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ARCHIVED DISCUSSION FROM 4/13/2001 All times are U.S. Mountain Time (Yesterday's Discussion.) justamereBear (4/13/2001; 23:25:11MT - usagold.com msg#: 51837) SolomonWeaver 51829 Belgian 51826 OldYellar51798 SolomonWeaver 51829A masterful job of a practical lesson in the Japanese verb of being, "WA". No one who has not lived there (and many who have) can comprehend how this concept can translate into the concept of foreign, and degrees of foreign-ness. Few could understand why there is a language (alphabet) solely for foreigners, or for referring to foreigners and/or foreign things. Or how and why "little gift" came from the historical difficulty, until VERY recent years, of travel from one side of the mountain to another, and how that is bound up in that verb of being, and of foreigner. I fear, and certainly in my own experience, it is impossible to convey accurately the Japanese method of thinking about foreigners, to "foreigners." (not that I believe I understand the thinking) It is like trying to describe the color red to someone who is, and always has been blind. There are no common points of reference. Unfortunately, also, many foreigners insist that their method of thinking is the only logical one, and therefore the Japanese must subscribe to this and so philosophy. Few indeed of these foreigners have NEVER made a mistake before. However they cannot believe that a different method of thinking is possible, and therefore they must be right.Belgian 51826It is a common misconception in North America,that gold is quoted around the world in dollar terms. In Japan, gold is quoted in Yen per gram.It has been a while since I spent much time in China. I am not sure of the effect of recent changes, but the Yuan, and the Renmimbi were 2 different things. One was an internal currency, only for use by locals, and if you took some away, you would understand the dangers of Fiat money. You could not even take it down to the local chinese bank, or consulate, or anywhere else, and exchange it for ANYTHING. The other currency was for use by foriegners, and or in, for example, foreign trade transactions. The government used this method to control both the foreign trade and the currency rates. Converting one currency to the other was strictly under the control of the governmwent. Locally, in all but the state run stores, foreign currencies, such as the US dollar, or the HK dollar, were tops in purchasing power, after all the conversion math was done, then came the "foreign Chinese currency" followed by the bottom of the heap, the "local currency". (which, theoretically, foreigners were not allowed to possess or spend)(the last time I spent more tahn a couple of days there was in the run up to Tianamen Square-1989)OldYellar 51798Yes, I think Bush did back down a bit, not as much as I read your post to imply, but a bit. The US is in a no win situation here, IMHO. It is my opinion that the Chinese, in an extreme situation, are willing to fill the Formosa Strait with bodies and simply walk across. (as memory serves, it is only a mile or so wide at the narrow point.) Bush is not in a position to rally the American populace to such a level of death over the abstract of Taiwan, and the Chinese know it. What does Taiwan provide for the US? If they had oil, or something similiar, maybe. Sure, a nuke or 2 will get a fair number of them, but so they lose 1 or 2 or 5% of the population. What is the population of China now? Something over a billion as I recall. Thats a 1 followed by 9 zeros. 1% would be a 1 followed by 7 zeros. 10,000,000. Such a loss would merely relieve the housing shortage, not even eliminate it. It would not do anything for the population pressure. And, in Taiwan, the US has one VERY LOONNNGGGG supply line, which many generals have learned is a key item in any battle. For the sake of argument, say the US could win. Do the have the stomache or capacity to pay the price of winning? And what exactly would they win? Would it be worth it? I think Bush realizes that he is in a political minefield here.j'Bear beesting (4/13/2001; 22:15:20MT - usagold.com msg#: 51836) Solomon Weaver & Belgian a few more thoughts on Japan. Solomon, good to see you posting again, and thanks for the added insight into the Japanese life style.I read recently on Bloomberg that the Japanese "Postal Fund"( a type of retirement fund) now has over 11 Trillion U.S. dollars in it and some of the funds investments are at muturity. The article stated the dilemma faced by the Japanese fund managers was; be patriotic and re-invest in very low yielding Japanese Government debt,(under 2%) or re-invest in percieved safe foreign Government debt that when bought at discount paid up to 6%.(U.S.)My Comment:If these fund managers would take some charts, like some on this forum have, and figure in currency de-valuation over time(all issued paper money) in relation to real products prices and actual costs of production, they may want to invest in something other than paper debt. It is my humble opinion physical Gold, at this point in time may appriciate in buying power at a faster rate than low yeilding Government debt vehicles in the near future, but unfortunately fund managers only look to numerical rates of return on investments.Case in point:Some months ago I posted here at USAGOLD a partial list of mutual funds that combined had hundreds of millions of dollars invested in Gold mining shares. All these funds had one thing in common over the last 20 years....The dollar values of the funds had diminished, some by as much as 95%. I wrote a sample letter here and sent a similar respectful letter to one of the Gold mutual funds I have an interest in urging them to change the bylaws of the fund to include physical Gold in their Gold investment portfolios. The reason being if the Gold mining industry totally collapsed because of a low Gold price at least investors would still have physical Gold left in the investment fund.Although the response was cordial, they made a lame excuse that it would take a company by-law change to do this, and they didn't want to change the by-laws.Now for the real reason they don't want to change by-laws. These fund managers extract their wages from the funds they manage! A small amount of Gold in the vault does not produce any interest or dividend income, that's why!Lets go a step further and suppose some smart Japanese Postal Fund manager wanted the safest possible investment and a decent rate of return. Couldn't he/she buy a good amount of physical Gold, when rollover time comes, than use that Gold as collateral to borrow at a low interest rate from a Japanese bank(1%) than use the old Yen carry trade to invest the newly borrowed money at a higher rate(5-6%)buying U.S Govt. debt.Does this sound too complicated? Well, the fund would be getting the usual 4% to 5% return on investment but would also have the added insurance of physical Gold included in the investment portfolio. Tonnes of Gold imported into Japan would also strengthen the value of the Yen and as an added bonus if the fund managers decided to act in unison couldn't they cause a worldwide shortage of physical Gold forcing the POG higher, and at the same time increasing the value of the fund they're managing?Wishful Thinking.....beesting. auspec (4/13/2001; 22:14:21MT - usagold.com msg#: 51835) Tree #51832 Yes, Sir{Tr}ee, there are rough waters ahead for all. If they sacrifice the IMF the BIS or some other alphabet soup scrap will do their bidding. None of this looks easy ahead, and free gold advocates are clearly in the way. Great place to be, no? auspec (4/13/2001; 22:00:25MT - usagold.com msg#: 51834) Christian ABC's Still working for some more synaptic connections as they relate to your gold and credit creation scenario. Please allow me to boil it down to some simple ABC's from what I can understand so far for more direction from you.Let's say A is a Central Bank with gold to lend to B, a Bullion Bank. B turns around and sells the gold {on the "open market" supposedly} to C who is most frequently a pre arranged entity , likely another Central Bank. Now, stepping back and viewing these transactions from afar makes one wonder{?} who owns/controls these various entities. Most all Central Banks are Siamese Twins {only one hypoactive conscience among them} conjoined at the wallet and they have full control if not outright ownership of your JPM's and GS's, etc. Common gene pool, no?Why would they shuffle this gold around this way? They know for sure yet there is much we can see. They get to play currency and commodity {gold} games as the paper POG wags the physical dog. Gold moving to another CB destination allows for your "gold credit creation" wherever needed. Instant liquidity for the fiat games. Our Central Bank C can turn around and bail out the bullion Bank B with the new liquidity if required {taxpayers preferred}, all pre arranged again.What do oil interests receive? They get to salvage for gold wherever they can find it at paper gold prices. They're happy and play along. Same with jewelry afficionados. Same with physical gold advocates!Of course some gold leaves the vaults for "unwashed" hands, so we have little idea of the TRUE short position. If the "massive short position" in gold is being used for leveraged credit creation it is not nearly the 'nekked' position many assume, plenty available for a fiat rescue. The gold stays with the same gene pool so if NEVER returned so what? If they exchange gold in hand for gold in the ground in secure hands, what do they care? Just another small and simple ploy in a much larger fiat theatre. Let the games.......continue.To quote FOA from March 1998 {thanks Randy}: "Now that the gold price in US$ is around production cost, most mines must use "paper gold" to survive. The gold industry is coming under world bank domination, without signing away any sovereignty! Slowly, the CBs are gaining the ability to manage production and price with this simple tool" { Me- basically controlling the amount of gold supply that hits the market}. ENDSo this process also is part of a global resource grab. They can't wait until it is actually in our hands this time, taking it in the ground. Must be some pretty good stuff, maybe I need more, hmmmm.Help me out if you will, Christian or anyone else, as this is simply a framework of thought. Trying to put the jigsaw puzzle together without the master picture. You are obviously referring to CBs as making use of gold for leveraged credit creation, as who else could do this? If an individual had sufficient quantity, say a Saudi Prince, could he not play along? Christian, can you advance your premises a bit more for all to follow? Thank in advance. SHIFTY (4/13/2001; 20:56:31MT - usagold.com msg#: 51833) IronHead IronHead : Thanks for the Golden Cure! I hope I never have to use it , but I know I unfortunately will someday. I wanted to thank you last night but one of my dogs poked me in the eye with her nose. I think she scratched my eye because I could not keep it open until today.It made it impossible to read.$hifty Tree in the Forest (4/13/2001; 20:27:32MT - usagold.com msg#: 51832) Belgian, Randy, Auspec Belgian: Regarding interest rates. I can remember looking for a mortgage circa 1980. Hard just to find a bank giving mortgages much less at 14% which was what I could afford. I got the mortgage but remember talking to people whose parents were just paying off mortgages from 1940's (1950's?) who had been paying 4%. Why were interest rates so low before WWII? Simple. 1)A high savings rate meant that banks were awash in money and anxious to lend. 2)Demand for credit was low (no credit cards) meaning banks were even more motivated to lend. 3)And finally low inflation. So for these three reasons, interest rates were at 4%. Why did they go so high in 1980? As I understood it, Volcker closed the spigot to squash inflation and jacked rates thru the roof. The inflation was a direct result of Nixon closing the gold window. ORO has previously identified your monster 1971 debt glitch as a debt restructuring of the United States due to our default on Bretton Woods (gold window) which put the US officially into bankruptcy. We are still in it now. Our current low interest rates are because we are floating on the greatest debt bubble and overextension of credit in history. Easy credit=low interest rates. Add to this the masking of inflation both by the credit extension itself (per Warburton) and by the manipulation of gold and commodity prices and this adds to low interest rates.Randy: With the Euro holding firm on interest rates, the die is cast. We have crossed the Rubicon. Couple this with impending default on Comex and we can expect fireworks this summer. It's only a matter of time now.Auspec: At least one poster over on GE has postulated (based on some kind of religious/astrological predictions) that at least certain elements of the cabal are doomed. Looking at other criteria seems to point in this direction also. The IMF for example may wind up with a significantly reduced role. While they may not disappear, the cabal (or at least some part of it) may be in a rough ride in the future. There is reason for cautious optimism. But there may need to be one more war first. This summer. Followed by a denoument perhaps by the end of the year. USAGOLD (4/13/2001; 20:13:15MT - usagold.com msg#: 51831) Japan. . . . Thank you, Solomon Weaver, for insights that define what this Forum is all about. Glad you're back. Belgian . . . .Relish each post you make. Thank you for being here.All. . .What can I say. I'm humbled by what you have done with these pages. Proud to be a part of it and be able to provide this venue. I never thought it would become what it has. In talking with Jeff yesterday on some technical matters, he chuckled at the success of this forum. Who would have guessed? Thanks to all. May God bless and keep you -- each and every one. USAGOLD International: We're here for you. Hill Billy Mitchell (4/13/2001; 20:10:50MT - usagold.com msg#: 51830) Michael D. - You've got mail Be sure to read post # 51810 in regards to # 51805 in regards to # 51758.Interesting, to say the least!Very respectfully,HBM Solomon Weaver (4/13/2001; 17:39:46MT - usagold.com msg#: 51829) A little light on Japan Belgian and BeestingHaving lived for a little while in Japan, I can offer a little cultural insight.1. Japan has an immense history....layers that thrive in traditions today....one great one is the role of family. One of the reasons why Japanese have such a high savings rate is because they all have very large obligations....paying $30,000-50,000 for a daughter's wedding...sending thousands of dollars to a distant relative upon the death of a spouse...they use savings for reasons we use insurance.2. The primary "debt" in the minds of all Japanese is the network of "non-financial" obligations...i.e. relationship obligations that will cost them money but are not denominated in yen and are not under formal legal contract. These are debts to eachother upon which they will never default. 3.If there is a major default coming out of Japan, it is a default of the Government. Read Davidson and Mogg, The Sovereign Individual, and simply understand that Japan's Government will not survive....because regional enclaves in Japan are very strong. Japan is uniquely poised to do well in a deconstruction of centrist organisations.4. The Yen did not grow strong because of hegemony....it grew strong because generations of Japanese people worked their behinds off for post WWII Corporations who created massive export machines.......needed to fund all those imports like oil and food (they even import California Sake)....they built the most powerful trading nation in Asia centered around a very dense Shinkansen line that strings Harbors together like pearls.5. The bottom line of many families looks very strong in Japan...and many Director Level Joes (Or Hiroshis)go home every night on the regional train (not a Lexus) to flop with their wife and kids in a 900 ft2 apartment (not a leveraged 3000 ft2 home) where the mother in law lives with them. They are actually quite poor in some way...very simple. Much more ready than Americans to weather the course of a worldwide financial storm.A sinking America will certainly hit Japan hard....but they have lifeboats......the idea that finanacial contagion in Japan is the cause of the worldwide liquidity crisis is not because they are ill-liquid and laden with debt...it is because Keynes was not Confusion.....the Asian mind does not really operate on supply-side economics.Poor old Solomon Topaz (04/13/01; 16:22:47MT - usagold.com msg#: 51828) Belgian (04/13/01; 15:34:20MT - usagold.com msg#: 51826) JMB@51805 - LOL FYI...This Tax on Gold has me confused. Up until recently here in Australia, all Au/Ag coins etc were treated the same ie: Not Taxed - however since the introduction of the GST (like a VAT) all but 24k is now taxed.This means only numismatic interest is retained in the "old world" coinage and investment sentiment is herded to the "newer - Legal Tender" coinage.Bars etc are still Taxfree however. Mr Gresham (04/13/01; 15:41:28MT - usagold.com msg#: 51827) JMB: on the run... Didn't Teacher use to say?: Don't bring your meds to school if you're not willing to share them with the entire class... (We're all gonna need something on the roller coaster ride ahead.) Belgian (04/13/01; 15:34:20MT - usagold.com msg#: 51826) Beesting and Bankrupt Japan ! Sir, that's a difficult one to chew.Japan is very difficult for me to understand. Am already glad that I think to understand a tiny piece of our own culture. But one particular aspect is familiar : Numero Uno in savings. And this makes it probably more understandable of what should happen when they should decide on banking default. Something similar happened after WWII in Europ.Operation Gutt : monday morning news : all paper money will be changed for other paper money. All savings and accounts are frozen and will be gradually released to the owners in specific tranches of NEW money. All paper from under the matrasses must be exchanged for new upgraded money.This is INSTANT DEPRECIATION. All debts will be settled in new money. 1.000 becomes 100. Too late to buy gold or other tangibles. Complete depreciation became a fact, overnight.Of course we have to discuss your scenario in function of our physical gold stash. The japanese goldholder can always exchange his physical gold for dollars. With this dollars, he buys new yens. And in the case of the 1000/100 exchange...he has multiplied his amount of new yens by ten.Say 1000 new yens.But the world has changed since WWII. All currencies are valued against the dominant dollar. The world has gone global. That's why the japanese are waiting for the details of the govt fund for supporting the banks by buying stock as to prevent bankruptcy the old fashion lalala way.Yes, I do repeat : buying stock with fresh created paper to prevent bankruptcy. In '95 there was a '29-style bank-run in Japan. People were waiting for trucks to bring in the paper ! This was no big news then !? All reputated analysts, I've spoken to are unanimous in saying that debt is NO problem at all and the only thing that must be prevented is : brutal shock ! This answer hasn't changed for almost the last 10 years ! And indeed, LTCM (and other) shocks) were avoided and contained. The same goes for the Euro. 12 different currencies are exchanged for a new currency. There is lot of speculation on price-rises or a globo zero effect ? A lot of regulation is already in place to prevent the trend of spontanious price increases. This is evidence that when a currency is exchanged, you create doubt and uncertainty with inflalalala as a result.So, your question leaves us with what will happen to the rest of the world when Japan defaults ? IMHO : SHOCK !This Numero Due has more weight than Turkey. Japan is a dollar-holder. And what will happen with this mountain of accumulated dollars in case of bankruptcy, is anyones guess.Because we don't know how this new debt-free yen will relate to the dollar and Asean currencies.Remember the Chinese Yuan (renmimbi) in lalala land . These are IMO the shocks they are constantly trying to avoid in a global economic tissue. It is from this perspective that the Euro is gaining its importance.And for this reason of mounting incertitude, we take refuge in the certitude of Gold. We will be able to choose when, where we are going to do what !Is this perspective of a global one way street with death end that is resulting in an unspoken agreement to lower POG?There must be a link in one way or another. And I have a tendency to believe that it is not only Euro related.There must be more global bias. But certainly to complicated for me to see or understand, now.But Hashimoto / Greenspan / different Europeans (WA), have been mentionning Gold, with strong statements. And therefore my intuition and instinct is alarmed. They have been setting up a global safety net. They don't care if people are looking for safety in real estate, because this is always taxable à la carte. Another funny detail is that VAT on gold was abolished a few years ago. Why ? Randy (@ The Tower) (04/13/01; 14:28:22MT - usagold.com msg#: 51825) The world is watching....a choice between tools http://news.bbc.co.uk/hi/english/business/newsid_1275000/1275508.stm BBC HEADLINE: ECB president raps eurozone knucklesExcerpts:----- The European Central Bank held its nerve on Wednesday and did not cut European rates unnecessarily. ...Wim Duisenberg made two comments after the meeting of the ECB that bear examination. -------[My interjection just to organize this: First, he said the slowdown in eurozone growth "should not be a source of pessimism". According to OECD's forecast, the growth rate was going to slow down to 2.7%, which is still GROWTH by their measure. Meanwhile, by way of contrast, the Federal Reserve has already cut rates three times since January, with expectations of more to come to ease the risk of America's slide into a recession.]BBC concludes:------The other comment by president of the ECB was a rap on the knuckles for the governments of the eurozone. He said that "monetary policy cannot lift the euro area's production potential". +Basically Mr Duisenberg was saying that if the eurozone's governments are that worried about the threat of a slowdown they could do a lot themselves to help matters by reforming their economies. The ECB seems to have decided that it is a bit too easy to expect Europe's central bankers to bail out its governments by cutting rates when inflation is still above target.-----Bottom line: On the global scene regarding INSTANTANEOUS trade, choosing a currency to denominate the transaction is really nothing more than a trivial mathematical exercise. At any single moment in time, a price in terms of one currency can alternately be given in any multitude of other currencies through simple multiplication by the pertinent exchange rates. Regarding the more important issue of preservation of purchasing power OVER TIME, however, more careful consideration is required. On the global scene, one must be mindful of reasonable short- and mid-term expectations of the changing exchange rates between the various currencies, and especially of the general trend of these currency prices against real goods and services.The world is watching the unfolding fundamental distinctions between the euro and the dollar as operating decisions are made for the time ahead. Given the mounting evidence, which one do you believe is poised to hold up in value best against the other? The dollar is looking sickly, to be sure. And when it comes to poise for holding value against goods and services over the long-term, we surely turn away from both dollar and euro currencies because physical gold beats every paper currency under the sun. Central banks know this, and that is why the legacy IMF reserve model is going the way of the dinosaur.You will want to hold gold through the full phase of this coming transition of international reserves because the dollar value shall be losing its firmest leg of support. Belgian (04/13/01; 14:05:55MT - usagold.com msg#: 51824) Gresham/Auspec/Stranger and Others Our daily bread doubled in price the last ten years. The average "NET" salary only increased with 35% . Standard of living improved thanks to 1/ extended welfare additions and 2/ double income from mother/woman/housewife/etc...It is that second income that is hiding the depreciation !My parents had the same standard of living with only one income. But had to perform double the amount of results with much harder work than today. But most youngsters of today don't bother to take a look at yesterday. They want to speculate and be left alone. So be it.Auspec: I'm afraid to give my opinion...because I'm too positive (optimistic) ! Anyway, it is the inter-relation, behaviour of mines and POG, that has always been the lead.I'm not following XAU or any other index. But only 2 mine leaders : Anglogold and Gold Fields. They also inter-relate on each other in function to POG.Both (supposed) bottom patterns are slightly different in nature : AU = flat/saucer/rounding - GF = inverse SHS-like.Both bottoms are full 2 yrs of age in line with POG.The second half of this bottom is diverging positively from POG, with recent outspoken strenght for mines and weak POG versus dollar. In itself these positive divergences can excist without necessary positive conclusions. But it is the particular way that the daily ticks in mines are building, rightly opposite to what one should expect them to do in relation with POG. Sorry, this is getting a bit messy. Major holders of AU are adapting the share price to the expected dividend. Once AU has reached the appropiate (dividend) price...bottom-accumulation starts in a very astute way. These shareholders are accumulating within a certain price-range. The expected dividends are also POG related and reflect therefore their insider knowledge of possible future POG projections. As to today they seem to act as if 250$ was the bottom for POG.The moment these long term loyal shareholders suspect a lower POG, they will immediately dump as to readjust the price of AU. They will do it before POG is showing its weakness.Of course this is nothing new. I am convinced that all core shareholders are managing their company's stockprice, with the insider knowledge. Wasn't this the name of the game for the major part of the SM in the past ?Other mines must confirm or contradict the leader's moves.Unhedged Gold Fields is contradicting POG's weakness.I translate this as follows : POG's weakness was connected to temporarely strenght in the dollar. And not indicating intrinsic weakness.I have the strong impression that the accumulation is done in such a subtle manner, that it is not the kind of short term run for a speculative attempt to make a profit.The silent strenght is not accentuated with strong volume bombardements to lure the masses into the play.These insiders, most probably know exactly, when POG will strengthen or weaken.The 21 yrs decline + bottom formation gives a wonderfull picture for what has to come. If the up-trend is confirmed, we arrive immediately in pseudo-uncharted territory, with enormous upside potential. Please, aknowledge that this is my intuition only !!!!As Stranger mentionned...it's the dollar Stupids !Slowly but surely, attention will shift to the dollar's status. It was the first thing the new administration wanted to talk about, altough in confusing terms (remember !)Gold is incredibaly CHEAP ! Against all possible comparable tangibles. This was for me the niciest of invitations for starting to dive into Gold's deep waters. I must admit it is the second time, I've bought Gold. First was the heavenly run in the '80-ties. But this time, I'm not going to sell any ounce of it. We will never see these ridiculous and mania Low prices. Value for almost nothing. Ideal to transfer my modest savings for the next generation.Note : this is not a commercial or advice !There is also a ressemblance of the POG and IR chart, when looked at from some distance. It is suggesting that both are rounding up. The AG, panic lowering of IR, has troubled this intuitive indication. If one day the dollar-index breaks the 100/90 zone...an defensive IR-rise will be the first impulsive reaction as to avoid effective inflalalala.The same reflex took place in the 1929 deroulement. It was the straw that crushed the buffulo's neck.Our discussions on this forum gave me the insight that the powers to be, have been managing quite a lot of spectacular events in the last 30 years I could trace with more or less reliable evidence. 1980 : stop and reverse POG + IR.1985 : stop and reverse Reagan dollar. 2001 : well, can they stop and reverse WHAT ? The surely didn't want to stop the SM. They still want to reverse it from falling. But they succeeded in stopping the fall of the dollar and the rise of POG. Dollar and POG will reverse themselves ?For the simple reason they wanted to hide the enormous DEBBIE DEBBIE. Were it our spouses who were responsible for the un-natural prolonged expansion ? Well, I'm honestly thinking it is as simple as that. Double the economic activity of these Boomers and let's try to find a solution for that incredible debtberg, so visible in 1980. Let's solve this problem...with moooooooore debt. Let's give Debt wheels and roll-it-over Beethoven.Intuition tells me w're gone see IR of 2% again. Much later of course. After the destruction of ALL bad money. Gold will inspire again as never before.The past expansion was un-natural. Most commodities didn't react as they should do in normal growth. Modern Valuations are based on another norm scale. Status...popularity...hype..mania...trends ? But digging to even 5.000 meters to get a 5.000 year old shiny thing seems to be worthless. They can make us believe lots of BS, but after a while, I'm disconnecting from collective hysteria.Hope you don't mind folks. beesting (04/13/01; 13:50:13MT - usagold.com msg#: 51823) Belgian # 51813 I.R. Thank You Sir for your fine post as it ignited these fragmented speculative thoughts from me:Most here have heard of the 11 years of banking financial problems in Japan, but as Sirs J-Bear and IronHead have testified from first hand experience( if I understood correctly) the man in the street in Japan,does not seem to be any worse off, because of the banking problem,normal life goes on.Belgian, this was my thought:What if "ALL" paper debts were some day payed off???Lets suppose a banking default was allowed to happen in Japan, where all banking debt was allowed to be written off.(Bankruptcy of the Japanese banking system)Who would lose? Who would gain?Answers:The losers would be all holders of paper Japanese banking debt. The banks and stockholders! The Yen on an international level would be manipulated like crazy as it would have "NO" debt backing, only Japans Gross National Product backing, Gold backing,and the percieved political stability of the country. Another words trade might eventually be consumated with an internationaly accepted medium of exchange....GOLD!??The winners would be IMHO the savers. The man on the street in Japan would in all probability still accept Yen for goods and services at the same rate as always on domestic products. Imported goods may flucuate wildly in price until a new international value(maybe based on POG) was agreed upon for the Yen.A side note:When I was in Japan many years ago large purchases(homes and cars) for an average family were in most cases paid for in "CASH", unheard of in the U.S. The average Japanese did not have all paper assets tied up in the banking system.Sooo, though this is a pipedream,,,,,The Fifth Horseman could also be:::: For ""ALL"" debt to be retired, worldwide over a period of years as people are re-educated to understand the harm caused by unlimited debt expansion. Abolish the international creators of debt IMF/World Bank!Don't laugh, many in the Islamic countries around the world may be right now practicing a no debt society. Do these same people accept Gold as an international medium of exchange? My guess would be a loud, YES!Thoughts Only! Thanks For Reading.....beesting. Humble Pie (04/13/01; 12:37:57MT - usagold.com msg#: 51822) post by Peter Hatch in L A Your tactfull critque of # 51805 is how it should be done.Glad to see you still live and kicking. have a nice weekend. JMB (04/13/01; 12:06:53MT - usagold.com msg#: 51821) Mr. Gresham Thank you for that artful chastisement which is received with a debt of gratitude. I will certainly display a respectful demeanor, that is until my medication wears off. auspec (04/13/01; 12:06:00MT - usagold.com msg#: 51820) Tannehill Hello Tannehill,Glad you are enjoying Paul's website, many jewels there. Couple of points in regards to current mining practices:You are most likely very aware of the end result of current "high grading" pervasiveness. This strips these mines of the very best portions and in essence shortens their lifespan, or possibly ruins the asset altogether. ANOTHER reason the pendulum swings excessively in one direction for the YELLOW. The current practice of producing at fire sale prices is also giving away the "farm". Some have no choice, but those who do will begin correcting this error. The "Harmony Way" will become apparent to many mining executives. Flexibility, incentives, and decision making at a smaller level. They obviously have it going in the right direction and will be one of the many HUGE winners when this consolidation/suppression ends.We have seen various "lines in the manure" drawn by the gold banksters, $300, $290, $260{?}. If they can continue to ratchet it down, as surely has been their game plan, they can escape the wrath aimed at them, and switch directions. What are the sources to bail out the shorts? Taxpayers of course, presses, resources grabbed during current manipulation, confiscation, or an unlikely failure by the BBs going down alone. Too many obstacles for them to achieve $200 POG, as they wouldn't solve their problem with a spike to $200, but would have to have a SUSTAINED POG there. No chance, too many smart people in the markets. Bring it on!Tannehill-- Most of your geologists are now in another line of work, and won't be available for hiring at the drop of a hat, right? That pendulum has almost broken FREE from its base. Best to you. Mr Gresham (04/13/01; 11:44:50MT - usagold.com msg#: 51819) PH in LA, JMB, Belgian PH -- was just thinking about you. Are you one of the 6 people in LA who doesn't have a screenplay out for sale? The "mysterious financial poster on the Internet" story has certainly struck me as worthy of a treatment. Have to go back and read my old Erdman novels.JMB -- without humor we'd be a cold, drafty Castle indeed. (I do recall you having a pretty good sense of humor in the past.) But I sure hope that the utmost of R-E-S-P-E-C-T among us all will be the order of the day if Another arrives and wants to stick around, don't you? Something I've been looking forward to for quite awhile now, and I'm not embarrassed to ask for you to contribute your best thoughts now as you have in the past...Belgian -- "Isn't it remarquable that everything else increased in price over the past 20 years with the both execptions of decreasing IR and POG ? " You nailed it again, looking at those long-term charts. The sense of inevitability -- something is now upside-down in the long historical order of things -- we just don't know the "When" on our micro-scale of time. auspec (04/13/01; 11:33:47MT - usagold.com msg#: 51818) Belgian {IR} Hello, good Sir! Thanks for your IR perspective. Unfortunately, I suffer from a dearth/lack of access to sufficient grey matter to be of much help. I do have a few comments and an entirely unrelated question for you.We are all grateful for the lower IRs and curse the hidden erosion of fiat. Fiat is debt and designed to inflate, that's the beauty of it to the banksters. As Doug McIntosh said in his most recent article "It's the debt stupid". Without credit/debt expansion the system implodes, and without low interest rates there can be no continued credit bubble. They would like this to be everlasting and totally satisfying as opposed to premature {also sorry!}.This is a rather simplistic view, of course, but the various CBs need relative low interest rates for the entire system to continue. I have had a 13% mortgage in the past and they simply can't go there again. That was an old game. When one IR goes to an extreme low {Japan}, it is simply used via the carry trade to support another linked currency, our own Banana. You oil my press and I'll oil yours. For this strategy to work you must just kill off the various alternatives, gold being NUMERO UNO. Low interest rates are supposed to lead us back to gold, right? Pitfall.The key question is what the Power Elite will do WHEN gold breaks free. If they have gone to this extent to suppress it over the many years, why would they not again grab or outlaw it when it breaks FREE? Good luck to them, of course. Will it be a parrt of the next {NWO} financial system? Not if they can help it, as they are addicted to the presses. Gold and resources are for them and fiat is for us. If they had NO other choice but to utilize a gold standard to arrive at a one world currency, then we will see it. It may be the "bait". Whatever they come up with, it will be a real bastard in the literal sense of the word.Now, Sir Belgian, for my unrelated question: I know you rely on technical analysis a lot. Can you give a classic description of the accumulation pattern and its most common end result? We {I} like to think our favorite commodities and mining stocks are under an intense accumulation by the very "smartest money" players. Do you see this in various charts? I've seen the bowl shaped pattern in regards to gold or silver {can't remember which}, but await the spike {?}. TIA TheStranger (04/13/01; 11:12:02MT - usagold.com msg#: 51817) The Incredible Dollar Warburton notwithstanding, the following tidbit appeared in an article about the dollar on the front page of yesterday's Wall Street Journal:"...the dollar is looking suspiciously like the Nasdaq Composite Index did a year ago -- something that rises so far so fast that the only issue is when it will come down and how fast. The higher it goes, the scarier. A stable or even slightly lower dollar might be quietly welcomed at Treasury. A dollar crash would not. No one knows how to get the first without risking the second." Tannehill (04/13/01; 11:06:10MT - usagold.com msg#: 51816) auspec @ van Eeden Golden thanks for the link to Paul van Eeden. Saw this at his website"Geology drives the mining, not engineeringAnother major difference at Harmony is that they let the ore body's geology dictate the production as opposed to South Africa's traditional focus on engineering. When Harmony took over Evander, there was only one geologist to oversee all the operations. Evander now has fifteen geologists and they are in the market for more. As you may recall, each production team now has its own geologist. "Going from one to 15 that growth. Enough said. love this bumper sticker Buy physical put a geologist to work.That's all from Tannehill JMB (04/13/01; 10:52:43MT - usagold.com msg#: 51815) PH in LA Hi there Grasshopper. Have you considered changing your prescription? You gotta try them "Happy Pills". auspec (04/13/01; 10:31:07MT - usagold.com msg#: 51814) Paul van Eeden and Exploration Companies http://www.pve.net/artcls/041101.htm Mr van Eeden is an occasional poster and writer for USAGOLD's Opinion page. Unfortunately he has insufficient time to allow for regular posting. His newest article at the above link is entitled "How To Make Money In Worldwide Exploration". It shows the pendulum of gold exploration swinging too far in the direction of under-production as well as the current opportunity available in the junior mining sector {for those inclined to venture past physical ownership alone}. An excerpt from the article follows: <<Taking the risk out of exploration>><<The best way to take the financial risk out of exploration is to use someone else's money. In practice that can be accomplished by finding a joint venture partner to fund the exploration costs associated with a project in return for an equity interest in the project. An important point here is that the funding partner should participate at the property level, not at the corporate level. As speculators we would want to be diluted at the property level, where our risk is the highest, and protect the corporate structure of the company that we are investing in, where our risk is drastically reduced and our exposure to multiple exploration projects can be maximized. Making use of joint venture partners, a small exploration company can gain exposure to many promising projects for very little financial risk. The junior exploration company can therefore focus its efforts on project generation. This part of the exploration process requires imagination, an ability to conceptualize and understand geological events that lead to ore deposition, extraordinary skill and hard work. This is where an entrepreneurial geologist working in a small company, in which he owns a substantial equity position, can really excel. In the end it all comes down to the three basic principles of investment. Just like real estate, there are three things that are crucial for success: management, management and management.>> ENDUSAGOLD- Thank you for the fine "management, management, management" that allows this Forum to illuminate the path ahead. Belgian (04/13/01; 10:21:38MT - usagold.com msg#: 51813) INTEREST RATES !!!!! (IR) Some definitions as a starter :- IR = the price for renting money.- IR = the price where a creditor, trusts, his debtor.- IR = the price of future-trust into the currency.- IR = the price result of offer/demand on money.IR is not the result (anymore) of an agreement between a money-have and a money-have-not ! IR lost its signal function as well as Gold. It is the authoritarian moneyprinter, who decides on IR. It is not the reflexion of private trust and risk.To simplify things a bit, just imagine, your neighbour asks you for a loan. Reflect on all arguments you are going to take into account to determine your IR. Next, you just imagine you are a paper money-printer and need votes to remain employed. Than we can all agree that there is something very strange about the IR-behaviour of the last 20 years in particular. Are IR reflecting Debt-evolution and money-depreciation ? Forget about the complicating lalalas (defla/infla/stagfla). Just concentrate on the amount of debt against expansion and currency depreciation against products and services over time.A 200 year chart of Govt Bond (30 yrs) is a real beauty :From 1800 to 1940, we have a steadily declining IR from 8% to the ATL of 2% in 1940. It is after WWII that the IR started its 40 years of parabole, with the ATH of 16% in 1980. This parabole was an impuls 5 wave pattern and Kondratieff cycle is accepted to have started in 1949.What happened in 1980 that made IR plunge from 16% to 5% in 1998 ? How was it possible that the rent of money could decline so drastically, when the price of everything increased during that period ? What is the paradox of the past 20 years ? Would you have lent your savings to your neighbour in 1980 ? Was that high IR compensating for the loss in buying-power ? Check the price of a loaf of bread...a haircut...a newspaper...a car !Are these lower IR, reflecting a real decline in currency-depreciaten "SPEED" ? Was it the knowledge that Debt couldn't default anymore ? Was there plenty of cheap (worthless) money available (for rent) to finance the biggest expansion ever ? Was the past expansion a Fata Morgana ? Was it only a Speculative bubble that had its orgasm (sorry !) ? Is there something we are overlooking ? Salaries followed the cost of living. Productivity, produced better for the same price relative to increased income. Was this the reason for money-creation ? And was it the purpose to lower the IR to avoid bankruptcy in 1980 ? Is it the global "Wealth Effect" of the SMs, that derived attention from currency-depreciation ? And can we really speak of depreciation when we have more dollars in the pocket to buy the stuff that increased in price ?Isn't it remarquable that everything else increased in price over the past 20 years with the both execptions of decreasing IR and POG ? At least for IR, I could find an explanation that the more paper is available at low rent...the less pricing power a money-have has. The paper-printer (Govt) is taking over with its paper presses.Isn't it also quite remarquable that POG= 260$ is the same price as 20 years ago just before the 850$ spike ?Why did POG spike when the SM plunged ? It is rather paradoxal that the commodity (!) price of gold is increasing when contraction is obvious ? Is it because fiat has become a priori worthless that IR are set arbitrarely ? It takes 12 years to double your 6% bond. What happened to prices over the last 12 years ?Have they doubled ? And how do we have to explain with some logic the japanese phenomina of zero rate and declining Yen ? How do these No I japanese savers assess their situation ? The second world-economy and free-rent-money !The Big Pretender "US$" with his relative high IR against Euro and Yen. If you are the strongest one...why do you need such a high IR ? Compare with past behaviour of the Swiss franc. As solid as a rock with rockbottom IR.Debt explosion and depreciation was more or less halted on its temporarely extreme in 1980. This for the only reason that a managed plunging IR was providing oxygen and delay in final execution. Once the ongoing economic contraction is going to pressure irredeemable debt again...we wil experience drastic "CHANGE". The extreme volatility in the SM, for already such a long period, is enough evidence for me, of extreme anomaly and fundamental rot !Natural and honest growth is not accompagned with the actual speculative excesses. How long can we bring more money into circulation to keep up with higher prices ? Can this be achieved with lower IR ?Is this fundamental contradiction, the definition, of "depreciation" without the 3 lalalalas ?Will dollar/euro/yen depreciate in tandem (as already mentionned here) ? Is my old suggestion of 1 dollar=1 euro=100 yen, a hidden agenda ? Will all IR decline to the natural 2% zone, for taking a concerted new start (NWO:?) ?Or is it the each one on his own "Hyperinflation" that will bring the unavoidable Change ? IR aren't anticipating this for now.Sorry, gentlemen, but I need some help on this IR-thing...again. ET (04/13/01; 10:16:37MT - usagold.com msg#: 51812) Michael Peirce http://www.lewrockwell.com/peirce/peirce34.html From the article;"My suggestion is even more radical. Disarm the police. Now! Today! Arm the citizens. We are the ones who pay the taxes, build the cars, sell the products and program the computers. We matter damn it! Why on earth should rioters be allowed to pull us out of our cars while we are coming home from a hard day's work and beat us? Should we tolerate this? I think not. "When people start beating us and destroying or burning our property, we should shoot them. That this sounds radical is itself a symptom of the madness that has descended upon our nation like a dark shroud. For the America of old is long gone. We hold no "truths to be self evident," we just stumble down the road to oblivion, wondering what went wrong." ET (04/13/01; 10:05:47MT - usagold.com msg#: 51811) David Dieteman http://www.lewrockwell.com/dieteman/dieteman40.html From the article;"Thank God there was no U.N. in 1776, and thank God that France and the Netherlands, at that time, were happy to run guns and gunpowder into the Caribbean for pick-up by American "rebels and resistance groups" fighting a war of secession against Mother England. "To imagine the world after the U.N. leaves only governments and their armies with weapons, consider the cautionary tale of Father Murphy and the disastrous Irish Rebellion of 1798, when Irish Catholics dutifully turned in their weapons to their English government – in exchange for death at the hands of English troops. "The Times also reports that "The European Union, Japan and the Nordic states are generally the most enthusiastic about strong measures on global gun control." PH in LA (04/13/01; 09:56:26MT - usagold.com msg#: 51810) Keeping to the point. JMB:Your words (# 51805), on the other hand, are more likely destined to be remembered as some of the most forgettable ever posted here. Which also applies to the post which preceded yours. Humor does certainly have its place. But let us not turn this forum into a laughing stock where the same disruptors post time after time with the same feeble attempts to get laughs, with the same feeble results... day after day, after day, after day... etc. ET (04/13/01; 09:48:42MT - usagold.com msg#: 51809) beesting, simply me My pleasure! Everybody should read "The Law". Things haven't changed much since Bastiat's day, have they? Canuck (04/13/01; 09:46:01MT - usagold.com msg#: 51808) Must be getting tough to sell mutual funds My financial planner emailed me yesterday looking to see if I wanted to buy any funds.My reply:Hi Mary,Thanks for the sites; I will check them out over the week-end.Do you have any time between April 23rd and the 27th?I was in a real estate office yesterday and had an interesting conversation with an agent. Apparently they are seeing the 'topping' in housing prices and expect alot of new listings this spring but unlike the last year or so where buyers were 'bidding' up prices they expect sellors to 'bid down' prices. His advice to me was sell immediately with a very, very long closing and buy at the last moment with a co-inciding close.Are we at the beginning of the bursting of the real estate 'bubble'?I had chatted with Bob in the past about BEARX, an American fund (bearish) and I was hoping that he could find an equivalent RRSP eligible Canadian fund. He had no luck. I found BEARX at 'prudentbear.com'.I find the Euro story most fascinating. Along with the European member countries, parts of Asia, Russia and the Middle East express growing interest in the 'common currency' as the introduction nears 01/01/2002.There seems to be aligning forces towards Europe and away from the Unites States. The oil and energy stories in the last couple years are also interesting. Control of oil production is ever so slowly shifting to the Middle East ('swing share'), is it any wonder why OPEC becomes more bold as time passes? Notice the calamities in California in the last year; natural gas has become the culprit to electricity woes. As a result of this pressure have you caught the price of coal and uranium?Oil, natural gas, gasoline and electricity are simultaneously nipping at the heels of the US economy. Will they rebound out of this or is the US consumer next to fall as corporate America has done so in the last year? There seems to be a convergence of forces internationally and domestically that may cause the USA to step down from its extremely high perch.The fund that I am looking for has an objective like this:"The goal of this fund is to focus on instability in the US dollar, capitalize on currency shifts and exploit weakness's in US domoniated assets. 'Shorting' corporations whose P/E's remain absurd and 'shorting' the real estate 'bubble' are paramount. Strategically investing in future gains in oil, gas, base metals and precious metals is also of utmost importance. We don't listen to analysts whose mandate is to screw the last nickel out of investors so that their empirical brokerages can reach multi-billion dollar levels in profit. We also invest heavily in organizations whose primary objective is to expose crooked governments orchestrating manipulations of financial markets.And last but not least, we are eyeing the banking community at large. We believe that exorbinant excesses in credit creation, and as a result, the 'derivative' exposure thereof, may very well cause the systematic failure of the entire planet. We believe that every balance sheet starting with the individual right through to the largest corporation and country is bankrupt and when the general populance realizes this the proverbial 'excrement will hit the fan'."Know of such a fund? ET (04/13/01; 09:45:39MT - usagold.com msg#: 51807) Randy Hey Randy - always glad to hear your thoughts. From your reply to Mr. G -"The search is on for the perfect hedge...What would be the ideal characteristics of such a numeraire? First, itwould be in fixed physical supply. Second, it would be resistant to weather-related influences. Third, itsownership would be diffuse, rendering futile any attempt to restrict supply through a non-competitive structure.Fourth, it must be freely tradable. Fifth, there would be no futures or options markets attached to it.------END Warburton EXCERPTS---------"Randy again: Here, you must admit that a physical-based gold market very closely fits his "wish list" for theperfect savings "hedge" against the financial system."Yes - but note carefully his fourth and fifth criteria; it must trade freely and must not have a futures and options market attached. In my opinion you and the author are making the same mistake but from different directions. You claim to not want gold to trade freely as money by removing its "currency function" while the author claims to want gold to trade as money but only in certain circumstances (no derived functions). Both create distortions.Your system of the future fails in that you would not want gold to trade freely, its price set arbitrarily. The author's system would be fine except for the prohibition of futures and options. Derivatives can only be popular under a closed system of trade such as today's, (gold's price arbitrarily fixed). If hard money was the rule, futures and options would serve little purpose as volatility would be markedly reduced. In other words, there would be little reason to hedge, gold would "be" the hedge. Futures and options would therefore find few trades as the free market would find little use for them. There would be no reason to arbitrarily ban them as some traders might still find uses for them. Government decree is not the answer. Mr Gresham (04/13/01; 09:39:13MT - usagold.com msg#: 51806) Many Steve H -- Great post! Your metaphorical mind makes the leaps that logic struggles to climb.The picture I get from it is that it has become The Abstract ("money") vs. Everything Else (commodities, time, our lives...) and that the "Triumph of Econometrics" is that the golden boys of statistics have learned to lump all of the real things on one side of the equation and control their prices simultaneously with a big dose of media brainwashing and educational co-optation and "The Fed behind the Curtain".(Until one little boy, like natural gas has done, points out that the Emperor's New Clothes are quite vaporous, and he is immediately packed off to a 4-year scholarship at MIT to study Advanced Fashion Design...)One of my early attempted posts two years ago was about a final resort they would come to when the short-term debt dam threatened to break (think Gray Davis here) would be to "commoditize time" in all these categories, and sell the debt out long-term (back it with California's -- or Social Security's -- creditworthiness). To get one last spin of the debt wheel, if people were unable to do the NPV math (net present value) and see how much of a haircut they would be getting... And do it by official force if they couldn't sell it to the market.Henri -- I heard those clinks! I'm thinking of doing a little celebrating today myself in like manner...Simply Me -- I had the same question about Warburton saying the Euro being "overextended" in debt. It seems like the ECB might be heading for an ideal "market share" of debt among the most solvent credit quality borrowers, rather than the dollar's "we'll take anyone's used car in trade, and give you a 110% mortgage on your trailer" strategy. And I assume that the weight of overextension weakens the currency in that it tempts the local CB to bail out more borrowers (as Japan is doing) by "overprinting". Does Europe have this level of default risk, even in a bad recession?Randy -- Interesting realization during your Warburton & Bloomberg excerpts: During recession (which is where we're going), the dollar confidence fades in the eyes of its holders, but the Euro's strengthens. Diverging debt burdens. "I don't have to outrun the bear..."Also, Randy, as a corrective to Warburton's "Hedge Quest" caveat about gold -- that being the "futures or options markets attached to it" -- those are brittle structures AND they are (we here believe) currently stretched to their maximum effect. The worst price damage is over. The only question is how much longer is government willing and/or able to expend its "POG-suppression budget" on that task.Also, it's an interesting observation that, while governments occasionally or frequently perform currency interventions (successfully or un-) during rapid price moves in order to make speculators think twice about piling on, they rarely if ever perform currency interventions IN ADVANCE of such price moves, and certainly never when things are already going their way. Big Hmmmmmmm....Lafisrap: Yes, I reacted to the "offshore holdings" information as not knowing what to think about its effects, but it was certainly an addition to the idea of complexity in the who-what-where of money holdings, not the simplification of dollars-here and Euros-there and maybe-some-dollars-under-mattresses-in-Moscow. The line between "foreign" and "domestic" statistics is greatly blurred, especially when we hear that Europeans and South Americans are playing the U.S. stock and options exchanges with great enthusiasm. (Online day-traders in Frankfurt and Buenos Aires?)People DO love to gamble. Was it Bugsy Siegel gave us Vegas?I would have to ask: If the statistics we are basing our gold ownership upon are blurred in their clarity, should we fade this for or against our case for that position? In the impossibility of better statistical depth, I would have to guess that things are most likely "worse than we think" in that the existing statistics probably hide a more precarious situation than the one available to the public. JMB (04/13/01; 09:37:04MT - usagold.com msg#: 51805) CANUCK Re: ANOTHER #51758 I was taken by the clarity, that is to say the most stylish succinctness ever presented at USAGold. His word stayed with me throughout the day. An uplifting experience. Thank you. Canuck (04/13/01; 07:27:09MT - usagold.com msg#: 51804) Another//FOA In case anyone missed posts yesterday:Another: 51758Gold Trail: 51757Trail Guide: 51756 SteveH (4/13/2001; 3:11:31MT - usagold.com msg#: 51803) Lafisrap The problem with the "nothing to fear" concept is that it ends up with all physical commodities in strong hands and systemic failure precipitated by the "final" strong hand possessing physical commodities. It isn't only gold that requires suppression, but all commodities, even food. The failure appears to begin with one commodity or more that can't be restrained. That would be natural gas and it seems leather. The reason for these break outs or few commodities to stand out or show their true inflationary pressures is because of universal use, lack of ability to over-produce or store. In the matter of the aforementioned commodities, there is a natural supply-demand deficit that can not be satisified presently. In the case of leather it is because of a natural (we think) animal disease. It the case of natural gas, we have a systemic dependence highly subject to availability.Clearly, the advice that Mr. Gray Davis got from his hosts prior to his actions in CA was to avoid the appearance of panic and inflation in any actions he took. Every step that I am aware of that he took was to prevent inflation from spreading -- bond issuance, bankrupt the utility, buy the power lines. All of these actions appear to be designed to avoid normal supply and demand remdedies such as allow for both wholesale and retail price adjustments to allow the utilities to actually make a profit. It has become all too obvious that the war is against inflation at all cost. Gold, silver, and other commodities have all been subjected to the same paper vs. real good disconnect of prices. We see it in gold because many of us were duped by what GATA claims to be the greatest fraud of two centuries -- we believed gold to be a commodity, not a monetary instrument. Natural gas users see it because their bills are rising or soon will be. But where damage control can be enacted against inflation it is being done to the detriment of the physical holder of that commodity. It has affected farmers for years. Most of the rest of us since 1994.The six-time DOW-gold ratio of being 2:1 of the past one-hundred years or so, will adjust itself yet again. Only this time it would appear that it will be painful and fast. Anti-inflationists will do all in their power prevent the gold "fault" from adjusting but fractally speaking the odds are against them in the end. It will adjust. The question will be, who has "earthquake" insurance. Not many of us do. Lafisrap (4/13/2001; 1:40:20MT - usagold.com msg#: 51802) Thanks Randy I see that you zoomed in on the same passages in the Warburton article as I and others did. That's very nice. I can't help but wonder what degree of conspiracy and collusion the central banks are engaged in. And if the euro and dollar are in a currency war, I suppose there will be no denying that when the metaphorical explosions occur and the dead bodies pile up. I also wonder if the U.S. might escalate a currency war into a military war, if necessary to maintain dollar dominance. Lafisrap Lafisrap (4/13/2001; 1:19:04MT - usagold.com msg#: 51801) Warburton article http://216.46.231.211/guest.htm From the Warburton article, and commented on by Simply Me: *** "[central banks] incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, their actions seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets."***Me: Wow, draconian brain-washing for the vulnerable, could even be described as an attempt to destroy the meaning of "value," and definitely a dirty trick, an aim to force a crooked game. But the LBMA volume tells us that a significantly large number of "super citizens" do not believe so much in these central bank currencies. Also from the article, and deserving comment, attention, discussion: *** The US dollar is not as vulnerable as it may appear. The key to understanding how this can happen is to consider how little information the flow of funds accounts provides about the true ownership of assets and liabilities. As far as the US external capital account is concerned, hedge funds based in the Caribbean are overseas investors. The activities of overseas branches of US commercial banks are also considered to be foreign transactions. Also, London, and Zurich are clearing-houses for all manner of nominee accounts and anonymous trusts. Around two-thirds of all US bonds recorded as UK-owned belong to UK entities representing non-residents. To fear that foreign investors will one day abstain from fresh investment in US financial assets, leaving the current account deficit uncovered and the US dollar prone, is to suppose that foreigners are the sole instigators of these external financial flows in the first place. It is quite likely that a substantial proportion of these external flow-demands for US corporate bonds and equities are, in fact, US-originated. US residents' subscriptions to leveraged hedge funds reappear as foreign investment in US securities. US commercial banks' overseas branches borrow in euros locally to invest the proceeds in US bonds, playing the yield curve.Thinking in these terms, a collapse of the US dollar versus the euro appears much less likely. It may still occur, but more plausibly in the context of cancelled credit lines and forced asset disposals. The obvious example is the slump in the US dollar against the yen in 1998 as the hedge funds lost their credit lines from Japanese banks and were compelled to unwind their carry trades.***Me: Not sure how to use this information. Is this a case of "We have met the enemy, and he is us!"? Therefore, we have nothing to fear. Or, should we be all that much more afraid? Another? Others?Lafisrap Randy (@ The Tower) (4/13/2001; 1:08:29MT - usagold.com msg#: 51800) For Simply Me I think Mr. Warburton's comments about the "overextention of credit" regarding the euro (in addition to the dollar and yen that he also mentions) is perhaps a referrence to the "collective euro" over time -- that is, the euro as the single modern reflection of what has been done historically to its component legacy currencies...the lira, the franc, the mark, etc.Must go for now... Randy (@ The Tower) (4/13/2001; 1:00:11MT - usagold.com msg#: 51799) Mr. Gresham, thanks for the Peter Warburton article yesterday in your msg#: 51789! http://216.46.231.211/guest_print.htm My apologies in advance for the length of this, but it is rather important (and related) material that is best delivered together rather than separately in smaller posts.Mr. Warburton has either managed to absorb elements of my recent series of posts (ha ha) or else there exists an observable "truth" out there that he sees with a perspective greatly similar to mine. Happily for me, he is a better writer than myself, conveying his thoughts far more clearly than I have been able (judging from the many objections and misunderstandings of my comments). These particular following excerpts warrant special attention. Perhaps in this some will see the reflections of my argument wherein a person needs a safe haven for savings outside of the "currency of the realm". Where I have labored to stress this, perhaps it will be clearer in Mr. Warburton's presentation.------BEGIN Warburton EXCERPTS, ordered for clarity on this point------Monarchs of old, when hard-pressed for finance, would debase their precious metal currency by reducing its weight or by mixing in base metals to create an alloy. Hey, presto! They were able to increase the money supply and buy more munitions and enlist more soldiers. ...These debased coins were, of course, the forerunners of our modern monies...Unfortunately, there is a giant flaw in this ... structure. Restraining the growth of the money supply does not prohibit the excessive expansion of the credit system... [the flaw] lies in the fantasy that the stock of borrowings (of all types) can somehow be divorced from the money stock.I am coming round to the view that the external value of all major currencies is eroding and that this general erosion is able to substitute for at least a portion of the decline that one might expect in a particular currency versus its peers.Beneath the surface, the values of the dollar, the yen and the euro [etc. currencies] have been eroded simultaneously by the over-extension of credit. ...a charge against the value of the currency, as surely as if the edges of the notes and coins had been trimmed away. The search is on for a valid yardstick, a measure of monetary value that has not been (and cannot be) distorted by central banks' firefighting and wrecking tactics. ...since all debt is borrowed money, in order to write off a debt, it is necessary to destroy part of the money supply.... What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur.On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. [Warburton states elsewhere that "the battle on the second front (is) much easier to fight than the first....using derivatives... (and that) investment banks are willing participants in the battle against rising gold, oil and commodity prices."] Equally, their actions seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.The search is on for the perfect hedge...What would be the ideal characteristics of such a numeraire? First, it would be in fixed physical supply. Second, it would be resistant to weather-related influences. Third, its ownership would be diffuse, rendering futile any attempt to restrict supply through a non-competitive structure. Fourth, it must be freely tradable. Fifth, there would be no futures or options markets attached to it.------END Warburton EXCERPTS---------Randy again: Here, you must admit that a physical-based gold market very closely fits his "wish list" for the perfect savings "hedge" against the financial system. Where Mr. Warburton should reconsider his comments, however, is where he makes the following comments regarding the prospects for future dollar strength in the face of our massive trade imbalance.Warburton suggests: "The US dollar is not as vulnerable as it may appear.....US commercial banks' overseas branches borrow in euros locally to invest the proceeds in US bonds, playing the yield curve. Thinking in these terms, a collapse of the US dollar versus the euro appears much less likely."I suggest that he would be wise to fully consider this from Bloomberg regarding the sustainability of that "euro carry" trend he has described:London, April 12 (Bloomberg) -- Euro money-market rates had the largest gain in 1 1/2 years on expectations the European Central Bank will be slower to cut interest rates than investors previously anticipated....after the central bank unexpectedly left the rate on hold yesterday. +ECB President Wim Duisenberg yesterday said inflation risks "have not disappeared," adding that there's no sign of a global recession yet. He also rebuffed calls from politicians and companies for lower borrowing costs. "I hear but I do not listen," he said.+"The ECB is not going to be bullied into doing anything," said James Craigen, money markets manager at Gulf International Bank. "Duisenberg's decided 'we decide interest rates -- not you.' " ---END BLOOMBERG EXCERPT----These excerpts from another Bloomberg article would also be helpful in that reconsideration:New York, April 12 (Bloomberg) -- The dollar fell for the first time this week against the euro as a bigger-than-expected slide in consumer confidence sparked concern economic growth may be slowing more in the U.S. than in Europe. In a Bloomberg News survey at the end of March, 56 analysts projected on average that the dollar would drop to 94 cents per euro by the end of June.+Today's figures, (retail sales and wholesale prices), hurt the dollar in part by bolstering a perception the Federal Reserve will cut interest rates faster than the European Central Bank... That means dollar deposits may become less attractive than those in euros.+In European trading... a report showed French consumer prices rose more than expected in March, which may reduce the likelihood the ECB will cut its 4.75 percent benchmark rate in coming weeks.+Fed policy makers next meet May 15, and many analysts expect an interest rate cut of at least 0.25 percentage point. The Fed has already dropped its benchmark rate 1.5 percentage points since the start of the year, to 5 percent. ---END excerpts----My bottom line: Between the expectation of falling dollar exchange rates against the euro, coupled with lowering dollar interest rates versus the euro, it looks the wheels are about to come off of the dollar's support vehicle. It shall then drop faster than its "peer currencies" despite the earlier stated trend that they are all dwindling together in some degree of "lockstep".Physical gold ownership shall be your "perfect hedge" against this "fragility of the financial system". Old Yeller (4/13/2001; 0:56:10MT - usagold.com msg#: 51798) Dollar deliberations http://www.prudentbear.com/boards/user/non-frames/message.asp?forumid=4&messageid=40114&threadid=40051 Missed the market close today,late rally in the golds on the day before a long weekend always inspires a little optimism on my part.Mr.Gresham,thanks for putting up the excerpts from the Warburton piece.I'd already read it at Prubear but in my haste,I obviously overlooked some significant points.The central bankers double dilemma,indeed.What these guys get away with and what lengths they will go to to keep the game going is truly amazing.The spy plane "problem" is seemingly solved to everyone's satisfaction,or is it?In my opinion,Bush backed down in an obvious and telling matter.Was it the Chinese dollar reserves that changed the tone?The economic trade with China and the rest of SE Asia is important to both sides and is an undeniable factor in the desirability of a speedy resolution to the stand-off.However,the latest developments with the possible formation of a stability arrangement between the Asian bloc and the Chinese facing down the US are intriguing.Are the Asians finally coming to the realization that what they are receiving from their dirt-cheap consumer goods exported to the US is of dubious value at best?Looks like they have about 620 billion reasons to be nervous.Could it possibly be that the rest of the world is tiring of the artificial prosperity of the fiat US reserve currency?The Eurpopeans are showing true resolve here in building a stable currency with lasting value.We are all in agreement on the importance of oil in the world economy.Taken in combination with the noises eminating out of Russia(very important source of oil in the future,especially the Caspian region),vis-a-vis use of the Euro,make the Euro reserve currency scenario a lot more plausible.Lastly,has anyone noticed the apparent absurdity of the semi-conductor bottoming theory being foisted by Wall St.It goes along the lines that things are so bad they couldn't possibly be worse,therefore the bottom must be in and it's time to buy.Hello,boys and girls,these things are commodities,just like wheat,oil and orange juice.A surplus of supply usually means retrenchment and the demise of the weaker players.I'm no expert in this field,but this wishful thinking looks pretty dangerous to me. Simply Me (4/13/2001; 0:54:24MT - usagold.com msg#: 51797) @Sir Gresham...a correction Of course, I didn't mean euro "interest" rates were being kept low. I meant euro value compared to the dollar....making it cheaper to borrow. SHeesh!!I hope I'm getting this right.simply Simply Me (4/13/2001; 0:46:39MT - usagold.com msg#: 51796) @ Many Folks.....And My Thanks to All for Interesting Reading http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20World%20News&s1=blk&tp=ad_topright_topworld&refer=topworld&T=markets_bfgcgi_content99.ht&s2=blk&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=AOtZFwBXnQnVzaCBT @ Trail Guide Welcome back! I am joyous...and relieved. I was getting worried that something tragic had happened to you! Eagerly looking forward to your next post. After watching the stock market slump and the gold mining companies consolidate, I'm so very curious about the Euro v. Dollar situation. @ ET and beesting (re: beesting post #51773) Thank you for the introduction to Fredric Bastait! @ tg Refer to Link: I think the truth is about to make an appearance.@ Rockgrabber They invest in gold paper because they are blind to the leverage built into physical gold over the last 20 years.@ MrGresham No gold-bug "rapture" yet. I would surely be gone (as long as the criteria was based more on faith than knowledge of the numbers).Thank you for the Warburton article. I especially liked..."What we see at present is a battle between the central banks and the collapse of the financial system fought ontwo fronts. On one front, the central banks preside over the creation of additional liquidity for the financialsystem in order to hold back the tide of debt defaults that would otherwise occur. On the other, they inciteinvestment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, softcommodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprivethe independent observer of any reliable benchmark against which to measure the eroding value, not only of theUS dollar, but of all fiat currencies. Equally, their actions seek to deny the investor the opportunity to hedgeagainst the fragility of the financial system by switching into a freely traded market for non-financial assets. "But I don't see how this makes sense..."Beneath the surface, the values of the dollar, the yen and the euro have been eroded simultaneously by the over-extension of credit. "How can the new euro be overextended already? Isn't part of the strategy of keeping euro interest rates low, to encourage new euro loans? ViewYesterday's Discussion.
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