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Welcome to the USAGOLD Gold Discussion Archives. The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets...   (Discussion Forum Hall of Fame) (The Gold Trail) ("Thoughts!" by ANOTHER)   The opinions posted by all guests are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of the public discussion shall therefore not be construed as an endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.

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ARCHIVED DISCUSSION FROM 12/12/1999
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View Yesterday's Discussion.

el St.One (12/12/99; 23:50:33MDT - Msg ID:20871)
Cycle Pro
http://www.geocities.com/WallStreet/Exchange/9807/Charts/SP500/Outlook.htm
Where Are We Now?

(12/12/99 PM) The market continues to keep us all guessing. But, I suspect the drama will become much clearer soon enough. So tonight CyclePro is stepping back
up on the soapbox to pose a few questions.

The Fed's M3 money supply has increased recently that exceed historically high levels. The Fed's target growth rate is just 5%, yet the M3 increases have been 15%
(annualized) and includes $36 Billion last week and $194 Billion over the past 13 weeks. Wall Street has known for awhile the Fed was planning to have $60 Billion
in reserves for any potential Y2K problems in the U.S. banking system. But this and recent dumping of additional liquidity, much of which ended up in the equity
markets, is well beyond what should be necessary to squash the little Y2K bug.

So why did the accellerated expansion of M3 start so long ago when the Y2K bug has not even arrived yet? The answer is probably quite simple... FEAR! Not so
much that the Fed believes Y2K will be a problem in itself, but because the public's impression in severity of problems. The hype has been growing and investors are
nervous. The best way to tame that nervousness is to pump the stock market bubble even larger (through increased money supply), so people get back into their
comfortable mode of GREED and worry less about any FEAR. We all know the bubble will ultimately burst, but now it will burst at a higher level -- which means the
aftermath will be all the more destructive.

So the next questions are likely to be: How much longer can the Fed continue to add to the money supply to keep our market players happy? Does this recent
excessive money expansion mean a more aggressive rate adjustment schedule next year? How will this M3 increase affect foreign exchange rates with the Dollar?

I am afraid I do not have the correct answers to these questions, but I can certainly guess. The global economy and all of the factors that drive it, are very sensitively
balanced. When one aspect is altered, other areas must compensate in an attempt to retain some form of balance. Since the U.S. economy was growing too fast this
past year, the Fed raised interest rates to help slow it down. Now the Fed has increased the money supply (at records levels) the economy is likely to speed up again.
This only means the Fed must slow it back down again -- with additional interest rate increases. A higher interest rate means foreign exchange rates are affected. A
stronger dollar hurts exports. Higher U.S. interest rates cause foreign investors to buy U.S. treasuries & bonds to capture the higher rates. But this increases the
strength of the Dollar. So to compete, other countries will be forced into raising their own rates in an attempt to keep their money at home. So we are almost full circle
in the foreign arena, but now the interest rates are higher across the board.

Rather simplistic perhaps, but that's about as far as I want to take this discussion -- you should be able to imagine these relationships and expand it into many more
layers of additional detail.

So what's up with the Fed increasing the money supply at the same time they were raising interest rates? The answer to that question is probably very similar to the
reason the CPI calculations no longer includes energy costs... the average investor only looks at the surface and whatever they hear in the popular media. More likely,
investors only hear what they want to hear. Even if the under-surface is crumbling, the average investor would never notice. The Fed seems to be counting on that
premise. These tactics by the Fed are too short-term oriented ... longer-term must suffer as a result.

Before I go tonight, I have another announcement: CyclePro will be taking another vacation over the Christmas and New Year holidays. This means there should be
updates this week and next Sunday, December 19, but the next update after that will not be until Thursday, January 6 ... unless of course Y2K affects my return flight!
Very little transpired in the markets while on my previous vacation, I am not so sure that will be the case this time around.

Gandalf the White (12/12/99; 23:11:47MDT - Msg ID:20870)
< ; - )
Just wished to poke my pointy hat in the castle and see if the "coast is clear". I have been asking both the crystal ball and the "Mirror, Mirror on the wall" to show me the handles of all the subversives on the FORUM and both have only been able to come up with one !!! -- They both say tis: "Gandalf the White". -- BEWARE ! was it the CIA that he worked for those ten years while in Washington D.C.?
<;-)


elevator guy (12/12/99; 22:48:44MDT - Msg ID:20869)
@Al and Solomon
Thank you for your kind responses.

I've gotta get up real early, and run on the wheel again. Sheesh, this elevator stuff is tuff! And the bars hurt my paws.

Anyway, good night.



Solomon Weaver (12/12/99; 22:40:55MDT - Msg ID:20868)
No flames for elevator guy
Elevator Guy

Having been worrying over the last two years about the fallout from y2k...and restructuring physical and emotional assets...I have often thought that "when we all slide, we all slide".

As I understand the analysis of FOA, in a "very dramatic" gold market, there will be so much carnage of hedge books, and so much related illiquidity, that even the gold mines, who should be able to profit, will find that their "normal" trading partners are "locked up" (financial grid lock for some - prison for others?).

We will all be very lucky if the FED is able to sustain some amount of control so that this whole thing melts down in a kind of scandal.

One thing which worries me about Joe Public...when the news gets out that there has been collusion in the gold markets is that a lot of silly people will view it as collusion to keep the price of gold high...that was at least what collusion in the stock market would mean. Understanding short sales is hard for the average investor...understanding the lease/forward sales story in PMs is off the map.

The real way to win will be to have the courage to sell some physcial gold down the road to buy up some paper assets...obviously will require good timing...but your dream house will be paid with paper too.

Poor old Solomon

Al Fulchino (12/12/99; 22:30:48MDT - Msg ID:20867)
(No Subject)
elevator....don't fret your thoughts go to the top floor....I put some money in PM's not to get rich, but to preserve wealth. If anything more comes of it, then fine.

Solomon Weaver (12/12/99; 22:26:50MDT - Msg ID:20866)
Perhaps Christine is a Pen Name
Just occurs to me that Christine might be a fiction of the imagination of someone on the USAGold Staff...trying to play a spoof on us.

Better be careful though, because if we believe this, and it turns out that Christine is for real, then she might be paranoid that we conspire to convince her she does not exist.

Little does she know that WE really don't exist.

Poor old Solomon

elevator guy (12/12/99; 22:22:34MDT - Msg ID:20865)
Do we have an interest in maintaining the status quo?
We all are by now aware of the very real possibility that the Fed, or the powers that be, squash gold to support the illusion of a strong dollar, either through a trading account at Goldman Sachs, or by other behind the scenes methods. (And also the current puppet administration, the bankers who pull the strings of the squawking politicians, the heads of huge corporations, big business, et al, attempt to keep a lid on Y2K fears, to avoid extra disruptions, above and beyond real Y2K related systemic symptoms)
Now please keep your swords sheathed, as I lay out reasons why this might be in our best interest. Ok, maybe not in the best interest of those who own physical. OOOH, its getting hot in here already! But here's the theory- Maintaining a low POG benefits the country at large. How? By keeping the cornucopia of stolen blessings rolling in, protecting the staus quo of the world's economy, and thusly our own, evil and wicked as it may be.
Now, keeping things as they are may benefit those evil gold shorts more than it benefits me. But the other day I was thinking, (I know, I know, "first time for everything" Ha-Ha, very funny!) But anyway, I was thinking that if the good ole USA in which I live, and have my home and my family, my business, and all things I hold dear, what would happen to my way of life if there was to be a sea change in our country's economy?
If there is a recession because of Y2K, or if the EURO starts to kick butt over the almighty dollar, dominoes will begin to fall, and that worthless piece of green paper we call the dollar will fall back to earth. And then we will have to pay the piper for exporting years and generations of debt. Now this might seem to many, as a more morally equitable state of affairs. But if it is to happen, what will that benefit me, as a US citizen? My business depends on a strong economy. My family depends on me. What do I have to gain by wishing a disasterous chain of events that will make gold soar to $30,000/oz? Some say, well, invest in gold, and when TSHTF, you will be a rich man. (If you survive the upheavals) But as I understand the FOA/Another scenario, gold won't be worth any more, its just the stated value of gold, as measured in what could become little tiny dollars. So earned value is protected, but not increased? Standing in one safe spot is good, if all around you is molten volcanic lava flow, I guess.

Have any of you had any similar thoughts?

(I wonder how long it will be before I'm flamed outta here?)

Please excuse my thoughts as no more than just the out-loud musings of a common man, and take no offence, for I do love golden truth also, and also highly esteem honest currency that does not lose its value while you sleep.

Solomon Weaver (12/12/99; 22:22:21MDT - Msg ID:20864)
changing the rules
Who ever makes the rules, can change them, right?

---

Right on the mark...the FED will have no other option than to change the rules a little...just that they will do it for some and not for others.

One potential windfall in all of this:

In a system where the banks are required to have a fraction of their outstanding loans present as reserves, we call the system FRACTIONAL RESERVE BANKING.

In a new system where there are no reserve requirements we can just call it BANKING.

Poor old Solomon

Peter Asher (12/12/99; 22:19:15MDT - Msg ID:20863)
Addendum
Just because she's paranoid doesn't mean someone's not out to get her: Right?

Peter Asher (12/12/99; 22:16:23MDT - Msg ID:20862)
Solomon
I wouldn't take that post of hers seriously. That was so totally absurd, I might believe it if she said an enemy of hers had gained access to her pass code.

Peter Asher (12/12/99; 22:11:06MDT - Msg ID:20861)
Solomon Weaver (12/12/99; 21:38:19MDT - Msg ID:20854)
Re >>> But if you go out and get $100 from the bank, by the laws of the FED, some bank is required to call in a loan to the tune of $1000 (possibly even several thousand). <<<

Precisely. I was wrestling for some time with the effects of the printed cash on the money supply. At first I thought as you said, that each withdrawal would require a much larger amount of loaned money to be taken out of the system. But, that can't just be done by decree, so the Fed would have to either issue more funds OR change the rules of fractionalization. Who ever makes the rules, can change them, right?

If they issue more funds, the money supply is increased, but if they change the rules, then a ledger entry is converted to an FRN. The liabilities change, but not the quantity of dollars.

The whole thing reminds me of the old skit with a napkin folded into a mustache, a ribbon and a bow tie. You must pay the rent" --- "I can't pay the rent" ----I'll pay the rent" ---- "Curses" --- "My Hero"

Number Six (12/12/99; 21:55:43MDT - Msg ID:20860)
Oil and Gold post y2k...
A while back both Another and FOA emphasised to watch the price of oil as a precursor to a move in Gold (and then, hopefully, silver and other PM's :o) )

This is a long thread which may indicate our fate in the next few months - please skip it if you fell y2k will be a bump in the road :o)

============================================================

In regards to assessing the Y2K impact on oil, perhaps it would help to pick up some Dep't of Energy's Special analysis on what is going on inside certain key oil-exporting countries as it relates directly or indirectly to oil. This report is called
World Energy "Areas to Watch"

I'll just post only the most pertinent aspects for each nation and I'm not sure how many to post to a thread. We've already posted Venezuela separately because of the size of the report and its unique #1 status. It is at this URL on TB 2000.

http://greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001zHG

Here are: World Energy "Areas to Watch"

The countries/regions listed in this report are: a) important from an energy perspective; and/or b) experiencing significant economic, political, or other problems which currently (or likely in the short-term) could affect their energy sectors. Click on the name listed below for a brief discussion/analysis of the main concerns regarding that particular country/region's energy industry.

Information contained in this report is the best available as of September 1999 and can change.

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

NIGERIA

http://www.eia.doe.gov/emeu/cabs/nigeria.html

Main Concerns: Ethnic unrest and violence continue in the Niger Delta region of Nigeria, the largest oil producer and exporter in Africa. President Obasanjo took office on May 29, 1999, returning Nigeria to civilian rule for the first time since 1983. Oil production operated by the foreign firms in the region has also been disrupted on several occasions. Nigeria is one of the world's leading oil exporters, with production of over 2 million bbl/d of oil in the first half of 1999, and with exports of around 680,000 bbl/d to the United States. On July 6, 1999, President Obasanjo announced the cancellation of crude oil sales contracts and exploration agreements awarded by the previous government of President Abubakr. A majority of the awards (11 were in Nigeria's deepwater area) were granted to local firms, which were believed to have ties to active and former senior military officials. President Obasanjo has established a commission to examine the propriety of all government contracts awarded in 1999 prior to his administration's assumption of power. Obasanjo himself has been accused of favoring nominees from his native southwest.

In May 1999, Nigeria awarded a repair and refurbishment contract for its 125,000 bbl/d-refinery in Warri to a consortium of Canadian, Dutch and U.S. firms. The contract was awarded to Canada's Ramboil, Dietsman Comerint of the Netherlands and Litwin of the United States. --------------------------------------------------------

IRAN

Iran is OPEC's second-largest oil producer, with average 1998 crude oil production of 3.6 million bbl/d. Iran's current sustainable production capacity is estimated as high as 4 million bbl/d, but this figure is controversial since Iran may have maintained production levels at some older fields only by using methods which have permanently damaged the fields.

http://www.eia.doe.gov/emeu/cabs/iran.html

----------------------------------------------------------- COLUMBIA

http://www.eia.doe.gov/emeu/security/hot.html#COL Main Concerns: Colombia, a significant oil producer and exporter, faces serious problems, including guerrilla groups active in the country for the past 34 years and now in control of large swaths of the country, right-wing paramilitary groups, a major illicit drug trade, large fiscal deficits, and high unemployment. Despite these problems, Colombia's oil production is at an all-time high, up from just over 100,000 barrels per day (bbl/d) in the early 1980s, to an estimated 844,000 bbl/d in the first quarter of 1999 (with net oil exports of over 470,000 bbl/d, largely to the United States). Colombia's government estimates that bombings of oil pipelines alone cost the country about $50 million annually.

On September 5, 1999, rebels ended a 5-day occupation of the Anchiclaya hydroelectric power plant in western Colombia and freed 145 hostages.. The plant is majority-owned by a consortium involving Houston-based Reliant Energy Inc. (REI) and Caracas Electricity company of Venezuela. The rebels initially had demanded a 30% reduction in electricity rates, but apparently settled for less.

http://www.eia.doe.gov/emeu/cabs/colombia.html

Low world oil prices reduced Colombia's export revenues, despite an increase in the volume of oil exports from Colombia's Cusiana and Cupiagua fields. To deal with the resulting fiscal deficit, President Pastrana submitted a severe austerity plan to Congress immediately after taking office. He has also called for large scale investments in education, health, housing, and infrastructure in the countryside (where rebel groups exert significant influence).

Colombia has about 2.6 billion barrels of proven reserves of oil, and possibly 10 times this amount in potential reserves. Oil production is located mainly in the Cusiana and Cupiagua fields in the eastern Andes foothills, and in the Cano Lim--n field in Arauca province near the Venezuelan border.

Both Cusiana/Cupiagua and Cano Lim--n are 50% owned by the state oil company, Ecopetrol. Cusiana/Cupiagua is also controlled by BP-Amoco (19%), Total (19%), and U.S.-based Triton (12%). The Cano Lim--n field is operated by U.S.-based Occidental, and Shell. A relatively recent discovery is Emerald Mountain field, explored by U.S.-based Seven Seas Petroleum, where proven reserves could total about 150 million barrels. There has also been increased interest in Caribbean offshore sites; last year, Ecopetrol awarded four offshore contracts which effectively opened the entire Caribbean coast to exploration. The contracts are with Texas Petroleum, Shell, BP-Amoco, and Arco. About 75 foreign oil companies now operate in Colombia. BP-Amoco is the largest investor in Colombia, with annual investment averaging about $2.4 billion.

Although Colombia is now producing the most oil in its history, under current rates of investment, Colombia faces the prospect of becoming a net oil importer by the middle of the next decade. Exploration activity is at a virtual standstill. Colombia's oil sector faces additional challenges, such as a difficult geology (deeper wells in the Andean steel-like rock), frequent terrorist attacks on its oil pipelines, and competition from other oil-producing nations offering better investment terms.

Colombia has about 38 wells in present operation (compared in over 400 in neighboring Venezuela). Only 17 wells were drilled in 1998, although it is hoped that this number will increase to 50 in 1999. Ecopetrol has been criticized for its inefficiency: in the last 10 years the state has had to infuse at least $8.8 billion into the company.

In April 1999, Ecopetrol announced a $600 million expansion and upgrade plan for Cartegena, to add 75,000 bbl/d of new capacity, to bring the total to 140,000 bbl/d by 2004. One private refinery operation in the most advanced stage of development is the Sebastopol refinery, located on the Caribbean city of the same name. U.S.-based Enron is managing the $270 million project. ---------------------------------------------------------

IRAQ

http://www.eia.doe.gov/emeu/security/hot.html#IRAQ

I won't take up the space to rehash the situation in Iraq. Gordon has been tracking this one. Suffice it to say that Iraq's oil infrastructure is 1980s vintage and boasts some of the earliest of the embedded systems. At least that which wasn't bombed back to the stone age during the war. Iraq admits it is not ready and will FOF.

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

RUSSIA

http://www.eia.doe.gov/emeu/security/hot.html#RUSS Russian oil production, for instance, has fallen from its peak of 11.4 million bbl/d in 1988 to only 5.9 million bbl/d in 1998. Coal, electricity, and natural gas production also have declined. Meanwhile, Russia's net oil exports (including exports to other republics of the former Soviet Union), after reaching 4.9 million bbl/d in 1990, fell sharply before bottoming out at 3.2 million bbl/d during 1993 - 1995. Since then, net oil exports have increased somewhat -- to 3.5 million bbl/d in 1998. In 1998, total Russian oil production fell an additional (though small) 0.8%. A 2.2% decline in production by Russian oil companies was mostly offset by an increase in production by foreign/Russian joint ventures. During the first half of 1999, indications are that further declines in investment in Russia's oil sector have led to another small (0.9%) decline in production. A survey by the Russian Petroleum Investor found that Russia's economic/political problems are affecting smaller independent operators and energy service companies, which have been forced to layoff personnel and/or curtail their operations, the hardest. Canada's Fracmaster, for instance, laid off 75% of its Russian work force in 1998. Russia's downstream/retail oil sector has been affected as well, with plans to expand the number of gasoline stations shelved. Major international companies have been affected to a lesser extent by Russia's problems. A few projects have been cancelled, such as BP Amoco at Priobskoye and Occidental at Komi, but a number of factors were considered in these decisions. Elf Aquitaine has downsized its presence, and BHP has pulled out of Russia. However, most major international companies have stayed in Russia after reducing labor costs.

for more see this link: http://www.eia.doe.gov/emeu/cabs/russia.html

In 1997, foreign JVs produced roughly 360,000 bbl/d, or 6% of Russia's total oil output. This 1997 output represented a gain of 50,000 bbl/d, or 18%, from 1996 levels. The two largest JV's are Vanyoganeft (58,000 bbl/d) and Vatoil (52,000 bbl/d), with Polar Lights, LUKoil-Aik, Komiarcticoil, and Nobel Oil all producing over 20,000 bbl/d. While some JVs are involved in new field developments, many ventures are focused on rehabilitation and technical services activities at existing fields. Pipeline access to export markets is key to the profitability of the JVs. In 1997, only about 30% of JV output was exported and sold at world prices, a figure which is comparable to the amount exported by the larger companies as a whole. In September 1997, 6 JVs lost their privileged access to export pipelines - White Nights (Phibro), Polar Lights (Conoco), Chernogorskoye (Anderman-Smith), Petrosakh (Nimir Petroleum), Amkomi (Aminex), and the Siberian-American Oil Company. Of the 7 PSAs approved by the beginning of 1998, only Sakhalin-I involved active foreign company participation. The Sakhalin-I consortium has continued its exploratory drilling program and seismic work, as well as testing two productive wells which were drilled in 1997. The Sakhalin-II consortium (Mitsui, Marathon, Shell, Mistubishi - collectively known as MMSM) is even further along, and expects to begin producing oil at Piltun-Astokhskoye in 1999 after investing $500 million by mid-1998.

Most of Russia's oil exports are destined for European customers, including the United Kingdom, France, Italy, Germany , and Spain. Petroleum exports (except those that pass by rail, truck, and barge) must use the 31,000-mile pipeline network operated by state-owned Transneft.

The majority of Russian oil is exported via terminals in the Baltic and Black Seas. Black Sea exports must pass through the increasingly crowded Bosporus. Russian crude oil also is exported to Europe via the 1.2-million bbl/d capacity Druzhba (Friendship) pipeline.

Many Russian refineries are relatively unsophisticated, oriented towards heavier products, and operating well below capacity. Crude oil is delivered to refineries based upon sulfur content. Low-sulfur oil (less than 0.6% sulfur) is processed by eastern refineries and to the Krasnodar, Tuapse, and Volgograd refineries. High-sulfur oil (with sulfur content exceeding 1.8%) is processed by refineries in Novo-Ufa, Ufa, Ufa Neftekhim, Nizhnekamsk, Salavat, and Orsk. The remaining oil (0.6%-1.8% sulfur content) is processed by refineries close to the producing fields, although blended oil in this sulfur range is also processed by the central refineries such as Moscow, Ryazan, and Yaroslaval.

Several refineries have undergone modernization programs. The Yaroslaval 359,000-bbl/d refinery is undergoing a $416 million upgrade by 2002, and NORSI-Oil is undergoing a $350 million upgrade on its 438,000-bbl/d refinery by 2005. Russia's refined product exports in 1997 to countries outside of the Commonwealth of Independent States (CIS) totaled 1.2 million bbl/d, about one-third of total Russian oil exports, and went primarily to Western Europe.

Proven Oil Reserves (1/1/98): at least 50 billion barrels (varies depending on method used to calculate reserves) Oil Production (1997): 6.1 million barrels per day (bbl/d), of which 5.9 bbl/d is crude oil Oil Consumption (1997E): 2.7 million bbl/d Crude Refining Capacity (1/1/98): 6.9 million bbl/d Net Oil Exports outside FSU (1997): 3.2 million bbl/d Net Oil Exports within FSU (1997): 0.3 million bbl/d Major Oil Customers: CIS, Europe ===============================================================

There are a few other nations listed but small and not probably at all relevant to the US Y2K situation. These are Angola, Caspian Sea, Indonesia, Libya. These along with the ones we've already mentioned above + Venezuela are all on the DoE's Watch List. This "Watch" list does not even mention Y2K factors, though I suspect that it silently weighed upon the editors who put this list together.

Clearly, these nations are already basket-cases or nearly basket-cases and it would not take much to tip these nations into serious oil production problems. As such, all (the above featured nations + Venezuela) but a Russian oil production problem would not affect US consumption directly. More on this will follow

-- R.C. (racambab@mailcity.com), December 12, 1999

Answers
Thanks, R.C.! Your continuous efforts to give good, well documented info on the status of oil is much appreciated.

-- King of Spain (madrid@aol.cum), December 12, 1999.

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

R.C.
What about Saudi? Wasn't there a report on TB referencing an E-mail from some worker in Saudi (I think from North's site) in which he asserted major problems on the ground there?

Just asking as you seem to have a better handle on this than anyone I've read in my parusing.

Philosopher.

-- philosopher (critcal@thinking.com), December 12, 1999.


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

KoS, Thanks. I love your ribald comments and your royally punctual postings.
Philosopher,

Well, I've just been posting the DoE stuff. I wasn't in touch with the Saudi source. That was either Dog Gone or Big Dog. I'm not sure which. I guess we need to put out a call on that and see if we can get a response. As I gathered, that source was posting on another forum (Free Republic, I think)... and one of our regulars picked it up and brought it over here. Of course, the reliability factor is low simply due to the 3rd or 4th hand status perhaps, BUT its all we have to work with. I think some other engineer confirmed much of what that Saudi remediator had been indicating though about the general status of Saudi remediation.

Why don't you post a thread asking for the Saudi report from Dog Gone who was in touch with the guy.

-- R.C. (racambab@mailcity.com), December 12, 1999.


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

The person who posted on the Saudi situation is back in the US. He still posts on the Free Republic mailing list, but has not had anything to say about the Saudi situation in recent days. That list does have some good information on it, but much of it is duplicated on this forum and other mailing lists. To subscribe, send a blank email to: freerepy2k-subscribe@egroups.com

-- Danny (dcox@ix.netcom.com), December 12, 1999.

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

R.C.,
Thanks for the info re: US oil providers. However, what happens if one or several major producers that do not supply the USA have major problems? Wouldn't that still reduce the total available world supply of oil and cause the price to rise here anyway? For example, if Europe or Japan have an oil shortage, but all of our providers are perfectly ok, the price of oil will rise there and our price will have to rise to match or our suppliers will ship to those markets with the higher price. So it seems to me that it does not matter whether it is our providers or "their" providers - if enough capacity goes off-line around the world, the effect on us is the same.

Bruce

-- Bruce T. Dague (bruce.dague@excite.com), December 12, 1999.


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

Thank you R.C. for all your efforts and elucidation.
Another way that Y2K might play out is for example Indonesia to be unable to deliver petro-product to Japan causing Japan to bid higher prices on the open market. Or Libya to be unable to deliver to Europe.

With inventories at a multi-year low today, I suspect that demand is rather inelastic and reduction in supply will tighten to the point that global rationing is implemented along the lines outlined by I.E.A. This appears highly probable even if the refineries and distribution system in North America are 100% compliant. As 100% compliancy is very unlikely, it looks like oil will have probelms at every link of the supply chain.

With oil so integral to modern economies (Economics is a prelude to war as in politics by other means.), I wonder if we could see a TEOTWAWKI scenario even if the USA experiences 80-85% Y2K compliancy.

If so, when do you think such might become apparent? My guess is we should know by February 2000 how overseas are able to perform post rollover.

-- Bill P (porterwn@one.net), December 12, 1999.

============================================================

Solomon Weaver (12/12/99; 21:55:17MDT - Msg ID:20859)
Why Christine is right...why Christine is wrong.
What in heavens name would cause the CIA to take any interest in a web site where a couple dozen regulars sit around and share notes on one of the most old fashioned commodities known to man?

If the GATA truely did send out over 50,000 e-mail copies of the recent letter, then I could see why some WA DC types might get worried. But using this forum as a CIA front would be a waste of government resources...why be paranoid.

On the other hand, I would not hold it against the CIA or FBI or other such to force coin dealers to disclose their client lists. Most coin dealers who have been in business long are very upstanding and honest types who would like to keep their client lists secret but might be good citizens and disclose them in a time of duress (in the national interest).

Poor old Solomon


Peter Asher (12/12/99; 21:52:55MDT - Msg ID:20858)
From 'The Orange County Register'
Speaking at a lecture promoting his latest book. "My Years With Ayn Rand," Nathaniel Branden said: "A group of people, including Allen Greenspan, would meet with Rand to hold intellectual discussions and read the manuscript of Atlas Shrugged as it developed. He said Rand did not like Greenspan at first. "She had zero interesr in him and thought he was ridiculous," but later "they became completely devoted to each other."

elevator guy (12/12/99; 21:50:59MDT - Msg ID:20857)
@DAYOOPER
Thank you for your kind comment about my alledged common sense.

Al Fulchino (12/12/99; 21:45:32MDT - Msg ID:20856)
cave not cace..my TVO is going bad
wink

Al Fulchino (12/12/99; 21:41:54MDT - Msg ID:20855)
Nevermind Christine we cannot hide it anylonger
http://www.Christine'ssecretconspiracycace.com
Hurry the site will not be up for long the "ops" will surely shut it down!!!! Buy Gold and fear not for my safety.


Solomon Weaver (12/12/99; 21:38:19MDT - Msg ID:20854)
Peter Asher (20835)
Mr.G's #2801 this morning, said that the Fed issued those extra funds to the banks short term, due back in a few months. HOW? If all that cash doesn't come home to roost then either they reissue the credit or they bring down the system.

----

Peter,

An additionl concern of mine here.

It is very obvious that the reason for the FEDs dramatic "short term" expansion of the money supply is to help create the bailout package for y2k in advance".

It is also pretty obvious that if y2k is anything but a bump, that they will have to rollover the credit.

It is also pretty obvious that "some debts will be called while others will be graced". Very political....

But what I worry about is that the very things which need this monetary expansion are going to drive people to move towards true cash.

But if you go out and get $100 from the bank, by the laws of the FED, some bank is required to call in a loan to the tune of $1000 (possibly even several thousand).

As banks and businesses collapse, deferred payments (credit) will move towards cash settlements.

Let's say for example that a large supermarket chain is unable to settle their accounts with several banks and are therefore being locked out of the use of credit card charges. Let's say that they happen to have fairly large depots with food, so they have a product to sell...so they demand cash...people realize that it once again takes cash to buy food so they restructure their entire financial reality towards cash transactions...this type of action, at large, will suck money out of the bank vaults and banks will no longer fufill reserve requirements....making the emergency credit that the FED has issued them even more unworthy.

Little old ladies with CD's will be bailing out the banks.

Poor old Solomon

Al Fulchino (12/12/99; 21:37:56MDT - Msg ID:20853)
Christine
Can you not tell anyone what you have discovered? Thank you

goldfan (12/12/99; 21:33:06MDT - Msg ID:20852)
Solomon Weaver- Leasing
http://www.usagold.com
Solomon thank you for your extensive and thoughtful message. Really useful to me in its simplicity. Too tired to continue now, but I am really grateful to all those here who have taken time to respond to my questions. This place is more like what I imagined Socrate's Agora must have been, than any I have encountered in my fairly long life. Let us hope we don't suffer the fate of those (for their time) eminently civilized Athenians when the barbarians from the North invaded.

Goldfan

DAYOOPER (12/12/99; 21:17:01MDT - Msg ID:20851)
SteveH
I once had grand visions of taking on the big boys that control everything. But, I found the apathy of the general public to be too great. I know the story about David and Goliath but sometimes the heighth of the giant is too much to be reached by our rocks. We should never give up on the dream but I believe there are too many sheeple out there that don't understand and don't care... Without them what do you have? Wouldn't it be great if WE could drive the market by just saying we are going to limit our leasing of gold or that we are going to have a gold sale?

By the way, I'm sick of what they can do also.

Solomon Weaver (12/12/99; 21:14:23MDT - Msg ID:20850)
Worst case scenarios for Canuck
Hey Canuck

I am a preparer, tried and true (just fired up our second wood stove tonight).

I just wanted to say that even thinking about such scenarios as 2 billion people dying is worthless...why? because if that many die, those who survive may envy the dead...as they say.

I have thought about it a different way.

World population is about 6 billion. Taking an average life expectancy of 60 years means 100 million deaths per year due to natural causes...so about 10 million per month. Most who die are poor, ill, old, etc. Just the types who are most vulnerable to systemic crisis.

I think that just by hitting the weak, that y2k could cause as many people to die in the first three months of the year as would normally die during the year anyway...in principle only advancing the time of death...not neccessarily a tragedy to someone who is suffering. This means that the death toll attributed to y2k would be several tens of millions...the media will get some good mileage out of that.

The other side will be that things like extended local electrical outages could cause some very normal people to die too...and make the news as well.

If the death toll reaches 100 million...the news will report it so much that the world would think it was 2 billion.

Poor old Solomon

Solomon Weaver (12/12/99; 21:04:18MDT - Msg ID:20849)
Hey Dayooper!!! Silver Bugs Unite!!!
http://www.gold-eagle.com/research/butlerndx.html
Although you have owned gold a lot longer than I, I am glad to see that their is some silver in your veins too.

The above link, if you haven't been there has some pretty gritty stuff to say about silver....

Here is what I see as valuable about a bag of junk silver:

1. It is "usually" traded at melt value, and is considered meltable...

2. It is a lot harder to steal than gold.

3. Silver is suffering from the same lease/forward selling/short selling scam...but the market is much much thinner.

4. If a rush to PMs comes again...silver will be the middle class version.

5. In a "semi-breakdown" scenario, where people are trying to cash in their gold coins to buy things, they will mostly try to use pawn shops and coin dealers...those dealers will need something (dollars, etc.) to buy the gold with. One very reasonable option is for dealers to offer silver in exchange for gold. For example, 100 silver quarters for an ounce of gold.

6. Bartering in silver is less dangerous than bartering in gold.

Poor old Solomon

Canuck (12/12/99; 21:04:10MDT - Msg ID:20848)
Anyone
Do you guys remember the editorial, possibly from G-E from the 'worst-case scenario' guy that predicted 2 billion people will die from Y2K after 6 months (by June/July 2000)??

SteveH (12/12/99; 20:48:31MDT - Msg ID:20847)
DAYOOPER
I don't think any of us want the scenario FOA paints. The issue for most of us (me anyway) is that our gold-related investments (stocks, etc) are being controlled by those who control the gold market and that makes us mad. Just because we know this first hand, doesn't make us happy with glee that the gold market must rise and banks and markets must fail. We are the victims and the perpetrators who have not taken responsible measures to ensure a fair playing field or have taken unfair advantage to our detriment deserve what they get, imo. It is so frustrating to see what is happening and appear to be the only ones who care, whilst our investments hit the skids. That is why I support GATA and the the folks who try to make folks aware and maybe, just maybe, we will prevail.

It is a sad day that in order for gold to rise all else must fall. We must ask who put us into that position? They are the ones who are responsible. Shame on them.

DAYOOPER (12/12/99; 20:34:38MDT - Msg ID:20846)
GENERAL OBSERVATIONS
I am new to this site but not new to the problems that a currency not backed by gold has created. I bought gold in the early 80's when the stock market wouldn't make it another day. And I bought some more because there was no way the economy could make it into the 90's. I bought it because I like gold...but I believe silver U.S. coins will be more useful if the crash comes. Everyone knows what they are and the smaller denominations make them more liquid.

I hope the crash doesn't come but it seems as if some of you are almost wishing for it so you can say I told you so or whatever. It will not be a pleasant experience for any of us...even if we have gold. And as for gold, I wish the feds or the bankers would drive the price down to $32 an ounce so I could afford to buy a whole bunch of the physical stuff. Over the years I have come to view gold as land. It will always be worth something no matter what happens. My worry is, if things get that bad, I can see the banning of gold ownership all over again. They did it once and they can do it again. Of course, I really don't have any...

Elevator guy seems to have alot of common sense and if you have common sense you will survive whatever the future holds in store for us.

I apologize for the simplicity of my views and that I don't have alot of numbers to profound you with...but most times simple is best.

It will take years of misery and strife if we were ever to get back to a gold standard. I'm not sure our short lifespan will see it.

Galearis (12/12/99; 20:31:10MDT - Msg ID:20845)
history: Goldteck and Steve H re. rhody
Regarding the Kitco post from Goldteck: I have the same comment as at that other forum. The poster does not factor in the growth in world population. Production and therefore supply has not kept pace.

On the subject of rhody. He mentioned to me yestereday that the poster who went under the handle of "Old Gold" (I certainly hope I have this right) was the individual who put him on this particular track. He (rhody) does not bother with watching the spot price anymore; he is more concerned with value trends and mechanics of the murky world of lease functions. There is, however, some small value in predicting the direction of prices on a daily basis and for a revelation of broad future trends, although the later still lacks precision and there are unknowns. He also feels that lease rates are also a manipulation factor in the gold market. Give him some more time and he will figure it all out - he is there by a factor of 90%. I am still trying to get him to start posting here, but he is a busy man and cannot plant himself for long periods in front of a keyboard as so many of us can. Best regards and I look in tomorrow.....

Number Six (12/12/99; 20:27:16MDT - Msg ID:20844)
Latets from Paul Erdman
By Paul E. Erdman

SAN FRANCISCO (CBS.MW) -- Pronouncements of the death of the euro when it sank below parity with the dollar last week are turning out to be premature.

It bounced back to just below $1.03 earlier this week, and is currently trading in the $1.02 range.

Speculation in the dollar-euro as well as the yen-euro is currently extremely heavy, meaning that there are bound to be radical swings in these markets. For instance, there is a credible story making the rounds that the euro got stalled just below $1.03 due to a huge knockout option that had been put on at the end of last week.

But none of this is new. What is new is what came out of Hong Kong this week. Hong Kong's currency reserves are around $90 billion. The vast majority are in U.S. dollars. China's central bank's dollar reserves total another $160 billion. And remember, the shadow of
China is now omnipresent in Hong Kong. Combined they control almost a quarter of trillion of our dollars.

That's the background. Now the punch line. The head of Hong Kong's monetary authority, Joseph Yan, announced on Monday that the euro's weighting in its reserves would rise to 15 percent from 10 percent. Why? Because of worries about the huge, and rising, U.S. current account
deficits, and excessive values on Wall Street.

"I'm afraid," said Yan, "that more and more people are focusing on the vulnerability of the U.S. market and will start moving out."

Should other central banks begin to agree with Yan's reasoning and start to increase the weighting of the euro in their reserves, the exodus out of the dollar could produce results very similar to what has been happening to gold.

Gold, like the dollar, has traditionally been a core
component of central bank reserves. Now, in one
country after the other, they are getting out of gold.
But a huge overhang still exists, continuing to cast
its pall over a gold price that has been sinking for 20 years. The current world dollar overhang dwarfs that of gold. We are literally talking trillions.

My conclusion: dollar-euro movements in coming weeks and months will bear close watching. They could portend worse things to come.

Canuck (12/12/99; 20:24:58MDT - Msg ID:20843)
Number Six
Re: your message 20783.

I believe the PM stated in public, on record, a couple months ago to 'store up' a few days worth of food and water.
Now its two weeks of supply. Can we imagine, you and I, in Denver and Ottawa respectively, (cold towns both) but the poor sap in Tokyo??

I fear.

Solomon Weaver (12/12/99; 20:17:25MDT - Msg ID:20842)
goldfan - leasing and the POG
Goldfan

Regarding the repost you made earlier this evening on how gold leasing affects the POG.

This is a seat of the pants analysis, coming from a neophyte in economics...so I am sure several of the posters to this forum could add flesh to the skeleton I paint...or correct me in my errors.

First, let us consider that we all generally believe that gold has been used as money in the past, is used in some places today as money (large international settlements), and will be used in the future (perhaps even as the backing for an international non-fiat and non-political money used by the masses via debit card and internet).

Second, let us consider that if you go down to the bank to borrow some money, you do not lease the money, you borrow it. I am not an expert on leasing of course, but I know that one can lease a car, lease office space, lease factory floor space, etc. Usually, leasing implies that the ownership "title" to the "physical asset" which is being leased is held by one party, while the "use" of the asset is in the hands of a second party. My understanding about the leasing of gold was that it was introduced as a way for people who needed to use gold (jewelers, mints, certain high tech companies) to borrow gold. This is very obvious in the case of a mint, for example which might make a $15 per coin markup for converting an 100 ounce bar into 100 beautiful coins. MOST OF THE PRICE RISK EXPOSURE TO THE MINT IS IN THE PHYSICAL PRICE OF THE GOLD. By Leasing the gold, the mint is able to completely negate the metal cost exposure.

To a jewelry manufacturer or a mint (or similar) it becomes pretty clear that the only logical way to manage their costs is through leasing. Working with futures contracts would also work, but the counterparties to those those contracts will want something in return, so the simple lease rate paid to a central bank who lends the gold is cheaper.

Now here comes the part where I think things began to go haywire.

If Joe or Jane Citizen were to go down to the car dealer and lease a car...and then drive it down to a new car salesman and sell it...and take the proceeds of the sale and invest it in the stock market, they would be violating their contract. If they were a company with 50,000 leased cars (say taxi company in New York) and they did the same thing, selling all the cars, and investing in the stock market, their CEO would probably be put behind bars. The entire institution of leasing is based on the idea of "using" a physical asset for a period of time.

If I rent a $1 million house from someone, I may be entitled in my contract to "sublet" out portions of the house to third parties...helps pay the total bill. But I am not allowed to "sell" the house and play with the money.

The gold lease rate, which is the cost of leasing gold, is low because those parties like mints and jewelers, who really need to use the gold have product inventories which always function as physical collateral equal to the amount on lease...therefore they are very low risk.

On the opposite side of the risk spectrum are the parties which have leased gold with the sole purpose of generating money to invest...the whole "carry trade" crowd. It seems to me that the use of carry trade is an important part of the freedoms given to traders in large markets, and that in low doses, they are useful. But maybe they should really be on the HAZMAT list (because they can blow up under certain conditions).

So, over the last years, gold leasing has gotten way out of hand, and most of the books are based on very low lease rates...now, if they raise the rates, to discourage new leasing, they add tremendous monthly costs to those who want, or need to roll over their leases.

I kind of think of Warren Buffet sitting across the table from a major counterparty who is leasing a lot of his silver stash...the counter party says "Mr. Buffet, if you absolutely insist on getting the market lease rate here, you will drive us out of business very soon and we will be forced to default on the return of your silver...so please be kind (prudent)and give us a lower rate. Only, the face value of the silver market is like a mouse compared to the elephant gold market...so those who set the lease rates on gold are forced to keep the rates low even more because default on their gold implies massive cascading defaults in all financial assets worldwide.

CONCLUSION: Lease rates MUST be artificial...and MUST be managed with an eye towards given as many institutions time to slowly unwind books (spread out the losses over time).

Poor old Solomon

Cavan Man (12/12/99; 20:09:09MDT - Msg ID:20841)
Y2K
I'd like to thank everyone here who posts about the rollover especially YGM. Thanks and good luck to all.

Cavan Man (12/12/99; 19:59:32MDT - Msg ID:20840)
New Euro Army Conbat Ready by 2002
http://www.iht.com
Sorry I couldn't provide the link. See 12-10 online edition. Sounds like ramping up over there.

There's a lot going on outside of our (US) geocentric world view(s).

Canuck (12/12/99; 19:53:07MDT - Msg ID:20839)
Correction; last post
"By 8:00pm (1:00am or 2:00am)" should be:

"By 8:00pm (1:00am or 2:00am, London time)".

Number Six (12/12/99; 19:51:39MDT - Msg ID:20838)
Off the Deep End
http://nick.assumption.edu/CV/view1199.htm
The reason that I went off the deep end a little with my friend RobertG yesterday was because he personified (to me at least) the sllepwalking dumbed-down American example of a sheep-person (sheeople...) - no offence to Robert but that's the way you came across.

Having been in the IT business for 22 years, and currently working on a y2k contract in Denver, I know what I'm talking about.

The USA has spent 100 BILLION DOLLARS on y2k remediation and is nowhere near fixing the overall systemic problem.

The rest of the world, in most cases, is way behind the USA.

We depend on our trading partners to keep our lifestyles here in the USA up to snuff - well I'm sorry to say that y2k will be more than a bump in the road... we'll see just how bad it will be in the next 6 months - please also don't fall into the trap of thinking if all ***SEEMS*** OK on Jan 1st that we are out of the woods - we will not be, not by a long way.

Check out these up to the minute observations from those, like myself, in the trenches...


The Bunker

by Cory Hamasaki

Peter Kind, a retired Army lieutenant general, will head a $40 million operations center designed to track how the world fares as it enters the technologically-challenging Year 2000. The facility is on upper floors at 1800 G St. N.W. It will coordinate data collected by existing government emergency centers and, for the first time, the private sector. Arrangements have been made for the sharing of centralized information by the following industries: electric power, banking, finance, telecommunications, oil, gas, airline, pharmaceuticals and retail industries. (News item)
The real question is, what is the point of the $40,000,000.00 expense? How will the monitors, displays, the commands barked out at the command center help anyone? ARF? WOOF! I am a big dog. BOW-WOW!

Even though Ko-skin-em may think he knows what the risks and vulnerabilities are, he doesn't. This is an IT problem. This isn't "Invasion USA-Y2K", staring Johannes Kosky as a bald, twittering Chuck Norris, General Peter Kind as George C. Scott, and Janet Abrams as a pale Pam Greer.

Will the top toy for Christmas 2000 be the Kosky inaction figure, a lump of clay with no form or substance?

What do they think they're going to monitor? Explosions? Bank riots? "Commandante! We're up to 17 bank runs now. Two have failed." "Keep up the good work and put that on the big board."

Have they been paying attention? The Nevada IT problem took longer than a half year to surface. Hershey has been a sea of loonie candy since June or July, mad chocolate bars racing from place to place, this didn't make the news for months. Whirlpool is going down the toilet but my electricity is still on and the stock market hasn't crashed.

As much as I dislike the word, their "methodology" is flawed. They're doing it wrong because, well, they're idiots.

Their command and control center goes live on December 28, 1999. Ho-kay, but things have been happening for months.... There are other things they should be doing, simple, inexpensive ones.

They could make a difference but they don't understand software and large systems. They don't understand Systems Engineering and Enterprise Systems. They don't know the risks so their solution misses the problem.

Where's my donut?

============================================================

Y2K QUOTES FOR THE MONTH
I expect we will experience no major national breakdowns as a result of the Year 2000 date change. - Bill Clinton.
Through some twisted invocation of selective logic that has yet to be questioned by a single journalist in the popular press, the White House congratulates businesses, industry and government departments for stockpiling supplies while insisting that individuals who pursue the same Y2K risk-reduction strategy are wackos and extremists. What's good for the people, it appears, is no longer good for the country. And by all means, unless you want to be called an "extremist," be sure that you take absolutely no action whatsoever to prepare for Y2K. - Mike Adams

I expect enough large systems to fail that we will pitch over into a depression. The scramble will be on to re-fix these things. The question is whether the firms will flub on failure, bypass and limp on, or what? I plan to sit this one out. I don't want to take on work, listen to the clueless contract administrators yelling and crying, and get stiffed when they're fired and their company goes bankrupt. Vendors and suppliers are paid last. Net30? Forget it. But we'll see. 45 days now [on November 16], 1096 Hours. I took a look at one of the Polly Places on the Internet the other day. Those boyz are running scared. It's one thing to polly-rant when the storm is way out at sea but this one is starting to rattle the windows. This will be greater than a category five IT failure.

Category Definition/example Resolution
1 occasional missing records DR, reprocess next week
2 slow performance DR, schedule maintenance
3 < 30 minute outage DR, call VP, tiger team
4 one day failure Crisis, switch to backup
5 > one day failure Call bankruptcy lawyers.

What's unique about this is that is that there will be multiple simultaneous category five failures.... Almost everyone, everywhere, at the same time. Nothing like this has ever happened on a global scale before. - Cory Hamasaki
I do not know what will happen on January 1 or in the months following. However, Y2K is not, nor has it ever been, about predicting the future. It is about risk management.... I do believe that the bump-in-the-road scenario is the least likely based on what most unbiased surveys continue to show. The only way you can assume that this is a likely scenario, in my opinion, is to take the self-reported data at face value and read nothing more than Y2K press releases.... reports all indicate that Y2K remediation is lagging, even in some of the largest organizations and in some of the most significant industries. I honestly don't know how anyone can assess this data and be optimistic. It appears to me that it is in spite of the facts rather than because of them.... I still have an informed hunch that Y2K is going to be a rough ride. - Michael S. Hyatt

The news, in my opinion, is getting drastically worse, yet the government, utilities, banks, etc. are (at least publicly) becoming more and more happy-faced in order to avoid panic. - Steve Baxter [webmaster, Canadian Y2K website]

Y2K is just like the fellow who stepped off a 10-story building. He's now at the second floor and everything's OK so far. - Ralph Burgess [Peer Financial Ltd.]

The combined bill for fixing y2k in the U.S. is $100 billion. That's a lot of money to spend because of consultants' hype. Senior managers are obviously easy marks for unknown consultants. All that money to fix a problem that really did not exist! It's amazing how the profit system works. People in control of the crucial institutions are unable to recognize a $100 billion scam. It's amazing that they reached such positions of influence. - Gary North

When I worked for XXX, they had a plan in 1995 to try to convert all mainframe systems to client/server, and address the Y2k bug in the process. They did a pilot project, finished in 1997. They then planned to do about a thousand other programs in the next 3 years. This is actually a project that would take 100 years with the programmers they have. Failure is a certainty. When I worked for company YYY, they were installing SAP. They abandoned that a few months ago, and are going to convert all their mainframe programs to be Y2k compliant. Not holding my breath, sold my stock. These management types have never been able to do accurate time estimates. The smart ones ask programmers for time estimates. Most of them, however, simply work backward from the deadline, announcing that you will be done at such and such time. This is the equivalent of telling a house builder that he will have your house built in a week. Doesn't work. - Amy Leone

Last month, International Multifoods Corp. (NYSE:IMC) filed a 10Q with a boilerplate-type Year 2000 disclosure.... The Company did not warn that installing a new Y2K-compliant system would create massive distribution problems. On Nov. 11, news that problems associated with the computer upgrade would affect this quarter's earnings slammed the stock down over 20 percent.... The stock fell so rapidly that orders became delayed and trading was temporarily halted. Investors in Multifoods lost about $112 million from the crash. - Michael S. Robbins

I saw the most delightful article in the Wall Street Journal the other day, just a minute, ah, here it is.... "Heard on the Street" reported that Chase Manhattan's bond balance sheet had a $40,000,000,000.00 discrepancy earlier this year. Yowza, that's what Bill Gates would call real money. The Chase worked on it and got the discrepancy down to $14,000,000,000.00 by September. They spent more months looking through their thousands of bond issues, the WSJ uses the word "painstaking", and have reduced the error to a mere $5,000,000,000.00. The problem started with a software system called "Bondmaster" that seems to have gone berzerk. There is no evidence that this is Y2K related nor (or is it or) have the fingerprints of one Jo Anne Slaven been found at the scene. Earlier when I raised the JAE and detailed my concerns the pollies said that no company could lose track of its balance sheet. You Pollies need to read WSJ, get out more. Maybe talk to the Chase. They both obviously don't have your big polly bra ins.... The pollies in denial-ville will claim that since the sun came up and my ATM card worked, this is incontestable proof that SAP is the answer, that banks "Get it", and that a college drop out with a PeeCee can solve the problems because. So there. Oh, and sell real estate too. No. It doesn't work that way. The problems at, sigh, Hershey, Bang and Olufsen, Samsonite, Whirlpool, the World Bank, the State of Nevada, and now The Chase are mere warnings. I sense a disturbance in the force. The main event is yet to come. These early warnings are just that, warnings. Evidence that the world doesn't work the way the pollies think it does. Evidence that banks don't "Get it", that SAP is not the answer, that simple problems can persist for months.... The forty billion dollars that the Chase misplaced is $160 for every person in the U.S. This statement makes as much sense as: "We're 99% done." So, if your heart stops for 15 minutes, 1% of the day, you're still dead.... "All our mission critical systems are ready." Ready for what? They'll still break because that's what software does. I'd be laughing if this weren't so sad. This is playing out worse than I expected. We're in for it. - Cory Hamasaki

I know this much about Chase, although it is secondhand. They could use an application of jam as they are toast. Instead of using an outside company to review their Y2K remediation, they used a very young, somewhat inexperienced group of new hires. The results? Bug city. The friend I spoke to was a consultant on site through last month. He advised me that the problems are being discovered during normal operations. No parallel testing. No stepped implementation.... His contract expired, as he had planned, and they begged him to stay on. He wanted no part of it, especially the thought of working in their shop on New Year's Eve, a long way from home. Even scarier is that they have basically given up and gone into what he called "bunker mode". They are resorting to F-O-F.... Just a cheery thought from a friend of mine who was at COMDEX trading war stories... - John "9.5" Galt

Y2K publicity efforts are filled with inherent contradictions. Take the North American Electric Reliability Council's "Y2K drills," for example. These drills were heralded as some kind of "industry-wide" test of the Y2K compliance of electric utilities. That was the public explanation, and that's what the press reported. But upon closer inspection, it turns out the drill didn't test electrical generation or distribution in any form whatsoever! In fact, this drill tested nothing but the backup communications systems of electric utilities. In some facilities, this was nothing more complex than a couple of guys chatting on walkie talkies. They say, "Can you hear me?" "Yes, I can hear you!" "Good, tell NERC we're Y2K ready!" - Mike Adams

The reports from the Wall Street Journal and Washington Post confirm my predictions of the look and feel of an IT meltdown. I can't recall any time in the last 30 years that there have been so many IT mega problems.... the right thing to do would have been to put every geek and geek wannabe to work in 1997, that doesn't mean that people will do it. They didn't. I overestimated the smarts of management. I was wrong, I thought they had a clue... So my sense of the mess is that the work did not get done. The few IT megaflops.... are indications and warnings. These show us what a flop is like, how long it takes to recover, and what the impact is. - Cory Hamasaki

More money has already been spent on Y2K readiness than the government spent on of all of World War II.... We are confident things will be OK. But we won't say there will be power. - Michael A. Thompson [account manager, Massachusetts Electric Co.]

Last week, a local corporation sent e-mail to the department managers: "URGENT! What is your contingency plan for Y2K?" They just discovered that their MIS system will fail on the rollover. This is after assurances for the last year from the vendor that it was compliant. By itself, this is not a big deal. This organization can function using paper and pencils, FAXes, pocket calculators. - Cory Hamasaki

I was contacted by a Time reporter who wanted to interview me about my plans for New Year's Eve, and I declined to get involved. As you may remember, Time did a cover story at the beginning of the year that focused on the religious-fanatic aspect of Y2K, with a rather lurid graphic on the cover of the magazine. The problem was that several of us Y2K "activists" (for lack of a better term) were interviewed at great length by reasonably intelligent reporters WITHOUT being given any inkling that the senior editors had already decided on the overall theme and perspective of their story. As a result, we got incorporated into a story that we would have preferred not to be associated with at all. Having thus been burned once, I now know enough to stay away from Time reporters... - Ed Yourdon

I have a friend who knows Ed Yardeni quite well. He says that in private, Yardeni paints a picture of extreme depression. - Greg Caton




Peter Asher (12/12/99; 19:47:59MDT - Msg ID:20837)
lamprey_65
(12/12/99; 18:58:07MDT - Msg ID:20834)
On the lighter side...
http://members.home.net/goldandsilver/joke.htm

My computer didn't think that link was funny, had to hit the crash button and re- start to get out of it. Maybe you van cut, paste and post, if it's worth it?

Canuck (12/12/99; 19:45:59MDT - Msg ID:20836)
Number Six
Been reading the Y2K articles this week-end; I'm getting concerned.

This giant pot of shi_ is starting to boil over. I could not agree more with McIntosh. I am beginning to write off Christmas in order to be 100% ready.

I'm going to be glued to my PC starting at noon on the 31st.
By 8:00pm (1:00am or 2:00am) the Y2K train will be rolling across the Atlantic. We will know by then, we will have an IDEA, idea being the key word.

I have a week, maybe two of supplies here in metropolis Ottawa. If I can get a sense of severity, I'm either going to get stinking drunk and relax (the non-event) or I'm running to the hills to the Y2K bunker (100 miles northeast, in the bush). The bunker (cottage) has a well, septic system, on the lake (lots of fish, game) and I have lots of gas, generator, and buckets of shotgun shells. I transport my food on the way out and I am set.

#1: I hope you are as well set.

#2: Let's hope for the best, prepare for the worst.

#3: I'm ready to be wrong or right about Y2K; are you?


Peter Asher (12/12/99; 19:38:16MDT - Msg ID:20835)
Goldilocks and the POG

The discussions here regarding te POG, break down into two basic subcategories: Purchasing to fulfill a paper commitment is one, and increasing demand over diminished supplies regarding owning and consuming, is the other. The first category has a school of thought holding that the overhanging short position must eventually be covered, and of its own fundamental weight create a price explosion. The latter considers that additional fundamental demand must occur in order to squeeze that short position into acting, while simultaneously adding it's own fuel to the fire. I believe I have gone on record here along with canamami and others, who believe the latter.

I hold that the pivotal event necessary to overwhelm the manipulative power of the paper gold market, is a fundamental shift of investing and speculative purchasing power from the equities markets over to precious metals. What is to me mind-boggling is not that the POG is still low, but that the Tulipmania is persisting in such strength. The explanation that I have been championing is the "double entry" phenomena I described in >>> 12/5/99; 17:00:12MDT - Msg ID:20344)

Each dollar that enters the Stock Market is at once a dollar's (Perceived) savings to the stock purchaser, and a dollar's worth of spending money to the stock seller. This is how the Goldilocks economy is created. Many earned dollars are doing double duty. They satisfy savings needs on one hand, while creating spending flows on the other. Simultaneously the "Can't lose" investment climate creates a marketplace for selling equity risk/reward to money that would otherwise have sought debt instruments. Even a bond is only an equity until it matures. <<<

We have a luxury goods bubble that is built on a substantial portion of the population,having a substantial portion of their buying power earnings exceeding the basic and secondary necessity levels. What facilitates this is the various vias that enable people to garner these large portions of purchasing rights.

The international imbalance of trade so expertly commented here by Goldfan, Mr. G and others is one factor that creates the current domestic affluence. Another factor is per my msg# 1863, 1/17 PM: >>>>Once, only the poor required two incomes to support a family, but in the sixties that began to change. Feminism provided the "sucker bait" that made two-parent income socially acceptable in all economic classes. So we had a long term covert depression. Imagine if right now every working spouse were out of a job. What would the economic landscape look like? <<<

It all boils down to the power to command price for goods and services, the power to command wages and salaries, and the ability to trade for profit. At this moment, it appears that a majority of people in this country are on the winning side of that equation. However we may be seeing a chink in the armor that is being stretched ever thinner in gauge.

Friday's little bomb shell of the Xerox earnings crash, mentions loss of market share. Could this be the harbinger of the topping out in the supply/demand factor of the Goldilocks marketplace? When a certain number of lions, have access to a certain number of antelope, there will come a time when they turn on each other in order to have their share of the feast.

Maybe it will be the nuts and bolts rather than the money supply that turns them, that will be the decisive factor in the sustainable size of the bubble. Or maybe it will be this basic fundamental of the "double entry" I describe.

Mr.G's #2801 this morning, said that the Fed issued those extra funds to the banks short term, due back in a few months. HOW? If all that cash doesn't come home to roost then either they reissue the credit or they bring down the system. Getting that cash back in the banks may be a problem. Once the dog's off the leash it's much harder to get him back on it. Don't we all feel a little safer right now having more of those "Ledger entries" in the 'take out' format. Those interest rates weren't that enticing anyway. Now raising them might be persuasive (But not to the Bubble-maniacs) and that would put a lid on the Market, and, maybe they figure a market crash will return all those margin funds back in. A liquidation of up to 50% in the margined equities wipes out the investors half, but returns all the borrowed margin funds back to base.

Maybe the big, big question is: Will Greenspan control the money supply to regulate the markets, or will he manipulate the markets to control the money supply?

S&P now down $3.00

lamprey_65 (12/12/99; 18:58:07MDT - Msg ID:20834)
On the lighter side...
http://members.home.net/goldandsilver/joke.htm

Takes a minute to download, but it's worth it! :-)

Lamprey

lamprey_65 (12/12/99; 18:54:32MDT - Msg ID:20833)
SteveH
Would you want to go long in a market where the big boys have been exposed as holding down the price and much of the short paper may not get covered? I think I'd either pick up physical somewhere else or try to make my paper gains in another market.

Lamprey

canamami (12/12/99; 18:51:55MDT - Msg ID:20832)
Year-Low OI - Reply to SteveH
SteveH,

I'm not FOA or ORO, but I'll hazard a guess. The number of people who feel sufficiently confident to predict the gold market is at a low, so the speculators are steering clear. In other words, the situation is too unpredictable and unclear even for speculators.

Peter Asher (12/12/99; 18:49:25MDT - Msg ID:20831)
Steve
How about
1) There was some short covering on balance. ??

2) Paper players don't want to play across the big 1/1/2000

SteveH (12/12/99; 18:43:04MDT - Msg ID:20830)
OI
COMEX open interest is at a one year low, meaning not as many player in COMEX for contracts. So, why would this be?

ORO?
FOA?


SteveH (12/12/99; 18:40:08MDT - Msg ID:20829)
goldfan (rhody)
www.kitco.com
He has even better ones early on. He did the initial research on it (if memory serves me) that I remember as did Dabchek. Try his posts too.



SteveH (12/12/99; 18:38:43MDT - Msg ID:20828)
repost (history)
www.kitco.com
Date: Sun Dec 12 1999 17:51
Goldteck (Gold: Over the years Economic Times) ID#431200:
Copyright © 1999 Goldteck/Kitco Inc. All rights reserved
Gold: Over the years A watershed in production 1850: Prior to 1850, gold was not just a precious metal but a genuinely rare one. World gold production from 1800-1850 totalled around 1,200 tonnes; from 1851-1900, propelled by the discovery in the United States, Australia and, later South Africa, it was almost 10,400 tonnes. The surge in output 1850-55: The expansion of the good delivery list by the Bank of England was an important step in guaranteeing the gold from London, now that much of it was going to foreign central banks, treasuries or mints. It entrenched the acceptance of officially approved names throughout the world. The gold standard 1855-90: Gold was accepted as currency. Track of statistics for the first time focused less on the reserves of central banks than on the monetary stock of each nation, which would include any such reserves but was usually primarily the gold coin in circulation. Rise in central bank stocks 1890-1914: There was a switch from private to government hands, which was aided, by the new supplies from South African discoveries, which assumed major proportions during the 1890s, supported by new gold rushes to Western Australia and the Kjlondike in Canada. The impact of war
1914: While the gold standard was not officially suspended, in practice it went into limbo. restoring the gold standard Post-1918: Under the bullion standard, notes could not be redeemed for sovereigns, but only for 400-ounce good delivery bars. That is, at a minimum purchase of £1,700. Free float of gold price 1968: The defence of $35 gold ended, leaving the price free to float, an embargo was placed on central bank gold trading. Today Even today, the markets reflect the way the world economy was in the late 1960s. And that is why some European central banks are left with a substantial stock of gold which they are not quite sure what to do with, while other nations, such as Japan, whose economies have grown so much in the last 30 years, have very little. ``If the movement of gold among central banks had remained as open and easy as it is with currencies, then today's gold reserves might be a truer reflection of the global economy,’’ says Timothy Green in his research study on Central Bank Gold.
http://www.economictimes.com/today/13comm12.htm

Peter Asher (12/12/99; 17:37:53MDT - Msg ID:20827)
Gandalf!!

Your accusations of Christine being a radical are unfounded. She has already given us the information to explain her posts. She's a psychotherapist!!

Probably confusing reality with her cases.



goldfan (12/12/99; 17:36:57MDT - Msg ID:20826)
SteveH, Gidsek- Gold Leasing
http://www.usagold.com
Thanks SteveH for suggestion re Rhody at Kitco. This is one I found but could be others even better.
Repost:

Date: Sat Dec 04 1999 06:25
rhody (@ Dabchick, your 6:47 on Dec 2. The 2.11% increase in) ID#410367:
Copyright © 1999 rhody/Kitco Inc. All rights reserved
one month lease rates on Nov 29 lead to the present precipitous
fall in pog. About one third of the increase came from the
forward rate ( lending rate drop by CBs ) and two thirds came
from the rise in LIBOR. I cannot comment on why interbank
lending rates would rise, although usually this reflects a
credit risk driven tightening for interbank transfers. My
interpretation here is that the world financial system just
got a little more unstable. The forward rates ( lending rates
to bullion banks ) dropped. This must mean that the CBs
intentionally added liquidity to the gold market. The bullion
banks chose not to pass on any of the spread to borrowers, so one
month rates rose. The above is what the numbers that you posted
mean to me.

The world gold market is opague, so I admit I am guessing here.
For example, I have no idea what forces really drive inter bank
lending rates ( LIBOR ) as I do not have access to the back rooms
of international banks.
My comments following the Nov 29 lease rate spike we more about
the inevitable result of such one month lease rate spikes rather
than their cause. A spike in one month lease rates ALWAYS tanks
gold on that day or the next. Could it be that a speculative
attack on gold occurs because LIBOR rises, despite the increased
cost of borrowed gold, as the powers that be sense instability
in financial markets and react to sell gold down lest a rotation
occurs into pms as a safe haven?
Bullion banks, on the other hand, were severely injured following
the ECB Washington Agreement driven gold spike. Could it be
that the drop in lending rates was an attempt by the CBs to
restore profit margins to bullion banks, who subsequently
passed none of the margins on to speculative borrowers, who
never the less were forced to borrow at the higher rates because
of lease roll overs? I heard yesterday that one bullion bank
in Europe has been cutting back trade and laying off staff.

I admit that all of this is perverse, and that I understand rather
little of it. Rising LIBORs should act to raise the price of
gold as lease driven selling should be made more expensive and
gold liquidity made less. If there is increased interbank
credit risk, then forward rates should rise, not fall, and
that should drop lease rates not raise them. I do not
know which end of this LIBOR/forward rate relationship is being
manipulated, but my guess would be the forward rate. Yet
forward rates accounted for only 1/3 of the lease rate spike.
Perhaps we are approaching this question of gold prices and
lease rate factors from the wrong side. If what I have said
above is accurate, then rising lease rates should be positive
for pog. Yet if one month rates rise, and the other terms
do not, the pattern is the price of gold declines. So it may
be that there are entities that react to lease rate fundamentals
in such a way that they never are allowed to reflect in the
price of gold. When fundamentals do not cause a change in
reality, look to politics for the answer. Gold is political.

A rise in LIBOR should have caused a rise in lease rates, and
that should have turned off speculative shorting. It didn't,
shorting increased. That's illogical. Therefore, the shorting
was political, and not lease driven, except indirectly.

repost ends

I wonder if a substantial portion of this stuff, leasing, POG going opposite to what it "should" might not be related to the Russian mob and others arranging to steal Russian PM'S?
Lease it to someone in your own organization overseas,looks on the "books" like it stays where it is, then ship it out and sell it to yourself, or some such scam?

How would all the stats analysis, and the m1,M2,M3 stuff and trends and dollar indices and so on, need to be regarded if the various "mobs" were all coordinating this for their own rotten purposes? Would the stats people look at have any validity at all?

Goldfan


canamami (12/12/99; 17:08:23MDT - Msg ID:20825)
Gandalf, I'm sorry I posted what I did re Christine.
I suspect that she genuinely does need help, and my post could perhaps cause somebody like that to think the powers-that-be are chemically messing with her mind.

A crazed woman in a large Canadian city starting screaming at me that I was CIA when I left work late one night, and that I should leave her alone. I was worried I'D get arrested if some policeman thought I'd been harassing her, because she had a bit of an air of normalcy about her (dressed well, etc.), so I rushed back in the office till she went away. Somebody at work with a psychology background said she sounded like a paranoid schizophrenic.

RossL (12/12/99; 17:07:48MDT - Msg ID:20824)
Christine

You DO have a complex conspiracy theory. Dont you?


RossL (12/12/99; 17:01:30MDT - Msg ID:20823)
Christine

I haven't seen your posts because I dont read Kitco. Why dont you post your theory here? I dislike reading Kitco because the signal-to-noise ratio is too high.


Gandalf the White (12/12/99; 16:59:12MDT - Msg ID:20822)
Crist's condition is cause to worry !
How can someone be so far gone ? --- Even before the crunch time arrives. -- I had not concerned myself to the degree that others have related to Y2K --- BUT if this is any indication of radicals coming out of the woodwork -- I shall have to rethink my situation. The Hobbits are still laughing, but now I am thinking about other things !
<;-)

canamami (12/12/99; 16:50:57MDT - Msg ID:20821)
Christine, this is how the CIA did it.....
.....they bonded the LSD to the fluoride in your drinking water. Those dirty crypto-commie agents of the New World Order in the CIA.

Gandalf the White (12/12/99; 16:50:50MDT - Msg ID:20820)
This is breaking up the Hobbits --- ROFL !!
Let us see how MK handles this personal attack on USAGOLD.
<;-)

Christine (12/12/99; 16:46:16MDT - Msg ID:20819)
We shall see what we shall see
Watch the market this week--the proof will be in the pudding--The Gold Cabal, which is backed by the
dark special ops CIA, is no longer in control. Laugh at me if you want. The explanations will be at Kitco, and this site will be closed down in the near future. Again, laughing at me won't change your reality.

ps LAST TIME YOU GET TO LAUGH AT ME--enjoy it while ya can

CoBra(too) (12/12/99; 16:45:41MDT - Msg ID:20818)
For Chris'sake -
How about DEA!

canamami (12/12/99; 16:38:35MDT - Msg ID:20817)
Yes, Christine, you're right!....
....and, unbeknowst to you, you are presently the subject of a CIA mind-altering experiment.

RossL (12/12/99; 16:36:08MDT - Msg ID:20816)
Christine

I am a US Army veteran with decorations and expert M-16 rifle qualifications. Please make up some conspiracy stories about me too.


Christine (12/12/99; 16:30:14MDT - Msg ID:20815)
While I'm on the subject
Date: Sun Dec 12 1999 17:47
chris (Privacy?) ID#293447:
Copyright © 1999 chris/Kitco Inc. All rights reserved
Ya must be joking. For example, USAGold, which operates many "gold stores", the website by the same name,
etc etc, is run by the "other" CIA, the secret dark CIA that is up to all kinds of very nasty business. When you buy
or sell any gold with them, where do ya think the info goes? I once went to one of the USAGold stores to buy
some gold. All these big handsome young men with very short military style haircuts were operating the goldstore.
Ya know the type. Check out a USAGold store if ya don't believe me--notice who is runnin them. Anyway, I
tried to be secretive--took in $5000 cash and parked aways away--they had me very cleverly followed--I never
saw a mother with a "baby" in a stroller move so fast--poor baby would of died of head concussion injuries if had
actually been in the stroller. Anyway, my point is that there is no privacy.

Leigh (12/12/99; 16:21:28MDT - Msg ID:20814)
Gold's Up
Gold's up $0.70!

Christine (12/12/99; 16:11:48MDT - Msg ID:20813)
Who runs this site--Who are Another and FOA
http://www.kitcomm.com/cgi-bin/comments/gold/display_short.cgi#start
Did ya guys and gals know that this site is run by the "dark" special ops CIA of US Government, and that ANOTHER and FOA are CIA operatives who were created to deceive all. Come on over to Kitco where the truth about all will come out.

CoBra(too) (12/12/99; 16:07:19MDT - Msg ID:20812)
Cycles, as the name implies, are not one way streets...
Having read FOA's narrative of his aged friend holding on to equity funds for 25 years and never selling -even knowing or assuming the inherent loss to currency depreciation (inflation) of about 75%, which may have been on the tame side in my book - and lately (last couple of years) switching gradually to hard assets - gold - is true wisdom, based on lifelong insights formed by close observation of geopolitical, economic, currency and market trends. - And as we now all observe, the marvelously ballooning paper asset bubble can only be perpetuated by ever more of the same. For how much longer - this is the (crucial) question.

We may very well witness the final battle of the Paper-$ faction against real money (gold! - in my view it will take a long time to install the euro as internationally accepted reserve currency). While the ultimate outcome is undebated, for most observers the time frame has proven cruel and may still prove unsurmountable until the final surrender of the most sturdy gold advocates.
Resorting to cabal and conspiracies, won't change anything in the long term (historical) progress of selfdestructing paper currencies, though as probably all of us would wish for a timely resolution of this charade.

On another topic: England, and I can't blame them is fighting for the little supremacy it has left versus the euro and is fighting against the adoption of the continent{ally} "accepted" interest tax, dubbing it creatively "mad tax disease", in order to prolong the leading edge of being the # 1 financial market in Europe. Well, as stated here before, the Brits will have to make up their minds as to their future geo- political, economic and currency status - even if the Pound (not so Sterling) appreciated to an all time high vs the euro.
Regards CB2




pdeep (12/12/99; 15:36:49MDT - Msg ID:20811)
Steve_H and all
Steve, thanks for reposting that here. I was going to post it here earlier as well, but I could not find my pesky password. Let's say it does not roll off the tongue. Now I've got it on a virtual "sticky" on the desktop.

I'm glad you enjoyed the money supply stuff. A couple of weeks back, I e-mailed Bill Fleckenstein of Market Rap fame the M3 data, which he used in one of the Raps.

My gold-bullion holding horizon is quite long, compared to some folks. I am wary of the $18 trillion in accrual-based debts (social security, medicare, pension-fund insurance, etc) that come due at the reserve between 2015 and 2022. I have been a slow buyer of bullion for a number of years, not so much for a quick investment fix as basically a way of keeping some wealth around in a form which makes it harder to be fleeced by the Fed.

However, given the money supply data over the past few years, I have accelerated the turning of green to gold, because the current level of liquidity injection will result in some serious decline in dollar-based purchasing power, perhaps much much sooner than 2015, when I would have expected the Fed to start monetizing to keep the bills paid in cheaper currency units.

And thanks to MK and to all for a very high level of discussion on gold on this forum. I talked to MK recently, and I also want to re-state here what I told him: I support his handling of participants vis a vis ad hominem attacks. Not a pleasant job, but someone has to do it!

turbohawg (12/12/99; 15:28:27MDT - Msg ID:20810)
a couple of tidbits ...
... from past issues of Jim Stack's InvesTech Market Analyst.

Those fretting about having gotten out of the stock market too soon and unable to feel comfortable about having gotten re-positioned (assuming that you have) while you have time might want to consider this first piece of analysis from his June ’98 issue:
_ _ _ _ _ _ _ _ _ _

In recent issues, we've been fighting a battle to relay a *real* historical perspective of a bear market and the emotional trauma which inevitably lies ahead. That's difficult when every mutual fund and financial analyst is trying to portray the biggest risk as being out of the market. So-called studies are used or abused daily to drag any remaining sidelines cash into the market [only to be expected from those with a vested Wall Street interest] …

To demonstrate the absurdity of some of these arguments, shown here <turbohAug note: the issue includes a bar chart> is the difference between a "buy-and-hold" strategy and "market timing" for the S&P 500 Index. Since 1928, a $1 investment would have grown to $1123.46. As Van Kampen enthusiastically points out, that return would have been reduced to only $20.99 if one missed the 30 BEST months of the past 70 years. Why hasn't anyone asked: "What if you had instead missed the 30 WORST months?" Well, we ran *that* side of the study, and here's what we found out …

First, we tried to show the results in the same bar chart. Couldn't do it. You see, the profit bar on the right would have been 18 feet 4 inches tall !!! That's right – if you missed the 30 WORST months, your $1 investment would have grown to $105,791.96 or 94-times greater than a "buy-and-hold." Of course that isn't possible, but it exemplifies the foolishness of such marketing tactics.
_ _ _ _ _ _ _ _ _

More recently, from the Nov 19 ’99 issue:
_ _ _ _ _ _ _ _ _

Something doesn't add up in Washington. The balanced budget is being attributed to the productivity and strength of the US economy, with surpluses now projected ad infinitum into the future. Only problem, as economist Gert von der Linde points out, is that based on 1995 estimates for fiscal year 1999, this past year's receipts showed corporate income taxes 13.2% lower than expected, and individual income taxes 23.1% ($165 billion) higher than expected. Where's the "new era" enhancement in corporate performance? And why did Social Security taxes increase only 3.8% or 1/6th of individual income taxes … unless a lot of that revenue improvement came from one-time capital gains. Chances are the federal budget surpluses will be as fleeting as the productivity miracle when the bear market starts to take its toll. Darn those Austrian economists!
_ _ _ _ _ _ _ _ _ _
On another note, it's inside 3 weeks till the big event. Here's to the Y2K readiness of Pizza Hut, Dominoes, Wendy's, Taco Hell, and KFC ... I would starve.

SteveH (12/12/99; 15:00:49MDT - Msg ID:20809)
ORO look-alike
www.kitco.com
repost:

Date: Sun Dec 12 1999 13:34
pdeep (Money Supply) ID#227185:
Copyright © 1999 pdeep/Kitco Inc. All rights reserved
I recently looked at what is happening to M3 and M3-M2 since about 1994. M3 is expanding exponentially, when fit to the equation

M3 = Ae^kt with t in years, k is about 0.087. Doubling time is about 8 years.

for the difference, i.e., M3-M2 = Ae^kt, k is 0.15. Doubling time for the difference is 4.62 years.

Meanwhile, M2 is expanding arithmetically,

where M2 = A + kt, where k is 0.004

What this tells me is that the high-powered debt is expanding much faster than M2, suggesting that what is being lent is much greater than available cash levels, and that continued expansion is what is keeping cash levels growing at a very anemic rate. Not surprising. If debt burns, based on lent reserves of M3, the ash that is left is M2.

The difference between m2 and m3 is a measure of how much "ready cash" is in the system compared to the total monetary aggregate. I ran the numbers since 3/28/94 to 11/22/99. At 3/28/94, m3 was 4273.4 billion, and m2 was 3495.1 billion. A difference of 778.3 billion. As of 11/22/99, m3 stood at 6412.9 billion, and m2 was 4640 billion. A difference of 1772.9 billion.

lamprey_65 (12/12/99; 14:26:37MDT - Msg ID:20808)
Hedging
There are just SO many problems with today's commodities markets. One of the things that happened which has put the gold market in such a crises was the ability to hedge more than one year out. It's a horrible idea and I can't believe it was allowed. Let's not forget that PROPER hedging is a useful tool for commodity based businesses...it's the way it's be abused that's killing the miners. Protecting this year's production, especially when prices have been falling (mainly through manipulation) is understandable. Ask any farmer and he'll tell you that locking in a better price for this year's crop does help. Going beyond the current year is where the glitches pop up...but of course I'm sure the banks wanted those out-year hedges to guarantee loans. Jeesh...it seems to always come back to the banks!

Lamprey

Mr Gresham (12/12/99; 14:04:52MDT - Msg ID:20807)
Nickel62
Nickel62

Where is everybody today? I was about to do a test post to see if it was alive, till you came on.

I can see gold mining companies (1) not having available cash to buy in physical or contracts after years of a down market, (2) assuming their future production will at least stretch out the burden of any future covering, and (3) holding the opinion that gold will not increase much in future. Also, their creditors may basically "own" them by now, and have for some time had them operating on a tight leash, and so their positions (and perhaps inevitable bankruptcies) would just be an offset for those larger creditors who could suck whatever real value they can out of them before letting them go under (to be reborn as Barrick of America, Chaser Dome, and CitiGold?)

I just can't see SOMEBODY not buying in whatever they could at this price, even if were only to mitigate their positions, however large – this is supposedly what they were praying for at 330 – unless either they really think they'll never see 300 again (with some "official" reassurance?), or they are in some kind of silent/not-so-silent standoff with the other biggies not to begin covering, or else the others will, too, and then they _would_ all get burned. These are the big ones with the cash to cover, if they chose to, so that's not their limitation like the miners.

But maybe I just need to go back and read those "physical" vs. "paper" stats again. If LBMA plus COMEX plus others trade "ump-tee-dum thousands of tons per year" but only, say, 500 tons of physical is available (I remember seeing recently American Eagles were taking 76 tons this year) and a 100-ton cover attempt by ANYONE would just shoot that through the roof, then I would better understand what FOA has been getting at.

And as gold settles into "stronger hands", such a short squeeze becomes more tightly-programmed into the next upswing to start at a lower level, right?

I am so used to reading things I pretty much know my way around in. But FOA's descriptions and insights really challenge me. I sometimes tune out halfway through a rich, rich post of his. I can't handle it all at once, leave it up on the screen, go get a beer, and come back to really savor it. And still I choke on the full "insider" picture it presents. It is that difficult Calculus class (or Prob/Stats) that brought me up against my limits as "boy math wonder." Organic Chem. That Economics textbook I had to read twice, and then take on vacation with me to have a hope of passing. It's not the writing – that's a breeze, candy – it's the rich content. I'm not used to failing to "get" something. I'm really having to work at this. Hey, I needed a challenge in this discontented winter!

Forward selling, discounts, implied interest, contango, etc. If I'd worked on the exchanges or traded enough, I'd already be familiar with these on a daily basis, but I still have to work out each direction in my head, and so far, it hasn't stuck permanently. And then, from FOA's position of familiarity, to ask us to visualize the breakdown of that market – separating paper from physical – in some sequence of defaults by players, brokers, and the market itself – is difficult again.

But keep it coming – please! (How many wives think their guy's clicking away on porno sites, when he's really struggling online with Econ 675, Advanced Graduate Level Money and International Banking: Market Disequilibrium Scenarios, otherwise known as USAGold Forum?)




nickel62 (12/12/99; 13:09:25MDT - Msg ID:20806)
Mr. Gresham
I have recently been looking at the size of some of the large gold producers and that information might help you as we all try to unravel what is currently going on in the market place for gold. American Barrick is short a total of about 18 million ounces which is about 500 tonnes. Placer Dome has a somewhat smaller total short position of about 155 tonnes, Anglogold stated when they bought the 40% of the BOE auction last week and covered a very small (2% or so ) of their 400 + tonnes of short hedges. Others can probably give more details or correct any errors I might have. But you can easily see that the "Big Boys" would be sitting ducks if they started to cover. Wouldn't that be nice. Maybe the best strategy is not to do anything but each of us go out and buy another 10% more physical.

Mr Gresham (12/12/99; 11:06:35MDT - Msg ID:20805)
FOA -- Short covering
OK, I feel dense this morning, like the memory of all I've read here is not firmly in place, but the question sticks in my mind:

One of the tenets of discussion here over past year(?) has been the overhang of short sales (10,000 tons?) we hear about from Veneroso, GATA, others. And not enough physical to cover.

At 278, wouldn't every small short be covering and removing the danger to themselves of a future spike? Your theory of "impossible to cover" short positions would seem to apply only to a coterie of a very FEW, BIG shorts, making up the 10,000. None of whom could cover their entire position with available physical, and none of whom who could make a move for the exits without the others noticing. E.g., stuck.

Is that who you see makes up the remaining universe of shorts, and who might they be? Recognizable names? Big banks, playing with lots of OPM? Perhaps counting on Fed bailout on this and any other crisis situation, TBTF?


Mr Gresham (12/12/99; 10:55:24MDT - Msg ID:20804)
Banks -- TB2000 discussion
http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001yps
Exchange of opinions on banks going down. Ed Yourdon appears briefly.

Looking to learn about those triggers that might start the money supply on its way to money heaven.


goldfan (12/12/99; 9:48:34MDT - Msg ID:20803)
Gidsek-Leasing
Thanks Gidsek for your lucid and thorough reply to my questions. I'll be watching for your further stuff should you care to post it.

Goldfan

Mr Gresham (12/12/99; 8:18:32MDT - Msg ID:20802)
Kudlow: y2k cash inflationary?
http://jewishworldreview.com/cols/kudlow112399.asp
Something of a primer on money supply at this crucial turning point.

Mr Gresham (12/12/99; 8:15:48MDT - Msg ID:20801)
Kudlow on Greenspan's Plan
http://jewishworldreview.com/1299/y2k.cash.asp
Will it work? Or cause more bumps to follow?

Lawrence Kudlow:

"The new Y2K-linked term repos are short-term loans to the banking system made this autumn, but they are scheduled to expire evenly during the period from early January through early February next winter. When they do expire, the Fed will sell the securities back to primary dealers, who then refund the cash back to the Fed.

"In other words, the temporary provision of high-powered Fed liquidity will be withdrawn. This means that the bulge in adjusted monetary base growth (25.1% annual growth since September) and adjusted reserve growth (80.2% at an annual rate since August) will disappear.

"That is why this "excess money" is not having an inflationary effect. Actually, gold prices are slumping, while the King Dollar index appreciating. Sophisticated credit market participants understand the temporary nature of this Fed reserve-adding operation.

"One other point. Gold prices have been weakening of late, and this is something the Fed should be watching closely. $500 billion of cash insurance seems like a lot of money, but should gold keep dropping from here, it would strongly suggest that even more cash will be necessary.

"The gold signal can help Greenspan & Co. see whether the global demand for dollars is even greater than the insurance policy supply. Chances are a lot of foreign capital (including Euros) will be seeking a safe haven into U.S. dollars in the weeks ahead. "

Interesting take: Gold dropping means not enough cash pumped into the system? But what if you're manipulating the signal on the other end?




ORO (12/12/99; 8:00:13MDT - Msg ID:20800)
Whadayaknow Goldfan
It is an astrological aspect based timing system using aspects assigned favorable or negative connotations.

Cool

I think the thing should not work but wadahell, if it does, it does.

YGM (12/12/99; 7:47:55MDT - Msg ID:20799)
Hope I Don't Catch Hell For This.......
CIA Predicts 30% Oil Shortfall/More on Y2k and Oil/Embedded Chips
From Gold-Eagle Forum.....Thanks Andy........YGM.




  Last Oil post - this from R.C. on Timebomb 2000 
(Andy)Dec 12, 06:39 I thought it might be good to post some History revisited regarding previous "Oil Crises" in order to give us a sense of comparison for a possible oil crisis from Y2K. You will note that we had a defined period of 5 months of an oil embargo that began in October of 1973 as a result of the Arab-Israeli War. You'll note that oil shot up from nearly $5.00 a barrel to just under $13.00 per barrel during that crisis. The next crisis came in 1979 even before the Iranian Hostage crisis began. It continued until 1981 when Saudi Arabia began to flood the market with cheaper crude oil (undercutting its OPEC partners). It peaked at just under $40.00 per barrel. The next crisis came with the Persian Gulf War when prices shot up again to nearly $35.00 per barrel. Note the sequence of events in the listings below. There is a price chart on this link, but it would not take my cut and paste in this posting. Visit the link to see the graphic chart.
It's very helpful to read how these crises developed. I've been looking for official numbers stating just how large the percentage of oil became. Unfortunately, I cannot find the statistics I wanted. I do know that Opec reduced its oil production by 25%. If the world lost 25% of oil supply today the effects would be expected to be at least the same as that of 25+ years ago. In subsequent posts, we'll look at further DOE analysis of some key oil exporting nations as we head towards CDC. Data from U.S. DoE and EIA World Oil Price Chronology: 1970-1998 http://www.eia.doe.gov/emeu/cabs/chron.html#a1973 The 1973 Arab Oil Embargo lasted only 5 months. http://www.eia.doe.gov/emeu/cabs/chron.html Oct 19-20 Saudi Arabia, Libya, and other Arab states proclaim an embargo on oil exports to the United States. Oct 23-28 Arab oil embargo extended to the Netherlands. Nov 5 Arab producers announce 25 percent cut in production below September levels. Further cuts of five percent are threatened. Nov 18 Arab oil ministers cancel the scheduled 5 percent cut in production for EEC. Nov 23 Arab summit conference adopts open and secret resolutions on the use of the oil weapon. Embargo extended to Portugal, Rhodesia, and South Africa. Nov 27 President Nixon signs the Emergency Petroleum Allocation Act (EPAA). Authorizes petroleum price, production, allocation and marketing controls. Dec 9 Arab oil ministers announce a further production cut of 5 percent for January for non-friendly countries. Dec 22-24 OPEC Gulf Six decides to raise the posted price of marker crude from $5.12 to $11.65 per barrel effective January 1, 1974. Dec 25 Arab oil ministers cancel January 5 percent production cut. Saudi Arabian oil minister promises 10 percent OPEC production rise. 1974 Jan 7-9 OPEC decides to freeze posted prices until April 1. Jan 29 Kuwait announces 60 percent government participation in BP-Gulf concession; Qatar follows on February 20. Feb 11 Washington Energy Conference opens. Attended by 13 industrial and oil producing nations. Called by U.S. to resolve the international energy problems through economic cooperation among nations. Henry Kissinger unveils Nixon Administration's seven-point "Project Independence" plan to make the U.S. energy independent. Libya nationalizes three U.S. oil companies that had not agreed to 51 percent nationalization in September. Feb 12-14 Heads of state of Algeria, Egypt, Syria, and Saudi Arabia discuss oil strategy in view of the progress in Arab-Israeli disengagement. Mar 18 Arab oil ministers announce the end of the embargo against the United States, all except Libya. 1979 Jan First emergency Crude Oil Buy-Sell Program allocations. Jan 16 Shah leaves Iran on vacation, never to return. Bakhtiar government established by the Shah to preside until unrest subsides. Jan 20 Saudi Arabia announces drastic cut in first-quarter production. 9.5 MMBD ceiling imposed. Although actual cuts never reach announced levels, spot prices of Middle East light crudes rise 36 percent. Jan 20 One million Iranians march in Teheran in a show of support for the exiled Ayatollah Komeini, fundamental Muslim leader. Feb 12 Bakhtiar resigns as prime minister of Iran after losing support of the military. Mar 5 Iran resumes petroleum exports. Spring Gasoline shortage/world oil glut. Mar 26 OPEC makes full 14.5 percent price increase for 1979 effective on April 1. Marker crude raised to $14.56 per barrel. May DOE announces $5 per barrel entitlement to importers of heating oil. Saudi Arabia announces intention to increase direct sales and to sell less through Aramco. Both announcements send prices higher. Jun 1 Phased oil price decontrol begins. Involves gradual 28 month increase of "old" oil price ceilings, and slower rate of increase of "new" oil price ceilings. Jun 26-28 OPEC raises prices average of 15 percent, effective July 1. Oct Buy-Sell Program sales average more than 400,000 B/D from October 1979 through March 1980 - highest level since February 1976, due to emergency allocations. Oct Canada eliminates light crude oil exports to U.S. refiners, except for those exports required by operational constraints of pipelines. Nov 4 Iran takes western hostages. Nov 12 Carter orders cessation of Iranian imports to U.S. Nov 15 Iran cancels all contracts with U.S. oil companies. Dec 13 Saudi Arabia raises marker crude price to $24 per barrel. 1980 Mar 1 Windfall Profits Tax enacted. May Saudi Light raised to $28.00 per barrel, retroactive to April 1. Apr-Sep Buy-Sell Program allocations drop to average of 120,000 B/D for period April to September 1980. Sep 17 Iraq breaks 1975 treaty with Iran and proclaims sovereignty over Shatt al-Arab waterway. Sep 23 Iraq invades Iran. Mutual bombing of installations. Nov 10 Iraq captures southern port of Khorramshahr. Nov 20-24 U.N. gulf war mediator Olaf Palme makes first unsuccessful peace shuttle between Tehran and Baghdad. Dec Collapse of OPEC's pricing structure. Saudis use $32 per barrel marker, others use $36 per barrel benchmark. 1981 Saudis flood market with inexpensive oil in 1981, forcing unprecedented price cuts by OPEC members. In October, all 13 OPEC members align on a compromise $32 per barrel benchmark. Later, benchmark price is maintained, but differentials are adjusted. Jan Iraq repels first major Iranian offensive. Jan 28 President Reagan lifts remaining domestic petroleum price and allocation controls originally scheduled to expire in September 1981. Apr After meetings in Baghdad and Teheran, attempts by nine Islamic Conference leaders to mediate peace between Iraq and Iran fail. Aug Windfall profits tax reduced. Sep 27-28 Iran defends its besieged port of Abadan, driving back Iraqi forces. Oct OPEC reaches an agreement to unify crude price at $32 per barrel through 1982 and sets an ultimate price ceiling of $38 per barrel. Nov 29 Major Iranian offensive mounted on central front. 1982 Indications of a world oil glut lead to a rapid decline in world oil prices early in 1982. OPEC appears to lose control over world oil prices. Mar Damascus closes Iraq's 400,000 bbl/d trans-Syrian oil export pipeline to show support for Iran. Mar 11 U.S. boycotts Libyan crude. May 24Iran recaptures Khorramshahr. Jun Iran demands $150 billion in war reparations; pledges war until Iraq's Hussein stands trial. Jun 10 Iraq declares unilateral cease-fire. Jul 13 Iran launches first attack into Iraq. 1983 Oil glut takes hold. Demand falls as a result of conservation, use of other fuels and recession. OPEC agrees to limit overall output to 17.5 MMB/D. OPEC agrees to individual output quotas and cuts prices by $5 to $29 per barrel. Apr

-- R.C. (racambab@mailcity.com), December 12, 1999

link at

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001zGa


  If you are remotely interested in the Oil problem hitting in 18 days or so... 
(Andy)Dec 12, 06:36 Check this link...

http://www.ask.com/main/metaAnswer.asp?MetaEngine=Excite&logQID=EE712F9C67B0D311B76900A0C9FB5560&qCategory=NERD&qSource=0&frames=yes&site_name=Jeeves&scope=web&r=x&MetaTopic=Oil+%26+Y2K&MetaURL=http%3A%2F%2Fsearch.excite.com%2Frelocate%2Fsr%3Dwebresult%7Css%3Doil%2Band%2By2k%7Cid%3D18173815%3Bhttp%3A%2F%2Fwww.pond.net%2F%7Enodrog%2Ftransport.html&EngineOrdinal=1&ItemOrdinal=8&ask=oil+and+y2k+metasearch&origin=0&MetaList=http%3A%2F%2Fsearch.excite.com%2Frelocate%2Fsr%3Dwebresult%7Css%3Doil+and+y2k%7Cid%3D18173815%3Bhttp%3A%2F%2Fwww.pond.net%2F%7Enodrog%2Ftransport.html&x=13&y=7

  1973, we had a 6-7% reduction in Crude... = recession 
(Andy)Dec 12, 06:34 Estimates now from the CIA (no link) are circa 30%, with refining ability in the USA cut by 70%... = Depression, Market Crash, deep doo-doo...

========================================================

Subject:
 70% of Fuel Refineries May Be at Risk, Sen. Thurmond Reports
 Link:
 http://www.dtic.mil/c3i/y2k/slides_1998/sld043.htm
Comment:
 This could also go under "Military" or "noncompliant chips."

U. S. Senator Strom Thurmond, the former Dixiecrat candidate for President of the United States (1948), asked Department of Defense official John Hamre about the possibility that we will lose 70% of our oil refining capacity in 2000, which he says is the figure being mentioned in the industry. What effect would this have on the military?

What effect will it have on the military? I would have asked: What effect will it have on the survival of the West?

Let the record show that Hamre did not respond with some version of "You doddering, drooling old ghost; what paranoid y2k Web site have you been visiting?" That is because Sen. Thurmond is chairman of the Senate Armed Forces Committee, and he is as well informed on the military as any elected office-holder except (maybe) for the President.

Thurmond kept going. What effect will a failure of private sector deliveries have on operations? How long could the military keep going? What about the inventory of spare parts? All good questions. No answers appear in the document.

 


  Wish it were million, make that BILLION... 
(Andy)Dec 12, 06:28

  40 million of the suckers give or take... 
(Andy)Dec 12, 06:28 Category:
 Noncompliant_Chips
Date:
 1998-06-01 09:36:43
Subject:
 40 Billion Chips: Latest Estimate
 Link:
 http://www.cv.nrao.edu/y2k/sighting.htm
Comment:
 David Hall now estimates that there are 40 billion chips and microprocessors. The standard estimate is 25 billion.

This is from the National Radio Astronomy Observatory (May 18).

* * * * * * * * * * *

At a special briefing for Capitol Hill staffers set up by ITAA and the House & Senate IT Congressional Working Groups, Cara Corporation Embedded Systems Specialist David C. Hall stated that there are over 40 billion microprocessors worldwide, and anywhere from one to ten percent may be impacted by the date change. Embedded systems process information, monitor and control system functions and are integrated into everything from bank vaults to bottling plants. Hall said that embedded system failures will cause one of three outcomes: systems may i) shutdown, ii) produce large, observable errors or iii) small, less noticeable errors. He said 80 percent of the total Y2K effort may be expended fixing automated control and embedded systems. In demonstrating the ripple effect of the problem, Hall described an oil company that has determined the need to replace thousands of chips controlling an oil dispensation system. The chips, he said, do not fit on the existing motherboards and new motherboards do not fit into existing valves. As a result, the valves themselves will have to be replaced, Hall said. Hall also claimed that no plant or factory tested to date has been found free of all Y2K related problems.
 


  Y2K - embedded chips - oil rises, gold rises, then silver... 
(Andy)Dec 12, 06:25 An oil drilling rig may have as many as 10,000 embedded chips. Need I say more?

* * * * * * *

The oil industry faces a gargantuan task to fight the millennium bug, illustrated by the fact a single offshore oil platform may contain over 10,000 microprocessors. Some are deep below sea level, but all need to be checked.

To put this into further perspective, there are over a 100 platforms in the North Sea alone.

link at

http://www.pathfinder.com/@@dkACfwUATCxSkJKW/net/latest


Andy in Denver

goldfan (12/12/99; 7:19:45MDT - Msg ID:20798)
ORO -Bradley Sideorogram
http://www.usagold.com
ORO
Thanks again for your many researches and publications to us. I'm no expert on it. But the Bradley Sideogram is described on the link here and applied to the DJIA for a few years past. Seems to correlate extremely well as an indicator of major turns in the index. http://www.astrikos.com/public/bradley.shtml

Goldfan

ORO (12/12/99; 6:40:12MDT - Msg ID:20797)
Nearly a frank discussion of US seigniorage
http://www.amb-usa.fr/irc/economic/texts/eco003.htm
From the report of the US Ambassador to France

"Is it Good or Bad to Be an International Currency? Does it matter whether the dollar remains the leading international currency? One should not overemphasize the decidedly modest benefits that having an international currency provides to a country.

"Advantages of having a key currency. At least five advantages accrue to a country from having its currency used internationally. The first is convenience for the country's residents. It is certainly more convenient for a country's exporters, importers, borrowers, and lenders to be able to deal in their own currency rather than in foreign currencies. The global use of the dollar, like the increasingly global use of the English language, is a natural advantage that American businesses may take for granted. But the benefits from having one's country's currency used as a unit of account should not be overemphasized. Invoicing U.S. imports in dollars does not necessarily shift the currency risk from the buyer to the seller, as the dollar price sometimes can change quickly when the exchange rate changes. A second possible advantage is increased business for the country's banks and other financial institutions. However, there need be no firm connection between the currency in which banking is conducted and the nationality of the banks conducting it (or between the nationalities of savers and borrowers and the nationality of the intermediating bank). British banks, for example, continued to do well in the Eurodollar market long after the pound's international role had waned. Nevertheless, it stands to reason that U.S. banks have comparative advantage in dealing in dollars.

"Having an international currency may confer power and prestige, but the benefits therefrom are somewhat nebulous. Nevertheless, historians and political scientists have sometimes regarded key currency status and international creditor status, along with such noneconomic factors as colonies and military power, as among the trappings of a great power.

"Some view seigniorage as perhaps the most important advantage of having other countries hold one's currency. Seigniorage derives from the fact that the United States effectively gets a zero-interest loan when dollar bills are held abroad. Just as a travelers' check issuer reaps profits whenever people hold its travelers' checks, which they are willing to do without receiving interest, so the United States profits whenever people in other countries hold dollars that do not pay them interest. International seigniorage is possible wherever hyperinflation or social disorder undermine the public's faith in the local currency, leading them to prefer to hold a sound foreign currency instead. And today the dollar is the preferred alternative. (Illegal activities are another source of demand for cash, of course.)

"How much does the United States gain from seigniorage? One way to compute cumulative seigniorage is to estimate the stock of dollars held abroad and calculate the interest that would otherwise have to be paid on this "loan" to the United States. Foreign holdings of U.S. currency are conservatively estimated at 60 percent of the total in circulation. With total currency outstanding in mid-1998 at $441 billion, foreign holdings are about $265 billion. Multiplying this figure by the interest rate on Treasury bills yields an estimate for seigniorage of about $13 billion a year.

"A final advantage is the ability to borrow in international capital markets in one's own currency. Some have argued that the United States' financing of its current account deficit through foreign borrowing has been facilitated by the ability to issue dollar-denominated liabilities, and the concern has been expressed that this ability may be hampered by a loss of reserve currency status. This concern is probably overdone, however. First, many industrial countries whose currency is not a key currency are able to borrow in domestic currency. Second, countries with larger current account deficits than the United States (as a share of their GDP) have regularly and persistently financed such imbalances with borrowing in foreign currency rather than their own. Countries become unable to borrow to finance current account imbalances when such imbalances become unsustainable. The fact that borrowing may occur in domestic or foreign currency has little to do with such sustainability. "

If the US debt held abroad is taken into account as seigniorage - since it is ultimately payable in the same banknotes, then the picture starts getting clearer as to the value of this advantage - about 2 to 3% of GDP per year.


YGM (12/12/99; 6:34:07MDT - Msg ID:20796)
GATA.........................
Http://www.gata.org/

Le Metropole members,

>From the Gold-Anti Trust Action Committee:

"No one at the Fed or Treasury has had the
courtesy to respond to our letter in
RollCall of 9 December," Ethan Stoud, GATA.

That same Ethan, GATA Committee member and
former Federal Treasury/Justice department
attorney, says he is considering a "gravamen"
- 1. A grievance 2. The part of an accusation
that weighs most heavily against the accused
3. The substantial part of a charge or complaint.

Ethan is a legendary Texas attorney on the
order of "Race Horse Haynes." Our "Ethan Stoud"
has made his fame and fortune by suing the Federal
Government. For those of you who might doubt
this claim, just call his former Federal
Reserve Bank associate and GATA Committee
member, John Feather of Houston, Texas.

GATA is not alone in its concerns about the
N.Y. Fed holding DOWN the price of gold.
This came to me today from Café member, A. P.:

"Thought you might like to hear a short part
of a letter I received today from one of my
state senators, Harry Reid of Nevada. Nevada
is the "Silver State" so his response is in
line with his constituents best interest.
He was responding to the letter I sent him
back in ..I think it was October when the
mining convention was taking place and we
sent out letters at that time. His
letter to me was received today but it was
dated November 3rd, and refers to
the IMF issue still going on at that
time. He writes:

"The issue of the Federal Reserve Bank
and the Treasury Department involving
themselves in the gold market has worried
me as well. I have met with former
Treasury Secretary Robert Rubin and current
Secretary Larry Summers. In addition, I have
expressed my concerns about the proposed sale
of a portion of the International Monetary
Fund's gold reserve. I will keep your views in
mind as I continue to monitor this issue"

It appears the good Senator Reid is aware and
worried about the Fed's intervention in the
gold markets and Reid says he is monitoring
the event. It's not the strongest affirmation
I have ever heard, and I wish he was some
what more ardent and involved in his "worried"
status, but at least he is aware of the
accusations that the Fed is manipulating the
price of gold and has mildly confronted the
issue with the Secretary of the Treasury. I send
this to you with the thought that if GATA
needs receptive ears in Washington to help
the cause the Nevada delegates might be a
good starting point."

The Gold Anti-Trust Action Committee feels
very strongly about our case and our issues.


"If the American people ever allow private
banks to control the issue of the currency,
first by inflation and then by deflation, the
banks and the corporations that will grow
up around them will deprive the people of all
property until their children wake up homeless
on the continent their Fathers conquered."

Thomas Jefferson


I am pleased to announce that on Thursday,
December 13 1999 at 10:00PM eastern time,
that as GATA chairman and co-founder, I
will be joining the Kitco Discussion Group
for a one-hour period and will be available
to respond to your comments and questions
about GATA's open letter to Capitol Hill
published in RollCall this week.

The letter may be viewed at www.gata.org
under "What's New."

Registration is required to post messages.
The link on the underlined words
"registration required" must go to:

http://www.kitcomm.com/cgi-bin/comments/gold/guest-comments.cgi?COMMAND=GETREGISTERPAGE&LIVEPAGE=0

Contributions to GATA just reached $124,937
and are going up every day. Thanks to all!

One more thing on this early Sunday morning.
KEEP THE FAITH! We are going to be on the
top of the heap in the months and years to come!

The bucks are going to come our way much bigger
than what the internet crowd is attaining now.
Good for them. I hope they keep it. Just their
turn in the roll of things.

<A HREF="http://www.LeMetropoleCafe.com/scripts/products.cfm">Le Metropole Cafe</A>

All the best,

Bill Murphy
Le Patron
www.LeMetropoleCafe.com




SteveH (12/12/99; 4:45:39MDT - Msg ID:20795)
Gidsek
Leasing.

Rhody at www.kitco.com has addressed this issue quite well. Search for his posts using the kitco search engine. When you find the best description, would you mind a repost here?

ORO (12/12/99; 4:43:31MDT - Msg ID:20794)
A few Cool Charts from Cycle Pro
http://www.geocities.com/WallStreet/Exchange/9807/Charts/SP500/DJ-GC91202.gif
http://www.geocities.com/WallStreet/Exchange/9807/Charts/SP500/DJ-JY91202.gif

http://www.geocities.com/WallStreet/Exchange/9807/Charts/SP500/DJ-CL91202.gif

http://www.geocities.com/WallStreet/Exchange/9807/Charts/SP500/SID91202.gif

I have no clue as to what a Bradley Siderogram is, but it seems way more in tune with the "real economy" currencies than with the dollar currency.

The US stock indexes may be viewed in context of many alternates, since any investment is measured against its alternatives - and the movement one makes from one holding to another puts one in a "symmetrical trade"
American Investment in stock =
Short $ (previous holding), Long Stock.

In reality, the American investor is seeking a return of real world wealth goods and services. A proxy for this may be obtained by using an index that measures the buying power of the dollar rather than the dollar itself. Thus a CRB index, Morgan Commodity index or a CPI index are good choices. A Misery index (CPI rate + interest rate + unemployment rate + default rate) could be an interesting alternative. A compounded version of the Misery index would be truly interesting. Since gold is a hedge against all of these, a good proxy to the compounded Misery index and all the other indexes could be the price of gold - or better yet, the price of a krugerand, or a pre FDR european gold coin index (Rooster+ Sovereign + Mark +Guilder +Helvetia).

The prime URL would be a good showing of what is happening.

gidsek (12/12/99; 02:36:00MDT - Msg ID:20793)
Gold Fan "Gold Leasing"
"A while ago TOWNCRIER asked for new posters to ask questions. Well, here's some from me.

Lease rates for dec 10 show gold at 1.2% for one month , increasing to 2% for one year
silver at 2.7% for one month incresing to 5.8% for a year
platinum at 61.5% for one month, decreasing to 21.3 % for one year.

These have been more or less the usual amounts and patterns for these metals for some time. I would like to understand how PM leasing works. Why do the rates exist at all for gold, if the leesors are aware that the gold cannot be returned? Why are the rates so much different for gold and platinum? Who would lease platinum at 60%, for just one month? Who uses gold or platinum for a month? How do they do that? Why do the lease rates for gold shoot way up, then come back down, as if the leasors were anxious to astract business? Who needs to lease this stuff today anyway?

I can understand, that bankers in the past would do their friends a favor by leasing the bullion for a nominal rate, to get some money for themselves, and give these friends a chance to profit by selling the stuff and investing the proceeds "safely" at much higher rates But why continue the practice in this upset market today?

I would be very grateful to be pointed in any directon for the answers to these questions. This lease stuff is a piece of the "banking-gold" revolution now that I haven't been able to grasp, and it seems fundamental. Thanks.
Goldfan"
-----------------------------------------------------------

BTW lease rates you have quoted are annualized. 1 month Plat at %60 (per year!) for example is in fact %5 for a month, or less if compounded.

To my knowledge there are three forms of gold borrowing/leasing, all of which tend to depress the price.

1/ Gold loans to producers for finance of mine construction.
An extrordinary amount of exploration/production activity was brought about by the huge runup in the POG in the '70s. The practice of gold loans to fund mine construction developed. Borrowed gold was sold to finance mine construction, the loans paid back with newly mined gold. A very sensible practice but not good for the price.

2/The Gold Carry Trade.
Because of the cyclical waxing of strength of the fiat money system and perhaps some Central Bank selling and because of #1 above, the price of gold developed a down trend and attracted short sellers. Gold can be borrowed at the lease rates you have quoted, sold and the proceeds invested in anything with a higher return. As the price of gold is/was falling the "leased" gold can be returned by going to market and buying gold at a lower price. Money is made in two ways as you can see, very profitable AS LONG AS THE PRICE DOESN'T RISE!

3/- Producer hedging.
Percieving a falling price producers tend to want to hedge. Oversimplified this involves "leasing" gold and selling it at todays' prices and returning the leased gold from future production. As the price has been falling producers have been forced to hedge A: to avoid bankruptcy B: because banks providing financing for exploration etc. insisted that they do.

The practice above may be what's called a forward sale... I'm not sure but basically whats' done is, a price is fixed by the miner for gold that has yet to be dug up and there is more that one way to do this.
-----------------------------------------------------------
You asked,
"Why do the rates exist at all for gold, if the leesors are aware that the gold cannot be returned?"

Well just some guesses here:
1/- WE Goldbugs say that the gold cannot be returned, the market may have different perceptions (we might be wrong). A broker aquaintance of mine is of the opinion that Washington Agreement Central Banks are lying and will continue to sell/lease, he says they want to get the best possible price (I don't think that jives with the evidence, BOE etc.)

2/- Nobody really expects bad loans to third world countries to ever be settled either, (nor my credit cards to be paid off!) yet there is still a market in this debt. Lease rates must be quoted in order to roll over gold loans whether in the end they will be paid off or not. No gold need change hands (no additional leasing) yet lease rates and interest are still calculated/quoted. Important, in the arena of rolling over existing loans it seems to me that the lease rate in these circumstances can be set low arbitrarily if Central Bank lenders are intent on helping the market to clear... and not to collapse.
-----------------------------------------------------------
You asked,
"Why are the rates so much different for gold and platinum?"

Platinum is a precious metal but also an industrial commodity that (unlike gold) is actually used up and depleted. It's a catalyst used in car exhausts, fuel cells etc. It is somewhat more scarce than gold as there are no large above-ground hoards and supply comes from (to my knowledge) only from 3 main sources (unlike gold). These are S Africa (Impala Platinum and others), N America (Stillwater Mining) and Russia. I believe the Russians have been playing games with their portion of the supply.
------------------------------------------------------------
Your asked,
"Who would lease platinum at 60%, for just one month?"

I don't have the slightest idea and I doubt anybody really does. It seems crazy to me. :-)
------------------------------------------------------------You asked,
"Who uses gold or platinum for a month? How do they do that?"

I don't know about platinum but the hedge/forward/futures market positions of mine companies are often extremely complex. Look at your own finances... you may have a twenty year mortgage and also owe a friend $20 til pay day. Suppose a miner has to deliver gold in January and production is temporarily interrupted ... falls short due to a strike or some equipment failure or disappointment in the grade of ore. A short term gold lease is just the thing.
---------------------------------------------------------
You asked,
"Why do the lease rates for gold shoot way up, then come back down, as if the leasors were anxious to astract business?"

Let's see...
1/- Lease rates might be manipulated as I mentioned above by lenders who don't want to destroy their debtors, they just want payments to continue in an orderly way. In this light lenders might be viewed as slum landlords and mining companies with hedge positions as their tenants, or perhaps as oldtime rail companies who adjusted their freight rates to keep farmers in seed grain for another years production but otherwise took them for all they had.

2/- Lease rates may have been responding to supply and demand. Miners/borrowers who were a little behind may have rushed to lease and driven up rates temporarily in a panic.

3/- The percieved risk in lending probably increased. Borrowers who are on shakey ground (an illiquid market) always have to pay a higher interest rate.
-----------------------------------------------------------
You asked,
"Who needs to lease this stuff today anyway? "

Miners, people who make things out of gold ("fabricators"), financial speculators.
------------------------------------------------------------You asked,
"But why continue the practice in this upset market today?"

This is a big question, we are perhaps on the cusp of change but you should go to "The Hall of Fame" at this site and review Aristotles' posts regarding Oil for Gold.

The upshot of these posts is that in order for oil to be cheap, gold must be cheap. Think about being an Arab country with very little going for it but oil. Would you trade your precious finite oil supply for a bunch of paper dollars that can be printed for nothing in infinite quantity? Only if these dollars were convertable to something of true value. It is thought that much of the monkey business with the gold market has to do with keeping the cost of oil down in dollar terms, by insuring that the dollars realized from oil sales will continue to be redeemable in gold.

Thanks for the opportunity to test my knowledge Gold Fan, I don't post much but all this is giving me an idea about another one.

gidsek



Joey (12/12/99; 02:30:15MDT - Msg ID:20792)
FOA

Thank you for the detailed response to my comments. It seems we are in broad agreement on the points I raised. There are just two matters I want to try to clarify:

1) You're quite right, I should not have suggested that Ashanti had in effect defaulted. Cambior, however, is as far as I can judge in a slightly different class in that they had sold considerably more calls maturing in 1999 than warranted by their production capacity. In this sense at least, they only avoided default by an effective "restructuring" of their committments.

2) In response to my point (1), you suggest that defaulted paper could trade at varying discounts to physical. As is I think apparent from my earlier post, I agree with this but believe that given the degree of leverage extant, any such interlude would be brief and the markets would soon "lock up". In your comments on my point (3), however, you seem to imply that any peripheral default would be lethal. No doubt I miunderstand your intent but these two reponses do appear to be in some slight conflict.

Yes, FOA, it will be fascinating to compare notes. I fear however that the consequences will be sufficiently dire so as to prevent the outcome being a gratifying one to any of us.

best regards

Joey

Goldiehawk (12/12/99; 02:24:48MDT - Msg ID:20791)
The best Gold Website in the www
http://goldworld.net/
Probably everyone has this one bookmarked, this is for the benefit of the ones who have not yet done so.
This Website has links to more than a thousand gold related URLs and more sites are added regularly. If you have a favorite site which is not listed, the author welcomes your suggestions and do appreciates your input.
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And by the way this is not a spam, and I get nothing out of it. I have offered many links in the past and I find this site the most complete and totally neutral. Sharefin's site is listed and of course USAGOLD.

ORO (12/12/99; 01:47:37MDT - Msg ID:20790)
Thanks be given
To FOA, thank you for your recent answers to my barrage of questions. I do appreciate the time you take to answer.

To Gandalf, RossL and Goldfan (welcome) thanks for going through the unexplained charts, playing guinea pig for my experiments in explanation.

ORO (12/12/99; 01:30:14MDT - Msg ID:20789)
Oil down? No way
http://www.bea.doc.gov/bea/ai/0699fdi/maintext.htm
From BEA

"The large investment in the petroleum industry illustrates a trend toward greater consolidation within the industry that was also reflected by a number of other substantial petroleum-related investments, particularly in oil refining, distribution, oilfield machinery manufacturing, and oil and gas field services. In response to weak growth in the demand for fuels, excess capacity, and low oil prices, companies have been more aggressive in seeking out opportunities to reduce per unit costs in areas such as administration, refining, and marketing. A longer term factor behind the consolidations is the intensification of the worldwide competition to secure large, new oil reserves. In the United States, oil production, though declining since 1970, continues to exceed new discoveries. Generally, excluding production in the OPEC countries, production is leveling off, if not already declining. Large, new oilfields are becoming increasingly hard to find, and oil companies must explore more remote regions, often under inhospitable conditions, and deal with political, as well as geological, uncertainties. Given these circumstances, only companies with the size and financial strength to assume high costs and risks will remain profitable."





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