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ARCHIVED DISCUSSION FROM 5/1/1999
All times are U.S. Mountain Time
View Yesterday's Discussion.
JA
(5/1/99; 23:32:16MDT - Msg ID:5479)
FOA
Thanks for the response, I suspect we see the world much the same, just use different terminology to describe it. I appreciate the perspective your posts provide.
OverHerd
(5/1/99; 23:31:33MDT - Msg ID:5478)
Hello Hiker
Arizona Hiker,
I hope you don't go I find what your saying interesting and would like to hear from you more often. I tried trading options but didn't have much success (gold, Eurodollars), a bad plan I guess, but I'm still interested and practicing my strategies.
JA
(5/1/99; 23:30:51MDT - Msg ID:5477)
Gandalf the White and Aragorn III
Been out for a while, now days when one leaves this site for a day or so it takes a while to catch up. Especially on week ends.
Gandalf
My humble apologies, bad choice of words on my part, I need to be more sensitive to my friends from middle earth. Yes, I realize the Hobbit and Trilogy is more real than much of what is about us in today's world. Many that frequent this site are on a heroic quest of their own, while gold and treasures are much discussed, the deeper underlying quest seem to be for truth.
OverHerd
(5/1/99; 23:28:33MDT - Msg ID:5476)
A Question
Hi all, there is something I was considering and wanted to get some input on. Could the EURO be rising verses other currencies except the USD but not show up in the USD/EURO exchange rate, a kind of market inefficiency? What I'm suggesting is that the EURO is rising verses say the YEN for example, and other world currencies, and is displacing the USD everywhere except in the US. I'm curious if this is possible? I'm also wondering, since the EURO is being used for electronic transactions, what is the price of gold or oil and other commodities in EUROs.
The Stranger
(5/1/99; 23:09:00MDT - Msg ID:5475)
Mine Eyes Will See the Glory, Too
I believe that an awful lot of wealth will be realized in gold this year. But I wouldn't dismiss mining stocks as readily as you do, FOA. Two weeks ago Priceline.com had their IPO. When the very first shares traded that day in the secondary market, just that one brand new company, with no earnings what-so-ever, instantly had a market capitalization greater than Barrick, Homestake, Newmont, Placer Dome and Battle Mountain combined. The point is, just as the future you see will feature a severe shortage of bullion, the future I see will feature a severe shortage of mining shares.
I don't necessarily recommend them, but those miners which hover in or near bankruptcy, at today's gold prices, may offer the greatest gains of all. Their shares may come to life like desert flowers after a Spring shower.
The Stranger
(5/1/99; 22:37:13MDT - Msg ID:5474)
Gandalf
Am I mistaken, or did Huey, Dewey and Louie catch the exact bottom?
Aristotle
(5/1/99; 21:45:50MDT - Msg ID:5473)
Thank you, everyone, for the kind words
It is nice to know that more people benefit than only the party to whom the post is directed, yet the effort is well worth it even if it is of marginal help in satisfying that one person's curiousity.
Stranger, don't give that Econ 101 quip of yours a second thought. It helps remind me not to take things in life so seriously, although I try to spare the Round Table from dealing with that side of me. Truth be told, back then I nearly fell outta my chair laughing, and I thought to myself, "Gads, what nonsense did I spew to earn such a friendly and well-intentioned rebuke?" So I scrolled back a day to refresh my memory, to gain context for both the original question and the response. I immediately saw the difficulty...I answered exactly the question being asked and didn't demonstrate all the steps between the premise and conclusion (a real rarity for me! though I swear I'm trying to shorten my posts, really I am! Honest!) Believe it or not, the answer does stand (among other possibilities) --otherwise I would have long ago offered the necessary modifications. I'm going to resist the temptation to get wordy by laying it all, taking a teaching cue from ANOTHER.
Thanks for being the one to come through on the current money supply figures. I expected either you or SteveH to be the one delivering the goods, and I can see my confidence was well placed.
Tomcat, thanks for the very nice thoughts. Taken to heart, I assure you.
FOA, thanks for all your explanations, information, and most recently for the pointer to Aragorn's post. As I grabbed a torch off the wall to venture back into the archives to read it, I was reminded that that scoundrel still owes me an answer...something in regard to 'the meaning of life' or 'how the world works.' Though surely as time passes, all the discussion at the Round Table fills that bill quite nicely. But still, where is that guy? ---Aristotle
Squire, bring my horse! There are great events stirring and we must gather in our Knights from far afield!
Gandalf the White
(5/1/99; 21:34:05MDT - Msg ID:5472)
FOA's answer to SteveH --- NOW a new question !
WOWERS -- That is eyeopening and straight to the heart of the future ! Please FOA, expound on this senerio: Some of the Goldhearts are Miners, and have their own claims and sources of raw gold. What do you see happening to these activities ? I can see the US Gov. requiring some if not ALL gold to be sold back to the Gov. and all new gold mined under the auspeces of the Treasury Department. What if every week I should take a hike and after a few days, return with a backpack heavier than when I departed. After a few more days, I would by magic alchemy produce a dore bar of an ounce or two. What would the possible sources for sale of the new item be for me ? Just wondering !
<;-)
Julia
(5/1/99; 21:30:33MDT - Msg ID:5471)
FOA
In one of your earlier posts you said," Watch the open interest on comex, over the next monthS, it should start a rise that will blow people
away! "
Could you enlighten me as to what "open interest on comex" is, what it shows and why it is important at this time and where I might find it (internet site) to watch?
Thank you, Julia
Peter Asher
(5/1/99; 21:23:05MDT - Msg ID:5470)
Typo
Crash, not cash (Fruedian slip?)
Peter Asher
(5/1/99; 21:21:30MDT - Msg ID:5469)
FOA
I would appreciate your comments on:
Awhile ago, I theorized that the insiders would be aware of a market debacle before the fact, and therefore would accumulate gold in advance of the cash. Therefore the first event would be an upsurge in the POG, before the occurance of a stock market panic.
FOA
(5/1/99; 21:17:32MDT - Msg ID:5468)
Time to go!
Thank you everyone. Aristotle, a fine M3 report. Yes, "I got me some" and will "get some more"!
Gold, Yesterday, Today and Tomorrow!
FOA
Gandalf the White
(5/1/99; 21:15:11MDT - Msg ID:5467)
Proposed Inclusions in the "Hall of Record(s)"
I hereby nominate the FOA mentioned posting of Aragorn III and the posting that generated the thoughts, the posting of canamami. These two postings are #5170 and #5165 respectively. MK, has the Town Crier a librarian sister ?
<;-)
Julia
(5/1/99; 21:04:56MDT - Msg ID:5466)
Aristotle
Thank you again for your kindness. I really appreciate your time and effort in explaining M1, M2, M3. Wish someone like you had explained it so well when I was struggling with economics in college.
Thanks.
Julia
FOA
(5/1/99; 21:04:42MDT - Msg ID:5465)
Reply
SteveH (5/1/99; 18:10:10MDT - Msg ID:5449)
Hello SteveH,
Yes, Steve, you have it about right. I have to admit that money will be made in gold stocks. They will move until action is taken against them. The problem is that anyone that would truly understand and agree that physical gold will return much more, would have to say, why bother with stocks? I offer these guideline problems (Tomcat!) to watch in a functional way.
We are dealing with two phases that will impact gold stocks. The first will be the falling world stock markets in general, particularly the US. The decline, this time, will not be like in the 70s when gold and metal stocks went up as the markets fell. This downturn will be the result of a
"collapse" of the reserve currency system and the resulting "strategic repositioning of assets" worldwide. Indeed, a big difference from a (70s) falling equity market as a result of relatively minor inflation (13%). This new downturn will slam all equity investments, no matter WHAT they are earning! It will not matter if a gold stock is earning $10 a share and selling for $10, no one will hang around for the story, or the return, or the perceived ownership of gold. History shows that in such conditions people grab what they have and take it home, for a long time! The problem for
gold stock investors, this time, is that they are waiting for the very event that will impact the markets the most! That being the driving of gold prices higher in a gasping attempt to save the last of the dollar system! That act will crater the DOW from these levels. With Gold stocks, so
depressed, the higher gold prices will take at least six months to filter through into earnings in a meaningful way. If you were a big player in gold equities would you hold on for months with rumors of: foreign exchange controls, state of emergency, new banking regulations. a 50% drop in the dow, a currency crisis and gold flying through $3,000+?
Steve, watch the xau for a small rise, then a stall as things unfold. If it stalls for several weeks as matters worsen, you know what to do!
The next phase of problems for gold equities will come after gold crosses it's old high of $800! No doubt, foreign exchange controls will lock gold into the local market. The country of origin. Yes, the commodity every gold equity investor has followed supply and demand for will now
suddenly become classified as a "currency" and subject to all emergency measures. Remember, the governments will not coin it because it's a commodity, but during an emergency, it's much to valuable a currency asset to allow it to leave the country. Now, locked into a domestic market it's
sources will be subject to "windfall profits taxes" of sufficient amounts as to match the scale of the financial crisis. Steve, at this point there is nothing to watch because, if you still hold gold stocks, it's to late. Sorry for this very real discussion. Now you may consider your moves. FOA
Julia
(5/1/99; 20:20:56MDT - Msg ID:5464)
Hall of Record
I vote for this great idea, Michael.
I'd like to see the selected posts catalogued according to the predominent subject or idea addressed in the post rather than by date or msg #. Then how about having an index or table of contents of those subjects discussed for easier discovery?
Thanks. Julia
USAGOLD
(5/1/99; 20:12:01MDT - Msg ID:5463)
Replies:
FOA... A good, but not great movie carried by special effects....the older Rose Dawson was great.
Stranger....This is relaxation. Too wet to golf. Wife and daughter off working at a charity benefit. Home Alone!
Aristotle...I want to join the chorus expressing my appreciation for your excellent background briefings. They are first class and I am certain the boys over at MIT Sloane School of Business couldn't do better....I'm certain.
All: Sorry for typos in long post.
Christine
(5/1/99; 20:09:18MDT - Msg ID:5462)
OK MK, As FOA and Another like to say
We will all watch this unfold together, yes. Of course they fight at the very top, too. But that doesn't mean they also don't get together to advance their aims-- kind of like this forum. (-:>~
USAGOLD
(5/1/99; 20:06:36MDT - Msg ID:5461)
By the way, Christine...
I want to thank you for adding so much to the conversation around here. If I haven't said it before: Welcome to this Table Round.
The Stranger
(5/1/99; 20:04:07MDT - Msg ID:5460)
Call Me Rapt
Aristotle- I take back what I said about you not paying attention in Econ. 101. Your money/banking lectures are very much appreciated by me, my friend. I actually passed a test on this stuff 22 years ago but have retained only what I thought I needed to know. As money growth has been the basis for my oft-repeated reinflation prediction, I suppose it is time I got with the program.
Since you asked, I hereby provide this week's monetary aggregates, taken from Friday's Wall Street Journal. Numbers are in billions.
M1-1,123.6
M2-4,557.6
M3-6,141.9
I might add that you are one very honest person to admit that you keep numbers from 1993 on your desk. No one else I know would every have the courage to let such a bizarre idiosyncracy come to light!
(By the way, isn't it great to have someplace to go where you can talk about something as mind-numbing as banking and have everybody's rapt attention? What a life!)
Speaking of bizarre idiosyncracies, Michael, I hope you know that none of us expects you to carry on posting at the forum while you are watching "Titanic", for crying out loud. My God, man, you have got to learn to relax!
FOA
(5/1/99; 19:58:11MDT - Msg ID:5459)
Reply
Chicken man (5/1/99; 8:44:42MDT - Msg ID:5430)
Hello Chicken Man,
Your post is written from a standpoint of "a battle for world power". Well, I don't think it's as much a battle, but rather a sliding of assets from one place to another. More like untied cargo in a ships hole during a storm. The task (battle) is to lash the "assets" down in one place before they sink the ship! Please go to Aragorn III (4/26/99; 6:49:34MDT - Msg ID:5170), as it gives an excellent description, using most appropriate language (he said what I could not).
I would think your "grain robbery" scenario will come about. However, it will be but one part of the "cargo" sliding around the ship. America can expect to receive a "sudden impact" from all of these overseas dollars once it is realized they will lose most of their value. Local US investors will do well investing in almost any useful, needed, exportable basic product. Many an investment
advisor, with commodity tunnel vision, will tout their "single idea" as proof of how good they are. I say, money into commodities will be the same as ".com" stocks. No brainer?
Also, Michael (UsaGold),
Thanks for the mention about my post. It is hard to describe the other 180 degrees. How was Titanic? FOA
USAGOLD
(5/1/99; 19:54:49MDT - Msg ID:5458)
Peter and Gandalf....
I will leave this open to discussion but let's just say that you got my attention.
USAGOLD
(5/1/99; 19:48:15MDT - Msg ID:5457)
Christine....
I thought I might take a stab at your question. I would start by saying that private ownership of gold might not be what it seems. James Turk has done some excellent work on the subject and my understanding of his conclusion is that for the most part the official gold that has been unloaded in the modern era (since 1971) has gone to millions of people all over the gold. In the United States where gold ownership was officially legalized in 1975, private citizens have built up a huge hoard -- possibly the largest on earth. But the truth is private holdings cannot be quantified and we may never know the real numbers. All we know for sure is that the gold has moved from weak hands -- the central banks -- to strong hands -- private citizens around the globe.
The gold that was moved out of the U.S. Treasury from the early 1960s through the early 1970s went for the most part into European coffers as they rebuilt their reserves at our expense. In recent years, if you believe in great historical trends, you might look to Asia and to a lesser degree, the Middle East, to see where the gold is going. Their huge export earnings have to go somewhere and only a fool would park their hard won profits in U.S. Treasuries only. If it is going there, it is likely to remain a closely guarded secret. If you were buying and you considered it a matter of national security would you make a public spectacle of it? In short, all those who have posted here that these cheap gold prices are benefiting someone are absolutely correct. I would not discount Asia and the Middle East now or in the recent past. At the same time, I wouldn't count out, as I indicate, private citizens all over the world, particularly in the United States
A word on conspiracy theories: I have been an admirer of Taylor Caldwell's work for most of my life. She was the one who penned in "Captains and Kings" that only a fool would believe otherwise -- or something along those lines -- on the question of whether or there is a conspiracy controlling world events. I must respectfully say that although I respect her writing enormously I haven't completely bought into that sentiment. I began my study of "the conspiracy theory of history" in the late 1960s -- believe it or not -- with Ferdinand Lundberg's "The Rich and the Super Rich" which postulated that the world economy was run by some 80 families who through inter-breeding were able to control the greatest corporations on earth by controlling the stock ownership. He believed that most corporations could be controlled with less than 10% voting ownerswhip if it were properly applied and concentrated and he many have been right. The primary question when you consider that seriously is "To what end?" In further study, I have discovered that "the establishment" is far from a monolith. It has all sorts of nooks and crannies, disagreements, feuding factions and the like. For years, Morgan with its British connections was in direct competition with Rothschild interests. They were appealing to the same monied groups as clients for their bond offerings. I don't know that it is much different today. If the Wall Street charade now being paraded before us is going to fall apart, it will be because some major banking/financial firm sees a chance to get a leg up on its adversaries and goes against the established trend, or wants to hedge its bets before everybody else does. That's the nature of the game. And that could very well be happening as we speak. Survival is the most important instinct we possess as human beings. Profit is an extension of that instinct. If my profit comes at the cost of beating you in the market, that takes precedence over whatever co-operations we indulged in previously. That happens at the level of competing hardware stores. That happens at the level of competing merchant banking firms. From the outside, we see Wall Street as a monolith. On the inside, I am certain it is seen as the jungle.
On the level of conspiracy in the gold market, I really do believe that if there is one it has to do with mutual self interest served by an accomodating business plan. The bullion banks have had their way and everybody was making big money at the same game -- gold lending and the carry trade. I agree with FOA that the new rules -- and they are now talking about international application -- could very well make that particular game less profitable if not a losing proposition. Some big players run the risk of being involved in various investigations at more than one level. That might explain action in both the gold and bond markets late last week. The public as it has gained an understanding of this game might collectively consider gold to be a good buy at these artificially maintained prices knowing that the gold shorting game, in the scheme of things, can't go on forever. More one than one top notch gold anlayst, and others, have maintained that the true equilibrium price should be in the $500 to $600 range. Those on the short side of the market are painfully aware they are on borrowed time as well.
Then, of course, there is the question of hubris....but that's another, more philosophical discussion for another time.
Peter Asher
(5/1/99; 19:45:56MDT - Msg ID:5456)
Re my #5454, Gadalf's #5450 & Michael's #5443
How about each poster submitting his favorite past essay for a vote, (Subject to MK agreement) with possibly an elaboration as to why they feel it should qualify.
Richard, Oregon
(5/1/99; 19:34:40MDT - Msg ID:5455)
Thank You My Friends!
Stranger, Goldfly, myego33 - Thank you all for your aid in enlightening me regarding the British money systems of days gone by. All is truely appreciated and the link to British Adventures remarkable. I knew someone here would know. Again, thanks!
Peter Asher
(5/1/99; 19:16:42MDT - Msg ID:5454)
Michael
I also move in favor off your hall of record, and I second Gandalf's motion. ( Although we might need an administrative volunteer to handle the backlogged posts.)
Peter Asher
(5/1/99; 19:08:50MDT - Msg ID:5453)
FOA, Christine, Michael
FOA, I was going to post an answer to your # msg.5540 , but I see Christine already took care of it. Nevertheless I would like to re-iterate and expand a bit on the "MOU" theme.
The people on top of the leaders are, of course, those who put them there in the first place. Personally, I think of Leaders as having "Handlers" IMCO,. (C for cynical). The other night, Michael, you referred to a Senator who had ideal qualities for a President. Well, he probably wouldn't be willing to cut the deal he'd need to, to get the support to be put in office. Again IMCO.
My own theory about Jack and Bobby was that they had too much of their own money, and that of their true followers, to be bought off. Lest this sound like "Abandon all hope, Ye who enter here", I think that throughout History, The good guy's have eventually prevailed by the majorities of the world persevering through enlightenment and good intentions.
The invention of the printing press has been credited with saving the world at that time. In this moment, we have WWW
Christine
(5/1/99; 18:47:40MDT - Msg ID:5452)
Who owns the private gold
An example of one name I have read in numerous places is the Rothchilds. These are the kind of powers I am talking about. Exactly who they are is not that important to me at present, as is understanding what and how they are doing it.
Tomcat
(5/1/99; 18:34:04MDT - Msg ID:5451)
Aristotle, Christine, FOA
Aristotle sir. Thanks for spending the time on M1, M2, M3 etc. Very helpful. The more I read your posts the more I realize how much you care for the members of this forum. I hope that for you, what goes around comes around and you are rewarded somehow in return.
Lady Christine. You remarked that there are 80,000 tons of gold in private hands. That translates to about 735 billion dollars worth of gold; no small amount. It would be facinating to know who the major holders of this gold are and where this gold is located. Perhaps the power on this planet could be defined by the major gold holders. I do not have the figures in front of me but the hot money on this planet due to drug trade is very high and according to some of the folks who wrote Drug Inc., the folks on top who control the drug trade control much more on this planet. I wonder if it is hard to launder gold?
FOA. Sir, your remarks about monitoring the open interest are inciteful and functional. Talking about gold is one thing but giving guidelines for us to take functional action is more than worthy of just a thank you. My hat is off to you.
Gandalf the White
(5/1/99; 18:22:18MDT - Msg ID:5450)
Proposed "Hall of Record(s)"
I, Gandalf the White, being of sou---- oh well, I second the motion, BUT suggest that the prior GREAT posts be considered for inclusion also.
<;-)
SteveH
(5/1/99; 18:10:10MDT - Msg ID:5449)
Question for FOA
Must dash for dinner but wanted to ask about this quote: "Truly, they will be very surprised to learn when the gold they "sold", so to speak, was loaned out so very cheaply. But, fear not, it will be the other gold 'in the ground' that they will not be so dumb not to attach! FOA"
If I were to surmise a strategy of investment then I would presume that gold stocks, be they big, be they small, would be a poor long term shot at the big marker. Rather, perhaps, in the short to medium term they may be good but once the PTB (powers to be) see the fire through the smoke, the PTB will dowse the flames of gold by throwing gold mines directly in to it and removing us small fire fighters from the picture. OR do I have this all wrong about the timing or for that matter at all?
USAGOLD
(5/1/99; 17:44:29MDT - Msg ID:5448)
Christine...
As far as I know, Louis Ruykeyser has not registered to post though we would welcome him here -- his "public" views notwithstanding.
Do you think that good ole Louis secretly owns gold? I do. Someone with that deep a reverence for money would have to. I am watching the surprisingly strong end to Titanic. "A woman's heart is a deep ocean, " says Rose Dawson. Gold is a deep ocean as well.
Christine
(5/1/99; 17:22:35MDT - Msg ID:5447)
MK--Louis Ruckeyser's PBS investment program
has a Hall of Fame of investment guru's--I think there are about 20 guru's in it now. Actually, Louis Ruckeyser has nothing kind to say about gold, but I still think he is way cool anyway. Actually, now that I recall, two of his three guru guests this week stated they thought we are now in a major transition back into cyclicals and commodities. I know, gold is not a commodity, but it certainly has some of commodity properties.
USAGOLD
(5/1/99; 17:10:53MDT - Msg ID:5446)
Christine....
I only heard the "whoosh" as that one went over my head. Perhaps you could expand on that?
Actually I'm watching Titanic. I never saw it before because I didn't want to bother with a movie where I knew the ending.
Aristotle
(5/1/99; 17:06:15MDT - Msg ID:5445)
Money supply for Julia, and a scrolling exercise for the Fed exec's among us.
A day has passed, but you probably recall asking if either M1, M2, or M3 might be a more important indicator than the others. Things changed in mid 1993, but I'll give you some insight into how it used to be. and in case anyone is joining us late, let's review by brief answer to your question about these monetary aggregates so they don't have to go searching.
<<Aristotle (4/27/99; 8:17:22MDT - Msg ID:5229)
Julia and M3
Here is a quick explanation to get you started. M1, M2, and M3 are simply the shorthand name for monetary aggregates measuring different "kinds" of money.
M1 is the money in readily spendible form...cash and checking accounts (transacton deposits). M2 adds on the savings deposits and short time deposits, while M3 further adjusts for institutions' assets and liabilities.
In a nutshell, it is a measure of the nation's money supply.>>
In conducting monetary policy, the Fed monitors money supply and 'spending habits' in an effort to smooth out the tendency toward boom and bust economic cycles. They have three primary tools with which to effect the real world as deemed prudent under their monetary policy roadmap. These are 1) changing the reserve requirement, 2) changing the discount rate, and 3) open market operations.
I'll admit, that looks completely worthless when considering the audience is maybe only now dipping its toe into the deep financial waters for the first time, as evidenced by the week's past questions about overnight repurchase agreements and the nature of these monetary aggregates. So, I'll try to peel the onion in such a manner to get to some terms or concepts that are more familiar...otherwise it will look like the same ol' mysterious onion all the way to the core. OK?
Let's start by revisiting my answer to beesting earlier, because it will help us here to understand the first tool mentioned above--changing reserve requirements.
<<Aristotle (4/28/99; 11:14:03MDT - Msg ID:5283)
Repo's
Basically, banks have fractional reserve lending requirements that they must maintain at least 10% of their total demand deposits (checking accounts) on reserve as vault cash or on deposit at the Federal Reserve System of banks. Because this required reserve money does not earn interest, banks keep this level on deposit as close to 10% as possible (averaged over two week periods). Any extra reserves tend to be invested in things that generate money, such as U.S. Treasuries. These act as interest bearing savings deposits for the bank. When the various banks need to withdraw money from 'savings' to satisfy customer demand for cash and to replenish their required cash reserves, the Fed repurchases these US Govt securities for cash...essentially adding the needed reserves back into the banking system. Hope this gets you started. ---Aristotle>>
You can see that as this reserve requirement is raised or lowered from 10%, the amount of money that must be set aside changes, and with it, the multiplier effect of fractional reserve lending. If it were raised to 50%, for example, for every two dollars a bank holds in a transactional account (checking account), it must keep one on reserve, but can lend the other to a different person. This increases the money supply by the amount lent. Theoretically, a 50% reserve requirement could, if played out with all loans being redeposited in transactional accounts, result in a doubling of the money supply. Similarly, a 10% reserve requirement could increase the money supply by a multiplier of 10! Five percent would have a multiplier of twenty! This value is RARELY changed, as its effect is very tumultuous and is a drastic action, particularly if it is raised!
It is important to remember that this reserve requirement applies only to these checkable deposits, and not to savings deposits, which have reserve requirements of ZERO! Other than a banker's prudence or conservatism, there is nothing to prevent them from lending it all away, and theoretically, if redeposited in savings accounts, this could expand the money supply infinitely!
OK, now for that second tool toward influencing money supply-- changing the discount rate. This is the interest rate at which the Federal Reserve System will lend to banks that choose to borrow money to meet their reserve requirements. If this money may be cheaply borrowed, the banks may opt for this avenue to replenish depleted reserves rather than through repurchase agreements as explained above, especially if this rate is low. If it is high, it becomes costly for banks to replenish depleted reserves, and they therefore tend to hold them in excess rather than tempt fate at the marginal level.
So, back to M1, M2, and M3. Because the Fed can only influence banks across the land insofar as the reserve requirements allow a measure of restraint, and because these requirements apply only to the checking accounts, the Fed has only as much 'monetary policy leverage' as can be found within the M1 money supply. Naturally, you would think that this would be the indicator of primary importance to them. Actually, your own experience reveals how easily you may move money from savings accounts into checking accounts or cash, and the Fed is fully aware of this. For that reason, M2 gets a bit more attention in monetary policy decisions. As I'm typing this offline at the moment, I can't pull up recent figures for examples, but I happen to have on my desk a chart from 1993 to give you an idea for the magnitude of these numbers. (((On my June1993 chart, M1 was 1.1 trillion, M2 was 3.5 trillion, and M3 was 4.2 trillion dollars))) As I have done enough here, I hope someone else will take it upon themselves to post 1999 numbers as soon as they read this plea.
The third tool, open market operations, is exactly what the name implies, but you have to know what market they are referring to! The bond market, of course. In regard to influencing the amount of cash reserves available within the banking system, this functions very much as the repo program I explained above. The key difference, however, is that the buying or selling of US Bonds takes place on the open market rather than through overnight repurchase agreements. This means that the buying and selling prices are subject to the competitive supply and demand pricing pressures that are brought to bear by any bondholders in addition to the private banks.
As I said at the beginning, the Fed moved away from their M2 'yardstick' in mid-1993, perhaps as a necessary reaction to some of the same events that ANOTHER has said brought us to where we are today with the dollar poised for collapse. (Gulf war expenses, and all additional expansionary forces that brought the money supply to all new, unmeaningful heights. And I say unmeaningful only in the regard that it meant nothing for the future management of sound monetary policy, as the money was now revealed to be UNSOUND.) The decision to abandon the M2 yardstick was further justified by the growing trend for people to keep their cash in mutual fund money market accounts, which don't appear in the M2 aggregate, making it even harder for the Fed to meaningfully measure cash supplies as an indicator of economic growth. Since then, they have moved toward an effort at setting target real interest rates (current interest rate minus inflation rate) that they believe are sustainable. Good luck! This castle is not only built out of sand, but is also well below the high-tide line. Sheeeeeeesh!
Gold. Get you some. ---Aristotle
Christine
(5/1/99; 17:00:26MDT - Msg ID:5444)
MK--Have you
been watching Louis Ruckeyser in the closet?
USAGOLD
(5/1/99; 16:48:04MDT - Msg ID:5443)
FORUM BUSINESS...
Canamami and FOA: Two brilliant posts for the newly inaugurated USAGOLD Hall of Record
Recorded by number here for archival purposes this first day of May, 1999 Nos. 5431 and 5439
Thank you for sharing your insights, Canamami and FOA.
******************
ALL:
This Hall of Record will be established as a permanent file to be accessed through the USAGOLD Home Page. The page will be established once the first twenty posts are selected. These are the first two.
In order for this Hall of Record to become a Permanent Institution established by this Table Round, we will require ten supporting posts seconding the motion.
Thank you, my fellow knights and ladies, let the Hall of Record become the keeping place of our most memorable and important posts -- a place of honor in which entrance should not be taken lightly.
Member recommendations will be considered by either e-mail or posting to the FORUM.
Christine
(5/1/99; 16:33:21MDT - Msg ID:5442)
Hello, FOA,
Am not referring to leaders per se, am referring to those who have the real power above the "leaders". 120,000 metric tons of gold exist. Only 40,000 tons belong to CB's. That leaves 80,000 tons in private hands, some of whom are extraordinarily powerful. IMHO, they are the ones pulling the strings on this. This may unfold as you say, but I do believe that the very powerful know exactly where it will end. It unfolds by their design, and to their benefit--mo one elses.
Chris Powell
(5/1/99; 16:24:49MDT - Msg ID:5441)
Statement by GATA's Bill Murphy
These remarks by Bill Murphy, chairman of the
Gold Anti-Trust Action Committee and patron of
www.lemetropolecafe.com, may be of interest.
CHRIS POWELL
Secretary, Gold Anti-Trust Action Committee
-------------------------------------------------
Statement by Bill Murphy, Chairman, GATA
I would like to thank so many of you for your
feedback after my email about my concern over the
lack of press attention to Chairman Saxton's
Press Release and to the fact that not one
newspaper in the United States printed Janet Whitman's
Dow Jones Newswire story about GATA.
There was note one in particular that I thought you
might enjoy. John has been a friend for some time and
is a big fan of the Cafe. He is also very well known
and highly respected in his field:
Dear Bill,
I haven't been in touch lately because we're working
to finance our return to an active site and it's
more time-consuming than expected. I read your good
stuff, however and I can explain why you can't get the
news media interested in GATA.
The problem is that the regular media are terrified
of being out there alone with a controversial story.
Ben Bradlee has said that if no one else had picked up
on Watergate he was within a week of dropping the story.
The press pretends to be anti-establishment, but it's
very reluctant to take any information from an
unofficial source. So, the only way you really get
information is to read all the non-estabishment stuff,
especially the extreme Right and Left. The Right wing
American Spectator magazine had the Indonesian connection
with Clinton more than a year before the NY Times
"discovered" it.
As a reporter, I have run into this all my life. I've
come in with a hot story and unless official sources
confirmed it they wouldn't run the piece. I tried to get
a story about massive theft from air cargo at JFK in TIME
for two years and always got shot down because the FBI
wouldn't admit it. Off the record they told me it was true,
but they had territorial problems.
Some years ago a black teenaged girl in Peekskill claimed
she'd been attacked by a gang of white cops. Sensational
front page in the Times, TIME, Newsweek, TV, etc. And then
a few weeks later a reporter from The Village Voice and
a guy from some non-network local TV station went up there
to get details--and found out that the story was a hoax.
The chief crime reporter from the Times found it hard to
look me in the eye and explain why they didn't bother
to go and check. The reason: it seemed to be police
brutality and the media WANTED it to be true.
GATA is unofficial and making what seem outrageous claims
against the establishment. So, they ignore GATA and
listen to Goldie and Rubin and others who probably call
your operation a bunch of nutty speculators.
The story is also hard to understand and that also
makes editors nervous. Finally, the official position that
gold is just another commodity is pretty much accepted
by the media. (Still, I'm surprised that Crudele hasn't
said anything. He's pretty good at doing odd-ball stories)
Your best hope is that Congress will get interested and
say so to the press. Another possibility: go to American
Spectator. Still, the official line will be to ridicule it
and deny it with self- righteous indignation. "How dare you
suggest that the Treasury and Wall Street are part of a
giant conspiracy!"
Assuming that Congress does look into it, and comes up
with some convincing evidence, the official line will be
that they are "Shocked! Shocked! that some offshore hedge
funds and such would try to rig the gold market." And the
Treasury and White House will see to it that the
malefactors are punished.
Finally, they will want to make sure that none of the bad
guys really get hit in the pocketbook. So, they might try
doing what President Grant did to break the corner in
gold engineered by Fisk and Gould: release tonnes of
AU from Fort Knox. Knowing how Clinton & Co work I would
not find this at all surprising. And they will be very
convincing explaining how they managed to step in an
avoid a worldwide panic.
When our 'net site is running again [ ClickOnMoney.com ]
I will be giving GATA plenty of space.
all best,
John
Thank you John and we will give you as much exposure as we
can.
GATA has received some special interest from members of
the Dallas, Texas community. Certain individuals learned
that Jerome Marcus is one of our attorneys and it caught
their attention.
For those of you that are not familiar with Jerome, I will
quote the following from the front page of the New York
Times - Jan 23, 1999:
"Quietly, a Team of Lawyers Kept Paula Jones's Case Alive"
This time last year, Hillary Rodham Clinton described in a
now-famous appearance on the NBC News program "Today," how
a vast right-wing conspiracy" was trying to destroy her
husband's Presidency.
As it turns out, some of the most serious damage to Bill
Clinton's Presidency came not from his high-profile political
enemies but from a small secret clique of lawyers in their
30's who share a deep antipathy toward the President,
according to nearly two dozen interviews and recently filed
court documents.
While cloaking their roles, the lawyers were deeply involved -
to an extent not previously known - for nearly five years
in the Paula Jones sexual misconduct lawsuit. They then helped
push the case into the criminal arena and into the office of
the independent counsel, Kenneth W. Starr. The group's
leader was Jerome M. Marcus, a 39-year-old associate at the
Philadelphia law firm of Berger & Montague, whose partners
are major contributors to the Democratic Party.
Although Ms Jones never met him or knew he had worked on her
behalf, Mr. Marcus drafted legal documents and was involved
in many of the important strategic decisions in her
lawsuit, according to billing records and interviews and
interviews with other lawyers who worked on the case. As
much as any of Ms. Jones's attorneys of record, Mr. Marcus
helped keep Ms. Jones's case alive in the courts."
Thus, as a result of very recent interest in GATA from the
Southwestern part of the U.S., I have decided to move
to Dallas, Texas on May 15 so that I may be more effective
and productive as GATA Chairman.
Bill Murphy
-END-
FOA
(5/1/99; 16:19:03MDT - Msg ID:5440)
Christine
Christine (5/1/99; 7:30:46MDT - Msg ID:5429)
You give these world leaders a lot of credit for knowing all about gold! My problem is that your credit to them is out of context. Any smart politician will never act to build on a system that denies "money creation". That is the mind set they apply to gold, and for them, the only one that counts. It, by nature, works against their agenda. Just as in my post to canamami (#5439), I again submit that most major western leaders want to use "gold the commodity" as an "asset creation" mechanism for their constituency benefit, not for the creation of a stable financial reserve. Always, when a politician is under pressure, they think of gold in the "present trend", it's a commodity that we can borrow from. Just don't let it into our house to control us.
This is where we are, today. The demand for gold from entities that want to remove dollars from reserves is creating a "piggy bank" for dollar / IMF countries to borrow from. Your supposedly, knowledgeable leaders don't understand that they are using the last asset in line.
Truly, they will be very surprised to learn when the gold they "sold", so to speak, was loaned out so very cheaply. But, fear not, it will be the other gold "in the ground" that they will not be so dumb not to attach! FOA
FOA
(5/1/99; 15:39:10MDT - Msg ID:5439)
canamami
canamami (5/1/99; 9:39:41MDT - Msg ID:5431)
All: please reread #5431 as my reply is for this post.
Hello canamami,
I am happy that your reading here has prompted a further break in said "posting moratorium"!The thoughts and reflections of others help everyone to view the world in a different light. Our bodies are not engineered to see 360 degrees at once. Therefore, at any moment in time,
someone else will always see something hidden by our lack of complete visual perception.
For, myself, Mr. Donald Coxe displays the same style of thinking that has cost many investors dearly during the 90s. He correctly states "gold has been a reliable inflation indicator for at least four millennia" but then associates the correct investment plan to play this "historical precedent" was to hold "precious metal stocks"! Search the western world of investment professionals and we will find the exact same thinking in almost every case. Billions of dollars have been lost using this very style of "association", yet even in the face of these loses, they will still buy shares instead of gold bullion. Why? Because every holder of modern currency is using their present "life trend experiences" to dictate the possible future value of gold! Even the well written history of paper
money, with all of it's chronicled destruction, cannot convince modern man that Gold can and will fully demoney paper! In our present lifetime! Yes, these shrewd trust managers can only accept that the value of gold will only increase to it's commodity value plus a premium for inflation. Hence they buy into the commodity story of gold and hold shares.
Standing upon a hill and looking in the same direction, none of them will view the other 180 degrees of history that is quickly approaching them. Today, the IMF appeals to the governments to use gold as a currency. It will be sold, yet no buyers will be listed! The books will be squared and show 10 million less gold, yet none of it has left the vaults. The bullion is "securitized" and multiplied into billions of loan guarantees, yet we only hear that it was sold to feed hungry people. During the past few years, millions and millions of ounces are leased, loaned and borrowed with
only four or five hundred tonnes shown as deleted from total worldwide CB books, yet we are told they are selling it completely.
Yes, my friend, gold is returning to it's centuries old roots, as it is used as the last resort for financing in a failing debt ravaged, outdated currency reserve system. I submit, that managing the price of gold lower has helped create, what the gentleman has pointed out, as the "rapid money supply growth and some of the lowest interest rates the world has seen". That effort has got us this far today without a currency collapse. The "influence" of low gold created the energy to effect this present state of affairs. Now, that energy has been used up. Now, gold will be managed UP in a final washout of the dollar. Holding physical gold, now will provide a return in proportion to it's past position as "the asset class".
This act will play out again today, just as history dictates. In reference to your post, I add:
The "Good Guy" will "get the girl", "win the lottery" and "never have to make a profit doing it! All because he (she) was dumb enough to hold gold!
thanks for reading FOA
Christine
(5/1/99; 15:04:15MDT - Msg ID:5438)
@Peter Asher--I don't disagree with what you say
Just would add that those with extreme power depend upon some political and financial stability of the system they sit atop. Otherwise, their stability is jeopardized also.
Peter Asher
(5/1/99; 14:33:51MDT - Msg ID:5437)
Christine
I suspect that "those who are really in power" are the ones who would have *bought* the gold if this scenario really occured. Likewise, I suspect that the current multi- year slamming of gold is for the purpose of those, who are really in power, to acquire it. As many of you have agreed over the recent week's posts, the insiders know the true value of Gold as well as we do. Therefore, the only plausible explanation for the *illogical* actions of the gold trade, is the totally logical purpose of wishing to accumulate massive quantities of it.
The immediate future is fraught with wild cards. Values of anything; Stocks, Bonds, Currency even Farms or Timberland, are subject to unknown future events. We know that gold is the way to store value (and accumulate profit) during a period of chaos. To paraphrase one of my favorite quotes: People look at the actions of the gold trade and say "Why?" I look at it all and say "Why not?"
Jon
(5/1/99; 14:01:59MDT - Msg ID:5436)
U.S. gold storage
Several days ago I suggested that supposed storage may be a myth.
Christine
(5/1/99; 11:42:06MDT - Msg ID:5435)
@Julia--How much gold is left?
Hi! IMHO, and strictly opionion. As I posted earlier today, those who are really in power are totally aware of the value of gold and how undervalued it was at that time and is now, and would never have sanctioned/allowed gold reserves to be sold off in that manner.
Peter Asher
(5/1/99; 11:37:51MDT - Msg ID:5434)
Gandalf
Even if only the "Oil Reserve Countries" take your advice and dump their stocks to buy Gold, it will be an interesting week
Julia
(5/1/99; 10:58:13MDT - Msg ID:5433)
How much gold do we really have to sell?
http://www.fgmr.com/unthinkable.htm
This is an old article but with a story to think about today. Can anyone comment on this article?
Thanks, Julia
Gandalf the White
(5/1/99; 10:33:04MDT - Msg ID:5432)
Looking at my Crystal Ball
The outlook from the Crystal Ball for this next week on the DOW is very dark, while the XAU and GOLD will continue to shine brightly. BUT now remember, only the ORCS take my investment advise !
Thanks all for the truely educational posts !!
<;-)
canamami
(5/1/99; 9:39:41MDT - Msg ID:5431)
Weekend Posting - FOA + Notable Op-Ed Pieces
A couple of things have prompted me to again break my posting moratorium.
First, FOA, I would like to echo the comments of The Stranger at post# 5379. To use the language of Economics 101, I have read your recent posts and they have contributed to a favourable "shift in the curve" in my level of understanding of gold's role and behaviour.
Second, in my weekend reading I have come across a couple of gems by Donald Coxe, who is a well-known market commentator in Canada and whom I believe is the chief mutual fund strategist for the Bank of Montreal/Harris Bank and affiliated companies. (MK - I am not advertising for any bank, but merely providing background info so non-Canadian readers will have some sense of the source of the opinion). I will directly quote three paragraphs from an op-ed piece in today's (May 1, 1999) Globe and Mail, entitled "Is the world safe at last for commodity investors?":
Apart from guilt by association, the precious metals stocks haven't benefited much from this resource rally. Reason: The same political leaders who got the West into a war that promises to be costly, messy and long - after promising us it would be cheap, civilized and short - have announced that the International Monetary Fund should sell bullion from its gold hoard to pay off debts from bankrupt nations.
This strategy is being pushed piously, with the backing of the Pope. It may be motivated cynically, with the backing of shrewd ex-trader, U.S. Treasury Secretary Robert Rubin. Announcements of monster pending sales naturally drive down prices of the merchandise to be dumped.
Since gold has been a reliable inflation indicator for at least four millennia, weakening its price at a time of soaring oil prices is politically smart. It will help convince economists and central bankers that disinflation or even deflation is still at work, despite rapid money supply growth and some of the lowest interest rates the world has seen.
I repeat: These views are expressed by a well-known market commentator who is the chief strategist for one of the Big Five chartered banks, in the more established of the two English-language national newspapers. It would appear that some of the views expressed in this Forum are now arguably mainstream, at least in Canada.
The second gem is found in the Spring 1999 edition of a mail-out called "NewsLine". After decrying the Internet-stock mania, Coxe writes: "In retrospect, the second best thing you could have done a year ago was to put your money into Internet stocks. (The best thing would have been to buy the winning Lotto ticket.)"
The above quotation reminds me of a comic short story I read in high school, I believe by Somerset Maugham. It was about a hard-working, dutiful man who is always bailing out a wastrel of a playboy brother. The playboy brother eventually marries a dish of a mega-heiress, thereby securing a better "outcome" than his more worthy brother. Nobody reputable ever promised Absolute Justice or Fairness in This World (or perhaps any world). Sometimes bonehead pseudo-investors make millions speculating in companies that will never make a profit. Sometimes scumbags win the lottery, or sleazeballs get the girl. But, more often than not, the good guys secure some measure of justice.
Justice and good times to all goldbugs (especially USAGOLDbugs).
Chicken man
(5/1/99; 8:44:42MDT - Msg ID:5430)
FOA - Question... if I may?
Enjoy the "riddle" theme of you and your friend!
Question: In this battle for world power,do you see that control of food might be a weapon? The Chinese have $150 billion IOU's from the US gov.What could they possibly buy from the US other than food? This would cause more damage to our economy than bombs. Could we have a grain robberery coming up? Could this be the catalist to inflation,weak $ and a world run on the precious metals?
Thanks for your time,effort and sharing of insite!
Christine
(5/1/99; 7:30:46MDT - Msg ID:5429)
@FOA--Gold is currency, fiat is fiat
FOA, you wrote at 23:30 4-30 (Thank you): "My point is that some people still look at gold as a currency that is so undervalued it's ridiculous. They accept it with the (inside?)
knowledge that the dollar is going to plunge. Not because politicians will force it down, but because politicians have forced it up for
so long. The
true conspiracy was in the dollar reserve standard, not gold."
Although I strongly agree that many have misunderstood and undervalued gold, I do not think those most powerful ever have misunderstood gold. Again, many of those powers also rest their power on top of the U.S. This is where my view of conspiracy originates. The most powerful know what is going on with fiat money versus gold. Somewhere I read, but was not yet smart enough to have saved it for reference, that a larger portion of world gold is held in private hands than by CB's. These are the powers that I am talking about. They know full well the implications of gold versus fiat, and have known it all along. They are the ones I view as controlling and shaping what is happening.
SteveH
(5/1/99; 4:58:30MDT - Msg ID:5428)
A mirror view of a view here...
from kitco about a post here:
mozel (@Somebody @usagold suggests watching Comex gold trading Open Interest now, ) ID#153110:
Copyright © 1999 mozel/Kitco Inc. All rights reserved
because this should be the place where local ( US based ) funds attempt to reduce their exposure to any future rise in gold ( perceived or other wise ) . ( President's Working Group on Financial Institutions exposure )
Private investment funds, that have raised capital through any form of gold short securities, may be asked to expose their "risk". The full group of investment entities may also be expanded to include "any" other parties that have dealings or actual exposure to these funds that are short. In essence, every major player in the gold market could be looking for a way to "neutralize" their books to scrutiny. Even though your exposure may have come from the unregulated part of the OTC world gold market, if one is "hedged long" on a "politically acceptable" exchange, then your position is "politically not at risk"! The books stay closed.
So why watch Comex, open interest? If a certain political faction suddenly changed direction and wanted to revalue gold as an asset to lend money against, the fastest way to do it is to drive currency traders into the paper gold traded on comex. When looked at in this light, gold takes on a very different appearance than the commodity we thought it was. If you notice, on Thursday, Comex gold traded app.. 45,000 contracts and rose $3.00+. Yet the OI dropped 11,000+. Today, a friday, some 60,000 ( estimated ) contracts were traded and it rose $.50. This general trend should continue, in that every time there is a major closing of speculative positions, the next day should show high volume. The major players are taking advantage of shorts closing and buying "insurance". Over the next months, OI should increase greatly! We will watch and learn.
-end-
Yet we all know insurance companies must have reserves sufficient to fill any claims. Only problem with shorts hedging their bets as evidenced by open interest rising is that their will be too many claims and not enough reserves causing a bankruptcy of delivery triggering self-protective rule changes as evidence by what happened to the Hunts during the last great Silver bull of 1979-80. 1999 is developing into the most interest year.
Oregon Geezer
(5/1/99; 3:00:35MDT - Msg ID:5427)
Thanks to TownCrier
I personally want to thank you for the time and effort you put in writing headlines and then providing direct connections to the sources. It is all very informative.
Click Here to view yesterday's discussion.
Permission to reprint is hereby granted where the USAGOLD name is cited along with our web address, mailing address and phone number. For electronic reproductions, citing the post heading and the http://www.usagold.com/cpmforum/ website address as the source is sufficient.
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