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ARCHIVED DISCUSSION FROM 2/14/2001
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(Yesterday's Discussion.)

SHIFTY (02/14/01; 23:38:33MT - usagold.com msg#: 48271)
Gold demand report has intriguing evidence for a rally
http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B2852569F30073845F?OpenDocument
Posted: 2001/02/14 03:00 PM EST
Gold demand report has intriguing evidence for a rally

NEW YORK -- The World Gold Council, a marketing organization funded by miners, says in its latest report that gold demand has set new records. The increase was achieved despite a steeply declining dollar price for the yellow metal.

Most of the gains came from jewellery consumption that showed strong quarterly sequential growth of 5 per cent with a year-on-year increase of 4 per cent to 2,902 tonnes. Total demand in 2000 was 3,281 tonnes. In the fourth quarter, demand in 27 major markets amounted to 894 tonnes, up an anomalous 11 per cent from a year earlier.

Unfortunately, jewellery demand is not a significant price driver and much needed investment demand remains subdued. Y2K fears spawned considerable private buying in 1999, but that metal, mostly in new coin form, appears to have made its way back to the market at second-hand prices. Notwithstanding the Nasdaq tech-wreck, gold could also not attract investors away from traditional securities leaving demand muted.

The WGC is betting on further demand improvements next year after doubling its membership fees to $2 per ounce of production for a new record budget of $55 million. That money will be spent on promoting gold, mostly via an extensive rebranding exercise that will no doubt bear some affinity with the increasingly successful marketing of platinum and diamonds.

It was a curious year for the gold market, principally because the strong dollar depressed buying in traditional markets. Local currency prices in the major consumer markets have soared which belie the apparent lack of responsiveness to a dollar gold price not much different, in real terms, to Franklin Roosevelt's $35 per ounce edict.

India, the biggest market by some margin, continues to grow and George Milling-Stanley of the WGC confirmed that the earthquake which knocked out some western cities will not adversely affect the market this year. Alternative import routes are already operating, mainly through Delhi and Jaipur. Besides, the primary production and consumption centres are further south. "A huge human tragedy, but this will not be a disaster for the Indian industry," Milling-Stanley adds.

Demand stimulus
The improved demand is, in the circumstances, encouraging but points to a continued lack of meaningful stimulus - the absence of a severe erosion of confidence in the US economy and the integrity of its currency. In such an event, demand may still languish because of diminished purchasing power not just in America, but also in all the countries caught in the turbulence of its contraction that will be broadcast worldwide.

The best-case scenario remains a soft-landing in the US where further interest rate cuts will reduce the holding cost of gold whilst at the same time making the dollar less competitive. Unfortunately that will raise the earnings prospects of equities generally leaving gold shares with no brighter prospects than before. A higher gold price, whether by stealthy readjustment or apocalypse remains the key.

In its assessment of the entire year, the WGC report highlights the impact of producer hedging on the gold price, albeit in a subtle and understated manner. The analysis makes it clear that the gold price responds favourably and with vigour every time producers report a reduction of hedging activity. Producer hedging activity has evidently declined substantially and shareholder pressure in the wake of the Ashanti and Cambior meltdowns has resulted in books being restructured with a heavy bias toward puts rather than calls.

Add to the mix shrinking supplies (2,500t) of new gold against increasing demand (3,500t) and you have a market undergoing a slow, steady return to balance. Current deficits are being made up with scrap and official sales, but they do not represent an indefinite supply and it's exacerbated by a virtual cessation of exploration activity. At the current rate of supply reduction the world may become entirely dependent on above-ground stocks as soon as 2010-12.

Central banks have not abandoned gold
Official holding data is perhaps the most interesting of all. Much press has been devoted to sales by central banks, but the WGC figures do not bear out the sentiment of the most cataclysmic headlines.

Central banks still have a cautious affinity for gold if you consider that official holdings are higher than they were three years ago. It is no less instructive that official holdings ebb and flow with the health of the global economy. The Asian meltdowns of 1997 and 1998 sparked buying and after some load lightening in 1999, the holdings have been surprisingly stable. The monetarists appear to be hedging their bets and the WGC report reinforces the fact that no irreparable harm has been done to official reserve allocations vis-�-vis gold. At least not according to the published reports that governments pass on to voters.

The only truly significant sellers have been international financial institutions. Even then it is not nearly as dire as we've been led to believe. After selling gold stocks heavily to help recapitalize Russia and other countries affected by emerging market contagion, institutions wasted no time replenishing stocks and are holding steady at 134 million ounces. Total official holdings have only decreased 2.3 per cent since 1997 leaving a billion ounces on the books. How much of that is actually under lock and key in the form of fine gold rather than IOUs is the vexing question. it will only be answered when edgy politicians begin to ask uncomfortable questions about the ability of banks to present the gold for inspection.

Hedging is not the scourge
Hedging does contribute to oversupply, but reality is probably being overshadowed by deeply entrenched pessimism. In an environment of put options and industry consolidation, hedging is perhaps nothing more or less than a mild seasoning for a chronic condition of oversupply which may itself be exaggerated.

What is not getting much serious attention � outside of conspiracy circles � is the short position, said to exceed 10,000 tonnes (four years of production or one third of all official book holdings) that is irretrievable. The short position has built up as a result of central bank gold loans where the metal remains on the books but which has in reality been consumed and is not readily available to be returned. This has created an effective "double-claim" on every ounce lent. Where speculative derivatives are layered on top of this paper gold, the double claim can multiply logarithmically. This is the heart of the excess supply problem.

The short position has been easy to manufacture and keep puffing up, but cannot be deflate without violence.

The central banks appear, on paper, to be in a position to cover the short position in an emergency, but the fact is a large portion of the holdings are entirely notional and paper committments written over long exited metal probably exceeds liquid supplies many, many times over. Milling Stanley agrees that current gold reporting is a Sword of Damocles. "We would like to see [official] gold holdings qualitatively separated." A recent WGC commissioned study by Jessica Cross concluded that the central banks have lent at least 5,000 tonnes which is still reported as "on hand" when it should be accounted for as gold receivables.

In an outstanding commentary on the subject by Douglas Pollitt, of his namesake Toronto broking firm, he says: "An ever-larger supply of lent gold is needed to fill the widening supply-demand gap and to ensure that the market remains depressed and investors remain disinclined to call in existing gold loans."

He highlights three conditions that could turn a "tinderbox" market into a raging gold inferno - a drought of official sector lending; faster reductions of new supply; and US dollar instability. One is sufficient for ignition, three would cause a wildfire that turns 1980 into an amateur stage production.

There's no middle ground in the debate on gold, but Pollitt leaves the sage advice for last. "Precious metal companies are...valued like options on the gold price, like portfolio insurance. Be positioned or be left out."

Milling Stanley says it another, more eloquent way: "When it's midnight, do you know where your gold is?"

Perplexed (02/14/01; 23:35:10MT - usagold.com msg#: 48270)
Thanks Journeyman

Before you see me as too optimistic, let me say that I have no expectations of a totally peaceful transistion, nor do I doubt that we will eventually move into massive inflation, if and when TPTB can figure out how.

The national debt is nothing more than an accumlation of uncollected taxes plus interest, taxes which should have been monitized as they were spent.

As stated in my post, there is or can be plenty of "money" available, it is just in the wrong place. I can understand the banking process resulting in price increases of merchandise.

What I can't understand is just how the newly created currency, whether in paper or electronic form, manages to get into either my bank account or billfold.

Perhaps you, or other members of the forum can explain it to me,

During the deflation of the 30s, the government attempted to re-inflate the economy with government make work programs, such as the Public Works Administration, and Works Progress Administration, both fell woefully short.

The economy was only rejuvenated by the massive labor,thus wages, required to equip the nation to fight a world war.

Failure to collect the tax as it was used, is only one part of the double whammy perpetrated by the American government.

The other is the income tax on wages.

From the founding of this nation, a free citizens time was recognized as a personal possession to be traded for food, clothing, shelter, booze, the gold or silver coin of the realm, or simply "wasted" in rest and relaxation.

As such it was declared free from taxation within the Constitution.

The only way that it is "legal" for the IRS to collect taxes on wages today is as a "voluntary act."

I will not get into the fraud perpetrated in the form of coersion, deceptive language, tricks of every form, and unlawful practices, in order to acquire that "voluntary act."

So now that the years of theft have proven so successful that it is threating the government, how do they get the trillions of dollars, now so desperately needed in circulation, back into the citizens pockets?

An income tax in reverse?

I am looking for ideas.

Now very PERPLEXED

megatron (02/14/01; 23:34:38MT - usagold.com msg#: 48269)
ORO
I hear ya brother!!! I dream about it every day. Government dis-empowerment. What a beatiful ring those words have. Maybe some day......

Peter Asher (02/14/01; 22:17:58MT - usagold.com msg#: 48268)
Long, hard day!
That should read HOW can we achieve this

Peter Asher (02/14/01; 22:15:03MT - usagold.com msg#: 48267)
ORO: Who can we achieve this?
Start our own Party????
>>>The only way to oppose the collective dementia that is the political process is to eliminate
political decision-making by the near total elimination of government power, and by its
decentralization and dis-proffesionalization. (e.g. not allowing prosecutors to come to court
without a complaint by a victim, and a grand jury and a judge to convince regarding the need for
subpoena and a civil or criminal charge, or disallowing taxation into the general fund, only
allowing particular taxes to go for particular purposes with the specific tax payers of that tax
themselves deciding where the funds should go, and how much of it). The same kind of limit to
government power that is embodied in the constitution, just taken further; into considering the
ineptitude of people to reach fixed decisions that do not backfire. Particulary putting an
expiration date no more than 5 years in the future on all legislation.<<<<<

Black Blade (02/14/01; 22:05:55MT - usagold.com msg#: 48266)
RE: Boxman
Boxman, thanks for that link,

Hydrocarbons are the lifeblood of the economy. The problem now is that NG is the fuel of choice for power generation. There are no new facilities planned that are "duel-fuel" generators. In the mid 1990's, the price of NG (and oil for that matter), did not justify the cost of exploration and development of NG fields. The costs of building pipelines alone meant that most oil producers would rather consider NG as a waste product and it was flared-off because it was more of a nuisance. Times have changed. There simply aren't enough drill rigs or crews to make up the shortfall. Virtually all power plants being planned and built are NG-fired. Also, NG-fired turbines are backlogged up to 3 years. The "New Economy" is sucking up energy like never before. Server farms for the internet are springing up like toadstools after a spring shower. They require a lot of energy. The "New Economy" was supposed to be the wave of the future. The pundits claimed that it would save energy, yada, yada, yada� Add to all this government involvement and you have a recipe for greater disaster. The energy crisis is the trigger, and it has been pulled. Every post-war recession has been preceded by an energy crisis. Looks like we're due. The markets will come under some pressure, so gold and silver is likely a prudent portfolio diversifier while prices are this low.

BTW, Brit Hume has a segment on his special report on FOX that covers the ANWR debate and special guest is our new Secretary of the Interior. I will have to check that out.

- Black Blade

Boxman (02/14/01; 21:36:50MT - usagold.com msg#: 48265)
Gas producing wells vs production in TX
http://www.rrc.state.tx.us/divisions/og/information-data/stats/ogisgpwc.html
Looks like 1972 was the peak production year. That's a nasty slide in the last 3 decades, and can only gain speed to the downside. Note the number of producing wells in "72" versus today. Real slap side of the head.

Mike

Black Blade (02/14/01; 21:32:02MT - usagold.com msg#: 48264)
USA`s Triple Energy Whammy in Electric Power, Natural Gas & Oil
http://www.ecotopia.com/news/article.asp?id=1565
Snippit:

The USA is in a major electric power crisis, partly a consequence of the deregulation agenda. Peak power demand is exceeding reliable generation and transmission capacity, especially in California. The industry is trying to overcome the crisis by installing gas turbines just when the supply of natural gas in North America is reaching a peak. Gas supply for winter heating is being compromised.

Note to Topaz ande Zenidea: The article concludes with a section on Aussie deregulation and potential energy problems in western Australia. I suspect that this could ultimately impact some Aussie gold mines as well. Maybe this energy crisis will spread globally. We could very well be headed for "Interesting Times."

Tree in the Forest (02/14/01; 19:15:36MT - usagold.com msg#: 48263)
Who says there are no conspiracies?
http://www.almartinraw.com/
I am attempting to gather some information on BOE gold auctions and will post what I find. In the meantime check out this link to a one man FBI whistle blower who has the goods on everyone in government. Take a valium first though. <grin>

Chris Powell (02/14/01; 19:09:36MT - usagold.com msg#: 48262)
Reply to Old Yeller
Hi, OY. To respond to your question about when
government intervention in markets becomes
unethical ....

GATA maintains that government intervention is
unethical when it is surreptitious and thereby
plays favorites by not providing crucial
information equally. Surreptitious intervention
is essentially stealing. Government economic
policy should be PUBLIC policy, in every sense
of the word.

Thanks for your interest.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Black Blade (2/14/2001; 18:23:20MT - usagold.com msg#: 48261)
RE: R. Powell

MINE POWER

I'm not aware of the situation at Newmont. I understand that Placer Dome has locked in long-term contracts for energy, however, anything can happen as I'm not sure how those contracts are structured or what's in the fine-print. It looks as if El Paso Energy will get to built a NG-fired power plant near Elko, NV. That said, NG prices are likely to remain relatively high from here on. I understand that the So. Cal. Hub rates are on the rise again. I don't have access to the prices right now. The increased energy prices will impact some producers more than others of course. Some producers are operating with very thin margins and others are even mining at a loss. Could continue to get "intersting."

NEWMONT

Newmont has 17 open pit mines, and 6 underground in Nevada. They also produce about 40% the state of Nevada's gold. They acquired a couple of Nevada mines from the old Santa Fe Pacific Gold corp. Unfortunately Santa Fe was a railroad company and such big mature corporations are "fat and lazy." they had to unload and it was a battle between Newmont and Homestake, with Newmont as the ultimate winner. they have another old Santa Fe mine in So. Cal. - the Mesquite Mine. I'm not sure of the power cost ther, but they must be rather high now unless they have longterm power contracts (then again, they might be tied into the Nevada system as they are close the Nevada).

I don't have much else to go on yet, however, the local news always has something and everyone knows everyone in these small cities. I'm sure that there will be more news forthcoming. Oh yeah, other than the high unemployment, I see that several local mines have been selling off equipment and anything else to keep above water. Dark days in Nevada 8-(

- Black Blade

R Powell (2/14/2001; 17:58:34MT - usagold.com msg#: 48260)
Black Blade

Thanks for the information on energy costs and mining. I believe you posted an article recently that spoke of Newmont Mining attempting to secure a long term energy contract as their current one was due to expire soon. I believe (from an imperfect memory)that the operation location is Nevada. Do you know if they have succeeded?
Newmont shares were down today.
Thanks for anything you can add on Newmont and/or the energy/ mining equation.
Rich

Also, thanks to Randy for the information. At your leisure, sir, can you tell us what Mr. White thinks of his Bigfloat prediction now, if you contact him again.

Randy (@ The Tower) (2/14/2001; 17:43:46MT - usagold.com msg#: 48259)
A wise contender should size up "the competition"...this builds on one of Trail Guide's latest posts
http://www.centralbanking.co.uk
In an interview with the ECB's chief economist, Otmar Issing, by S.F. Frowen published in the upcoming February 16th edition of Central Banking journal (Vol. 11.3), several items emerged that have bearing on topics of recent discussion here at the forum...particularly regarding the involvement of government. Carefully selected excerpts are provided here for their relevance, but you can view the interview in its published entirety at Central Banking Publications� website at the link above.

"One thing remains certain, however: If a currency is strong and stable internally this will in the long run always be reflected in its external value." --Otmar Issing on currency fundamentals

QUESTION:
Is there a possibility that EMU could fail if there is not more macroeconomic policy coordination in the Eurozone, as some commentators have suggested?

MR. ISSING:
I am not always sure what people have in mind when they talk about macroeconomic policy coordination. In my view the Maastricht treaty and the stability and growth pact provide a sound framework for economic policymaking in the euro area. This framework leaves the main responsibility for economic policies at the national level but it includes mechanisms for policy coordination among national governments. At the same time, the treaty gives responsibility for the single monetary policy to the ECB as an independent and supranational institution.

I don't think there is anything missing in that framework, but, of course, one could argue that this or that aspect of the framework could be implemented more effectively. As long as all economic policymakers live up to their respective responsibilities under the treaty and if governments tackle the longer-term challenges for structural reforms there is every reason to believe that monetary union will be a great success. This success will be based as much on the beneficial forces of competition between European businesses and also between national and local jurisdictions as it will be based on the fruits of cooperation in those areas where this is needed.

QUESTION:
In your recent thought-provoking St. Edmund's College Millennium Lecture �Should we have faith in central banks?� at Cambridge University, you expressed the view that "European monetary and economic union has been and will continue to be part of the wider economic and political project, but that it also stops far short of becoming a single federal entity". Can the euro ultimately be a success without political integration and therefore unified fiscal and other macroeconomic policies?

MR. ISSING:
The decision for a single currency - i.e. the transfer of sovereignty in the monetary field to a supranational institution -- goes beyond mere economics. It is at its core a political decision. Thus sharing a single currency requires as its basis a shared political commitment to this currency.

However, in the speech you cite I also said that I do not believe that a stable monetary regime necessarily must have its roots at the level of the nation state. Therefore it need not require a wide-ranging political union, which is, anyway, not on the cards for some time to come.

The Maastricht treaty and the stability and growth pact set out a sound framework for policymaking in the euro area. If the existing provisions are observed and implemented in letter and in spirit I have no doubt that monetary union can function very well without far-reaching political union.

On the contrary, there could even be a risk that excessive centralisation or harmonisation of economic policies might stifle healthy competition and weaken economic efficiency. For the euro area to fully reap and unlock its growth and employment potential, further progress on structural reforms and greater flexibility -- not least in labour markets -- are required.

QUESTION:
On what grounds do you think the ECB is right in regarding price stability as its only ultimate objective?

MR. ISSING:
The first thing to note is, of course, that the ECB is not free to choose its own objectives. An independent central bank must not be �goal independent�. Our independence is limited to �instrument independence�. This regards the freedom to take monetary policy decisions and choose the appropriate strategy to guide our decisions to achieve the goal set out by the legislature on behalf of the ultimate sovereign: the wider public, the people we serve.

The treaty gives the primary objective of maintaining price stability to us. There are good reasons for this choice of objective. By maintaining price stability over the medium term monetary policy makes its best contribution towards society's wider goals in terms of growth, employment creation and economic welfare.

If prices are stable the market mechanism can work most efficiently in guiding resources, saving and investment to their most productive uses. Price stability reduces the inflation risk premium in real interest rates and avoids creating costly distortions in the tax and social security systems. Through these and other channels price stability can contribute to creating better growth and employment opportunities - and thus, ultimately, economic and social welfare.

QUESTION:
Should there be some weighting within the European Central Bank Council? It does not seem right that countries such as Germany should not have a more powerful voice than, say, Portugal or Greece?

MR. ISSING:
This was an option that had been considered by the Delors Committee back in the late 1980s but it was rejected. I believe, for good reason. Having members of the governing council act as representatives of their respective countries would imply that national problems would be discussed. However, the ECB has only one instrument: monetary policy, and one objective: the maintenance of price stability in the euro area. Thus the governing council has a European mandate and must take a common, area-wide perspective for monetary policy decisions. Weighted voting would go against this logic.

QUESTION:
What is your view on the assertion that the politically united US is mightier than the Eurozone and therefore in a game framework a leader, while the Eurozone is a follower and likely to benefit from a more balanced (Fed-like) ECB monetary policy?

MR. ISSING:
The ECB has responsibility for monetary policy in the second largest economic area in the world. For us, however, monetary union is not about being more or less �mighty� compared to others. The ECB has a clear mandate to maintain price stability. We are perfectly equipped to do our job and in doing our job we will, of course, take the global environment into consideration. But we will focus on maintaining price stability no matter what others may choose to do. In this sense we are certainly a leader, not a follower.
-----------------------
Bottom line: When the dollar's international support starts to visibly crumble, you will sleep better knowing your gold is already on hand to anchor your wealth from being swept away by the currency flood.

Black Blade (2/14/2001; 17:32:17MT - usagold.com msg#: 48258)
Sorry for the Triple Post

Sorry, high winds and a bad internet connection make posting a bit difficult.

Black Blade (2/14/2001; 17:30:37MT - usagold.com msg#: 48257)
Barrick's Genius Turns to Folly

I heard from a friend in Barrick's camp that Barrick's hedge book has been rolled forward (again)locking them into a $340 price. If true, then this put Barrick ina position of lower future profits. As they continue to roll forward their positions and get a lower price each time they are driving their hedge book into the ground. I stated a while back that these hedges would run down and the price for forward sales would converge lower and lower price until they met the lower spot price. The price obtained for forward sales once the current hedge book was filled or rolled forward will eventually not net enough profit to continue this game. It appears that Barrick is ready to roll forward again soon. This could get "interesting." Their costs have also been rising and that has to have these geniuses a bit on edge. Energy prices are still creeping up in the carlin trend area. When the mines run out these term contracts for energy, then it will really start to get ugly. Most of the producing mines are mature and are mining their deep refractory ores, and that requires unusually large blocks of energy to oxidize the ore (essentially a "shake-n-bake" operation). It would not be unreasonable to assume that most of the mines in northern Nevada will have to consider closure or at the very least go into "care and maintenance" mode for a some time until the POG recovers. Either way, it seems that the forward sales game is in the so-called "end-game" and then the supply of gold will decrease. Since Nevada is the world's 3rd largest gold producer, that should have a significant inpact on the gold supply and the POG.

- Black Blade

Black Blade (2/14/2001; 17:30:08MT - usagold.com msg#: 48256)
Barrick's Genius Turns to Folly

I heard from a friend in Barrick's camp that Barrick's hedge book has been rolled forward (again)locking them into a $340 price. If true, then this put Barrick ina position of lower future profits. As they continue to roll forward their positions and get a lower price each time they are driving their hedge book into the ground. I stated a while back that these hedges would run down and the price for forward sales would converge lower and lower price until they met the lower spot price. The price obtained for forward sales once the current hedge book was filled or rolled forward will eventually not net enough profit to continue this game. It appears that Barrick is ready to roll forward again soon. This could get "interesting." Their costs have also been rising and that has to have these geniuses a bit on edge. Energy prices are still creeping up in the carlin trend area. When the mines run out these term contracts for energy, then it will really start to get ugly. Most of the producing mines are mature and are mining their deep refractory ores, and that requires unusually large blocks of energy to oxidize the ore (essentially a "shake-n-bake" operation). It would not be unreasonable to assume that most of the mines in northern Nevada will have to consider closure or at the very least go into "care and maintenance" mode for a some time until the POG recovers. Either way, it seems that the forward sales game is in the so-called "end-game" and then the supply of gold will decrease. Since Nevada is the world's 3rd largest gold producer, that should have a significant inpact on the gold supply and the POG.

- Black Blade

Black Blade (2/14/2001; 17:29:52MT - usagold.com msg#: 48255)
Barrick's Genius Turns to Folly

I heard from a friend in Barrick's camp that Barrick's hedge book has been rolled forward (again)locking them into a $340 price. If true, then this put Barrick ina position of lower future profits. As they continue to roll forward their positions and get a lower price each time they are driving their hedge book into the ground. I stated a while back that these hedges would run down and the price for forward sales would converge lower and lower price until they met the lower spot price. The price obtained for forward sales once the current hedge book was filled or rolled forward will eventually not net enough profit to continue this game. It appears that Barrick is ready to roll forward again soon. This could get "interesting." Their costs have also been rising and that has to have these geniuses a bit on edge. Energy prices are still creeping up in the carlin trend area. When the mines run out these term contracts for energy, then it will really start to get ugly. Most of the producing mines are mature and are mining their deep refractory ores, and that requires unusually large blocks of energy to oxidize the ore (essentially a "shake-n-bake" operation). It would not be unreasonable to assume that most of the mines in northern Nevada will have to consider closure or at the very least go into "care and maintenance" mode for a some time until the POG recovers. Either way, it seems that the forward sales game is in the so-called "end-game" and then the supply of gold will decrease. Since Nevada is the world's 3rd largest gold producer, that should have a significant inpact on the gold supply and the POG.

- Black Blade

Randy (@ The Tower) (2/14/2001; 16:50:50MT - usagold.com msg#: 48254)
Rich...Big Float
http://www.usagold.com/gildedopinion/bigfloat.html
I had a pleasant time corresponding with the author L.R.W. on this last year, so I hope you will agree that the above URL is the finer of the two presentations...if for no other reason than its proximity -- down the hallway and to the right.

I'm not equipped with the time at the moment to find stats and give a response worthy of your question...(I just happened to see your post as I was amid another project and in the area of the Forum). I can say that I recall posting a semi-relevant article about two (+/-) weeks ago on the Fannie Mae and Freddie Mac securites markets and how they were making inroads as substitute holdings into the tighter Treasuries markets. In the larger picture, the article went on to cite stats of international holdings. Over the past year, the amount of these GSE securities held internationally has certainly increased, but more notably, the increase shown was smaller than the corresponding drop in the holdings of Treasury securities.

Big Float coming home? Perhaps it is, even as we speak. Here is one example of a "sea change". Back in August (+/-), the ECB decided to no longer reinvest its interest from dollar-denominated reserve holdings.

Where is "Big Float" going, you ask? Well, we have certainly seen the Fed step up its outright purchase of Treasury securities to be held in its System Account, and we have also seen the Treasury Department embark on the novel approach that it is buying back some of its own old bonds -- even as it continues to auction off others. Perhaps two and two make four...maybe not.

R Powell (2/14/2001; 16:01:18MT - usagold.com msg#: 48253)
New York, New York

Just like the precision of a finely tuned Swiss watch, gold gets the h*** out of New York and it's back in the green +0.6. Silver too, +0.5. If we could just get it to trade round the globe but not in N.Y. Isn't Albany the capital? Maybe if it stops there instead.

ORO (2/14/2001; 15:52:17MT - usagold.com msg#: 48252)
TrailGuide, Randy, Journeyman - rights and dispeptic groups
Very much contrary to the position Trail Guide, Aristotle, Randy, perhaps PH in LA, and others have taken, that humanity is politically incapable of coming to grips with the free markets, and thus with freedom, the constitution's mere existence is proof enough that is not so.

Prior to the Constitution's writing the pre-Kantian pre-Herder debate of rationality and the ultimate sovereignty of individuals was dominated by thinking about governing structures that either subvert (Rouseau's social contract) or protect (Locke) the individual's freedoms. Deeply and universally accepted was the idea of individuals having rights, and the core particulars of what those rights are and what law should protect them.

Socialists, those who believe rights should be subservient to the "will of the people", invented "social contracts", by which people would forego some or all of their rights (freedoms) to either a king, a technocratic oligarchy, a representative council, or some other institution of authority.

Frenchmen, having a nearly simultaneous revolution(s) with that of the US, had an established domestic government. The US had foreigners governing them with limited domestic government. French revolutionary leadership grasped for power rather than freedom, because what they wanted was to replace the king. They were not interested in the Voltairian or Lockian freedoms, because those left them no power. In America, power was synonymous with exploitation by foreigners and was frowned upon. Thus the leaders of the revolution were those who wanted freedom.

The "people", the mass that was the majority, did not expect to fare much better one way or the other. Estimates of support for the American revolution show clearly that the bulk of the population cared little for the cause, not being for or against it. The minority who were for the revolution was simply stronger than the one which was against it. The minority against the revolution was expecting English armies to fight on their behalf and were mostly motivated by economic interest. The minority for the revolution fought for itself and proved stronger than the English army far from its supplies and having limited support from their local confederates.

Today, after having gone through a democratic transformation, the "will of the people" has many claimants, and no means of expression save where representatives are geographical. Which means no country in unified Europe (Germany has limited geographic representation). The proportional representation system does not even allow minor expression of the people's will. No one representative can be found to be accountable to a particular person. The only effective means for people to express themselves is to go into the street. Thus interest groups can get their way by organizing labor, farming, transportation, or environmental demonstrations that involve violent disruption. Given the choice between open confrontation (a guarantee of losing the next election) and coming to some agreement with the group's representatives (quietly in Germany, publicly in France and Italy).

As can be demonstrated, the public will act en-masse in thoughtless ways, while given an opportunity to think on a particular subject at hand, the same people would have said something completely different. It is the difference between a Jury and a Mob.

Everyone has sympathy for the plight of one or another group, and most might even consider supporting them directly with contributions, and would often vote for such support. Given the information - the fact - that when taken together the totality of the various group's desired demands would eat up 60-70% (or more) of one's income (through direct taxation and by raising prices to meet tax costs of suppliers), the people would make the decision to support no one through government action but their own group, or to support no one at all. Thus the party that wins an election in America, is the one that provides credible promises to enough people to obtain entre to the whitehouse or to other office. Obviously, the groups are going to be disappointed, because the elected incumbents are loath to put into place the costs that go with the benefit. Eventually, the people come to the conclusion that the system and its representatives are corrupt and stop participating in it altogether, leaving the minorities of net payors and net beneficiaries to duke it out.

In Europe, governments form from coalitions of party (not geographic) representatives that require compromises, thus it is more important to voters to vote. Not because they actually believe in one party's ideology over another's, but because it represents some of their interests sufficiently as to provide hope that these would get attention during the building of the coalition.

Noisy groups do not get popular support for government benefits when the choice is put to them in a realistic way; namely that governemnt decisions have a -80% return. That is that the ultimate cost of $1 of a benefit is a $5 collective loss. Since the cost is diffuse but the benefit is concentrated, the cost gets little attention in the media and from interest groups (interest groups are not paid to fight a general problem but a specific one). Most would not even realize that there is a cost. Furthermore, while it is easy to prove the benefit, the cost requires honest economic analysis, something that few economists can provide, since they are employed by particular interests rather than the general interest.

Informed discussion as to government policy is unlikely. Magical thinking, the kind of emotional reaction that mobs, poll participants and voters indulge in, is not a reflection of considered opinion, and relies on few facts, if any, and no thought as to mechanism and long term effects.

Even informed people will reach compromise decisions other than those that provide the best results for the participants in the decision. Why? because the fact of a political decision (law and regulation) sets a fixed set of decisions regarding particulars, which law's fixety causes it to become outdated and to damage some, or all of the participants. The alternative; a "flexible" law with discretion, provides a strong imperative to the day to day decision makers to sell their decisions for votes, for money, or for favor.

The only way to oppose the collective dementia that is the political process is to eliminate political decision-making by the near total elimination of government power, and by its decentralization and dis-proffesionalization. (e.g. not allowing prosecutors to come to court without a complaint by a victim, and a grand jury and a judge to convince regarding the need for subpoena and a civil or criminal charge, or disallowing taxation into the general fund, only allowing particular taxes to go for particular purposes with the specific tax payers of that tax themselves deciding where the funds should go, and how much of it). The same kind of limit to government power that is embodied in the constitution, just taken further; into considering the ineptitude of people to reach fixed decisions that do not backfire. Particulary putting an expiration date no more than 5 years in the future on all legislation.

Finally, "The imperfection of people and our modern democracy" are not of the people themselves being imperfect, but of the existence of political power and the inevitable result that political decisions have to be made. Only extremely severe restriction of the power of government can prevent the need for political decisions and prevent the idiotic process we all decry.

R Powell (2/14/2001; 15:49:16MT - usagold.com msg#: 48251)
Bigfloat
http://www.thespiritof76.com/bigfloat.html

Second try, sorry. I've mentioned this before and know that most of us have read this, but some may have missed it and be interested.
Rich

R Powell (2/14/2001; 15:42:40MT - usagold.com msg#: 48250)
Randy, Michael and Grant all notice the same thing?
http://www.thespiritof76.com/bigfoat.html

Randy (28246)
"The current consolidated financial statement of the Eurosystem reporting on last week's balance shows a 2.8 billion euro decrease in the net position of foreign currency assets held by the national central banks"

USAGOLD (47938)
"I note in my latest Grant's Interest Rate Observer that foreign held U.S. paper is down 3.1% over the last quarter."

Questions please,
Randy, are these both refering to U.S. paper returning home as in our horseman "Bigfloat"? Where is this paper going (who is buying) and how is liquidity in the paper markets these days?

If this is the beginning of the return, I posted the link to White's "Big_Float: The American Damocles" above.
Any thoughts?
Rich

Randy (@ The Tower) (2/14/2001; 15:17:13MT - usagold.com msg#: 48249)
More "truth"...gold miners building on Monday's example set by tobacco farmers
From Bridge News:
HEADLINE: Falcon Gold Zimbabwe Chairman warns mines could be closed
Johannesburg--Feb. 14--The Chairman of Falcon Gold Zimbabwe, a subsidiary of Luxembourg-listed Falcon Investment Holdings Societe Anonyme, warned that should costs at its mines continue to increase at unacceptable rates and the Zimbabwe dollar exchange rate remains constant, working costs will soon overtake gold income and cessation of mining activities and closure of all mines is inevitable. --END--

For convenience, and owing to both its brevity and importance, here is the related material from Monday:
_______________________
Randy (@ The Tower) (2/12/2001; 16:09:30MT - usagold.com msg#: 48114)
SUBJECT LINE: The voice of the people...(a "truth" you should know)
http://allafrica.com/stories/200102120459.html

HEADLINE: Zimbabwe Farmers Demand Currency Devaluation
From this article:
-----Zimbabwean tobacco farmers, the country's biggest foreign currency earners, are demanding a devaluation of the local dollar before sales of their crop start in April, sources said Monday.
Last year, the farmers withheld their crop from auction floors to press their demand for devaluation, which the government later agreed to.------

In a "political world", children choose candy over medicine. And here we see the selection of "liquidity" and a degree of debt repudiation in favor over the sanctity/integrity of the value of the national currency held by hapless savers. Well, nobody said mankind was perfect.

It seems like I've seen a viable proposal for an alternative method of operation for these people...it's laying around here somewhere...

Randy (@ The Tower) (2/14/2001; 15:00:33MT - usagold.com msg#: 48248)
Not a rosey picture from the IMF
http://www.imf.org/external/np/sec/nb/2001/nb0119.htm
In its newly released quarterly Emerging Market Financing report, the IMF said emerging bond and equity markets were adversely affected in the last quarter of 2000 due to "heightened expectations of a slowdown of the U.S. economy, lowered earnings potential of the technology, media and telecom sector, and a deterioration in U.S. credit markets."
Further,
"The outlook for emerging market assets and financing remains closely tied to developments in the external environment. Changing expectations of the relative probabilities of a "soft" versus "hard" landing scenarios for the U.S. are likely to keep markets volatile."

There you have it, folks. No matter how grim the past year appeared to investors, we still haven't landed...be it "soft" or "hard".

We all know that it is the function of fiat currencies to be inflated as the politically-preferred alternative to a recession, so you must have your gold in advance of the coming erosion of your currency's value.

You can almost hear the objective and the reluctant directive being uttered even now (after two impressive rate cuts are in the can)....
"We shall save the banking system. We shall have the hyperinflation."

got gold?

Randy (@ The Tower) (2/14/2001; 14:29:54MT - usagold.com msg#: 48247)
PH in LA...
To be sure, I found your latest (msg#: 48244) to be a much more effective and efficient (and therfore preferred) means of delivering your intended message than was the collective tome you provided late yesterday. Given your personal skills at expression, without the use of text-generating software, I may honestly say I look forward to further examples of the former and none of the latter. Carry on, good Sir...

Randy (@ The Tower) (2/14/2001; 13:55:28MT - usagold.com msg#: 48246)
Wow...this drop is much bigger than we've typically seen
The current consolidated financial statement of the Eurosystem reporting on last week's balance shows a 2.8 billion euro decrease in the net postion of foreign currency assets held by the national central banks -- resulting from customer and portfolio transactions by these CBs and a swap transaction by the ECB. Thus, the total foreign currency assets held in reserve by the monetary union has now fallen to 257.9 billion euros.

Somewhat surprising us here in The Tower, their gold assets were reported up one million euros to 118.112 billion euros on the balance sheet. We are inclined to think that gold interest revenue on outstanding gold lending operations has accummulated to the critical point where it appears as a significant figure (at least one million) to show up on the balance sheet.

To tie this in with earlier discussion at the Forum, I see Sir Galearis has been kind enough to share an excerpt of email received from the estimable Sir Rhody. Rhody said:
"The ECB could cut the throat of the USD any time they feel like it, but I think they
will wait until 2002, then allow the POG to rise to at least $1000. With a 15% gold backing
of the EURO, that will compensate for the drop in the USD."

While it is true that the ECB as a lone entity holds gold as 15 percent of its total reserve asset value (all received from subscription by the member national banks), by doing the math from the figures presented above regarding total Eurosystem reserve assets, we see that gold holds an even more lofty position among reserves... thirty-one percent. And with their quarterly mark-to-market regime, as the dollar eventually slips against the euro, the percentage of total reserve value represented by the gold will rise (and compensation will come from gold that will be seen rising against the euro even as it soars against the dollar).

The writing on the wall is clear for all willing to look at it. Banking systems are evolving to edify gold in the exalted position of Reserve Asset, to never again suffer the indignities that befall when used as inflatable currency (such as seen during gold's previous engagement in the role of "Dollar" ...Boy, THAT was sure a laugh!)

Get you some.

Journeyman (2/14/2001; 12:18:49MT - usagold.com msg#: 48245)
Fine post!! BUT, we'll have the MONETARY inflation! @Perplexed msg#: 48222 (&Peter Asher)

This was posted earlier, though strangely garbled. So if you read this one, skip the near duplicate further down the page.

Hi Perplexed!

Nice job on that post!

"As laws were written and court decisions rendered augmenting the change of status, previously
existing rights protected by the Constitution, became Our Constitution Rights, a change so subtle that
only now, as so many of these rights are consistently violated by the government, are many of us
suddenly aware of the transition." -Perplexed

VERY MOST IMPORTANT POINT!! The understanding of the framers was that we were
essentially born with rights and the Constitution only reaffirmed SOME of them
to remind future incarnations of their organization that they are legally
precluded by their own rules from intruding on these pre-existing rights
in any way what-so-ever.

"Laws written for the sole purpose of concentrating the control of wealth into the hands of the
politically connected, are vivid testimonials to the fact that our government has reverted to the same
philosophy under which mankind has suffered since the advent of "civilization." -Perplexed

Only one quibble: Those people in D.C. are NOT "our" government!! It has, as per the majority
of your post, become "their" government.

I'm a little more pessimistic than you are about the outcome - - - but I like
your attitude better! Hope I'm too pessimistic and you're right!

Finally and most importantly, remember about 92% of today's dollars are megabyte
entries in computer memories, and theoretically at least, can be inflated to the
limits of the universe by a few key-strokes. Thus if TPTB desire to do-so, they
have PLENTY of "ingredients" to create enough inflation not only to fill all the
plates in the restaurant, but to fill it to the rafters.

TPTB can - - and almost certainly will - - monetize any bad loan, etc. a bank
can document (and bail-out other "too large to fail" organizations - - like
Long Term Capital Management for example -- in a similar fashion, if necessary
by pipe-lining them through the banks). In this way, lots of those electronic
entries that were electronic "debt" will become, as if by magic, electronic
"money."

We'll DEFINITELY have the MONETARY inflation, even though we'll likely gag
on it.

High regards,
Journeyman

PH in LA (2/14/2001; 11:58:54MT - usagold.com msg#: 48244)
Mea Culpa (with explanation)
Thank you Tree in the Forest!!

At least one tree in the whole forest got the point. I couldn't stop laughing either.

And it was not without purpose that I made those posts, either (even if Randy @ the Tower didn't get it). Greenspan's prose sounds like some kind of disconnected simmering mudhole (ala Yellowstone Park) that can only be intended to confuse us. Fleckenstein called him a "vapid gasbag" yesterday. My aim was to show just how cheap that stuff can be in our technology enhanced world that Greenspan worships so assidiously.

My message was also intended for some of our more abrasive posters that try to take every little remark personally. They should think long and hard about how easily personal attacks can be generated (and just how good and at the same time how pointless they are) and modify their style accordingly.

Forgive me Randy... But also please understand that I was not drunk and/or completely oblivious to "what we are trying to accomplish here", either.

Pete (2/14/2001; 11:51:38MT - usagold.com msg#: 48243)
Alan Greenspan AKA Mr. Magoo
http://www.newaus.com.au/econ197colin.html
Article in Fiend's Super Bear url. The similarity is amazing. Also read entire article for views on gold, derivatives and GATA.

Alan Doomspan's place in history

by Colin Colenso

TNA News with Commentary Wednesday 14 February 2001

Excerpt:

The sycophantic flattery by the Keynesian market experts over the last few years would have us expect to see Alan Greenspan forever remembered as the greatest economist and monetary manipulator of all time. Instead, his fate appears to be turning in the direction Austrian economists have long predicted. He may be remembered as being the worlds most
overrated and dangerous economist.

He has obeyed the fearless cries of encouragement from the proponents of easy credit for too long, and now it seems his boat is heading straight for the rocks. The only question seems to be, will he decide to add some extra fuel to his load. It seems the Federal Bank's only strategy in a crisis is to pump out increasingly easy credit. They would have us believe our biggest danger would be if the printing presses
could not print fast enough. This as the regular reader knows is no solution. It only increases the irritation. It seems possible that the US is heading for it a severe economic adjustment and some are wondering if the US fiat currency can survive this worsening recession. If confidence in the US dollar falls, and a run starts on the banks, it could be sayonara for the world's most used currency.

This might be extreme. I can only guess at the future from this time where debt is at levels never before seen. To look at the enormity and rapid acceleration of measures of credit pumping and money printing it is little wonder some writers are calling Mr. Greenspan, Mr. Magoo (a blind cartoon character, who thinks he can see). Perhaps Mr. Doomspan will
be a more appropriate moniker if my fears are realized.

Old Yeller (2/14/2001; 11:32:14MT - usagold.com msg#: 48242)
Trail guide;#48160/Chris Powell;#48208

Thank you both so much for a long anticipated(in my case,anyway)discussion on the gold markets and GATA's role in them.

Mr. Powell,you made a couple of statements that I found of particular significance.

-gold investors were under the misapprehension that the ordinary rules would be followed and that there was a free market in gold,the free market the government told them there was.-

-GATA argues the problem is not that the rules were changed nor were they not fully understood, but that they were broken-

My question is;where is the ethical breaking point in all of this?We all,to varying degrees, accept government intervention in all manner of markets as an attempt by the authorities to make policy for the greater good.However, this particular intervention,even if it is a mere shadow of what we discern it to be,offers no redeeming benefits whatsoever,unless promoting deception by the monetary powers is viewed positively by the masses.

Everyone with a gold related investment has suffered, especially in the last five years.The price we investors have paid pales,though, when it is compared to the price paid by lesser developed countries,especially those in sub-Saharan Africa.The humanitarian aspects of this "problem", appear to me,to be immense.The AIDS crisis in Africa made the cover of Time magazine recently.Gold price suppression and by extension,official policies of deception,if proven;will expose central bank policy as being indifferent to mass suffering and death.

I,for one,was extremely impressed with the results of Bill Murphy's mission to South Africa.Gaining recognition in such an impressive fashion in a country that has paid more than any other will surely help to alter the status quo.

Good luck to you sir,and to all of the other fine people at GATA.Your dedication,perserverance and bravery are much appreciated.

Tree in the Forest (2/14/2001; 11:29:40MT - usagold.com msg#: 48241)
PH in LA
Thank you! The coolest link I have ever received! Now since you and I disagree somewhat on the issue of Chairman Greenspan, here are my thoughts about your opinions: (Hope you have a sense of humor and I don't get thrown off the board! This is too funny to pass up. After I generated this, I was ROFLOL!)

My complaint about PH in LA

I take exception to a few key aspects of PH in LA's jeremiads. So, without further ado, I present you with this all-important piece of information: If PH in LA continues to destabilize the already volatile social fabric that he purportedly aims to save, crime will escalate as schools deteriorate, corruption increases, and quality of life plummets. On a similar note, he is driving me nuts. I can't take it anymore! PH in LA whines about self-centered derelicts, yet he enthusiastically supports biased idiots. An ancient Greek once wrote something to the effect of, "He can pervert any established ideology." Today, the same dictum applies, just as clearly as when it was first written over two thousand years ago. It's our responsibility to put an end to disagreeable absolutism. That's the first step in trying to subject his offhand remarks to the rigorous scrutiny they warrant, and it's the only way to work beyond the predatory plasticity of his epithets.

To Hell with PH in LA! Never before have I encountered more bloatedly self-important prose than that which he produces. I would like to digress here.

My purpose here is not to shed a little light on some of the ignorant prejudices that reside within his pea-sized brain. Well, okay, it is. But I should point out that his positions are based on two fundamental errors. They assume that his vices are the only true virtues. And they promote the mistaken idea that pharisaism is a be-all, end-all system that should be forcefully imposed upon us. While some of PH in LA's anecdotes are very attractive on the surface and are decidedly entertaining, they ultimately serve to scapegoat easy, unpopular targets, thereby diverting responsibility from more culpable parties. Who is behind the decline of our civilization? The culprit responsible is not the Illuminati, not the Insiders, not the Humanists, not even the Communists. No, the decline of our civilization is attributable primarily to PH in LA. Just don't expect consistency from a man who is entirely and unquestionably hypersensitive. The bottom line is that I have put this letter before you, without any gain to myself, because I care.

Pandagold (2/14/2001; 11:14:06MT - usagold.com msg#: 48240)
Leigh thought your dream had come true

I just checked my shares on Big Charts.com. The first I checked was Agnico Eagle and it showed them at $544.00

I thought perhaps Greenspan had departed this earth and the Saudi regime overthrown while I was making my coffee, and I remembered Leigh posting about his/her dream.

Too bad, guess it must be an error. They shouldn't do these things, it can give one a heart attack.

SALMON (2/14/2001; 11:12:36MT - usagold.com msg#: 48239)
Just another day in the gold business
McWatters Mining Halts Production at
Sigma-Lamaque

11:54 GMT-05:00 Wednesday, February 14, 2001

MONTREAL (Reuters) - McWatters Mining Inc., feeling the pinch of a slumping gold price, said on Wednesday that it will cease operations at its Sigma-Lamaque complex in Quebec for an indeterminate period.

The Canadian gold miner said in a release that the closure will result in the temporary layoff of about 120 employees at the complex. It also said it will continue its operations at its Kiena complex in Quebec for a period of approximately three months, at which time such operations will be reviewed.

The company said that to continue operations it requires additional capital to complete expansion of Sigma-Lamaque. It said it is "pursuing various avenues to raise the required capital."

Pandagold (2/14/2001; 11:01:56MT - usagold.com msg#: 48238)
Gold Demand Up
News via www.Kitco. com

Leading role for Darcey as gold demand soars

Demand for gold rose a record 11% to 894 tonnes during the fourth quarter of 2000 in the world's 27 main markets, the World Gold Council Council said today. This growth offset a weak first three quarters, leaving demand for the year little changed at 3281 tonnes.

The WGC is doubling membership fees to fund a marketing campaign to drive up the gold price, now at a 16-month low of $259.90 (�179.24) a troy ounce. The campaign will feature ballerina Darcey Bussell bedecked in gold jewellery. In India, the world's largest gold market, demand is ahead of 1999

( BW)(NY-WORLD-GOLD-COUNCIL) Gold Demand Up 11% in Q4 2000 to New Quarterly Record; Year-on-year Demand Steady

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 14, 2001--Gold demand in the world's leading gold-consuming countries was 11% higher in the fourth quarter of 2000 than a year earlier, according to figures published by the World Gold Council today.
At 894 tonnes, this set a new quarterly record for the world's 27 major markets, topping the previous record, in Q3'99, by 2%. The strong growth in Q4 offset a weaker performance in the first three quarters so that demand for the year as a whole, at 3,281 tonnes, was essentially unchanged from 1999.
Jewellery consumption for Q4 reached 793 tonnes, 12% higher than a year earlier and 5% higher than the previous record in Q3'99. Annual consumption of jewellery was also a record at 2,902 tonnes, 4% higher than the previous record in 1999.
In contrast to jewellery, investment demand throughout 2000 was subdued, falling 21% from the 1999 level. In 1999 investment demand was exceptionally high, particularly in the US, due to fears of widespread Y2K disruption. When the disruption failed to materialise demand fell sharply in 2000, a fall exacerbated by some of the gold acquired being sold back to the market. However, by Q4 there were signs that investment was shaking off the effects of the fallout, with demand higher, by 4%, than a year earlier for the first time in the year.
Demand reached new records in several countries. In India, the world's largest market, demand edged above the previous record in 1999, despite an abnormally low number of auspicious days in the Hindu calendar for weddings and a patchy monsoon hitting rural incomes in some areas. In Turkey demand rose a massive 49% over 1999 enabling the country to regain its place among the world's top five consumers. Records were also set in the Gulf States, Mexico and Vietnam. Also of note is the 10th successive annual record for gold jewellery consumption in the United States.

Haruko Fukuda, Chief Executive Officer, World Gold Council, commented:
"I am encouraged by the all-time record achieved in the fourth quarter. Despite the effect of Y2K fallout on investment demand, which depressed the figures for 2000 as a whole, the trend in consumption has been strongly upwards in the last few months. We are determined to build on this performance and I look forward to seeing good progress in 2001."

Gold Demand Trends No. 34 is available from the day of publication on the Council's website (www.gold.org). Hard copies of the GDT document can be obtained from the World Gold Council, 444 Madison Ave., New York, NY 10022. (Tel: 212-317-3800 Fax: 212-688-0410) or a PDF file can be downloaded from the website or obtained by e-mail from george.milling_Stanley@wgcny.gold.org.

Galearis (2/14/2001; 10:40:22MT - usagold.com msg#: 48237)
@ Old Yeller re RHODY and lease rates
http://www.kitco.com/lease.chart.html
Hi,

Coincidently, Rhody just sent me an email on this subject. I don't believe he would mind if I shared his words with you.

*******snip***
The leasing pipe is choking off, as one, three and 6 month rates surge, while one year rates remain flat. Translation: Mines are hedging less, while hedge funds and
investment banks lease more to roll over existing lease contracts or dump on the
physical market to contain the spot price. These guys may have more short positions
in options than in lease exposures so it makes sense to take a hit on rates in order to
head off an option short position that's leveraged 100 to one. They will do this when
we are in backwardation in lease rates for the same reason. Leasing has been providing
a large portion of the liquidity underlying the option (paper gold) markets. In this way,
one derivative (lease contracts) is used to provide the security for an even more leveraged
derivative position (options). If the CBs ever cut off the lease supply, this whole system
will blow up and likely take the financial system with it. These are interesting times we
are in. The ECB could cut the throat of the USD any time they feel like it, but I think they
will wait until 2002, then allow the POG to rise to at least $1000. With a 15% gold backing
of the EURO, that will compensate for the drop in the USD.

Journeyman (2/14/2001; 10:33:50MT - usagold.com msg#: 48236)
Fine post!! BUT, we'll have the MONETARY inflation! @Perplexed msg#: 48222 (&Peter Asher)

Hi Perplexed!

Nice job on that post!

"As laws were written and court decisions rendered augmenting the change of status, previously
existing rights protected by the Constitution, became Our Constitution Rights, a change so subtle that
only now, as so many of these rights are consistently violated by the government, are many of us
suddenly aware of the transition." -Perplexed

VERY MOST IMPORTANT POINT!! The understanding of the framers was that we were
essentially born with rights and the Constitution only reaffirmed SOME of them
to remind future incarnations of their organization that they

"Laws written for the sole purpose of concentrating the control of wealth into the hands of the
politically connected, are vivid testimonials to the fact that our government has reverted to the same
philosophy under which mankind has suffered since the advent of "civilization." -Perplexed

Only one quibble: Those people in D.C. are NOT "our" government!! It has, as per the majority
"their" government.

I'm a little more pessimistic than you are about the outcome - - - but I like
your attitude better! Hope I'm too pessimistic and you're right!

Finally and most importantly, remember about 92% of today's dollars are megabyte
entries in computer memories, and theoretically at least, can be inflated to the
limits of the universe by a few key-strokes. Thus if TPTB desire to do-so, they
have PLENTY of "ingredients" to create enough inflation not only to fill all the
plates in the restaurant, but to fill it to the rafters.

TPTB can - - and almost certainly will - - monetize any bad loan, etc. a bank
can document (and bail-out other "too large to fail" organizations - - like
Long Term Capital Management for example -- in a similar fashion, if necessary
by pipe-lining them through the banks). In this way, lots of those electronic
entries that were electronic "debt" will become, as if by magic, electronic
"money."

We'll DEFINITELY have the MONETARY inflation, even though we'll likely gag
on it.

High regards,
Journeyman

Stocks, Lies, and Ticker Tape (2/14/2001; 10:18:43MT - usagold.com msg#: 48235)
Boycott New York Gold?
The effect of the New York exchange on the POG is mostly negative. If physical was increasingly withheld or not traded at all through New York, wouldn't the POG rise?

Is this something GATA can try on the cheap?

Why not actively trade physical where it is "appreciated"?

Old Yeller (2/14/2001; 9:50:55MT - usagold.com msg#: 48234)
Hello;Rhody

Rhody,if you are out there;any thoughts on the state of the current gold lease rates.

ORO (2/14/2001; 8:20:26MT - usagold.com msg#: 48233)
Tea and labor costs in India and China
Though tea prices also reflect insurance and transport costs, the main component is the cost of labor in the producing areas in India and China. Tea picking is done by hand, picking the two top leaves of new growth on a tea bush. So long as the marginal labor use was subsistence farming, relative labor costs in India and China were such that prices of tea have not budged in dollars for the better part of a decade. These prices have started moving up over the past two years - not only because of higher transport costs (packing and distribution). But because the marginal labor in tea producing areas is beginning to transfer to industrial uses and retailing for the portions of the economy that are industrialized (soon to be 300 mil in India and about the same in China) the price of tea itself is rising relative to American and European labor prices now by about 10% (25-30% nominally over 2 years).

India and China have both reached critical mass for their industrial economies. Future growth will be smaller relative to the prior rates but will involve much larger portions of the population moving from subsistence farming to industrial agriculture and industry. Relative pricing of our labor to theirs is going to start shifting against our purchasing power.

DaveC (2/14/2001; 7:56:52MT - usagold.com msg#: 48232)
Iceman #48230
http://www.agora-inc.com/reports/RCLF/SpecialReport/
There have been BOOK written on just some of the topics you asked about and I am sure that more books are onthe way.

Clinton selling out to China, get a copy of Betrayal by Bill Gertz, reporter for Washington Times.

Phony economy, do a web search for the following topics

"hedonic deflator"
"chain weighted index"

Try the link above for a good recap of "The Era of The Big Lie". It is a sales pitch but Dr. K knows what he is talking about.

ORO (2/14/2001; 7:52:02MT - usagold.com msg#: 48231)
Aluminum cans and plastic bottles
In your next grocery shopping trip note that the prices of bottled and canned soft drinks are up, as well are tea and chips. The recent closure of aluminum production and processing plants due to high electric and gas costs has raised can prices by 75c per 12 pack, which translates to $1 higher cost in the store. PET bottles are 15-20c higher than 2 years ago and have raised prices by 20c over this period. Chips packages have gone up in price as size was reduced (less headroom for the chips in the bag). Average price rise is 50c per "large" bag since late 1998, early 99, mostly affected by the rise in packaging materials cost. Contents have fallen in size as well.

General price rises are at 25%-30% over the past two years. That adds to higher energy costs (50% for gasoline, and 200% for natural gas) to restrict consumer purchasing power in general, and therefore in durable goods.

I venture to say that labor costs are rising more quickly than reported (particularly for tech people) and join with organizational problems to restrict the utility of technology for business. Business is not increasing buying new computer and telecom equipment at prior rates because telecom companies can't find people to do the physical installation at the distributed switching centres that are crowded with a patchwork of equipment upgrades that makes new upgrades very difficult and raises the cost of installation crews. The crews are limited in numbers. Similarly, operator capacity is restricting how much additional computing power business can make use of. The outsourcing trend that has put operators to better use has run its course, and again reached the limits of operator capacity. Now high tech source suppliers are being raided for people to staff the user side. Since the conversion of skills takes time (about 2 years) it should be about the beginning of 2002 when business will be able to make use of new computer and telecom equipment. Orders should start increasing at the end of 2001.

Iceman (2/14/2001; 6:42:42MT - usagold.com msg#: 48230)
I need some input on the subject of the last five years being a fake economy.
I have heard about the leakage of the news about the last five years being a fake economy under the Clinton administration to give him a legacy to live by, the selling of sections of national forests to other countries for money, and something about the London gold sales. And also about the selling of nuclear secrets to like China. Is there anybody who can elaborate on these subjects for info?

Usul (2/14/2001; 6:37:26MT - usagold.com msg#: 48229)
Alan Doomspan's place in history
http://www.newaus.com.au/econ197colin.html
"... it has alarmed experts in the industry to find that total derivative receipts created in the last 2 years far exceed total holdings of gold..."

Klondike Kate (2/14/2001; 5:32:25MT - usagold.com msg#: 48228)
A New Gold Rush

It is going to be a good day for gold investors because it brings us one day closer to the day of reckoning.

Remember the $290 cap, then the $275 cap and now almost $260. It has been a long struggle for gold bugs, speculators, Dan McGrew, Lou, and me. But, as everything else in life, the more difficult the path, the more rewarding the end.

All this is not just wishful thinking, high hopes and unfulfilled dreams. It is par for the course in the investment game. Some fall by the wayside, and only the strong survive. The time has come when any meaningful sell off will meet an even stronger buy out. Why? because the mining CEO's told you so.

Some of the strongest gold producers in the industry are producing gold at a total cost of ~$240 per oz. They told you that they are responsible corporate citizens, right?
So, they are not going to pollute the environment to produce a product they can buy cheaper in the market place. We are looking at around 30 million oz perhaps. They are not going to deplete resources that have become more and more difficult to replace with world-class projects, high volume, and high quality ounces.

So, take it from Kate, prepare your cash and be prepared for the final washout. Everything's going to be all right.

Black Blade (2/14/2001; 2:09:15MT - usagold.com msg#: 48227)
Gold can boost an investor's portfolio
http://www.bangkokpost.com/today/140201_Business10.html

A safer long-term bet than stocks & bonds

OK, so I thought that we could use a little cheering up. Not everyone is out to pummel gold ;-) Of course, the Thais had to suffer the Asian Contagion/Asian Flu, and gold saved a lot of people some serious distress.

Black Blade (2/14/2001; 2:02:34MT - usagold.com msg#: 48226)
Hot Times Ahead for California & West as Shortage Intensifies: CERA Report
http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=18120972&ID=cnniw&scategory=Utilities

Snippit:

Opening statement: California's current power crisis is the precursor of a much more serious shortage that will occur during the coming summer despite recent steps to expand the state's power generation capacity, according to "Beyond California's Power Crisis: Impact, Solutions and Lessons," a report released today by Cambridge Energy Research Associates (CERA).

The article outlines how The People's Republik of Kalifornia got into this energy crisis. An interesting read for sure. Is your state on the same path? This is just the tip-o-the-berg! The Wall Street pundits and talking heads are completely overlooking this problem and it will hit hard rather soon. Hang on tight - hard (crash) landing!

- Black Blade

Black Blade (2/14/2001; 1:56:02MT - usagold.com msg#: 48225)
California's Dark Days Lie Ahead
http://www.thestandard.com/article/article_print/0,1153,22098,00.html

As to my previous post. - The state's power crisis is crossing state borders. Your company better get ready.

This article really puts the energy crisis in perspective. The shrill cries from Wall Street continue to be "Don't Worry" be happy. However, even Cheeta in hios testimony yesterday said that the energy crisis could cause "problems." - No Kidding!

Black Blade (2/14/2001; 1:50:27MT - usagold.com msg#: 48224)
RE: JMB #48158 Energy Costs and Carlin Trend, Nevada

Unfortunately for the producers in the Carlin Trend, higher electricity costs won't necessarily result in higher POG. Any lost production in the Carlin Trend and all Nevada for that matter could be made up in production from other regions around the world. The Grasshoppers have only brought the prospect of a recession to the forefront by raising the costs of doing business because of their shortsightedness. They had to know that the other western states could not forever serve as "energy-farms" for Kalifornia. Now that Kalifornia is forcing the delivery of energy into the state, they have effectively raised the costs for their neighbors. That may be bullish for gold in the long-term. However, they have caused a problem that is spreading like a cancer throughout the west and the likely result IMO is that the recession will spread taking the economy of the US with it. And as the US economy goes, so goes the global economy. This energy crisis was in the making for well over a decade. The Grasshopper mentality has finally hit home. I don't think that I'd "hug a Kalifornian" (I'll pass), but they are an amusing specie as far as the study of "human" nature is concerned.

The lower POG continues to put pressure on the producers of the Carlin Trend. I also noticed that the local casinos were less busy than usual. There is an airline that services the casinos with out-of-state tourists. They may shut down operations due to a decline in business. That may also reflect a general downturn in the economy. Most of these people live in the western states (including Kalifornia). If they are facing higher costs at home, then they are not likely to take off to gamble in places like Nevada. Energy costs are being felt in the casino business as well. The casinos use huge amounts of electricity for flashiness with grand light displays and electronic gambling devices. Maybe the economy overall isn't as rosy as the myopic Wall Street pundits and talking heads seem to think. Local businesses that service the mining industry in the Carlin Trend � at least in Winnemucca and Elko, NV � are also in various stages of distress. The higher costs of energy will certainly have an effect.

As far as the lower POG. I'm thinking that I probably don't mind a brief drop to under $200 oz. I would not mind grabbing a few ounces on the cheap.

- Black Blade

Randy (@ The Tower) (2/14/2001; 0:56:11MT - usagold.com msg#: 48223)
justamereBear, I highly recommend your #48139 (posted yeserday to CarlH) to any who missed reading it
Yet if I may take this occasion to be so bold as to offer a revision, I would change one paragraph in particular...as noted in the following excerpt of your text.

"What happens when gold is leased by a bullion bank? Well, as you point out, the ***Bullion Bank***
[[[NOTE: here, I would replace your use of "Bullion Bank" with "mining companies and hedge funds". The BB would generally be in a position which simply brokers the deal for others (the counterparties) as we see commercial banks do with dollar-denominated deals. What you go on to describe here sounds more like the domain of a hedge fund in the gold carry trade, not a BB. Of course, I could be wrong.]]]
borrows the gold at a low rate of interest, and immediately turns around and sells it on the open market. Then they buy, say bonds, at a higher rate of interest. Over the term of the lease, they pocket the diffence in income between the low lease rate of the gold, and the higher rate that they are getting for lending money to someone else in the form of a bond."

Perplexed (2/14/2001; 0:35:56MT - usagold.com msg#: 48222)
Feeding Peter Ashers Leviathan

Peter Asher (01/28/01; 22:02:42MT - usagold.com msg#: 46783)
Feeding Leviathan

Everyone on this Forum is either part of the USA economy or definitively affected by it. It is the size itself of the American GNP and infrastructure that is the source of the dollar being the global reserve currency. This recent boom of historical proportions has created an economic animal of gargantuan size and akin to a biological animal, it must be fed and maintained in order to survive.

This economy has been brought to it's present size by unprecedented liquification of purchasing power and is now depended on that quantity to maintain it's existence.
But, some of the factors that contributed to this growth
are tapped out. The two most critical are the stock market wealth factor and the record amount of credit.

PERPLEXED

Please bear with me as I explain why I agree with your essay.

Your first impression will be "How does all this relate to either inflation or deflation?

In a word MANIPULATION of both truth and circumstance.

THE AMERICAN PEOPLE HAVE BEEN LED DOWN THE PRIMROSE PATH OF
CONTRIVED REALITY, IN THE STATE APPARENTLY OF IGNORANT BLISS.

To those on the forum harboring the conviction that after the anticipated upheaval, nothing basically will have changed:

That TPTB who have somehow sheltered their wealth and power will just resuffle the deck and deal a new hand, while still controlling the house. I SAY NUTS!!!

The house they control is constructed of nothing more substantial than a deck of playing cards.

The paper leash and whip with which the United States is being controlled, and our citizens threatened, is worthless without respect for authority, and authority shorn of
credabily has no viability.

If the anticipated upheaval is anywhere near the expected magnitude, it will have the same effect as a Texas twister in a mobile home park.

The created beast "the governmentally induced economy", like the governmentally created business vehicle, "the corporation" together represent opposite sides of the
same coin, and both must either perpetually expand, or die.

Consequently, because the government is dependent upon the health of their creation, The Federal Reserve Corporation-- this now malignant entity, having usurped much of the delegated power of its creator, is now threatening the health of that creator.

IMHO unless it is possible to successfully exercise it from the host within the near future, both will perish.

Because the government, as it now exists, is itself a malignant corporation, I harbor very grave doubts as to that possibility.

Generally speaking, the very purpose of government is as both originator and manipulator of laws and currency as it affects the common good.

Ad the fact, that under the direction of virtually every government which has ever existed, the welfare of
the common individual was recognized only to the extent required to forestall insurrection.

With this conduct as benchmark, why then is it such a shock to many on the forum that gold, energy, markets, supply and demand etc. are manipulated to the detriment of the
individual?

The answer? From the first day of its existance, the "stated" purpose of the government of the USA was the sanctity of individual freedom.

The common good was to be acheived through recognition of individual sovereingty.

This statement constitutes total departure from the above benchmark, and the "Bill of Rights" proves the statement.

Even though exploitation of this "weakness" has been common practice by its detractors, from day one, the American government has been held to a higher standard, and severly criticized when it has fallen short of expectations.

When this exploitation becomes blatant common practice of our own elected officials, it constitutes a grievous insult to our intelligence, propriety and dignity.

The shielding of a few from the consequences of their quasi legal decisions, constitutes a direct attack upon the principles of universal individual responsibility, the very basis of individual liberty.

How did we arrive at this juncture in our political, moral, ethical and legal evolution?

A sovereign people (entities created by natures God) created a sovereign government, with the created always subservient to the creator; authority limited to that to which the
creators acquiesced in writing; and access only to that wealth budgeted and allocated to specific purposes.

Under this scenario, as employees of a subservient entity, the officers of government are relegated to subservient status, subordinating their individual sovereign status in all matters in which a conflict of interest manifest between their contracted duties(by oath) and their private business dealings. While working for the government, they are to work only in the interest of their fellow citizens.

The scenario was altered 180 deg. by the outcome of the Civil War.

At that time Individual Sovereignty Absolute was lost to the Sovereign State Triumphant.

Officers of the Federal Government, released from the shackles imposed by the Constitution, over the next 130 years, set about accomplishing the mission of government
as stated within the Declaration of Independence--the security of life, liberty and the pursuit of happiness to every citizen regardless of race, sex, or religion.

Although the foundation of the present government was laid in 1865, realistically the attribute of sovereignty devolved slowly from the individual to the government.

While not eliminated, over time the sovereignty of the individual was reduced to that allowed under their subserviency to the federal government. (the common good)

The accessibility to only budgeted and targeted wealth was itself another natural casualty of governmental ascendancy

As laws were written and court decisions rendered augmenting the change of status, previously existing rights protected by the Constitution, became Our Constitution Rights, a change so subtle that only now, as so many of these rights are consistently violated by the government, are many of us suddenly aware of the transition.

The power inherent in governmental sovereignty, an element required to accomplish the mandated task of establishing equal justice to all citizens, was acquired by conquest,
however, although no longer required, the power is being consolidated and embedded as a permanent attribute of government, rather then being relinquished to the
individual citizens.

The devolution of the United States into the realm of "equality" with other nations, accomplished by the
stripping away of much of our constitutional guarantees
has required mountains of laws, rules, regulations, and enforcement agencies in order to "legitimize" this transition. Thus the plague of lawyers.

While the "authorities" in other nations for millennia have possessed the "right" to control every facet of the average citizens life, and to enter houses or places of business
in order to check for "compliance with the law"--this was not a natural part of our nations foundation, and, although now practiced by SWAT teams, it is far from acceptable to a very large percentage of our citizenry, and is sure to come under fire from many local and even state courts.

Laws written for the sole purpose of concentrating the control of wealth into the hands of the politically connected, are vivid testimonials to the fact that our government has reverted to the same philosophy under which mankind has suffered since the advent of "civilization."

Total control of weapons, if possible, would have completed the transformation....

Although a citizen of the USA might utter the words "that is that or something else is a violation of my Constitutional rights" very few have any idea why this is a true statement only if they are in possession of their individual sovereignty.

Presently, most citizens can neither define sovereingty; understand its ramifications upon their welfare; nor care to be enlightened. This will change only when freedom becomes more important than sports, celebrities, and television etc.

Don't sell the American people short!

Currently freedom is being taken for granted, and many of the social ills now manifesting as over indulgence with drugs, alcohol and sports is the result of pure boredom.

When the threat to freedom materializes, most of our fellow citizens will become quick studies, and as avid students, will have no trouble understanding that:

In a nation in which the government is governed by the Supreme Law of the Land we would still be using gold and silver as money.

Our court system would still be punishing actions, rather than guilt by association with "criminal object".

There would be no one killed by SWAT team raids on the wrong house; and the IRS would not exist in its present form.

Waco would have resulted in Mr. Clinton changing his place of residence from one big house to another.

They will accept very readily that their their actions are protected by rights, and the government governs by permission of the governed.

And Now a Change of Gears

It became apparent many years ago that any politician who even hinted at increased taxation would be summarily kicked out of office.

Because there are only two means available to "immediately" fund government---either by taxation, or the printing press, this should have been translated as a signal to reduce
the scope of government.

If you overlook the term "immediately" however, a third method materializes "finance it."

Thus they choose to not only not reduce the size of government, but to continue to purchase their offices by expanding existing and creating new programs, with revenue
to be furnished by future generation.

While hiding inflation in plain sight in the form of national debt, our "experts on the economy" peddled the "no inflation" line.

Ahhh, something for nothing, the three magic words always in vogue.

Something very strange happened however.

Tomorrow turned into today; the future generation became us, and the debt suddenly returned lugging some baggage called interest.

Since taxes are still a no-no, credit is tapped out, and current government must also be funded, suddenly the list of options had changed, cheaper dollars is still there, but a new option called repudiation, or some variant, has been added. What to do?

The choice is clear, because out right repudiation will make some very important people very unhappy, inflation, which should have been allowed to manifest as it was created, is
now inevitable, if possible; it will be sold to a gullible public as company greed and price gouging.

And now the crux of the matter. The United States is a warehouse of uneeded merchandise.

Per your example of the garage and yard sales. These sales occur because a very large percentage of the American people own so many possessions, that many of them, purchased on impulse in time of plenty, and although still in great condition and useful, are sold at "junk" prices when money is no longer so plentiful.

Much of this "junk" was purchased on credit at 18 to 22 percent interest, and was purchased because the price, screamed "bargain."

It is a bargain however, only because, in many instances, millions of our fellow human beings sold his or her most valuable of possessions--TIME-- FOR VIRTUALLY NOTHING just to eat.

Is it entirely our fault? No! People and governments preying upon their fellow man,unfortunately is common in every nation.

As an example: Because of governmental manipulation of inflation information, those working toward the production of wealth within this nation have not demanded that their
wages constantly reflect its true cost, we are thus staring Leviathan squarely in the eye with no means of feeding him.

As I have previously posted,TPTB inadvertantly created a doomsday machine, a ticking time bomb of accumlating debt and interest which is concentrating currency faster than it
can be created.

So while there is plenty of currency or credits in existance, it is in the wrong hands.

It is very unlikely that the current inflation of the money supply will translate as added income in direct proportion, or within the time frame necessary to keep pace with the
escalating cost of living, let alone the debt service.

Peter you see mitigating possibilities that I don't see. As you have already observed, storage lots are already filling with repossessed and unsold equipment, where will the
additional deluge of merchandise be stored, and what will be the cost of protecting and keeping it serviceable?

Just processing the paper work required to foreclose loans will become an impossible task.

As previously stated, virtually every home in the USA is a store house of merchandise ranging from baseball cards to quarter million dollar motor homes, all of which will be
competing for scarce currency.

There is enough new and good used merchandise within this nation now, so that even if not one more item is either created or imported, we could live very well for two years
with very minor inconvience.

Unless a means is devised to get the purchasing power out of cyber space and off spread sheets, and into the hands of the working class people immediately, pandemonium will reign supreme.

Trickle down economics was a disaster in the 1920s and 30s and should have been seen for what it was, a recipe for more of the same.

The idea that if you over fill the hog trough and allow the chickens to consume that which the hogs manage to spill, works only when the hogs are few in number, very sloppy
eaters, and the chicken population remains static. When the hogs get greedy and efficient, the hungry chickens first quit laying, and then peacefully die.

Not so with people. While they will quit working, the only peace to be enjoyed will be that eventually enjoyed by the survivors.

Taking your rocket example one step further, when sufficient pressure may be released and directed, the engine completes the job for which it was created, if however the vent is
insufficient to release the mounting pressure, then it explodes, releasing uncontrolled energy in every direction.

MANIPULATION HAS JUST ABOUT REACHED ITS ZENITH, CONTRIVED REALITY IS ON ITS DEATH BED, AND THE INFLATION WHICH SO WORRIED MR. GREENSPAN ONLY A FEW MONTHS AGO WOULD BE O-SO WELCOME COMPARED TO WHAT IN ALL LIKELIHOOD AWAITS.

PETER
A nation of tapped out debtors, asset rich and stressed to service debt would all benefit from Hyperinflation. However, Asher's third law of Ecodynamics states "Any activity that
creates gain without production can empirically only benefit a minority.," Therefore in this current endemic situation, the ratio of buying power to available goods, necessary to
inflate, cannot exist.

If the food-chain necessary to sustain this behemoth falters, then -- Contracted buying power, lot's of debt, no sales, need to raise cash, nation wide garage sale; =Deflation!
Waiter: "...and for you, sir?"
Uncle Sam: "We shall have the hyperinflation."
Waiter: "Sorry sir, we're out of the ingredients to make it."

PERPLEXED As I stated in the beginning I agree!

I for one however will not be betting against the United States.

Within 5 years I see a nation of sovereign individuals immerging from the shambles of a wrecked world economy. A nation in which cooperation reigns supreme, a business
system favoring the individual entrepreneur with all employees sharing in the profits, and a government built to serve the individual, per the Declaration of Independence.

AND GOLD? I HAVE NO IDEA WHAT ITS PRICE WILL BE, BUT I DO KNOW THAT IT WILL NOT BE WORTHLESS!!!

Randy (@ The Tower) (2/14/2001; 0:35:22MT - usagold.com msg#: 48221)
PH in LA....regarding your recent large block of off-topic text
Next time, as an acknowledgement of what we are trying to accomplish here, please exercise some discretion before clicking the "Submit Message" button. This same sentiment applies to all, myself included.

Randy (@ The Tower) (2/14/2001; 0:19:57MT - usagold.com msg#: 48220)
Tree in the Forest...I see an innocent explanation
You commented on your BOE research:
"Also interesting is the fact that the payment for gold bought at these auctions is in US dollars delivered to the Fed Bank of NY. Very strange don't you think? Why would they want payments to the BOE made to another country's central bank in another country's currency?"
-----
It should be no large surprise that the terms of settlement require dollars because ours is the conventional currency in which gold is directly priced -- including the daily fixings in London, not *just* the auction bids. (FYI, gold prices in other currencies may be figured after-the-fact by way of exchange rates prevailing on the currency markets.)

The NY Federal Reserve Bank is involved because it is the entity that ultimately facilitates the clear transfer of dollar-denominated currency. When the Fed says the funds are clear, then brother, they are clear. To be sure, the funds are not paid to our CB, but rather to England's account at our CB.

Hope this helps unravel some mystery.

SHIFTY (2/14/2001; 0:13:25MT - usagold.com msg#: 48219)
US says Mideast security situation 'seriously deteriorating'
http://asia.dailynews.yahoo.com/headlines/world/article.html?s=asia/headlines/010214/world/afp/US_says_Mideast_security_situation__seriously_deteriorating_.html
Wednesday, February 14 3:35 AM SGT

US says Mideast security situation 'seriously deteriorating'
WASHINGTON, Feb 13 (AFP) -
The United States said Tuesday the security situation in Israel and the Palestinian territories had seriously deteroriated since the weekend and threatened to spiral out of control.

State Department spokesman Richard Boucher said political assassinations carried out by Israel and attacks on Israeli settlers by Palestinians had to stop if peace talks were to resume.

"Our assessment is that the events of the last 48 hours represent a serious deterioration of the security situation on the ground at a time that we all recognize is very, very sensitive," Boucher told reporters.

"The use of Israeli helicopter gunships, Palestinian attacks against settlements and motorists, the use of mortars by Palestinians and the targeted killings by the Israeli defense force today are producing a new cycle of action or reaction which can become impossible to control," he said.

Boucher referred to the latest in a series of pinpoint strikes against Palestinian activists in which the Israeli army killed a senior officer in Yasser Arafat's personal bodyguard, accusing Massud Ayyad of being a terrorist.

Ayyad was killed when an Israeli helicopter gunship fired a volley of rockets on his car in the northern Gaza Strip. In Gaza and elsewhere, two Palestinians were killed in other incidents and gunbattles raged, leaving around 36 Palestinians wounded.

"Both the Israelis and the Palestinians need to do everything they can to stop the violence, to maintain calm, and to create the right environment for dialogue and negotiation," Boucher said.

He spoke as envoys sent to Washington by Israeli Prime Minister-elect Ariel Sharon met with US State Department officials and a Palestinian official urged President George W. Bush "not to repeat the mistakes of the past" in the peace.

DaveC (2/14/2001; 0:12:31MT - usagold.com msg#: 48218)
Gotta Love These Rare Metals and Their Usage
Rare metal rhenium reaches for skies in superjumbo
By Martin Hayes

LONDON, Feb 14 (Reuters) - When the world's largest commercial aircraft, the superjumbo Airbus A380, takes to the skies in 2004, one of the vital constituents in its giant engines will be rhenium.

Rhenium, the last found naturally occurring element, was discovered only in 1925. It is resistant to very high temperatures, and is a necessary element in the superalloy used in the hot turbine blades at the rear of the A380's four massive engines.

``Rhenium is used in the turbines of virtually all our engines, and will be used in future Trent (aircraft) engines,'' said a Rolls-Royce spokesman.

In a jet engine, cold air enters at the front, is compressed, mixed with fuel and ignited. This drives the turbine blades at the rear.

``The higher the temperature...the greater the thrust, and less unburned fuel is disgorged in the form of exhaust gases, such as nitrogen oxides. The superalloys that have been developed now cannot exist without rhenium,'' an industry specialist said.

At much higher operating temperatures there is less fuel burn, so these flying leviathans will travel much further for the same or less energy cost.

``Fuel efficiency is a constant driver. We are all designing engines that have better fuel burn,'' the Rolls-Royce spokesman said.

European plane maker Airbus Industrie's [ARBU.UL] A380 will be powered by Roll-Royce (quote from Yahoo! UK & Ireland: RR.L) Trent 900 engines, as well as Pratt & Whitney (NYSE:UTX - news) and General Electric (NYSE:GE - news) GP700s.

Airbus already has commitments for 60 superjumbos, with sales of a further 50 A380s over the next 12 to 18 months.

It is not only the A380, which is yet to come -- the Rolls-Royce Trent series of engines, using the third generation of single crystal superalloys, already power many of the aircraft that circle the globe.

``The market is growing towards aircraft of the A380 size, and that is where the Trent family sits,'' the Rolls-Royce spokesman said.

Rolls-Royce Trent engines power Airbus A330s and A340s, Boeing (NYSE:BA - news) 777s as well as Boeing 747s.

THE HOTTER THE BETTER

The first generation of 60 percent nickel-base superalloys that were common a generation ago were predominantly tungsten, chromium and cobalt-based, using no rhenium and only a small amount of tantalum. However, engine performance was limited by temperature restraints.

But by the 1980s rhenium had been introduced as an alloying element. The alloy was typically three percent rhenium and 6.5 percent tantalum.

Now, third generation superalloys use the same 60 percent nickel base, but six percent rhenium and 8.5 percent tantalum.

The key gain is the much higher temperatures that the engine can operate at -- rhenium and tantalum have high melting points of 3,180 and 2,996 degrees Celsius respectively. Only tungsten and carbon have higher melting points than rhenium.

Because of this, the engine blades have improved 'creep resistance' -- they are less susceptible to shape changes caused by rapid heating followed by equally rapid cooling.

Even at the time of maximum thrust -- during take-off -- turbine blade temperature is no higher than 2,000 degrees Celsius (3,632 degrees Fahrenheit), a Rolls Royce spokesman said.

Future super alloys may see ruthenium added to the mix, but the rhenium ratio will be maintained at six percent, underpinning demand from the aircraft industry for many years.

``The outlook is good, as aircraft technology can be applied elsewhere, such as industrial land-based gas turbines, which are used for marginal electricity demand at certain times of the day,'' the industry specialist said.

NONDESCRIPT IN APPEARANCE, BUT EXTREMELY RARE

Rhenium metal is dull-grey in appearance and takes its name from the Rhine river after its discovery by German scientists.

The first tonne was not produced until the mid 1940s. It is generally found in copper porphyry volcanic orebodies, which stretch from Chile, the Andes, the Rockies in North America, across the Bering Straits into Mongolia.

Only in Russia on the Kuril Island of Iturup, where rhenium in gas is emitted from the Kudryavy volcano, is it potentially possible for the metal to be exploited exclusively. Worldwide, there are very few producers -- Molymet in Chile, Phelps Dodge (NYSE:PD - news) in the U.S., and Dzeskasgan in Kazakhstan.

Also, it is extremely rare. Compared with copper, which is found in the earth's crust in a ratio of 50 parts per million, rhenium is four parts per billion.

Production was still only three tonnes by the early 1970s, but the market has grown enormously since then -- a decade later output was around 20 tonnes a year, and the level now is some 40/45 tonnes annually.

Some traders say this may pose a major supply problem, as rhenium is not produced by itself -- it is a by-product of copper and molybdenum. So decisions taken on economic grounds by copper producers to close mines effect rhenium supplies, irrespective of its supply and price prospects.

But others said end-users -- engine makers and land-based industrial turbine manufacturers -- had secured their supplies. There may also be stockpiles of recoverable material generated by the price spike of the early 1980s.

``Demand is fairly well-defined for many years from the aircraft industry. If anything, there may be cancellations. These companies have covered their requirements, either with producers, or with super alloy manufacturers,'' a trader said.

But price movements of this metal are susceptible to extreme volatility -- potentially a major headache for superalloy makers when plotting costs on forward price curves.

Since the early 1970s, rhenium has fluctuated from $771 a kilo, peaking at $3,306 in early 1980s on one-off demand from the oil catalyst sector. From depressed levels around $350 in mid-1980s the price has risen to around $1,400 kg now -- making rhenium the eighth most expensive metal.

``That sounds a lot, but it translates to $43 an ounce -- so it is cheaper than gold, platinum, palladium, and rhodium,'' the industry specialist said.

Journeyman (2/14/2001; 0:09:22MT - usagold.com msg#: 48217)
Question of the Day @Shermag (2/13/2001; 18:05:24MT - usagold.com msg#: 48190

Hi Shermag!

Agreed, that's why the markets should have dropped. But this is, as you imply, no longer the way markets are played. Fairytales are more entertaining and comforting, after all.

Or maybe, in a back-handed fashion, maybe the markets are played by Austrian rules. See comments to Peter Asher below.

Regards,
Journeyman

Journeyman (2/14/2001; 0:04:24MT - usagold.com msg#: 48216)
Question of the Day @Peter Asher (2/13/2001; 18:39:03MT - usagold.com msg#: 48193)

Hi Sir Peter!

My interpretation too. As Mises points out, manipulating interest rates, lowering them especially, even when he wrote Human Action, caused the newly created liquidity to go to the stock markets.

Today everyone knows that and plays the increase in liquidity to the markets in advance, knowing that it should pump-up stock prices. But, as you point out, his testimony and the numbers weren't as negative "as hoped" so another immediate interest rate cut is a little less likely, hence the stocks, well up before his testimony, tanked a bit.

Regards,
Journeyman

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