unwealth effect'' in which consumer spending contracts as paper affluence shrinks.-----------------------

Too bad you don't have ESP, it might keep you outta that developing jam. Oops, my mistake...I see by the color of your robe you've already "been there, done that."

My Good Wizard, I couldn't find TownCrier's post that involves the EFP you're referring to. Not knowing the context, I may be wrong, but I assume because of the nature of this forum it is in reference to Exchange of Futures for (or in connection with) Physical--or some such nonsense. Actually, I shouldn't call it nonsense, because it is the element that puts a measure of reality into the predominantly all-paper COMEX futures market.

EFP means exactly what you might expect it to mean. Somebody, generally a producer or end-user, is opting to settle their futures position through an appropriate exchange involving the metal instead of a cash equivalent. This usually entails notifying the Commodities Exchange of their intent so that the appropriate scramble can be done to accomodate that handful of positions. Most positions are content to settle the contract for the cash equivalent, so it's not usually any trouble for COMEX to collect the payments and settle the bets like any common bookie. Even the longs that do want gold in the end will often liquidate their futures position for a cash settlement, and then take that money (if they are on the winning side) to do their gold purchasing at their preferred gold outlet.

You can see the jam the COMEX "bookie" can get into in such a rare event that the contract buyers (longs) all opt for EFPs, while at the same time all of the contract sellers (shorts) are intent on a purely paper operation. COMEX essentially would have to turn to the spot market to satisfy the EFP demands. Suddenly, the pricing wouldn't be driven by the contract demand, but by the physical spot market.

One other thing, Gandalf. The next time you find yourself atop Saruman's mighty tower, Orthanc, let me know it you can see Rotterdam from up there. You DO remember the significance of the Rotterdam market for oil, don't you? Maybe you'll be able to see a similar future for gold. Maybe we can get Aragorn to lend you his palantir for a better view.

Gold. Earn you some. ---Aristotle

That was a fun read, Thanks!

"We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way."

Exceptionally well put! A week ago I was hold a discussion with various posters about the meaning of "$17." Aragorn had the last word with various comments and revealing questions that pretty much put the wraps on the issue in my mind. (Come to think of it, I don't think I ever said "thanks for the input, Big guy," so this will have to serve in its stead.)

I think your comment opens the next chapter. Not only must we be concerned whether this particular "$17" is an electronic counterfeit, but we must always contend with the emotional element that at any time could alter its prevailing sentiment to conclude that even non-counterfeit dollars are bogus by the very nature of the government's willful and indiscriminant creation of them.

Gold. Why settle for anything less? ---Aristotle

GC9Z calling control tower! Requesting permission to fly above 260 $ US and increase rate of climb to $3.00 per day. Ceiling appears to be breaking up with only scattered shorts still creating cloud cover. Expecting CAVU shortly.

Now at $259.3, up .8

Sir Koan, you stated:

"comex silver stocks down 81,125 to 77, 500,000. This is not much, but at least it is in the right direction."

Why would declining silver stocks be bullish? Isn't silver stored all over the world and the comex stock just being one of the most public storage locations? Do the Comex silver stocks represent something special?

PS: Sasha sends her regards.

There he lay, a vast red-golden dragon, fast asleep; a thrumming came from his jaws and nostrils, and wisps of smoke, but his fires were low in slumber. Beneath him, under all his limbs and his huge coiled tail, and about him on all sides stretching away across unseen floors, lay countless piles of precious things, gold wrought and unwrought, gems and jewels, and silver red-stained in the ruddy light.

Smaug lay, with wings folded like an immeasurable bat, turned partly on one side, so that the hobbit could see his underparts and his long pale belly crusted with gems and fragments of gold from his long lying on his costly bed. Behind him where the walls were nearest could dimly be seen coats of mail, helms and axes, swords and spears hanging; and there in rows stood great jars and vessels filled with a wealth that could not be guessed.

To say that Bilbo's breath was taken away is no description at all. There are no words left to express his staggerment, since Men changed the language that they learned of elves in the days when all the world was wonderful. Bilbo had heard tell and sing of dragon-hoards before, but the splendour, the lust, the glory of such treasure had never yet come home to him. His heart was filled and pierced with enchantment and with the desire of dwarves; and he gazed motionless, almost forgetting the frightful guardian, at the gold beyond price and count... ----

Imagine, being face to face with a terrific dragon, and losing your wits only to ADMIRE THE GOLD!!!
"The Hobbit" is a classic, written in 1937, and I encourage any and all parents to read this delightful tale to their young ones, or if the young ones are of reading age, provide them the encouragement to read it for themselves.

Make no mistake, this was no run-of-the-mill dragon hoard, and even the most fanciful and wealthy amongst our ranks will never come close to acquiring a personal treasury to match its splendour. But that shouldn't stop you. While these current Gold prices are unreal, the Gold you can have brought up from MK's cellar (does he have Marie do all the work?) is quite real, I assure you! There is no time like the present to start your own little hoard--and its fun for all ages. You can watch your children's eyes grow wide as you hand them a Gold coin and tell them that it might have passed through the ages from the Gold in this tale, because Gold can't be destroyed, even by the hottest of dragon fire.

And here's the best part. Some hobbies offer the good value of entertainment, but often amount to a drain on your overall wealth. Not so with collecting Gold! My own preference has evolved to the little pre-1933 Gold European coins. At near bullion values they really pile up faster than the one-ounce bullion coins, and they are sturdy enough for routine handling by family and friends--they WERE minted for circulation after all. It's never too soon to start your family's very own "dragon hoard." And one day you may find that your "hobby" has saved your wealth and your bacon. Just beware of wandering bands of dwarves traveling with one hobbit under employment as a grocer, er, I mean a "burgler."

Gold. Hoard you some. ---Aristotle

Y2K can be dangerous to you work day! Robin came down to help out today and we spent far to much time on the clients deck, with double latte's, having a two person �Forum' type of conversation.

She brought up a very interesting point about TEOTWAWKI. It doesn't say"The end of the world", it say's The end of the world AS WE KNOW IT. No matter how bad the Y2K turmoil is, the productive infrastructure will be totally rebuilt, but the economic, financial, infrastructure will be a new and vastly different landscape.

It was typical of the timeliness of subject matter, that tonight's article by Kevin Phillips referred to the similarity between now and the Roaring Twenties. We had commiserated today on how that phenomena of lavish spending of other peoples money, obtained through �paper' vias as in the Twenties, gets eliminated from the system for decades when it gets rung out by cataclysmic correction.

When things are up and running again, the transfer of wealth by the operation of the �bigger fool' syndrome should be out of favor for some time. The post Y2K recovery will, of necessity, be built out of endeavors that have real productive value. Those of us who not only survive, but grow in wealth and fortune, will have found a way to contribute to that reconstruction.




On the cynical humor side; ---The employment position most needed to be filled in the Y2K aftermath will be --- Repo Man!

Need work? Yuk!

Oil eventually shows up in the cost of manufactured goods. Oil is nearly double the price of a couple of months ago. Should this not eventually show up as inflation of consumer goods? The talking heads in the media seem to either miss this point or dismiss it without comment.

AEL, excellent post! Looks like we read much of the same info. IEA has a lot of interesting info contributed by the industry. I should keep up on it more. I think that whatever happens with Y2K, we should live in ""interesting times"" yes? Even if Y2K is just a "bump in the road" as some suggest, I think that the question then becomes, What is the other guy going to do? If one's life is disturbed from this "sleep" we call life, and things are not so normal even from a minor to moderate disruption because of this Y2K "bump in the road", then what? Do others unused to disruptions in their "sleep" patterns suddenly wake up and panic? Maybe Y2K won't be much of an event by itself, but the reactions of a few could disrupt the many. Remember a few years back when Johnny Carson announced a shortage of toilet paper on the "Tonight show"? Well it was funny at the time, but the store shelves in the next few days were stripped bare of toilet paper. Definitely prepare for the worse-case scenario and hope for the best.

Koan, Silver - Looking good. Hope it's not just a "dead-cat bounce" (Oh no, did I just do that, another animal, and a dead one at that!). I'll definitely keep my eye on Hecla. I know some Hecla geologists and I'll keep my ear to the ground when I get state-side. Take care.

I thoroughly agree with the fact of the $US being of infinite supply. The Fed is only one of the myriad players in the credit business. Everyone in the financial services business want in on the game of credit. Freddie MAc, Fannie Mae, all the brokerage houses with their margin loans, even the bullion dealers--the guys in LA I buy through are now offering loans against metal. None of this is tracked as debt by the industry. This is all a huge ponzi scheme that is ready to implode. I just sold a large house for $102/sq. ft. I can't wait to close and buy more gold. This whole rotten piece of fruit will melt when the first homeowner defaults on the first 125% mortgage, which triggers a margin call on his overextended stock account, which causes his broker to sell "at the market" which incurs a loss for the broker, which has to sell treasury bonds that are underwater to pay off the bank that loaned them the money to extend the margin credit which causes the USG to raise rates to sell the next tranche of debt which pays the interest which is owed the Japanese who hold $400 billion in US debt which is underwater because the dollar is down which..........well, you get my drift.

[Does this concern anyone? As a rule, presidents are supposed to offer "no comment" on the economy unless it's hitting the fan and there's nothing else to be done but try to give direction to the herd. Maybe it's a Y2K sorta thing...banking or monetary controls?]

By Bridge News
Washington--Aug 3--President Bill Clinton will make a statement at
1130 ET Wednesday on the US economy, the White House confirmed today. The
White House would not be more specific on the nature of the announcement
but Clinton may use the occasion to tout White House efforts to reduce the
federal debt.

The Washington Post reported today that sources said the US Treasury would
propose rules Wednesday that would allow it to buy back federal debt that has not yet
matured.

There have been indications from other sources that Wednesday's event
may be related to this issue, although one White House official indicated
the event also would focus on pending congressional proposals to cut
taxes. Clinton opposes those proposals.

(c) Copyright 1999 FWN Reprinted at USAGOLD with permission. For details please go to:
http://www.futuresource.com/internet.shtml
No further reproduction without written permission from FWN.

http://www.egroups.com/group/gata/175.html?Another "Midas" by Bill Murphy.

This has got to signal something to us all......

"New York City is suing Consolidated Edison of New York for "gross negligence" in failing to anticipate and plan for increased electrical demand during the week of July 4, when temperatures several times exceeded 100 F. Several big cities and east coast consumers are venting their frustrations at the weather by suing electric companies for power blackouts which occurred during the recent heatwave, one of the worst this century."

If this isn't the height of arrogance and ignorance, well I don't know.

To be sung in rapid-fire fashion ala R.E.M's "It's the End of the World as We Know It." How fitting!

Gold...makes it easier to vote with your feet (accepted around the clock and around the world.) ---Aristotle

Thanks Stranger for the elucidation (is that a word?). I had a nice comment and some stuff about silver and my server crashed just before I posted and lost it all. Well there is one masterpiece lost to eternity. Your right Black Blade, Canamami has rightly talked about that a lot (oil that is). Tom Cat, I would guess you are right, but everyone keeps quoting comex stocks, so ----. I guess they see the comex staoks like a statistical sample (which it probably isn't)representing the total supply demand picture. I am going to post without cleaning up much because I just know my server wants to blow out again. By the way this next $5.50 to $6.00 is very important because of the great technical damage done at those heights. If silver can get past $6.00 look out; and it looks like it is going to.

"Access troubles--Testing...testing...Mic check one...two..."

TEOTWAWKI, if taken literally, could mean the world in a newly changed condition. However, I don't think most people use that defintion. When most people use the term I believe they mean: The End Of The Infrastructure As We Know It or The End Of The World Paradigm As We Know It.

Many talk about the bad new side of the depression. However, for a few, there was a good side. The depression blew apart existing lines of commerce and opened the door for some entrepreneurs to hurdle impeneratrable barriers to wealth. For the courageous and nimble, the depression brought opportunity, market entry, and wealth. Y2k will to the same for those rare fellows who come alive when challenged by new realities. Y2k will bring pain and sorrow to those who struggle to maintain the status quo. Once a person starts spending a good deal of his time struggling to hold what he has, he is on his way out. He will look wealthy and sophisticated but his days are numbered.

I saw a sign on a fellow's dump truck which read: Find A Hole And Fill It. He will never go hungry, y2k or not.

I just posted another one and lost it. Boy double duty tonight. I don't know exactly about the comex stocks and how they relate. I have been wondering about this for a while because they stay right around there historical lows, I think, of about 75 mil oz. I found out about cots (commercial longs and shorts in relation to speculators), so I guess we are ready for a new adventure. The comex question? Are they a reliable indicator of silver supply? How's that. I have seen the mkt react when the stocks got down in the 74 mil oz range, at least I think I did. But my guess is that if they get below 70 mil oz we will see a reaction. But if there is some trickery going on then maybe we won't see them go below, even if everything else is bought out. I have my stock stuff all on the canadian mkts and part is mining and part is everything else in the world from companies that do fish vaccines to soccer betting sites.

You asked the question how could someone be positve about y2k a few days back? For my part, I don't really know. I guess I have an educated guess that it is something we will muddle through and it may be not too bad or very bad, but definately survivable, but that is just an educated guess. I am surprised sometimes though that it gets so much attention when, as I have said before, China looks like it wants to invade Taiwan and maybe a few other places and Russia is such a basket case that it could be pretty scary. For me it is a big picture thing. But I don't know about y2k, maybe it will be worse than I think. What I am saying is that I would bet agaainst a catastrophy if they were talking bets in Las Vegas.

Economist #33
---------If you are a trader, a Real Trader, you do not become attached to any commodity in an emotional way. The commodity will gain or lose value in only way anything gains in value, by the pressures of supply and demand.------------
FOA
Agree. Because you are a "real trader", you must certainly know that anything can be traded if and only if it can be measured accurately. Man can equate no value to anything without a constant rule of measurement. Being bound to earthly things, said measurements can only be in the form of
real things to be honest. We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way! Truly, gold has a supply and demand, while the modern dollar is like the air of your breath. Always expanding and contracting.

me
FOA, you could not be describing the coming storm any clearer, I only hope and pray that understanding comes to many before it is to late.
The whole world (even creation) is groaning under the wieght of SCALES (ancient tool for conducting commerce) being out of BALANCE! Boy oh Boy hear it comes!

August 11,1999
-solar eclipse over Jerusalem. (Amos 8)
-Mars (=Judgement, Atonement), lies within Libra (The Scales) for the next month. (Prov.11:1 & James 5:1-7)

The wise men of old followed the stars (just like Daniel taught them) and ended up at the Messiah's feet, may I be as wise.
Keep Well

Koan, Thanks for the comex reply. Makes sense to me. As time goes on I like silver more and more. Have gobs of the physical stuff and I think I have hit my limit weight-wise.

For years my business has used both Macs and PCs. I now use Macs myself exclusively but still own PCs for others. If your concerned about reliability you might look into a Mac.

Stranger, your recent posts have really been great. Sometimes we students need to hear the same message many times before the lights start to turn on (maybe I am not compliant!) but the lights are finally starting to blink a little. Your emphasis and viewpoint on the strenght of the dollar and its importance in the big picture has changed my way of thinking. I find myself looking and reading about the yen and the yen carry trade and areas that formally were too esoteric but are actually are pretty important to view the overall scene. Thanks again.

Buying back bonds when their price is down is good business. But what is "Down"? If a bond was issued at 100 and went to 125 and you buy it back at 114, your still paying 14 points more than if you let it run to maturity. Now if interest rates were going lower, than it could be made to appear with some double -think spin, that this was an astute move. But how could interest rates get lower from here? Maybe everyone is going to get a cheap unsecured Y2K "tide over" loan from Uncle Sam, come January. (More on that fantasy when I have some serious writing time)

OR, maybe someone like say, Japan, wants to cash in some bonds and no one wants to upset the market place, so why not conveniently have some bond redemption funds available. Why does this seem just like the BOE gold supply handout and, just who did Bill have dinner with last week??

Have you seen this?
A recent Associated Press poll found that nearly a third of Americans plan to stock up on supplies, and 25 percent will take extra money out of the bank. The AP poll of 1,008 adults found that 11 percent expected major problems.

And specifically in seperate poll in Atlanta ...
The poll found that, of the 95 percent of metro Atlantans who've heard about the Y2K bug, 41 percent are "somewhat concerned" that it will affect them, while 12 percent are "very concerned." Thirty-one percent are jittery enough that they're planning to set aside cash.

The human element is the primary factor to be concerned with, although it would also be a bit reckless to dismiss the tech side, despite the assurances of various officials with a vested interest in keeping the peace.

Gold. Get you some. ---Aristotle

Is anyone watching this - silver and gold on the highs of the night in overnight trading? We have all been fooled so many times, but this sure looks real? And what does it portend for everything else?

Buying back bonds when their price is down is good business. But what is "Down"? If a bond
was issued at 100 and went to 125 and you buy it back at 114, your still paying 14 points more
than if you let it run to maturity. Now if interest rates were going lower, than it could be made to
appear with some double -think spin, that this was an astute move. But how could interest rates
get lower from here? Maybe everyone is going to get a cheap unsecured Y2K "tide over" loan
from Uncle Sam, come January. (More on that fantasy when I have some serious writing time)

OR, maybe someone like say, Japan, wants to cash in some bonds and no one wants to upset the
market place, so why not conveniently have some bond redemption funds available. Why does
this seem just like the BOE gold supply handout and, just who did Bill have dinner with last
week??

Thanks for your reply on Y2k.

Many years ago I used to work as a systems test engineer for very large systems. I used to interview the builders of the subsystems who would all insure me that the entire system would do fine (because they were sure their part was ok). It never worked out this way and after speaking with many techies in the y2k arena I am a pessimistic.

Picture a world war where millions of computers all over the planet were knocked out of commission. If enough wipe out, the problem becomes one of a non-linear chain reaction that could have long term devestating effects. It is a question of reaching critical mass or not. If it is reached, and non-linearities take over, it could be the ride of our lives. We'll know soon enough. The world won't end, as Stranger says, but it sure as hell might change.

There will be opportunities of a lifetime.

Yes, on the highs at these times is bullish especially as we just got through the Sydney 'Dump Gold' hour with only a dime down.

You know what the fellow by the open 5th floor window, heard the guy who fell from the tenth floor say as he passed by? -- "So far, so good"

BTW, if your password has a Q in it, you maybe hitting ctrl instead of shift, that'll wipe the post!

I will defer to you. Maybe I have been too lacadasical about this y2k stuff. Well I live in the place everyone wants to get to, so I'll just sit tight. There is plenty of bear meat, water and wood, so I think we are secure.

It is always something when you see the PM's just blow through the ceilings like they seem to be doing. In a situation like that (I hope it turns out to be a situation like this) tech stuff means nothing it just moves. I mentioned last week that when the mkt senses a botttom is in sometimes everyone piles on afraid they will miss out. If this move holds watch the stocks react tomorrow and the options will go nuts. The shorts won't sleep tonight.

First oil, then gasoline, next was withering crops, now mortgage rates and-- The USG just froze a slew of Federal timber sales. That will surely spike lumber up.

Inflation: Soon to be a major motion picture, coming to a theater near you. (The sneak preview was shown on the USA Gold Forum)

Kitco shows Hong Kong just sold silver down a nickle. It is about to hit London. I am supposed to be in computer classes half a day tomorrow. Wonder how I will do without any sleep.

I may have been in error before about the bond buy-in. Might be that they can call them in at Par. Anyone know the facts on this?? If there is enough new money coming in at lower interest rates at new auctions, then calling in older issues paying higher rates would be a debt reducer. If so, why now??

http://www.accessatlanta.com/partners/ajc/newsatlanta/y2kpoll0803.htmlHowdy, Stranger
You have frequently demonstrated yourself to be coolly detatched from some of the more dire predictions of a y2k-fostered collapse. But please forgive me if I've just now grossly misrepresented your position.

I have a difficult time conceiving that it is possible for everything with a chip to shut down ushering in a return to the dark ages. While I must admit that this isn't my area of expertise, and this is offered as perception only, isn't it true that computers deal with binary numbers, in which case 2000 would look like 10001001100 to an embedded chip, and it would have no problem reaching that from 10001001011. Software and databases are a more obvious point of difficulty, however. It seems to me the machines would work, but the software and data has no guarantees of satisfatory or uncorrupted performance post-millennium.

If, in fact, you remain confident in the TECHNICAL viability of the assorted national infrastructures, do you harbor sufficient concern over the potential disruptive nature of the HUMAN element. Currency crises seem to bring out the worst in people, and a degree of rioting in the streets was something we saw a bit of, which ultimately led to the ousting of Suharto (sp?). And in these instances, there has always been the somewhat stabilizing effect of the rest of the world in a state of relative balance. The potential for a worldwide banking crisis due to a run on paper will undermine confidence in banks not for the right reasons, but simply because they didn't print up enough paper notes to begin with to cover all of the account balances. Again, this is a shattered confidence for the wrong reasons, but it is shattered, nonetheless. And although my example above would lead me to believe that many of the machines will be still be operable (with manual overrides as necessary), the work of engineers and technicians and other specialized labor generally relies upon an equally reliable currency. Once lost, confidence in government paper is not an easy thing to reestablish.

Picture this...bank runs clear out all of the paper cash, and to remain viable corporations banks have to borrow this equivalent in electronic form from the Fed in order to maintain their reserve requirements based on their outstanding loans. (You will LOVE this part...) THAT, my friend, is quite INFLATIONARY--new money created through borrowing. People might in the interim try to spend down their remaining electronic accounts on cash equivalents such as Gold, and whatever else suits their fancy. This would tend to push up prices. Suddenly we're looking at 1923 Germany. Will the government try to fend off the perceived need of people to spend down their electronic balances by printing whatever bills are needed to give these numbers on account a "legitimate" paper backing? They could do this fairly directly by devoting just a few presses to cranking out $10,000 bills or larger ones if necessary.

But the problem is, most people don't understand money and what money is to the same extent that we do. They would see these new bills with the view that the government was trying to "pull a fast one" so to speak. Even in a post-y2k environment where equipment still worked, what self-respecting worker would respond to the governments pleas for calm, with promises to pay good paper for an honest day's labor? The workers would say, "Hey! You ran out of "real" money (which would be "paper" to their feable minds) last Autumn. We're not gonna work in return for paper that you OBVIOUSLY just now printed up out of thin air!"

Ok, I realize this is all conjecture, but it is reasonable conjecture, and therefore the human element can't be dismissed. The fate and fortune of the dollar is intimately tied to this same human element.

Had Gold been maintained as the obvious money of mankind all these years, y2k would probably be just a blip. Oh, sure, there would have been runs on the banks due to the nature of fractional reserve lending, but the money that could have been gotten safely out of the banks would have remained stronger than ever, even as the banks themselves would be forced to fail, because even the Fed can't lend them interim Gold deposits out of thin air like they can (and will) with our modern money.

Gold used as the sole money fosters sustainable human development. Because people don't understand the nature of modern fiat currency, and because of the various excesses this currency has bred, y2k will probably shape up to be quite messy, indeed. Much worse than it would have been otherwise. Shame on the government, shame on the lenders, and shame on the borrowers...the people who have tolerated the development and continuation of this mass delusional farce.

Save yourself...save humanity... Gold--Save you some. ---Aristotle

$259.40.

I sent this note to my friend:

Leroy,

Below is the GATA and Lemetropolecafe's latest on the impending gold bull market on the cusp of a falling dollar, rising long-term bond yield, rising mortgage rates, and lowering dollar. Bill tends a bit towards the melodramatic but he is certainly emotionally invested in his anti-manipulation of the gold market campaign, which I support, as you know. If you stick with his synopsis of the current affairs in the gold market, you will note that things appear positive for a potential rally in gold. As I have explained earlier gold plays the pivotal role in international circles as a means of settlement amongst Central Banks. Its role has really never diminished as a reserve asset as some would have had you believe. Gold is ready to breakout. Last time this happened the Bank of England announced a gold auction that caused the price of gold to tank $38. This so alarmed the South African miners that it caused major embarassment for England. In my opinion, they were attempting to cover a few Bullion Bank's who were believed to be short gold and needed physical gold in order to make good. It was felt that the BOE was the lender of last resort to these BB's.

If anything, the current gold market has many eyes rivoted to it. It is just a matter of time before, the entire world watches with us. This just in from GATA and Lemetropolecafe.com:

10:15p EDT Tuesday, August 3, 1999

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy has been working non-stop for
the last few days and has consented to my sharing with
you his second "Midas" commentary in the last two days
at www.lemetropolecafe.com.

Last night Midas told us that something was afoot at
the Commodities Futures Trading Commission in regard to
the gold market. Today, as you'll read below, a
dispatch from Bridge News confirmed as much. Bill and
GATA are wired to the gold market around the world, and
we think we're turning the tide. We really could use
your help.

If you like what you see here, consider checking out
GATA's informational web site at www.gata.org and
making a donation to our legal fund.

A two-week trial subscription to the "Cafe" is free.
Check that out too at www.lemetropolecafe.com.

Please post this as seems useful.

With good wishes.

CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.

* * *

By Bill "Midas" Murphy
www.lemetropolecafe.com

August 3, 1999
Spot Gold $255.90 up $1.20
Spot Silver $5.44 up 8 cents

Technicals and Fundamentals

Would you believe that a gold price explosion is
coming?

The gold market see-sawed all day today but eked out a
small gain. The big news was behind the scenes, in the
spreads and the lease rates. Spot gold closed up $1.20,
October up $1.10, December up 70 cents, and April 2000
up only 30 cents.

The one-month lease rate is on the rise again and shot
up to 3.3 percent, while the six-month rate charged
into new high ground at 3.35 percent.

Meanwhile, the word on "the Street" is that panic
producer selling is holding down the gold price. The
reason offered for the selling is pressure by the
"banks" on certain producers to hedge. The "banks" in
this case are the "Hannibal Lechters," as it is the
bullion banks that lend to producers. Pretty neat. The
"Hannibals," in like Flynn, went short just before the
Bank of England sale announcement, along with a few of
their big clients. The market panicked upon the BOE
news, the death of gold was pronounced, "Hannibal" sold
for weeks, and the gold price dropped $38 per ounce.

Now some gold producers feel compelled to hedge or are
panicking and selling forward as a result of "Hannibal
pablum." Knowing a big rally is coming, Hannibal is
quietly covering his shorts, which the cowered
producers are handing him. Gold producers that are
selling forward now are being snookered by their own
bankers!

Now to the good stuff. We believe that a short squeeze
of sorts is coming in the gold market. You will not
hear this from too many others because of this
"Hannibal pablum" phenomena, which has influenced
mainstream analysts and those in the press who report
on the gold market.

Why do we think as such?

First, the one-month lease rate refuses to ease -- 3.3
percent is four times what the one-month lease rate was
running until recently. After a spike up to 4 percent
and an ease-off to around 2.5 percent, the nearby gold
loan rate moved back up sharply today -- and with no
apparent reason. That occurred with a narrowing of the
spreads between the contract months on the Comex, so
Midas will offer his version of what is going on. You
will like it.

Regardless of the zillions of analysts who tell you
that the high rates are solely due to urges by
producers to sell, the truth is that the central banks
are very concerned about the liquidity of their gold
loans going into the end of the year. Many weeks ago we
told you that access to gold loans would be cut back to
the middle tier of borrowers on down. That is happening
at this very moment. Yes, certain borrowers can roll
over gold loans, but they must pay these much higher
rates and they must take a much greater price risk.

A move to $280 gold from here in a month would mean a
10 percent principal loss on any gold loan that was
rolled over today. Add to that 3.3 percent for the
lease rate. Annualize that and the cost of borrowing
becomes about 160 percent. Not such a great deal --
especially if one invested in Treasury bonds that are
sinking in price. Losses on all sides abound.

It appears that central bankers are finally waking up
and acknowledging the danger lurking out there in the
gold loan arena. The loans (10,000-14,000) tonnes are
out of control relative to mine supply (2,529 tonnes in
1998).

It also may just be that Y2K fears that are starting to
circulate more widely may be the catalyst that finally
woke the central bankers up. Maybe rising interest
rates around the world and the widening of the credit
spreads (expressing liquidity concerns) have them
taking action regarding the gold loans. No matter; the
jig is up for the shorts. Midas has been telling you we
have them right where we want them, that the conditions
for a bull market in gold are in place and the only
holdout until now is the gold price itself. And that
could blow sky-high any day -- or week.

I am not the only one who thinks this way. The XAU
soared 3.48 points today to close at 65.22. Silver came
right back in the face of the shorts to close at its
recent highs, and is close to taking out $5.50. In the
background, the CRB broke out and cleared all technical
hurdles by closing at 194.11. It has completed a
massive base. And bonds acted very poorly AGAIN today
as yields have risen to 6.16 percent and are close to
making new highs for the move. The tell-tale bank stock
index also closer lower again today. This is another
sign that all is far from well in Financial Land.

Now back to the spreads. Our British whiz kid who is a
master at commodity plays says the word is out in
London to buy December gold and sell April or June
gold. In addition to Y2K year-end fears, the English
value-added tax of 17 1/2 percent disappears on gold
purchases beginning Jan. 1, 2001. That means that gold
is 17 1/% cheaper in England on that day. There will be
a scramble to buy bargain gold just as Y2K problems may
be kicking in.

Demand will surge in the nearby months relative to the
distant months, so the spreads could go into
backwardization (with nearby months higher priced than
the back months), which is practically unprecedented in
the gold market, as gold normally trades at a contango
(with the back months trading higher, reflecting
interest rates, storage, and insurance).

Because the gold loans are much too large relative to
supply, a squeeze might develop. The front months could
soar relative to the back months as central bankers
become horrified at the possibility of facing force
majeurs, delivery defaults. Sheep that they are,
central bankers will cut back on the leasing of their
gold, driving up rates further and exacerbating the
squeeze.

Those who borrow short and lend long could face ruinous
consequences. During the mini-silver squeeze that
occurred after the news of Warren Buffett's buying,
some silver fabricators went bust as one-month silver
lease rates shot up to 70 percent. That's loan-shark
material.

Bullion banks could suffer terribly as the short
borrower and long lender. If gold lease rates stay at
this level for long or go higher, problems will
surface. The producers that are heavily hedged could
run into problems too if there is a big rise in the
price of gold. They have credit lines from the bullion
banks. The producers have sold forward at fixed prices.
Maybe the credit line with the bullion dealer will be
OK up to, say, $325 gold. But if the price of gold goes
to $350 or more, the bullion dealer will say to the
producer: We need more collateral or you will have to
cover your hedges" -- (forward sales) -- probably at
big losses. So while the heavily hedged companies are
King of the Hill now, when the price of gold explodes,
they might have serious problems themselves.

Get ready, gold bulls. Fasten your seatbelt. The good
gold ship rocket ride is coming.

The silver market continues to perform well as the
silver lease rates are firm also. Six-month silver
rates are around 5.3 percent, which is much higher than
normal and signifies that the physical silver market is
very tight. Our longstanding bullish target of $9.78
silver remains intact. Tickets are still available for
the "Silver Streak" rail ride.


Potpourri and the Gold Shares

More on the chatter about the Commodities Futures
Trading Commission from Christine Denver at Bridge News
today.

"The U.S. Commodities Futures Trading Commission has
been in contact with major gold market players
recently, but that is just part of the agency's normal
surveillance, said a commission spokesman. The CFTC is
aware of the market fundamentals and feels recent
developments in the gold market are reflective of
supply and demand, he said.

"Some industry sources had speculated recently that the
CFTC was investigating the gold market. While the CFTC
typically cannot say if there is an ongoing
investigation, it has commented from time to time if
there is `heightened surveillance,' said the spokesman.
He noted that the CFTC conducts routine surveillance of
commodities markets and said that recent calls to major
gold market players were part of routine surveillance."

In last night's Midas I informed you that something was
going on regarding the CFTC and the gold market. This
is confirmation.

But the CFTC is being a bit disingenuous here. A second
source tells me that he has conveyed information to the
CFTC about the gold market and is under court order not
to discuss that information with anyone, Midas
included. So stay tuned. The CFTC gold story is just
beginning. You can count on it.

Oh yes, counselor, one more thing. If this was so
routine, how come Midas knew about it yesterday Am I a
"major gold market player"?

For the GATA file: At 11:40 a.m. today the XAU started
to rumble up and some excitement was building in the
golds. Spot gold was trading at $256.80 and moving
higher. Out of nowhere massive selling hit the gold
market -- stopping the XAU rally dead in its tracks
until the end of the day, when Comex was closed. Then
the XAU rose again.

>From Bloomberg News:

"Comments by John Muery, head of the bullion division
at MTB Bank in New York, on rising gold prices amid
tightening supplies of American Eagle gold coins. Some
traders expect demand to rise later this year as
investors buy coins as a hedge against any computer-
related disruptions to the economy at the start of the
year 2000.

"`I think a lot of people were surprised that gold
prices have climbed as much as they have. Now they're
afraid of missing the boat. We're selling all the gold
coins we can get. It started last week, and it's this
week too. There's good gold demand right now. I don't
think it's Y2K-driven yet.

"`Everybody's understanding that there's a shortage.
People are buying Canadian maple leafs, our gold bar
business is doing extremely well, and we're selling a
lot of Krugerrands.''

"`Right now even primary distributors are trying to buy
coins from each other to satisfy the demands of their
customers.'"

More from Arch Crawford:

"The most important period of the year, as far as the
stars are concerned, is not Y2K-day. It's the upcoming
eclipse series and accompanying massive configurations.
About this momentous occasion the French psychic
Nostradamus wrote 430 years ago: `In the year 1999 and
seven months" -- old style -- from the skies will come
a King of Terror, To raise again the King of the
Mongols' -- (China?) -- `Before and after, Mars (God of
War ) shall reign at will.'

"Although the psychic world speaks to us more in
riddles, which can be easily understood only after the
fact, the timing of this one is hard to escape!"

"Nightmare scenarios pictured by those who attempt to
pierce the veil of the future: 1) Natural disasters,
including earthquakes, tidal waves, tornadoes,
hurricanes, flood, famine; 2) man-made disasters of
chemical, biological, or nuclear war or accident; 3a)
financial meltdown signaled by Chinese devaluation or
the unwinding of the Yen-$US carry trade, either of
which could lead to repatriation of money held in U.S.
Treasuries, or 3b) financial meltdown caused by
reversal of the huge gold short, either of which could
catch hedge funds in vulnerable positions; 4) major war
involving blockage of oil flow from the Middle East;
and finally 5) Y2K-related panic and bank runs. These
are dates most likely to bring the dirty laundry out
into view: July 14, 21, 26-28, August 5, 7, 11, and 17.

"August 11, 1999. This is the big one, the mother of
all solar eclipses, about which Nostradamus wrote: `A
king of terror will come from the skies."

Arch is a firebrand and has a very big following here
in the States because of the accuracy of many of his
writings.

OK, more goodies. I got word today from London that the
pressure on Prime Minister Tony Blair and the Labour
Party to reverse the Bank of England gold sale program
is intense. At this moment there are government-to-
government negotiations. The damage to the economies of
sub-Saharan countries in Africa has been extensive. The
Labour Party guys are looking like louts in England.
The British bankers are looking like "buggers." There
is a very good chance now that the gold sales will be
rescinded or something will be arranged to the same
effect.

If that happens, the groans of the shorts will be heard
around the world.

The Gold Anti-Trust Action Committee has an article
coming out in the August 1999 of the prestigious
International Mining Review, which is published in
London.

Gold, silver, and precious metals shares have arrived
at the dance. It's time to party!

-END-

Peter, I am one step away from not knowing what I am talking about here, but my understanding is more that it would be like a house loan. You can pay it off whenever you want. so, it would make sense to pay off the loans with the highest interest rate first. On loans you generally pay for interest after you use it. But I only scanned the article and may have missed this one entirely.

I wasn't sure what the post meant. I was hoping someone would comment on its significance. Just seemed important but complicated, eh?

FOA,

Why the full-court press now? You must feel we are close? Certainly, the GATA release below, shows a move is immenent but why would it be different this time than all other failed gold rallys? After all, last time we got the BOE announcement. What this time?

What is it that Mr. Another senses from his fellow world leaders that tells him that 1999/2000 is the possible last notch in the dollar belt? Why now?

http://www.wwfn.com/crashupdate.htmlStock Market Crash index of -10 means get out now until signal improves. Index is at -10.

Kitco has London silver blowing through $5.50. Boy, are the shorts going to be in for a surprise in New York. Couldn't happen to a nicer bunch of guys. It will be nice for a change to see the technical damage down below spot rather than above spot. I bought a bunch of cde November $5.00, a couple of weeks ago, and Paas feb 2001 $6.00, would sure like to see them in the money tomorrow. There was still some highly leveraged bargins yesterday, hope there still there in the morning - one last buy to get fully positioned.

The level of Y2K concern on the forum seems to be rising lately, and better lately than never. Although this is a good thing, it causes me a pang. I realized some time back that the pleasures of this forum provide me an escape from thinking about and otherwise preparing for Y2K. Perhaps the lesson to be learned is nothing will be unaffected by it.
A quaint and curious little book by Arthur Conan Doyle deals with a situation oddly similar to this forum and The Impending End of the Financial World as We Know it. Titled The Poison Belt, this post-holmesian work stars a brilliant scientist. He deduces the earth will soon pass through a duecedly dicey bit of the galaxy, and publicly proclaims the problem. The scientist and a few friends attempt to evade both skeptics and poison... Y2K similarities included at no extra cost.
Speaking of literature, thanks to Aristotle for the Smaug Alert. Without doubt, welters of wise words have wended their way from learned pens to deal with the relationship and provenance of Tolkien and Wagner's ring cycles. I just haven't read any of them. If anyone has, a summary suitable for study by the less scholarly would be stunning.
Goldsun

They are scared shitless, They can't even let silver rise. G.T Expect the same for GOLD?????? I hope they Burn in HELL!!!!!!!!!

Kitco had a electronic glitch on the 24hr silver chart it showed silver had dropped 0.50cents. Sorry false alarm. I still hope all "SHORTIES" Burn in HELL though. "Kick when they're up and kick,em when they're down" Golden Truth.

Someone was talking about a mining co that was "taking a write down"(?) earlier. Can someone explain what that means, especially in terms of effect upon such a company if the POG/POS rises?/falls?
Thanksabunch,

(gonna be a fun day, even if we don't go to the moon, gonna be sittin on nice firm bottoms from here out.)

get some! and how?
Q.

Uh-huh, lets see...S&P futures down, A/D line is looking interesting, more Y2K talk, markets falling, PM's rising...me thinks that the game is afoot!

Hope everything's ok. It seems that their charts are upside down. I have to stand on my head to make them look right. What a head rush!
8*)
Get some! and how?
Q.

http://www.cme.com/cgi-bin/gflash.cgiPPT fight song:
...~we see red num-bers and we want to paint them bla-ck~...
~ev'ry thang that's not black should be black, that's just the way it is~....

phhht. I guess that's why that crash warning system says only sell the 4 letter high flyers. (hmmm, 4-letter; kind of appropriate, huh?)

still gonna be fun.
Get some! and how?
Q.

http://www.thisislondon.co.uk/dynamic/news/business_story.html?in_review_id=161272∈_review_text_id=129947Why is this an issue now? He has about year left still to run.

www.gold-eagle.comGold, Silver, Platinum & Palladium SOARING
(vronsky) Aug 04, 07:34

Gold fututes (Dec) UP $1.80 to 260.30

Silver futures UP 7.8 cents 5.54

Platinum futures UP $4.80 to 351.10

Palladium UP a whopping $28.50 to 336.10


see Gold-Corner 24-Hour Trading
http://www.gold-eagle.com/quotes/goldcorner.html

http://www.gold-eagle.com/intra-daykit.htmlfor breakfast ^
|

...the upside-down-Kitco-chart-thingy was a jokey-thing.
(The G-E charts are nice, too, cause their all together. I just like to see when which markets are open/closed.)
Anyway, I should've said "Hehe" or something.
Hehe,
Get some! and how?
Q.

Which CB or BB or whatever is going to throw a wrench into this rally?

remember, everybody is watching...this time.

...what's this "bond buy back" all about. They said it hasn't been done since the 60's, so it sounds fishy to me. But I'm clueless about the implications.
Know anything?
Get some! and how?
Q.

11 golden dragons were sent to find the rare scent of a womans happiness. But, alas all they found was a large red rose.

http://biz.yahoo.com/rf/990804/hl.htmlWhile we were sleeping...the dollar continued its fall against other major currencies. Here's a trader that has a newsflash for the world, but it's already well known at the Round Table.
"I think people are starting to smell the coffee now," said David Bloom, currency strategist at HSBC Markets in London. "The U.S. stock market's not looking like the most brilliant thing on earth..."

http://biz.yahoo.com/rf/990804/hr.htmlOil as a mighty bargaining chip...Saudis are holding firm to their upstream production positions while partnering with others on "less attractive downstream activities and the natural gas sector." The reason why seems clear. As an asset, the oil in the ground is enough to ensure the wealth of the nation, while outside parties may split the rest of the pie.

http://biz.yahoo.com/rf/990804/ns.htmlThe dollar and the US bonds appear very vulnerable. Not knowing which currencies might tank with them, gold is the natural choice for any "flight to safety."

http://biz.yahoo.com/rf/990804/m5.htmlDoes anyone care to dissect the merits of this proposal?

http://cnnfntech.newsreal.com/story/19990802/19/02/5205074_st.htmlNews reported from Bangor, Maine: this official government advice seems pretty anemic at best, pathetic at worst. Do you call this preparation?? How frail we have become. If we were being invaded from Mars, I think the government's advice would be "Don't look up, and everything will be okay. Be sure to keep good records, though!" Sigh...

http://www.jrnl.com/news/99/Aug/jrn34030899.htmlIt reports that this week the House of Representatives approved new legislation that would expand the types of collateral the Fed could accept from banks seeking additional credit. The purpose of the bill is to help banks deal with an unusual demand for cash. Clearly a Y2K thing. Will they be accepting beanie babies?

Y2k is much more then a few hundred million technical problems occuring simultaneously. If it was purely technical, and the human factor didn't enter, then it would pass with small consequences.

The biggest human factor in all of Y2k has already happened and passed unnoticed. It will be the factor most often mentioned by historians. Here it is: Those humans who are responsible for fixing and testing got started too late on underfunded and understaffed programs that got a lot done but left out the big mama the killed them: inter-system and intra-system testing.

Even way the score is being kept for Y2k is faulty. The Y2k score keeping system counts the percent of y2k ready systems; not the percent of inter- and intra- system that passed all tests. This planet has been bamboozled into believing that most sub-sytems are ready when in most cases, testing has been so weak, that we won't know the status of Y2k until Dec/Jan/Feb. Much of what I say about y2k is my opinion but this issue about testing is a fact.

I'll go one step further. When the big test day comes on Jan 1, 2000 they will find problems they never even thought possible! Why do I say that. Because that is what happens whenever you put together thousands of subsystems and try to get them going on their first test run.

Large system wide testing hasn't happened and isn't even planned for. Even for electric utilities, tests are not being run on even one of the three electric grids. Simulations and drills are being conducted but not full up system wide tests. Even at a micro level, utilities have to take the word of telecommunication companies than their super critical communication lines will work.

As always, the press and the government passively accept the fact that 90% of the critical programs are fixed and ingore the fact that not even one percent of the the entire system has been tested on a state wide or country wide level.

I will leave you with one fact that no-one should ever forget about Y2k:

JAN 1, 2000 IS THE FIRST DAY FOR SYSTEMIC WORLD WIDE TESTING THAT WILL BRING FORWARD UNALTERED AND NON-POLICATICAL FACTS ABOUT THE FUTURE WORKABILITY OF OUR PLANET.

Until that day comes, it is all conjecture, because y2k is systemic and systemic tests were never planned for, haven't happened, aren't happening, and won't start until Jan 1, 2000.

We might see confidence shaken before Jan 1, 2000. But if those systemic, worldwide tests don't go well in January then we will see confidence pulled, uprooted and tossed to the winds of fear.

MARKET REPORT (8/4/99): Gold was up as much as $2.30 in early New York trading
after a strong night overseas before calming a bit as we go to fetch this report over to the
server. Of primary importance, the dollar is getting battered against major currencies with
capital flows now reversing away from the United States -- something we warned about
quite some time ago that has now become standard fare in mainstream press financial
reports. Much of that capital judging from last night's price action in Asia and Europe is
going into the yellow. Standard London reports Fund short covering overseas. Lease rates
continue to rise in an unprecedented fashion. Few traders can remember a time when gold
lease rates remained this high for this long. We continue to hold to our view that these high
rates are due to a scarcity of metal. There were reports yesterday of major, clean-the-shelf
purchases of gold coins by major gold buyers. Bridge News reported yesterday that the
Commodity Futures Trading Commission has been contacting "major gold market players."
Bridge reports that the contact was just part of normal surveillance, but our sources tell us
that the firms did not take it as "all in a day's work" -- that the inquiry had to do with
monitoring whether or not these firms intended to make and/or take delivery of metal in the
future. All in all, we may have come to a turning point with today's trading becoming a
very important indicator of where we go from here. Technical analysts put minor resistance
at $260 and major at $262.50. Some of the more bullish traders say if it gets through
$262.50 we could have a clear run to the $300 level.

If this type of analysis interests you, you might like our monthly newsletter -- News &
Views: Forecasts, Commentary & Analysis on the Economy and Precious
Metals. We are offering a trial subscription to potential gold buyers along with our
standard information package -- both of which will add greatly to your knowledge of an
asset sorely abused by the mainstream press, government bureaucrats, and Wall Streeters.
If you have a different view, and we happen to know that many of you do, then please
contact us to get the other side of the gold story.

Call 800-869-5115 if you have an interest. Ask for Mary Conway.

http://www.y2ktimebomb.com/Computech/Issues/hyatt9930.htmHyatt: "If Y2K is no big deal, why are so many organizations having chronic difficulty meeting their deadlines? Why do they keep quietly pushing them back and why isn't the press calling them to task?"

Since Kitco's down, I'll ask here: Would anyone like to recommend the best unhedged producers to buy now since recently NEM has gone over to the hedged side. This is in light of FOA's comments about the dangers hedged producers may run when gold goes up substantially and their bankers start really feeling the heat - so in anticipation of those happy times -- Many thanks, Goldilocks

They are returning money to the system (too fast BTW). There is either a number of financial black holes out there (likely) and they are trying to keep this debt off of the market (so as to keep the market somewhat intact, or they are trying to reinflate the world economy, or both.

The Asians and Europeans want out of their huge US$/bond positions in order to return liquidity to their regional systems (which they have been building since 1997 or earlier due to the 'contagion').

If they dumped these bonds on the open market then bond values would go through the floor (interst yeilds would rise) and the whole apple cart would be turned up and over. Its a sweetheart deal for now. Let's see if they can pull this off. I doubt it.

Kitco goes down? Strange. Welcome uptick.

Just when one thinks that the "Same Ol'e" may now have been changed to something fair and reasonable --- BANG -- ZAP! --Zing --Kabooie !! Holy Dogs, Batman, the JOKER is loose again.
<;-)

The Larry Summers show announces the bond buy-back and the bond and equity markets go up. The preditor-in-chief is going to make an announcement at 1130hrs EDT. I bet the feds know how unhappy the foreign holders of US debt are and this buy-back is designed to massage their nervous tummies. It's a thinly veiled plot that won't work. When the debt gets dumped, all will rush to the exits. I think the PRC could do more damage to us by dumping UST bonds than buy nuking LA.

Broken Oak - Thanks for the reply. Makes sense, in a desperate kind of way. Seems to be having some effect for now. Grrrr. Ok.

DT - RE: Looking for (un?)lightly hedged producers. I still like NEM. Not a bad deal, IMHO. My other favorite is BMG, but only after we see how it acts after being dropped from S&P (8/6/99?).
I don't know if anyone is totally unhedged anymore. If someone knows of any I would like to hear about it, too.

But truth is, I don't know much...

Get some! and how?
Q.

Silver and gold are hopefully just backing and filling with some base building before there next ascent. Silver closing above $5.50 and gold closing above $260 will need extra punch it seems. Lot of tecnical damage up there. Sure looked good last night. I still think it looks ok. Upward moves generally do a lot of backing and filling. Mkt activity like today usually will have silver end on a strong note. We'll see. Good luck to us all.

>>>Buying back bonds early, through a reverse auction process in which debt holders *state how much they would require to part with their bonds,* could allow the government to lower financing costs while continuing to issue new long-term securities which serve as an important benchmark for financial markets. <<<

Well, that answers the first question.--- So, if interest rates rise, which they will, then the price that holders will redeem at will be down. But, bonds keep expiring and new auctions keep occurring; therefore it's unknowable if, on balance, the National debt gets better or worse. In other words, is a buy-back auction any better than just not having as many New Issue selling auctions?

As I said earlier, this seems to be a supply ploy akin to the BOE gold sale, and/or a political dog and pony show. Maybe this is what spooked te PM market this morning and kicked up the DOW. After the speech and some digestive review, the impeding reversals should continue their march into history.

At this moment all the other indexes have gone minus and it's a Dow rally, 62 points off it's high.

Buena Fe (8/3/99; 23:50:45MDT - Msg ID:10272)
BANG ON!!!! FOA
Economist #33
---------If you are a trader, a Real Trader, you do not become attached to any commodity in an emotional way. The commodity will gain or lose value in only way anything gains in value, by the pressures of supply and demand.------------

FOA
Agree. Because you are a "real trader", you must certainly know that anything can be traded if and only if it can be measured accurately. Man can equate no value to anything without a constant rule of measurement. Being bound to earthly things, said measurements can only be in the form of
real things to be honest. We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way! Truly, gold has a supply and demand, while the modern dollar is like the air of your breath. Always expanding and
contracting.

me
FOA, you could not be describing the coming storm any clearer, I only hope and pray that understanding comes to many before it is to late. The whole world (even creation) is groaning under the weight of SCALES (ancient tool for
conducting commerce) being out of BALANCE! Boy oh Boy hear it comes!

Buena Fe,
I'm glad it's clear to you. I'm also happy that you are able to grasp it without having any idea who myself or Another are. It's really a very simple message tangled up in a giant web of political cross currents.

There is only one investment direction anyone should have been able to pull from all of these posts. Buy as much physical gold, in your possession, as is prudent for your finances. In addition, Another always presented it in a way that should have signaled, "let the percentage of gold be in
proportion to your education of the current gold market dynamics"!

Also, people who buy gold in small amounts, will probably always be able to find physical at local dealers of extremely high moral standards (USAGOLD as Example). The ethics is important because the coming crisis will prompt many players to charge exorbitant fees to unsuspecting clients. Run from any company that offers high pressure sales people pushing leveraged plays. You have most likely seen their people posting on other web sites.

I have a further drum to beat about this, but will offer it later after more commentary.

thanks FOA

Aristotle (8/3/99; 21:33:22MDT - Msg ID:10256)
Wow, FOA, I'm awestruck by your comment:
"We all agree, that an item of infinite supply, as a dollar created in an electronic charge, could never represent labor in an unemotional way."
Exceptionally well put! A week ago I was hold a discussion with various posters about the meaning of "$17." Aragorn had the last word with various comments and revealing questions that pretty much put the wraps on the issue in my mind. (Come to think of it, I don't think I ever said "thanks for the input, Big guy," so this will have to serve in its stead.)
I think your comment opens the next chapter. Not only must we be concerned whether this particular "$17" is an electronic counterfeit, but we must always contend with the emotional element that at any time could alter its prevailing sentiment to conclude that even non-counterfeit
dollars are bogus by the very nature of the government's willful and indiscriminant creation of them.

Aristotle,
And a WOW back to you for expanding on this item. We are getting right into it here. It isn't just confidence that counts, "credibility" from past performance is a "concrete" fact that haunts foreign dollar holders like the "Blair Witch Project"!

The "real" default on gold in 1971, followed up with a confirmation of that action with the "Jamaica Accords" begs the question, can it happen again? What would stop the IMF/dollar group from defaulting all present gold loans and trading contracts? It's obvious to everyone now that there isn't enough gold to satisfy all the claims. Are we headed into the same circumstances that lead to 71? If not gold, what about the pound? If they are running from the dollar, into the Euro, they have to change a lot of valuation to make this fit as MK points out. Changes that will impact my English holdings. In addition, if England is bailing, what do they know that I don't?

The same holds true for the dollar. If the American economy, that is supporting the world currency system, begins to slump, as a preemptive measure, they will "HAVE" to devalue the dollar. Against what? You got it, the Yen (fact in progress) and the Euro (fact in progress)! Guess
what else will be caught up in this, "GOLD"! A fact that if it is in progress, will bring the need for some big time bailing out of major banks! SteveH, perhaps this is what all the "collateral eligibility" increases is all about. Under cover of Y2K (still a real threat) the new credit is readied for other purposes.

As I have (only recently) said many times, Another guided me to the point that the entire gold market may fail on this move. That's because it's unlike the circumstances of the 70s and 80s. One person on this forum finds this to be "not responsible thinking". On the contrary, if it does
take place, some "simple people" may take massive loses as this plays out. It may not, but it's a huge risk to take. A gold only position may make this trip a lot easier to weather. We "are" going to see!! FOA

Impending, not impeding. -- Need more coffee!

http://news.bbc.co.uk/hi/english/business/the_economy/newsid_411000/411890.stmIf there are real goods on one side of the e-commerce equation, it only makes good sense that there would be real money on the other side, too. Get your gold while its cheap, you'll need it before you know it, especially in the modern world.

http://news.bbc.co.uk/hi/english/business/the_economy/newsid_410000/410750.stmThe game of Hot Potato rages on, and the debt passes unwanted from hand to hand. Whose idea was this debt-based currency, anyway? My kingdom for an alternative. What's that you say..."cold?" Ohhhhhh..."gold!"

What are the daily limits for gold futures and for silver futures?

Just had a nice discussion with Cheryl Martin at Gold Fields, the world's second largest gold mining company based in South Africa. She asks that I post that Gold Fields is virtually unhedged. "Virtually" means that they have a couple small hedged positions affiliated with specific projects and that's it. Gold Fields will produce 4 million ounces this year and trade on NASDAQ under the symbol -- GOLD -- FYI. So with Newmont joining the ranks of hedgers and short sellers, that leaves Gold Fields as the only unhedged major. Cheryl requested that I make this clarification.

That symbol (GOLD) does not contain FYI....

>>>With borrowing needs fast fading, Treasury also announced it was scrapping its traditional sale of 30-year bonds in November but would keep selling bonds in February and August. As well, Treasury is considering cutting the frequency of sales of 1-year bills and 2-year notes.<<<<

OK, that's what I was wondering about. But still, why not just cancel more auctions?? Of course, when they have the "Rules in place by Jan 2000", The world may be a bit different, so it doesn't mean much at this time except for the canceled auction.

For the moment, it is a good action to have taken, and it is logical for the markets to respond as they did. I don't think it will be of a magnitude great enough to reverse the long term "Reckoning" though

http://www.mises.org/journals/aen/Aen_wi96.asp... the link above is an interesting interview from the recent past with Jim Grant that is inflation/deflation neutral, so it neither adds nor subtracts from our debate in that regard, but Grant does peel away at the omnipotence of the Fed very insightfully. You really might enjoy it ... it's quite lengthy so give yourself time to review it if interested. Now, moving on ....

If my adamant belief toward rapid money supply contraction as the next major wealth-altering event has come across as ego brandishing, then I apologize. This issue, in my opinion, is one of crucial importance, which is reflected in my attention to this subject. I've looked at it from a number of angles for some time and always end up back at the same place. My efforts at rooting it all out are a genuine effort at finding a reasonable alternative scenario, which has proven exceptionally elusive.

To follow is the background of my thinking.

SteveH (8/4/99; 1:35:51MDT - Msg ID:10288)
Tom Cat
I wasn't sure what the post meant. I was hoping someone would comment on its significance. Just seemed important but complicated, eh?
FOA, why the full-court press now? You must feel we are close? Certainly, the GATA release below'shows a move is immanent but why would it be different this time than all other failed gold rallys? After all, last time we got the BOE announcement. What this time?
What is it that Mr. Another senses from his fellow world leaders that tells him that 1999/2000 is the possible last notch in the dollar belt? Why now?

SteveH,
First I want to thank you for making this statement in your:

SteveH (8/2/99; 20:52:53MDT - Msg ID:10182) "The message is important, whether they are 100% correct or just 25% correct."

This may offend some, but this drum must be pounded home.

In the past, so many writers have come down hard on me for posting Another's Thoughts. Yet, they don't even examine their own writings and the agenda it pushes. Be it options, silver, mines, or gold options, it's always the same story to other investors:
"you can't just lay there and hold gold! Out of the investment capital you have put only a tiny bit in physical gold, then get a great return in all of these other paper gold products. At the very least, if paper won't do, buy silver"

If these thinkers are being responsible to readers "of lesser knowledge" why don't they ever talk about the loses these item can and have recently produced? Why does the "average reader" have to make this "good" return on this portion of their insurance holdings. Their matra is almost
like the CBs saying they must make a return on their citizens most sacred gold reserves!

Most of the mine bulls have been talking and trading these items all the way down over the last many months. Some readers that had decided to hold gold instead, have a loss to show, true. But, they still hold metal that can't go to zero as some companies have. I remember some friends
plowing big bucks, on leverage into ABX and laughing at others for buying anything else.
"I don't mess with the foolish stuff, they said".

Almost every one of them took far bigger loses than they thought. From a mine "fully hedged", they even lost more in percentage than gold bullion! So much for "brains"!

Each step down the slippery hill of this crisis, they said,
"oh no don't buy gold at these cheap levels, the mines have fallen even further and present an even greater value".

Today, gold in the $250 to $280 range is still considered crazy to consider! The mines are still cheaper they say, and
look at those mine options? Then, if someone says gold could fall further (destroying some mines) before it spikes, the "stockers" say, "how could you be so nuts as to cause these poor people to miss out on the greatest opportunity to buy holes in the ground?"

Well, people, the CRB is going up, oil has doubled, crisis is in the air and gold?

A think persons might, just might, consider that the gold market itself is failing. And, worldwide, on the sidelines, people may be taking gold where they can get it. And, yes, as Carl says, the mines may find a way to work around it. But, it's a "total washout" if they can't! What percentage of risk do we place on that?

Do we wait for "responsible", "professional" conformation before even considering this possibility. Remember, the professional "smart money", "money too smart to buy physical gold like the average people", has been trading in and out of leveraged paper and mine stocks "ALL THE WAY DOWN"!!!

Yes the paper investments may explode. I only point out that any explosion will be in proportion to the risk presently in this market. If one has risk capitol, Gold Fields (thanks MK) would be the one. As for silver, they killed the Hunt brothers and millions of simple investors in the last run of that thing. And they have killed it several times in between. This time, I think they will do it long before it ever gets to that extreme. As Another said, gold is presently the most important money in the world. This should make it important to you.

Steve, "Why the full-court press now?" Not now, but a month or so ago, around $280. The action was heating up then so I didn't wait for any lower. Delivery could have been a problem then and it could be even more of a problem now? For me, it makes little difference from here on out. For others, it's going to make a great difference.

I'll be away for a while. FOA

#1 didn't have time to read all posts yet - so pls -pardon moi - if somebody had the same thoughts before. Fed tsy buy backs smacks - in view of the overall "gallopping gov. and private" debt (as we are led to believe gov. is in surplus - only by off-balance sheet cheating: I should know - my country is involved with the same scheme (scam) foe years)-, well, smacks of desperation. As we all know this will probably not even rescue today's trading day.
Desperate measures by the official sector - here is Y2K already used as scapegoat - will be self explanatory in a while and will exaggerate the underlying, fundamental imbalances, as well as dragging the hitherto concealed dislocations in the system to the surface.
Thank you all for helping me to the decision sell the farm - for a smaller one, indeed - and for getting more of the ever scarcer physical (next to my GM's)-CB2
unrevised!

Please note: the topic of this post has nothing to do with the expected money expansion attempts one could see the Fed pursuing as a response to a dramatic money contraction. It certainly seems unlikely that they would allow the arguably more responsible reaction of outright debt default and liquidation. But that's a debate for another time.

In the shorter run, the answer to the coming monetary contraction or monetary expansion riddle will prove far more important to those who don't already own gold than those who do, but will be of absolutely major consequence to everyone in the longer run.

The money expansion/contraction cycles do not always manifest themselves in the commodity, financial, and metals markets in the same ways, at least in part because policies undertaken by the money gods one time are an attempt to prevent what happened the previous time, which leads to different mutational effects each time. Therefore, we must stay alert to all indications of a paradigm shift ... lagging indicators such as the CPI can be particularly misleading.

It's well understood among us that the future economic trend rests squarely on the shoulders of the dollar. It seems to me that for there to be any outcome other than a dramatic contraction in the money supply at some point relatively soon would require an orderly retreat of the dollar along with an orderly retreat of the stock market and a leveling off or fall in interest rates in the context of an expanding money supply, moves that are largely herd psychology-dependent. But the very action the Fed has taken over the last several years appears to have only increased the odds that the opposite will occur.

Several factors lead me to that conclusion:

First and foremost, the insanely-fractional fractional reserve system, at 100 to 1, is an accident waiting to happen. To borrow from an earlier post (I hate this, it feels like laughing at my own joke, but to save time...) >Now consider what happens when the multiplier effect is thrown into reverse, say, by a mkt crash. $1 destroyed destroys $100. No matter how fast the Fed could crank up the printing presses (assuming they could push the cash out if they had it) they can't create cash faster than money that never existed can disappear.<

Second, which ties to the first (and which makes a Weimar result impossible, in my opinion, at this point) is the virtually total electronic credit nature of our money today. The effect of that is two-fold. People can not pull out large amounts of cash ... and more importantly, immediate capital flight out of this country is a huge threat if foreign investors get spooked; that means out of the banks, out of stocks, out of bonds, you name it. There is no means to stop this that I'm aware of other than before it happens, which would cause problems of its own.

Third, one word: leverage. Leverage out the rear end. People creating 'wealth' by trading paper. Margin debt, credit card debt, 125% mortgages, corp debt, govt debt, and likely the most evil of paper beasts: derivatives. Taken from David Tice's piece in the Gilded Opinion > What was not appreciated in Asia or Russia then, and what is certainly not understood in our market today, is that only individual market participants can hedge exposure with derivatives, not the entire market. If much of the market attempts to use derivatives for hedging, there is simply no one with the resources to take the other side of the trade. If no one takes the other side, the only way to hedge is to sell securities and, when the crisis begins, prices collapse as derivative-related selling simply overwhelms the market place. With about $14 trillion of stock market value in the US today, the market is too large for significant amounts of risk to be "unbundled", as Mr. Greenspan likes to say. Indeed, who has the resources to "insure" against a 25% market correction that would involve stock market losses of $3.5 trillion? The answer is no one.<

Fourth, with the Fed having always been there for the last dozen years or so to successfully prevent any money expansion cycle-ending slides from occurring, predictably, fewer investors are there to take the downside risk, which ultimately should result in a more dramatic plunge. Consider this post-fall panic rate cut evidence from a Feb report in IBD: > Shorts on the Nasdaq fell 14% since July. Short sales on the Big Board have fallen 13% since September<.

Fifth, the continued maintanence of this mania by the Fed has resulted in the replacement of much of the real assets of the individuals and corporations in this country with paper assets. The savings rate of individuals is now negative, stock assets are at an all time high, corporations are going deeper and deeper into debt to finance stock buybacks. In a serious economic slowdown or disruption of cash flow, rolling debt defaults are a near guarantee. There will be little seed capital to start over with. This item will impact more longer term, as the Fed likely tries to respond.

Sixth, signs of desperation are cropping up everywhere, as has been well noted here at the Forum. Europe's creation of it's own currency. The BOE gold move. Bailouts. Remember when there was so much talk about the IMF having only, what, $100B to spread around ?? It's been spread around and the trend continues ... now what ?? Is this oh-so-kindhearted debt forgiveness talk any more than the political and monetary spinmeisters jumping out ahead of more debt default announcements ?? So many holes in the dike ... got enough fingers ??

To me, that describes the setting. There are many possible pins ... rising interest rates (whether from rising cost of living expectations or from liquidity drying up due to market fears, it doesn't matter), Y2K breakdowns and/or cash withdrawals, a major unforeseen domestic or international debt default, war, ....

To prevent a sudden money supply contracting event from happening in the US it seems to me would require the Fed to always be out in front, which means the money supply will have to continue to expand, which means credit will have to expand ad infinitum.

With the experience of SE Asia, Russia, and Brazil, we've already seen what can happen when a fractional reserve fiat system breaks down. The effects are immediate and wealth destroying. Bailouts, and even a pre-bailout, didn't work. Maybe the bailouts have kept the local effects of those collapses from being as long lasting, but with these countries (hell, the world) dependent on the US debt-riddled consumer spending an overvalued fiat dollar, those effects will probably prove to be a bounce. We won't know till we see what happens in the US.

The 'restrictive' nature of the gold standard in the past probably prevented past cycles of money expansion from having reached the ubiquitous extremes of today, thereby preventing those past inevitable retrenchments from being as quick and as destructive as what we're now seeing.

Certainly, if we could vote on the outcome, I would vote for money expansion ... the consequences would be easier to deal with. But the economic world is not a democracy.

Stranger, this is my perspective. Can you or anyone else (this is an open question) provide a reasonable, alternative point of view ?? Honest question in search of an honest answer. No set up ... no gotchas ... no time demands. An 'I don't know' is acceptable ... that would provide grounds for future debate. Maybe some Knight(s) has/have the gold bullet.

And looks to close above $5.50. Looks better and better.

I agree with your bet that the USG will expand. They have no choice if they want to continue the game a little longer. They still haven't come up with a scapegoat for their wicked ways and they won't stop until they do. I think y2k is the goat they will scape. It is an amorphous problem with very definite consequences that can be blamed on the past actions of unidentified individuals. What better excuse could a fascist government want?? I truly hope that the coming debacle is fierce, blinding and deep. Why? The current situation has been allowed and promoted by an ignorant and irresponsible citizenry, preyed upon by a fascist cabal of global corporate interests, NWO elitists, socialists and government hacks. They will soon be the death of many, once again. The harder the consequences of the coming crash and the phoenix of tyranny that arises from the 401k ashes, perhaps the better the lesson will be learned. After the '29 crash, the banks were despised for one or two generations. That curtailed their philandering ways until the socialist revolution of the 60's. Since then it has been a rising tide of regulation, taxation, police state power and usurpation of "unalienable" rights. You can have your 'golden chains' if this is what it gives us. I prefer to see the system explode completely and take millions of people and trillions of their fiat dollars down the hole. Tribulation indeed, upon our heads. I'll take my share of it too. At least it will presage a new turn--this time we may be able to resist, a little longer, the glitter that got us to this point. It certainly offer us nothing at this point.

http://biz.yahoo.com/rf/990804/0g.htmlNo surprise. Production of the supply side drops off with the drop in price. That which is scarce, becomes more scarce.

While my vote would be for expansion, the point I had hoped to make was that, in my view, they're going to be overwhelmed by the market forces they've created and contraction, it seems to me, is inevitable ... at least for a short, but devastating, time.

That type of scenario would be more to your liking because it would be much more cleansing. However, the social aspects could turn quite violent ... but they could the other way too.

I'm extremely empathetic to your views ... that's why I got involved in politics (minor role) a few years ago. On the other hand, my anxiousness to see it played out is tempered by my lack of enthusiasm for experiencing it.

Thanks for responding ... sometimes I catch your posts while speed lurking over at Kitco and I always enjoy them.

http://www.treas.gov/press/releases/ps42.htm"This morning I have the great pleasure to announce the introduction of new tools for Treasurys management of the public debt to meet the needs of a new era of surplus..."

The Treasury Press Release

http://biz.yahoo.com/rf/990804/yd.htmlType of Offers:
Competitive offers only, no noncompetitives.

Type of Operation:

A "reverse auction," with a multiple-price process in which successful offerors receive the price at which they offered securities.

and all the other details...
Buyback Operation Announcement:
Eligible Submitters:
Offer format:
Maximum number of offers per security:
Announcement of results:
Settlement:
Location of Rule:

day. It does seem there is not much left in terms of PPT ammunition.
Djii - giving back some gains - only lifted by UK(Union Carbide takeover).
NASDQ: Internuts tanking -
L-bond Y: back to 6.12% and rising
PM's: holding and gaining after early pullback- XAU - we'll see...

As the highly regarded Ned Davis Research -our mandate is to get ourselves in harmony with market trends- today postulated, Ned is still fascinated with contrary opinion analysis in an effort to pinpoint when market trends
m i g h t b e in their very late phases. Courtesy of Market Vane Bullish Consensus he came up with some interesting numbers from early July 99: 96% US$ bulls on July 9 vs 3,83 Grain bulls and still 57% bulls on equities on July 13. vs 7% bulls on pork bellies!
What does 13% bulls on AU mean in this context? We'll expect Neds Hotline by Friday!
PS: Intellectually, I concur with FOA's outlook on the endgame of the "reserve currency US $", but I have to admit that mentally I feel terribly concerned since this outcome spells total economic and financial armageddon for -lastly- all of the world. There will be no escape for any region, is it the euro, yen or anything else except pysical gold?
Unfortunately the golden haven (or better heaven) is but for few. Scarcity and supply shortages will just allow very few to escape this meltdown of paper value(s) into the eternal hunting grounds of the Inka (or is it The Whitnesses of Jehova, which sport even lower numbers of tickets to heaven, by Jove!).
Even if all circumstantial as well as hard evidence leads one to accept this ultimate outcome, I, for one, would still feel terribly and utterly sorry and devastated for the rest of the human race, not having the chance and/or even the choice to run for the shelter of FOA's predicted precious asylum, which would leave the majority of the populace and man(un-)kind to the wolves.
Seeking answers to unasked questions!
Regards CB2
. . . tsk ...

Goldfields limitedhttp://quote.bloomberg.com/analytics/bquote.cgi?view=usbq&version=usatoday.quote.cfg&ticker=GOLD
at this price this stock of the second largest goldmine in south africa is a gift , un cadeau , a steel

This what foreign nationa are telling the US. Foreign nations are dumping US bonds. So, what do companies do
when a hugh holder wants out???? They make a deal to buy the
shares to control the damage. I think that this is what the
US is doing by announcing the Bond buyback program. They are
going to buy out foreign holders to stop them from selling
on the open market.

http://biz.yahoo.com/rf/990804/zj.htmlI dunno...twisted logic?

Let me get this straight:

1. First we hear that the dollar is getting weaker vs the yen and the euro.
2. Interest rates and gold and silver start to rise accordingly.
3. Foriegn bond holders make a run from the dollar and start a rush to Treasury's front door to get rid of their bonds.
4. The Treasury Dept. announces that they are buying bonds to the benefit of all. The world sees us reducing debt instead of of having a run on the dollar.
5. Joe Six Pack, the foundation of the the new stock market paradigm says: :Hey, cool! Look at all those new liquid dollars looking for a home! I'll take some. Let's see, hmm, AOL looks like a good buy.
6. Insiders sell into a rising market due to their desire to share the wealth with Joe Six Pack.
7. The nation goes home for the weakend secure that the nation is finally adressing the national debt.
8. The PPT goes home for the weekend secure that more time has just been bought without anyone even mentioning the word inflation.

top performance of Anglogoldhttp://quote.bloomberg.com/analytics/bquote.cgi?view=usbq&version=usatoday.quote.cfg&ticker=GOLD
results just published
look at the divident !

REREAD the instructions on how to use the "URL link" line. The instructions are just below the posting "Post Message" button! Thanks.
<;-)

Anglo earnings were impacted by forward hedging profits. They may look great now, but wait until later and see them crying about the "lost forwards".
<;-)

looks like some of us share the same feeling ... the feeling that the US and the dollar cabal are at the apex of a contracting triangle, with virtually no more room to maneuver. The only option left is to try to fake out the market and hope to quietly back out. good luck !!

sorry, Gandalfi allways use " copy "
it works
am not a specialist

The dollar is currently suffering versus the major currencies. What is behind the situation?

We have to look at the so-called 'carry trade' for some clues. It could well explain why the euro (EUR) and swiss franc (CHF) are taking a non-stop charge recently without any meanningful conventional correction, and why the offer by the Euro Central Bank at 1.0725 and 1.0750 were so easily taken out. It even expains why the EUR is back off 1.08 at this moment.

As we all know, carry trade players have their own Profit and Loss model which is different from those that any conventional FX trader would use. The time to dump dollar is nothing to do with any fx technical terms like support, resistance or even intervention sometimes, it purely depends on the profitability of the specific carry trade.

We know a fund who borrowed USD 120 millions worth of CHF at the exchange rate of 1.4650 in March with 6 month term. Most of the borrows were invested in the Nasdaq, now, with the sliding of the Nasdaq and Dollar, we were told if the USD/CHF down to 1.4775, this carry trade is going to turn the profit of about 21 million to break even, and will lose money if lower than that level. Obviously, anyone in their shoes would look for dumping the trade before too late.

So anyone who thinks that the USD/CHF finds support at 1.4835 and look for some correction might get caught if this Fund decides to do so now. The worst is that no one knows how many of these type of trades up there and when or what the terms they bonded.

That might also expain the situation we have all experienced, 'Why the dollar always takes longer time to move up than going down...'

http://www.marketcenter.com/news/news.cgi?story=19990804-160052Ok, I knew you were looking for these. I didn't read it well, but I think the silver stocks are down another 261,000. However, I agree with you, we have no idea if this means anything. Cheers.

http://www.napm.org/turbo, I will read your posts with interest and the James Grant interview when I get back from an errand. I am just dropping by right now to leave 2 items.

1. Gov't buying back bonds was going to happen anyway. Today's announcement was a public message to Miyazawa. "We have already demonstrated that we will no longer cooperate in your efforts to boost dollar/yen. Now you have been trying to accomplish your goal by selling our bonds. Don't waste your time. We can buy just as many as you can sell. The answer to your problems does not lie in America but in Japan itself."

2. Look what I found today hidden in the NAPM report: "NAPM's Price Index gained 1.2 percentage points to 54.7, rising above the 50
mark for the third consecutive month. The index indicates higher prices paid by
manufacturers during July, as compared to June."

Strangers Note: Wow, we are so confident of low inflation these days that the media won't even waste their time on as big a single month price increase as this. Ask yourself why the CRB, XOI and XAU were all strong again today while the rest of the market is still in decline. I hope farfel is enjoying this little "fart" (his word not mine).

http://www.usatoday.com/money/charts.htmCOMEX gold futures jumped higher in early
trade, but trimmed the gains by the end of the session. The December
gold contract (GCZ9) climbed to its highest level in nearly a month,
reaching $260.80 in the early going as New York trading joined London.
The lower end of the day's trading range briefly visited $257.00 before
settling up 10c for the day at $258.60 per ounce. Spot gold closed at $255.90.

We are encouraged to see a more positive mood prevail in the day's market
reporting by Bridge, with their Nobel Laureate level of observation that
weakness in the dollar against other key currencies was also
instrumental in boosting gold prices. Bridge offers a this array of trader's
views:
"This makes gold more attractive to foreign investors and there was decent
demand in Asian trade overnight," said David Meger, senior metals analyst
at Alaron Trading.
"We're getting more interest in overnight and early morning sessions because
as the dollar falls, gold is looking more attractive in other currencies,"
said one trader.
"The market is trying to rally a little bit and if it gets to higher
prices it could run into fund short covering," said Bill O'Neill, analyst
at Merrill Lynch. " Going over $261.10 will take out the 40-day moving
average and give gold the potential for modest strength," he said.

The DOW gave back all of its early gains, losing in afternoon trading the
150 points it had gained during the first hours of trade. It finished with
a small loss on the day while the hammering selloff of the Nasdaq continued,
ending down over 47 points.

The Long Bond faired better today, on the surprise announcement of elimination
of the November 30-Year Bond auction. Many traders had expected that such action
might apply to next-year's auction, with three-months notice seeming a bit unlikely.
Well, they were surprised, and the jump in price was a knee-jerk reaction to the
news at mid-day. The Bond gained 25/32 in price, dropping the yield to 6.112%.

The world of USTreasuries had a full plate of news to digest today.
Treasury Under Secretary for Domestic Finance, Gary Gensler, had this to say
on reducing the supply of Treasury debt held by the public:

"We are now in our second year of budget surpluses. Thus far, we have
managed the paydown of our debt by refunding our regularly maturing debt
with smaller amounts of new debt. What we are proposing today would enable
Treasury to repurchase debt that is not currently maturing. This new tool
would provide us with an important new means of managing the government's
debt and responding to our improved fiscal condition. First, the use of
debt buy-backs could allow Treasury to maintain larger issuance sizes,
enhancing the liquidity of Treasury's benchmark securities. Over the
long term, this enhanced liquidity should reduce the governments interest
expense and promote more efficient capital markets. Secondly, debt
buy-backs could enhance our ability to exert control over the maturity
structure of Treasury debt."

The opinion in this tower is that the effort is exactly what Gensler said it
is: "important new means of managing" and a means to "enhance our ability
to exert control." It seems an awful lot like a company stock buy-back program,
and we all know why they do those and what effect that tends to have on
stockholder/invester psychology. We'll have to see what other nifty new things
they trot out in advance of the ever-present Y2K challenges of "controlling the
herd."

And that's the view from here...after the close.

All of you people just try and try to make it way, way
too complicated !! Just look at it as it is: A Commodity,
PERIOD! And now it is becoming more in demand ! Never mind why, or Who, or even when. If you've got lots of money go ahead and buy the metal from Michael right away. If you haven't much money, BUY long term options before they skyrocket! And then you will make lots of money and can afford the metal. KEEP IT SIMPLE S. (PUT IN YOUR OWN ADJECTIVE) Now Is The Time.

Unknown Economist #33

Hey, #33, boy, have you changed your tune. Sounds like some real sound economic thinking went in to your latest post.

Actually, I am just teasing you. Please don't be offended. It is good to see you again! Have a chair.

Think I'll print out your post as it will help me get through some of the ramblings and keep me on track.
Thanks

Just read your carefully considered and well written post.

"Stranger, this is my perspective. Can you or anyone else (this is an open question) provide a reasonable, alternative point of view ??"

When you extrapolate any economic scenario, you are, to use a metaphor, watching a wind-up toy head for the table's edge. But a free market economy is not like a wind-up toy. It is, rather, a constantly evolving dynamic organism.

I believe I understand your posts. Some of what you say, I even agree with. But those of your observations which are correct (high consumer debt levels, for example) are nearly ALWAYS correct in this country. If we are to await the cataclysm you predict, we are liable to be here a long long time. For, despite sustaining seemingly horrendous debt levels over the decades, America has had only three or four years of actual deflation in this entire century. And the only reason it happened in those years, as I hope I have proven by now, was because the monetary authorities essentially sat on their hands instead of acting appropriately.

Last year was the closest and only brush we have had with dollar deflation in your lifetime. We called it Asian Contagion. It surprised some goldbugs by driving PMs down in price (which was, to my mind, a perfectly logical reaction). But, this time the monetary authorities did act appropriately and the toy did not go over the edge. As for the Rupiah, the Ruble and the Real, you may persist in thinking that they deflated, but any citizen of Indonesia, Russia or Brazil would quickly set you straight. What all three of those nations experienced wasn't even normal inflation. It was HYPER-inflation. Today, for example, it takes over 25 rubles to buy what 6 would buy a year ago.

Now, with each passing day and nearly each new economic report, your scenario fades further into the past. Government debt, as a function of the size of our economy has been declining for years. Consumer debt is frighteningly high, I agree. But your forecast implies that the consumer is so dimwitted that he has just spent himself into irretrievable oblivion. That may be true of many, but most people do not behave that way. Instead, when they reach their limit, they either ask for a raise of they stop spending for awhile. If they choose the latter, the nation experiences a recession.

Is there a recession coming? Maybe. But I think a recession is what the world has just been coming out of. Unfairly, perhaps, America got away unscathed this time. No doubt, that is because we are the ones who get to print what the world has lately regarded as the real money. Had the dollar been goldbacked, things would have been a lot tougher.

Now comes the inflation, not a lot of it perhaps, but enough to send bond yields higher still and gold to $400 minimum.

Next up - James Grant.

Canuck- your fist impression is right in regards to inverse relationship with gold and other indices(stocks and bonds). Enough has been shared here in this forum to explain why that its manifestation has been postponed. The various carry trades and other manipulations in the markets have all contributed to this delay.
Also I believe that the manipulation in a way has been part of the bailing out of priviledged factions who have gotten over their heads in trouble with these trades.THe fed has not been shy to claim credit for liquidity added during stock market crashes and other world crises as they appear. They used those times to put 100's of billions of dollars in derivatives to add liquidity to the markets including even the gold markets.It is commonplace to see this happening more and more via the actions called the PPT.
Now during these times it would be difficult for them to bail out individual parties, LTCM for example. The hoopla that bail-out created is not a desired effect. Maybe they are using these monies that are being put into the market as a hidden way to replace monies that the various privileged parties have lost, or to help them get out of these positions without having to do a public bail out as LTCM. Also the selling of contracts of gold to hold the price down could be a way for them to help replace gold to those who are short. In this way they do not have to go public with these bail outs and can use the cover of sustaining a stable market condition arousing no suspicion. This would explain the buying of time in the markets until all were safely covered, and would avoid public criticism.

Good evening Knights and Knightesses,

Hope everyone had a nice day.

There have been a few posts lately whereby a participant asks another if this stock has potential and that stock is a 'griefer', if equities are falling downhill, if commondities are reviving etc., etc. Many of the questions are very specific and often the asked party has no alternative but to skate the issue because it may not be prudent to answer the question(s) in a direct fashion. I have an idea. What if we were to quote our holdings/asset groups/mix periodically to let each other know what we feel may be a safe mix. This may provide others with a sense of
direction without compromising details. It may tell others
what I have and not what I am going to do or what someone else should do.

For example:

30 days ago I held,

20% short-term securities. (MM fund)
50% US equities. (Equity fund)
10% Japanese equities (Equity fund)
10% PM (Equity fund)
10% Oil & Gas (Resource fund)
---
100%

Today I hold,

60% short-term securities (MM fund)
15% PM (Equity fund)
20% Oil & Gas (Resource fund)
5% CDN Equity (Common stock)
---
100%

Is this a good idea? Helpful? Please advise.

Turbohawg, agreed with you on final outcome in markets of inflation due to over response as far as deflation. Y2K will I believe slow down the velocity of money and their response will be to increase money supply to make up for the lack of velocity. Y2K will be like a wall of molasses being hit by a high speed car. They will have to do something to push the car through a slower medium that will be the liquidity that you are talking about. Totaly agreed.

Aristotle/agreed with your last post. The added liquidity to banks will be inflationary in their battle to fight deflation.

http://www.usagold.com/wgc.htmlThe weekly gold market commentary for July 26 - July 30, 1999 has now been provided by the World Gold Council for your review. In this commentary, WGC staff from around the globe contribute their views of the important events that helped shape the world gold market over the past week.

Grab your torch and wander down the hall for this brief commentary, or else click the link above to be magically transported straight away! (Personally, I prefer the scenic route past the Home Page, where the excellence of The Gilded Opinion beckons like a remote inn with the finest of ales.)

Using this chart as a guide, and looking at longer
term charts as well, we're getting close to the time
where a pull back is in order.

When that happens, we will either see the recent bottoms
hold, or make a new one. After that we should see a trend
in gold being established, other than the bear trend we've
all been watching. IMHO.

http://www.askresearch.com/cgi-bin/chart?symbol=pdg&size=640x480&months=6+months&type=Bar&color=Graph+Paper≻ale=Logarithmic&moving=exponential&moving1=50+day&moving2=100+day&moving3=None&bollinger=20+day∈d_vol=on∈d_sto=on&sto=15-5-5℘r=12&rsi=8&macd=12-25-9&roc=16-8&mfi=13&cobrand=decisionpoint

On the y2k issue, there have been some interesting comments
made, and I cannot add too much new, but feel that the re-
action of the masses to a potential crisis, like the electricity going down, even for a short period, or the
water being cut off, or communications, or banks, going
down, will very likely cause panic, and unforeseen behavior
on the part of the sheeple(not my word- but good substitute
for the herd instinct)and from all of my reading of governments preparing the troops, I believe major decisions
have been made at high levels, which would indicate, that
those in a position to know, are expecting major disruptions
and are preparing.
However this having been said, there are some unforeseens
and unexpected things that could happen. If you call a familyman or woman to work, whether in the army, national
guard, Mounties, etc., their first priority, I would imagine
would be their concern for what's happening to their families. Discipline is well and good under certain conditions, but when faced with a potentially life threatening situation in one's home, the decisions might just be a little different from the norm.

Remember, storms, earthquakes etc. are in isolated areas
and others can come to the rescue. This time with a world-wide breakdown possibly effecting everyone at the
same time, we have a new set of rules, and one must expect
the unexpected.

Thinking About Deflation XIV
Polyconomics, Inc., Jude Wanniski -- July 8, 1999
The reports everywhere about gold sales by the British government of course were said to be the reason for the yellow metal's decline. Gold now is down 10% for the year, from the $288 plateau it had reached -- after a two-year decline of $100 per ounce from the $385 plateau that held during the three years 1994-96. Conventional wisdom remains that gold steadily is losing its importance as a monetary commodity, which is why the UK as well as the International Monetary Fund are discussing openly the sale of more of their gold reserves into a declining market. The UK actually sold 25 metric tons and said it plans to sell 415 tons in all from its reserves. The amount is not terribly large, against total world gold holdings of 125,000 metric tons in public and private hands, but the trumpeted news of the sales makes it appear there is a direct connection. Our view remains that the gold price in the primary currencies of the world is the purest measure of the excess or dearth of monetary liquidity in that currency's trading area -- and that its continuing decline in dollar terms represents a deepening of a deflation caused entirely by the Federal Reserve's failure to supply sufficient liquidity to prevent it.

Our evidence is overwhelming -- both in the currency markets and in the commodity markets. In the currency realm, if the declining dollar/gold price were simply a sign of the species passing from one owner to another, why is the price of gold in euros almost exactly what it was at the beginning of the year, even a bit higher? The fact is, the European monetary authority has been stabilizing its new unit of account against gold, not the dollar, and this is the reason the euro has been "weakening" against the dollar for these several months, to $1.02 from $1.17, almost 15%. (In the same period, sterling has "weakened" against the dollar by about 5%.) We do not have the slightest idea if the euro managers are targeting gold purposely, but if they are, we applaud them for breaking away from the dollar as a guide and using gold. By doing so, the new Europe is refusing to import the monetary deflation Greenspan has fashioned here.

(Used by WGC permission from their July edition of Notes and Quotes.)

turbohawg, thanks for pointing me to the Grant interview. I know that Grant has missed much of the greatest bull market in stocks and bonds ever, but I still think of him as a marvelously gifted and insightful man. If I felt I could afford a subscription to "Grant's Interest Rate Observer" I guarantee I would have signed up long ago. Believe it or not, I go to his website every couple of weeks just to try and glean something useful from his teasers. It is a pity that markets so often reward mindless trend-following while mercilously punishing great minds like Grant's.

For me to critique his remarks would be rather like a high school physics teacher questioning Einstein's relativity theory. Yes, Grant has eaten a lot of humble pie over the years, but isn't that a fate which awaits all of us prognosticators sooner or later? I will say this however: Much of the interview appears to coincide with your own postings here at the Forum. For that, I doff my hat to you both.

Side Note to Town Crier: Thank you as well for the Wannisky post. I have a hunch he is already reconsidering his analysis given the breakout in commodity prices of the last 2 days. We'll see.

Stranger, even though we disagree, your response is respected and the kind of response that I've been seeking. We have two distinct visions of what's going on, much like some of the sleep-inducing talking heads (do you think we've been inducing sleep ??). I believe the events we've been witnessing (really, starting with Japan a decade ago) are evidence of a shift in the cycles of economic history, and US citizens are lucky to be in a position to see them coming before they hit here. Your argument is basically the New Era argument as I understand it ... that events in other parts of the world are mostly isolated and pose no more than a bump in the road to continued prosperity in this country, possibly even being a net benefit (I don't mean to put words in your mouth).

Shouldn't any discussion of the proper diversification of assets be qualified with one's economic vision (asked rhetorically) ?? Interestingly, gold is unique to that discussion, as it serves as a fulcrum of sorts to either strategy. I guess that's why we both find ourselves here despite such differing views.

Regarding Grant, I don't have any comments ... I just found the article interesting and thought you might too.

Thanks, buddy.

Watcher, thanks for your continued support. Making the deflation case gets kinda lonely sometimes. You know what they say ... it's a dirty job but ............

Unknown Economist #33, good point !! Where have I heard that before ??

That was quite a post and it got me to thinking. Is this how you see a possible deflationary scenario playing out?

1. Some event or process like a stock market dip of 30% or Y2k puts the temporary breaks on in the US and world economy.

2. Consumers cut back on spending. Profits drop. Sales lag. Inventories pile up. Debt payments are delayed.

3. Competition becomes fierce, invetories increase, and corps start to slash prices and layoffs are in full swing. Consumers buy even less.

4. The Fed increases liquidity but consumers and corps refuse to take on more debt and the slide continues. Stagflation is now is now everywhere.

5. Defaults increase and then become contagious leading to a dwindling spiral of more and more defautlts.

6. Every dollar of default leads to many more dollars eliminated from the banking system since the fractionalization in now working in reverse. The supply of dollars is super high but they remain in the bank as the engine of commerce has gone from a high rpm to an idle.

8. The dollar is devalued and more dollar are repatriated. O

9. Unemployment mounts and the system as we know it has now collapsed and has to be rebuilt.

Is this the kind of sequence you are talking about? If so, it would seem that a key step is Step 4. If consumers and corps refuse to take on more debt then there is trouble. If, however, the Fed in all its power, can intervene quickly enough and smartly enough then they might avert the rest of the downward spiral.

Perhaps this is too simplistic but I am trying to get a better picture of how you see this. If this is not how you see it then could you list out a similar sequence that is closer to your reality?

Note that in this model there are gobs of dollars available but consumers and corps refuse them because of their debt level which is too high already.

<;-)

$259.30, up overseas. Persistence in face of manipulation.

This bond for debt thing has me miffed. Why? What is the gain?

As one of the troops I can say youre right on most of your points. I think we all expect panic though not warrented. Most of us relize this. If you don't, spend ten minutes alone....... and just think about it.
You're also right that our families come first. I'm sure most of us feel that way. It's hardly a "decision" though when simple preparations are in place so that we can do our job protecting citizens AND our families. The US military as a force has never and won't let our citizens down.
Sorry for the excesive flag waving. No I'm not, "sorry" that is. Although, I think I hear the Anthem starting in the background, so I guess it's time to sign off.

Bill---I am grateful for your INDIVIDUAL service to me - the taxpayer - but I think that your role as a soldier is greatly overvalued in the context of "doing the right thing". By that I mean, you are bound by oath and by law to serve the powers that be for ANY REASON THEY DEEM APPROPRIATE. You have no choice as to your services. I have served in three armies and say this from my own perspective. You will be tasked with keeping your CinC and his minions in power at all costs. You will be enticed into carrying our your orders by threats, promises and enticements. Your family will be "safe" as long as you OBEY. You will be inculcated and propagandized by the psyops people that you are "doing the right thing". You will be acclaimed a hero by some. You are in a terrible position--worse than me. I owe no oath of allegiance under penalty of death anymore---YOU DO. Things will be explained to you that make some sense if you trust your superiors. The BIG QUESTION is "is it moral and just"? I hope you have more strength than I did to resist the commands to do wrong. Unlike my past service overseas, yours will be against your own people. I hope that you can resist the call to "glory". It will not be the easy path to follow.

Having been out much of the day, I only just now read your y2k remarks. Perhaps you are right. Perhaps the human reaction to the prospect of crisis will in fact BE the crisis. For a long time I was thinking that myself.

Perhaps we live in more cynical times today than was the case in 1933. But I remember reading about how FDR spoke to the American people during the nationwide bank closure. He said, in so many words, "tomorrow the banks will be reopened. We have taken the steps necessary to protect all deposits from this day forward. For all our sakes, I ask you, the American citizen to take your money back down to the local bank tomorrow and redeposit it. The survival of our nation is in your hands."

The next day, people took their money back to the bank by the millions.

Do we have that kind of leadership today? Will people respond to such reassurance (if its even required) in 1999 the way they did in 1933? I don't know. But, as I said before, panics occur without warning and fear is a symptom of ignorance. Yet, Y2K has given us all plenty of time to consider our options and make our plans. I submit that those who are afraid have already prepared, whilst those who have not prepared are not afraid.

For this reason, I now believe that computer malfunction will actually be the bigger problem. But I also believe that, by this time next year, the whole episode will be as old hat as a hula hoop. I am not going to build my investment strategy around something as transitory as that. The real money in this world is made by he who sees what others do not.

http://news.excite.com/news/r/990804/21/economy-imf-gold2>>>Alabama Rep. Spencer Bachus, who attended a meeting on
Wednesday with U.S. Treasury Secretary Lawrence Summers, told
Reuters the issue of IMF gold sales, which hit a wall of opposition
in Congress and elsewhere, was no longer being considered as a
viable option by the administration.<<<

Glad somebody mentioned it.

You ask "Why? What is the gain?"

Scroll down to #10277, also check out #10321 & #10330,

Feed back??

Didn't anyone else get a Business checking account Sub-Account notice today. This is real cute, I need some coffee and a half hour to write this up, back in a bit

both near their highs in overnight trading. 2 jokes, can't help it: One of my female co-workers told me this today "do you know why there are so many y2k problems - ok are you ready? because none of us would sleep with the nerds in high school. My wife and I were taking our nightly bike ride through Mordor and in one spot (which is a clear bear crossing) the alders close in real tight on both sides of the bike path - we have seen bears there several times. My wife never cares (as she is a bear biologist) so I am continually humiliated. So she says "don't worry they are used to people by now - they find them delicious - pretty corny. I will tell you it is taking me a lot of courage to leave this post in. Someone once said the key to having a sense of humor is the courage to throw out 9 bad ones to get 1 good one - I know you are waiting for the good one. Welcome #33 (I hope you don't mind that I shortened it up), and Bill. I am having a hard time pushing the post button on this post.

It would seem to me that this y2k scare will stimulate purchases of PM's, plus the increased purchases by other countries who's dollars are strengthening against ours. Question, don't the coin dealers and intermediaries, like coin makers have to get stocks from comex et al. I gues what I am getting at, is the thought that the above plus, speculation in a rising mkt should be causing drawdowns at the retail level, which get their stocks from the wholesale level, so can we expect to see comex stocks drop as a result. On a level playing field I would expect it would. Any thoughts out there on this idea. We do have two days in a row in smallish silver stock drops on comex. Boy, is my thinking disorganized tonight. Well you get the idea.

I bought some lottery tickets today: Hecla September 5's for .06. I have seen it run, fast in the past, and this move fits the pattern. We shall see.

"For regulatory purposes your Business Checking Account may be divided into two sub-accounts: a checking sub-account and a money market sub- account. We will treat these accounts as a single account for most purposes and will not report balances separately or report transfers between sub accounts on your statement. ----

At various times during the statement cycle, if your checking sub-account ledger balance exceeds a threshold balance, we may transfer all funds in excess of that amount into a money market sub- account. As transactions reduce the checking sub-account balance, we will transfer funds back into the checking sub-account from the money market sub- account so that we can pay your checks or negotiable orders of withdrawal. We will make up to six such transfers-----per statement cycle. Upon the sixth---we will transfer the entire balance---to the checking sub-account."

Next comes the punch-line! " Although we have no intention of exercising this right, (Ho, ho, ho; ha, ha, ha; he, he, he.) Federal regulations require that we reserve the right to require seven days written notice prior to withdrawal or transfer of any fonds in your money market sub-account"

OK: It seems that they can take your liquid funds without notice and put them in a money market account in which they can than be frozen for seven days, EXCEPT when you spend them ELECTRONICALLY.

Now if lot's of people wanted CASH, than the "Reserved" right can be "reluctantly' enforced, and six days later, who knows what NEW regulation will appear.

Clever, clever clever!

I was in the doctor's office a few days ago and found a great poem I thought you might like it so I asked a nurse to xerox it, but keep leaving it at my office. Will post soon, it is much better than my jokes - I didn't write it.

The chart's a clone of last night. I really do believe that this comex morning will be diffrent though. Hey, I called the Dow and gold reversal this morning, maybe I'm on a roll!

Tell your co-worker I liked her joke, but wish I had been there for the obvious rejoinder, like "Oh really, then who did you all -----?

A poem sounds like a good idea, we're getting a bit off color tonight, I think the rules might be a little looser an the graveyard shift when we're manning the parapets in the chill of the night. I wrote an economic poem ( Is that an oxymoron) several years ago, but have been holding back on it, its a bit sermonesque. (I like to invent words) Maybe some stormy night when, we have the watch, I'll post it.

http://www.gold-eagle.com/silver_section.htmlEnjoy.

http://www.kitco.com/gold.graph.htmlAre you watching.

I will look forward to your poem, Peter. Here I am posting late at night running on the nub of my spinal cord. The last few days I have been in the Gladiators pit. That gladiators pit always wears me out, then as I finanly get a chance to climb up and over the wall, blood running through my brain and down my psyche - it is in these conditions we late night people often have to post. The metals are sure looking tough. I have all my mainstay metals play, but in the last few weeks I have loaded up with stock options, cde and paas mostky, but bought some lottery tickets today Hecla September 5's at .06

http://www.kitco.com/silver.graph.htmlYour chart is better than my chart.

You know this whole move is like a pretty equation, right down to the actual movements of th PM's responsibly backing and fikking (I just had to leave that mistake) and never getting to far ahead of iiits selk (leave these as well). I will call this poetic post stream of consciousness. I am of to bed just getting to loony.

Peter, she told me - the football players, who else?

For all that are interested in why the BOND market has been falling. Chapman lays it down as it is and of course the recent scare about interest rates is a "Dog and Pony Show".

To keep us all off balance to what is really going on and of course it involves GOLD also. CHAPMAN hit the the nail on the head with this one.

Can be read over at Gold Eagle. G.T

http://www.goldminingoutlook.com/ Howdy STRANGER the above link i think should clear up this inflation/deflation debate. Also everyone else look what the Worlds largest Gold mine is doing, "ANGLOGOLD" This is WAR and if its one thing i can smell its a WAR.
G.T

Gold lease rates continue to be strong for the short term. Perhaps Anglo-Gold will unwind their positions. It remains to be seen. Usually short-term rates are lower than long-term rates because plenty of the Midas metal appears to be scattered about in the vaults of the CB's and readily available for short-term lending. The last time that there was such a large spread between the short- and long-term rates was in 1995 when several producers unwound their hedge-books. The rise in these rates may be an indicator of something worse.

1) One reason could be that a CB or multiple CB's have decided to sell gold rather than roll forward lending contracts.
2) Another reason, possibly a major gold producer or multiple producers believe that the POG will continue falling and therefore are increasing their hedge-book positions (i.e. Newmont?).
3) Another reason, Hedge funds or others are building short positions.

On the other hand, it is quite possible that CB's see that short positions are extreme in relation to the physical available and from production, and may be ready to let the BB's hang out to dry by refusing to lend sufficient gold in the short term. Combine this with lower mines production, increased physical demand from the jewelry and investment sector, and then - the squeeze is on.

For last few years I have wondered why producers don't forward sell, drop the POG, swallow up competitors with promising properties on the cheap, accumulate forward contracts on the cheap, drop production, demand delivery of physical from their forward contracts to cover the CB loans (causing the shorts to lose their - well�. "Shorts"), cause the POG to rise by soaking up the alleged "supply", and go back into production at higher prices. Over and over again? I think that it would require too much cooperation between the producers and is probably illegal, but a nice thought.

Koan, I think you might be on to something with your "lottery tickets". Silver is looking good today (tonight?). Silver standard (SSRI) doesn't look bad either. Risky but worth a look. I have increased my Stillwater (SWC) and Placer Dome (PDG) positions, and my TransOcean Offshore (RIG) as well. Somebody's going to have to re-drill those offshore oil fields when Y2K hits.

Buy back bonds, but with what? Presumably dollars, at least the electronic simulacra thereof. What will happen to those dollars after they have been used in this manner. Aside from their loss of selfesteem. Has a limit been set on the amount which may be bought backwards? If so, probably the program will just bail out a few favored flummoxed firms. If unlimited, the Japanese could sell $1 trillion. These electronic dollars would join the 6 trillion others my unscientific guess says currently roam the planet. Some of them might become homesick. Oddly, 6 trillion dollars is about the size of the USG's debt. A national debt of such weight usually defaults, either openly or through repayment in devalued currency. The buyback program appears to be a default mixing the two types. It openly admits that the bonds will not be honored according to their terms, but promises partial payment in devaluating currency.
Goldsun

www.kitco.comOro seems to be saying this bond-buy back is to prevent bank failures caused by bond-carry and if I read him(her) correctly is a form of another bailout. Scary.

Date: Thu Aug 05 1999 06:00
ORO (Summers Treasury buyback program) ID#71231:
Copyright � 1999 ORO/Kitco Inc. All rights reserved
I have done an interesting ( to me ) study of price inflation and equity dependence on M3 when expressed in "real" terms ( M3/CPI both nsa ) - as in how much buying power has the gov printed net of inflation.
Data is available at www.economagic.com

The main conclusion is that M3 bloats first, then starts contracting. During the contraction phase the Fed tries to keep the markets from folding and tries to prevent liquidity crises when this contraction starts. When the open market operations put in more money, it exits the financial arena and buys goods without increasing M3 above CPI inflation.
The move of the expanded M3 into the real economy triggers CPI inflation. The Fed pumping monetizes the debt.

Today we face a Fed wary of inflation and a liquidity crisis. The liquidity crisis is in part because of the first mini wave of Y2K bank cash withdrawals. The main part is that the accumulated US debt ( private and public ) in foreign hands is skyrocketing and has caused some to worry about US $ policy when Summers said that there will be a not-quite-as-strong $ policy so as not to choke US exporters. The doubts this and the earlier inflation data formed in treasuries and forex trigered the unwinding of the Yen carry trade. The organization of a bailout for the beleagered hedge funds was too obvious a sign of trouble in the credit markets and started an exodus of foreign money out of US assets. Since this is about $3 trillion there is very little the Fed can do without appearing to be highly inflationary.
The treasury bond buy-back scheme is needed to take out the long side of the hedge fund carry trade in off-the-run treasuries. The Japanese intervention is intended to help the short side. The buy back requirements are heavy if the carry traders amassed as much as 1 trillion $ in open offsetting positions. The loss of this money ( all borrowed from banks ) . The default on this debt would eradicate most of the world's bankers equity

Tomcat, my time is very limited this morning (jury duty calls). I'll respond back to your post when I have time to give it thoughtful consideration ... hopefully by tonight.

Peter, nothing like that came in my mail. Looks like you're on to them >Ho, ho, ho; ha, ha, ha; he, he, he<

http://infoseek.go.com/Content?arn=a0495LBY053reulb-19990805&qt=gold+silver+platinum+palladium+rhodium+-olympic+-olympics+-medal+-medals&sv=IS&lk=noframes&col=NX&kt=A&ak=news1486"But foreign exchange dealers say the central bank has also been intervening in recent weeks to prop up the rouble."

If Gresham's law causes you to keep the superior money and spend the inferior money when you have a choice, what would be your guess that Russia is holding onto their gold while dumping their paper whenever intervention is necessary?

First, I greatly enjoy your particular wisdom. You are very quotable! Although my core beliefs about many things are rooted in what histroy has taught us, there is a bit of a paradigm shift going on around us and I am not referring to how technology has changed our lives. This is not the same world in which I grew up and in many ways that is good. Conversely, in many ways, it is not (good). You can only offer an opinion about Y2k like others here. You nor any of us cannot definitively state what will happen or what will not. While I greatly admire your conviction and am not in significant disagreement, to say, "I submit that those who are afraid have already prepared, whilst (love that word) those who have not prepared are not afraid". First, many of us who have prepared are probably cautious, conservative and pragmatic individuals with not an ounce of fear in our bodies; we simply accept the tenuous nature of humanity's existence in this world in which we live and invest. Second thought, I think many who have not prepared simply have not given the issue a second thought. Likewise, you comment, "The real money in this world is made by he who seeswhat others do not". That is as true as it is profound. Isn't it a possibility that those who prepare see what others do not and might stand to make some "real money".

As to leadership in this country in the person of POTUS, historians will chronicle the cynicism engendered by this poor, pitiful man and his minions. They have done this nation a great harm with their governance. When called upon to rally 'round the flag, our countrymen will respond but not as history has illustrated. We will all soon realize in the event of a major crisis of any stripe that, character does matter. Kind regards this fine day......

Good Morning! Yes, you are right, of course. But the point I was trying to make wasn't that y2k is no big deal. (I concede that it may be a big deal). My purpose was to explain why I no longer believe that the greater threat will come from human behavior. The thing has simply been too widely advertised for too long to cause a panic.

I further submit that NOBODY IN THIS ROOM REALLY OWNS GOLD BECAUSE OF Y2K. (Sorry for shouting.) If they did, they would be looking to sell at the moment of highest uncertainty and greatest chaos. That will occur at _:__o'clock on __-__-__.

The mere prospect of everybody getting out at _:__o'clock on __-__-__ gives me the willies. Fortunately, I believe that the gold rationale is MUCH BIGGER than Y2K. When the time comes, I think everybody else in here will think so too.

>>>>If they did, they would be looking to sell at the moment of highest uncertainty
and greatest chaos. That will occur at _:__o'clock on __-__-__. <<<<<

Sell for what????

The risk of lending gold (where the borrower may sell it), is much greater when gold is depressed and more exposed to repurchase difficulties. The rise in lease rates could simply be the logic of requiring higher rates for greater risk.

Of course, leasing the gold in the first place doesn't appear very logical, but the we don't have the mind set, (Or the goals and purposes) of Central Bankers.

Why sell for whatever it is the supermarket will accept in payment, of course. What else?

You've obviously not experienced, (first hand) PANIC.

It doesn't matter that one knows about the y2k thingy.
It's how one perceives it...meaning denial, is a perfectly
natural behavior pattern. No I'm no phsychologist, but
I do observe.

If developments, expecially unexpected ones, and unforeseen
ones, suddenly catch you off guard...panic can easily follow.

In the old days, one would refer to some behavior patterns
as having a nervous breakdown......if y2k or it's aftermath
which is what I'm looking for, not the Jan 1,2K event, but
what follows, a lot of people being caught by *Surprise*
all at the same time, can cause a lot of havoc(panic).

Governments are not preparing troops just for routine
assistance....they're expecting big time problems, because
they have calculated, that given the amount of time to solve
this global set of unknowns, is impossible.

Think more, and not just what we know or are being fed,
but the unknowns, which will catch one by surprise.

http://www.usatoday.com/money/charts.htmA one-stop look at all the charts.
Lots of red. When will the stock "dipsters" arrive to save the markets yet again for the umpteenth time?

I think what Stranger is saying is that there are many reasons to own PM and Y2K is just one and not even a significant reason at that. If all sold at the highest price and all who sold only bought because of Y2K then those true Goldhearts will suffer the consequences of low currency denominated hard assets going forward. While many are buying because of Y2K, the crowd here I think is not; we are buying for all of the right and obvious reasons. You know, I wouldn't be surprised though if there was a lot so selling at some point next year by those who are pedestrian in their outlook on PM resulting in a price correction and perhaps another buying opportunity for all here.That is, unless other events well chronicled here begin to unfold.

Why does one need to experience panic personally? Does not history offer plenty of examples? Come to think of it, can you think of a single historical event which was advertised well beforehand and resulted in panic anyway? I'll bet you can't. Yet, by your post, you imply that you have actually lived through such a phenomenon.

on CNBC, they're talking alot about a rumor, "....Big hedge fund...deriviatives trading desk...big trouble...."
Anyone know anything???
Hee-hee-hee-hee!
Get some! and how?
Q.

Well, I promised myself I would leave this one alone, but I see this is the topic of interest. So here is my 2 cents. I don't think very many of us really know what is going to happen, including me. But I don't "think", it will be as bad as people generally think. Golden Calf, you make a good point talking about the psychologicaal aspects, but let me present another idea of similiar ilk from another direction. Many people like the "idea" of y2k for whatever reason: there lives are boring, there angry about something, they feel life has given them a bum rap and they like the idea of people suffering with them, or they like the romantic aspect i.e. This thing will happen, but I will be prepared. So many people tout and exagerate this thing for personal reasons. Because of this, and because it is such a complex problem, it is hard to get a good read on what the seriousness of the problem is. It remains a conondrum. But we will see in just a few months.

Date: Thu Aug 05 1999 11:07
Allen(USA) (Let me ask a second question) ID#246224:
Copyright � 1999 Allen(USA)/Kitco Inc. All rights reserved
If a mine sells a forward contract ( a promise to deliver metal at a certain price in a certain period of time ) then there really is no 'market' per se. It is a contract with another party. The mine gets the money now, the counterparty gets the gold later, right? Or possibly the mine doesn't get the money until delivery?

So the mine has this outstanding position like a short position, but without actually selling physical metal. Its a commitment, a promise to pay, an obligation against its assets. Its a short to medium term loan without interest if they had received money for the contract up front.

The contract for delivery can be seen as a security, like a securitized loan and can be traded like a bond. This would flood the market with 'gold' when in fact the gold is never really there to begin with. So is this the 'paper promises to pay in gold'? Is this the 'paper that will burn'?

Certainly a world flooded with 'paper promise gold' would begin to pay less with the perception that 'gold' was so plentiful, etc. So the price would fall and fall. But why would miners sell massively forward? Why would otherwise sensible people do such a thing when their profit margin was high enough to ensure profitablity over the $350-450 range which was typical of the past 15 years???

Scenario 'A'

For some reason TPTB decide that they want to own all the gold mines. One way of doing this would be to get the mines to mortgage their future into the hands of TPTB. How to do this with the resources at hand?

We notice that the mines use forward sales at times to hedge their bets when prices are low.

We decide that we would like to inspire the mines to sell as much forward as possible in such as way as to completely sell themselves into slavery or receivership.

We begin to insinuate that the CB's are going to sell their gold into the open market. Hint that it might be a wise idea to hedge ahead of such an occurance. So the forward sales begin and the price begins to fall. In the mean time we step up a rumor campaign that CB's are selling their gold and that this is the reason for the decline in price.

We keep buying forward sale contracts through intermediaries, essentially buying all the mines up as the price falls. At some point we are sitting with a massive commitment from mines sold to us at a very low price collateralized with the mining operations themselves.

Then the deal is done and the market is 'released'.

Mines can not cover their contracts without massive losses and so go 'bancrupt'. The assets fall into the hands of those who hold the contracts.

Why do this? So that you can recreate the world monetary system with all the future gold production in your pocket. Much less politically incorrect than simply confiscating ( nationalizing ) the mines.

I think there will be y2k buying and I think if y2k turns out not to be too much, then the selling will just sort of dribble out. Once a person buys gold or silver I think they get to like the idea of having it. They sort of marry it, like they/we do stocks sometimes. So, I think overall y2k will help the price of the metals by soaking up some supply.

MARKET REPORT (8/5/99): Gold was steady at the open with the currencies once
again surging against the dollar. Now the government wants to get into the interest rate
swap business under the guise of reducing the national debt and we will depart from our
normal daily format to make a comment or two on the proposal. Please fogive me the liberty
taken.

Though reducing the national debt remains an end devoutly to be wished, the deficit reality
continues to be a problem for political Washington. Thus, the Clinton administration plan
leaves open the option to replace what the federal government takes in with new bonds
issued at the other end presumably at a lower interest rate. That's the one factor that of
course makes the whole proposition appear a little half-hearted, but let's not dwell on details
in this age of the easily digested political sound bite. Who are we to wreck the party?

If the government can't buy a lower interest rate due to an intractable Federal Reserve, at the
very least, the government can hope for extending the amount of time required to pay off
that debt. In essence they could assume themselves the age-old consumer remedy of paying
one credit card off with another. So net/net, I doubt you are going to see much in the way
of debt reduction, since the dead zone between political and economic realities still contains
all these troublesome "entities" who are actually holding on to piles of this supposedly
non-existent debt -- and (I should add) would like to be repaid. To them the deficit and the
debt derived thereof are very real indeed. I will gladly eat these words if five years out we
see an actual reduction of the accumulated national debt but, let's be realistic: Do any of us
think that there will be a real debt reduction?

By the way, at last count , the federal government tacked nearly $100 billion to the national
debt in this age of the political surplus -- and nobody has said a word about this nagging
anomaly except a few befuddled newsletter writers and a conservative politician or two who
can't get the numbers to work. This, in the end, is why Alan Greenspan is against the tax
cut, i.e, you would be cutting taxes on top of a very large existing deficit -- usually highly
inflationary. But listen, what does it matter anyway. As I say, let's not dwell on these
negatives.

As Maureen Dowd said in her New York Times column yesterday, "For the Clintons, talk
is always cheap." Just ask Hillary "My Husband's Scarred" Clinton. As her now famous
revelations about Bill's scarred childhood were published, the Chinese were testing long
range nuclear missiles acquired through special arrangements with the Clinton
administration -- missiles that could easily annihilate Taiwan or Los Angeles for that matter.
It's going to be difficult to blame this breakdown in our collective national security on his
mother and grandmother. If the Clinton administration can make a rear-guard debt
maneuver -- essentially paying off one credit card with another at its worst or swapping
interest rates at its best-- look like an exercise in prudential money management, it can
certainly deal with the threat of China as an international strategic threat by simply saying
the menace doesn't exist. For the most part, the American people are willing to buy into
these fantasies along with the Clinton administration. And why not? We're all getting richer
by the day as we take this walk through Wonderland, aren't we? Or are we? As I say, let's
not dwell on these negatives.

Call 800-869-5115 (Ask for Mary Conway) if you have an interest in receiving a trial
subscription to our widely read newsletter, News & Views: Forecasts, Commentary and
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Broken Oak - I completely agree with your 'Scenario A' but there is one thing I don't understand - Why are the mining companies going bankrupt? Lets take Barrick for example, they have their next 3 years of production hedged at $385. Let's say gold were to jump to $1000. Disregarding their ability to roll over their contracts they will receive $385 per ounce of gold sold. Assuming their costs are $200 an ounce they are still making money. Or, they could sell their gold at $1,000 and close out their hedge position by paying the difference between $1000 and $385 ($615). The $615 plus their costs of $200 still is less than the $1000 they will receive.

Aside, Barrick proud of the fact that they can roll over their hedges if the spot price is greater than the hedge price. I believe they are able to roll over their hedge at the prevailing contango which is LIBOR minus the lease rate on gold. Now, if gold were to take off due to a squeeze, I would assume lease rates would also jump because the central banks would no longer want to lease gold at a low lease rate. Therefore, if the lease rate was higher than LIBOR, rolling over Barricks hedge would result in a lower price the next year. Am I missing something?

http://www.neatideas.com/data/index.htmHello all,

I've been lurking for the past week or two, but all your posts have been most interesting.

I am inclined to feel that the US T-bond buyback and the BOJ intervention to support the USD are really two sides of the same coin and are designed to take up the slack as the yen carry trade is unwound. The unwinding has been rendered inevitable by the signs of recovery in the Nikkei and the Japanese economy.

It is inevitable that if Japanese recovery accelerates that the BOJ will have to raise domestic interest rates above zero sooner or later. Hedge funds and their kind are increasingly anxious to reverse out of their positions causing rising JPY/USD and falling T-Bonds (rising yields).

The deep danger to the US is the threat that rising bond yield & falling USD pose to the Dow.

God help anyone who gets caught in a pincer movement with leveraged US shareholdings financed with margin borrowing. God help any institution which has a lot of its money out on loan secured only by shares.

If anyone has the database available, a chart of the Dow in Yen terms since 1982, say, is most instructive. Look at what the Dow looks like to a Japanese based or yen-financed investor.

(I am not aware of a site on the net where this chart is posted but the raw data is available at the above link. If you have a spreadsheet like Excel perhaps you can chart it for yourselves.)

Regards 18K

http://biz.yahoo.com/rf/990805/wr.htmlSo essentially, if by some miracle the IMF sale were to be approved, there would be no further slide in price. But if the official word came that the sale would not occur, a big rebound mayhap...?

"Leach, a Republican from Iowa, said a number of alternatives cropped up at the meeting, among them the idea of revaluing IMF gold closer to market prices to give the institution more assets with which to furnish debt relief."

If they were to officially mark the gold to market price, they essentially throw in the towel on the current system as we know it, right? The BIS- (and euro-)type system prevails. Right?

ANOTHER or FOA, do you have a wise word or two on this? Anyone else?

"whatever it is the supermarket will accept in payment." --- For what??

"the moment of highest uncertainty and greatest chaos," Will see bare shelves, unstable currency, unknown values of everything, and no clue as to the state of the worlds the next morning. That is when one KEEPS their gold, until the phoenix rises and one can perceive a course of action again.

Value: Hold on to some

>>>can you think of a single historical event which was advertised well beforehand and resulted in panic anyway?<<<

Maybe Hitler and the holocaust. There was a lot of denial in Germany as the Nazi phenomena loudly and overtly developed. "How could we believe that the Land that gave us Schiller and Goethe---would come to this"

There may be a parallel here.

To an Ostrich, sand is as Gold!

You're wrong about no one owning/buying gold because of Y2K.
Three months ago, I didn't own any. Now I own a growing # of coins, stocks, a couple of contracts and over 40 options that don't expire until after the new year. I purchased ALL of these because of the hist. low POG in conj. w/ Y2K. I expect all of these to pay off nicely before the end of the year. Regardless of the POG in Jan 2000, I'll be selling most if not all of my gold interest to possibly enter the market at a more profitable time. I'm sure I'm NOT the only one planning on this.

I do not know. Found it there. Maybe there is some kind of overcommitment or something? It would seem that there is alot of 'gold' floating about which is some mine's promise to deliver at a future date, no? Is this what is driving the market down? I don't know, but would like to understand that market dynamics better (for a better position, etc).

Thanks

I would appreciate the input, of any on this esteamed round table, on the senario I'm thinking about.
I am a very financially conservative person. I've never been a risk-taker, whether that is good or bad, I don't know.
I find myself being tempted. I'm in possession of several new credit cards offering 3.9% interest untill the end of the year. I am tempted to buy, let's say for example, $20,000. in Physical Gold bullion coins (1oz. US eagles) I feel the chances for 4% or more inflation, till the end of the year a good bet. I see this as a free loan. Further on the upside, my purchase could double or tripple in value. AT he worst, this risk my cost me $300.00. I see it much better than Las Vegas odds.

The Stranger (08/05/99; 09:16:08MDT - Msg ID:10404)
Golden Calf
Not only have I lived through it(holocaust)I intend
living through this perios as well.

You must really understand the true meaning of denial.
Try speaking to people who have heard and read and
know about y2k and know less than you and I. Denial
is a very strong part of one's makeup, and it's a necessary
one,but there comes a point, even with knowledge and fore
warning, one panics.

If a person had gone to a meeting of say any jewish group
in the early and mid '30s and said watch out this is going
to turn out very bad...the group would have thought him
some kind of a nut case.

If someone had told the captain of the Titanic, that there
is the slightest chance of a serious problem....he would
have be considered a real crazy.....no?

Do you really need a few more historic examples?

We already know, if we read, that this is not just a
computer problem, nor just an embedded chip problem,
but a systemic problem, that even heads of corporations
have denied and avoided facing, and have given low priority
to in the past.

So here we are, interrelated to the whole world, and a part
or the lack there of can bring down the house of cards, which btw, is not only precarious in the bug area, but
the banks and international financial mess as well.

Patch work works for a while, but eventually the piper
will be paid, and the debts will also be repaid.

The shame is it's not those that created the problems
that will be paying, but future generations....our offspring.

koan: I'm a believer in Y2K, but it's not because I'm bored, or because I want everyone to suffer, or any of the other reasons you put forth. From the time I was a teenager I've been hearing about the "last days" and Bible prophecy. Back then (in the Seventies) some of the predictions sounded like science fiction (biochips and such), but today those things are a reality. The European nations are teaming up, just as Daniel said they would. There ARE people out there who would dearly love to see a large fraction of the world's population die off ("useless eaters") or to enslave them through the rationing of food and fuel (I read on the Kitco board a while back that there's a U.N. "greening" proposal out there to make it illegal to burn FIREWOOD). Prophecies which were made several thousand years ago, which nobody believed could ever happen, are on the verge of coming true. I see Y2K as a trigger event which will cause a worldwide panic leading to a breakdown in community and society at large. Couple that with the multitude of disasters forecast in Scripture (I used to think they were all going to be natural disasters, but some may be manmade), as well as terrorism, and you are going to have people willing to accept anything which will bring order and comfort back into their lives. The Tribulation is supposed to be the most terrible time in the history of mankind. If indeed we are at the very brink of the Tribulation, people need to wake up and realize the grave danger they are in.

If you can still locate Jason's website (Jason, where have you been?), it's all on there.

Leigh, I was not singling out anyone in particular. I was just speaking of human nature in general.

Come gather 'round this sturdy oak table, my friends. To take part in a contest of erudition and philosophical skills -- to be sure the most challenging contest to date. It starts now and it will run through Monday noon on August 9, 1999.

The following article was published in a recent edition of the Denver Post just a few days before the Mark Barton rampage/murders in Atlanta. By latest count his losses as "day-trader" are pegged at $505,000 in the stock market -- a number not readily published in the mainstream press. I have read the article several times. On some readings I think it "tongue -in-cheek" -- a spoof. On other readings I think the writer, Mr. Cunniff, completely serious. I will leave that judgement to you and let it add sharp spice to this contest.

There will be a gold British Sovereign awarded the best essay -- and two silver U.S. Eagles to the runners-up. This is a bit different from previous contests in that it delves into deep societal issues as you will see when you read what's below. Somehow, as always, the subject of gold must be woven into this tapestry perhaps intended to hang on the Hall of Fame's vaulted walls. That weaving must also contain a high degree of logic based on the arguments made. In other words, "Go Gold" at the end of the post is not going to cut it.

Towncrier has agreed to announce the winners early next week. Only one entry per person marked AMERICANS DISCARD OLD RULES, INVEST, SPEND WITH ABANDON in the subject box. Other posts on the subject, responses etc. are perfectly allowable. In fact it is for discussion purposes that we are having this contest, but only the one properly marked will be considered in the competition.

A NEW RULE: In order to encourage early entries, if two posts are equally persuasive and incisive, the award will go to the earlier post.

New posters for the duration of the contest will automatically receive a free 1947 or 1948 Mexican 5 peso silver coin .900 fine from the Castle Treasury Vault containing .8681 ounces. The obverse bears the portrait of Aztec chief Cuauhtemac. A nice prize indeed to help our lurkers find their courage. THIS IS IMPORTANT: You must e-mail us that you are a first time poster. We cannot trace all the posts to find that out, so please let us know if you made your first post during this contest.

The article as it appeared in the Denver Post:
---------------------------

AMERICANS DISCARD OLD RULES, INVEST AND SPEND WITH ABANDON

By John Cunniff
AssociatedPress

NEW YORK -

It's not one of those things you can measure precisely, but it's there - a sense of relief and freedom from all those old rules and admonitions that governed economic society.

It's palpable. You can feel it in the stock market, for instance, where investors are freed from the old fashioned notion that it takes profits to elevate the price of a stock.

In the old days, a decade or so ago, the marketplace was weighted down by so many old criteria and ancient fears that you didn't dare make a move without con-
sulting a white-haired expert.

Today, investors can express their new freedom by turning tip into transaction simply by going online and punching a few keys, thus ignoring all the warnings that applied to the past.

You can witness it in housing, where existing homes are traded in numbers never before seen, because a title deed is viewed as a security to trade, not just a roof overhead as in the old days.

And so, investment conscious, status-seeking techies sell their perfectly adequate 4 bedroom, 2Y2 bath standard product for an innovative, 6 bedroom, 4 bath castle with swimming pool.

Meanwhile, those of lesser incomes can play the game too, since freedom from bank regulations means you can borrow mostof the equity in the house to spend.

You can see it in automotive sales, now running at a record pace, were sound, 1 1/2-year-old vehicles are exchanged for new ones because - well, you don't wear a polyester tie with a silk suit, and you don't park a Yugo in the driveway of a mansion.

You can read the new sense of freedom on the covers of the popular magazines, and you can see it in affluent neighborhood tag sales, where unused gym equipment, bought on impulse, is dumped.

Or experience it at the casinos, or hear economic consultants explain to legislators how gambling and lotteries can substitute for productive industries as a secure source of revenues.

Unless there is some other, obscure reason, the zero savings rate also reflects the sense of freedom from the past's rules of conduct, the sort of rules that warned of rainy days to come.

While those brought up under the old rules believe with unshakable conviction that recessions follow expansions, in the new view, such ugly cycles have been tamed by modern monetary genius.
The current expansion has lasted through most of the 1990s, and it is likely to continue for many months more, and each month that is added to the string seems to add a new layer of confidence.

Nothing like it has occurred in the memory of anyone alive today. END
---------

Knights and Ladies, my best wishes to you all. Good luck. Let the contest begin!

I live in Belgium @ the heart of Europe. My wife and I have been getting our physical Au from our local Bank (BBL) in a small Flemish commune. During our last visit - about 2 weeks ago, we enquired as to the level of Au activity. We were told the level of activity was quite high and the reason was that the people percieved Y2K will be a problem. This was also confirmed at the local jewellers.

I will say that we are not acquiring Au for Y2K reasons, more because of the general unhealthy state of the world financial structure. If it all comes tumbling down, Gold is money.

http://cnnfn.com/1999/08/05/economy/productivity/NEW YORK (CNNfn) - The productivity of the
American labor force slowed for the second
consecutive quarter while labor costs rose far more
than expected, the government reported Thursday,
heightening concerns that inflationary pressures may
be accelerating again.

I quite agree, but hysteria is the other side of that coin. We engage in about an equal amount of both denial and hysteria. The human species is capable of abstract thinking, but I don't believe very comfortable with it. It is more natural for us to keep things on the concrete level, real or imagined. About the holocaust: years ago I taught High School. I always showed my classes, documentaries of the holocaust, because it showed the dark side of human nature. And the third side is lazy thinking (there is a reason why the National Enquirer sells more papers than Time, Newsweek and U.S. News and world report combined. T.S Elliot said: "Man cannot stand too much reality" he went on to say that to stare reality right in the face takes the greatest courage, or something to that effect. I have found this to be very true. We are a species that is almost great, and capable of all sorts of good, bad, smart, stupid and ugly behavior.

It is human nature to procrastinate. I think the anxiety over Y2K will pick up steam as the appointed time approaches. It will probably only take a well publicized event such as a small run on a minor bank for example. If Y2K turns out to be a rough ride, then I think that anxiety will turn to panic and anger towards authority. Look at the Riots in LA when a certain court case didn't turn out as some had hoped. Imagine what will happen if government benefits (i.e. Social Security, Welfare, etc.) aren't provided on time, if supermarkets run short of food, if gas stations run out of fuel, etc. If all turns out well, then our insurance (PM's) wasn't needed for financial survival. At least not for Y2K. Anyway Gold, Silver, and Natural resource stocks are on sale.

GC - I am so tired of debating every issue in here (I know, I seem to ask for it) that I would just as soon let you win this one.

I think, however that you have chosen two examples which actually make my point. The Jews could have panicked in the 1930s. Instead many left Germany and 6 million others stuck around and wound up being put to there deaths. It is no accident that the Israeli military motto is "Never Again".

I have read two books on the Titanic. Some people did panic. Most did not. Many of the men, in particular, very calmly accepted their fate, even though they had only 2 hours notice. In fact, the ship's band remained on the deck playing music until the very last minute. Each of them subsequently died.

I am not an expert on panics, but I know that it is uncertainty which causes them. When a problem is understood beforehand, people tend to behave with remarkable self-control.

Please forgive me for being such a know-it-all, G.C. I really don't "know it all" and appreciate your views. I also respect enormously the Jewish people and their courage in the face of one of mankind's darkest hours. I was only trying to explain that, if the effects of y2k are indeed onerous, I suspect it will be from the deprivation caused by the malfunction of the computer's themselves and not by a panic. Obviously, I am no expert.

Hello, Mr. Wide Awake Club. Thankyou for your remarks. I believe Y2K is the spark which is prompting many to buy gold today. But I believe there are longer lasting reasons which have provided the fuel for such a decision. I am glad to hear you will not be selling in January, as I believe you are wise indeed to hold on. As Mr. koan says, it is likely that most will follow such a course.

Let me be one of the first to enter - as I have some time at the moment: My analysis will be simple and I hope profound. We have entered the industrial revolution part II, and as such it is very difficult, if not impossible to quantify, just, as I am sure, it was difficult for people to get used to tractors, cars and airplanes. We HAVE entered a new era that is even more extreme than any time before, except the industrial revolution itself. This is a period of amazing increases in productivity, because of modern technology. "A mistake is always harder to detect if it has a lot of truth in it" me. These are puzzeling times. Bio chips, molecular chips quantum computers - amazing technology doubling, what, every 18 months, or so. The human species is doing the best it can, but has become carried away and confused with this cornucopia of new tchnology, economic paradigms and moderneity in general. And as far as over speculation of this new technology, the same thing happens in a gold bull mkt, as we all know (1980?); speculators over buy and over sell as they always have and probably just did (over sell gold) and probably always will. We are witnessing human nature doing the best it can in a most confusing era of human history, and one I must say that I don't expect to get less confusing. We may have evolved beyond our genes.

http://infoseek.go.com/Content?arn=a1728LBY481reulb-19990805&qt=gold+silver+platinum+palladium+rhodium+-olympic+-olympics+-medal+-medals&sv=IS&lk=noframes&col=NX&kt=A&ak=news1486despite all a good result and hope for tomorrow
stock price higher in south africa

http://biz.yahoo.com/rf/990805/9d.htmlIt would appear that all the euro ever wanted was a little stability and a little respect...sorta like the little evergreen Christmas tree at the end of that Charlie Brown episode.

That was a PERFECT "Link" job.
Good news on "GOLD" -- Love that ticker symbol!
<;-)

http://quote.bloomberg.com/analytics/bquote.cgi?view=usbq&version=usatoday.quote.cfg&ticker=GOLDstill " un cadeau "

http://biz.yahoo.com/apf/990805/economy_6.htmlGreenspan recently warned Congress that if productivity slows, wage pressures are likely to quickly surface, and he pledged that the Fed would act promptly to raise rates at the first signs of inflation.

Looks like we have that scenario now, and the markets don't seem to care. Line up to get fleeced, my Wall St. friends...

AMERICANS DISCARD OLD RULES, INVEST, SPEND WITH ABANDON

Those centuries "Old" rules were forged in the fires of pervious periods of 'abandon'. It has ever been so. As memories fade and generations are diluted with fresh inexperience, a slow process of communal forgetting begins. Today we stand in a peak experience of inexperience where no pain is remembered. We stand as 'gods' in the world.

Even the gods of the ancient Greeks were subject to the visceral passions and compulsions, which we read, as all too human. We, today, may stand as 'gods' astride the globe of finance and economy yet we also are governed and dominated by greed and fear. These twin rulers over men lead them repeatedly to the same mistakes. These compulsions, greed and fear alternately, etch the course of every 'new era' which has been declared by those who have forgotten.

Euphoria is folly's intoxicating liquor. We have come to a time of forgetfulness, greed and excess. This period of abandonment brings the seeds of its own destruction. One day the party will end. It always has ended and it always will end. Today's generation will suffer what every foolish generation before them has ever learned: there are rules and you disobey them to your own destruction.

One of humanity's oldest rules is that the currency system must have underlying value apart from its use as money. This 'old rule' has been steadily abandoned over the past 100 years in Occidental society. Today we stand as 'gods' walking a tightrope leading to nowhere and without any nets and no way out other than our fatal 'fall' from the heavens.

Unfortunately the present system of money and economy is unusually vulnerable in that debt is its foundation and strength. In the past money were expressed in terms of something other than the mere concept of money. Today we use currencies, which in and of themselves have no use. In the past money were minted in materials that had intrinsic value apart from their use as money. There was an inherent desirability for the underlying material whether it was gold or silver or copper or wheat. We could view this as a 'backing' of the use of it as currency. Today's 'money' has no such support or recourse unless you are interested in remaking it into some kind of paper product.

Historically, where gold and silver have been found they have inevitably been used for money; as a medium of exchange, as a means of savings. These precious materials have almost universally been found to posses those qualities that make for the best of money. So they have been used repeatedly and widely by many different cultures around the world. Gold is recognized and 'universally accepted as payment' according to our own Alan Greenspan. Far from being a simple commodity it is used as money in many parts of the world today as well as amongst the highest levels of banking in the world.

Today's investor 'gods' have no use for gold. To them it is uninteresting because its numbers do not 'perform' as well as their vaunted stock trades. They have forgotten the old rule: he who has the gold makes the rules. Today the prices of stocks are high and the price of gold is low. There is another old rule: sell high and buy low. New blood does not know this rule, yet. They do not know by experience that gold holds the polar opposite position of power in the world of finance that speculative investments hold. They will learn this the hard way.

The bold will buy gold. No one will convince the many to buy gold today. They will buy it after it has been proven to be the correct choice. This is typical behavior for that crowd. They only buy what has gone up in 'price' and then they are burned when the price collapses on them. At this point they are at the pinnacle of the high prices of stocks. As one has said 'I can't bear to watch this'.

The bold will buy gold because they know that the six thousand year 'old rules' still apply, that humanity as a group never learns except by hard and painful experience and that they *will* take their place among those who make the rules for those who forgot them.

Will you be bold?

Bill - I stand corrected. I wonder if any one else in here has plans similar to yours.

Scot - I can't recommend 100% margin to anyone, which is essentially what you propose. But I do think you would make out great, providing you are liquid enough not to get stuck having to sell at the wrong time.

Today was what the Tower would call a healthy pause in the recent, relentless trend of stocks and bonds prices falling down the mountain. We've done some of our own, crude tests here in the Tower ala Galileo Galilei, and have confirmed that gravity is still the prime force. What will October bring? For that matter, what will tomorrow bring for these assets that have a foundation built on a paper dollar?

The December gold contract (GCZ9) settled at $258.0, down 60c from yesterday after trading in a range of $257.5-259.80. Spot gold closed in NY at $255.20 per each troy ounce. In Comex vault action, 3 kilos of gold were added to the Eligible inventory, barely filling the void left by the transfer of gold out of Eligible stocks late last week of 2,250 kilos.

Low paper prices paid to miners for gold production continues to put a crimp in the supply stream for new metal to reach the treasure chests of those with an eye for real money. Bridge News tells us that South African junior gold miner Durban Roodeport Deep announced it was in discussion with trade unions about the closure of 3 shafts at its West Wits mine. Many of DRD's shafts are marginal and the collapse in the gold price to 20-year lows makes a significant proportion of output uneconomical. And moving to reports from areas farther north, the Kazakh gold industry is deep in recession, and Kazakhstan may reduce gold production this year compared with 1998 when it produced 8.866 tonnes of gold, down from 9.659 tonnes in 1997.

In Washington, Alabama Representative Spencer Bachus indicated that IMF gold sales in conjunction with debt relief was no longer being considered as a viable option by the administration. Jim Leach, chairman of the House Banking Committee, said a meeting on Wednesday with U.S. Treasury Secretary Lawrence Summers had in essence removed the IMF gold sales as an obstacle to debt relief plans, and brought up a number of alternatives. Included among alternatives was the idea of revaluing IMF gold closer to market prices in order to "give the institution more assets with which to furnish debt relief," acording to a Reuters report. (Earlier in the day we wondered aloud here in the Tower whether this was an omen of a fundamental shift in monetary structure.) To continue, others with knowledge of this meeting said that a previous suggestion that the IMF gold be repatriated to the original donor countries had been put aside.

Data released today by Labor Department showed national wages growth outpacing productivity gains during the second quarter, a signal of possible inflation. They reported that productivity (output per hour of work) increased at an annual rate of just 1.3 percent in the April-June quarter. Compare that to the 3.6 percent rate in the first three months of the year, and you've got yourself quite a slackening of pace. Must be the heat. Or the humidity.
Meanwhile, unit labor costs surged at an annual rate of 3.8 percent, the largest increase since the end of 1997. This matters because unit labor costs are considered a key measure of wage pressures, and we can all remember Alan Greenspan's assurance to Congess two weeks ago that the Fed would act aggressively to curtail inflation. Or is it pricing pressure? Whatever. Get gold and "forget about it,"--to be spoken with your best Italian accent.

In a headline today from the Reuters newswire: IMF Says High U.S. Stock Prices "Difficult to Explain". No story needed there.

The euro is looking healthy these days, regaining its postion relative to the dollar equivalent (or a bit higer, actually) to the pre-eurolaunch ECU days. Dismissing that high intro exchange rate as more about hype rather than fundamentals, a look in hindsight reveals that the true euro has held together well, considering the incredible dollar strength over the past year. The Neil Parker, treasury economist at the Royal Bank of Scotland commented on the euro's breach of the key $1.08 resistance level shifting the market attention to the $1.10 target rather than parity with the dollar. "I do not see parity being tested again. But if we get two or three economic reports suggesting that the recovery (in Europe) is not going to be as fast as the market expects, you could see the euro back at $1.0550." It would seem that the euro's worst days are behind. But of course, "Another day, another curve ball," that's what we always say here in the Tower.

Turning to oil, OPEC oil production in July (excluding Iraq) was 23.40 million barrels per day, down 60,000 bpd from June production. Inclusive of Iraq, total OPEC July production was 25.95 million bpd, down 50,000 bpd from June. July compliance with agreed upon production cuts was 90.2%, slightly higher than June's compliance rate of 88.7%. Exacerbating concerns of this Fifth Horseman known as Rising Oil Prices is the current Russian oil export restriction imposed in August. Russian fuel and energy minister Viktor Kalyuzhny indicated the ban on gas oil and fuel oil exports would remain in effect in September. He said the ministry planned to ease the restrictions in October, when Russia completes oil products' supplies to farmers and the Russian Far North regions. Can't exactly blame them for taking care of the home front first, now, can we.

And that's the view from here...after the close.

http://news.bbc.co.uk/hi/english/world/americas/newsid_413000/413032.stmHEADLINE: Alabama gunman kills three
Local television stations reported that the man arrested in the Pelham incident had been fired, and that one of the people he shot was his former boss.

http://news.bbc.co.uk/hi/english/business/the_economy/newsid_411000/411973.stmThis is written clear and simple enough that you may get your arms around the issue and form your own opinion.

http://news.bbc.co.uk/hi/english/business/the_economy/newsid_387000/387543.stmA good article, posted here a month ago. Worth your time.
One cautionary note about this line: "But why is there so much fuss about oil prices? The answer is that oil is crucial to the world's economy. Forget gold - the world thrives on oil." When you read that line in the early stages of this article, you must remember that this same oil must be paid for somehow. And I think we all know the story on that account.

Hey FOA - thanks for your response. Yes, as you have probably been able to tell I am certainly concerned about the return of my wealth. It is an easy decision.

Your point about current 'bets' having to have the current framework to work is well taken. I think what few realize today is that the current framework is subject to the same market forces as any other. The dollar framework must compete with other forms of money. To think otherwise one would have to take a very, very short view of economic history. A 'bet' on one system exclusive of all others is actually a very risky venture. Not only must the 'bet' in the system produce a return to be successful but the system itself must remain successful. A two part failure here could cause one to lose not only the 'bet' but one's total savings if all is denominated in the system's units.

Too risky for me. I don't think one can be too conservative at this point in time. Thanks for all your thoughts, FOA. They are always most enlightening.

ET

Hey AEL - thanks for the great response. It was most informative.

My intention of course was not to question the validity of the argument, only it's presentation. I'm extremely reluctant to take 'anonymous' articles seriously. Unfortunately, like you say, getting real information about embedded systems has been very difficult. Opinions are all over the board and it is difficult to get a handle on even the absolute level of possible failures.

I figure why take unnecessary chances. This is the part of y2k that is a 'crapshoot'. It doesn't cost much to insure against a catastrophic failure that might affect you. I've spent some bucks to make sure I'm not cold, hungry and broke in any event. Just seems like common sense.

Thanks for taking the time to respond. I hope people will take the time to get some kind of education about this problem in the time remaining. Hope you're ready AEL, I don't think we've got much time left until the financial panic underway becomes noticeable. Good luck, partner.

I guess you haven't seen the Sportscenter ad.

ET

www.kitco.comDate: Thu Aug 05 1999 14:34
2BR02B? (jams, spreads & toast) ID#263305:
-

Swap spreads -- the difference between a swap rate and
Treasury yields with comparable maturities -- ballooned to 110.75
bid and 115.25 offered, the widest since the 1987 stock market
crash. The swap rate is the fixed-rate dealers demand in exchange
for floating-rate payments at the three-month London interbank
offered rate.

{...}

Meantime, speculation also circulated that a large bank,
dealer or hedge fund had taken large losses on derivatives,
though derivatives traders at five out of six different firms
said they believed the speculation to be untrue. ``This is an
environment ripe for rumor,'' said Mark Lieberman, head interest-
rate derivative trader at Nomura Securities International Inc.

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=23d3f312dc65bab02289e8c50ae60cf0

Le Metropole members,

The HEAT is on the "Hannibals" and they are
feeling it. Rumors were flying all over Wall Street
today about Goldman Sachs, Deutsche Bank, Chase, and
Credit Suisse regarding bad swap positions. Chase
was mentioned quite often, but their CFO was seen
having coffee this morning at a Morgan Stanley Internet
Conference, so the rumor about them is suspect. Then
again, maybe that is how one quells rumors about facts.

What we do know is that the 10 year swap spreads
continue to widen dramatically which demonstrates tremendous
liquidity stress in the financial system. At last
notice they had risen to 112 basis points and had
reached a high of 114 points. In our last report to
you about them, they were 100 and that was a decade high.
They are now 12% higher than during the financial
crisis of last summer. Something is terribly
wrong out there in financial land.

Where there is smoke, there is fire and the smoke
is billowing now. All the more reason these Hannbials
did their "collusive" thing once again today and held
down the price of gold. Same old song. They are
so obvious! Their days are numbered!

More on the news front:

We have also heard that Conti Financial is bust as
they have some trade coming due August 22 and that will be
their undoing as that trade is underwater.

Along the same line, word is out that
Long-Term Capital Management has big problems again -
their British Pound/D Mark derivative trade supposedly
went awry.

But the biggie news is good ole Tiger.

This giant of hedge funds is in deep trouble. We are
enraged at them because we hear they are short some
10 million ounces of gold. They borrowed this gold and
are using the proceeds from the sale of the gold to try
and help them out of their financial mess. We have
reported to you that their borrowing coincided with
the Bank of England gold sale and that it was a
collusive effort by our officialdom (N. Y. Fed and
Treasury), the British Government, Goldman Sachs, and
Tiger. Yes, a CONSPIRACY to trash the gold market
and protect the positions of the bullion dealer shorts.

Well, Tiger-we want the Caf� to know the mess you
are in as payback for your participation in the
gold market manipulaton.

A year ago you had $22 billion in capital. Because
of your lousy performance, redemptions came
pouring in. That took you down to $12 billion.
You have certain positions that are very illiquid-
"liquidity" and margin pressures are taking their toll.

Then, mid-year redemptions took more capital out and
we hear you are down to $9 billion in capital. Before you
know it, you start losing your cool and spout off
to the press about your big U.S. Air position, etc.
Very unseemly. This only adds to suspicions about
your troubles.

After hearing of this, I then called one of my
most plugged in sources to further check on Tiger.
He told me that Tiger was down 17% to 20%
(most likely 19%) year to date. That
adds validity to this email I received this AM:

"I have not seen it in print but Bloomberg radio
this AM discussed Tiger fund and loss of capital
and possible merger according to a friend!"

Yes Siree Bob, the Heat is on Hannibal & Co. and
intensifying. What will the "Hannibals" do if Tiger
has to cover its big gold borrowing short position?
Make a call to Peter Fisher at the N.Y Fed again?

I spoke with the Joint Economic Committee in the U.S.
Congress today. They will be coming out with a statement
very soon that the IMF GOLD SALE PROPOSAL IS "KAPUT" -
as far as the U.S. Congress is concerned.

Hannibal can color that source of that gold supply gone.
And now he is having to deal with the government -
slowly but surely breathing down his throat.

Reuters - August 5 - New York:

"CFTC says gives battered gold mkt more scrutiny"

"The Commodity Futures Trading Commission is keep a
closer eye on the gold market after the hair-raising
fall in the gold price to 20-year lows since May,
the regulatory body said...."We are aware of the
market and we staying on top of it, but I don't think
it is anything out of the ordinary," said John Phillips,
a spokesman for the CFTC in Washington....."

"While some central banks and other institutions have in
recent years sought to enhance portfolio returns by
direct sales of their low yielding gold reserves, or
by loaning gold to finance short sellers, the metal's
plunge has fanned conspiracy rumors and talk that
bullion dealers and others may be manipulating prices
to ensure these short positions remain profitable...."

"Whether or not there has been any contact with any
of these large traders or they have been in contact
with us, I couldn't tell you the answer to that."END

Remember, the first reports about Watergate were
about a third rate burglary. It is only a matter of
time before the truth is revealed as to what
the "Hannibals" have been up to. Then, they will have
to run for the hills

The important item reported here is the word "scrutiny".

GATA knows there is an investigation of sorts
going on regarding the gold market. Since the
investigation is about the enormous and
very vulnerable position of the gold shorts, a
government official is not going to come and say:
"yes, we are investigating the short positions of
the bullion dealers because they may be so large
that they could not get out of those positions
if they had to, or wanted to, on a sudden price rise."
The is the last thing that the government wants
let out to the press.

What matters here is that Hannibal, the bullion
dealer, knows that this "scrutiny" is going to
grow ever more intense in the months to come. He is
dealing with the ticking of the time clock on his
own "time bomb".

GATA thanks Richard "The General" Harmon and
all of you that are part of the GATA e-mail army
for barraging Congress about what is really going
on in the gold market and for emailing so many
members in Congress the document/letter that I
sent to Senator Phil Gramm, Chairman of the Senate
Banking Committee. Is it a coincidence that all
of a sudden there are news wire reports about
gold market "scrutiny"? I don't think so!

Le Metropole Cafe

All the best,

Bill Murphy
Le Patron

I believe that the average American, and for that matter Canadian, and European investor is getting confused. From my family at home.. 'I thought these Internet stocks were just great.. What's happened?� to the day trader who is going nuts trying to outguess the system, to the neighbour watching his neighbour take a bath�. It is all adding up to a very mixed message, and not a good one to the average Joe.

So mix into those, Y2K fears, a falling US dollar which will means that the Lexus or Sony toy will cost more means that there will soon be a change in sentiment from the average western world Citizen. Compound that with a health pounding the markets will take when the hedge game does blow up, and the banks start to really get discredited, and you can truly see more than a little panic and anger set in.

When James Carvell said� "It's the economy STUPID" I don't think anyone (except those on the inside like the special advisors at Barrick (Mr. Bush, Mr. Mulroney) plus the real insiders like Mr. Ruben and Mr. Greenspan knew what he was really saying. It's clear now that he also didn't know what he was saying!!

The end game is now in high gear. I believe that Bill Murphy and GATA have stirred the hornets nest, as have the little and big efforts of tonnes (note the spelling) of little folks. The IMF deal will die, the Swiss won't 'do it', and the BoE will have to find a way to stop, or change their approach, or continue to be distracted by this heat for a LONG TIME. Remember that they set the timetable for 18 months, but they now realize they cannot live with it.

But when the domino hedge funds fall� look out. It's going to be a blast.

I say go for it, i've done the same at 8.9% for $15,000 and i bought in at $292.00/oz. The difference, the amount i,am down is only $20/oz plus the interest over the last couple of months. I originally bought $5000 at $292, then $5000 at $275 and $5000 at $260. The only bad thing if you call this bad is that you are creating more fiat money. The way i've justified it to myself is that it's money that is not going directly back into the General economy. It also is like firing Golden bullets at the GOLD price manipulators.

Your downside risk is if the price of GOLD drops from where you buy at, which i just checked via my local coin dealer is $277U.S/oz. AS of today Aug5th/99 16:oohrs m.s.t. You might be able to buy for less and don't forget to "ASK" for a discount since you are buying in quantity. Shop or phone around for the best deal. You might even want to check with Michael j. Kosares here at the forum or send him an e-mail directly. I don't know where you are from, but i was forced to buy "Canadian Maple leafs" and Austrian Wiener "Philharmonikers" and "Australian Nuggets" not that its all that bad, but in Canada if its not fine GOLD 9999 pur you have to pay 7%G.S.T. Gst stands for "goods and services tax" We in Canada call it "Government Slave Tax" or the "Gouge and Srew Tax". So no American Eagles for me unless i want to pay 7%($277)=$19.39 per coin? You see my point.

The $19.39 has nothing to do with the crash of 1939 or does it? either way now is an excellent time to buy. As far as the P.O.G dropping more in price i personally would welcome it we are so close or below the cost of production now that i think if it does drop lower the market will implode as "Another & F.O.A seem to think? I don't know if you follow these two CATS all that closely but i do think its possible that the Mid east oil producers are asking for Gold as payment for there OIL.

Canada has sold some 8000-9000mt of GOLD since the 1980's my question that still has not been answered is where did it go and who bought it and why? Especially if GOLD has lost its value and has been dropping in price??? Again shades of Another? Also while i,am on the topic of Another he kept repeating to watch the price of OIL. Quickly before i forget look how much "Canadian GOLD" has been sold and i.ll bet anyone 9 out of 10 people are completely ignorant of this fact. Yet the B.O.E sells a mere 25mt and the price drops $30? Give me a break it has become very obvious what is going on pure and simple manipulation to keep the price of GOLD down to cover your SINS of GREED at the expense of the rest of the World. Guess what? the word is "OUT" my friends and i see the Gold mines are starting to call you to task! Witness AngloGolds latest move soon to be followed by other Gold mines, Givem Hell "Bobby Godsell" because its what you manipulators deserve.

Now back to "Another" saying to watch the Price of OIL notice he said to watch the price and not the change in supply or demand? The reason i bring this up is that in the National Post on Aug 2/99 an article was written by "Cheryl Strauss Einhorn" in the commodities Corner. Called "Ample Supplies Belie Inventory Data" The article states and is backed up with calls to Amoco, which controls 8 million barrels, the largest single holdings in cushing,Oklahoma "we're full,too", said a senior manager of STORAGE. He says the facility has been at capacity for the past four months. Before that,his tanks were usually 75%-100% full. "the weekly crude inventory numbers just don't make sense", he says, adding,"We're getting quite a number inquiries too, Recently" from firms in need of more OIL storage space.

As for Amoco's turnover, the manager says the Barrels aren't moving. His storage is owed by speculative traders who are "playing the contango", that is the premium built into futures prices that reflects the cost of storage. All this means is that OIL prices could be vulnerable. Crude has run up 70% this year without any real sell off. I'd say that right now these OIL price bets look pretty slick.

O.K folks what do you all think this means? Is Another right about GOLD for OIL and since apparently they are not getting enough physical GOLD and are no longer taking paper GOLD due to the possibilty of never being able to collect on it and i think they are right, they been screwed before and probally will be again? Or is it the speculative players "playing the Contango" due to the US wanting to keep inventories high? Or the both put together Meaning "Anothers " thoughts are true and the Spec's are doing what they do to make money off the the high inventory levels.

So is $20/barrel sustainable? with inventories this high? Somebody here is lying? Speaking of lying the Dept of Energy says inventories for its most recent reporting date in July are 7 million barrels below year earlier levels, while the American Petroleum Institute numbers show stocks down 10 million barrels.

So has everyone here been driving twice as much as last year? I didn't think so. So more stuff to wonder about thats for sure.
As for Y2K that gets beat to death at this forum. I say if you are that worried about it do something about it ,get ready and prepare, you know what you have to do. If some choose not to do a thing then they have no one else to blame but themselves when has the Governments ever told us the truth about anything or said you will be fully protected from all disasters. I say never! We are on our own Baby like it or not, just look at how many people die every day! Do you think they thought today is the day i have to or will die do to no fault of their own?
Y2k will be the same, lots of people will Die directly or indirectly. So i say "Work brings Profit;talk brings Poverty or in this case Ruination"
I say lets talk more about GOLD and less about Y2K. If Y2K is indeed destined to create serious problems i am certain we will see that reflected "FIRST" in a sharp decline in the Dow Jones industrial average, which will be out of this World for the price of GOLD. On the other hand, if Y2K will prove to be only a bump in the road, the DOW may very well hold up into the New Year and not be good for GOLD.

I think we have to look for more substantial fundamentals for GOLD ownership be it inflation, a short covering extravaganza,mines closing,hegde fund meltdowns i.e Tiger and more, meaning collaspe of all carry trades be it GOLD, YEN,or Swiss Francs ,the bond market Or OIl coming out in the open to bid for GOLD. My point is Y2k is a one shot deal hit or miss,i think if it does hit and hard we all could be very RICH. Isn't that why we are all here? But if not come the Year 2000 don't be to disappointed. I still believe Gold is an excellent investment and at these prices you can't go to far wrong. It will always have a value no matter what and with all the controversy surrounding GOLD it makes it all the better "Sauce For The Goose" if you will.

As far as the DOW is concerned i woundn't touch it with a 1000ft pole. It will correct itself, bubbles always do."Its Just A Matter of Time" One last item this goes out to F.O.A i'd like to take a guess at your identity. I think you are "MR GRABBE" your superior knowlege about the GOLD market and the markets in general are just to remarkable not to coincide with my hunch. I perceive your I.Q to be one in a million and it has a nice fit with GRABBE's biography. If it is you i,am pleased to meet you! Golden Truth.

Oil is as complicated a subject as gold I think; vital components to the world economy both and perhaps that is why. It is my understanding that quantifying bbls of oil inventory is nothing les than an arcane art that even the most experienced hands cannot completely fathom. My research has tauhgt me that, while there is plenty of oil in the ground awaiting retrieval, we do not have enough straws sticking in the ground to pull it out. We need more holes and at low price levels, the rig count does not go up; it holds steady or decreases. To forecast price I believe one needs to understand the velocity of depletions in relation to new production coming on stream and ongoing demand. I the short term I believe oil is going higher wheter or not Y2K. I think the same for gold. Good post!

When gold makes a pattern, as seen in the EURUSD (1st) chart, at the bottom
meaning going south not with an upward bias, that's when we may expect
to see the real Bull!.
http://forex.freeservers.com/charts.html

Another pattern to watch, as mentioned before, when the 50 day MA
goes through the 200 day MA, then there's a good chance the bull signal
is in. Before that it's still basing, or on a more positive not, accumulation
by those with funds, and knowledge.

http://www.decisionpoint.com/DailyCharts/XAU.html

My guess would be to the low 50's in the XAU, and possibly
new highs, in the US indecies.
Sorry, but that's what I see in the charts.

http://www.egroups.com/group/gata/179.html?Bill Murphy's latest.

Saudi Arabia's oil is real high quality and just a piece of cake to pull from the ground. They could, I believe, dramatically increase their production very easily. I think their cost of production is practically in the pennies per barrel to produce, and boy do they have a lot it. As I have said before, they won't because they don't want alternatives to even get started. I have always heard the number $20 per, and that is sure where it has stayed, although I could see it going higher short term.

Leigh, I have not been posting because I was away at another computer, and I didn't have my password with me. My website address is still there. It's my full name .com But my latest ISP wants to charge me MUCH more than I'm using in bandwidth, so I'm hesitant to publicize just now.

koan: y2k certainly is a hot topic on this forum today, as it's mentioned over 40 times in this forum today.

Although I think y2k is going to be extremely bad, I'm not a "y2k believer" for any of the reasons you suggest. I'm not angry about something, life has not given me a bum rap, I don't like the idea of people suffering, and I don't think there's anything remotely "romantic" about it. In fact, I feel mostly sadness and love towards people who just don't get it, and I realize that my efforts to educate people will largely fall on deaf ears.

If you find that it's hard to get a good read on what will happen, you could get great information from www.garynorth.com. However, since almost all of his stuff is clipped from popular mainstream news press, and there is a distinct bias in the press right now saying it's all going to be rosy, it becomes harder to sort truth from lies. The point is, there are many compelling FACTS why y2k is going to spell a disaster. Almost a year ago, on August 25th, 1998, I wrote a 12 page essay summarizing 6 months worth of y2k studies I had done.

The essay is revealing, because it makes a few predictions that have not happened, (nuke plants failing), and has old data on other issues (how much paper the Fed was going to make available.) I was unaware of how vulnerable "just in time" inventory would make things. I was accurate when I said programmers would panic more than the general public. I was wrong when I thought that the bank panic would hit by mid 1999. I did not mention all the missed deadlines that would go by, and the lack of reporting in the press regarding them all.

A few "y2k-is-not-a-threat" type people, a year ago, had confidence because the government mandated compliance by fall 1998. Funny thing is, these same people have confidence today because the government is mandating compliance by Dec. 1st, 1999. Passing a law doesn't make it so.

The Stranger: I own gold because of Y2K. I do not feel it is important to try to time "getting out" of gold before y2k or immediately thereafter. In fact, after a complete collapse, gold will be totally worthless. The important assets will be, in order, fresh water & shelter from the elements, then food, perhaps a gun, and finally, things you might have in excess to trade to other people after the chaos calms down, in which time gold and silver might have value, if it is legal and safe enough to trade them. So, if y2k causes something crazy like the fulfillment of Rev 18

[Rev 18:8] Therefore shall her plagues come in one day ...
[Rev 18:19] ... for in one hour is she made desolate.

and causes the complete and total destruction of the United States, one may end up holding on to gold and silver for over 10 years or more, if they survive...

One more interesting y2k bible quote:

[Mat 7:24] Therefore whosoever heareth these sayings of mine, and doeth them, I will liken him unto a wise man, which built his house upon a rock:

[Mat 7:25] And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell not: for it was founded upon a rock.

[Mat 7:26.27] And every one that heareth these sayings of mine, and doeth them not, shall be likened unto a foolish man, which built his house upon the sand:

[Mat 7:27] And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell: and great was the fall of it.

Computer chips are made from the most pure silicon, which is made from SAND!
Jesus is the rock.

George Cooper, sorry I didn't get back to you today. Perhaps tomorrow.

Can anyone tell me why the bbc lists the US debt at
http://news.bbc.co.uk/hi/english/business/the_economy/newsid_411000/411973.stm
as being 3.7 Trillion, and shrinking, while the ustreas.gov website at

http://www.ustreas.gov/opc/opc0019.html
lists the debt as being over 5.3 Trillion and growing?

http://www.drudgereport.com/matt.htmThis is definitly "Mission Critical"

Pupil: Kind sir, would you mind if I asked a question of you?

Aristotle: (with a smile) I'd say you're about one question too late with your request.

Pup: Huh?

Ari: Do you have yet a third question, my young friend? What's on your mind?

Pup: What is money?

Ari: Only a zen master could answer such a question.

Pup: But that is why I asked YOU.

Ari: (smiles) Of course, my fine friend, and yet there is this difficulty too--such a question should also be asked only by a master, for only a master will understand the answer given.

Pup: But I have been in training for a long time now. How will I know when I have become a master?

Ari: My, but you have a short memory! Did I not just now reveal one such suitable test?

Pup: It is true that you did. And so to discover the one or both together, I shall ask you now, "What is money?"

Ari: In answer to "What is money?" I need only tell you this: "When you have a moment to do so, look at it. What you shall see is money." I must now be on my way, and shall leave you to dwell on this as you see fit.

Master: (after a brief moment of thinking) Eureka! How could it be otherwise?!

Ari: It is always a pleasure and an honor to look upon a master such as you.

Master: As you already know, it's not so much what you see, but where you choose to look.

Aristotle: Of course...how could it be otherwise.

Hey Tomcat, sorry I'm so slow to compare notes with you ... thanks for responding back in the way you did. It gives me a good opportunity to say that my post may have come across as being more specific than what it really was. I believe the initial jolt will be highly deflationary ... the specifics laid out in that post explain my reasoning for believing it could be no other way. By deflationary, I'm strictly talking about a net contraction in the money supply due to a contraction in the credit supply, which is just about all our money supply is (nothing here about prices), as you obviously understood.

Your layout is similar to the way I think it will play out, but to be honest, after that initial jolt, it's anybody's guess as to how the money expansion/contraction scenario will play out over any particular time frame ... there are simply far too many variables ... and I'm not sure if knowing would even matter in a practical way.

While no one has taken me to task over it, I want to clear up a possible misconception ... maybe it was understood. I regret mentioning any Weimar-type of possible result. My point was only that there appears to be no need to worry about having a wheelbarrow on hand to tote one's cash to the local grocery. As far as prices, it would not surprise me at all to see a Weimar-type of purchasing power loss compressed into a matter of weeks or months as part of this initial jolt. Confidence, future expections, plays the leading role in the purchasing power of a fiat currency, not currency supply. And one has to think that foreigners, who hold so much of our currency and Treasuries, are particularly sensitive to any change in perception. Their actions in the market could devalue the dollar in a hurry.

The most important aspect, in my opinion, of looking at the currency supply today is to illustrate just how overextended the banking system is. The currency supply itself could become front and center if people start pulling their cash out of the cartel, as that could bring the walls tumbling down. Of course, one would think that that is a little more manageable of a situation than other possible threats to the system. The Fed has extra cash on hand already to meet possible demand, up to a point ... bank holidays could be called ... limits could be placed on withdrawal amounts.

If my views are correct, it's most important to be prepared ahead of time ... historically, and certainly as we've seen more recently, deflations have their climactic effects up front, with the subsequent time being a period of adjustment.

People carrying debt into such a deflation, i.e. inflationary depression (devalued currency in conjunction with money supply contraction), would be especially hard hit. The 'price' of the debt would stay the same, while the purchasing power (or payback power) of the dollar was tumbling. The period of adjustment (months, years ??) would see snowballing debt defaults as you describe, resulting in widespread unemployment. The relative value of homes, which have been bid up in price due to easy credit, would fall considerably as homeowners (home borrowers ??) could not meet payments. Stocks, and persons' retirement plans, would go up in smoke.

So how am I preparing for an outlook like mine ?? As an opportunity !! Without being specific, my strategy goes something like this. Because there is so much uncertainty, my priority is to be very nimble, capable of making quick investment moves, which means being very liquid for now. I carry virtually no debt. Diversification into precious metals is highly important to protect against a dollar devaluation (this is more than insurance for me ... it's also speculative). Cash and cash equivalents (Treasury-only money market funds) are very important. Some short positions to try to make some bucks on the way down. I try to always keep in mind that if other countries implode before the US, it could spark more dollar demand, extending out the time frame of the US market demise. If I'm wrong about how this will all play out, I might miss out on some gains, but I don't think I'll lose much, if any.

I hate for this to seem so gloom and doom sounding ... it's not meant to portray the end of the world ... just a sudden change in fortune for lots of people. And who knows, maybe the Fed really does have a hotline to God.

The Scot: You're not the only one tossing around that idea. As of today, I don't have the cods to do it.

koan: >We may have evolved beyond our genes.< Some of us are evolving beyond our JEANS.

Well, there are a lot of smart people here and you have got me questioning my complacency about y2k. It just so happens my work place is doing a major computer overhaul, and they sent up this little young genius to assist with the computer conversion. This is all this guy does, so I asked him "what about y2k"? His answer surprised me. He said I am not worried about the US or Russia. I asked point blank about Russia, but he said no - he was worried about China. He said 2 other things I found interesting from a young guy who seemed totally pluggged in. He felt the computers were getting away from us - too complicated to keep control of for long and he thought we would blow ourselves up sooner or later - and once again he was back with China. Only one guys opinion, but I felt he represented a generation that is not conveyed very much in the media. I have always been interested in the evolution of consiousness. It is ironic that it would be computers I would end up analysizing rather than humans!

More thoughts on this oil question. I think, and someone correct me if am wrong, the oil industry - US, Japan and Europe- is working feverishly to perfect the technology and reduce costs with regard to coverting natural gas to oil products. It is my understanding that this is a big deal, as there is so much gas, and it would reduce the reliance on the middle east - of course that begs the question would the middle east decide to make as much as they can now before the technology is perfected. I think that kids right, it is all too complicated right now, let alone in the future. I am also enjoying the posts by Turbohawg and others on the credit crises problem. It is clear there is a lot going on, but boy I know I only have a piece of that elephant, and not a very big piece. Got to get some rest.

http://www.nationalpost.comThis article proves the tremendous tug of war that is going on to have two extreme views like this.It proves something is terribly wrong with GOLD!
I have to come back to F.O.A comments about how he disagrees with Another over the Market imploding or Exploding. It seems even the experts can't decide either way it should be very interesting to watch. Another says implode, F.O.A says explode, in my simple and humble understanding of the events to be played out.

Once you click on the above link click on the financial post heading at the top of the page.
After that click on the "choose" pulldown menu and click on INVESTING and you are there. Just scroll down 1/4 of the page.
Sorry for all the trouble to get there but the Nationalpost doesn't have a U.R.L to get right to the story and they don't archive all their storys or put them all on the net. They want you to buy the paper. Which i do!!!

http://www.thisislondon.co.uk/dynamic/news/story.html?in_review_id=161397Thousands of London Electricity's pre-paying customers
have been left without hot water, light, or cooked food for
days, as a plan to save them from the millennium bug goes
"horribly wrong".

http://www.geocities.com/WallStreet/Floor/9024/index.htmlShows why the Economy is so good and how these robust conditions will end.

Whis is Mr. Grabbe and what is he noted for?

Dec gold now...

$257.70. This is incredible. ;-(

My buddy the coin dealer got snookered for 200 ounces. Not good. (an Internet scam) (Let's see that is $2,000,000 at $10K per ounce...oops I mean $257.70). He isn't a happy camper.

This gold thing is becoming quite depressing. BTW, all have a nice day.

http://www.yahoo.co.uk/headlines/19990806/business/business_story_150604_7.htmlAnglo-Dutch oil group Royal Dutch Shell says crude oil
prices will continue heading upwards if the industry sticks
to its promised cuts in production.

Mr. Grabbe?

To be honest, I don't know any Mr. Grabbe, and don't know why I should. But I did a search on the net and found to men named Grabbe, a physics professor and a guy who reported on Vince Foster's death.

You would be Horribly Morally wrong to borrow money on credit cards to invest in Gold.

Prov 13:11-12 "Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase.

Prov 22:7 "The rich ruleth over the poor, and the
borrower is servant to the lender."

Prov 28:22 "He that hasteth to be rich hath an
evil eye, and considereth not that poverty shall come upon him."

Ps. 37:21 "The wicked borroweth, and payeth not again:..."

[Neh 5:3] Some also there were that said, We have mortgaged our lands, vineyards, and houses, that we might buy corn,
because of the dearth.

[Neh 5:4] There were also that said, We have borrowed money for the king's tribute, and that upon our lands and vineyards.

[Neh 5:5] Yet now our flesh is as the flesh of our brethren, our children as their children: and, lo, we bring into bondage our sons and our daughters to be servants, and some of our daughters are brought unto bondage already: neither is it in our power to redeem them; for other men have our lands and vineyards.

[Prov 11:4] Riches profit not in the day of wrath: but righteousness delivereth from death.

[Prov 10:2] Treasures of wickedness profit nothing: but righteousness delivereth from death.

------------
In fact, every time you use a credit card, you have to sign a line that says something to the effect of "I swear to repay the sum of ...... to...."

But do you know one of the MOST IMPORTANT commandments that just about all of Western Society seems to have so conveniently overlooked these days?

[Jas 5:12] But above all, my brethren, do not swear, either by heaven or by earth or with any other oath, but let your yes be yes and your no be no, that you may not fall under condemnation.

"Do not swear... with any other oath,... that you may not fall under condemnation."

[Mat 5:34] But I say to you, Do not swear at all, either by heaven, for it is the throne of God,

[Mat 5:35] or by the earth, for it is his footstool, or by Jerusalem, for it is the city of the great King.

[Mat 5:36.3] And do not swear by your head, for you cannot make one hair white or black.

[Mat 5:37] Let what you say be simply `Yes' or `No; anything more than this comes from evil.

http://www.coolpages.net/2000/boardThis is a Y2K website forum for ordinary folks to ask and answer questions about preparations, products and other Y2K activities. Very informative, informal and friendly.

http://www.y2knewswire.comThis site reports Y2K stories from around the world and the U.S. from the media and selected authors. It also takes to task the liars, cheats and gumment types who try to lull us into a false sense of safety and security. Good site with current news.

Jason,

I meant the question for Golden Truth. Sorry about that. Thanks for searching.

As far as borrowing to buy gold. I understand the concept, it is the timing of it that is scary. The prospect of a low gold price, although we hope it is not a long-lasting phenomena, could be dragged out longer than one's ability to repay. The pressure to service debt or pay it off at a loss may be greater than one's ability to wait it out.

I have this formula. The greater one's debt to gold, the longer it will take gold to rise and the less likely that debt will be reduced by any rise in gold.

It seems the more you want something the less likely it is to happen. We know gold will ultimately rise. We know that FOA believes it will rise soon enough but we don't know when. Everyone's clock ticks differently.

Further, it is becoming a sad affair of "us or them at this point." In other words, why is it that for us to benefit from gold's rise, those who hold gold back would suffer the most and they hold the purse strings? That is what is seems to boiling down to. I feel Bill Murphy's frustration. It isn't right that it has to be this way. But it sure seems as though it is turning out that way. And, that just isn't fair, is it? Life is all about win-win, not we loose-they win. How can it have come this far? It is if we all feel guilty for wanting our investments to rise, knowing more everyday that for them to do that means a greater and greater chance of finacial collapse. Something not right about that.

http://www.aci.net/kalliste/Excellent Web Site - Good Stuff - Scroll down to a six part series regarding the Gold Market and how it trades.

Bill, The Scot, & Stranger,

As The Unknown Economist recently stated, '...let's not complicate the issue ...'

Gold is either going to go up or its going to go down. I believe Watcher and I are in the same school, that is, gold has an inverse relationship to money. If stocks, dollars, etc. (boom) gold will go down, if they bust, gold goes up.

I have 'poised' myself (cash) to enter into gold very quickly (15 minutes) if Y2K rears its ugly head. I'm, in general terms, 80% cash, 10% PM's, 10% resource.

Sir Scot, you would have to have testicles the size of 'ET's' to borrow 20 grand to finance the purchase of gold eagles on speculation. It is very widely stated that
gold will go up when and if Y2K hammers the planet and gold will go down if the supply 'overhang' is marketed. I, and I
recommend nothing, am waiting until the IMF deal is sorted out (what the hell is the agenda for these people?), Aug.24
when 'A. Goldspan' speaks, Sept.21 B.O.E. auction #2. What if the IMF deal goes through, Swiss sell, Goldspan says that everything is ok and does not raise rates and BOE pulls another stunt? You have lost your shirt. Mind you, if IMF is dead, Swiss is dead, Goldspan raises one-half point, and BOE reverses the auctioning you will have a very good day. $20,000 is a big bet, you flip the GOLDEN COIN!!!

Larry Kudlow on CNBC just said ...if POG goes up ...that is one part of a healthy growing economy...that's new...for him...how things keep on changin....keep the faith goldbugs...things are looking up...

BTW check out the US jobs report...it's a good one...

http://www.kitco.com/gold.graph.html

Kinda similar patterns, during the same time period
with a sorta regularity.

Who's in charge here, anyway?

GATA go investigate the culprits!

http://biz.yahoo.com/rf/990806/ni.htmlBecoming old (regular) news...Paper Heads South

Cavan Man, Koan and all those who factor in natural gas as a competitor to OPEC.

For natural gas to compete with oil above $20 per barrel is feasible. However the capital outlay to build refineries to produce any meaningful quantity would be tremendous.
Suppose OPEC raised the price of oil to $50 per barrel today. Eureka! We now start building refineries all over the world. Pilot plants first to perfect the technology, then plan for full factory construction and finally huge production into storage tanks for delivery into the market at a profit margin. Years of work, billions of dollars in capital outlay and the dream of a quick payoff. In this dream there is a $30 per barrel profit.

OPEC drops the price to $19 per barrel. Natural gas conversion plants operate at a loss, can't service their debt and go bankrupt.

IMHO natural gas conversion will not take place until the supply of oil is such that it cannot possibly drop below the conversion costs. Decades away.

http://biz.yahoo.com/rf/990806/lg.htmlJobs total exceeded expectations by more than 50%.
Expected: 199,000 new jobs
Reported: 310,000 new jobs

http://biz.yahoo.com/rf/990806/n5.htmlThe markets won't like that.
"C'mon Uncle Fed, let us all keep playing in the Street just a little longer...Pleeeeeeeeease?!"

http://biz.yahoo.com/rf/990806/jz.htmlFed staff news.

http://biz.yahoo.com/rf/990806/m0.html"It's a lock, Fed rate hike August 24, no ifs ands or buts about it," John Lonski, chief economist.
I always hate to see such waffling on an issue...

http://biz.yahoo.com/apf/990806/asian_mark_1.htmlA look at the rest of the world.

http://biz.yahoo.com/rf/990806/ob.htmlOne chief economist expected "a fairly sizeable intervention over the weekend, probably in the neighborhood of $3-$4 billion."

If that is considered "sizable", please recall Monday and Tuesday when I brought to your attention the $7+ billion and $5+ billion repos.

Now let's see...why is the banking system in need of such a steady and sizable injection of reserves? Oh, THAT's right...People are withdrawing cash for the upcoming girl scout cookie drive.

Numbers keep the heat on. Soup's jus about ready.

MARKET REPORT (8/6/99): Gold was sideways this morning despite the inflationary
July jobs report showing strong gains in hourly earnings and increases in the number of
people holding jobs. The long bond fell nearly a full point on the news and some analysts
once again raised the specter of a Fed interest rate increase. The dollar thus far has taken the
whole thing in stride having a fairly good day in the early going.

The inside story surrounding the Bank of England gold sale got "curioser" this morning
when The Guardian newspaper reported that Eddie George, the head of the Bank of
England, opposed the gold sale. The Guardian also reported "that Bank of England
executive director Ian Plenderleith had also opposed the gold sale and that both he and
George were outmanoeuvred by the Treasury and other BOE officials." Several weeks ago,
if memory serves correctly, Chancellor of the Exchequer Gordon Brown also claimed that
he was opposed to the sale and that it was the Bank of England's idea to press forward with
the liquidation. So, if key members of the board of governors of the Bank of England were
opposed to the sale as well as the Chancellor of the Exchequer, who was for it (!) and why
did it go forward? Perhaps its time for a visit to Baker Street and a session with Mr.
Sherlock Holmes to gain his assistance in unraveling this murky mystery. Both this
morning's story and the earlier report on Gordon Brown were published without quoting
sources. Public opposition to the sales has grown to a fever pitch in Britain and it seems the
politicians have found the need to do a little back-pedaling.

In other news, former Fed chairman, Paul Volcker said that increasing globalization would
eventually lead to a convergence of exchange rates and fewer currencies used for global
trade. He said the eventual alignment of currencies was likely to be a dollar bloc, the euro
bloc and some sort of Asian grouping. And it would take another one or two financial crises
before any shift was actively pursued. Those of you who regularly read these Daily Reports
as well as News & Views know that we have agree with Mr. Volcker's assessment. I also
believe that each of these currencies will be linked in some with gold. The euro serves as a
prototype for the currency of the future. Stretching out the implications of such an
international exchange rate system, gold owners who have assiduously exchanged dollars
for hard metal over the years will be major beneficiaries of such a system. The dollar price
of gold would have to be substantially higher than what it is today to make the reserve
system workable, just as a much higher price than $35 was necessary to make the
post-Bretton Woods floating exchange rate system work.

It was basically a light day for gold news. That's it for today. Have a good weekend,
fellow goldmeisters.

Please call 800-869-5115 (Ask for Mary Conway) if you have an interest in receiving a trial
subscription to our widely read newsletter, News & Views: Forecasts, Commentary and
Analysis on the Economy and Precious Metals. Or you can go to our ORDER FORM and
submit your request by E-Mail. You will also receive our introductory packet on investing
in gold. Thank you for your interest.

http://www.usagold.com/DailyQuotes.htmlRunning late this morning. There are a couple errors in today's report and a missed attribution of a Volcker/Reuters quote. For the corrected version, please access the Daily Report via the link above. Thanks

http://www.egoli.com.au/egoli_frame.asp?Frame=SofaerRegards 18K

Good point. Can the oil industry expect to be able to convert natural gas for say $10 at some point in the future? Say the North Slope AK, where there oil production is half of what it was, 1 mil instead of 2 mil, and could run another million barrels of oil a day through the pipeline if they had it.

Don't look for any aggressive moves
by the Fed. Problems in the bond market now go beyond just reinflation.
Talk is there is more trouble in hedgeland, ala LTCM. It's not cheap talk
either. Today's Wall Street Journal makes a pretty good case for it.
Anyway, last year the Fed LOOSENED for LTCM. In light of similar problems
surfacing now, don't be surprised if the Fed shocks everybody by "passing" at the August FOMC meeting.
This theory that the Fed has to tread softly, even as prices begin to rise,
is fundamental to the case for gold.

http://biz.yahoo.com/rf/990806/tu.htmlGiven that things are improving in Japan and Europe, one analyst says the U.S. looks overvalued after two years of being the only game in town.

Canuck (08/06/99; 05:29:55MDT - Msg ID:10468)
Response
Bill, The Scot, & Stranger,
As The Unknown Economist recently stated, '...let's not complicate the issue ...'
Gold is either going to go up or its going to go down. I believe Watcher and I are in the same school, that is, gold has an inverse relationship to money. If stocks, dollars, etc. (boom) gold will go down, if they bust, gold goes up.
I have 'poised' myself (cash) to enter into gold very quickly (15 minutes) if Y2K rears its ugly head. I'm, in general terms, 80% cash, 10% PM's, 10% resource.

Canuck,
I'm going to make several posts now. Please read all of them as together.

I would like to comment on your post. Most people in this era live their lives with little fear of change. As "The Unknown Economist" puts it, we are way too complicated. Just keep it simple! I agree. The majority of us can and do drive down the highway without seat belts. If we see to
many wrecks, then it's time to buckle up. On a golf course, don't worry about lightning. Get off the green only after several people have been hit, close by!

Most of the world functions in this way. Be it in private life or business, the perception is that we can rearrange our strategy "IF" things start to look bad. The reason we build on this mindset is because the odds are in our favor. Through out time, seldom do events turn so radically against us that we cannot dive for cover before all is lost.

This is the "steady as we go", "let's not go overboard", "play the odds of recent history to your favor" thinking that perhaps Stranger and several others here promote, regarding gold. It could be a good bet. But, if you follow the reasoning offered by myself, based upon the thinking of
Another, we could be about to make one of those "once in several centuries changes".

When things do change to this degree, history has shown that it's always these "regular simple thinking" people that get ground up, "unmercifully"! Canuck, you are "'poised' (cash) to enter into gold very quickly (15 minutes)". That's fine, but a "fantastic financial crisis" may, this time, lock up the very system you use to function in. Your order may book in 5 minutes, but if the other side of your deal can't close, you will receive nothing! During these few times that events reverse "big time major on a world class scale", everybody holds onto what is considered "most dear". You will hear this often: " Yea, I owe you 5,000 barrels of oil. Yes, I have it, but it's going somewhere else because your deal with me is not as important as my deal with this other guy. He has something I need more, so get in line and kill me or sue me! I'm bankrupt anyway!" This is the way business dealings are resolved during war, natural disasters and major international disputes. Your, so called "lightning fast trade", is killed by a much larger breakdown involving much larger players.

Truly, I don't expect most people to change from this current line of thinking that embraces a "western style" of secure economics. If they did, it would negate thousands of years of natural human behavior. Most of the time, people will continue to play with paper contracts right up to and during the "burning of Roam". The Hunts thought they had "big" oil in Libya. They even borrowed against those assets as banks clamored to lend against these secure in ground holdings. Right up to the last day, traders booked contracts against delivery of those producing wells. Then, in a split second, it was nationalized. All gone! The same will be seen with gold stocks one day. Traders will buy them right down to .05, and still say, "I know it will come back with the demand for gold because the asset value is in the ground". Heard this before Carl? Gold goes from $100 to $10,000 during the crisis, and someone bigger (the local government?) then the shareholders says:

"Yes, I have it, but it's going somewhere else because your deal with me is not as important as my deal with this other guy. He has something I need more, so get in line and kill me or sue me!"

None of this is anything new. It's just that most "westerners" haven't been defaulted on recently, in a big way. Think about it. FOA

Hello ET, your words:
"I'm extremely reluctant to take 'anonymous' articles seriously."

ET,
Another never wanted me or anyone else to "take anonymous articles seriously"! He wants you to consider the content, apply them to the real / current events and with the education time brings, come to an opinion on your own. Then you should "take your thoughts as unanonymous" and act
on them in your families best interest.

Many of us are a "world" apart in our perception of money. Another is trying to bridge that gap using human experience. FOA

ALSO:

ET (08/05/99; 17:04:25MDT - Msg ID:10440)
FOA
Hey FOA - thanks for your response. Yes, as you have probably been able to tell I am certainly concerned about the return of my wealth. It is an easy decision. Your point about current 'bets' having to have the current framework to work is well taken.I think what few realize today is that the current framework is subject to the same market forces as any other. The dollar framework must compete with other forms of money. To think otherwise one would have to take a very, very short view of economic history. A 'bet' on one system exclusive of all others is actually a very risky venture. Not only must the 'bet' in the system produce a return to be successful but the system itself must remain successful. A two part failure here could cause one to lose not only the 'bet' but one's total savings if all is denominated in the system's units.
Too risky for me. I don't think one can be too conservative at this point in time. Thanks for all your thoughts, FOA. They are always most enlightening.
ET

ET,
As others would be glad to know that I understand their motives and reasoning, so am I happy to see you "know where I'm coming from"! thanks FOA

The Scot (08/05/99; 10:52:28MDT - Msg ID:10417)--TELL ME IF I'M WRONG
I would appreciate the input, of any on this esteamed round table, on the senario I'm thinking about.
I am a very financially conservative person. I've never been a risk-taker, whether that is good or bad, I don't know.
I find myself being tempted. I'm in possession of several new credit cards offering 3.9% interest untill the end of the year. I am tempted to buy, let's say for example, $20,000. in Physical Gold bullion coins (1oz. US eagles) I feel the chances for 4% or more inflation, till the end of the year a good bet. I see this as a free loan. Further on the upside, my purchase could double or tripple in value. AT he worst, this risk my cost me $300.00. I see it much better than Las Vegas odds.
--------------------
Great Scot! You're going to love this answer, my sturdy, kilty knight.

You are a free man. Do as you see fit. If you like this current price of Gold, and feel it to be a good bargain, and you wanted, say, $20,000 worth, then everything is settled. Isn't it great to have the freedom to make these decisions over your own life? Affirmative!

The key issue you need to resolve for yourself is what you hope to gain. Let me put myself in your shoes for a little role-playing, and I'll think out loud your benefit.

"Dammit! You know, I really enjoy my career, but I think I screwed up on my choice of employer. Or at the very least, I screwed up during my last salary negotiations. Back then, I was young and naive, and didn't give much thought to the nature of money and exchange rates. Silly me. I simply locked into a fixed salary denominated in dollars, and now I have to live with it.

"And this is what bothers me--I work all month long, earning this same amount of dollars each month. That really bothers me because, while the amount and quality of my labor stays the same each month, that crappy little dollar floats all over the place, one day it is worth plenty of yen or euros, and the next thing you know, it's going south--and the price of groceries seem to keep getting higher. Why, oh why did I lock in my steady labor to something as uncertain as a fiat currency? (Followed by a moment of weeping...)

"You know, I'd rather be paid in Gold. That stuff is rock solid real money, and thanks to this unique and bizarre moment in history, Gold is dirt cheap compared to real things. It is certainly easier to earn $270 than it is to earn one full ounce of Gold. I see what I should do...

"Thanks to the same power of contract that enabled my employer to secure my rock steady real labor, month after month, with paper currency that he can typically get more easily and more cheaply over time (if the dollar really goes south I'm left holding the bag!), I can do the same thing. I can contract with this here banking institution. They will give me a lump of money today, and I will agree to make regular repayments over time. If the dollar really goes south, the bank is left holding the bag. I will have gotten Gold today, and transferred the risk of my future paper salary along to the bank!

"But the last thing that I want to have happen is to get caught in a trap. Although I think this current price is outstanding, and would be willing to LOCK my paper dollars into this current exchange rate for life, I'd hate to find myself in a position where I was forced to re-exchange my Gold for fewer paper dollars during some period even more blissful than this. This could happen only if my contract with my employer blows up in my face...he shuts down the whole operation and I am out of my reliable numbers of monthly dollars in salary. My own contract with the bank doesn't blow up too...I still owe them these payments I promised. And according to the contract, after the promotional period, they will raise my interest rates from 3.9% to 19.9%! Because my personal productivity is temporarily on hold, I would be forced into selling back my Gold (which was intended to represent future EARNINGS from my personal productivity) to meet my payment schedule. While this would still be fine if the dollar went south and I could unravel this mess with a small fraction of this Gold, what if the price of Gold is driven south, and I don't have enough Gold to meet the paper demands of my contract?

"Clearly, I must be very prudent in my decisions. I can live with this exchange rate. I would be happy to play one contract against the other, and continue to effectively earn Gold (indirectly) from my employer at a rate of $270 per ounce. While locking in this rate now protects me against future failure of the dollar, it does also prevent me from taking advantage of any chance for cheaper Gold in the near future. Hmmmmmm...which scenario is the more likely, and also the more troubling to live with of the two? Bingo! I can't afford to let the dollar go south on me. I must have Gold. But I don't want to get caught in that rare trap...what are the chances I will lose my means of personal productivity, my job? I must be conservative, and only lock in as much future production in Gold as I might reasonably be able to honor through my paper contract with the bank."

The key issue here, Great Scot, is the stability of your source of paper earnings. If you can deduce what amount can be counted on to reliably pay back your loan, you may comfortably and confidently engage in that particular level of salary hedging. This is the most delightful form of Gold loan...you accept Gold today (at these rates!) which has been borrowed against your future productivity as defined by paper dollars which are used to settle
the claim against you. Each $270 you earn for the life of the contract (i.e. as you pay off your bank loan) settles one ounce of the claim against you, and that ounce of Gold comes under your permanent ownership. A pretty nice arrangement if you foresee a rocketing Gold price and a worthless dollar. Why, even a job at McDonald's would effectively be paying you a king's ransom in Gold. Such is the power of your ability to engage in contracts. Do it responsibly. You will have to live with your choice until they are settled. The idea proposed by some: to buy Gold cheap and let the Gold pay for itself when it is priced right---well, that's crap. Productivity is the name of the game. Who would grow our food if the farmers decided to make their living by trying to buy grain when it was cheap, and letting the grain pay for iself by selling it at some later, higher price. Who would be growing it in the first place? Keep working, as it seems to be your intention. And choose Gold for your payday. Hedge your own production as only you can see fit to do so.

Gold. Earn you some. ---Aristotle

Golden Truth (08/06/99; 01:19:34MDT - Msg ID:10457)
Sparks Fly Over GOLD Pegged At $200.
http://www.nationalpost.com
This article proves the tremendous tug of war that is going on to have two extreme views like this.It proves something is terribly wrong with GOLD!
I have to come back to F.O.A comments about how he disagrees with Another over the Market imploding or Exploding. It seems even the experts can't decide either way it should be very interesting to watch. Another says implode, F.O.A says explode, in my simple and humble understanding of the events to be played out.


GT,
Yes, I got hit right between the eyes when Another put this reasoning to me. Anyone that does not have a firm grasp of this "new gold market" is going to need a lot of guts and conviction to continue to hold even physical gold as this plays out. It could go either way, but the downside will
hammer the current "secure trade and paper mentality" of most Americans. (see my last post to
Canuck)
Most traders / investors are just looking for a little new inflation or some type of Y2K disruption to bring gold (and gold stocks) up. The process of moving away from the current gold market to a mostly world physical market could have the effect of driving down the quotes of London gold. Because, every physical dealer and trader buys from someone "upstream" from himself, we must look to the ultimate creators of the "gold price" to see how it's made. At the very top of the food chain, are all the menders of the LBMA, most of the major banks of the world. Practically all of their price setting function revolves around the paper trading of "allocated or unallocated" bullion accounts and the cash settlement of future delivery contracts. All marked to the market and settled in dollars. If the world begins to move away from "investing in gold" using dollar settlement and towards outright physical delivery (as represented by vault certificates) settled in, say Euros???? I think such a process will bring a shrinking liquidity into the dollar gold market along with lower quotes for "contract gold". Just as one bids the price of bonds down from $1,000 par to say, $300, not because the yield isn't good, but because the principal may never be paid.

Because "this new gold market" operates in a kind of parallel universe, most "western traders" will not see the dynamic at work. It will appear on their computer screens as falling gold prices on the world dollar market and increasing premiums on physical gold. If the London price is $100, and your dealer sells it at $650, the press will say that the premiums on coins have risen to $550 because of gold horders (or something to that effect). It will come across that anyone that buys gold at $650 is getting "ripped off" (english pronouncement) because everyone knows that the
true gold price is set in london at $100. This is the arena that the mines may get dragged into. Forced by the bullion banks to sell into London in much the same way they forced NEM to hedge. Today, LBMA controls most of the world mines. Believe it!

So, I hope this is understandable? FOA

TownCrier (08/05/99; 09:56:18MDT - Msg ID:10412)
IMF gold sale uncertainty priced in, dealers say
http://biz.yahoo.com/rf/990805/wr.html
So essentially, if by some miracle the IMF sale were to be approved, there would be no further slide in price. But if the official word came that the sale would not occur, a big rebound mayhap...?
"Leach, a Republican from Iowa, said a number of alternatives cropped up at the meeting, among them the idea of revaluing IMF gold closer to market prices to give the institution more assets with which to furnish debt relief."
If they were to officially mark the gold to market price, they essentially throw in the towel on the current system as we know it, right? The BIS- (and euro-)type system prevails. Right?
ANOTHER or FOA, do you have a wise word or two on this? Anyone else?

TC,
A lot of people read your items. Thanks for posting them along with your comments!

This is a perception everyone may miss, but, if the IMF gold "doesn't" come to market, it would further damage the LBMA paper system and force a further lowering of bids on the world gold market. See my last several posts, especially the one to Golden Truth.

A loss of gold backing begs the question: "why do I bid par for London gold is it may not be backed with full physical delivery"? So, to the American investor, he just sees a further confusing and conflicting event as the world gold price falls as the Swiss, IMF and perhaps BOE sales are
withdrawn!

Can we now envision why a new physical market for gold priced in Euros may evolve?

FOA

http://www.newsunlimited.co.uk/AC/setguestcookie.cgi?section=News&host=www%2Enewsunlimited%2Eco%2Euk&uri=%2Fguardian%2Ftodays%5Fstories%2F0%2C4450%2C%2C00%2Ehtml&userid=4G9Dbb01
Bank governor in clash over gold sale

Alex Brummer and Mark Atkinson Friday August 6, 1999

The governor of the Bank of England, Eddie George, raised strong objections to the government's decision to sell more than half Britain's gold reserves, but was outgunned by a coalition of the treasury and some of his own senior officials.

Mr George saw the proposed gold sale as a further erosion of the Bank's power base in the City. The negative market reaction to the sale of half of Britain's $6.5bn of bullion reserves appears to have indicated his judgment.

It also underlines that two years after the Bank was given control of interest rates, tension remains between Mr George and the chancellor Gordon Brown, who was unenthusiastic about his reappointment in May 1998 to a second five-year term.

Mr George and a fellow member of the Bank's executive, Ian Plenderleith, are understood to have argued fiercely against gold sales at the Bank's inner councils.

But senior members of the Bank's executive, including deputy governor Mervyn King, supported the government's view that Britain would be better placed if it reduced its holdings and invested the money in foreign government bonds.

The government caught the markets on the hop when it announced the sale in May. Since then the bullion price has tumbled 10 per cent to $258 an ounce.

The Tory leader, William Hague, claimed in the Commons that the fall in the price of gold had cost British
taxpayers up to �500m.

The treasury says the Bank was fully consulted about the principle of the sale, the method of auction and the impact on the markets. At no point did the Bank formally object.

Gold sales have been the subject of vigorous discussion at the Bank for years. Mr George is understood to have told colleagues it was essential for the Bank to hold a large proportion of its reserves in gold because of the City of London's pre-eminent role in the bullion markets. The Bank's technical management of gold reserves for more than 40 central banks and monetary institutions around the world gave it symbolically important status in the gold market.

He also believes that Britain, as member of the group of seven leading industrial countries, has a responsibility to hold a significant proportion of its reserves in gold, as do the United States, Germany and Japan.

Relations between the treasury and the Bank have outwardly improved, but traditionalists see the rundown of reserves as a further erosion of the Bank's power base. The government hived off banking regulation two years ago. The management of the national debt is now in the hands of the treasury.

Senior treasury mandarins have for years sought to persuade the Bank that it was in the nation's interests to diversify its reserves, but the change in hierarchy at the treasury, and new thinking in the Bank, swung the debate in favour of gold sales.

The treasury maintains, that the delays have already cost the exchequer dearly. Gold sales in 1979 on the scale now being proposed would have earned $4.5bn for the public purse.

The government has been forced on to the defensive by the sales, which many fear could interrupt plans by the International Monetary Fund to sell 10 per cent of its reserves, to finance debt relief for the poorest countries.

So far the Bank has sold 25 tonnes at auction, which led to an immediate reduction in the market price. It has scheduled a further four auctions of 25 tonnes each until March 2000.

The treasury insisted the programme be publicly announced, but market experts say this provided speculators with a one-way bet on the future gold price.

The government says that by being open and transparent it has prevented wild rumours which could have caused an even bigger fall in the gold price

Dear Knights: Jason and Canuck,
I very much appreciate your responding to my query. I cannot argue with either of you. Your reasoning is sound and is excellent advice.

Jason�� Having been a student of the Scriptures myself for about 30 years, I am one of the few that believe that every word is the "Word" of God and can be taken literally. Your verses are profound and should be heeded by all.

Canuck�..Your observation is accurate. If you like to "Take chances" this would be one to remember. If we all only did the safe and sane thing, there would be no USA, no stock market or any gold mines for that matter. As we get older, (I am 60) we tend to get more conservative. Let the young have the excitement (Been there, done that).

�Getting back to our discussion as it has been developing over the last few days. I have gleaned, from this group, that many believe there will be quite a bit of turmoil prior to Y2K. It would not take many people to cause a very large problem. If by chance, 30% of our "Players" drop out of the market, "stash cash" and prepare for the unknown, this could cause a very large swing of the pendulum. Many might feel there is more "safety" with Gold under the mattress than US$. I truly believe, and might "bet", this will be occurring. Gold coins may be very hard to obtain in December 99 "at any price". As I mentioned in my original post, I am very conservative; yet, I find myself "tempted" to do something exciting even if it is foolish.
Sincerely, The Scot

PS��.ET�.defend thyself.

http://biz.yahoo.com/rf/990806/vq.htmlA good summary report on paper. Positive sentiment for the euro continues to build.

Thanks for the remarks, FOA. I understand what you're saying.

Le Metropole members,

We have just received word from a reliable source that the renowned hedge fund, Tiger, is in deep, deep trouble and in even worse shape that we have been reporting to you.

The latest news is they are about to be hit with a $6 billion dollar redemption. At best, that will mean their
capital base will have dropped from $22 billion to $6
billion - and perhaps it could be lower. In addition we
have been told that 50% the staff has left.

If true, and our source is impeccable, it can explain why
the swamp spreads are at such high levels - which indicates
that there is tremendous stress in the credit system.

It explains why there is do much talk ( even in the Wall Street Journal ) about Goldman Sachs, Chase and other banks having some big problems.

Today, the bank index is tanking and is down 2% at the moment. The index broke 800 and is down 16 points on the day. It expains why financial stocks are reeling.

This new revelation most likely means what we have been telling you about the emergency Fed meeting, the hush hush banking meeting in Philadelphia, and the borrowing hundreds of tonnes of gold by Tiger and its bankers is also most likely all true.

It also can explain the strange Bank of England sale. I will
have more this later, but there was a front page story in
the Guardian in London today that nows says the Bank of
England Governor, has contradicted himself about the sale.

And the Bank of England did not deny it.

Friday August 6 - London- Reuters:

"A spokesman for the Bank of England had no immediate
comment, other than to say the story CONTRADICTED PUBLIC
STATEMENTS by George in evidence to the committee on May 25."

Any of most importance to us, it can further explain the
mainipulation of the gold market and it makes a mockery
out of the British and American governments. This is
collusion and conspiracy at its finest.

It can explain why the price of gold will not rise when all
the news is bullish for gold. Today, the the stats in the U.S employment report were very inflationary as 100,000
more new jobs were created than expected and average
hourly earnings were much higher than expected as they
rose $.06.

But gold never rises on bullish news. It can't rise because
Peter Fisher of N.Y. Fed and his "Hannibal Lechter" bullion
bankers are sitting all over the gold market in "cabal"
fashion.

This is an outrage of the the highest order and is surely going to bring on one of the great financial scandals in
American history.

Why do you think Bank of England Governor is running away from the BOE sale and not denying the kind of story that came out in the Guardian this morning?

Stay tuned. Much more to come

All the best,

Bill Murphy
Le Patron
www.lemetropolecafe.com

Clint H (08/06/99; 07:49:04MDT - Msg ID:10472)
natural gas conversion
Cavan Man, Koan and all those who factor in natural gas as a competitor to OPEC. For natural gas to compete with oil above $20 per barrel is feasible. However the capital outlay
to build refineries to produce any meaningful quantity would be tremendous. Suppose OPEC raised the price of oil to $50 per barrel today. Eureka! We now start building refineries all over the world. Pilot plants first to perfect the technology, then plan for full factory construction and finally huge production into storage tanks for delivery into the market at a profit margin. Years of work, billions of dollars in capital outlay and the dream of a quick payoff. In this dream there is a $30 per barrel profit.
OPEC drops the price to $19 per barrel. Natural gas conversion plants operate at a loss, can't service their debt and go bankrupt.
IMHO natural gas conversion will not take place until the supply of oil is such that it cannot possibly drop below the conversion costs. Decades away.

Hello Clint H.,
Thank you very much for posting that. Your thoughts present the world in the viewpoint of someone "in the business". Not someone trying to project from a university desk.

A lot of people got cleaned out in the last oil runup and fall down. The average citizen only looks at the mechanics of BTU comparisons, then jumps to the conclusion that "we are saved from our sins" by this law of physics! A joke on the public, indeed.

It should be clear, by now that the supply of oil to the marketplace was never based on the amount of oil that could come from the ground. Politics and international money values have everything to do with how oil is sold. And these attributes are in a state of constant flux! They don't control the amount of oil, rather the value of oil.
After all these years and an actual hot war in the middle east, the oil price never went up and stayed up in dollars. As WWC #10461 points out , tanks are as full as ever. Now, suddenly right after the EMU, the price of oil starts rising, as it pulls up the Euro! At the same time, the gold market is sliding into a crisis that, as Mr. Turk wisely observes, has never been seen before?

While many wait for the oil price to come down from "competition" and "the Euro to sink because it could never work", the world reserve currency is being abandoned right before their eyes!

Stay right here at USAGOLD, where Mr. Michael Kosares is only a quick phone call away! The coming events are going to open some closed minds as they reverse the actions of many
investors. It will be poured out, a little at a time until the knowledge glass is full.

FOA

revaluing IMF gold closer to market prices to give the institution more assets with which to furnish debt relief."

If IMF gold is revalued..... what would this do to the POG?
Anyone?

USAGOLD (08/06/99; 09:16:08MDT - Msg ID:10480)
" I also believe that each of these currencies will be linked in some with gold. The euro serves as a prototype for the currency of the future. Stretching out the implications of such an international exchange rate system, gold owners who have assiduously exchanged dollars for hard metal over the years will be major beneficiaries of such a system. The dollar price of gold would have to be substantially higher than what it is today to make the reserve system workable, just as a much higher price than $35 was necessary to make the post-Bretton Woods floating exchange rate system work."



Michael,
Good report. I agree, In some way, gold will have to be brought back into the money system. Only, the current gold market will have to die first. That process could take London gold way up or way down. It's taking longer than I thought to play out, but it's starting to crack now. This
should get real interesting! FOA

USAGOLD (08/06/99; 09:16:08MDT - Msg ID:10480)
" I also believe that each of these currencies will be linked in some with gold. The euro serves as a prototype for the currency of the future. Stretching out the implications of such an international exchange rate system, gold owners who have assiduously exchanged dollars for hard metal over the years will be major beneficiaries of such a system. The dollar price of gold would have to be substantially higher than what it is today to make the reserve system workable, just as a much higher price than $35 was necessary to make the post-Bretton Woods floating exchange rate system work."



Michael,
Good report. I agree, In some way, gold will have to be brought back into the money system. Only, the current gold market will have to die first. That process could take London gold way up or way down. It's taking longer than I thought to play out, but it's starting to crack now. This
should get real interesting! FOA

One of your best ever, whether you realize it or not. I think you have come more nearly to providing the visitors to this Table with an understandable presentation of the pricing mechanics for Gold than I had thought possible to deliver by anyone in written form. In fact, I had given up any personal attempt at that challenge as a lost cause. I was of the opinion that even were I to hold someone's hand and lead them through a whirl-wind tour in real life visits of mines all the way to the bullion banks and the daily London price-fixing decisions, that person would still come away from the tour without an improved understanding of the pricing element of dollar-Gold market. But, by Jove, I think you've done it!

A quick additional word to The Scot:
One of the biggest up-sides to that hedging deal that we discussed is that delivery of Gold is accomplished during a the present time when it still remains a "sure thing." After the mess hits the fan, regardless of the posted price of Gold, delivery would be uncertain at best. And not because your personal bullion dealer would try to pull a fast one on you. No, a reputable bullion dealer would take your Gold order in good faith. But they pass the order on to their own suppliers, and that is where we would see FOA's example of "Sorry, Pal, but we've promised this to somebody more important. You'll just have to go back and tell The Scot and all of your other customers that the deals are off. No Gold for you!" Sure, you can order Gold in fifteen minutes if world events suddenly break, but actual delivery takes a bit more than a week. A lot can happen between the time you pick up the phone and the time that the Gold gets put into the Registered Mail. Our look into a very responsible buy-now-pay-later plan of salary hedging is a way to mitigate this type of risk. And again, never plan your deals such that you are counting on your Gold's paper profits on the backside to be used as the means to pay for your Gold purchase in the first place. That would be an exercise in gambling on timing that will leave you in servitude to the bank, working for paper 'til the end of your days. But with you, Scot, I know I am preaching to the choir. I said it for the benifit of anyone lurking that missed the point on the first go-around.

Gold. EARN you some. ---Aristotle

Aristotle,
Thank you very much sir! I am going away for a little while and will return later this weekend. FOA

http://biz.yahoo.com/rf/990806/zg.html"*U.S. Treasuries in freefall, forge fresh session lows."
News in a nutshell.

Thank you for your wise council. I read all of your posts for I feel a great education is before me.

For the subject of acquiring gold now, I feel that soon we will be faced with the decision to sell our gold at a very attractive "price" or hold it for unsure times which may require much financial depth. However, I believe the "sreet price" will be two or three times higher that the world "spot price". We will find ourselves tempted by an attractive black market for the real thing. The Scot

John Gault: Cute. Stranger, could you elaborate on that last post about the feds and LTCM and gold. Thanks

FOA's post #10480 - " In some way, gold will have to be brought back into the money system. Only, the current gold market
will have to die first. That process could take London gold way up or way down."

Aristotle lauding FOA - "I think you have come more nearly to providing the visitors to this Table
with an understandable presentation of the pricing mechanics for Gold than I had thought possible to deliver by anyone in
written form. In fact, I had given up any personal attempt at that challenge as a lost cause. I was of the opinion that even were I
to hold someone's hand and lead them through a whirl-wind tour in real life visits of mines all the way to the bullion banks and
the daily London price-fixing decisions, that person would still come away from the tour without an improved understanding of
the pricing element of dollar-Gold market. But, by Jove, I think you've done it!"

Sorry about the u in your last name. I knew it was wrong just as I hit the post button. My mind had to go through many years of files, back to when I was a kid, to get to that name and information, and my hand was faster than my search engine. A case of matter over mind.

FYI, from the TB2000 forum:

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001CMp

Where the Gold is Going

"Bankers Caught in London Gold Heist!"

"Financial System is so Close to Death that the Oligarchs are
Stealing Blatantly"

"The latest evidence that the world financial system is doomed and
near its end is the Eddie George, chief of the Bank of England, has
been caught stealing billions from that Bank -- selling off the
national assets of gold at a loss to put them in private oligarchical
hands. Acting on behalf of the British monarchy, George was acting to
lower the gold price, which will shut down production, and permit
these same oligarchical insiders to steal the gold mines and control
their physical output in the post-crash world. This is indicative of
a worldwide pattern of massive looting by bankers and others of
their own institutions."

(snip)

"On May 7, Her Majesty's Trasury announced that the Bank of England
would sell 415 tons of the United Kingdom's 715 tons of gold reserves
over the next several years, beginning with five bi-monthly auctions
of 25 tons each, starting on July 6."

(snip)

"The effect of the announcement, as Her Majesty's Treasury and the
Bank of England well knew, was to trigger a sharp drop in the price
of gold."

(snip)

"That the intent of the gold sale was to depress prices is clear from
the nature of the auctions."

(snip)

"But the idea was never to make money [to restructure ... invest the
proceeds in other interest-bearing assets]; the idea was to cheaply
transfer gold to the hands of the oligarchs while driving down the
price for subsequent auctions. This is a process known as "skim and
park," where assets are siphoned off and parked in private accounts,
in preparation for the bankruptcy of the institution which
[previously] owned them."

(snip)

"The auction was structured to allow only a handful of insider
institutions to buy the gold, in this case the members of the London
Bullion Market Associatin (LBMA), and central banks and monetary
institutions with accounts at the Bank of England."

"The LBMA ("formed in 1987 in close consultation with the Bank of
England," according to the Bank itself) consists of 12 "market
makers" and "50" ordinary members. The market makers include N.M.
Rotschild (where the price of gold has been "fixed" twice a day since
1919), Barclays, and HSBC's Midland Bank, J.P. Morgan, Chase, AIG,
Goldman Sach's J. Aron, and Republic New York from the U.S.;
Switzerland's UBS and Credit Suisse; Canada's Bank of Nova Scotia;
and Germany's Deutsche Bank."

"The details of who bought what have not been made public, but in a
sense it doesn't matter, since they are essentially buying for the
oligarchs behind the curtain."

(snip)

This is typed from a longer article in "The New Federalist," July 26,
1999, newspaper. Unfortunately, not on a web page.

FYI, the newspaper is a Lyndon LaRouche publication, one of many
sources I peruse. If you get your information only from your
establishment daily newspaper, Time/Newsweek, and Dan Blather, you
are seriously out of the loop re what is going on in the world.

Frequently the LaRouche people have good analyses of problems. I
don't think their proposed solutions are much (if any) better than
what we got now. Some things might be better, some worse, so it would
be a draw, in my opinion.

With these disclaimers, the point is obvious: Buy metals (not just
gold). Bury it or hide it well until well into the other side, when
and however that turns out.

-- A (A@AisA.com), August 06, 1999

I excerpt this from the Credit Markets column in today's WSJ:


"Today's massive spread widening is likely to have inflicted significant pain
and pushed investors into the front end of the Treasury market," said
William Lloyd, the head of market strategy at Barclays Capital in New
York.

The market's unrest suggests to some that the Fed could hold off on raising
interest rates this month.

"If a large U.S. financial institution has indeed lost hundreds of millions of
dollars, this is likely to elicit a response from the Fed just as the
[Long-Term Capital Management] debacle did last year," said Mr. Butler.
"All things being equal, a Fed concerned about the solvency of the U.S.
financial system is less likely to raise interest rates."

Stranger's Note: koan, If you can get your hands on a Wall Street Journal, you might want to read the whole column. It is a little long to post here (not to mention copyright considerations), and one must be a subscriber to get it from the web site.

You've got to realize, however, that the importance here is to be found not so much knowing what the price is or will be; but rather, knowing what the mechanics are behind the scene that have given cause to whatever price direction is revealed to occur. Knowing that is winning the war.

The Gold is ALWAYS Gold, and ALWAYS money. Can you tell me what a Dollar is? (This question is fundamentally different than last night's posted dialog.) ---Aristotle

Thanks. Yes, I have access to the Journal.

By E-mail:

Dear Another: To keep this brief please let me join many others in thanking you for all of your time taken to share your vast knowledge and understanding of these interesting times and their relationship to Gold. My education grows daily thanks to you and many others. As a Yukon Gold Miner (YGM) who became pro-active in an attempt to fight gold price manipulation thru GATA, I now find myself trying to relax and go with the flow and flux of world events
and rest assured, safe in the knowledge that I own many miles of Gold bearing river beds. (Placer Gold Claims) Also I have the equipment needed to mine at any time.

** So now my question to you is-- Does Government view this Gold on my claims as a future asset??** I must also state that Gov't meddling and a never-ending continuous flow of new and cost restrictive not to mention ridiculous laws and regulations come out of Ottawa (fed gov't) with a net result of hampering the operations of all placer mining here in Canada. The favourite avenue to restrict is thru environmental laws. It almost seems as tho our Federal Goverment wants all placer operations to fail thru regulation.

Do you, from where you sit think the days of freely being able to mine Gold (primarily small scale) by individuals is at risk??

Thanks for taking the time to read this:

Sincerely: YGM (worried)!!

A while back I half-jokingly suggested that tennis shoes might
do better than gold.

While shopping for shoes recently I noticed, after pulling a couple dozen
pairs off the shelf, that ALL of them (EVERY ONE) was "Made in China".
(Indeed, in strolling thru many stores, I noticed that 90% of *all*
sundry items are now marked "Made in China". But that is another story.)

Then, I noticed this thread on the TB2000 forum (below): "Is it true that
no shoes are made in the USA anymore?" It seems that the answer is: very
few are made in the USA anymore... certainly far fewer than would be
needed to meet demand, should trade with China slow down, or should
China have difficulties with their manufacturing, or if US/China
relations should chill, or etc.

Right now, you can get great quality boots for around $30-40/pair. I think
that there is better than a 50% chance that they will be $130/pair in late
2000, if they are available at all.

Got shoes?

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

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001CSV

Is it true that no shoes are made in the USA anymore? (nt)

It would be truer to say that no large manufacturing company makes shoes in
the USA anymore, only small specialty companies or craftsmen. The number of
shoes they make could not begin to cover the demand for shoes in the USA.
-- Brian McLaughlin (brianm@ims.com), August 06, 1999.

If I remeber correctly, China supplies 85% of the world's shoes. This came
up when the container ship crashed off Canadian waters earlier this year.
-- Rob Somerville (merville@globalnet.co.uk), August 06, 1999.

There is one company, New Balance. Forty Percent of the total production of
New Balance shoes are made in the USA. About 30% more are designated "Made
in USA of foreign and domestic components." -- ExCop (yinadral@juno.com),
August 06, 1999.

Still at least half a dozen shoe factories operating up in Maine, including
Dexter and LL Bean. We'll be cold but well shod. -- Cash
(cash@andcarry.com), August 06, 1999.

New Balance and Saucony were the last 2 running/tennis shoes made here at
last check. Dress shoes and work boots (Carolina, Red Wing, Wolverine) are
still made here but the lower priced versions have Made In China tags all
over them. Got shoes? -- barefoot (das@boot.foot), August 06, 1999.

Hi Michael- Thanks for posting my question to Another.
If YOU or OTHERS have any feelings or comments re- my
question to Another I would be indebted for your thoughts.
I am truly beginning to question whether or not the future for Gold (known by but a few) has serious ramifications for
us individual gold miners!! Nice to be back to my computer
so as to try and catch up with the thoughts and views
at the forum!!! Regards to all - YGM
GO GATA!!

AMERICANS DISCARD OLD RULES, INVEST AND SPEND WITH ABANDON

In his Associated Press story , published in the Denver Post, Mr Cunniff said:

"it's not one of those things you can measure precisely, but it's there - a sense of relief and freedom from all those old rules and admonitions that governed economic society".

Is he correct? Who made the old rules anyway? Were they valid? Why can't it be measured precisely?

Let's try and answer some of these questions and see if we can help ourselves and explain it better to our friends who may agree with Mr. Cunniff.

First; the old rules were made by 6000 years of economic history. They have not changed. As John Exeter said: "The market is the master of us all" . Hundreds of times over the centuries they have been brushed aside temporarily but they always return to show us who is the master. Governments, bankers, wild eyed speculators and the like have stomped on the rules only to have them return to take their vengeance at the most unexpected times; usually exactly at the time men in power thought they had conquered the markets. Ask the Romans, ask the Dutch, ask the Russians who is the master. This time will be no exception...if only we could measure precisely.

Why do we have 10,000 television economists equipped with an equal number of supercomputers and still think we can't measure precisely? Why do we pay those guys if we can't measure anything? What is going on here? I can tell you what is going on...it's called inflation and it began in 1933 when the dollar was cut loose from gold.

A dollar then is not a dollar now as anyone over 16 years of age can tell you. Sure, companies and governments love to measure in dollars. In their annual reports they say: "Look at the progress we've made!" "Everyone is richer because we work so hard and are so smart. Aren't you lucky to have us in charge". Inflation has given them the numbers to "prove" their cases, and to "justify" their multi-billion dollar salaries.

Let's use one example to show the truth and to show how we can measure precisely and know exactly where we are at any time. The Dow Jones industrial Averages provide a 103 year price record of the 30 bluest of the blue chip stocks. It is comprised of companies that account for about 80% of all stock market value. Its adjustments over time have been modest and as honest as is possible. The flaw in the index is that it is priced in dollars and as we agreed, a dollar then is not a dollar now. With a relatively simple calculation we are going to convert dollars to ounces of gold.

Now that we see a Dow priced in ounces things become much clearer. From May, 1896, when Dow records begin, we have a Dow average of about 4 ounces through July, 1924, when speculation fired the market to a peak of 18.43 ounces on September 3, 1929. By July, 1932, with the "Old Rules" well remembered, the Dow reached a low below 2 ounces. During the 20 year period from 1934 to 1954 the average Dow price was about 5 ounces but in late 1954, with inflation from the aftermath of the Korean War starting to be recognized, the ounce price started rising reaching a top of 28.03 on February 9, 1966, then under pressure of the Viet Nam war. Priced in ounces there was a nearly invisible crash, in dollar terms, as stocks dropped down to a price of just over a single ounce in January, 1980. Politicians and CEO's love those invisible crashes. From 1982 to 1994 the Dow rose steadily reaching a price of 9.5 ounces in January 1994. By July, 1994, the stock rocket had ignited and liftoff was well under way reaching an astounding peak of 44.24 ounces on July 19, 1999.

If we use the experience of 1929 and 1966 we can expect a 90% drop in "Dow by the ounce" terms when the old rules are enforced by the master. That is a price of 4.5 ounces again, back to below the price in much of 1987. Allowing for the normal progress of mankind perhaps an honest price for the Dow now is about 6 ounces. We will get there eventually.

The Dow is just one example. You can just as easily pick a commodity with a long price history such as oil or wheat to make your analysis using prices in ounces. Perhaps the market is doing just that in our subconscious minds. How else can we explain the often used example of the Roman toga and the man's suit being priced at one ounce of gold over 1500 years; or the cost of a dressed chicken being a half ounce of silver over the same period. Talk about old rules! Just think of gold as nature's pricing yardstick.

Dear AEL: Thanks to your message back in June about stocking up on things like shoes, our closet shelves look like shoe stores! I have purchased (on sale) every size of every type of shoe the kids (8 and 2) will need for several years. Boxes of winter clothes and summer clothes in bigger sizes lay under the beds. Snowsuits, jackets, and hats in bigger sizes are stuffed into the closet. Penneys is having a great (30%) sale now, and I've been in several times this week stocking up for myself.

I am certain prices will NEVER be this low again, and quality is very high. I don't want to be scrambling around next year or the year after trying to piece together necessities for my family. Better to convert cash in the bank into physical items we're going to need.

Something I've given a lot of thought to is FOOD for next year. It is so easy and cheap to go into the local Whole Foods Market and order up hundreds of pounds of grain and store them in buckets. I've stuffed the freezer with butter, meat, and orange juice, and I've got LOTS of cans of tuna and ham, as well as containers of peanut butter and jelly. We have containers of powdered eggs, and I just placed a large order for soy-based storage food and powdered soy milk. My reasoning is that AT ANY TIME the banks could fail or begin to ration money, prices could go through the roof (hyperinflation), or food could be rationed. I don't want to look back and say, "Boy, if only I'd stocked up on such-and-such!" I don't want to be standing in a long line at the grocery store amid terrified shoppers. We've been warned for a long time now and we have a fantastic opportunity to prepare at very low prices--it amazes me that everyone else isn't doing the same thing.

http://www.the-moneychanger.com/html/mmm/exter.htmlDonald: In your essay you mentioned Mr. John Exter. The above link provides an interview with this wonderful man. He has fought the good fight for gold for many years. I believe he's in his nineties now, and I believe he is going to see his vision for gold realized very soon.

December gold settled up 60c at $258.60 per ounce, finishing at the high end of the day's trading range of $258.7-257.00. Traders suggested that gold was pulled higher by the slump in both U.S. bonds and stocks which fell sharply following the release of the July employment report. The Labor Department data showed that the U.S. economy added jobs by an unexpectedly strong 310,000 in July, 50% more than analysts expected. That's missing the mark by a huge amount, folks! This cemented many analysts' worries that the Federal Reserve may raise interest rates following the August 24 FOMC meeting in order to nip additional inflation in the bud.

The 30-Yr Bond lost 1 17/32 in price, driving the yield up to 6.147%, with much of the loss occuring early, followed by slow and steady erosion for the remainder of the day. After breifly seeing positve territory after an initial selloff, the DOW and Nasdaq worked their way lower throughout the day, to each finish down about .7% (-79.8 DOW, -17.6 Nasdaq). The U.S. dollar spiked down after the July nonfarm payrolls came in unexpectedly strong, but rebounded in the face of the declining U.S. asset markets to close with marginal gains against the Japanese yen and only a fractional decline against the euro.

Bridge News reports:
Market rumors abounded that a leading hedge fund switched its portfolio
from the potential profitability of the equity markets to the relative safety of
the fixed income.
"People are selling equities and trying to get into Treasuries," said Alex
Ignirra, senior trader at Generale Bank.
While the Treasuries got clobbered today, many analysts feel that the
decline could have been sharper if wasn't for the demand from investors looking
to hedge the distress in other fixed income instruments.

Yikes! Here in the Tower we fear the very thought that these same Treasury losses could have been sharper. We thought the mountain they are falling down had a steady slope, but apparently there could be some dropoffs, too, along the way.

In Comex vault action, 755 kilos of Registered gold arrived for safekeeping under the watchful eyes of Scotia Mocatta. The stock of Eligible gold was unchanged throughout the day.

Keeping our eye on the Fifth Horseman, it seems that rising oil is getting a bit of a domestic boost here in the States. From Bridge News we learn more about the dumping suit brought against foreign producers by a group of small, independant oil men as they push for duties of $6.18 per barrel. Sounds like a variation of the good ol' days (TRC) that we've all learned about here at the Round Table. News was slow today, so here's most of that report:

US to decide Monday on initiating oil "dumping" trade case
By Robert L. Schroeder Jr., Bridge News

Washington--Aug 6--The US Commerce Department will decide Monday
whether or not to proceed with an oil "dumping" case against 4 crude
oil-producing nations, a spokeswoman said today. If initiated, the
investigation that follows could eventually lead to duties on crude oil
from Saudi Arabia, Venezuela, Mexico and Iraq.

The decision is expected "late in the afternoon" on Monday, the
spokeswoman said.
Duties on oil from the named countries would not automatically go into
effect if Commerce decides to open a case. They would come only if
"preliminary" and "final" decisions by the Commerce Department and US
International Trade Commission found dumping and subsidization of oil
exports in fact occurred.

Commerce must make its preliminary determination on whether
dumping occurred within 190 days of initiating the case, and another
preliminary determination within 130 days on whether unfair
subsidization occurred.

If Commerce's preliminary decisions are affirmative, interim duties
may be imposed.

Save Domestic Oil, the group of independent US oil producers charging
the 4 countries, is seeking duties on crude from the 4 countries, plus a
countervailing duty of $6.18 per barrel to counteract alleged unfair
subsidization of exports.

SDO alleges the US oil industry was injured as a result of dumping
--selling at below fair price--by the named countries during 1998
and early 1999.

In order for the government to take up SDO's case, the group must
prove it represents 25% of the US oil industry and that it has the support
of 50% of the industry who comment on the matter.
Major oil companies and some independents have said they do not
support the petition, but SDO argues that big oil companies cannot be
counted against the case because they are related to foreign producers and
they import crude from the countries involved in the case.
SDO founder Harold Hamm today said the group had "obtained more than
the required amount of support by individual support statements from
producers to meet the 25% requirement."***
(c) Copyright 1999 FWN Reprinted at USAGOLD with permission. For details please go to:
http://www.futuresource.com/internet.shtml
No further reproduction without written permission from FWN

And that's the view from here...after the close.

"Leigh (08/06/99; 14:58:12MDT - Msg ID:10515)--Shoes and Much More"

From your post I can point to you as a fine example of someone who grasps the true essence of wealth. Wealth is having the means to keep yourself alive and well.
Well ---> health ----> Wealth!
(don't give me credit for that one--I picked it up from A-III)
So, always try to think of Wealth in that regard. Clearly you already do. Shoes and food and shelter are more important than money. The reason you have money in the first place is to facilitate the efficiencies of specialization and division of labor. Coupled with money, this is mankind's greatest accomplishment!

Having money also provides you with the flexibility to easily obtain things you might need on a moment's notice without the burden of the classic barter system to stand as an obstacle. Also, as you find that a very productive life may quickly fill your house to overflowing with shoes and grain, you can choose to store a more convenient proxy for this wealth in the form of money. But why settle for paper? It is a creation of the banks and the governments, and its fate is a certain one. All paper money burns eventually. Gold is the money of a mankind that is capable of selecting his own destiny and living to tell about it.

Thanks for the inspiration for this post, Leigh. Its always nice to meet someone who sees things in that light.

Wealth takes up lots of space. When you can't have REAL wealth, or can't store any more, or need flexibility, Gold is the nearest equivalent. (And this is not just a Y2K issue. Go ask the huddled masses in areas of the former Soviet Union that have unreliable paper and no shoes!) ---Aristotle

Oops. Now that I see it in print I notice that I spelled his name wrong. Glad to hear he is still alive. He was always one of my favorites; I learned a lot from him and you are right, everything he said 25 years ago is happening now. Thanks for the link.

I thoroughly appreciate the input of all posters to the (mutual) benefit of all.
As some of you might have stumbled on and over a few of my infrequent posts in the last couple of month. Whilst (love the word too) lurking and learning for over a year from the wealth of wisdom and as Ari would say academe of most providers of the same at this forum, I feel more humble than ever in my not too short career in the investment business, which has brought me to early appreciation of gold and gold investments.
Right after the demise of Bretton Woods and the simultaneous
overnight depreciation of the US$ - starting its infamous battle to conquer the globe via fiat reserve hegemony -, while at the same time "betraying" its own citizens and the rest of the world by "chameleonic" abprupt change from the world's largest creditor nation to the opposite.
Now as A/FoA and Ari are postulating the time for reckoning is close. The main and probably final battle for US$/IMF faction supremacy is underway. The formidable opponents constitute the Euro/Bis faction, with the SE Asian outcome in limbo. The US, while winning all battles up to now - to the detriment of a majority of the global population, including the capacity to produce and/or allow a large part of their basic industries to survive - in a virtual sense, and losing ever more control by allowing hot, virtual uncontrolled money (no, currency)for the benefit of of few "oligarchist" bankers debase their own autonomous survival. All of this under the pretext of limitless global trade, while repercussions in tarifs ( beef , steel.. etc.) go bananas. So does Orange County, LTCM, Barings and rumored Tiger hedge funds collapses- abusing the system in Yen-, SFR-, or Gold carry trades -not only undermine the system,but bear whitness that it is predominantly founded on "paperization" fraud.
Admittedly, I do have a problem in correctly understanding FOA's Msg. 10486, whilst I concur with the parallel universe of paper gold to physical - it has been discussed here ad libidum - I would not totally agree with the outcome as FOA postulates and I'm absolutely sure that mines of the calibre of Ron Cambre's of NEM, Bobby Godsell's of Anglo or John Willson' PDG (new Chairman of WGC), for that matter, wouldn't either subscribe to be forced to hedge or even belong to the oligarchs.

Esteeemed Knights, pls forgive my sometimes faulty lingo, as I come from an old country, were gold was mined by the Celts (Kelten), long before the Romans.
Will try to catch up again late sunday or monday - have a great weekend all and regards - we certainly live in interesting times - CB2

@John Galt - I think I almost understand the contents of the letter. (ie: Gravity Induced?) However, are you using Kitco as an reference of POG's downward pressure or do you have something in mind more specifically related to Kitco? Please elaborate. Thank you.
@ All minds, dull & sharp - RE: Bill's question below:
Bill (08/06/99; 11:57:16MDT - Msg ID:10497)QUESTION ??
revaluing IMF gold closer to market prices to give the institution more assets with which to furnish debt relief."

If IMF gold is revalued..... what would this do to the POG?
Anyone?

I have been amazed that no one is discussing this more in neither this forum nor at G-E. I, for one, am totally dumbfounded at the implications of this but surely someone must have some valuable perspective to share with us(?) No?
Thanks to all,
it feels like we're somewhere in the 9th inning now,
hold on tight.

Get some! and how?
Q.

Your comparison of the Dow to gold should be printed on each stock certificate, like the warning on a cigarette package.
I have an old chart listing Dow components from 1916. What makes your post even more true, is that low performers on the dow are routinely replaced by a company that better represents the average. Say, what is Studebaker trading at these days?

I just got back from the beach and read the kind messages from Donald and Aristotle. Thanks! While I was at the beach, I was thinking about Guam. Not Guam beaches, but the stores there. There are very few clothing stores, and the selection is pathetic. Prices are outrageous. When we lived there, every military wife had a Penneys catalog (delivery took three days) and a hotline to someone back in the States who could send them necessities you just couldn't find in Guam. One day I needed to find a brown leather belt for my little boy. I went to every clothing store on the island - including the Exchange - and couldn't find one. Ditto a rain poncho. Ditto pretty maternity clothes.

I bring this up because I am afraid that we'll be seeing this situation here in the future. Once supplies of cheap foreign-made goods dry up (especially if there's a major financial slowdown here), we'll be hard-pressed to find nice things. AND THERE WON'T BE A HOTLINE OR TOLL-FREE NUMBER TO ANYWHERE WHERE WE CAN ORDER THEM!!

Koan, there was a discussion between AEL and Julia a while back where Julia asked - "If you're prepared for Y2K, does that make you prepared for the mother of all currency devaluations?" (AEL said yes.) Even if you're not convinced about the seriousness of Y2K, it would be smart for you to do everything you can imagine to prepare for economic hard times. Then you could face Y2K without fear. Sorry to be on a soapbox.

P.S. I think John Galt meant that Kitco was down for a long time today.

So what's next for gold and XAU...
do we have to wait for the refunding to be complete...
do we have to wait for expiration to expire...
probably...IMHO...

Thought someone here at the forum asked about buying euros some time ago here in the states. The best chance at this might be the Mark Twain Int. Markets Bank in St. Louis
1-800-926-4922 http://www.marktwain.com

Personal contact was pleasant and helpful.

I wonder...Would'nt it be a gas if pog and xau decided to rally the week of expiration...that would be different...

@watcher - Thanks for currency info. It may have been someone else but I had made such an inquiry. Much appreciated.

@ Leigh - Thanks for the thought regarding Kitco. That makes sense, of course. Man, I'm getting jumpy.

To all who recommended taking a look at Goldfields, thanks. I was skeptical, but IMHO I now feel like that is one you can hold while sleeping soundly.

To any who have access to "level II" time & sales data - technically, I can not share any specific info, so I will just say I saw something very interesting at end of day with BMG. May be worth checking out, if you can.

Good luck all,

Get some! and how?
Q.

Tsk, Tsk, Tsk. Hubris, the original sin.....
And the serpent said to the woman, " you shall not surely die!" "For God knows that in the day you eat from it your eyes will be opened and you will be like God knowing good from evil." Modern paraphrase, " discard the old rules, use your wits, you can be a god unto yourself."
Short of going out and digging it up, which constitutes WORK, gold does not allow you to "create your own wealth". It is a standard, and in being so, is very much like a rule. (the temptation here is the easy pun.) THE INVERSTOR IN GOLD SUBMITS to the rules of hard work and just compensation. In essence it would take me at least $400 of effort and expense to go dredge or mine my ounce of gold. Either I mine it or I pay the man that did. Gold = Work. Work is honest money. Conversly, to sit down and "day trade" your way to wealth is to assume that you're smarter and more savvy than the next "investor". Let me tell you kids something, there's always a faster gun. The sad case of Mark Benton was predictable. He was IN HIS OWN MIND, a master of markets, a God among mortals. As a final sick tribute to his own diety, he excerised the power of life and death over those that had wronged him.
And just one work of caution to all who post and lurk here:
The day will come when we will be right about the value of gold, possibly to the point of riches. Remember that we have waited patiently and sacrificed some things, many of us for years, to be correct about the failure of other forms of wealth. It would not be honorable for us to smirk or gloat, at the misfortunes of the many. And Honor, my good friends, is another rule that had better remain unbroken. There is going to be pain for people, real pain, when the current system of "false money" collapses. Let us be wise, and thank Him who has led us here, prepared us, and given us wisdom.

Leigh, Thanks for this link to this 1991 interview of Mr.Exter. I just finished reading this and can only hope that all that post here take the time to read it in it's entirety. Thanks again, The Scot

I have not done business with Mark Twain, but I have talked with their people and read their "fine print". If you purchase FX with them, it is not a fx account. The bank owns the trade and gives you credit for it stateside. They do this through an offshore subsidiary. It is still ILLEGAL for you to buy or trade fx in the US. I don't believe that this vehicle for euros is a good way to go if you have ANY DOUBTS about the USGovt confiscating/freezing fx accounts. It is a subterfuge IMO. Write to a foreign bank that has NO US BRANCHES and open an account. Buy euros from them and keep them offshore. If you report the transaction, you will be at the mercy of the USG. But, I would never never council that kind of thing on a public forum. So forget everything I said.

Brilliant piece! You're exactly right!

AMERICANS DISCARD OLD RULES, INVEST, SPEND WITH ABANDON

Get outta my way you bunch of old fogy cowards.
Can't you see this is a new age? We have tamed the world and the fruits are ours!
We, not you, We, are in charge now because we get it and you don't. Don't be so afraid of stepping off that ledge and flying. Quit being so scared you are gonna fall because you don't understand.
Why get locked in on such limited thinking that you can't let the human species realize his full potential!
Don't you get it yet? We create our own reality! We don't need gold as a little security blanket! We are riding the cutting edge. We are blazing new trails into entirely new territory. Would you rather put your faith in the unlimited resources of your fellow humans, the shining genius that is man, or would your put your faith in that sad story that ends with disaster and collapse.
It's what we make it.


I want you to know that I am playing devil's advocate here. I think the guy who believes this is in for a fall, but I believe it captures the prevailing attitude
Michael

Hey FOA - thanks for the response. I'm afraid my attempt at responding to AEL's request for debate has gotten me in hot water.

I played some golf today and shot my best score of the season. Fortunately the lightning missed me again so I live to play another day. I'm hoping MK is thinking of organizing the 'US Dollar Memorial' sometime soon in Denver before the snow arrives. Maybe we could get an invite!

As to 'anonymous' information, you are indeed correct. I remember when Another was first posting; at some point you started posting under the same moniker and several people questioned why the posts had such different style. People were questioning the argument based upon the perceived credibility of the author. This matter was settled after you made your identity known. However, the only reason it was settled was your willingness to continue to participate in the ongoing discussion. I'm glad you did.

The article in question was submitted to gold-eagle and I'm not aware of any further responses by the author. Unfortunately, the author initially claimed to be a reporter thus implying that what followed was investigated using standard journalistic methods. He didn't byline the article or reference his sources so I consider this type of journalism suspect. My choice of words in describing this was also suspect. Apologies to you or anyone else that might have been offended.

We are all anonymous to some extent and the words we write we submit voluntarily for all to consider. In that respect, they are opinion. What might give these opinions some level of credence is the willingness of the authors to debate their ideas in an open forum. Your and Another's presentations have always included this key element. Your anonymity is not an issue nor is anyone else's within this context.

Sorry for the misunderstanding.

ET

Sometimes it's good to let them get the quarterly refunding out of the way...

If I were you, I would hold off on buying those euros. They won't be in circulation for a couple of years. As far as I know, they don't even exist yet.

Sorry, Ari. It was so delicious, I just couldn't resist.

The Stranger called the spread problem...so now let's wait and see how the refunding goes...then fill in the blanks...things are a changin...amen...

koan (08/06/99; 09:50:13MDT - Msg ID:10483)
Clint H - natural gas:
Good point. Can the oil industry expect to be able to convert natural gas for say $10 at some point in the future? Say the North Slope AK, where there oil production is half of what it was, 1 mil instead of 2 mil, and could run another million barrels of oil a day through the pipeline if they had it.

Koan
The Alaskan pipe line was a 20 year project to begin with. It has done what it was built to do, move North Slope oil. I believe they do move some natural gas thru the line now and there is a demand for the ng in the northern cities. No need to reduce this gas to a liquid.
Even if the cost of converting ng to a gasoline type fuel was $10 per barrel now it would still not make sense. Think of the hundreds of burning oil wells after the gulf war. They were burning because the oil flowed out of the ground after the tops were blown off the wells. Gushers on fire. It is cheap production because it takes no energy to force the oil out of the ground. It flows under pressure.
In Texas it is rare to get a flowing well anymore. It takes a pump jack and lots of tubing to force oil to the surface.
Consider again the middle east. Some of the original wells drilled in the 30s are still flowing. Run a pipe to the ship loading dock and turn it on and off. When the wells stop flowing with natural gas pressure these wells can still be pumped for decades.
Consider also that the middle east has more natural gas than anyone else. Some of it is being flared off as a waste product today. If there were money in conversion they would be the first to take advantage of it.
The bottom line is that the COST of production in some mid east oil is less than one EURO per barrel. (notice how easy one can replace the US$) No plants will be built until the COST of the production of oil exceeds the cost of conversion. Decades in the future. Remember oil from coal?