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ARCHIVED DISCUSSION FROM 7/12/2001
All times are U.S. Mountain Time
(Yesterday's Discussion.)
Privateer
(07/12/01; 23:10:50MT - usagold.com msg#: 58005)
(No Subject)
R Powell states that The Privateer defines money as a medium of exchange. So I do, but the definition is by no means original with me. The most rigorous "explainer" of money I know of is Ludwig von Mises, with Murray Rothbard, Percy Greaves, Elgin Groseclose, Henry Hazlitt, and Harry Browne (in no particular order) also having no flies on them.
But the first step to discussing and/or learning more about anything is to agree on a definition of what it IS. There is no need to define the word "exchange", so lets try "medium".
According to my dictionary, a "medium" is: An agency by which something is accomplished, conveyed, or transferred.
An exchange is accomplished - money is the medium which facilitates the exchange. It is the "common denominator". It is ALWAYS one side of the exchange.
Before we can discover if the pieces of paper and electronic entries which are passed as money today really ARE money, we have to agree on what money is. And as all economists would have told you in the nineteenth century, and as some would still tell you today, money is a medium of exchange.
To get right to the core of the matter, consider this. To accomplish and EXCHANGE, as opposed to a robbery or a legalised act of pillage, force or fraud must be ABSENT. "Fiat" money employs both. It is "legal tender" and it is "produced" at the whim of government agencies through the banking system.
justamereBear
(07/12/01; 23:09:39MT - usagold.com msg#: 58004)
B.Blade Dragonfly CoBra(too) Econoclast R.Powell
Go Black Blade Go
Wish I had the foresight to start making a file of your posts. Call it "Anatomy of Armaggeden" and would be a fine source for future historians to track how the world descended, a little bit at a time, day by day. Must go back and see your posts of say 2 years ago, and compare them with today. Then the trend is much more apparent.
Dragonfly 57977
Who "SHOULD" create this abstract value unit? Why "SHOULD" we have some omnipotent "Big Brother" in this equation? How about a nice democratic, those who are engaged in commerce at all levels? What do they feel confident in? What are they willing to accept as a common demoninator? And especially today, particularly in the US, the dollar is a common denominator.
I have not been following, but I understand that Randy said something to the effect that there is no such thing as money, it is abstract. Money is anything that people have confidence will enable them to acquire groceries (the necessities of life.)ie., it is what people will accept. "Big Brother" need not apply. That is why a gold standard existed. People did not have confidence in the full faith and credit of the US government, or other countries for that matter. They did have faith in gold.
R Powell 57969
Inflation/Deflation and the velocity of money.
In inflation, poeple get rid of what is losing value quickly. (In Germany, poeple demanded pay at lunchtime so they could buy bread. By 5 the total days pay, unless they hah a raise at lunch, would not buy bread.) so no one wants to hold money, and it goes around quickly. (ie velocity is way up, and no one wants to be caught with it overnite.)
Deflation is a different mindset. Deflation is a massive asset destruction. Look at some posts today about bankrupcy. In the bankrupt situation, assets that previously sold for dollars are now priced in pennies. Assuming a constant dollar, if your pension plan,(say because the pesion manager had invested foolishly in the stock market) or salary were cut in half, would you be able to spend for the items you previously did? There might be plenty of dollars around, but you don't have any. In deflation, everybody is at least slightly bankrupt. So they do not, or can not spend, so velocity is down.
Econoclast 57962
Could it be we are witnessing deflation, and M1,2 & 3 are no longer valid indicators?
Yes, worship the idol, and not the god. What we have here is an idol with feet of clay.
I would say that if you look at a bell curve, there is a point at the very top when things are exactly in balance. Then it starts to decline, ever so slowly, but faster and faster. With somebody painting rosy pictures, it is hard to discern any downward motion in the early stages of the down motion. We will have to hit the steep part of the curve before it becomes apparent to the unwashed masses. (in which I include myself)
CoBra(too) 57953
I don't think this trend you illustrated so well is what the US wants to perpetuate.
These are the actions of unthinking fools, or desperate men, or unthinking foolish desperate men. Take your pick.
j'Bear
Solomon Weaver
(07/12/01; 23:06:41MT - usagold.com msg#: 58003)
TEX....are you logged on again tonight?
TEX (7/12/01; 00:36:58MT - usagold.com msg#: 57938)
Up for some air
Time to surface from the lurking depths for my monthly "look around". Hm........its a little choppy and it seems there may be some blood in the water. Two and a half years and I'm still not breaking even on my PM but time will tell. YIKES, better get below before the sharks begin to appear. Until next month.....adios!
----------
TEX you are doing fine....In the last 2.5 years, the USD Money supply has grown by about 2 trillion dollars? The new gold mined has been about 6000 tons or 180 million ounces, so that is about $12,000 new dollars for every ounce mined...the real numbers are probably worse. Compared to those dollars you hope to measure your break even-ness with your little PM stash is that much more rare...have faith good man.
LeSin
(07/12/01; 22:26:35MT - usagold.com msg#: 58002)
FOA/TG: "Play On" Have a Couple of Kicks of the Footy!
FOA/TG:
Welcome back to the Real GAME!
Cheers
"S"
uponroof
(07/12/01; 22:12:17MT - usagold.com msg#: 58001)
GREAT NEWS FOR CRYSTALLEX INTERNATIONAL (KRY)......
perhaps I'll get some Gaudens out of this after all
Venezuela has taken a shine to Crystallex International, and at the same time dumped Placer Dome. This management deal is loaded with politics and could be the grease for a lawsuit (between Placer and KRY) happy ending. Seems KRY is very good at making powerful friends down there. Spending 400 million on infrastructure doesn't hurt.
**********************************************************
Dow Jones Newswires
Venezuela: Placer Dome Out Of Las Cristinas Gold Deal
Dow Jones Newswires
CARACAS -- Venezuela's state mining and heavy industry holding company Corporacion Venezolana de Guayana, or CVG, won't continue its joint venture with Placer Dome, Inc. (PDG) at the Las Cristinas gold mine, CVG said late Thursday.
"Las Cristinas will go ahead, but it won't be with Placer Dome," CVG President Francisco Rangel said, according to a CVG press release.
Placer's contract is due to expire July 15.
Placer is 70% owner of the Minca joint venture with CVG but suspended mining operations at Las Cristinas in 1998 citing low gold prices.
Since then, CVG has reviewed the agreement every July and hinted earlier this year it wouldn't continue with Placer unless the company restarted the mine.
In June 2000, Placer wrote off its $116 million investment in the Las Cristinas mine, which has proven reserves of 12 million ounces.
CVG has said it's talked to several companies interested in restarting the mine if it quit the deal with Placer.
One such company, Crystallex International Corp. (KRY), said earlier this week will invest a total $400 million it takes over the project.
The investment will be over three phases, with the first worth $130 million, according to a plan presented in November 2000 to Venezuela's congress, Crystallex Corporate Developments Vice President Richard Marshall told Dow Jones Newswires.
-By Jehan Senaratna, Dow Jones Newswires; 58212 564 1339; jehan.senaratna@dowjones.com
KarenSue
(07/12/01; 22:01:59MT - usagold.com msg#: 58000)
Good Sir Canuck Re: your post # 57863 addressed to me
Good Sir Canuck Re: your post # 57863 addressed to me
You said, "@ KarenSue - Your HOF nomination comes quickly given your 'newbie-ness' to this forum; you are familiar to this procedure, yes?"
Your comment demands a response. I am often said to be naïve. Please re-read my post # 57835 again. If you will tell me exactly what you mean by your use of the word newbie-ness I will tell you what it means to communicate in a facetious manner.
Touché!
Only me
KS
Gold Trail Update
(07/12/01; 21:16:44MDT - Msg ID:57999)
The Gold Trail Discussion has been Updated
The Gold Trail Discussion has been updated. Click on the link to read the latest updates.
Randy (@ The Tower)
(07/12/01; 20:32:21MT - usagold.com msg#: 57998)
Gandalf
Surely the wisest wizard in Eriador (and beyond) should be able to detect some good-natured ribbing among cyber-associates.
Speaking for myself AND for the master of The Tower out here on the moors (in which I merely run amok with his tolerant blessing), I'm sorry to see you withdraw from the RoundTable. Further, I assure you that the warmth of this particular cyber hall of MK's "Castle" is surely diminished as a result. I happen to know that he is fond of you too.
Dammit! I'm done for now.
SteveH
(07/12/01; 20:32:04MT - usagold.com msg#: 57997)
Privateer
Thanks for pointing out your link.
I have read your gold6.html page for years. I always appreciate your down-under persective. You hold no loyalty as we American's do to not find fault with our own system of money. Because of that I see a freshness in your viewpoint that is rewarding at the least and informative, but not the last.
As such I have grown to respect your opinion and now that I have an opportunity to ask you, how do you see this gold affair playing out and its timeline in doing so?
Thanks in advance,
Steve
jinx44
(07/12/01; 20:23:03MT - usagold.com msg#: 57996)
I used to visit here often.......
but now, it's about the same as KITCO. Been coming here daily for about 3 years. Maybe it's like the US economy, we need a big crash to flush out the crap. Time will surely tell.
My best to all concerned.......Lang Price
megatron
(07/12/01; 20:21:16MT - usagold.com msg#: 57995)
Gandalf
Man, all I gotta say is you and (some other people)would'nt last 10 seconds in the entertainment biz. The man was making 'light', even I can see that.
ORO.... wherevever you are....please come back.. don't leave......:^)
Black Blade
(07/12/01; 20:16:12MT - usagold.com msg#: 57994)
U.N.: World Needs U.S. Recovery
http://biz.yahoo.com/apf/010712/un_world_economy_2.html
United Nations Says World Depends on U.S. Recovery for Economic Revival
Snippit:
The severity and length of the economic slowdown in the United States will be decisive in the overall health of the world economy this year, the United Nations said Friday. Since the 1998 Asian crisis the world has been a ``plane with one engine'' -- the United States -- said Ian Kinniburgh, a senior policy analyst for the U.N.'s department of economic and social affairs. The slowdown in the U.S. economy is a major reason for the overall slower growth. Other causes are high energy prices, falling stock market prices and a bruised technology sector. If the United States economy recovers as quickly as it slowed down, growth could start to accelerate from the second half of 2002, the study said.
Black Blade: Going Global! It doesn't look good, the Titanic is going down. Prepare the "Golden Lifeboats!"
Randy (@ The Tower)
(07/12/01; 20:14:13MT - usagold.com msg#: 57993)
RossL's comments on Mundell article
Thanks for sharing your interpretation of John Stuart Mill's "The substitution of paper for metallic currency is a national gain: any further increase of paper beyond this is a form of robbery."
My interpretation differs. I think this is an indictment of any inflation of the current money supply, regardless of the form of currency used to represent it.
And he'd be justified in that view, if that's indeed what he meant. But because the money supply (read "credit") is destined to grow with man's economic development and expansion, this form of "robbery" is unavoidable. That is why we must all look toward tangible assets (such as gold) as the avenue into which we direct our savings. Only an innocent fool attempts to save money over time.
Gandalf the White
(07/12/01; 20:12:15MT - usagold.com msg#: 57992)
Ok , Randy -- The Wizard is "OUT of HERE" also !
People in "CONTROL" of the "Tower" should not be throwing buckets of FLAMING PITCH !!
The shot of -- "Perhaps ORO is on his way to the hardware store for a replacement for his screen door? We can only hope!" -- is your lowest shot to date !!
Please "pull my plug also" !!
Come on Ents and Hobbits, onward toward the Truth !!!!!
<;-)
Black Blade
(07/12/01; 19:57:58MT - usagold.com msg#: 57991)
Former FBI Director Louis Freeh Hired by Delaware Credit-Card Giant MBNA
http://biz.yahoo.com/apf/010712/freeh_mbna_3.html
Ex-FBI Chief Hired by Credit Firm
Snippit:
DOVER, Del. (AP) -- Former FBI director Louis Freeh, whose tenure included an agent spying for Russia and others withholding documents in the Timothy McVeigh case, has been hired by credit card giant MBNA to manage personnel and legal affairs, the company said Thursday.
Black Blade: He probably has the goods on a lot of people like J. Edgar did. Now about those missing FBI files…
Randy (@ The Tower)
(07/12/01; 19:51:40MT - usagold.com msg#: 57990)
Turnaround (msg#: 57976), thanks for reposting the best quote of the day!
---"However, free markets still have the final word. One can concoct whatever financial scheme one may choose, but in the end it still comes down to assets and liabilities. Unsound policies soon create conditions where liabilities outnumber the assets, and someone must pay the piper."---
TRUTH!
Randy (@ The Tower)
(07/12/01; 19:45:19MT - usagold.com msg#: 57989)
Beautiful summary, Solomon...
SW: -----Folks…gold is not money. It is something much more simple. It has so much more peace of mind in it than money. It is somehow untarnished and "ever-young"------
Naturally, we can't expect anyone to accept these "notions" of both money and gold at our mere say so, so we try to inspire them to embark upon a journey of investigation and calm, deliberate thought. Keep 'em coming!
Solomon Weaver
(07/12/01; 19:22:34MT - usagold.com msg#: 57988)
Tree on the silver info
Tree
Thanks for the info on 118 million ounces at the Buffet.
I just have a hard time believing that any news in this regard is credible.
As I mentioned in a recent post, it is meaningless the +/- 50 million ounces that Buffet has or has not leased (I think he still holds a solid stake in physical in vault).
The story will be has "has" a lot, and once again he makes a killing. Joe commoner will scramble to play the same game.
At the same time, purchasing agents at thousands of companies all over the world are going to realize that their companies will go bankrupt if they can't get spot silver delivered...and they will suddenly want 6-12 months "security stock".
Poor old Solomon
megatron
(07/12/01; 19:06:25MT - usagold.com msg#: 57987)
I think...
..Gold is life... condensed!
Tree in the Forest
(07/12/01; 19:02:57MT - usagold.com msg#: 57986)
R Powell, Turnaround
Rich: Based on info I picked up on line somewhere, as of a month ago or so, Buffett had all but a couple of million oz of silver still stashed. 118 M oz somehow comes to mind.
Turnaround: Thanks for the link. Some good late night reading. The Austrians always made the most sense to me. Even Greenspan has doubts about the necessity of the Fed.
Solomon Weaver
(07/12/01; 19:00:55MT - usagold.com msg#: 57985)
Cost - Plus
HOUSTON, July 12 -- A proposed bill that would make it a felony for natural gas or electric power producers to curtail production or to sell energy "at prices above marginal cost" is now before California legislators.
HOUSTON>>>WE HAVE A PROBLEM.
Waaaaaait a minute!!!!!
The producer of any good must know his cost, and the "plus" he needs above that to 1. Survive 2. Satisfy his need for "return". The collective of producers (sellers) and buyers creates the market price....which may lie below the "cost" of production (the case with gold and silver), or above (the case with MS Office 2000). Nobody was complaining when Bill Gates made a profit.
This legislation would ruin the bond ratings of and equity investment values in companies who are given the task of building our "shared" infrastructure.
Poor old Solomon
Solomon Weaver
(07/12/01; 18:51:11MT - usagold.com msg#: 57984)
What is money?
What is money?
Money is something you don't really understand much about when you are a kid, and then at some early age like 3 or 4, your really begin to understand how your parents use it to get things you like. A little later you realize that money comes out of little machines when your parents stick a card in and push some buttons. A little later, you realize that part of the reason your dad and/or mom goes to work is so that they can have money when they get home.
Usually, there is a telling moment in life when some fat precocious kid down the street sticks out his grubby little hand and shows you a bright shiny money fraction unit commonly referred to as a coin, and not only announces how cleaver he was to get one of these babies from his dad…but also that there is a little machine down at the store where one of these can be used to get a gumball. Of course, in the first moments, there is the question, which is more fascinating, the coin or the gumball. If you prefer the coin, you are destined to be a gold-bug…if you prefer the gumball, you are a commoner at heart.
If you have reasonable parents, there usually comes a moment when you hear of the word "chore"….work to do around the house…there is typically some early connection between doing your chores and getting some "allowance"…at this point, early awareness of savings, spending, and choice begin to happen.
The next breakthrough is when you learn that some older kids are able to find some old cans, do some lawn mowing or baby sitting and get rewarded by a nice little handful of money…..sooo Money comes from other people…and this is when you begin to understand that your parents go to do something a little more important than mowing a lawn and that the money they make usually moves around in things called checks.
A little later, you begin to take money around with you in your pocket and will soon find that other children at school have money in their pockets too. Those who always know exactly how much money they have in their pockets are usually going to learn accounting…those who know exactly how much change they are going to get are going to be scientists, and those who find ways to scare you into giving them money for no reason but not getting punched will usually succeed at politics. And those who are willing to "bet" you money against a dare make good businessmen.
Eventually, you learn that there is a constant flux between the money you have and the things you can get with it. Then suddenly, interest in the opposite sex arrives in your life, and suddenly money does not directly buy the things you want…so you either spend money to look nice or spend money to take out the look nice spenders….dating, dancing….those are the best years and a little money actually goes a long way. Some people, however, never get out of the destructive loop of using money to chase sexuality. They usually make poor investors and are rarely gold bugs in the end.
Later, hopefully after "somebody" has forked over a whole lot of money to let you go to College, you begin to live in the full world of money …. Debt. Student Loans…if not, at least car loans, credit cards, money in many forms. It is also the case that whereas in years gone by you spent your money on wondrous things you "wanted", you now face a world where money is spent on needs. There are also a large number of people who want to "sell" you things you don't need, and offer you places where you can keep your money safe. And unless you are very uncommon, there are usually times when you run very low on money.
What is money…??? Well it is really something very simple and complicated…it is an extension of ourselves which we all share in the common square. It is filled with emotion as we crave to accrue more of it, and measure ourselves to others with it as a yardstick.
Folks…gold is not money. It is something much more simple. It has so much more peace of mind in it than money. It is somehow untarnished and "ever-young".
Poor old Solomon
Randy (@ The Tower)
(07/12/01; 18:33:54MT - usagold.com msg#: 57983)
To RPowell
Silver buffalo coins are sold out at the source (the Mint). I don't know about the availability on the private market. You'll have to drop MK a call to see if he has connections that can deliver this item.
As I tried to get away before but was delayed, now I am SERIOUS about paying a visit to the medium of exchange article. Perhaps in the process, "the Captain" (Privateer) will let me bring it over as an addition to the Gilded Opinion????
Awaaaaaay . . . .
Black Blade
(07/12/01; 18:28:44MT - usagold.com msg#: 57982)
California considering bill to make curtailing energy production a felony
http://ogj.pennnet.com/articles/web_article_display.cfm?ARTICLE_CATEGORY=TOPST&ARTICLE_ID=107127
Snippit:
HOUSTON, July 12 -- A proposed bill that would make it a felony for natural gas or electric power producers to curtail production or to sell energy "at prices above marginal cost" is now before California legislators. The proposed legislation calls for a prison term of 16 months to 3 years and a fine of up to 10% of gross corporate assets for "any act that creates a shortage of fuel with the intent to raise fuel prices or materially adversely affect competition" in California's energy market. The original proposal also included producers of oil and coal, but those two energy categories were dropped from the amended version. As it now stands, the proposed legislation is intended to punish natural gas producers, cogeneration operators, pipeline companies, and electricity generators for California's energy shortage, said John Martini, director of public affairs for the California Independent Petroleum Association (CIPA). It marks the first attempt within the US to impose criminal penalties on "individual business practices" such as deciding when to sell production or when to shut in wells or facilities for routine maintenance and repair.
The "logical conclusion" of a specific provision banning "economic withholding by submitting bids at prices above the producer's marginal cost" would seem to make it a felony to sell natural gas or electric power for a profit. But even worse is the so-called "bounty hunter" provision of 10% of any resulting criminal fine to anyone providing information resulting in a conviction. The possibility of such a windfall "encourages individuals and groups to keep lobbing accusations in hopes that something will stick to the wall," he said. The result would keep producers busy in costly court battles instead of producing the energy that California needs so badly.
Black Blade: Yeah, that will give the out-of-state producers more incentive to do business in California. The Grasshoppers are descending upon the scene like a plague of locusts. So far 5 producers have vowed to withdraw from the California market and others are exploring the idea as well. It should get "Interesting." With the economy in recession, the last thing that is needed is restricting energy supply by driving off energy producers.
Randy (@ The Tower)
(07/12/01; 18:28:03MT - usagold.com msg#: 57981)
Thanks dragonfly (msg#: 57977)
http://www.usagold.com/cpmforum/archives/3020016/default.html
I'm glad to see you are still following along -- I had made a mental note of you nodding in agreement at "(6/30/01; msg#: 57232)" and was pleased to have evidence that my presentation was coherent for those willing to remain objective.
In that post, you summarized the situation to my liking: ----"The fact that gold was captured for a time on this chessboard of life is simply a fact. Nothing to get too worked up about, especially now that some brilliant moves are occurring that will allow gold to shine brightly in the open once again."----
In your current post, I really liked your comment: ----"it is the correct apprehension of the proper basis for the generation of this "abstract value unit" that prepares men of good will for life in a world where there is true substance to our idealism. A blizzard of technical information based upon an incorrect interpretation of "the right way to do things" is as useless as a screen door in a submarine."----
Perhaps ORO is on his way to the hardware store for a replacement for his screen door? We can only hope!
Until then, the "teasing out" shall continue, for I will not FORCE the hot flame of my thoughts upon anyone... much better to simply let the candle flicker such that others noticing the light may of their own free-will use this as a reference point to pick and choose their own future paths through the night.
R Powell
(07/12/01; 18:15:52MT - usagold.com msg#: 57980)
Randy/ Medium of exchange
The Privateer defines money as a medium of exchange.
When you ask if this pertains to payment-in-full or settlement-in-limbo I'd suggest that money earned to be used immediately to pay bills or to be exchanged (spent)in a very short time for anything would be classified as payment-in-full money.
If the medium of exchange (money) is stored for a future use then it might be a settlement-in-limbo as its value will probably fluctuate with the passage of time. We know its value (future buying power) will probably deteriorate. Don't Americans have a negative savings rate now? If so, then most money spent is the payment-in-full type and only that saved for a rainy day is settlement-in-limbo. If I had much of this, I'd store my settlement-in-limbo money in something secure, silver coins. I'd also put (gamble if you will) some in long term silver call options. Now that's some serious limbo (risk)!!
Maybe if you're going to qualify the privateer's "medium of exchange", the time between money earned and money spent must be concidered. Buffalo coins??
Rich
Randy (@ The Tower)
(07/12/01; 18:01:03MT - usagold.com msg#: 57979)
First things first... Wow.
Fed adds $9.0 billion to banking reserves via overnight repurchase agreements. That's a big one.
Also, (as if that weren't enough!) for the second straight day, the Fed added permament reserves through the outright purchase of U.S. Treasuries... today adding $1.348 billion from the purchase of coupons dated Feb-Nov 2002 for delivery tomorrow. That, too, is a big one.
You guessed it -- the going rate in fed funds was NOT in need of adjustment. It was trading at the FOMC target of 3.75 percent. You do the math....
Black Blade
(07/12/01; 17:59:00MT - usagold.com msg#: 57978)
How California Spread Its Electricity Shortage
http://www.spectator.org/special/special010710.htm
Snippit:
For six months, President George Bush, Jr., resisted putting price controls on California electricity, saying they would only make matters worse. Finally, in June, the Federal Energy Regulatory Commission (FERC) succumbed to public pressures and imposed wholesale electricity price controls on the whole Western region. Two weeks later there were blackouts in Las Vegas. "The perverse effect of price controls is that they seem to have made things worse," complained Nevada officials.
Price controls have produced similarly perverse results for 4,000 years. In Forty Centuries of Wage and Price Controls (1979), Robert Schuettinger demonstrated how politicians and the public have never given up the illusion that price controls can make things cheap and plentiful. Hammurabi's Code, written in 1750 B.C., is basically a long list of price controls. The Decline of the Roman Empire was sealed when the Emperor Diocletian imposed price controls on the entire Roman economy. They are history's longest running magic show.
Black Blade: Ya just gotta love the Grasshoppers for trying, even in the face of factual evidence to the contrary, they insist that price caps are the answer. It does not look as if the situation in California will improve much. So far mild temperatures have helped, but now out-of-state NG and electricity producers are refusing to do business in a hostile environment. Go figure. Scratch the Western region's economy. Good analysis and commentary.
dragonfly
(07/12/01; 17:53:26MT - usagold.com msg#: 57977)
The Money Thing
Randy, All
Randy - A few comments on your "money thing". I really like how you are "teasing out" the notion that money is not a "thing" but is, in all actuality, an abstract value unit (my interpretation, not your words). You are quite right to insist that we look deeply into this, as it sets the foundation for all other economic understanding. It seems you have ruffled a few feathers and puzzled some others. Maybe the attachments some have to naming "things" and then believing that they have thusly circumscribed the "essence" of those "things" simply by the act of naming (or defining). It is the meaning of "things" that counts, much more than the naming and subsequent misunderstandings which revolve around the naming and defining process. Beyond that, it is the correct apprehension of the proper basis for the generation of this "abstract value unit" that prepares men of good will for life in a world where there is true substance to our idealism. A blizzard of technical information based upon an incorrect interpretation of "the right way to do things" is as useless as a screen door in a submarine. My question to all who are interested in this subject is as follows --- Who should create this "abstract value unit" in a well-functioning society? Maybe when the "money thing" has been fully fleshed-out we can pursue this. Keep up the good work.
Turnaround
(07/12/01; 17:50:13MT - usagold.com msg#: 57976)
history of the Federal Reserve/ Money Trust
http://www.mises.org/journals/qjae/pdf/qjae2_3_1.pdf
Old Yeller (07/12/01; 14:33:40MT - usagold.com msg#: 57957)
Greenie's magic wand
http://www.mises.org/fullstory.asp?control=725&FS=The%2BFallible%2BFed
"Good article on the fallacy of Fed worship.Someone is going to be proven right on this schism between Austrians and the central planners(manipulaters)."
Yes, great article, thanks!
A couple excerpts-
The Fallible Fed
by William Anderson
[Posted July 10, 2001]
"Austrian economists, I believe, understand the Federal Reserve System like no other people because they despise it so much. In fact, Austrians condemn central banking in general because they recognize that these institutions are set up primarily to fund profligate spending by politicians and to rescue banks from their own bankruptcy...
"The Austrians, especially Rothbard, have documented all of this, of course (e.g., see Rothbard's article "The Origins of the Federal Reserve"). However, it is nice to read an outsider who gives us an account that differs from the disinformation which comes from Milton Friedman and the monetarists, ...
"However, free markets still have the final word. One can concoct whatever financial scheme one may choose, but in the end it still comes down to assets and liabilities. Unsound policies soon create conditions where liabilities outnumber the assets, and someone must pay the piper."
Tree in the Forest-
Rothbard's "The Origins of the Federal Reserve" in the link above has a pretty extensive history of the National Monetary Commission and the members thereof- the usual suspects. I hadn't seen this before, it's really detailed on who, what, where, when. Also includes a good description of the Jekyll Island conspiracy.
One of the best books on the Fed is "Creature From Jekyll Island", extremely well-researched and documented.
megatron
(07/12/01; 17:48:31MT - usagold.com msg#: 57975)
R Powell
as far as positive correlation between the grains and PM's
I would not hold my breath, or gamble on that occuring. From what we've all seen and observed, the PM' are far too important to the functioning of the worlds derivatives/bond complex to EVER be let loose. It will never purposefully,knowingly be allowed to happen. Massive crop/agricultural problems are glaringly obvious to all. They cannot be covered up. Pm's on the other hand will be driven into the ground(ironic;^) I am almost certain. Everyone knows it. It's viceral. The point that one of Greenspans robots is asleep at the switch is when 'somebody' is going to pounce. When that 'somebody' pounces it's going to make Black Friday look like an earnings warning from Amazon. That point is years in the future, maybe 2 maybe 5, but by then we will have accumulated enough to be instant ' multi-millionaires' , whatever that stupid term will mean. But it will happen.
Randy (@ The Tower)
(07/12/01; 17:35:29MT - usagold.com msg#: 57974)
Money = Medium of Exchange
Excellent!
But now this begs the question: What is the ESSENCE of this thing we have alternatively called 'Medium of Exchange'?
And further, how do you or I know how much value each unit of the 'Medium' is worth when used in our exchange/trades? And always ask yourself: Does it represent payment-in-full, or rather settlement-in-limbo?
OK, now I'm stepping out to visit and read the article...
megatron
(07/12/01; 17:33:24MT - usagold.com msg#: 57973)
R Powell
It remains to be seen if the 'paper' can thwart the actual
laws of weather and physics. I'm sure the Agricultural Dept of the world are doing exactly the same thing the central banks are doing with PM's. Pm's could run a little further because 'joe schmoe' doen't care, but there will be a nasty disconnect at some point if there is a multi year crop failure and price gap up, meaning inflation. I don't see how it would be possible to fudge the figures beyond a certain point. It would be laughably transparent, even to the man on the street.
Black Blade
(07/12/01; 17:28:12MT - usagold.com msg#: 57972)
The State of Energy in the US
http://www.dismal.com/thoughts/article.asp?aid=1285
Snippit:
The U.S. economy has undergone major structural changes over the last two decades, becoming more energy efficient, thus reducing its overall dependence on energy. As such, the current high price of energy has not led to a more serious downturn; although it does, nonetheless, make an economic recovery much more difficult.
Black Blade: The author fails to realize that the US economy is more dependent on energy than at any other time in history. The "New Economy" does not exist without sufficient energy. Some regions are in desperate need of energy infrastructure and energy production such as the western states and California in particular. Interesting article nonetheless. Conservation alone is not sufficient and the return to a robust economy is tied to development of "Cheap Energy." "Cheap Energy" is a thing of the past. Gold insurance is more important than ever.
R Powell
(07/12/01; 17:19:48MT - usagold.com msg#: 57971)
megatron
I'm thinking of anything that grows calls but so much still depends upon the strength of the dollar. Lots of grain production in many countries that may devalue their currency at any moment. But I believe the U.S. is holding more than its share of the world's carryover so drought or lower production anywhere might force the world to buy from the U.S. This has not been the case for some time. So much of last year's analysis boiled down to currency exchange.
Viewed from this perspective, I find the POG has maintained quite well. Many of these other commodities are far below the cost of production for even the most efficient producers. No one can grow cotton for less than 50 cents/pound. It's been trading around 40 cents. Many commodity analysts and economists in general are looking for a move away from paper held assets in favor of tangible ones. Maybe, after calling for this for so long, maybe the grains (OATS!) have announced the arrival.
If so, I'd expect the dollar to weaken and POG and POS to start a determined move upward. Wouldn't that be nice!
Rich
Black Blade
(07/12/01; 17:10:18MT - usagold.com msg#: 57970)
Jobless Claims
http://www.dismal.com/economy/releases/release_2k.asp?r=usa_claims
Snippit:
Jobless claims shot upward last week to 445,000. This is the highest figure since mid-1992 and dashes hopes that jobless claims were beginning to ease. Thus, initial claims continue their upward march, indicating still-deteriorating labor markets. Continuing claims support this trend with a rise to 3,046,000 two weeks ago. The insured jobless rate, however, remained steady at 2.4%. The surge in initial jobless claims last week was a surprise, given the short workweek that kept state employment offices closed on Wednesday and some easing of announced layoffs. There now appears to be no change in the rising trend for claims, and with the approach toward 450,000, the figure is near a level consistent with recession conditions.
Black Blade: The unemployment numbers will continue to rise as the US recession deepens. Not a healthy economy by any measure. - waiting for the other shoe to drop. Meanwhile grab ahold of a place in a "Golden Lifeboat."
R Powell
(07/12/01; 17:02:44MT - usagold.com msg#: 57969)
Deflation or inflation question
I'm way over my head but I sense that the movement or velocity of money has slowed down from what it was a few years ago. If the money supply were constant and no other factors influenced the inflation/deflation equation, would the slowdown in the money movement (velocity) give us price of goods inflation or deflation?
In the one sense, constant supply means neither inflation nor deflation but what effect does velocity have on the price of goods (cost of living)?
Maybe we can get oats to teach that "up" move to Spot.
I'm glad I don't own horses.
Rich
megatron
(07/12/01; 16:57:26MT - usagold.com msg#: 57968)
R Powell
Funny you mention grain. I was discussing this subject this morning with some producers and buyers in the Prairies(Canada) They are now tilling under a lot of the spring plant because of drought. It is the driest year in a long time. Prices have risen already as buyers are expecting lower supply this fall. Inflation here we come. These producers by the way have no debt, and can barely scrape by.
It will require years of higher prices to induce them to expand or continue. Sound like an industry you've heard of?
Kondratief will be chuckling in his (gulag) grave. Wheat calls?
megatron
(07/12/01; 16:50:18MT - usagold.com msg#: 57967)
Blade
There isn't going to be a revolution or anything. Magic Al is going to order some sycophant to produce bookkeeping entries that eradicate the problem,and well placed leaks to the financial community will indicate all bad debt will be covered, in fresh $US, printed just for this occasion, and all will be glossed over, again. Sorry, future US taxpayers.
R Powell
(07/12/01; 16:46:53MT - usagold.com msg#: 57966)
Econoclast
I like your idea of deflation in some sectors (certainly tech and dot com stock prices as well in the number of companies that will survive) and inflation elsewhere. Here I'm using higher prices of consumer bought items as opposed to inflation meaning more actual money in existence. We know that the Fed. is trying to create (print) more $ and this seems in keeping with Greenspan's fears of a tightening of bank loans. It would seem that a great deal of money has gone to money heaven with the Nasdaq decline but has enough disappeared to cause deflation (meaning simply less money)? By money, I'm using the privateer's definition, money=medium of exchange.
If the monthly trade deficit is still about $30 billion or one billion/day, and assuming that this debt is lurking overseas or outside U.S. boundries, then I wonder if the Fed. is printing faster than it is leaving? Randy will know. If/when it returns in mass, then it's definitely inflation but as of now isn't it still held in paper debt of one form or another? So could we be deflating domestic supply while inflating world supply and increasing the risk of an unwelcome return?
Perhaps selective short term deflation leading up to a longer term inflation (meaning both price of goods and simple supply deflation and inflation.
If commodity prices are any indication of inflation, then look at today's grain gains. I've never seen oats move 5 cents let alone 15! Many say that the price of oats is a solid, not to be ignored, indicator. Interesting times?!
Rich
megatron
(07/12/01; 16:45:51MT - usagold.com msg#: 57965)
Just Wonderin'
Why would there be a meeting of the central bank in the US if there is a debt crisis in Argentina? I thought 'Honest Al' didn't participate in the markets in any way. Why are American taxpayers paying that idiot to backstop another idiot's bad trades?
Black Blade
(07/12/01; 16:43:32MT - usagold.com msg#: 57964)
Argentina Default?
http://www.washingtonpost.com/wp-dyn/articles/A48822-2001Jul11.html
More on the Developing Crisis in Argentina! Shades of Asian Contagion, Russian Bond default, and the Mexican Peso collapse. It looks especially grim this time around and probably incurable. The FED could get involved as the currency is pegged to the USD. If the IMF gets involved then it could get even worse as we know the country's history and when the IMF makes demands for implementation of austerity programs, then we could see another revolution.
- Black Blade
Black Blade
(07/12/01; 16:34:34MT - usagold.com msg#: 57963)
Argentina debt sparks foreign fears
http://news.bbc.co.uk/hi/english/business/newsid_1434000/1434592.stm
Snippit:
Domingo Cavallo promises to cut state spending. The fallout from Argentina's financial crisis has spread through the Americas and across the Atlantic, hitting the value of the dollar and sending Spanish shares to a three-year low. Argentina's bonds and shares also plunged on Wednesday after borrowing rates soared during an auction to sell government debt. Fears that Argentina will be unable to service its $128bn of debt sent the Brazilian real and Chilean peso both to record lows against the US dollar on Wednesday. But the dollar itself slid in later trading against the euro and the Swiss franc, over concerns that the fallout from the crisis could spread throughout the Americas.
AND THIS:
Rumours spread on Wednesday that America's central bank, the Federal Reserve, had held an EMERGENCY MEETING to discuss the situation in Argentina, whose currency is pegged to the American dollar. The Fed has declined to comment on the claims.
Black Blade: Where have we seen this before? Deja Vu! Now if they only had some of those gold Argentinos that MK had for sale a while back! However, I bought the Gold Uruguayan Pesos.
Econoclast
(07/12/01; 15:37:24MT - usagold.com msg#: 57962)
For Oro and Others....
I have not been posting much due to the recent turbulence here and also I have just been too busy.
To the subject...
I have been thinking about and trying to find the time to work on an essay detailing a thought/theory that has entered my mind.
We all are witness to the current phenomenon of inflation in many areas of the economy as well as deflation in other sectors.
The general consensus and standard thought here, as well as in my own mind, is that we are witnessing a massive inflation of the dollar, masked through the use of derivatives/other tools of manipulation (moving manufacturing to third world countries, etc.)
I try to keep my mind open and look at the world from all angles.
Could it be possible that we are actually witnessing a deflation and the much reported FED pumping is necessary to try and contain this deflation?
I understand that M1,M2,M3 are increasing rapidly, but since AG himself admits that he can't define money (Hi Randy) could it be possible that these are no longer valid indicators of the money supply?
Kudos to the posters that have come out of lurking status. I am especially impressed with the thoughts and writing of "KarenSue". Looking forward to more on-topic economic analysis and gold discussion from all the great posters here.
ORO
(07/12/01; 15:12:43MT - usagold.com msg#: 57961)
Randy, Turnaround - another missing piece
It should be indicated that the dollar notes of the Federal government and the National banking laws had already made for an extension of leverage in the direction of a central bank, by providing some banks (National ones) with greater credit through unconditional deposit of Federal Treasury balances, in turn by forcing others to accept the national chartered bank's paper without discount while allowing the national banks to raid the other bank's reserves. The assymetrical structure allowed the National banks, which were holding the Federal government's paper, to expand credit while forcing other banks to cough up reserves. Morgan, being a major beneficiary of the priveleges of a national charter and the central player since Jay Cooke's demise of 1878, could, and did play the part of spoiler (in secret) and saviour (in public). Leading the National bank cartel, he brought them into a the regular pattern of credit inflation followed by contraction, which Morgan led in each direction, as he was often the one that broke ranks with the cartel.
Again, to get an idea of this, we can look at Rothbard's "Mystery of Banking" pp132-3(http://www.mises.org/mysteryofbanking/mysteryofbanking.pdf)
"...the bank acts of 1863 and 1864, national banks could be chartered by ... anyone meeting the legal requirements ... but the requirements were severe. ... from $50,000 for rural banks to $200,000 in the bigger cities—that small national banks could not be established, particularly in the large cities.
"The national banking system created three sets of national banks: central reserve city, which was then only New York; reserve city, for other cities with over 500,000 population; and country, which included all other national banks.
"Central reserve city banks were required to keep 25% of their notes and deposits in reserve of vaultcash of lawful money, which included gold, silver, and greenbacks. ... Reserve city banks, ... keep one-half of their required reserves in vault cash, while the other half could be kept as demand deposits in central reserve city banks. Finally, country banks ... keep a minimum reserve ratio of 15% to their notes and deposits; and only 40% of these reserves had to be in the form of vault cash. ... 60% ... demand deposits either at the reserve city or central reserve city banks. [p. 227]
"In short, the individualized structure ... was replaced by an inverted pyramid of country banks expanding on top of reserve city banks, which in turn expanded on top of
New York City banks. Before the Civil War, every bank had to keep its own specie reserves, and any pyramiding of notes and deposits on top of specie was severely limited by calls for redemption in specie by other, competing banks as well as by the general public. But now, all the national banks in the country would pyramid in two layers on top of the relatively small base of reserves in the New York banks. Furthermore, these reserves could consist of inflated greenbacks as well as specie.
"The national banks ...keep part of their reserves as deposits in larger banks... They could then expand uniformly on top of the larger banks, and they enjoyed the
advantages of having a line of credit with a larger "correspondent" bank as well as earning interest in demand deposits at their bank.
"Furthermore, ...every national bank's expansion of notes was tied intimately to its ownership of U.S. government bonds. Every bank could issue notes only if it deposited an equivalent in U.S. securities as collateral with the U.S. Treasury. Hence national banks could only expand their notes to the extent that they purchased U.S. government bonds. This provision tied the national banking system closely to the federal government's expansion of public debt. The federal government had an assured, built-in market for its debt, and the more the banks purchased that debt, the more the banking system could inflate."
Chris Powell
(07/12/01; 15:10:20MT - usagold.com msg#: 57960)
No shooting here!
For Steve H....
Thanks for nothing that you were only reposting
something. I should have been clearer. But I'm
glad of the chance to have tried to tell
everyone that Greenspan's comment about gold
was not as innocent as some suggest.
Privateer
(07/12/01; 15:00:57MT - usagold.com msg#: 57959)
What Is Money?
http://www.the-privateer.com/gold-b.html
I lurk here frequently but post very irregularly. I have been following with interest the discussion on the nature of money which has been going on for quite a while now.
Instead of "re-inventing the wheel", I'd like to make a contribution which is posted on my website under the title "What Is Money". URL included in the post.
In my view, the answer to the question is simple. Money is a MEDIUM OF EXCHANGE - full stop. All of its other qualities/uses are derived from this basic function.
SteveH
(07/12/01; 14:37:13MT - usagold.com msg#: 57958)
Chris Powell
Chris,
It was not I who doubted you or quoted you as quoting the Chairman out of context. Note my post again. You will see it is but a repost and I the messenger. Please don't shoot me. ;-)
Old Yeller
(07/12/01; 14:33:40MT - usagold.com msg#: 57957)
Greenie's magic wand
http://www.mises.org/fullstory.asp?control=725&FS=The%2BFallible%2BFed
Good article on the fallacy of Fed worship.Someone is going to be proven right on this schism between Austrians and the central planners(manipulaters).
History says we are going to win.The waiting is the hardest part.
Christian
(07/12/01; 14:18:22MT - usagold.com msg#: 57956)
Central planning
Wall Street says that refinancings of mortgages by homeowners is a sign of optimism. Must be for the banks. But in reality most homeowners are on the edge of bankruptcy and trying to pay off short term creditors with long term loans. 44% of all mortgage applications are refinancings and 56% of all mortgage applications are for more expensive homes with bigger mortgage payments. People are ending up with more debt, longer repayment periods. Our money supply is based on credit creating gold which is made up of a bundle of commodities and housing. A good part of the money supply as represented on the books of banks is created by credit on property. That is why housing is a part of credit creation gold. The lowering of interest rates serves the purpose of helping banks to increase profits in order to write down bad loans. Today our stock market is up- not because people are buying but because shorters are taking profits and use that money to short different stocks. Also today the treasury is using gold futures to fund equities. Note: A lot of big cap stocks like most small cap stocks buy and sell spread is widening. Trouble ahead. I can not see how our central planned economy can hold up when everything is used to hold up the value of stocks. Sure has not worked in Japan. I think October is a good month to own a put option on technology indexes. I can not see gold move up as long as the treasury sells long dated gold futures to buy stock indexes. Gold is being used to hold up the market. This is a central planned economy based on credit creation gold which consists of metals, grains, oils+gas and housing. Actually the housing refinancings could be used to prop up the market.
goldfan
(07/12/01; 13:28:46MT - usagold.com msg#: 57955)
ORO -on the Profit Motive (re Wanninsky msg. 57912)
ORO I get cheerful whenever I see you have posted, and the recent 57912 Wanninsky post had a couple of thoughts I'd like to address. The first is your statement that the motive of all trade is profit. Somehow I think gambling is a more integral part of human nature. Of course, no one does anything without expecting to benefit. Straight behavioral psychology. But maybe one distinction between Queen Isabella and Cristoforo Columbus, is that she had a power complex, and he, a gambling complex, and the two together resulted in what we call economic enterprise. More on that below. My other thought was a question. In the last part of your post, you described what would be the result of trying to fix credit money dollars to gold by manipulating interest rates.
My question is, can we confidently assume that the underlying laws of economics are such that all schemes by those in power and authority will come to the same end? Their dogma be run over by the inevitable karma of economics?
I sure like your position on the impossibility of achieving anything but misery under central planning. Maybe this answers my question. If so, how many life times must we wait before others will to power ceases to dominate our affairs, and we can watch economic events unfold without trying to direct them, or vote for others to direct them for us?
Gambling and/or the Profit Motive
Data suggest that in our time, gambling is by far the primary economic activity as measured by volume of currency units traded daily. Something like $3 trillion per day in currency trading versus only $20 billion needed to conduct world daily trade in goods and services. My own experience of men in top positions in large corporations is that they are more like gamblers than accountants. And where they are accountants, the company is either a non-entrepreneurial no-risk-taking organization, producing a basic product with only cosmetic or cost saving changes year to year, or it is on the way out and the board has become desperate to save the thing by installing a "bottom-line" man instead of a "visionary".
I favor the idea that business is conducted less out of the "profit motive" and more out of the "gambling desire". Something like in the sports world. People in sports all aim to win (akin to a "profit" motive), but their primary motivation is to compete. Winning is but a measure of success. So in all large scale business or economic enterprise, the rush comes from the risk-taking. You win some and lose some. But the rush comes from the risk. I'm not talking about the (usually) smaller enterprise where the straightforward desire is to provide a needed service at sufficient profit to stay in business.
I have seen corporate executives make big new spending decisions because of the "appeal" or the "size" of an idea, and then do the arithmetic. And those doing the calculations are enjoined to make it come out to look "profitable". Certain shibboleths are always intoned. For sure, no one would build anything of size if the engineers were allowed to submit accurate cost estimates. And how many times have I seen the first attempt at new stuff fail in bankruptcy, while those who bought from the receiver, with much less capital at stake, easily made a profit? This is the way of practically everything in economic history, I'll bet, from the time of the great railroad expansions ‘til now.
FWIW
Goldfan
Pragmatic
(07/12/01; 11:50:13MT - usagold.com msg#: 57954)
Goldfan
You are correct, I think, $ is the key. I do not know if I can keep my promise to uponroof for a 140 $ but a blow off for the $ would be quick, purging and a watershed for gold. Remaing at these levels indefinitely is the worst, both for the U.S. economy and for gold. They are both an enigma now. In "deep storage" why that description? An euphemism? Of course, but what dark truth is being masked? Much is strange about gold trading recently. Strong surge followed by a relative collapse with no known reason. The nature of gold trading seems to have changed since May. Maybe something we do not know about? (nothing gets by me).
Close TA observations of gold, $ and bonds are warranted. Something that will telegraph the direction; how it will all go down.
For an excellent scholary paper on the different flavored abysses read "Deflation or Runaway Inflation" by Anral Fedete at GE. Not easy read but material enough for this forum for weeks of rehash, and speculation, I think.
Old news, I know, but just now getting over shock of FOA's strange departure. Really did not make sense to me. Oh well.
CoBra(too)
(07/12/01; 11:31:33MT - usagold.com msg#: 57953)
Re - Genoa Summit July 20-22
@ The Invisible Hand - The Rome conference of the G7+1 was in final preparation to the Genoa Summit of the Heads of State, which may well be the most important meeting of the G7 or more in a long time as it will be dominated by monetary and currency matters on a global and, pheraps more on a geo-political level.
It may well be that President Bush expects to sign an agreement to give the U.S. a perpetual global "credit card" as Bill Buckler has termed it recently.
In view of the overall numbers of the vast U.S. credit expansion this demand will be met with mounting resistance:
- 1992 total US credit stood at 15.2 Trillion in March 2001 it stood at $ 27.9 Trillion, an increase of 83.6% in 9 ys.
- 1999 US NET external debt $ 1.52 Trillion vs $ 2.19 Trillion, an increase of 44.08% in one year!
- 1992 the current acct. deficit was $48 Billion in March 2000 it stood at 449.3 Billion - a tenfold increase!
... And that is what the US wants to perpetuate. So it will boil down to the real issue as to will there be room for the EURO as a second global reserve currency in stages, or will the $-Supremacy fight to the end? This latter alternative comes close to declare economic war, though in the end it will lead to global recession and depression. The first alternative will at least leave us some glimmer of hope that the mess the $-hegemony has created for itself and now for the rest of world, though ambigously- at an accelerating pace in recent years - may work itself out come time and come mutual assistance - instead of head on confrontation.
The chances for this scenario may be poor, indeed IMHO -cb2
Turnaround
(7/12/01; 10:48:46MT - usagold.com msg#: 57952)
Randy- quite a few missing pieces
Randy (@ The Tower) (7/12/01; 04:18:45MT - usagold.com msg#: 57944)
Continuing our investigation into the meaning/essence of "money"
Just a couple notes for now-
"However, that year is best known by the Panic of 1907 in which the people's economy was plagued by runs on trust companies, banking panics, and a bear market in stocks. "
The 1907 Panic, like the Black Teusday crash of 1929, appears to have been an engineered event. J.P Morgan was involved in both, along with providing financial assistance for the Bolshevik revolution, WWI, probable co-conspirator in the sinking the *Lusitania*, and of course as owner of the Jeykll Island resort, where the massive swindle called the Federal Reserve was hatched.
These kinds of things need to be borne in mind when discussing the likes of Mr. Morgan, lest the read receive an unbalanced perspective.
"In the wake of this banking panic, a National Monetary Commission was formed to undertake a scholarly look at the failings of America's financial system. "
The word "scholarly" may mislead the reader. The National Monetary Commission was of the banks, by the banks, for the banks. Naturally, the recommendation could only be 'let's set up a really big bank'.
"Through the coordinated stabilizing actions of three prominent NY bankers to arrest the banking panic [J.P. Morgan, George F. Baker (First National Bank), and James Stillman (National City Bank / Citibank)], their wealth and power was perhaps made more conspicuous in the eyes of the nation than perhaps it would otherwise have been."
The coordination consisted of withholding reserves from some of their competitors banks, particularly banks not "within the Morgan orbit". This scam was repeated in the early 1930's to destroy banks not within the Federal Reserve System. First, the Fed Act was amended from something like '*shall* provide reserves to non-member banks' to '*may* provide reserves to non-members'. Or, *may not*.
Tree in the Forest
(7/12/01; 10:40:08MT - usagold.com msg#: 57951)
USAGOLD
Thank you Michael for the update. Re: The Fleet Street Letter. These gentlemen (Bonner, Davidson, Rees-Mogg) along with many other bears, have been consistently wrong in their "dire warnings" for many years. Their timing has been atrocious to say the least. I still have their booklet "The Depression of 1999" which they released in 1998 (1997? 1996?). However, even a stopped clock is right twice a day and we may finally be approaching the end. Their "depression" may well be at hand. Bears need to improve their timing by allowing for the rampant manipulation that precedes these downturns. In this case, gold has been manipulated for some 6 years. A question for you or Randy: How long did the London Gold Pool sucessfully manipulate the price of gold? Thanks Michael.
goldfan
(7/12/01; 10:37:42MT - usagold.com msg#: 57950)
SteveH (msg#: 57920)
Hi Steve
Saw your reference to chaos theory in this post of yours. Here's my ruminations,
I think the trade-weighted USD index could be a proxy for all the significant economic activity in the world. Seems to me it has three component driving forces, one the currency gambling that is the major economic activity of our time, two the desire of others to save their wealth in USD rather than the Euro or other currencies under siege, and three the need for $ by those engaging in trade for oil or gold or whatever is denominated in $ that they want. And chaos theory I believe would say that a change in the fractal dimension of the graph of the USD would indicate an incipient crisis, a saddle point, that could result in rapid change. A change in the fractal dimension would be heralded by increased volatility, I think.
Could we say for certain that a large drop in the USD index would signal the air has gone out of this bubble, and it's time for a rush into the gold bubble?
I don't know how to separate the three component drivers of the USD index. But my bet(grin) is that it is the gambling component, since currency trading is much greater than normal goods/services trading on world exchanges. Some thing like about $3 trillion per day in currency trading, versus only $20 billion per day needed to handle all the world's trade in goods and services. Gamblers ride and exacerbate trends, up or down. They don't pay a lot of attention to fundamentals, only to news that's likely to affect the trend. When they start betting against the USD....
In the last few weeks we have seen some pretty wide swings daily in the USD index. Maybe a change in the fractal dimension? Maybe....
FWIW
Goldfan
Tree in the Forest
(7/12/01; 09:59:08MT - usagold.com msg#: 57949)
Randy
Re: your post #57944. Bravo! Encore! A fascinating topic. In particular, I would ask who were the men sitting on the National Monetary Commission? I'd like to know who was making these recommendations. Thank you.
USAGOLD
(7/12/01; 09:49:25MT - usagold.com msg#: 57948)
Today's Commentary
http://www.usagold.com/Order_Form.html
Ed. Note: Today we will reproduce my Commentary & Review in its entirety on this page for the weekend to give new readers an idea of what goes on at our client only page. This is available to prospective clients free of charge for a limited time period. Entry requires an easy one time registration at link above.
We hope you enjoy today's Commentary. To get to the links mentioned, you will have to go through the Commentary & Review page. They are worth following.
---------
7/12/01
In Brief:
Today's Action: Gold gave up most of yesterday's post-auction gains as the market switched to concerns about Friday's option expiration. UBS-Warburg reports that "the next major event in the options market will be Comex Option expiry of this Friday. There is still large open interest around the 265 strike levels." The statement implies that if the past is any indicator the major trading houses will try to take the price lower the profit out of the 265s. This is precisely why we preach endlessly against playing the paper game. The average investor cannot win except by a huge stroke of luck. At least that's the way its been for a number of years. The physical is not on a time fuse and you don't have to worry about default -- a potentiality with which Comex has flirted on a couple of occasions over the past few years (most notably in 1999).
This will be my last report for the week. It has been an unusually busy week for gold news despite the summer doldrums. Gold buying has been steady to strong at USAGOLD/Centennial Precious Metals, also unusual for the dog days of summer. There seems to be a shift in underlying sentiment with the Genoa conference coming up and great pressure developing against the strong dollar. For something to happen on that front, the G7/8/9/10 will have to agree on a framework that will convince forex traders that the dollar will be forced down through some sort of policy initiative. It's difficult to see how that framework can exclude some type of decision on interest rates. Perhaps its time to bring U.S. rates down low enough to make the dollar carry trade an attractive enterprise. (And maybe that's why the Dow is up this morning. I don't think it will last. Most stocks are still greatly overvalued and I have yet to see a inflationary/stagflationary economy that was good for stocks. And that appears where we are headed. If there is a dollar carry trade, it will produce the opposite of the gold and yen carry trade. Gold, not stocks, will be the biggest beneficiary.)
Hoping the heat dissipates. And hope your having a pleasant summer. See you here Monday or Tuesday. I've made some interesting additions to the page. Please scroll.
Fleet Street Letter warns of the crisis almost no one sees coming
"It seems that no one is watching. Not here in America at least. Most investors don't have a clue about the dangers that lie ahead. Even more dangerous... they don't care. But worst of all, they are being set up for what could be the greatest economic disaster in 70 years. The last time the dollar fell... it wasn't long before the stock market came down too. And a recession that was the worst in the last 25 years. Unfortunately, many investors today hardly remember it. Most stock brokers and fund managers today have never seen a bear market, let alone have managed investments when a bear is devouring portfolios. The coming crisis will be much more devastating than 1987. The imbalances are far worse... and there are fewer options for dealing with it... because financial markets have changed dramatically. . . . .
[Prominent economist] Dr. [Kurt]Richebächer has revealed that the dollar is going to weaken. In the last few years, foreign investment in the United States hit all-time highs. European banks hold $222 billion in dollars... and there are about $7 trillion, altogether, in foreign hands. This spells trouble for the dollar. Not this month, and maybe not next month. But soon. When this does happen, you'll want to be safely out of dollar-denominated investments."
**
Dr. Kurt Richebacher: "Just about everything is astronomically worse today than it was in 1987... Reaping the whirlwind of a crashing dollar, in particular against the euro, is meanwhile the mutual nightmare of policy makers in both America and Europe. For investors, it is an unbeatable opportunity in the making."
Of client interest: Related link w/ graphs worth seeing
Oppenheimer and Company goes bullish on gold
"...The price of gold has broken through several technical and psychological barriers. We believe the trend is still in it's infancy and is destined to be both sustainable and real. Accordingly we upgraded the sector and adjusted our recommendations to match the times. We believe that there has been a recent positive change in the sentiment toward gold. The reasons for this change lie mainly with the possible decline in the U.S. dollar coupled with the possible increase in inflation.... Historically these changes have resulted in a positive indicator for gold. Latest economic figures show the first decline in productivity in six years. Accompanying the productivity decline was the announcement of a rise in labor costs at an annualized rate of 4.5%. The fastest pace in 7 years. Together these indicate an inflation increase may be nearing. On the gold side non commercial holders of gold have moved to net long positions for the first time in almost a year. There have been only 7 instances of net long positions for this group for the past 5 years. Each time gold prices have moved positively..." (Thanks to "uponroof" at the USAGOLD Forum for posting this quote.)
Barclays says gold risk spread over many lenders but only a handful of borrowers
"So perhaps the consolidation of global gold production is finally upon us. In one aspect, however, the market is already extremely consolidated. Although the top 6 producers account for less than 1/3rd of production, the top 6 hedgers account for over 2/3rds of total hedging, with an average hedge book of 10.5 million ounces. This consolidation stands in stark contrast to the fragmentation of the lending side. A total of 118 countries lend approximately 4,500 tonnes into the market while 6 companies account for 44% of this borrowing. Consolidation among the top 6 hedgers potentially raises significant issues given the fact that lease rates have historically been demand-led. Merging the top 6 hedgers into 3 would create an 21 million ounce "average" hedge book. The funding of such a book would consume more gold than is lent by the 48 lenders in Latin America and Africa."
**IMPORTANT**
Ed. Note: Not to speak of a disproportionate amount of risk concentrated in the top two or three borrowers. A large number of third world countries would have their gold reserves threatened if a big hedger were to collapse. With mining costs skyrocketing thus marginalizing a higher proportion of in-ground reserves, such a scenario makes mergers between hedgers and non-hedgers all the more crucial particularly for the companies that owe substantial amounts of gold and the bullion bank(s) that co-signed for it. File this small piece of information for future reference. It tells more than one might garner with a quick read, particularly in terms of what it might mean for the gold price if even a medium-sized hedger were to get in trouble. As this is written, it surfaces that Canadian mining company, Cambior, is back on the ropes with its hedge book once again going under water. (See "Cambior Hedge Book Swings Wildly in Red" Link) Says analysts Tim Wood, "The negative hedge position will be vindication for hard-core gold bugs who warned that producer forward sales cannot withstand a sustained price increase even after lessons learnt from the Ashanti and Cambior debacles of 1999. Since then, hedged producers claim to have engineered forward sales programmes that offer upside exposure as well as reducing downside risk." Those claims are beginning to take on water. Envision a bevy of lenders scurrying about the gold market trying to find hard physical metal to return to the central banks. Keep an ear to the rail and fully paid for physical metal stored nearby. It wouldn't take much to touch off a fire storm in the gold market. And who is the lender of last resort for a gold loan gone sour?
Deutsche Bank sees 'potential for a serious rise in the gold price
Dow Jones reports that Deutsche Bank sees the 'potential for a serious rise in the gold price,' noting gold demand already well in excess of mined production; says that this together with a structural shift in bank gold lending, further industry consolidation, more return-focused gold mines and consequently tightened supply could be stimulus for gold price."
BOE's George opens split between Europe and U.S. on strong dollar
According to this morning's London Observer the Bank of England's Eddie George "has opened a fresh front in the growing split between Europe and United States over the strong dollar policy. George blames the U.S. for this situation in forex markets and fueling inflation in the euro zone. He said that the European Central Bank had been unable to make a single rate cut this year against six by the U.S. Federal Reserve. George's comments followed a meeting in Italy of the Group of 10 leading nations. European figures are stepping up the criticism of the strong dollar with the ECB describing the current exchange rate as "ridiculous."
Ed. Note: We have said all along the rhetoric and finger pointing would heat up as we approached the January launch of the euro for circulation. George's comments typically avoid the role of the forex markets in pricing currencies. On the face of it, what more can the Fed do than lower interest rates while the ECB holds the line? On top of that the United States Federal Reserve is printing currency like there's no tomorrow. Yet the dollar stays stubbornly strong proving that its all a matter of perception. The hard reality is that oil is priced in dollars. Europe must purchase dollars with the euro, then oil. That automatically drives up the dollar and the euro down. And since oil is such a huge factor in the Europe's import/export numbers, the dollar has been on a rise ever since OPEC moved to double prices. One wonders how much of the George rhetoric is a sound and fury signifying nothing, or at least a sound and fury to drop the blame on rising inflation on the United States. Rather than simply complaining, if Europe really wanted to change the situation they would do everything in their power to make the euro a currency that can be used directly in payment for oil. And that perhaps ought to be what the next international economic conference centers on -- at least if Europe is serious about what they are saying. But one wonders how much of this is a smokescreen and how much genuine concern. After all both Europe and Japan have found great comfort in the strong dollar/weak everything else milieu. Meanwhile, if George is right about the rising specter of inflation, it will come not only because of the strong dollar, but because rising energy costs are taking a toll on the global economy. And that's not likely to be problem just for Europeans but for most of the global economy. Gold is the best insurance against deteriorating purchasing power, and the only choice when all currencies are depreciating against goods and services in tandem. That's the real reason for gold's stubborn strength since mid-1999. It also explains the steady rise in gold demand over the last few years as well as the dip-buying by consumers globally.
Bank of Russia approves payments in gold Chervonets.
(Ed. Note: Those of you who availed yourselves of our recent Russian gold chervonets offer might be interested in this recent press release from the Bank of Russia. We can still procure this coin for you if you would like to add it to your holdings. Please call 800-869-5115 if you have an interest.)
ST.PETERSBURG, RUSSIA, JUL 9, 2001 (A&G News via COMTEX) -- The gold coins minted in the 20s are now a legitimate means of payment along with the coins minted after January 1, 1998. As a result, Russia obtained a new financial tool, capable of becoming an alternative of a dollar. The gold pieces of the bank of Russia have a higher degree of liquidity than collectible coins also minted by the bank of Russia. Firstly, paragraph 149 of the second part of the Tax Code allows the VAT exemption to the operations involving the gold pieces. Secondly, the Central Bank (CB) intends to regularly quote the gold pieces. From the CB press-release it becomes clear that commercial banks will be the first ones to receive precious coins from its deposits, and will make regular deals with the clients based upon current quotations.
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Black Blade
(7/12/01; 06:38:07MT - usagold.com msg#: 57947)
RE: andrew the kiwi - PGMs
Hi there! It's been a long time. I have been out of PGMs for some time (several months)except a smattering of North American Palladium shares and physical Pt. I got out as the TOCOM and NYMEX defaults on PGM contracts (rules changes) in the middle of the game were obvious attempts at manipulating the market as we have seen in the past with the Hunt brothers and silver. I couldn't stomach the criminal activity anymore so I bailed. The US-GLOBAL recession has had an effect on US and global auto sales so there is also less demand for PGMs and the Asian Pt jewelry craze is coming to a standstill. The Russians still can't seem to kick up PGM production and they sold off their stockpile reserves of PGMs long ago for so-called hard currency to make good on foreign loans, etc. Should the global recession end and the world's economies turn positive, then PGMs could rise under high demand pressures. Cheers!
- Black Blade
Black Blade
(7/12/01; 06:27:29MT - usagold.com msg#: 57946)
Cambior hedge book swings wildly into the red
http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B285256A860066F868?OpenDocument
Snippit:
NEW YORK – The average increase in gold prices over the second quarter has had a deleterious effect on the hedge book of Toronto and Amex listed Cambior [CBJ]. From March 31 to June 30 the mark-to-market value of its forward sales slipped $15.8 million to negative $1.1 million.
The details were released in a production update preceding the release of quarterly financial results later this month. The hedge book was worth a positive $16.9 million at $258 per ounce at the end of the first quarter but, at $271 an ounce at the end of the second quarter, it is under water
Black Blade: A preview of things to come for heavily forward sold miners. Barrick is grossly exposed. After the WA announcement, there was sheer panic in the ABX boardroom and an immediate announcement that ABX would increase its forward sales. Then they proceeded to purchase calls to protect against a rising POG. AU is in a similar situation. This CBJ announcement just puts an exclamation mark on the dangers of forward sales.
RossL
(7/12/01; 06:17:39MT - usagold.com msg#: 57945)
Money
http://www.usagold.com/gildedopinion/MundellGresham.html
Thanks to the editor of The Gilded Opinion for the Mundell piece. I particularly liked the passage on John Stuart Mill:
"The substitution of paper for metallic currency is a national gain: any further increase of paper beyond this is a form of robbery."
My take on this statement is that gold and silver certificates, bank notes, promises to pay, what have you, are GOOD forms of money and liquidity as long as they are backed by integrity and real assets. Once the line is crossed where paper issued is not backed by integrity and real assets, it is robbery.
In the message by Randy (msg#: 57944) we are shown some carefully edited history where justifications for this robbery begin in their early stages. Any support for a system of unbacked fiat money, (eg. FRN, Euro), and a system that allows holders of gold obligations to default and pay with Euros is a support for robbery.
If the footsteps of giants are leading us on a trail around the mountain in a great big circle right back to where we started, we will never ascend the mountain.
Also, thanks to ORO for the link to Rothbard (for some USEFUL definitions of money.)
http://www.mises.org/mysteryofbanking/mysteryofbanking.pdf
Randy (@ The Tower)
(7/12/01; 04:18:45MT - usagold.com msg#: 57944)
Continuing our investigation into the meaning/essence of "money"
In 1907, while America was on the Gold standard and WITHOUT any central bank (such as haunts ORO's waking thoughts,) many modern goldbugs might be inclined to yearn for those "good ol’ days" when "money was money and banking was as it should be!"
However, that year is best known by the Panic of 1907 in which the people's economy was plagued by runs on trust companies, banking panics, and a bear market in stocks. Across the nation, banks were unable (and refused) to deliver gold coins and currency to satisfy the requests of depositors for withdrawals of money from their own accounts -- and 246 banks collapsed. It is not difficult to see how the frustration of depositors unable to obtain currency from banks (even solvent ones!) holding their deposits would lead to pressure for political intervention and change.
For a quick exercise in perspective, imagine what you would do today if faced with the same situation in which your bank could not give you any currency ($1s, $5s, $10s, $20s $50 or $100s) to carry away with you as a representation of the money residing in your bank account. No problem. You would simply write a personal check to meet your spending needs, or perhaps ask for a bank draft, or wire the money wherever it needed to go. Amazing! What IS money??? How did you get yours; where did it come from? How do you know what its value is?? Ponder that, and now we return to our glimpse at history...
In the wake of this banking panic, a National Monetary Commission was formed to undertake a scholarly look at the failings of America's financial system. Of these, the four major flaws cited were that the banks were decentralized, clearing methods were inefficient, the huge cash holdings of the federal government were not distributed where most needed, and the currency supply was inelastic. (Please ponder for a moment how or why the CURRENCY supply would ever be an issue if the amount of MONEY found in banks were at a one-to-one ratio with the currency (gold) that represented it. Surely, in this absence of a dreadful central bank there couldn't be more money than gold coin! That's impossible!! <wink>) By 1911, the Commission had recommended a plan for a "Reserve Association of America" as the solution to these defects, giving rise two years later to what became our central bank -- The Federal Reserve System. However, that's another story for another time.
Through the coordinated stabilizing actions of three prominent NY bankers to arrest the banking panic [J.P. Morgan, George F. Baker (First National Bank), and James Stillman (National City Bank / Citibank)], their wealth and power was perhaps made more conspicuous in the eyes of the nation than perhaps it would otherwise have been. A prominent Wall Street lawyer named Samuel Untermyer suggested that there was a "Money Trust", and The Wall Street Journal also took notice of affairs and wrote, "So long as Congress will not give us what every other civilized country possesses, a central bank, it forces Wall Street to improvise something of the kind itself."
The House Banking and Currency Committee formed an investigative subcommittee to determine whether a Money Trust existed in NY. The chief counsel was Sam Untermyer, and I think you might gain some insights about the true nature of money from the testimony delivered by Morgan and Baker before the committee in Washington DC at the beginning of 1913.
In questioning Baker about the proposal for banking reform regarding expanded disclosure of bank assets and investments, Untermyer probed, "Why should not the assets, and the detailed assets, be a matter of public knowledge?"
Baker replied, "Business would come to rather a standstill."
Untermyer demanded, "I want you to explain to the committee why."
Baker declined, "I can not explain it."
Untermyer pressed further, "You mean you can give us no reason?"
Baker admitted, "It would be exposing all the details of that business to the whole world."
After following a sidetrack in questioning, Untermyer returned to this issue, asking, "Why should the public do business on confidence when it can get the facts?"
To which Baker proclaimed, "Mr. Untermyer, THE FUNDAMENTAL PRINCIPLE OF BANKING, perhaps more than some others, is CREDIT." [emphasis added]
It seems that George Baker sensed (rightly?) that the public, familiar with their Currency being a tangible asset (gold coin), would NOT be readily comfortable with the truth about Money. That is to say, that they might struggle to accept the reality that their Money Supply, as represented on the books of the bank, was created by credit, and existed through the grace of confidence. In effect, the tangible Currency had become a mere symbol for the Money (credit) it represented while circulating outside of bank account ledgers.
If you don't care to belief my assessment, I have another point for you. When Untermyer had J.P. Morgan on the witness stand, he asked him, "Is not commercial credit based primarily upon money or property?" [In this exchange, it appears that Untermyer ignorantly used the word "money" as equivalent to gold coin, a usage which Morgan plays similarly until his concluding point about granting CREDIT.]
Morgan responded, "No, sir, the first thing is CHARACTER." [emphasis added]
Untermyer, shocked, reiterated, "Before money or property?"
Morgan reassured, "Before money or anything else. Money cannot buy it. [credit]"
Untermyer remained obstinate against this notion, as though there were communication difficulties, and pressed again on this point.
Morgan then conclusively stated his conviction on the point that commercial CREDIT is based on character: "Because a man I do not trust could not get MONEY from me on all the bonds in Christendom."
From two eminent bankers who surely knew their business, you now have it that the creation or granting of Money (the extension of Credit) has more to do with the creditworthiness of the borrowers than the collateral that secures against possible default. And recall, these comments occured while on a gold standard AND in total absence of a government-sponsored central bank -- which was authorized (against Baker's preference) a year later.
This presentation will continue at a later point...
As you come to understand how Money and Credit are interrelated, the more you will understand the separate Wealth of gold and why you need it now more than ever.
Knallgold
(7/12/01; 04:08:27MT - usagold.com msg#: 57943)
Further
I might add that the announcement "US selling Gold" would tank the POG temporarly to the famous 200$ (Belgian etc) "target".Keep some powder dry!
Knallgold
(7/12/01; 03:54:39MT - usagold.com msg#: 57942)
US selling Gold
The Goldmarket was tight,with high lease rates,POG was trending higher.
POG is back in the cave again,lease rates have collapsed,Eurozone said not to increase leasing,the US "reclassifies" a part of its Gold twice,from custodial to deep storage (which means gone!?):
conclusion: the US is in the process of forward selling this 1700t of Gold.FOA also discussed this recently.This must be the end of the game.
If you are in deep trouble,you have to sell your Gold.It is always good to own of this stuff...
Netking
(7/12/01; 02:36:15MT - usagold.com msg#: 57941)
"Barrick seen as the main reason that worldwide gold prices have continued to stay low" - Stockscape
This from Stockscape an interesting look at Barrick (aka The Hedge Hog). . .
". . . The key to their success might just lie in the fact that Barrick's almost big enough to control the price of the precious commodity itself; that combined with the fact that Barrick has been the leader in the hedging trend which has emerged in the gold market has seen Barrick's profitability rise. The size of Barrick Gold has been increasing ever since the company adopted its hedging strategy, and at a pace that the competition sees as nearing exponential.
And with the recent acquisition of Homestake Mining, Barrick Gold is set to become even bigger and will be able to reap even more benefits from the hedging process.
Many companies see Barrick as the main reason that worldwide gold prices have continued to stay low. As long as Barrick has the biggest stockpile of gold, the company could, conceivably, flood the market with gold, thereby controlling the price. . . "
Netking
(7/12/01; 01:31:59MT - usagold.com msg#: 57940)
Brazil & Argentina - It starts to "hit the fan" . . .
http://www.canoe.ca/MoneyEconomic/jul11_argbrascotia-cp.html
Argentina's economic troubles worsened Wednesday and rippled to North American markets as stocks skidded further and pressure mounted on the debt-laden government to make massive new spending cuts.
The broad sell-off has been inspired by uncertainty sweeping markets as analysts ponder Argentina's ability to meet payments on about $130 billion US in debt.
This is NOT a good time to be in bank stocks. . . but it's a great time to own Gold & Silver, I love it!
Usul
(7/12/01; 00:50:17MT - usagold.com msg#: 57939)
Traders Find Little Comfort in Dollar as Crises Deepen-----------
http://www.iht.com/articles/25811.html
An unending one-way flow of capital into the US has financed a huge trade deficit
"There's this gut feeling that what we've had in the first six months is about to change, with respect to the dollar," said Alfonso Prat-Gay...
TEX
(7/12/01; 00:36:58MT - usagold.com msg#: 57938)
Up for some air
Time to surface from the lurking depths for my monthly "look around". Hm........its a little choppy and it seems there may be some blood in the water. Two and a half years and I'm still not breaking even on my PM but time will tell. YIKES, better get below before the sharks begin to appear. Until next month.....adios!
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