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ARCHIVED DISCUSSION FROM 3/5/2001 All times are U.S. Mountain Time (Yesterday's Discussion.) R Powell (3/5/2001; 21:41:07MT - usagold.com msg#: 49449) WA and BIS's rumored gold imput From ORO (49417) and mentioned again by Old Yeller, "Only when gold liquidity is lacking at the lease rate dictated by the central banks, are they tapped to lend out bullion." Speculation has mentioned the BIS as the sourse of this just in time sourse of liquidity. Whether by sales or by leasing, is this increase enough to break the limits set by the Washington Agreement? Was the BIS one of the fifteen signature members of the agreement? If so, should we now assume the agreement has been broken or are we going to hear of revised figures or changed timetables such that the BIS's gold imput is somehow not a violation of the Sept. 1999 accord?? TIA for any thoughts. It's nice to be able to ask questions. Good way to learn! Rich 714 (3/5/2001; 21:32:03MT - usagold.com msg#: 49448) Oro...some questions...some answers... First the questions, which follow some of your statements:"The particular arrangements for payments of royalty should be seen as part of a whole picture, one in which dollars flow in and out of Arabia and its Gulf neighbors, and gold accumulates both at home and in vaults abroad."What money was flowing into Saudi Arabia besides royalties? Yes, we have local payrolls (at third-world pay rates, no doubt), and some Saudi suppliers, but what else? I thought I painted the broader picture in my #49422. -----------------------------------------------------------"A 100% pricing discrepancy is alot of room for arbitrage on something as dense in value as gold, even in war times."Where would King Saud, head of a remote and primitive desert kingdom, or his court/government conduct such an arbitrage? Or for that matter, the hangers-on or whoever else you imagine would conduct this arbitrage? You seem to be assuming modern market mechanisms were in place at that time in Saudi Arabia. They weren't! Not only that, there was no gold trading in NY or London during this period. Remember LBMA was closed during the war and there was no gold trade at that time under US law. For instance, we know Aramco went to the LBMA went to LBMA to buy gold, under special dispensation from the US government, to buy sovereigns for these payments before the war. -----------------------------------------------------------Who were these hangers-on? I've never seen Brown refer to "hangers-on", or any other such references that use such a term. Could you be more precise?-----------------------------------------------------------"The thinness of the Jiddah market, even by the standards of that day, is not an indication of the conversion volumes, because those would have been outside that market precisely because it was thin. The point is the price."Really? A thin market is not indicative of conversion volumes? Since when? I think it's safe to say that the dollar price of gold reflected the expectation of inflation (typical during wars) and that country's increased supply of US$ (tiny by today's standards) relative to gold. What Saudi moneychanger would particularly want this strange new currency, from a country that for all they knew, would lose the war? A thin market indeed, very thin. In every way.-----------------------------------------------------------"The US government's idea of the business was (and remains) the continued flow of oil, and that of the oil companies was the continued control of supplies to sell."Well, if you read a bit more closely, you might realize the US government was very much at odds with Aramco on a number of issues. In fact, it was the US Navy which desired this oil more than any other government entity, for obvious reasons. In contrast, the State Department let Aramco know in no uncertain terms they were opposed to the building of the Dhahran-Riyadh railroad.-----------------------------------------------------------"The state is most nakedly the private domain of the elite in Arabia."Has anything changed? Fwiw, you never did address the debt problems King Saud himself faced. They should be obvious in any read of Brown's book, where he commented on them extensively. -----------------------------------------------------------"I ran searches on authors of some of his reference to find info, and had enough to use."That is too bad. I NEVER feel I have enough to use.-----------------------------------------------------------I fear I've burnt up too much of Mr. Kosares' bandwidth on this issue over the last few days. I'll leave you with the last word for now. I'll be back in a few days or weeks, maybe months.Salaam (peace). R Powell (3/5/2001; 21:14:50MT - usagold.com msg#: 49447) Second link try http://www.lemetropolecafe.com/guests.cfm Maybe this is it? R Powell (3/5/2001; 21:12:13MT - usagold.com msg#: 49446) LeMetropoleCafe http://www.lemetropolecafe.com/guest.cfm A good fellow who calls himself uponroof at the other castle (G-E) alerted those listening of a free two week guest membership at the Metropole Cafe. I followed the link and got in after filling out a few forms and recieving an access number from the Cafe by e-mail. I'm now allowed in and can wonder about without an escort to listen but not speak. Speaking is still a privilege reserved for members only. I believe it may have been Twain who said, "Never give advice, a wise man doesn't need it and a fool won't heed it". I'm always interested in the thoughts of the man who listens but rarely speaks. I have never presented myself in the presence of others where expressing one's thoughts were forbidden or, to be precise, one has to pay to have the right to speak. It's a little strange. The guest pass is free and there are indeed many hours worth of interesting reading there so I've inclosed the link. Just remember, it's like being in church during the sermon- NO TALKING ALLOWED! Rich AEL (3/5/2001; 20:57:01MT - usagold.com msg#: 49445) from the far side http://groups.yahoo.com/group/gang8/message/3291 From: "Henry C.K. Liu" <hliu@m...>Date: Mon Mar 5, 2001 11:20pmSubject: Value of US$US Government debt: $5,726,774,439,028.95US Gov. gold holdings: 261,000,000 ouncesPOG required to pay back gov't deb in gold = $21,941Market Price Friday March 2 2001: $262.70Interesting........Henry C.K. Liu Chris Powell (3/5/2001; 20:39:33MT - usagold.com msg#: 49444) Toronto mining conference to hear from GATA http://groups.yahoo.com/group/gata/message/695 To subscribe to GATA's dispatches by email and get them immediately so you don't have to go look for them, send an email to:gata-subscribe@yahoogroups.com Chris Powell (3/5/2001; 20:38:50MT - usagold.com msg#: 49443) White House aide replies to GATA http://groups.yahoo.com/group/gata/message/694 ... and a big gun in South Africa enlistsin the GATA cause there.To subscribe to GATA's dispatches by email and get them immediately so you don't have to go look for them, send an email to:gata-subscribe@yahoogroups.com Old Yeller (3/5/2001; 20:24:52MT - usagold.com msg#: 49442) Who owns the title? I'm sure this question is redundant,but I'm in need of a refresher.In the event of a hedged mining company's bankruptcy,does the property title revert to the bullion bank?Is this clear-cut,especially in a country like Australia,which appears to be so massively over exposed?Or is it a legal black hole that would force central bank physical gold liquidation in order to stave off a total gold derivative meltdown? ORO (3/5/2001; 20:03:43MT - usagold.com msg#: 49441) Belgian - questions I noticed your post, and I am sure you are not alone in finding my writing rather more opaque than enlightening. If you don't mind, I suggest you write up a few questions of principle on the issues I write about and I will try to answer them as clearly as I can. This should serve both of us well. Randy (@ The Tower) (3/5/2001; 19:39:57MT - usagold.com msg#: 49440) Nickel62, as stated in the right-hand column of the home page, "Precious Metals IRAs Available" And at the lower portion of the right-hand column of MK's Commentary & Review page, he has this to say..."Please call Centennial and ask for George Cooper if you would like to move IRA funds into gold. Rollovers available. Good program. With gold at 22 year lows, here's a good way to preserve stock market profits, or diversify if you are taking a hit in your retirement plan."So, in simple answer to your question, Yes...this is legal. Thankfully, Americans have many freedoms (and it is up to each person to keep them well exercised). Thanks for considering Centennial for your portfolio's metal needs! nickel62 (3/5/2001; 19:26:09MT - usagold.com msg#: 49439) Hello I need some help from the members... I have a long time friend who would like to buy 150 ounces of gold in his IRA to replace his devalued tech stocks. He nor I can remember if that is legal. I think I remember that American Eagles were allowed to be an investment in IRAs. Can anyone help me and our gracious host who will be receiving the order? silvercollector (3/5/2001; 18:54:28MT - usagold.com msg#: 49438) (No Subject) http://numismaticgoldcoins.com/wormartod.html "There are MANY around the world that know of the historical oil/gold price relationship. Especially the Arabs. They may have kowtowed to the Clinton Administration in recent years and refrained from buying gold. As the price of oil takes off and with the dollar so fundamentally overvalued, it will be hard for them to refrain from buying gold. They will have the money to do so and the incentive. A sharply rising gold price in early November could be the Achilles Heel of the Democrats" silvercollector (3/5/2001; 18:38:28MT - usagold.com msg#: 49437) The last sentence is the topper!! Same link "The dollar gold price quickly advanced, first to about $70 at the end of 1971, then up to $200 at the end of 1972, then drifting back to $140 for the first part of ‘73. The Arab oil companies had been selling us oil at $2 a barrel, and in 1973 they realized they were being cheated at that price, which would mean it would take four times as much oil to buy an ounce of gold with the dollars they were receiving. So they announced they would quadruple the oil price. When the Federal Reserve kept pumping dollars into the banking system to accommodate the rise in the oil price, gold went from $140 to $280, and the Arabs doubled the price again"-End-So the FEDs are pumping dollars again 'cheating' the Arabs again; can we expect further increases in POO?Ticked at $2, (cheated in buying gold) so they quadrupled to $8, then (cheated in diluted dollars) so they doubled to $16.So today TPTB are keeping one side of the equation (low gold) but failing on the diluted currency which buys their oil.So here we are with a miserable, overvalued buck selling/leasing the physical away. HAVE A GOLDEN DAY. ORO (3/5/2001; 18:22:26MT - usagold.com msg#: 49436) 714 - indeed - on labor - on thin markets - and trade in privilege I read Brown's book and used his info and of a couple of his references from which quotes are available on the net. I ran searches on authors of some of his reference to find info, and had enough to use.The thinness of the Jiddah market, even by the standards of that day, is not an indication of the conversion volumes, because those would have been outside that market precisely because it was thin. The point is the price. A 100% pricing discrepancy is alot of room for arbitrage on something as dense in value as gold, even in war times. If the price held for so long, then it was so because that was the market clearing price that had dollars and sterling exchange for gold.As for the dollars leaking out of the oil company budgets, Brown provides some idea of the labor and local expenses, but no square figures. The congratulatory book celebrating Shell's centennial in 1997 written by Stephen Howarth, "A Century in Oil", also provides some insight as to local spending. As to the value of the Saudi court, including its various hangers on, to the US and Aramco's then undisputed owners, it should be obvious that the undertakings of the US and Aramco to liquify the Saudi barter economy with coinage, and otherwise develop the country as a whole, were not done out of charity, but as part of the continuously escalating costs of doing business with this group - which ended up being the capital of Aramco in the 80's, when it was "sold" to the Saudi government. Meaning that the US investor's interest was always threatened, and in WWII, when no forces could be spared for "taking care" of these threats, the US interests simply paid up what was necessary to make the oil flow. If it was a railway, a silver coinage system, military assistance, or anything else, it was just a cost of doing business. The US government's idea of the business was (and remains) the continued flow of oil, and that of the oil companies was the continued control of supplies to sell. The cost of maintaining oil flow were met, or the multiple costs of occupation would be considered the alternative, not least of which is the enmity of the actual customers of Arab oil in Europe and Asia. The supply cost estimate was taken from an old (1954?) petroleum handbook from the local State university library, and Brown's book. Brown shows the relationships within the court, and how they were used by the hangers on to obtain trade concessions that were, in turn, used to extract much money out of Aramco beginning in the 40s, and accelerating as time went on.On a general note:The particular arrangements for payments of royalty should be seen as part of a whole picture, one in which dollars flow in and out of Arabia and its Gulf neighbors, and gold accumulates both at home and in vaults abroad. The payoff does not usually come into the the recipient's country in whole, but just in part; often a minor part. There is no reason to expect to see these payoffs, be they royalties or bribes, in the official economic numbers, nor to see them spur local economic development. Often, the economic development takes place outside the courtier's land, where he and his employees spend their money and hold their assets and investments.It is not as simple as paying official royalties to the state. The state was nearly non-existent when the arrangements started, and is still largely controlled by a narrow segment of Saudi people, who are paid off in the traditional manner of the place ("bakshish") in order to make state decisions favoring one interested party or another. The state is most nakedly the private domain of the elite in Arabia. The courtiers are not at court just to bend down their necks in recognition of the king's glory. The kingdom was Saud's private property, and the concession his to give. Unlike a private individual, he also had the power of the state to force law and policy in favor of his private interests. Courtiers were charged to keep the King in power and in return got positions of power that could be sold. Without this kind of trade in state power, not the Saudi royal house nor any other ruling individual or oligarchy could rule. silvercollector (3/5/2001; 18:19:23MT - usagold.com msg#: 49435) Here's to Another/FOA http://www.polyconomics.com/searchbase/les9.html "The circular flow of dollars between the U.S. and Europe formally ended on August 15, 1971, when Nixon broke the US promise made at Bretton Woods in 1944, to keep the dollar at $35 per ounce. Because the rest of the world was tied to the dollar, when we broke the link, that linkage was severed for all currencies. The dollar gold price quickly advanced, first to about $70 at the end of 1971, then up to $200 at the end of 1972, then drifting back to $140 for the first part of ‘73. The Arab oil companies had been selling us oil at $2 a barrel, and in 1973 they realized they were being cheated at that price, which would mean it would take four times as much oil to buy an ounce of gold with the dollars they were receiving. So they announced they would quadruple the oil price."-End snip-Well, well, well; "Cheated at that price" So now with overvalued dollars they must 'feel cheated again'. Raise the POO and "keep the price of gold down if you want to see oil flowing at reasonable prices"Now where have I heard that!!! Old Yeller (3/5/2001; 17:20:02MT - usagold.com msg#: 49434) All animals are equal,but some are more equal than others. ORO'so good to see you back,especially after the events of the last two weeks.I feel we all have,in varying degrees,grown to accept and try to work around the background machinations in the gold market.Seeing your statement:"Only when gold liquidity is lacking at the lease rate dictated by the central banks,are they tapped to lend gold bullion.Even then,they are only required to provide just enough to keep prices and gold interest rates from rising above the point threatening the solvency of "important" market players that are short.",put in such a concise and revealing fashion,however,triggers the outrage of the ethical and deceitful imbalance of this situation.I live for the day when central banks will be accountable to all people;both in their country of domocile and to the world at large.Thanks to people such as yourself,hopefully that day may arrive sooner than they expect. Buena Fe (03/05/01; 16:14:47MT - usagold.com msg#: 49433) (No Subject) test Tree in the Forest (03/05/01; 15:56:53MT - usagold.com msg#: 49432) USAGOLD March 14 should be very interesting. I have been opining that this BOE auction will be the last. If they announce this on the 14th, it is unquestionably capitulation. If on the other hand they play the old bankers game, (thanks for this info sir ORO) they will maintain the charade right up to default. They would announce a third series of auctions with the next one late in May and cancel the auction just beforehand. With Comex open interest for April still at 80,000 contracts there is still the possibility of default on April contracts. Orville Goldenbacher (03/05/01; 15:55:32MT - usagold.com msg#: 49431) somebody said.... There is $1,000,000,000,000 (one trillion) worth of gold (already mined) in the world.which is roughly 3,846,153,846 ounces ($1,000,000,000,000 divided by $260 spot pog).There are currently 6,000,000,000 people calling planet earth home.this means that there is only .641 ounces of gold for each man, woman, and child alive. (3,846,153,846 divided by 6,000,000,000)does this figure sound right? Orville Goldenbacher (03/05/01; 15:55:24MT - usagold.com msg#: 49430) somebody said.... There is $1,000,000,000,000 (one trillion) worth of gold (already mined) in the world.which is roughly 3,846,153,846 ounces ($1,000,000,000,000 divided by $260 spot pog).There are currently 6,000,000,000 people calling planet earth home.this means that there is only .641 ounces of gold for each man, woman, and child alive. (3,846,153,846 divided by 6,000,000,000)does this figure sound right? 714 (03/05/01; 15:49:42MT - usagold.com msg#: 49429) Thanks, Oro... ...but that seems to contradict much of what I have if I understand you correctly. The lack of liquidity in the Jeddah gold market is well-documented in a number of works. Try "Oil, God and Gold" by Anthony Cave Brown. Interestingly enough, at the end of the war, the US government stepped in to help the Saudis out of their liquidity mess by making a large silver loan, then minting the silver into riyals, so there would be a circulating currency for that country. According to my sources, the King's biggest expense far and away was his household which consisted of 120+ wives, another 100+ concubines, and all their children. His household expenses alone were $5 million a year (and this is in the 1940's). And then there was the expense of maintaining lessor sheiks, no doubt. But I don't recall in my research Aramco taking issue with contractors and suppliers, with the exception of labor. I had the impression they were a pretty tightly run outfit that imported most of what they needed, refraining from much dealings with the Saudis, save for labor. Where do you get your figures? For instance, the 1/4 to 1/3 was spent locally (of course, that's almost a standard breakdown for labor in many businesses). Can you be more specific? And what are your sources?Tia. ax (03/05/01; 15:38:14MT - usagold.com msg#: 49428) Gold Reserves/ GNP Ratio Just as the amount of physical gold an individual investor should own should be proportional to that investor's total net worth, each country should have gold reserves in proportion to their Gross National Product. The U.S. with its huge GNP had a much larger ratio of gold reserves/GNP in 1960 than it has now. U.S. Central Bank Gold reserves should be raised proportionally to the increase in GNP since 1960.Belgian mentions the relationship of above ground gold/ world gnp(see post Belgian (03/05/01; 10:50:31MT - usagold.com msg#: 49406) Also see AX post ax (2/24/2001; 17:57:46MT - usagold.com msg#: 48889)INCREASE U.S. GOLD RESERVESAX Belgian (03/05/01; 14:29:37MT - usagold.com msg#: 49427) Dear Sit ORO Please, allow me to say that I don't understand what you are trying to communicate. It must be surely me and for this reason, I hope, I am not offending you in one way or another. I can't even explain "what" I don't understand. Is there a possibility of simplifying your precious insights ? Apologise my impertinence. Thanks ORO (03/05/01; 14:26:05MT - usagold.com msg#: 49426) 714 - an economists answer Re: Dollars and gold in the Saud household of WWII.Well, yes and no... Depends on what "is" is...Who "they" are...The hangers on to the house of Saud were sucking both Saud and Aramco in the way of the vampire. They were the converters of dollars to gold. Their income came from exclusive license and monopoly contracts with suppliers to Saud, Arabia, and Aramco, which gave them up to 80% margins on key supplies and services. The well documented financial sclerosis of the Saudi Royals and their government is not an indication of the Saudi "establishment" (and other oil royalty establishments around the globe) being in dire straits. A portion of the oil company revenue, about 1/4 to 1/3 was spent locally and much of that was the profit margin of the local "establishment" that kept the royals in power and profited from that power. These people's gold buying with dollars was the cause for gold prices being so much higher in Jiddah and various markets than official values. Journeyman (03/05/01; 14:04:43MT - usagold.com msg#: 49425) For lack of a yardstick, the argument was lost . . . @Pandagold & 714, I was going to refrain from posting this week, but . . . The basic problem with the world economy - - and many otherprocesses - - is failure to use the universal yard-stick tomeasure things. It isn't that the yardstick isn't available,it's just that TPTB have gotten us all in bad habits. Habitsnearly guaranteed to keep us all confused for the forseeablefuture if we continue them.In the past, gold proved itself the natural universal yardstick. Yet rather than thinking and saying 262 dollars are worth onegold ounce today, we say one gold ounce is worth 262 dollarstoday. As if the dollar were the yardstick.This is like trying to measure how much the shore is moving upand down from the bucking deck of a ship on a stormy sea.You look across the heaving deck and see the euro movingrelatively downwards, riding a neighboring wave. If you look waydown over the rail into the trough, you see the Turkish lirafoundering. (You've heard a rumor that divers were looking forthe Ecuadorian Sucre somewhere in this area.)Similarly you see that oil tanker. While seemingly vibrating upand down on the waves just like the other "ships," you wonder howit has stayed so much in sync with the apparent up-and-downmotion of the golden shore. You see the name "M.E. OIL" out ofDubai. You call the Arabic captain and he explains: "Our goal isto keep in sync with the shore as much as possible."You get the idea. Once folks begin to price things in gold-weight units, as theycan do on-line through things like e-gold.com, we'll switch fromptolemaic economics to auro-centric economics and things will bemuch easier to understand and predict.Regards,JourneymanP.S. The Ptolemaic system was an early very complicated modelused to explain the observed "retrograde" apparent motion of theplanets. It was replaced by the helio-centric (sun-centered)model, which stopped assuming the earth (rather than the sun) wasthe center of the universe. This made the solar system mucheasier to understand. Randy (@ The Tower) (03/05/01; 13:37:01MT - usagold.com msg#: 49424) Fed continues to add temporary and permanent reserves at impressive pace http://biz.yahoo.com/rf/010305/nat017636.html From the activity, one might think we were once again on the uncertain side of the Millennium Date Change.Although the size of the Fed's outright purchase of Treasury securities to add permanent reserves has not yet been disclosed by the newswires, this article summarizes the details of the two morning additions of temporary reserves to the banking system. With the fed funds market trading just 1/16th percent over the FOMC target, the Fed added $2.0 billion via 28-day repos, and another $4.0 billion through overnight RPs.Here you can see an endless supply of new paper currency available on an as needed basis to reliquify the commercial banking sector to "save" the system against any threat of a deflationary collapse and the attendant cascade of bankruptcies. (Yes, the banking system will be saved at the expense of the currecy unit's "strength".)But as should be clear from ORO's fine summary in his recent post (msg#: 49417), this commercial banking structure stands in stark contrast to the bullion banking sector in one important regard. While it is true that the funds used in both systems expand as "ledger entries" through such normal banking activities as borrowing/lending, the important distinction is that the bullion banking system does not have unlimited access to a "lender of last resort" at such times when the lending cycle may turn deflationary. (Central Banks can only extend their physical gold so far, and happily, the Washington Agreement shows the resolve to function in that capacity is waning.) In the arrival of that dark hour for bullion banking, you will either have the benefits of physical gold in your ownership, or you will have paper gold promises which are very similar to the failing paper dollar from which you had sought safety (a paper investment situation we describe as "out of the frying pan and into the fire").Again, if you have gold in an unallocated account that is made available to its custodians for leasing (for a quid pro quo of either cheaper storage costs or for nominal interest returns), then you really don't have gold either. Rather, you have just a ledger entry (paper gold) and, I might add, too much confidence and exposure in an overextended system. You have been warned. Mr Gresham (03/05/01; 13:35:00MT - usagold.com msg#: 49423) Oro "Hopefully, the ideas come through"...We understand: it's a book-in-progress. Like I said before, Oh, to be your editor.Economics writing is an attempt to linearize (?) flow diagrams that should be two- or three-dimensional. One can pick out a small two- or three-variable relationship for description in words, but no paragraph can hold the entire model up for observation.As a result, one is always wondering what hooks to outside concepts are being short-changed or ignored in any paragraph of economics writing. You, Oro, succeed in referencing more of those hooks to the larger model in many of your paragraphs, while maintaining readability, than I would expect to see.This allows me to engage my thought processes for longer runs before hitting bumps of not-understanding, or questions of my own (content to be put off till second or third readings). Even where I disagree with or would challenge your model, I am satisfied to read on, for you are gettting your ideas out clearly. At least, as clearly as one mind can suppose to know the clarity of another. 714 (03/05/01; 13:13:03MT - usagold.com msg#: 49422) I couldn't resist stopping in for a peek... http://home.att.net/~strat.gt/secret_history ...Oro, you are correct that the exchange rate for gold in Jeddah was $70 both during and after WWII, more than double the official rate. And I was well aware gold traded at wildly varying rates on different exchanges during this time, particularly in Asia.But nobody was massively converting dollars to gold in Jeddah during this time. Why? There were NO dollars in Arabia at that time. The House of Saud was running massive deficits, even borrowing money from Aramco to stay afloat, their only source of income being the royalties. Saudi finances were quite a mess at that time and the King was heavily in debt. And there were no "petrodollars" yet, because the scale of the oil business was yet rather small, generating only a few million dollars in royalties every year. Not only that, Aramco was, at that time, 100% owned by Standard Oil of Texas and Standard Oil of California, thus generating no corporate revenue for the Saudis. In fact, the Saudis did not even begin taxing Aramco until '49 or '50! So the fact the exchange rate in Jeddah was twice what it was in NY and London was irrelevant. THERE WERE NO US$'s THERE FOR GOLD! Again, all this is documented in the 70 pages of documents to be found at the above website. It's a much easier read if you print it out, as I had to sacrifice some quality to keep the file a manageable size.For those of you unable to access the site (AOL users), drop me a line at brokencrow@yahoo.com and I will forward you the document. It's a .pdf file about 1.7 mb's so it's a bit of a load on a phone modem. ORO (03/05/01; 13:00:33MT - usagold.com msg#: 49421) All, Mr. Gresham - apologia I just read my posts and must ask forgiveness for the low quality of the work - particularly on the post to Holtzman. I will only excuse myself with the explanation that I was on vacation and had little time to write, as well as this time being restricted to short periods in the wee hours of the night.Hopefully, the ideas come through despite the horrid writing quality and disorganization. Mr Gresham (03/05/01; 12:54:30MT - usagold.com msg#: 49420) Oro We have cheated ourselves of an "ORO PAGE" long enough. Randy? I know it's a big (BIG) job, but this level of scholarship freely given to us ought not to be lost in the daily rollover into Archives. Stocks, Lies, and Ticker Tape (03/05/01; 12:49:06MT - usagold.com msg#: 49419) Hill Billy Mitchell,.....I also second The Stranger's post #49230 for the HOF His post was short and concise. I was able to understand it to the point of taking action. I appreciate that very much. Thanks again Stranger. Mr Gresham (03/05/01; 12:42:41MT - usagold.com msg#: 49418) ORO (03/05/01; 11:05:57MT - usagold.com msg#: 49408) So THAT'S what you were working on all weekend!And I let my reading go, thinking I would catch up on Monday. Procrastination punished.I propose a new pronunciation for the word "thOROugh" and its relative, "thOROughness", in your honor. ORO (03/05/01; 12:31:44MT - usagold.com msg#: 49417) Pandagold, 714, Tree in the Forest - oil and gold Oil does not need to settle purely in gold, only the portion "saved" by the powerful few needs to be. Thus the bulk of funds and barter assets used to settle oil payments do not need to be gold. As for the WWII methods of converting the excess portion of dollars and pounds sterling into gold, I suggest you look to the Jiddah gold market of the time, where gold traded at double the official US dollar rate. Obviously, someone was massively converting dollars to gold.What the gold savings rate is for the Saudi Royals and their hangers on, or for their neighbors, is not answerable with certainty. But rest assured that it would be somewhere around the 8% minimum, or above. Also, you should not be surprised to find gold traded at different prices to different sellers and buyers, as was the case many times in the past, be it at Jiddah or in London after the gold pool closed. The involvement of central banks in the bullion banking business is similar to their involvement elsewhere in the financial markets. Their role is only as "insurance"; to provide liquidity to the markets as lenders of last resort, and to dictate the interest rate (lease rate) from below. They lower the percieved risk in lending out gold and lend it out when tapped in order to maintain market confidence in the paper gold outstanding. As prices are derived at the margin, so is the gold interest rate. Only when gold liquidity is lacking at the lease rate dictated by the central banks, are they tapped to lend out bullion. Even then, they are only required to provide just enough to keep prices and gold interest rates from rising above the point threatening the solvency of "important" market players that are short. The role of the central bank is to induce gold credit, not to provide it. The central banks do so by undercutting market rates; promising (rather than actually delivering) gold at a particular interest rate, quantity, or price. CB promises (and gold miner's gold obligations) are used by the bullion banking system as a reserve, and are leveraged by the routine 2.5 to 4 times, at the least. The paper they print up is used to replace the physical gold holdings of some, who then provide that gold to the markets. When you buy a gold call or futures contract and put the rest of your dollars in a treasury note, you have substituted paper for physical gold. Thus your demand for cash gold is eliminated from the bullion market, and moved to the paper arena where it is provided by the simple printing of a contract. The banker or hedge fund selling you the contract needs only to hedge as dictated by the delta calculated from models. Therefore, your purchase of paper gold removed the whole of your demand from the gold market, and replaced it with a contingent demand derived from the need to hedge. The hedges themselves, are mostly derived from the obligations of other banks and the promises of CBs and gold producers. The only portion that must be provided in bullion is that which only physical supply can settle; demand for jewelry, bar, coin, and industrial gold. Since investment demand is answered mostly by paper obligations, all that is necessary is to prevent the markets from moving into physical. The only reason the markets would move into physical would be that there is fear of the gold contracts not being filled. Propaganda is sufficient to prevent loss of confidence most of the time. The rest of the time, minor amounts of physical gold (relative to outstanding paper) must be provided to the markets so that defaults do not occur when a gold delivery obligation is due but the indebted party has insufficient gold. At this point, only the shortfall need be covered, and there is also the possibility of buying out the creditor with an alternative that is sufficiently attractive. Thus the system may remain stable so long as gold can be displaced from current holdings, on the one hand, and demand for physical displaced with paper supply on the other. The danger is that of escalating growth of gold obligations, and the loss of confidence in solvency of those printing them. The cures are (1) restructuring of gold delivery obligation schedules to fit within available fresh supply, (2) the sale of gold by holders who value the stability of the system more than their gold (i.e. central banks) and are willing to lose some or all of what quantities they lend, (3) exchanging certain delivery obligations with contingent ones (replace futures with calls), in the hope that they expire unexercized. We have seen all three strategies followed, confidence in the availability of gold to fill obligations is still high, and general default is still considered unlikely anytime soon. The gold deficit, at an official 1000 tonnes per annum, and my estimate of over 2000 tonnes, is being filled with only minor fluctuations in price by displacement of private gold holdings with paper backed by central bank lending promises (1/4) and by CB sales (1/4), the balance being backed by producer forward selling of their gold production many years into the future. New paper gold demand has dried up as discussions such as our own on this forum have brought many to buy physical rather than paper. However, many of the prior paper buyers had not the cash on hand to buy the whole amount at the market price, thus the amount of paper gold that can be bought posting 10% margin is not equal to the amount of physical gold that can be purchased at 100% cash payment. The few who have the whole cash balance on hand, can do so, the many who don't will buy 1/10 to 1/5 in physical relative to what they would otherwise have bought in paper. Thus for each 10 ounces diverted from paper, one would expect 3-4 ounces to be bought in physical (using the 20 80 rule).This will continue so long as the international markets are short of dollars. When the moment arrives where these markets receive more dollars than needed to cover debt obligations, the portion of global buyers having dollars on hand will grow, as will the demand for physical gold over the demand for paper. SHIFTY (03/05/01; 12:00:58MT - usagold.com msg#: 49416) Randy @ theTower Can you drop an e-mail to Sir Farfel to see if he is still among the living?$hifty SHIFTY (03/05/01; 11:57:18MT - usagold.com msg#: 49415) Here we go snow day 1726 GMT (Dow Jones) Nymex will delay the opening of all Exchange metal markets by two hours Tue due to anticipated transportation delays arising from snowstorm. (BWH) 1632 GMT (Dow Jones) Nymex to close early Mon at 1 PM EST (1800 GMT) as a snowstorm pummels New York, spokeswoman said. Also expected to close Tue as heavy snow, freezing temps seen continuing. (MSX) SHIFTY (03/05/01; 11:43:28MT - usagold.com msg#: 49414) Comex Mkts To Open 2 Hrs Late http://www.thebulliondesk.com/DJNews/4428469.htm *DJ Nymex Energy Mkts To Open 1 Hr Late At 10.45 AM EST Tue(MORE) Dow Jones Newswires 05-03-01 1725GMT *DJ Comex Mkts To Open 2 Hrs Late, From 10.10 AM EST Tue (MORE) Dow Jones Newswires 05-03-011728GMT~200103051725 -----------------------------------------------------------This is all I can find on this.$hifty Pandagold (03/05/01; 11:42:33MT - usagold.com msg#: 49413) 714 and all interested in Arabs Gold and Oil First let me say 714 I am very much smiling. I don't think that we disagree, it is just that we are not reading each other's point correctly.Anyway, if any of you want a wealth of information on the subject go to www.google.com and type in the search 'Arabs Oil and Gold price'. You will have enough stuff to keep you happy for hours. It is VERY well covered. Pandagold (03/05/01; 11:34:56MT - usagold.com msg#: 49412) Wild Hare Sorry about that. It has been mentioned before. It is just me, sometimes I don't know what the actual web address is when I have got it from a roundabout way. Sometimes when I have give say 'fallstreet's' web address, the particular item has been removed. Wild Hare (03/05/01; 11:16:20MT - usagold.com msg#: 49411) Dear Panda I respectfully request that you properly use the "Optional Link" field in the forum so that we may actually "get there from here". Enter the link only, without the parenthetic commentary, or else it's a dead end. SteveH (03/05/01; 11:16:05MT - usagold.com msg#: 49410) 714 Thanks for responding. Regarding oil and gold relationship. If we could ask HBM or RossL to repost those charts that show this relationship over time, I believe we could agree that their must be some sort of relationship to get the charts to perform the way they do. Just an observation. 714 (03/05/01; 11:12:41MT - usagold.com msg#: 49409) Belgian, real quick... ...I wasn't aware of the Sultan's vast fortune in gold. I think you have a very good point about being in the dark, though even in the dark, one can develop the sense to find one's way. Fwiw, the Saudis were not the only ones to be paid royalties in gold. Iraq, Kuwait, and Iran all had gold royalty arrangements with Aramco's British counterparts. I must go... ORO (03/05/01; 11:05:57MT - usagold.com msg#: 49408) Holtzman - a critique Holtzman, these comments are meant for you and are applicable to positions presented by FOA, Randy, and Aristotle along similar lines, and echoed by many others (donnemuir being the latest). All that is wrong in modern "hard money" and "conservative" political thinking is present in abundance in your comments this last Wednesday.Journeyman, thanks for stating the reality of the matter of artificial separation of functions of wealth money and trade money.I will start with the basic notion that government has any purpose but for the protection of individual rights in which it may provide a net gain to a society. There is no such purpose that can be served. Bread and circuses did little for their supposed beneficiaries in Rome, and ultimately destroyed the whole of the Empire. The Roman welfare state was not popular outside of Rome's near destitute riffraff, and the aid to these people was meant to buy the loyalty of this portion of the public away from the electoral republican institutions and the courts. The majority had never supported this, but were not capable of moving against the Emperor without the Roman street mob. This is repeated throughout the world in modern times for the same reasons but in a slightly lesser form, where the state's (Caesar's) beneficiaries are slightly less concentrated. Much propaganda is necessary to maintain the situation, since it is obvious that the beneficiaries may never be a majority of the people, as the state destroys at the very least one additional unit for each unit of benefit provided. Thus the un-benefited part of society must lose at least two loafs of bread for each provided to the state's beneficiaries, the one taken away, and the one destroyed. The possibility of majority support for this kind of proposition is near nil, but for temporary popularity of this kind of scheme with deluded masses and power hungry eunuchs of the court. For this purpose, governments have sought to control education and curb the freedoms of the press. They have sought to control opinion by buying the allegiance of the intellectuals who might otherwise voice an opinion contrary to the range of opinions not threatening to the state. Research in the social sciences is dominated by government money and it has no purpose but to squelch criticism of the state, and promote state power. The move by government from censure of opposition to subsidy of allies was not a move away from censorship and propaganda, but a move towards a more effective form of them. The imperative remains the same; to justify the absolutely impossible notion that government can provide a general beneficial value over the free markets.The wealth of Caesar was in his power to squeeze property (agricultural land) and income (grain and livestock) out of the landowners. This came about as a result of the ease of exercising the violent threat, and the lack of alternative jurisdictions for land based wealth to seek.Heavy industry brought the income extractable by government to new heights, as the physical capital was easy to destroy completely and the added productivity of industrial capital relative to agriculture and small industry was so great. Furthermore, alternate locations for capital were not available once capital was in place, thus the creation of new facilities in alternate locations required the building of a complete duplicate of the rest of the related infrastructure of upstream and downstream industry. It took 70% income taxes and capital gains taxes to make the construction of a duplicate heavy industry network an attractive proposition for the investor. At first it was out of the US and Britain into Europe and Japan, then taxes drove out European investment into South America and the Pacific Rim, where government was sufficiently easy to bribe so that the bribes and the risks to private property were lesser in cost than the certain taxation at home. Once this industrial infrastructure was rebuilt in multiple duplicates, it became much more difficult to prevent marginal investment from going to these places. As a result, Western policies of tax, regulation, and government ownership of industry were turned back towards free market principles, not mainly because of the popularity of such a move but because the alternative was obvious economic stagnation. The economic stagnation would have been undeniable with the contrary example of newly industrialized nations highly visible to the people. I will say this in short: The welfare state is not desired by the people, is not provided for the people, and creates social instability rather than the other way round. Government creates new poverty with each penny it gives the "poor". Rome was lost because of bread and circuses, these kept tyrants in power and the people in bondage. The reason for Europe's union is completely unrelated to colonization, which is well outside its diminished military and social capacity. Europe is not (at least not yet) in a position to colonize Antarctica, not to speak of a place having people in it. The European Union is many things to many people, with differing expectations and motives that are often at odds driving the form and substance of it. First, however, it is a union of governments and politicians. As is always the case in cartels of this kind, the motive is to prevent competition among the members, and close the market to external players.It is an attempt to keep the governments of Europe alive and their bureaucracies in power as labor and business cartels meet competitive pressures that would cause both to turn their backs against the governments that can no longer improve their lots at the expense of everyone else – not only because the bureaucracy wants all the benefits for itself, but because "everyone else" can leave; in person, in their labor, with their wealth, with their consumption. Governments of Europe hoped that these forces lose power as a result of competition within Europe, leaving the government institutions in power longer. It was also hoped that the enhanced efficiencies resulting from the union would grow the EU economies without governments having to forgo some of their income. The EU is a union of European governments against their citizens.The businesses community and conservatives that supported monetary union and dismantling of remaining intra-European trade restrictions were more motivated by the possibility of putting governments and protected labor in competition with their counterparts among the EU member countries. The structure of the EU still leaves open both possibilities: of governments losing power and their share of income because of jurisdictional competition, or of governments forming a cartel of coordinated tax and regulatory conditions to prevent this competition.The second issue, that of currency, has two main purposes: displace the dollar from internal monetary use within the EU, and continue isolating Europeans from the rest of the world. The latter is intended to herd Europeans, their incomes, and their capital within the circle of the fifteen wolves that are their governments. The French government is openly talking of electronic systems to track in detail exactly what each person earns and where and how he spends it. Obviously with the intention of capturing a greater portion of income. The first is to deny the US the "free ride" at the expense of Europeans that is the effect of holding dollar reserves for internal EU trade.The EU restriction of trade over the past 30 years has prevented Europe from benefiting from the extension of industrial culture that has occurred through the development of an industrial middle class in many emerging nations during this period. This stands in the way of Europe enjoying fully the benefit of division of labor around the globe.The progression of events you see for the hypothetical "auri" is wrong because having a gold exchanged currency would introduce a different set of considerations than is now facing the markets. First, it is not at all applicable to set the auri as an equivalent to any given currency basket on an exchange basis because contracted interest rates were derived from a fiat monetary system with fiat inflation rates dictating interest rates. Second, the artificial auri rate of exchange pegged in this way (pegged to the dollar at parity) would make it necessary for it to be pegged on a much lesser ratio than 1:1 (no leverage), something on the ratio of 1:50 would be more realistic (2% reserve). Furthermore, the appearance of the Euro – or the auri – would bring about the transition of intra European borrowing from dollars to the new currency, thus creating an immediate drain on the gold backing the auri, while still having the dollar rise against the new currency so long as the transition is ongoing (because that forms a dollar deficit in the Eurodollar markets, since fresh Eurodollars are no longer created). Shortly after the borrowing in auri began, the gold flow out of reserves would cause the ECB to raise interest rates till the gold flow stopped, and then let go slowly, and repeat. The process would have been very long and the strengthening of the dollar would never have been so steep, and may not have occurred at all. Second issue, and likely the one of more substantial import for a CB is that of market reaction upon rumor of such a plan. The immediate response for a fully covered fixed gold exchange standard would be a blow up in gold prices as the market raises gold prices to the point of EMU gold reserves fully backing not only all outstanding legacy currency, but all potential monetization; i.e. to cover up to 40% of outstanding Euro area debt. Greenspan's interest rise never changed the relationship with Euro interest rates, keeping the spread about constant. The defense of the dollar was not done by the pull of interest rates alone (a short term and self defeating strategy since it creates more dollar assets in the depositor's hands) but by raising the cost of debt service on the short term portion of emerging market debt, and restricting the growth rate of dollar exports by keeping liquidity within the US scarce.The first thing to note it that the Euro is a currency, and that the alternative to the Euro currency is not a gold backed "auri". The alternative is having a market money, one chosen by the people through their interaction. It may be a composite money, it may be a competing system where various combinations of any denomination bond indexes, stock indexes, metals, etc. are the money. The gold standard is not a full substitute for a free market. Though less artificial, it is still somewhat a creature of government. A transitional system could have been planned, but none such has been proposed, because no government or banker would ever want such a system that being because it denies them the benefit of government intervention against the people.The reason for the Euro not being a gold money is that what was desired was a currency. An inflatable currency based on debt, coupled with the possibility of having a cash gold element when necessary, so that rather than provide Euro for liquidity by buying market debt, euro would be used to purchase gold to provide liquidity. Thus assuring balanced books at the ECB and member CBs without having to hyperinflate the Euro, and without having to export Euro for goods (carrying a negative trade balance due to monetary effects) but for gold (carrying a Euro for gold trade balance). The EMU is not about solid honest money so much as it is about the political needs of EU governments and politicians to have a non-German non-French money – one that is not a political football between the two governments. Thus the need to have gold in the system results from the need for a non-partisan money within Europe. The dollar experience has made the rest of the world wary of a new Western debt money for trade designed in all its institutions to benefit only its issuer. The Gold scheme is the alternative that allows Euro to be a potentially politically neutral currency.The one to one setting of gold to a currency unit within the existing contractual infrastructure of European currencies is obviously what one would NOT start with if a gold standard or free market standard were the ultimate goal. There is no way that the contractual obligations undertaken within a fiat world could be replaced overnight with gold denominated contracts. One would start by putting a legal tender status on gold and a number of alternatives (silver, plat, plad, etc.) at the going exchange rates. Once steady exchange rates develop and the markets have worked through the contractual legacy and established a new contractual infrastructure, then the currency denominated contracts can be converted into a basket of monetary metals and then let loose to develop monetary preferences including financial media. The current ECB structure has nothing to do with assuring European's welfare and everything to do with assuring the welfare of the Eurocrats, the national bureaucracies, the financial and industrial cartels, and the politicians that coordinate them in the guise of pursuing the "people's business" (which is only a minor consideration). Had the ECB and the process of EMU been something like what I suggest, they would have a credible path towards a "hard money" or free market regime. Money can be used as a weapon if the other side is vulnerable; if one is using another country's currency for trade, and perhaps the same could be said for a gold standard system where there is a set peg of a leveraged artificial currency and gold. For this reason the markets within a nation must be free to respond to the shenanigans of foreign governments. One of the political reasons one should not yearn for the old gold standard is exactly the vulnerability that creates to other government's manipulation of gold supplies using their massive holdings. A free market standard could adjust to this easily enough. Furthermore, what the US can do with its gold is substantially irrelevant because it holds a small portion of the liquid gold in the markets, and gold is much less susceptible to supply dumps than you imply. Gold, when traded in quantity, is absorbed rapidly, at any amount sold, and with relatively minor moves in purchasing power. Your pointing out to the 1920s and 1930s as having anything to do with a gold standard implies an erroneous view of the monetary system that collapsed. It was not a gold standard system, but a leveraged gold standard, where the degree of leverage was controlled and purposely expanded by government regulation and directly by government itself. Governments manipulated the credit system into expanding to such an extent that gold constituted under 5% of the money supply. Obviously that was not a gold standard.As to the tying of one nation's well being with another's, it is inherent to trade that this would happen. There is no gain from isolation. Living standards are hurt horribly where this misguided concept of "self sufficiency" is pursued. The 30s are the perfect demonstration of this. The depression years are not at all a demonstration of any problem inherent to the gold standard, but were the inevitable result of (1) tariff rises, (2) income tax expansion, (3) increased government spending on "make work" programs, (4) increased government regulation on all levels local to Federal that made government a partner in business decisions and provided a massive business friction equal in its economic effect to pouring molasses on a hummingbird. (5) Monetarily, the banking system was made to expand credit, which was then purposely imploded in the interest of keeping the Federal reserve system (and thus the US government) from insolvency. The 30s in the US, and the pre WWI developments in Europe were nothing more than a naked power grab by governments over the economy. Once in power, they proceeded to make economic decision making into a political game, destroying the economies end making paupers of the people they claimed to aid.Back to gold;The absorption capacity of the markets for gold is such that all the gold in the CB vaults can be released and would be absorbed in a short while. Even paper gold is accepted in large amounts, a proven 30,000 tonnes of bank gold obligations exist (without measuring obligations wholly internal to the banking system, nor the portion that is unallocated gold accounts), of which 3000 tonnes per year were issued in the period 1995-1999. The total gold production and paper gold printing of today is more than triple and near quadruple that of the early 80s. The sale of gold by government is regarded by the markets as a sign of currency weakness. The London Gold Pool and successor gold price control projects have absorbed three times more gold than the US has remaining, and had barely managed to keep gold in a price range.There is no security issue at hand in a free market gold currency, and no reason to believe that gold would be released by one government in order to attack another. The only reason one finds governments releasing gold from their stores is to defend their own currency, or to pay off an ally. No government would disarm itself of its ultimate purchasing power in order to attempt a destabilization of another. It is like hurling one's cut off head at the enemy, one can do it only once, and is likely to suffer more from doing so than the target.You repeat over and over that governments need to use their fiat currencies in order to keep "Joe Average" fed and clothed. There is no function unique to fiat currencies that assists in keeping Mr. Average fed and clothed. Any such function is much better filled by gold and the other precious metals. The mere existence of the fiat currency takes substantial portions of Joe's dinner, and takes away his best clothes. There is no value whatsoever which fiat provides the "average" person. The only beneficiaries are the thin layer of high government bureaucrats for which all Joes slave, and the politician elected by Averages to the post of slave driver. Joe Average's current behavior regarding debt accumulation is a function of his need to protect himself from the depreciation he expects of his future monetary income. The self-indulgence we refer to often, is that resulting from the habit of trying to outwit the monetary authorities and their coterie of hangers-on. Joe does not need or want fiat money, he seeks protection from it.Finally, the separation of the wealth and trade functions of money into currency for trade and debt, and gold for savings is not desired, required, or of general benefit to the country that adopt it. The bulk of gold's purchasing power is derived from its use in trade. Gold obtains its premium when used in trade it is a premium over its wealth value. When gold is displaced from use in trade by law (the law that establishes fiat money), by fractional reserve banking producing fiduciary gold substitutes, or by dilution of the gold content in coin, its purchasing power is low, and it is hoarded as wealth. When gold is used in trade, it obtains such a premium as to eliminate the bulk of its wealth function, thus it is not hoarded when used in trade, but dishoarded.It is dishoarded because of the premium it obtains in trade, where it finds its best use. FOA shows the significance of gold's use as a trade money – not a wealth money. (I believe his usage of the words is a reverse of my use, but the concepts we present are identical, gold serves best in trade, not as a hoard). Governments and bankers have forever attempted to gain for themselves the premium gold obtains in trade over the value it obtains as wealth – the same kind of wealth as a precious painting or bottle of oil. Holtzman, Aristotle and others have fallen into the intellectual trap of impossible coincidence. Namely that gold can obtain its full value - its trade premium - without being used directly or indirectly in trade and therefore in denominating contracts and debt. Yes, a portion of the gold premium may be absorbed in credit expansion and the use of fiduciary substitutes instead of gold bullion, but this portion is minor and steady in relation to the gold stock, thus having a minor effect on its value (once the fiduciary portion is created, and so long as government does not encourage further credit expansion). In short:Gold can not soar to its ultimate value when it is not used in trade. Gold displaces currency once currency is destroyed and no currency is available as a credible replacement for previously accepted moneys. Gold, in the form of the dollar, displaced the Pound Sterling after WWI, and continued after the first US default in 1933 (an internal default in the main, since the dollar exchange rate abroad was not significant till the UK went off gold altogether). Gold made its way back to its full value in the late 1970s. Only when political agreements were made for the central banks of the rest of the world to absorb excess dollars, did the gold price stabilize and move back down. Now that the agreement is over, the excess dollars may not find a permanent home but must slosh around in the markets. There is no excess yet on the international dollar market, but for a short period at the end of last year (see prior posts on global dollar supply and demand statistics), when emerging market debt no longer provides a sink for dollar exports (as these debts are falling at a 7% rate), the dollar will decline in purchasing power abroad. Understanding of Gresham's law is at the core of misunderstanding of gold's relationship to currency. Bad money displaces good money use in trade ONLY when markets expect gold to be available at a certain price: a par exchange rate. Otherwise, good money displaces the bad and is actively used in trade. Gold is on the trade routes and obtains a great premium when used for trade settlement and denomination of contracts, and none is hoarded. Gold is absent from trade and is hoarded when displaced from use in trade by a "bad money", be it fractional reserve bank notes, low gold content coin, or imposed "legal tender" fiat money. All of the bad money alternatives collapse at some point, this point of collapse is that of a break market confidence in the availability of gold at the official or historic exchange rate (or range of exchange rates) considered the par value.E-Gold has already demonstrated that settlement costs are lower for gold accounts than for fiat money credit accounts, because of the lack of a need for estimating creditworthiness, the absence of the credit allocation process within trade settlement, and the absence of default within a fully backed gold settlement system. 714 (03/05/01; 10:58:18MT - usagold.com msg#: 49407) One last one for now... ...thanks ge for your input. Having seen that old post from Another, those very thoughts have crossed my minds regarding the paper claims. I don't doubt that gold is flowing to the ME oil producers to some extent. But the link with oil is indirect at best. You know, I work and get paid in FRNs, some of which I use to buy gold. I suppose one could construe, and suggest, a work-for-gold trade going on, but nonetheless, there is no direct link between my working for a living and gold. Tree in the Forest, I certainly wouldn't rule that possibility out, although I'm not sure anyone truly knows where these markets are going. And why settle for gold at $3000 and ounce when you can get it for $300 an ounce? I wouldn't underestimate the shrewdness of ME businessmen. They know, for instance, that it's dollars and euros and yen that buy their imports and investments, and I'm sure they look at gold as insurance as many of us do. Much more fundamental to the gold market is the supply-and-demand picture, which is somewhat analogous to the silver industry of the 1870's when it was simultaneously being demonitized in Europe while oversupplied by a boom in production. Of course, there are somewhat different, and more bullish, circumstances at work today, particularly regarding derivatives, that are difficult to figure into the equation. Panda, relax, no reason to go nuts. I GET EXCITED, TOO, SOMETIMES! (I hope your smiling.) I learned a long time ago there is a certain futility that goes with looking for a change in others, a futility that touched me this morning. I really don't think we see eye-to-eye on this matter, but I'm more than willing to accept that and listen to what you bring here. I really must go...thank you... Belgian (03/05/01; 10:50:31MT - usagold.com msg#: 49406) WHAT IF...... Anglogold merges with Gold Fields >>>> Erases, immediately 50% Hedge position >>> POG spikes strongly, with the help of 14 th (GATA/Howe) + 15 th (BOE-aution) of march, super news >>> Goldpaper squeezed >>> Ashanti-avalanches >>> POG, through 350$ barrier ??? Impossible ?714 : oil/gold : you have a point ! BTW, what happened with the gold-stash of the Sultan of Brunei ?IMO, we are completely in the dark with actual oil/gold relation, if any . Other than Arab oil-producers, never stocked a percentage of their revenues in gold. And goldproducing countries are either stocking the produced gold. Gold will always be treated with outmost discretion. The captains of the desert found other ways to seed their dollar-revenues. Prince Whaleed and friends !Perhaps, more interesting would be the charting of the following correlation : World's GNP (now=40 trillion) and above ground gold-capitalisation (POG x tons) since 1971.To put the actual goldcapitalisation into perspective and searching for future price-projection. Is physical (!)goldtrade in a constant relationship with the expanding worldtrade ? Again...this is information I am expecting from the WGC !2$ an ounce to update any fund on how much physical gold they should carry as an optimum in their portfolio. Urging an open and public accountability from central banks and their goldreserve. Argumenting with that good old confidence-factor towards paper-currency. Am I suggesting another goldstandard, again....no, no, nohhhhh...wouldn't dare. ORO (03/05/01; 10:24:02MT - usagold.com msg#: 49405) HBM – money supply determining interest rates In the current financial world, the dollar interest rates from various sources are the primary element, the money supply being a result. In the gold system and free financial markets, there is a true liquidity constraint in that the acceptable money is limited in supply at any time. Modern currency (dollar) systems respond to liquidity constraints by the monetary authority deciding to inject new "cash" by buying all paper offered it up to a certain interest rate. Since the quantity of money is the loose end of the equation, the dependent variable, interest rates play the role of the determining factor in the financial markets. The supply and demand relationship for money is different from that balance for debt. One borrows when rates are low enough for the purpose at hand. One does not borrow first and determine the rate later. The money balance is not a determining factor for interest rates, since the lending side is inexhaustible in quantity, and the recipient of the newly created funds (the vendor of items bought on credit) can not make that money disappear, he can decide only whether to keep the money or dump it into someone else's hands. Ownership of money changes but funds remain within the financial system till someone uses them to pay down debt. Supply and demand for money are determined by both interest rates and outstanding volumes of debt obligations (and therefore debt assets as well). Interest rates are not determined by amounts of money, but for the presence, absence, or degree of default premiums embedded in interest rates, which tend to rise when money is more restrained, and drop when fresh credit flows strongly.The demand for money to pay debt has an indirect effect on interest rates through the currency depreciation rate. Such that the price inflation premium embedded in interest rates is smaller when debtors are forced to sell their product at a lower price than would otherwise be the case in order to increase revenues such that debt may be paid off, and assets not be lost to seizure by creditors. The price drops are limited, however, (1) to the value of the assets used as security, otherwise the assets will be given up to the creditor and liquidated on the markets or shut down, (2) prices must be such that continuing production at these relatively lower prices does not entail further growth in debt (no production at substantial loss). To summarize:Credit money systems have no natural liquidity constraint, only the decisions of the monetary authority.Therefore, the fundamental value is that of interest rates. That is a driver rather than a driven factor.Gold standard systems are liquidity constrained and thus interest rates interact with money supply and long term credit. The reason for this is plainly that the money supply is limited to the resources available in the economy, which has adjusted prices, contracts, and interest rates to the existing gold stock. Thus higher productivity would show up as higher supplies of both goods and services, and a roughly commensurate rise in gold supplies (which are affected by more efficient production, processing, and distribution systems, the same ones that make the rest of the economy improve). USAGOLD (03/05/01; 10:04:22MT - usagold.com msg#: 49404) Speculation on the BIS "Yawning Gap" Role: Additional Snippet from this Morning's Commentary http://member.usagold.com/commentaryreview.html We now surmise that some entity stepped into the "yawning gap" to supply metal to borrowers last week but, at the moment we don't know who. Some speculate it was the Swiss based Bank for International Settlements (BIS) and let's assume for the purposes of discussion that it is. I have no reason to second guess the reports that filtered out late last week of its involvement. Founded just after World War I to clear German reparation payments, the traditional role for BIS evolved to play central bank for the world's central bankers -- making a loan here, clearing a payment there, essentially providing short term liquidity for those havingshort term problems. As such, one could say with some degree of confidence, that if it was the BIS that stepped into the "gap," it could just as quickly step out drying up liquidity as easily as it added it. If the BIS is indeed involved in the gold market, one would have to assume the reason would be to offer an assist to the increasingly beleaguered Bank of England. I am assuming last week's reports by the World Gold Council on the BOE's lack of gold liquidity are true. (See Review section.)Now some are saying that BOE's "liquidity problem" could cause it to cancel further gold sales -- a development which would be not only prove to be an embarrassment; it would hint at problems in the gold market much deeper that any of the shorting institutions would like to admit. For BOE, such are the problems when one has the London Bullion Marketing Association in its backyard and a large number of those members owe large amounts of gold to other financial entities -- most notably the world's central banks. For the bullion banks short the gold market, the BOE's retreat could be cause for many a sleepless night with thoughts of a bailout dancing through one's head.Interestingly, the reports were calling for gold to open down a dollar this morning and it opened marginally higher instead. Something tugs in the back of the mind about all this that tells us we may be feeling the effects of a short term band-aid on the leaking gold liquidity. So we are going to reserve judgment, and, in fact forward the notion that perhaps this sudden cooling in the gold market may be temporary. That something tugging at the back of the mind, by the way, has to do with the relatively low gold reserves of the BIS, its penchant for hanging on to them, and the short term nature of its involvement in markets. More deeply, it has to do with a hunter's sixth sense that the quarry might be injured. We will see how injured as thisprogresses. As gold owners with our metal bought, paid for and sittingcomfortably nearby, we can afford to watch all this unfoldpatiently and with the appropriate amount of interest. Afterall, we aren't the ones who owe the world something on theorder of 5000 to 17000 tons of gold depending upon whoseestimates you want to believe. They are.---------------Note: I should emphasize that the BIS involvement is only surmised at this time and to my knowledge unverified.If you are new to USAGOLD and would like to read these (almost) daily reports, we welcome you. Please see registration link in previous post. Those registered already can gain access thru link above. USAGOLD (3/5/2001; 9:47:12MT - usagold.com msg#: 49403) Wilhelm II German 20 Mark Now Available http://www.usagold.com/onlinestore/special.html We have never been able to keep the German 20 Mark gold coin in stock for long. We have a group of buyers who wait until these rock solid pieces of history become available and then take them off the market almost as quickly as they appear. This is the popular Wilhelm II mintage from 1890-1913 that helped so many German families through the Nightmare German Inflation which occurred a decade after the coin's last year of issue, hence the nostalgic attachment. The Wilhelm II 20 Mark has special meaning with the descendants of those who suffered through that monetary debacle ending with the rise of Adolph Hitler. This item is also generally popular with those with an interest in financial history. Hopefully at 1000 pieces, we have enough to get us past the first week of the offering. Orders, as always, will be filled on a first-come, first-served basis. The premium is still low for the item; it will go up and down with the gold price; and the liquidity is strong..2304 net fine ounces. .900 fine Brilliant Uncirculated. No minimum. 1000 offered.----------------Randy @ theTower provides some interesting and instructive background for the Wilhelm 20 Mark gold coin which can be read at the link above. We urge to reserve your share of this hoard at your earliest convenience. We do not expect it to last. Tree in the Forest (3/5/2001; 9:45:16MT - usagold.com msg#: 49402) 714 A very interesting exposition on gold for oil. If I might ask a question. You valued gold at $300/oz, but suppose the Arabs are valuing it at $3000 /oz knowing that it will soon be at that price. Then less gold would be needed to satisfy their requirements. How would that effect your conclusions? Thanks. USAGOLD (3/5/2001; 9:39:49MT - usagold.com msg#: 49401) Why the Lull in the Gold War Might Be Termporary http://www.usagold.com/Order_Form.html 3/5/01 www. usagold.com. . . . . Gold was up marginally in the early going after a quiet night overseas. Paper selling by one or two funds was met on Friday and this morning by counter-balancing physical demand. Gold demand is being driven worldwide by wilting financial markets, a growing energy crisis, and concern that the Bush administration has backed off the strong dollar policy. This week we have Q4 Productivity and Factory Orders on Tuesday and the Employment Report on Friday -- a relatively light week but possibly just enough to keep an edge on equity markets. The Australian Financial Review published an article (See Review section for link, right) overnight that puts an interesting spin on the recent gold rally. "As a rally," says Robin Bromby, "it was short-lived -- but just long enough to show gold's potential to catch some big players on the wrong foot. . . . . . . . . . . . Continued at COMMENTARY & REVIEWClients and Subscribers Only. Registration required. Go to link above. USAGOLD (3/5/2001; 9:38:54MT - usagold.com msg#: 49400) Why the Lull in the Gold War Might Be Termporary http://www.usagold.com/Order_Form.html 3/5/01 www. usagold.com. . . . . Gold was up marginally in the early going after a quiet night overseas. Paper selling by one or two funds was met on Friday and this morning by counter-balancing physical demand. Gold demand is being driven worldwide by wilting financial markets, a growing energy crisis, and concern that the Bush administration has backed off the strong dollar policy. This week we have Q4 Productivity and Factory Orders on Tuesday and the Employment Report on Friday -- a relatively light week but possibly just enough to keep an edge on equity markets. The Australian Financial Review published an article (See Review section for link, right) overnight that puts an interesting spin on the recent gold rally. "As a rally," says Robin Bromby, "it was short-lived -- but just long enough to show gold's potential to catch some big players on the wrong foot. . . . . . . . . . . . Continued at COMMENTARY & REVIEWClients and Subscribers Only. Registration required. Go to link above. Pandagold (3/5/2001; 9:30:11MT - usagold.com msg#: 49399) Gold last week www.financenews.com au (via 'fallstreet') Brief gold rally wrong-foots investors By ROBIN BROMBY05mar01AS a rally it was short-lived -- but just long enough to show gold's potential to catch some big players on the wrong foot.Gold rose to $US268.25 last week, its highest level for seven weeks.Those holding any of the many massive short positions would have been given a fright.While the metal was back at $US262.85 by Friday night, the brief rally had shown the yawning gap between available physical gold and that sold forward by traders and speculators.After all, these people know that short positions -- gold sold on paper in the belief that the physical gold can be bought at a cheaper price to fill the contract in the future -- amount to something between five and eight years' physical production.Annual world gold production is about 2550 tonnes, but short positions total several times that, with some estimates as high as 17,000 tonnes.The tight state of gold supply was thrown into relief last week when leasing rates soared as high as 4.75 per cent for one month, against a rate of less than 0.5 per cent for most of 2000.Even as late as the end of January, the monthly gold lease rate was just 0.8 per cent. By last Friday, it was back down to 1.7 per cent.The rally is being written off by some as just one large short position being covered.But even if that were so, the price and leasing rate jumps do illustrate the potential for serious dislocation if there were to be a sustained rally.Mercurial Hong Kong investor Marc Faber, known as Dr Doom, believes that 2001 could mark a decisive turn in the fate of gold."If a gold market rally took place -- for whatever reason -- massive short covering could drive the gold price far higher than anyone currently thinks possible," he wrote last week.Faber's forecast is based on his belief that there is a good chance the US will find itself in an "unpleasant deflationary recession this year, in the course of which corporate profits will collapse and bankruptcies soar".He is telling clients gold is the best hedge against the coming bear market, and advising positions in Newmont Mining, Placer Dome and AngloGold, among others.Gold tends to be a refuge in times of crisis when faith in paper money is diminished. During the Great Depression, for example, the metal rose 69 per cent from $US20.67 to $US35 an ounce.Even the more restrained analysts at Salomon Smith Barney were this week adding gold to their positive sector. Speculators piled into gold last week on rumours that some central banks were refusing to lease gold and that there would be a squeeze as buyers would need to pay more to buy the metal.Australian Gold Council chief executive Greg Barns said part of the problem was that rumours were driving the market.The market will be in a state of uncertainty until March 14, when Bank of England governor Eddie George will outline the bank's future gold sales policy.Overall, Mr Barns said last week's shallow rally had lifted the barrier to $US270 an ounce. Should it break that barrier, gold could well rally as high as $US280.The World Gold Council's George Milling-Stanley told The Australian the key factor last week was that the cost of borrowing short-term gold exceeded that for longer term transactions.This demonstrated a shortage of gold liquidity."Some lending has entered the market over the past couple of days, probably to take advantage of the higher lease rates, but the cost of financing short positions remains higher than usual and could still trigger some short covering," he said.However, one US writer reports that the WGC recently sent out a letter to its sponsor members about problems in the physical gold market.Jay Taylor, who edits a gold newsletter, said the council's letter complained that the Bank of England had for several days not lent any gold.This, added the WGC, was unprecedented as the bank's short-term lending was vital to the London market.Mr Milling-Stanley said neither the British nor the Swiss central bank had indicated a reduction in lending.But he added: "There was certainly less gold being made available to the market from central bank lenders." Pandagold (3/5/2001; 9:23:48MT - usagold.com msg#: 49398) 714 Arab oil producers Gold and Oil Gee714, we've just got to get this one straight, or I will go nuts.I appreicaite you are not yourself saying that oil is sold for gold - or that you doubt it through lack of evidence.I am NOT saying it either. I am just saying that they use the POG as a yardstick for pricing their gold. the POG as THEY see it, not Rothschild's London fix. As both commodities are priced in dollars, and gold is the 'real' money not paper dollars, the Arabs make sure they get their true value, whatever the market makers dictate. IE., inflated dollars, suppressed gold price = higher oil price.If this doesn't work, then we'll call it day. It's just a misunderstanding I'm sure ge (3/5/2001; 9:12:27MT - usagold.com msg#: 49397) 714 & Pandagold It seems as if the works of ANOTHER/FOA and Reginald HOWE complement each other. According to Howe, physical and paper short positions amounted to 10,000 tonnes and 6,000 tonnes respectively at the end of 1999 (http://www.goldensextant.com/commentary12.html#anchor341719). He based his study on published BIS data. The question is, "who holds all the (16,000 tonnes) of paper claims?"Having walked through the Gold Trail, I can now speculate: Oil holds most of the paper gold claims. Apparently, gold is cornered. Unbelievable! The following is a quotation from ANOTHER.BEGIN QUOTE...Understand that oil is still traded for a certain number of US$ but after the deal is done a certain amount of gold is also purchased with the future flow of oil as collateral"...In the beginning the CBs didn't sell their own gold. They ( thru third party ) found someone else who had bullion. That "party" sold to a broker who sold forward for a mine or speculator or government). In the end the 3rd party had the backing from the broker that he had backing from the CB to supply physical if needed to put out a fire. The CB held a very private note from the broker as insurance and was paid a small fee. This process mobilized free standing bullion outside the government stockpiles...This whole game was not lost on some very large buyers WHO WANTED GOLD BUT DIDN'T WANT IT'S MOVEMENT TO BE SEEN!...Well a funny thing happened right after the Gulf war ended. What looked like big money before turned out to be little money as some HK people, I'll call them "Big Trader" for short, moved in and started buying all the notes and physical the market offered. The rub was that they only bought low, and lower and cheaper. They never ran the price and they never ran out of money. Seeing this, some people ( middle east ) started to exchange their existing paper gold for thereal stuff...Gold is cornered. Plain and simple. No complicated theories, no options problems. The commodity value of gold was forced so low in paper currency terms that all of the new mined gold, going out some 10 years is spoken for. Between the third world buying physical gold and the jewelry industry ( same people buying ) there is none left for the oil states!END QUOTE 714 (3/5/2001; 8:53:14MT - usagold.com msg#: 49396) Forgive me, Pandagold... ...but obviously we don't see eye-to-eye on this issue.I am NOT saying oil sold for gold. I am contending just the opposite. OIL NEVER SOLD FOR GOLD! Capiche? There is no link between oil and gold outside of some dated royalty deal, and history clearly shows gold was not used to pay these royalties at times, as some here have indicated. If you've got some documentation, great, let's have it. What I am saying is that Another's & FOA's well-intended musings on the oil-for-gold trade (their term!) is FICTION. Yes, it is that simple.Thanks again. Pandagold (3/5/2001; 8:33:26MT - usagold.com msg#: 49395) 714 What concerns me is why you keep stressing this oil 'sold for gold'. I keep explaining that that is not what I am talking about. I keep saying that the POG= 20 to 25 barrels is only the yardstick for pricing their oil.Where are we going wrong. Am I not making my point clear, I have tried several ways. Then someone says there would not be enough gold. But it does not depend on how much gold. The Arab Oil producers don't need the gold - they have plenty. But as the arrangements at the present are that oil will be priced in dollars, they want to be sure they get enough dollars to give them the VALUE.Gold is their YARDSTICK. Before we go further - where am I going wrong in that you keep referring to selling oil for gold? Am I misunderstanding you, or you me. I am sure there is a simple solution 714 (3/5/2001; 8:19:31MT - usagold.com msg#: 49394) Pandagold... ...where do you get this figure of an ounce of gold for 25-30 barrels of oil? And do you have any documentation? The figure of four shillings a barrel comes from Aramco memorandum and applies not to the price of oil, but rather the royalty paid by Aramco, per barrel of oil, to King Saud, for the right to drill, pump and export oil under the terms of their original agreement, dating to the 1930's. Do you have any documentation, or any other evidence, that oil ever sold for gold in the open markets? And perhaps more importantly, are you at all familiar with the details of the working arrangements, and relationships, between the various parties in the ME oil business?Tia. Pandagold (3/5/2001; 7:19:23MT - usagold.com msg#: 49393) 714 Just quickly. I am not quite sure what I was supposed to seein that post you asked me to note. I did observe that I believe the part referring to the four gold shillings and price of oil, the maths did not quite work out, for the 1930's, though I did it in my head (not the best of places)Was your over all point agreeeing, more or less with what I had said, or diagreeing?Remember what I stressed, there does NOT have to be enough gold to pay for oil. The price is what matters when converted to value.Once they have got the value, they use their funds for building infrastructure and whatever rewarding financial instruments, or property purchases are in vogue at the time. 714 (3/5/2001; 6:37:05MT - usagold.com msg#: 49392) re: oil-for-gold trade Topaz, I fail to follow your logic as to why a fixed exchange rate would negate any point I made last night. There was a fixed exchange rate in place from the time of the original deal between Aramco and King Saud up until the 1970's, and since then, a floating US$. So what? You say His Majesty still insisted on gold sovereigns. But we know that from 1939 until after WWII, King Saud recieved NO sovereigns. He received no gold. He took US$, pegged to gold, for royalties, also pegged to gold. The record is clear on that. We also know, that upon renegotiating royalty payments in 1947, King Saud accepted, among other things, the construction of a railroad in payment of the royalties. Now, I will grant you that perhaps his successor, King Faisal, did indeed insist on a stricter gold arrangement, but what evidence do we have of that? Conjecture? Suggestion? You say, a small portion of oil was traded for gold, post '71. Where? And who consumated the deal? Was it before, or after, Aramco was nationalized in 1976? You know, Another was very good at making suggestions. Doesn't it strike you as odd that is all we seemed to get from him? He and FOA are certainly talented at stimulating goldbugs' imaginations.Randy, thanks for your input, but how can we really separate what was going on in the 40's from what is occurring now? History is wonderful for shedding light on patterns of behavior and relationships. And history clearly shows that the House of Saud has been more than willing to accept alternatives to gold, though such royalties were still pegged to gold, as payment through the years. They even accepted a railroad! But again, and I will keep returning to this point because it is so important in this conversation, there is no history of gold being used in the oil markets of Europe, America and Asia to purchase oil from companies such as Aramco and Anglo-American. There is no evidence of it whatsoever, unless you accept suggestion as such. And how is it Bretton Woods affected any arrangements between Aramco and the House of Saud? SteveH, those are very rough calculations. My point in making them is that the gold market in much, much thinner than the oil market, and as such, if gold were paying for oil, we would be seeing much more volatility and movement in the price of gold than in oil. In fact in reviewing those figures, I now have serious doubts that there is enough gold production to pay for Saudi oil royalties, if they were in fact still insisting on gold as payment. It would be very, very difficult, given the size of the gold market, to hide such huge gold transactions if it indeed were paying for oil on any kind of scale. Perhaps I'm belaboring this critique of Another's oil-for-gold trade at this point, but let me say that gold is a wonderfully tangible investment. And we need many more who feel the same so investment demand for gold rebounds (it's awfully low). I do not think we are well served to hawk it like some kind of snake oil, making unsubstantiated claims and suggestions that it is a panacea for all that ails us. Salaam. Pandagold (3/5/2001; 3:43:00MT - usagold.com msg#: 49391) Randy (China and gold) Actually, I am only really posting at weekends, but as I was checking on yesterdays late night posts that I may ned to reply to, I saw your post re the above. Well anything about China and gold alerts a mental sensor to me.I believe what China is planning (and achieving) is going to have a dramatic effect in many ways. There are also 'outside' dangers from sources that deem this a threat to them, so must keep alert.Opening the gold market was planned for last year, and should already be operating, but was delayed until this year. Shanghai, a city I love, and know well, it will certainly be.It is VERY old news now. SteveH (03/05/01; 02:34:13MT - usagold.com msg#: 49390) 714 So, based on your calculations, how many times do the ounces of gold in the 485 tons (13 plus million ounces?) go into the annual supply of oil in barrels and what is the significance of that number, which I calculate roughly at 1850 or so? And, how constant has that number been over time? And, what if anything does it signify? And, what could or should we expect as the supply of oil is depleted in 34 years by way of a graph? In other words, what would a chart look like, not showing a constant state of production of annual bbls of oil but the same amount of gold valued at the remaining qty. of oil, assuming total depletion in 34 years at current rates of consumption? I would think that it would be exponential such that the entire 485 tons of gold would eventually only buy the last remaining bbl of oil. Therefore, we should expect to see that more and more gold is being required to pay for less and less oil. Is this supported by the facts or even a trend seen in the current set of data that we have available today? Randy (@ The Tower) (03/05/01; 02:05:01MT - usagold.com msg#: 49389) Again, put this on your horizon if it is not already there... http://english.peopledaily.com.cn/200103/05/eng20010305_64115.html Just when things here in The Tower were settling down, I received a knock on my door with word that a gentleman was here to see me about some bit of important news to pass along. With a wary glance toward the clock, I put aside my bit of evening reading and lifted myself from the large rocking chair in which it is my custom to sit beside the lighted hearth within this particular chamber. In turning into the hallway I saw that I was to be met halfway by this messenger, whom I immediately sized up as an old friend. I wondered aloud at the urgency of any message that would inspire him (at this hour, no less) to climb the many steps to see me rather than await my decent for a proper meeting in the more aptly furnished anteroom of The Tower.In summary of the message I offer you this link to an article...(Excerpts)-----China plans to establish a National Gold Exchange (NGE) this year, another step towards reforming its gold trading market.Today's China Daily reported that a nine-member panel has been formed in the central government to lead and plan details for the establishment of the exchange. A preparatory committee will be formed soon, it said.Shanghai is the most likely location for the exchange, though the central People's Bank of China (PBOC) would not confirm this early last month.For years, gold trading has been strictly controlled by the central government. PBOC monopolizes the purchase and allocation of gold. China's gold prices are separated from the international market and rarely fluctuate.The upcoming NGE, which would mainly target gold producers and wholesalers, would introduced market prices to China's gold trade.The central bank would gradually withdraw from its monopoly position.A retail market for gold would then be established, the newspaper's source said.--------Also according to the article, in a speech before congress the mayor of Shanghai ranked this move as a top priority in the current Five-Year Plan; meanwhile a manager for the World World Gold Council Shanghai Office said the establishment of the National Gold Exchange "will help Shanghai become established as an international financial center."I yawned as politely as I could, and asked him for how long he had been afield and away from all contact with anyone here at The Tower or at the Forum Round Table. After reassuring him that this was in fact information of global importance, I further explained that as a topic, it was anything but news (leastwise "urgent") to us here in The Tower, having discussed it off and on for many months now. But I thanked him just the same for providing this additional clear "evidence" of China's impressive progress in support of our commentary.After exchanging a few other items of information with a relaxing drink by the comfort of the fire, he was eager to be gone as suddenly as he arrived, fading into the night on the sound of galloping hooves. With him went a gold coin I provided for his trouble, knowing full well that this wealth would in time grow to fearsome proportions, though his pony would know it not by the unchanging weight. Clint H (03/05/01; 01:50:06MT - usagold.com msg#: 49388) Peter Asher msg#: 49333) Hill Billy Mitchell msg#: 49336 Many thanks for the response. Many things to learn......... Topaz (03/05/01; 01:17:24MT - usagold.com msg#: 49387) Randy, 714. Randy,...evenin' Squire, I've found your link to Another's postings and spent a good part of the w-end reading.What strikes me is the (predicted) tanking of the Markets in concert with a "ever so slightly" too high POO.For my small mind - the writing's on the wall.714,Go back and read the content of Another's message, not from an Investment point of view, but from the position of someone "desperate" to retain profit's from trade NOW - well into the distant future.The chips WILL fall into place. Journeyman (03/05/01; 00:54:22MT - usagold.com msg#: 49386) Thanks @Turnaround (03/05/01; 00:30:05MT - usagold.com msg#: 49381) Just the kind of info I can really use.Regards & Thanx,Journeyman Topaz (03/05/01; 00:39:03MT - usagold.com msg#: 49385) and furthermore...714 Let yourself imagine you're the big Kahoona. (with the entire world trading your Fiat money)You know full well the fatal flaw is - a continuing growth pattern HAS to be maintained for the system to function.You realise growth these last 20 yrs have been directly linked to a reasonable and regular Oil supply and whatsmore, you know those suppliers want to retain wealth in the future in something that isn't hamstrung with other peoples "INPUT" ie: Gold.What do YOU do?FWIW, here's what I'd do:-Well firstly I'd poopoo gold and run it's price into the trash-can (thus divesting all but the most resilient goldhearts of their bullion)Then, out of no-where, one fine eve, I'd let the price explode to a point where only the ultra-rich could afford it.My cohorts in the Central banks would then declare Au is "MONEY" and impose total control over all things Au.Pretty well what A/FoA have predicted....Yup? Randy (@ The Tower) (03/05/01; 00:37:53MT - usagold.com msg#: 49384) Well, well, well...Sir Topaz You certainly pulled the trigger more quickly than I could on that fixed gold-dollar issue, and far more efficiently, too. It seems I continue to type two words were one would do. Now I must rest and gather my few wits for a big day of projects ahead. Randy (@ The Tower) (03/05/01; 00:32:13MT - usagold.com msg#: 49383) Sir 714, I've read your comments with interest My own perception is that ANOTHER was describing events and potential eventualities of the modern decade or so, whereas your comments concentrate on the early and mid portions of the past century. As such, I don't believe your commentary does anything to discredit the "Thoughts" put forth by ANOTHER.Further, if we examine your era focus, one is left wondering how it is that you can make such a comment as you have made in your recent post. You say, "oil has never sold for gold as far as I can tell".Is your chapter closed against your study of the 1944 agreements of Bretton Woods, agreements which persisted in a form directly contrary to your above-stated knowledge for three decades? As the "bitter end" approached and sorely tested the originally-designed structure of the Agreements, did not the London Gold pool give adequate testimony to oil (or for that matter, anything and everything else which was also seen to be internationally priced in the convertible dollars of that era) selling for gold? As you will see, the dollar and bonds were effectively units of account in those days, representing gold as currency (money) and as gold loans.I hope this helps somewhat in the event you choose to ponder these matters further. elevator guy (03/05/01; 00:31:53MT - usagold.com msg#: 49382) @Journeyman Thanks, I enjoyed the Millenium Adventure in Japan link. Turnaround (03/05/01; 00:30:05MT - usagold.com msg#: 49381) tit for tat Hi Journeyman,Someday I will get around to finding and reading "Hierarchy in the Forest" as per your recommendation. Thanks for the gambling viewpoint, it's so...clear.You may find "The Selfish Gene" by Richard Dawkins interesting- there is much about altruism, game theory, evolution, etc. It's written in an easy style but still pretty dense, I've read maybe a third of it so far.Excerpt:Chapter 12, Nice Guys Finish First"The mathematician's simple distinction between the one-off Prisoner's Dilemma game and the Iterated Prisoner's Dilemma game is too simple. Each player can be expected to behave as if he possessed a continuously updated estimate of how long the game is likely to go on. The longer his estimate, the more he will play according to the mathematician's expectations for the true iterated game: in other words, the nicer, more forgiving, less envious he will be. The shorter his estimate of the future of the game, the more he will be inclined to play according to the mathematician's expectations for the one-off game: the nastier, and less forgiving will he be.Axelrod draws a moving illustration of the importance of the shadow of the future from a remarkable phenomenon that grew up during the First World War, the so-called live-and-let-live system. His source is the research of the historian and sociologist Tony Ashworth. It is quite well known that at Christmas British and German troops briefly fraternized and drank together in no-man's-land. Less well known, but in my opinion more interesting, is the fact that unofficial and unspoken nonaggression pacts, a 'live-and-let-live' system, flourished all up and down the front lines for at least two years starting in 1914...."The theory of games and the Prisoner's Dilemma had not been invented in those days but, with hindsight, we can see pretty clearly what was going on, and Axelrod provides a fascinating analysis. In the entrenched warfare of those times, the shadow of the future for each platoon was long. That is to say, each dug-in group of British soldiers could expect to be facing the same dug-n group of Germans for many months...The shadow of the future was quite long enough, and indeterminate enough, to foster the development of a Tit for Tat type of cooperation."References:Axelrod, R., (1984) *The Evolution of Cooperation*, New York: Basic BooksAxelrod, R. and Hamilton, W. D., (1981) "The Evolution of Cooperation", *Science*, V211, pp1390-6--The Selfish Gene", 1989 editionHope this is useful, have a nice, iterated game. :-) Topaz (03/05/01; 00:03:34MT - usagold.com msg#: 49380) 714 - Oil for Gold. Just a few observations 714,Up till '71, US$ was likened to Gold (fixed exchange rate) so the direct O/G purchase wouldn't have been an issue. His Majesty STILL insisted on sovereigns though. A/FOA contended that only a SMALL portion of oil was traded for Gold post '71 (full blown Fiat Dollar) as a trial balloon, and have suggested the bulk of O/G trades are now done with O & G still in the ground.The gist apparently is to keep the trade wheels "ON" and have something to show for it at the end of the day (Gold) as opposed to debt. ViewYesterday's Discussion.
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