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ARCHIVED DISCUSSION FROM 11/15/1999 All times are U.S. Mountain Time View Yesterday's Discussion. THX-1138 (11/15/99; 23:54:48MDT - Msg ID:19170) C-Span Co-opted http://www.worldnetdaily.com/bluesky_metcalf/19991115_xcgme_cspan_coop.shtml An excerpt from the article about the income tax discussion:***Why would C-Span, in the wake of cultivating a reputation for non-partisan candor fold on this one? It certainly wasn't any programming imperative. Instead of the promised tax protester live speeches, C-Span ran a re-run of a Books Notes show. When they ran the first event it proved to be a huge success. Reportedly, it had been the most often requested tape ordered from C-Span. It was apparently both an audience success AND a financial success in that it generated considerable tape sales. So why would they cancel the sequel with the original cast? ORO (11/15/99; 23:32:45MDT - Msg ID:19169) Another Bubble Once the consuming industry has prevailing inventory carrying practices of nearly one delivery interval and producers have shuttered production, ceased maintenance of ongoing operations, lost large portions of their labor forces and sold forward the majority of next year or two's production (illegal on the public US exchanges, but possible on international OTC markets), the ground is set for a multiyear rally in the commodity accompanied by defaults, shortages, severe losses in consuming industries, and price inflation. Since the practice of this shorting strategy is automatic and dictated by interest rates in the trade settlement currency alone, the higher interest rates dictate the severity of overselling, and the steepness of the price decline trend. This continues until a situation of no additional supply being available is created, and the high interest rates have discourage investment in new production capacity for a sufficiently long period. At this point, a minor supply shock could devastate the whole economy of consuming nations. Currency bubbles. A currency bubble is also a byproduct of arbitrary pricing of funds through artificial interest rates. The main structural issue is the natural tendency for international borrowers to borrow at the currency offering the lowest interest rate for short term or long term loans. Central banks tend to lower interest rates into the ground, near 0 nominal, negative real rates in order to stimulate economic activity during a recession. As a result of this, there is a period where a constant stream of money is lent by the banks with the lowest discount rates, The borrowed currency is converted into local currency and the borrowed currency is sold into the markets, causing a decline in its value. The low interest rates also infect the rest of the world as interest rate "arbitrage " turns to high interest countries to make a profit on the difference between borrowing in the low rate currency and lending in the high rate currency. The high rate currency appreciates and interest rates are lowered in that country. The borrowing country then enjoys a boom as new investment and consumption develop as a result of the low interest rates induced by the central bank of the country in recession. The exchange rate differential causes a stream of exports that are artificially priced low in terms of the low rate currency. As this process progresses, in typical banking cycle fashion, the borrowers meet a low supply of the borrowed currency, whereas a relative abundance of currency is available in the high rate borrowing nations. The currency exchange rates reverse trend when the inevitable shortage of borrowed currency for return of loans causes the borrowed currency exchange rates to rise despite interest rate differentials continuing to be high. Interest rate arbitrageurs then meet problems in returning borrowed funds, and the bubble in the borrowing nation's currency is suddenly stopped. Trade flows are disrupted as a result of the exchange rate fluctuation, and the long term interest rates in the borrowing country turn even higher as the arbitrageurs unwind their trades in serious losses. Importers find the products from the low rate country quickly becoming unaffordable, and have problems replacing inventory just sold. As the unwinding progresses, liquidity problems pop up in the borrower nations as bank deposits are pulled in order to repatriate loans back to the low interest rate country. Since loans must be returned with interest, a rise in the interest rates of the low interest country may cause a deflationary banking event in countries that borrowed heavily in the low interest rate currency. A characteristic phenomenon of this situation is having short term rates higher than long term rates as the borrowing country tries to protect its currency from the reversal of financial flows when interest payments to the low interest rate country come due. The desired new lending from the low interest rate country may continue into the higher interest rates, particularly in the interbank lending arena, but this only exacerbates the problem later on, as more lending has occurred since the beginning of interest payment strains. During the strengthening period of the high interest country's currency, trade deficits expand, stock markets boom as interest rates drop because of low rates offered from abroad competing for the lending business. Housing construction booms and loans are refinanced at progressively lower rates. The consumer income released from debt service creates new consumption and brings further consumer indebtedness, Banks based in the high interest rate country are pushed out of the high quality lending markets because of the higher discount rates they must pay their central bank for funds they lend, relative to the low interest rate country's banks. The local banks are pushed into lending further out on the risk scale, and the foreign banks buy most of the loan consolidation market's products. Loan securitization business expands radically. As the liquidity in the markets leaks into the economy through wealth effects and investments funded through the stock market, price inflation starts appearing. Tightening by the local central bank pushes them even further out into the high risk unsecured low quality consumer and business credit operations. Local banks merge in a bid to lower costs of operation. The process continues to push the stock market, because the low interest rate foreign stock investor sees the expanding investment boom and the growing companies in new industries through the much stronger enlarging lens of his low interest cost. New capacity in the high technology industries of the day is created as the investment boom continues. When the currency exchange trend reverses, interest and principal payments on the now appreciating low interest rate currency can't be obtained. The long term interest rates in the local bond markets rise, since there the interest rate differential was greatest between the low short term foreign discount rate and the previously high long bond interest rate, and these loans have grown for a longer period. Strangely, liquidity dries up as price inflation creeps up with the weakening of the high interest currency exacerbating the foreign deficit even as unit import volume begins to fall. Long rates remain in convergence with short term rates as these are raised by the local central bank (of the high interest rate country) to cool the economy and protect the currency. Finally, as long rates rise to scuttle the stock markets and reduce loan refinancing due to the need to make loan payments in the low interest rate currency, slow downs occur accompanied by import led price inflation. In the US, interest rate arbitrage was conducted against Yen, Swiss Franc, Euros, and gold. In many of these areas, the loan volume taken is very large, and repayment by the heavily indebted US is near impossible in all of these currencies while a burgeoning trade deficit prevents the economy from obtaining the currencies through exports. We have already reversed course on the currency direction vis-a-vis the Japanese Yen, despite the interest rate differentials being higher than they were when the original carry trade started. If the process remains true to form, the Fed will raise interest rates to the point of their being higher than long rates, but this will not slow price inflation, but may exacerbate the problem of illiquidity as local banks can't make profitable loans with long rates at par or lower than short rates (banks borrow short and lend long). Formerly profitable companies will show signs of weak margins and higher import and labor costs. Consumers will shy away from new mortgage borrowing, but prices of goods will continue to rise even in the face of weak consumer buying locally. The Fed's extremely low rates in the beginning of the decade stimulated $ denominated lending to the emerging market countries (EMs) that had high interest rates because of their high growth. Over investment in new production was funded with $ loans from Japanese and European banks who had a high inventory of $ from the US profligacy in the 1980s debt and import boom. The local EM consumer markets were saturated, as were the export markets in the US. Since the end of the US recession of the early nineties in 1994, which also marks the topping out of the Asian markets, US banks were pushed out of the emerging market lending arena, because of low discount rates of the now dominating European banks that have taken over from Japanese banks. The $ debt trap that was sprung on these countries was not as bad as the one slowly closing on the US, because the local population had significant savings and the US does not. Not even the investment boom can come close to the consumer debt revolution. Consumers are indebted to a record 106% of income. As the main US household asset is the equity portfolio and it is priced according to retail Japanese and European interest rates in the 2.5% to 3.5% area, increases in these rates will have a negative effect on stock valuations here. As in Asia, once the stocks have fizzled and the foreign currency denominated bank debt repatriation accelerates from American banks into reviving Japan and Europe, the odd combination of low price inflation in a booming economy will transition to a high price inflation in a recessionary and liquidity constrained market. Though it will be a mystery to many economists, the classic Misessian economist will figure it out. The price inflation is simply the acceleration of leakage of funds printed in the 93-99 boom, escaping from financial markets into which they were injected and into the real economy. As this occurs it will lower liquidity in the financial markets. This should be accompanied by additional loss of liquidity due to foreign loan repatriation. Finally, in order to prevent liquidity squeezes, the Fed will print cash through monetization of debt. The newly printed currency will increase the rate of price inflation as it leaks into the real economy. Because of the low savings rate here, the US has not been able to make counter loans to foreign nations, and can't obtain demand for the newly printed cash $ from them, since they are rapidly converting $ debt into Euro debt. ORO (11/15/99; 23:31:16MDT - Msg ID:19168) What is a bubble? I think the Austrian (Mises in particular) business cycle theory can explain what bubbles are.On the most fundamental level bubbles are a debt generated phenomenon, where obligations are taken up by people without fear of the possibility that they will be unable to live up to their word. As in the banking system, the bubble has cash and credit (deposit accounts) equivalents trading at par. While they are substantially different, one perceives credit as equivalent to cash because of a long history of success doing so. Very few of us ever suffer from a large organization that fails to live up to its debt to us. The large scale failure of obligations from Russia through Korea, Thailand, Brazil and Bolivia are repeating phenomena that in the last incarnation became greater in scale.The Misessian view is of a government created distortion in interest rates or profit margins creating a boom in credit, making either borrowing too cheap (interest rates too low) or profitability of a large cross section of business too high (tax advantages given corporations as against individuals, or allowing employers to force workers into accepting lower pay, or substitutes for pay, or dictating a high price for an item). In the modern central bank dominated setting of interest rates, the likely source of distortion are in reserve levels dictated and interest rates. A boom results from lending excesses, leverage, to new levels of risk. Businesses thought to be too risky become attractive and the interest expense of established credit worthy clients is cut, inducing them to accelerate their rate of new debt financed undertakings. The result is the famous economic distortion known as "malinvestment", which is characteristic of the Austrian business cycle analysis. A bubble, then is a debt driven process, whereby investments and expenditures are made without regard to returns, or without regard to the risk of expected returns never appearing. The investment boom causes consumption to rise in tandem as incomes are increased and individual's indebtedness is increased to fund demand as expectations of future income grow. This creates growth in profitability, which in turn raises investment rates. The new productive or mercantile capacity rises to the point of competition for labor and competition for market share eliminating profitability in general. The larger companies enjoying the faith of markets because of a stellar past seek to extend growth and profitability even more by buying potential and current cash flows in the form of other companies that bear promising technology or fundamentally strong businesses that can be trimmed of costs by merger. This ends with the realization that the levels of income are not sufficient to buy all products of business, and that businesses are not as profitable as once seemed they would be. Strains on abused capital in some industries are matched only by idleness of new capacity in others.The key perception regarding bubbles is that there is a feed forward mechanism that feeds itself, A causes B, B causes C, C causes an increase in A. Meanwhile, the volume of outstanding obligations grows continuously. For example, investment expenditure into fresh consumption demand that feeds returns on investment, which, in turn, pushes fresh investment into the area and the attendant new hiring. The problem is that debt obligations power this cycle at each turn. The debt may be an implied one, such as issuance of equity based securities rather than straight debt.In real estate the (A) growth in debt due to under-pricing of interest turns into a rise in bids for assets. (B) As price rises, (C) the equity in the property (A) can be borrowed against to fund purchase of (B) additional properties. As price rises are steady for prolonged periods, the expected equity return on investment is added to the income return on investment in the considerations of the investor. Thus the aggregated expectation of return beyond income (property yields 4% in income but 10% in appreciation) is weighed against the same interest cost (say 6%, vs. a 10%+4% expectation of returns yields 8% return on borrowings beginning 1 year forwards) to cause the rise in property investment, and therefore cause the expected rise in values to materialize. Eventually, the low income returns cause some operators to sell properties in order to meet interest obligations. This, in turn, causes a drop in property prices and marks the beginning of the unwinding of a real estate bubble.Stocks can also be borrowed against in the form of margin debt, as assurance (security) for a borrower of his capacity to live up to loan obligations. Stocks can also be borrowed against through futures, options, etc.. This leverage is not usually great even at severe extremes of stock market euphoria. However, pyramid schemes abound in optimistic stock market environments. The key feature is the cycling of capital obtained through issue of stock into the bottom line of earnings statements, either through revenue, or directly. The direct cycling of stock issuance into earnings is the preferred method. The easiest of these in modern days is the use of stock issuance to purchase cash flow in the form of ongoing operations. Next in line historically, but now more prevalent, is the issue of stock or stock options and warrants as payment for labor, goods or capital. As in the case of real estate, the investor has in mind two sources of profit, income stream and appreciation. If capital gains are taxed at a rate lower than income, then the effective interest rate for the investor in preference of long term investment for capital appreciation against investment for income is proportional to the remainders. Income tax rate 32% leaves 68% of income. Capital gains tax of 15% leaves 85% of gain. Thus time preference is distorted to lower the effective interest rate for discounting stock relative to CDs (though not against long term bonds that allow capital gains). Thus a 6% interest rate on income is equivalent to 0.68/0.85 X 6% = 4.8%.The time horizon for investors in large cap stocks is about 10 years (calculated from a Merrill Lynch study indicating 7 years in high inflation to 13 at low inflation). If a company's earnings are expected to grow at a rate, G, of 25%, then the discount rate on the future income stream from the company can be calculated as 4.8% - 25% = -20% (rounded to whole number).The discount formula then gives the present value of the income expected as [(1-20%)^10 -1] / [(-20%) X (1-20%)^10] = 42. This would be the P/E expected. If the expectations are spread in a range of 30% to 20%, then the top estimate would make for a 67 P/E while the lower one would be 27. Since the people expecting the lower rate would be out of the market, the price would be skewed towards the upper range and above the mean, at say halfway or P/E 57. The earnings are viewed as those expected for the next annual report.This model explodes above 30% growth rates giving incredible numbers such as P/E 120 at 35% growth rate, 240 at 40% etc.. A secondary model is used for high growth companies. The time n years ahead, in which the industry reaches steady growth is estimated, often 3 to 5 years ahead. The income expected at that projected time of steady growth, En, is projected, usually as a multiple of projected margin, market share, and industry revenue at the projected time. This is a very rough calculation and requires an extra margin of error. If an industry is expected to grow to 100 $B in 4 years, and to be dominated by 4 companies in roughly equal chunks accounting for 50% of the market (thus a 12.5% market share), and growth type margins are expected (20%-30% in software and media, 10-15% in retailing, for example) and the point of steady growth is 25% then E4 = 100 $B X 25% X 12.5% / number of shares (say 100 M) = $31 per share, and will be valued by the guidelines above at the current interest rate, giving a P/E in the 50 to 60 range, thus providing a value at year 4 of P4 = $1550 to $1860, say $1700, which is discounted at the interest rate and the "uncertainty margin" of 5 to 15% annually above the interest rate. Thus at the current rate and a 15% uncertainty discount, one has a discount rate of 20% and present value of $1700 / (1 + 20%)^4 = $820. Since analyst estimates are considered very rough for high growth companies and industries, investors tend to allow for a 50% discount before putting in fresh money. Thus a $400 price would be expected. Note, however, that current expectations of revenue and earnings for the next year have no bearing on this pricing model. Another point is the analyst error. Average analyst error in high growth industries is 50% for the next year estimates (2 years ahead of previous annual report). For our example, this comes to two 50% discounts on the 4 year estimate - to 1/4. So the "smart money" would take the estimated value and pay 1/4 of that sum, or $205 at most. M&A, mergers and acquisitions: The effect of purchasing cash flow for a company expected to grow 20% through acquisitions only and valued at P/E 30, makes it profitable to buy cash flow at anything significantly below that P/E, so that cost cuts of $1 from mergers and acquisitions turn into $30 in valuation for the next year. This makes it attractive to buy any operation that has cost cutting potential of more than 20% of earnings net of M&A costs. The purchase target with 6% margins will have to provide a cost reduction of 1.5% of revenue to provide the growth necessary, not that hard when sales force is reduced, administration eliminated and R&D closed down. The M&A also provides a tax benefit over the years as the cost of the merger is deducted from IRS reported income, but taken off as a one time charge on current reports, and does not affect cash flows. An example: a 1 $B sales company with 10% margins, at P/E 30 (therefore market cap 3 $B) buys 4 companies with 0.25 $B revenues and 5% margins through an all stock deal valuing earnings at the same level and therefore valuing revenue at 1/2 (lower margins of purchase targets). Company increases stock outstanding by 50%, the company has created 100% growth in revenue, and a 30% growth in revenue per share, or pro-forma revenue growth. Without cost cuts this is not going to provide the desired earnings growth. An acquisition within the same industry would normally allow margins to converge at the same level within some 2 years. Thus earnings will grow to the same portion of revenue as the larger company prior to acquisition, and pro-forma earnings will grow by 33% (1 $B X 5% + 1 $B X 10% to 2 $B X 10% over 50% more shares or from a pro-forma 150 $M to 200 $M) over 2 years. Closure of overlapping operations would improve margins further - to say 11-12% (bringing the company to $220-$240 earnings within 2 years and growth to 50%-over 2 years, meeting 20% earnings growth target and adding to market cap 50%) on an acquisition doubling revenue. Successful acquisitions should then be expected to perform this way. If the target's earnings or cash flow sold at a discount to the purchaser's earnings, there would be even more of a gain. In mature growth industries, small companies often trade at 50% earnings and 50%-75% revenue discounts to the larger ones and are easily absorbed with at least minimal increases in margins. By purchasing small companies for stock, the expensive acquisitive company can increase earnings by simply buying cheaper companies. Privately held companies are often sold at 50% discounts to their public company counterparts. The IRS allows tax deductions on cash and stock purchases to be made over the foregoing years, thus adding to future cash flow while income may still match growth expectations despite the charge against earnings. Pooling of interest accounting allows the corporation to avoid charges to earnings, but eliminates the tax deduction.The main point here, is that the market allows companies to raise their earnings to expectations by issue of new stock. Thus earnings become a product of stock price relative to earnings. A self reinforcing structure. The corporation with the highest P/E will win the day as each bit of cash flow it buys will be valued more highly as part of the new company than as part of the smaller. In the true spirit of perversion implied in self fulfilling prophecies, the market's expectations of growth produce the growth. Microsoft, which bought 38 smaller companies and took a chunk of ATT over the last year or so, is a case in point. Trading at 23 times sales, anything remotely needed in the future can be purchased for stock. When does such a system crack? When the buyers can no longer gauge what they are buying because of the great size of the company, which to maintain the growth track record must make ever larger purchases at an ever growing $ rate. The first major acquisition to blow up in their face (for example Cendant - the failed merger of CUC and the HFS due to the latter's fraudulent books), will end this for a corporation. A stock sell-off can also cause the same kind of problem. On the trading front, an SP500 company and particularly a Nasdaq 100 and SP100 company can have the automatic investor pay for the mergers and acquisitions strategies as the indexed funds must purchase stock in proportion to the increase in market cap caused by the issue of new stock in an acquisition or merger. This induces a price rise in the stock, which raises the premium on the next cycle of acquisition when the company is valued significantly more highly than its small rivals.Employee and management stock option programs: Replacement of wage pay with stock options allows companies to avoid expenses directly tied to wages (about 28%), as well as the wages themselves. In addition, the company receives cash from its own employees upon option exercise and a tax write-off of (usually) 35% of option compensation. The options issued are not reported as expense at any point in the earnings reports. This practice translates stock price gains into wage cost savings, social insurance cost savings, and tax expense savings. In the broadest sense, the company gets 100% + 28% + 35% = 163% of the exercise profit on the stock options issued written straight into their bottom line. It allows the favored companies to leverage their stock valuation into earnings. If a company has a valuation of say P/E 50 and issued 10% of its current stock outstanding in options, a $1 rise in the stock price will turn into 163% X 10% X $1 = $0.163 in earnings per share, Since the company is valued at a P/E of 50, this will cause the market to raise the stock price after the next reporting cycle (1 year) by up to 50 X $0.163 = $8.15, and at least by 35% X $1 X 10% X 50 = $1.75 just due to tax savings component (though only 20% will be typically cashed in in the current year). Only companies with P/E below 29 can't rely on the obvious portion of the trick. Companies with employees completely disbelieving in their company's future will perceive no benefit in issue of these stock options, since the employees would not consider them valuable, and would not consider them as part of their wage. Thus the wage and wage cost savings would be 0. Usually, the employees will expect the company, and therefore its stock, to appreciate in the same way it did in near memory, and through their work-life. If the company stock rose by 50% per year for a few years, then most employees would consider the options as close to assured to increase in value. Thinking themselves conservative, taking the expected rate of increase as 25% rather than 50%, the leverage the company will obtain in saved wages, would be 50% of potential, and would be per $1 stock rise the previous year, 1/2 X $1 X 128% X 10% = $0.064 per share, And the tax benefit on the 20% of outstanding options excercised would add 20% X 10% X 35% X $1 = $0.007 the current year, putting the price rise benefit for the next year at $0.071 which at P/E 50 that is still $3.5 price rise solely because of a $1 price rise the year before. This is the "Holy Grail" of bubbles. Where a rise in price is nearly guaranteed to cause a further rise in price. As long as the stock moves, the employees will not press for higher wages, and the company can maintain earnings growth rates far in excess of their revenue growth rate. Microsoft grew earnings by 70% on a 30% rise in revenue. The Options held by employees saw them making a $30 per option profit on some 800 Mil options in 1998. Or a 24 $B profit (44 $B since 96 through 98's last option exercise), of which 9 $B was realized this year. 1998's stock induced employee profits was far greater than the company revenue or their cash pay. Therefore, the employees would take 12 $B (50% of last year's profits) into consideration as guideline for what the wage equivalent would be. Microsoft also saw a 3.1 $B tax deduction from exercised options, putting the probable actual benefit of this $30 price rise last year at 15 $B or better for this year, paying for all R&D activities, sales and marketing, software manufacturing, etc.. Yet the company had only $20 billion in revenues in the 1999 fiscal year. How badly it must be run. How it must be under-pricing its bloatware products in the marketplace if its profits are completely synthetic. Without the tax benefit of the employee stock option exercise, the company would be losing money hand over fist. If it had to pay even 1/2 of the employee stock option profits out of its revenue stream it would be losing 50 cents on each dollar of revenue. Here we have the predecessor of Amazon, a money losing operation masquerading as the pillar of the new economy using our pension and equity investments to fund the production of "everything for everyone" software that is sold below development costs. The markets value Microsoft's employees at a cool $32 million per head. The average per employee of options profits were $800,000, $300,000 were realized on average. Surely Microsoft's employees do not think themselves worth $300,000 per year in options + $220,000 in cash pay. If they are, then a stock market downturn will decimate the company's income statement. Because of their heavy use of put options selling, the company balance sheet would be damaged in a market panic as well. Like a shark, Microsoft shares must keep moving, or their earnings would disappear, and so would their price, their employee and management compensation, and the economies that grew around the company operations.The company stock options compensation constitutes an obligation by the stockholders through their company ownership to buy enough shares to prevent the options income from disappearing. It is a symptom of of a bubble and a major mechanism of it. The automatic "dumb investment" through index funds and derivatives lays before us a horrible specter of loss begetting loss.Momentum investing and bubbles. Momentum investing is the strategy of investing in instruments with a recent history of high price appreciation (or depreciation). The availability and utilization of feed forward mechanisms is the key to bubbles. It is their defining characteristic. Momentum investing is the most appropriate investment methodology for bubble markets, and it is thoroughly justified as long as market sentiment can be maintained. The most important aspect of this strategy is the exit. Once a stock is damaged severely, there is nearly no way to recover. The price decline is immediately transferred into the next year's income statement and employees start costing more as pay by options is replaced in part by cash wages. Employees with the best skills, particularly in sales, marketing, management and R&D leave for greener pastures. The future of the company is put in jeopardy and the stock is decimated on a regular basis. The basis of exit strategies can be anything, but a point calculated to fit the option compensation model may be the most critical. Once a stock falls below that point, options can no longer provide incentives for employees, and earnings suffer badly, simply as a result of a stock price decline. Commodities. Commodity bubbles today are downward spiraling processes. Because of a heavily erroneous application of the Black Scholes model to commodity markets that are limited by the supply of commodity and by the differential in interest rates between investment cost in production and financial speculation. The producer must pay a 3-5% higher interest rate than the financial speculator on the futures market looses by foregoing a money market interest rate. Through the Black Scholes pricing model, the commodity is considered not to bear interest while the alternatives to the direct purchase and storage of the commodity are considered to bear interest. Namely, a contract for future supply and settlement upon delivery, has a particular value, which allows for the interest income obtainable on funds allocated for the purchase of the commodity. Thus for a time T years ahead, at the obtainable interest rate I, the commodity contract (AKA "bird in bush") should trade at a fractional premium of P(T) = [(1 + I)^T - 1] to the commodity price for immediate delivery. Since the model is believed to be correct, this induces the buyer to commit the producer to a price by this fractional payment, and hold the funds in investments. Therefore, producers will sell forward their future production at the set price, taking upon themselves supply disruption and cost hike risks. This way, production of significantly more than one year is sold every year. Industries that consume the product, avoid the costs, and benefits of inventory, and this removes demand from the spot market. Because of the structure of this market, there is a tendency for paper supply to overwhelm real supply. The operations of all but the strongest (debt free) commodity producers are repeatedly bankrupted, and suffer from extremely low margins. Supply shocks because of operation disruptions - particularly plant closings and bankruptcies as well as industry labor turmoil repeatedly cause short term commodity price spikes, that are quickly sold into by producers and financial markets to obtain the time premiums, once arbitrageurs "fix" the futures market price to the Black Scholes prediction (which is incorrect). Once the consuming industry has prevailing inventory carrying practices of nearly one delivery interval and producers have shuttered production, ceased maintenance of ongoing operations, lost large portions of their labor forces and sold forward the majority of next year or two's production (illegal on the public US exchanges, but possible on international OTC markets), the ground is set Gandalf the White (11/15/99; 22:25:13MDT - Msg ID:19167) A hard day fighting with Orcs in the field ! Scrappy, Is that a GOLDEN cake ?Everyone must be very busy getting ready for The Scot's B-Day ! -- Here's a early HAPPY B-Day to ya ! -- GREAT to see all the new posters coming out of the shadows and joining in at the TableRound ! -- Must run now, but I never miss a day's postings. -- Thanks all.<;-) The Victorian (11/15/99; 22:24:53MDT - Msg ID:19166) Interesting, but not a likely solution. Sounds like a mess to me! http://www.africanews.org/business/stories/19991112_feat5.html Business and FinanceElectric Currency Could Trash Cash The Mail & Guardian (Johannesburg) November 12, 1999 By Charlotte Denny Johannesburg - He is the darling of Wall Street, credited with engineering America's longest post-war economic expansion. But the man who holds the future of the world economy in his hands, Alan Greenspan, the head of the United States Federal Reserve, is under threat.New technology has already changed the face of high-street banking: branches have closed as customers have moved to telephone banking services and now the Internet. The next Internet revolution will put central bankers like Greenspan and Britain's Eddie George out of business.Once money moves online, it moves out of the control of central banks, crippling their ability to run the economy. Greenspan and George will no longer be able to conquer inflation by putting up interest rates because holders of virtual money will be unaffected by changes in the cost of borrowing in the real economy.George's deputy, Mervyn King, has already seen the future. At a gathering of the world's top central bankers in Wyoming this August, he warned that once they lost their monopoly over printing money, "the successors to Bill Gates would have put the successors to Alan Greenspan out of business".Online, the revolution has already started. Cyber loyalty schemes like Beenz, ipoints and Flooz pay customers who visit Internet sites in credits which can be spent online. One Canadian site offers everything from propane stoves to copper pans to collectors of its reward points.The British founder of Beenz.com, Charles Cohen, admits his brainchild isn't really money yet.But he foresees a world in which private electronic money becomes more popular than official money issued by central banks. "It will be less than a decade before private companies start issuing their own currencies," says Cohen. "I wouldn't want to be working for the inland revenue when it happens."The real revolution will occur, says King, when companies no longer need to use the banking system to settle their bills with each other. At the moment, when firms make big financial transactions, they settle them through the banking system. Because central banks set the rules for high-street banks, Greenspan and George have leverage over the whole system.When inflation threatens, central bankers raise the interest rates on loans to high street banks, which pass on the increased costs to their customers. This has a knock- on effect throughout the rest of the economy, even though the reserves held with central banks are a very small part of the total money supply.But when companies can settle their bills with each other electronically, without needing to use the banking system, then central banks no longer control the levers of the economy. Once there is no need to use the conventional banking system, there is no need to use national currencies either.Imagine a world where Microsoft has its own currency - called Bills perhaps - backed by the wealth of the company. Companies trading with Microsoft could decide whether to invoice in Bills or dollars. Individuals might prefer to be paid in Bills if they think that Microsoft money will be less inflation-prone than the pound or the dollar. Using existing smart card technology, Bills could be downloaded into electronic wallets, which would allow them to be used in the real economy instead of cash or cheques.For the libertarian right, such private money is a long-held dream."Money does not have to be created legal tender by governments. Like law, language and morals, it can emerge spontaneously. Such private money has often been preferred to government money, but government has usually soon suppressed it," wrote Frederich Hayek, 50 years ago.Legal tender - government control over printing money - is a fairly recent development in most countries. In the US, private banks issued money until the creation of the Federal Reserve in 1913. The Bank of England has held a monopoly over printing notes and coins since 1921, but the government did not control the money supply until Thread- needle Street was nationalised by the post-war Labour government."Ultimately, the competition for the standard of value should be no different to the competitive market of multiple providers we see for toothpaste or for shoes," writes Jon W Mantonis, author of Digital Cash And Monetary Freedom.The Internet offers the chance for individuals to escape from the government's monopoly. Developers of e-cash can issue it easily to a wide number of people, and, as e-commerce grows, the spread of the digital currencies will be guaranteed.The real revolution will come when a big firm with global brand recognition decides to establish a currency. A firm like American Express which already has a money substitute - traveller's cheques - would be a natural starting point, according to Mantonis.Amexes could even come to replace existing currencies in countries prone to hyperinflation. This is not as far-fetched as it sounds. Several Latin American countries are considering abandoning their own inflation-ridden currencies for the comparative stability of the dollar. Only the colonialist overtones of adopting the greenback as their currency are holding back countries like Argentina. There would be no such hangups about adopting a credible private currency.The chief danger of private currencies will be that companies can go bankrupt; governments rarely do.Tim Congdon, chief economist at Lombard Street, says he finds the theory that national currencies are in danger of extinction rather implausible. "There is effectively a government guarantee on deposits with a central bank. If you leave your spare cash with a big company you don't have that guarantee," he says.But the prospects for Greenspan and George look a little uncertain. As King told his colleagues in Wyoming, central banks may be at the peak of their power. "Societies have managed without central banks in the past. They may well do so in the future." --------------------------------------------------------------------------------Copyright (c) 1999 Mail and Guardian. Distributed via Africa News Online (www.africanews.org). For information about the content or for permission to redistribute, publish or use for broadcast, contact the publisher. Send your thoughts to readers@africanews.org for our Readers' Forum. If you are commenting on a story, please indicate the article name and date. Scrappy (11/15/99; 21:35:05MDT - Msg ID:19165) Cavan Man, from a bigger simpleton than you, do you suppose that all the powers that be might be wishing to call an end to this war before it really gets going? Being that the fall of the U.S. would hurt everybody, (would it?} Might they be working out an agreement that will keep the pog down, while the price of oil skyrockets, use y2k as reason for the bubble pop, then allow gold to be traded for oil, thus become the new money, (to a degree) Marius (11/15/99; 21:34:05MDT - Msg ID:19164) YGM (re: message 19113) I'm not familiar with the person or broadcast to which your post referred, but it's not a new argument. Check out www.ischiff.com if you're interested in an old foe of the IRS: Irwin Schiff. A former Libertarian presidential hopeful, Schiff travels around the country giving seminars on how to be free of the income tax, sells material via his Web site, and is an entertaining guest on radio talk shows.I'm sad to say my (insert your favorite naughty euphemism) aren't nearly big enough to test his theory in the real world, where judges ignore the Constitution and make their own law. He makes an impassioned argument, though, and his site is interesting. TownCrier (11/15/99; 21:33:16MDT - Msg ID:19163) After the Close: the GOLDEN VIEW from The Tower No matter where you look...stocks, bonds, currencies...everywhere they're saying two things with almost equal zeal.First, that the market (it matters not which one, for this apparently applies to them all) was paralyzed today in advance of tomorrow's meeting of the Federal Reserve's Open Market Committee (FOMC) to decide on interest rate policy. At stake is the cost at which banks may borrow money from each other (as steered by the FOMC's target Fed Funds rate--currently 5.25%) which they promptly pass along to their own borrowing customers.Second, that regardless of the Fed's decision, the markets will likely rally on the news. One economist quoted by TheStreet.com said, "Whatever happens tomorrow, it's probably a win-win for the stock market." They further quote Randy Billhardt, co-head of block trading at PaineWebber, who said of tomorrow's meeting "People have shrugged it off. The thinking is even if the Fed does raise 25 basis points it will be the last time before the end of the year. Even if they do [tighten], it's still a low-inflation, high-growth environment." Besides, The Tower casually adds, when a company can raise money through their own issue of corporate bonds or new issue of stock, why should the Fed be seen as raining on the parade, right?? The Treasuries markets echoed this care-free attitude toward the imminent Fed decision. Analysts are evenly divided on the prospects of the Fed holding rates steady versus hiking rates by 1/4 percent, but traders say the bond market may rally regardless. "The whole idea of the rally is just the idea of relief. The markets will probably think the Fed is done for a long time and that in itself is enough to start a rally." That from Ian Morris, an economist at HSBC Securities. Bridge News indicates that Morris also sees both stocks and bonds rallying even if the Fed leaves rates unchanged (that ol' "win-win" situation the economist mentioned earlier.) He says, "I think the market will see that if the Fed doesn't raise rates, there was no reason to raise rates and that's a reason to celebrate."Market analysts are largely of the shared opinion that only the highly unexpected decision to raise rates by 50-basis points, or a 25-basis point rate hike that is accompanied by the Fed maintaining the tightening bias could really rattle the markets. So in the final analysis, if the consensus is that the markets will rally tomorrow no matter what, why didn't everyone read the road ahead and jump the gun will a rally today? Could it be that the last person with cash available to dump into the market has already done just that? If that is the case, there is only one direction from the peak of the mountain...DOWNYes, that was what we got a glimpse of today, but you had to look really, really close. A casual glance across the board revealed that everything finished nearly even in these various markets which were, as we first indicated, apparently paralyzed (by the impending rally tomorrow??) as the various traders told their various reporters.The Dow finished at 10760.75, losing 8.57 (-0.08%), while the Nasdaq composite gave back its 15-point pioneering effort into new record territory to settle for a loss of 1.61 (-0.05%) at 3219.54 points. NYSE advancers led decliners by 1,623 to 1,397 stocks, new 52-week lows besting new highs 100 to 82. Nasdaq gainers led losers by 2,298 to 1,788, new 52-week highs had the upper hand 206 to 76. The 30-Yr Bond changed by only 1/32 in price, the effective yield now at 6.029%.Currency traders watched the dollar lose a little ground against the yen and the euro on lackluster flows that were described as "extremely subdued" with most traders content to stay on the sidelines today. It is the dollar, after all, and not the stock or bond markets directly, that the Fed is tweaking with its FOMC meetings. Ahead of this decision on monetary policy, the dollar stayed within the trading range established Friday. Once again, in a common theme, traders told Bridge News that regardless of the outcome, the dollar is not expected to overreact on the forex markets. Traders said the euro received some buying by Asian players and also from "large players" on Chicago's International Money Market. Also helping the euro where late-day comments by European Central Bank Vice President Christian Noyer reiterating that despite the euro's latest slide against the dollar, he saw that the euro had "strong potential for appreciation," though he wouldn't comment on a preferred exchange level. He did say, however, that "A strong euro is in the interest of Europe," and said that the ECB would strive for a strong euro and price stability.The euro climbed 0.15¢ against the dollar, closing at $1.033/€. The dollar lost 0.34 yen, closing at ¥104.83/$.GOLDAfter a prompt overseas recovery from the late book-squaring selloff on option expiry Friday, the gold price took another small dump at the start of NY trade today; yet spot gold gained 40¢ over last friday's NY close, last quoted at $291.00. On the small price fall at the COMEX open, Reuters reported a London dealer as saying, "There was a little bit of light fund selling on the opening. That's been about it." The December COMEX futures contract also gained 40¢ to finish in the upper half of its range at $292.50. Traders expect gold to trade in a narrow range until the next UK gold action slated for November 29. Leonard Kaplan, chief bullion dealer at LFG Bullion Services told Bridge News "It will stay quiet until then and even if the auction is not that positive, once it takes place it will be out of the way." In London, another trader said the market will be able to easily absorb the 25 tonnes of gold offered again by the Bank of England in their third auction. You'll recall that the first auction was five times oversubscribed and the second was eight time oversubscribed, the going price HIGHER than spot price at that time...September 21. Sentiment immediately turned positive following a new 20-year low reached in August, and was turbocharged a week later upon the Washington Agreement announcement of the 15 European central banks limiting future gold sales, and more notable, gold lending. Prices quoted for COMEX December gold reached a two-year high at $339 by October 5. For many hedging operations accustomed to years of predicably mild price movement, generally settling lower, this $80 surge in price spread havoc far and wide, and might explain the slackening of hedging activity during this typically brisk time of year for the most precious of metal. Many funds are reportedly now closing up shop after this hardest of lessons. Kaplan noted that for this time of year physical demand in gold is "less than anticipated." However, his outlook seems quite positive for the metal, "Investor demand is non-existent. They don't believe it's going to hold at current prices and they're wrong."The slow but steady gold exodus from Scotia Mocatta Eligible inventory continued yet another day. The number of ounces liberated from the watchful eye of COMEX was 3,101, leaving total eligible stock at 84,928 troy ounces, and Registered stock at 857,645 troy ounces.Both sides of the COMEX December futures apparently are eager to settle their positions against each other and leave the market before the next big surprise. Friday marked a huge fall in open interest for this contract, 18,659 positions in open interest being closed out on COMEX volume of only 23,621. Open interest for December futures stood at only 59,904 as the day began.South Africa's mining group Gold Fields is rapidly emerging as the miner's miner...the company with a heart of gold. After taking an active role in buying gold at the last UK auction, Bridge News reports that they partnered with the National Union of Mineworkers (NUM) today to launch a 10 million rand "social upliftment plan to benefit retrenched mineworkers." The Gold Fields Foundation was said to have contributed an additional 4 million rand to the development of NUM leadership in a 4-year program, and further, announced that it was unlikely to embark on more compulsory retrenchments in the near future. Chairman and CEO Chris Thompson cautioned that the gold mining industry was not yet out of "the woods" despite the recent rise in prices.OILNYMEX crude futures reached nearly three-year highs when an intraday gain of 54¢ brought the price to the highest seen in 34-months at $25.45 before setlling back to a more modest 22¢ gain to $25.13. December crude options contracts expire Tuesday, and NYMEX December crude futures contracts terminate Friday. Supporting the oil market is a growing consensus among OPEC and non-OPEC oil producers to extend oil supply cuts (limiting crude oil production and/or exports) beyond March. Kuwaiti Oil Minister Sheikh Saud Nasser al-Sabah said today that he will be meeting with his counterparts for Venezuela and Saudi Arabia (Ali Rodriguez & Ali Naimi) on Friday to discuss market developments. This so-called "informal tripartite discussion" follows hard on the heels of the Wednesday meeting in Riyadh that will also include Mexico's oil minister Luis Tellez. In a news conference reported by FWN, Sheikh Saud said "I am looking forward to meet with the...Saudi and Venezuelan oil ministers...and to review the content of the consultations in the Riyadh meeting." Of the proposed extension to production cuts, he said "The principle became accepted by all (producers), within and outside the organization (OPEC)....The remaining issue is the duration of the extension...and the (actual) decision which God willing will be determined in March," a ministerial meeting that will occur in Caracas.FWN also reported that Iraqi Oil Minister Amer Rashid also noted that "There is a general tendency among several OPEC members not only to adhere to the output cuts which had been agreed upon last March, but also to maintain reductions after next March to ensure rewarding prices for producers," adding, "It is possible to push up prices if the present cuts are adhered to." He noted further that oil prices now "represented only half of what they used to be 20 years ago." He said that his country "wanted to play a key and active role in the oil market at this stage, particularly after the plunge in prices in 1998." He said communications from Iraq recently sent to a number of OPEC leaders had the aim of "bolstering OPEC's unity and keeping it free from foreign domination," and that "Iraq will remain adamant in demanding that the new secretary general [for OPEC] comes from a state with an independent political will that refuses to succumb to pressures of powers which seek to marginalize OPEC's role on the world market." Meanwhile, Rashid said the Iraqi government would honor the crude contracts it signed for this 6th stage of the UN oil-for-food program which expires on Novemver 24. Will Iraq continue to make efforts at playing nicely with others? Our crystal ball clouds over, but OPEC (and non-OPEC entities) seem to have forged a more solid foundation of cooperation than we have seen for some time. The writing on the wall looks like this...oil is a unique and depleting asset, whereas dollars are unlimited and therefore of dubious merits in a world that offers alternate means of settlement. Use for oil settlement seems to be the primary distinction between the U.S. dollar and so many other currencies of similar origin and design. The future need not resemble the past, and it may be detrimental to your wealth to assume it will.And that's the view from here...after the close. Scrappy (11/15/99; 21:20:30MDT - Msg ID:19162) FOA, Cavan Man, forgive my eavesdropping, but I too, have been wondering. Especially since 'they' are so adept at keeping the POG down, (at least, on the surface}. While I can write that off as a false front while things are worked out behind the scenes, I wonder, why is gold not yet following oil? Scrappy (11/15/99; 21:16:16MDT - Msg ID:19161) Cavan Man Thank you. I am assuming the love of the Austrian coin is because the Philharmonic is beautiful, yes?As for the stigma of the SA coin, I understand. What is it called, when a chef imparts love for what he is doing into the food; thus resulting the difference between a meal, and a work of art? Thank you for the conclusion, for those of us who must tend towards the more practical, utilitarian side of things. Cavan Man (11/15/99; 21:08:21MDT - Msg ID:19160) DEAR FOA Sir-As you know, I follow your thoughts and the thoughts of your friend very closely here at this forum. I have stated here on many occasions my general agreement with the "THOUGHTS", simpleton though I am.I have been reading Another's THOUGHTS for the second time these last few days. Most of the posts were about two years ago more or less. Although I can see the road ahead you describe coming into focus, something(s) has/have happened to slow the progress and transition to the new market you project. What is it? There appeared to be a sense of urgency to Another's posts at that time. In hindsight, it seems to me that we were close to fulfilling his prophecy and then what?Timing of most events in life is impossible to predict and I grant you that. Although I would be interested in your continued thoughts on timing, I am content to, " lie in the weeds" for awhile. Timing to me is not so important at this juncture because I do not invest in gold in the traditional and classical sense. However, has the transition to a new gold market been slowed deliberately? Now, your thoughts predict $5K in five years. C'est la guerre eh? Why doesn't oil bid for gold?I hope you find this question intelligent enough to answer.Kind regards....CM Cavan Man (11/15/99; 20:56:15MDT - Msg ID:19159) CM 19158 Sorry. Should read; I AVOID coins of any countries.... Cavan Man (11/15/99; 20:54:43MDT - Msg ID:19158) Scrapmeister Bullion IS bullion unless it is confiscated. Then, it would be good fortune to have pre-'34's or, perhaps dual citizenship. A mix of both is prudent I think. I prefer the Austrian coin and so does our host. I coins of any countries that have a vested interest in a strong USD. The Krands are good value in bullion coins. I avoid them only because of the SA stigma which really is not logical. If you are not buying pre-'34 or true numismatic then, bullion IS bullion imho. Scrappy (11/15/99; 20:42:31MDT - Msg ID:19157) Canuck. The week they finally announced that yes, there was some minor inflation, I made a bitter comment to a customer at work about it. Someting like 'The price of food, gas, etc. has been going up for months, and they say there is no inflation'. The reply was a one of confusion, "Oh, but just yesterday they announced that there is inflation". How long have prices been steadily rising? How long did we go with 'no inflation'? Is it not there because it isn't announced? Do people have eyes and ears? Scrappy (11/15/99; 20:37:58MDT - Msg ID:19156) Okay, so it has been discussed. I just don't recall a 'conclusion' on this one. And I'm awfully close to buying just one more ounce, just one. :} I repeat, 'My queendom for a search engine in the archives!' :} Canuck (11/15/99; 20:36:21MDT - Msg ID:19155) Gasoline Stopped at gas station on the way home tonight. The price has risen from 63 cents per litre to 67 cents. That's what,5/5.5%; ya, there's no inflation.I heard a line about inflation about a month ago from an analyst critical of the recent trend, " ... inflation was released today at 0.5% and the core number (which excludes food and energy) was 0.2%. This is particularly handy if you don't eat or drive ...". Scrappy (11/15/99; 20:31:51MDT - Msg ID:19154) The Scot P.S. No, I haven't been on vacation, (food servers don't get those). Au contaire, I've been working whatever extra hours I can, hoping to get enough together to buy maybe one more ounce, just one. BTW, no one ever discussed the merits of Eagles vs. Mapleleafs, vs. Kruggerands for us newbies. I have a feeling pre-1933's are out of my league. Beside confiscation issues, which are the best? Will it make any difference when the price skyrockets? Would it be better to own U.S. Eagles or coin from another country? I know I've heard 'patriotism' premium, and numismatic premium. Are those the only differences? Is bullion is bullion is bullion? The Scot (11/15/99; 20:28:45MDT - Msg ID:19153) Thank you, thank you, thank you I feel better now. The Scot PH in LA (11/15/99; 20:26:15MDT - Msg ID:19152) ***WARNING*** OFF TOPIC POST (Mea culpa!) Even though the subject of Colloidal Silver has been declared off-topic I feel that I owe the forum an update to the post I made on Nov. 9 (Msg ID:18711) in which I brought up the possibility of Argyria. Since then I have corresponded with the makers of a Colloidal Silver cold remedy, Peaceful Mountain Sinus Spray, (http://www.klearsen.com) (which I have used to good effect--it really did prevent a cold from developing from a sore throat). Here is their answer:Dear PH in LAI'm glad that you have realized the benefit of our product. It is completely safe. There are a few issues regarding the publicity that silver has been getting."Silver was used medicinally for centuries, and remained on the market as a cure-all for infections right up until World War II. Since then, much safer drugs have become available,"The anti-infective drugs that this author is refering to are the anti-biotics and because of their over-use, we are now facing a very dilema due to anti-biotic resistance. "The most dramatic side effect of silver taken internally over long periods of time is a gradually appearing, bluish-grey discoloration of the skin that makes its victims look like the tin man from the Wizard of Oz."This is infact the ONLY side effect. There are no toxic side effects. The level of silver required to achieve this could only be reached by using the sinus spray every waking hour of your life for the next 140 years. Don't do that.Silver was used extensively in the 50's through the 70's as a silver salt. This was very ineffective and the doses given were HUNDREDS of times higher than what is used in our product. The medical community didn't realize that they were limiting the anti--microbial effectiveness of the silver by administering it in this way and so it fell from favor. But interestingly enough, even by overdosing their patients by 100x, they did not create a bunch of grey people.When one reads the papers on Argyria published by the medical community, it is quite clear that the silver colloids in the 20 ppm range such as ours are completely harmless and the levels that you would be acquiring are lessthan what you would receive through normal dietary intake.Each time you spray the product, you are receiving 2 millionths of a gram of silver. This is thousands of times lower than the levels of Zinc and Iron and other metals that they would have you ingest in your vitamins. Look at the Copper, Chromium, Molybdenum, Nickel, Tin, Manganese, Magnesium and such in your multivitiamins.The medical folks who are preaching this fear are simply un-informed of their own research. It's truly sad.Our product works where other silver colloids don't due to the fact that we have you spray it "right" where you need it to protect your nasal passages. If you were to take the same amount as drops in your mouth, they would do absolutely nothing to stop a cold.Keep enjoying the benefit of not getting sick. This product is completely safe.Steven R. FrankSRFrank@compuserve.com Canuck (11/15/99; 20:24:12MDT - Msg ID:19151) Scot Pre-birthday wish Hope the 20K rocks and rolls.T minus 47 days. Cavan Man (11/15/99; 20:12:33MDT - Msg ID:19150) The Scot Hello my friend; all hands are on deck. Scrappy (11/15/99; 20:08:11MDT - Msg ID:19149) Hi, Scot! Come the 29th, don't forget to eat cake! LOTS of cake, (Sacher Torte, preferably) :)I've been wondering about the others as well. Aristotle, Leigh, Canuck, Bonedaddy, Peter? Are you all okay? (Gandalf, please forgive me for mentioning cake...:}} I'm really glad to see all the new posters. Rock, and you, The Victorian, welcome. Just a thought from Scrappyland. (a dream, really)...What if the Chinese government is looking out for its' people by charging them a 20% tax on the interest of their savings? By simultaneously starting a free market in gold and silver, the citizenry who care about setting aside something, would have no choice but to buy gold and silver.Thus, the Chinese govmint has covered both bases. No offense to the U.S., as they are 'officially' planting a consumer-based economy, but, getting real money into the hands of the population, insuring against depression. The Scot (11/15/99; 19:23:38MDT - Msg ID:19148) Cavan Man Where is the old gang, Scrappy? Leigh? Bonedaddy? Canuck?Aristotle? Gandalf? Peter?Is everybody on vacation? Skip (11/15/99; 19:20:02MDT - Msg ID:19147) The Scot's birthday Your post inspired me to do something that I almost NEVER do...post two postings in a row!YES, it certainly would be a nice birthday present for you to share with this group for us to all witness another upward breakout of gold on your birthday!Also, to Rock, remain solid as a rock in your decision to hold onto gold during the times ahead.--Skip Skip (11/15/99; 19:15:53MDT - Msg ID:19146) Rock (Msg ID:19141) Thank you for your comments. I too heard Peter Daniels speak once, and agree that he is a profoundly interesting person. Don't take criticism too harshly, as many of us have been burned VERY badly in our gold (and gold stocks) purchases in recent years...and have gotten into quite a state of anxiety over some substantial losses based on current values. Thus, some are sensitive.You will notice, as you read this forum, that there are some posters whose messages are WELL worth reading (such as Towncrier, among others). Sometimes you'll read a post that doesn't seem to belong in this forum; just pass over it. Also, you'll notice that some of us (such as me) will only very rarely post...but that doesn't mean we don't read this forum almost daily.My time is VERY, VERY valuable to me; yet I feel that this forum is well worth my while, so I try to keep up on it almost daily. It's quite possible that others whose names appear here only once or twice a month might be like me.Again, welcome aboard!!! Sincerely,Skip The Scot (11/15/99; 19:09:42MDT - Msg ID:19145) November 29,1999 Just thought I would let everyone know my birthday will be on Nov. 29, the same day as the next BOE Gold sale. Wouldn't it be nice if the next sale was 16X oversubscribed instead of the last one which was 8X.Gold could get a new jump start toward $400.00 and then the unknown of Y2K might just give it the needed push where the manipulators can't control it anymore. What a wonderful birthday present that would be and I would love to share it with all on this forum.The Scot Cavan Man (11/15/99; 19:07:20MDT - Msg ID:19144) TEX 19137 The Kitco chart I see shows POG up .75. Cavan Man (11/15/99; 19:02:26MDT - Msg ID:19143) Rock 19141 Welcome Rock."Besides, as much as I want gold to break loose again, I'm in no rush because I have my stash and it's not going anywhere".Thank you for that pearl of wisdom! Did you check the gentlemen's credentials regarding his board membership?GOLDEN TRUTH: Take note and take heart sir. Hang in there! Red Hen (11/15/99; 18:51:46MDT - Msg ID:19142) Test Test Rock (11/15/99; 18:51:19MDT - Msg ID:19141) Another Prespective from a Nubie From Rock USA GOLD FORM DISUCSSIONHi everyone, I have been reading this forum for about six months now and I guess its time for me to put in my two cents worth. I don't think I can really enlighten any of you with my pearls of wisdom because your too busy enlightening me with your pearls of wisdom but I just wanted to tell you that I appreciate what I have learned here. Back in June of 1998 a gentleman named Peter J. Daniels visited the church I attend. Mr. Daniels who is a statesman that lives in Australia was the first one to inform me about the stock market crash. He said this crash would occur within the next ten years and that it would be the biggest crash in the history of the world. He is a millionaire by the way and he told us that gold would go up to $40,000 an ounce. He said that some of us who are well off today could be literally starving to death if we're not prepared.He visited four nights and then flew back to his home 10,000 miles away. He said he owed America his gratitude and thanks because when he was a kid it was America that liberated his country from the Japanese, so there he was giving us Americans his pearls of wisdom. Those four nights back in June of 1998 change my life.Mr. Daniels also stated that he sat on the board of directors of THE WORLD BANK not a world bank but THE world bank and that when the stock market crashes it would begin events that would put this country in the biggest depression that the world has ever seen. I must say it was quite a sobering meeting with Mr. Daniels. I didn't need to be convinced by any sales rep to buy gold and silver because once he spoke I was convinced. Then I discovered USA Gold some eight months later and what Mr. Daniels spoke about was confirmed by those that have contributed to this discussion forum. Now on a side note I've been following CNBC very closely for quite some time now and one thing that stands out in my mind about "Squak Box" is that they are nothing but a bunch of cheerleaders and liars for the stock market. They hand pick their CEO's for the most part and drill them on what CNBC's intentions are so that we can keep our hard earned money pouring in the market. When gold finally broke loose back in September CNBC finally had to squeeze in a few minutes on the subject of gold but it was short lived and with no enthusiasm. CNBC really makes me sick but then again I 'm sure most of you feel the same sentiment as I. Professional and amateur investors alike pummel a company's shares when it misses its quarterly earnings-per-share estimate by a penny, and that makes me sick too. It's a cruel market isn't it?I also noticed CNBC always says, a quarter of a percent rate hike has already been added in and then market skyrockets as if the market wanted a rate hike. I've never seen anything like it in my life.We'll have our day in the sun guys don't worry. Hang on to your gold and don't loose heart because they can't suppress the yellow metal forever and I believe our day is coming soon. Besides as much as I want gold to break loose again I'm in no rush because I have my stash and it's not going anywhere. Meanwhile I'll live my life and enjoy these days and when the #$#% hits the fan we'll be prepared. I sleep good at night knowing I did my homework and again I have to thank the Knights of the round table for keeping my hope alive. For a while there I thought I was all alone but now I know that there are many goldmisters out there just like me. I read a post the other day on this forum from someone saying to be more serious and quit with the medieval jargon. What's wrong with adding a little colorful flavor to the forum, I love it. If the person that wrote those negative comments about our forum don't like it then do us all a favor and LEAVE. After all, if you can't go along with the flow here then join a monastery or work for a nuclear facility so you can exercise your seriousness to the extreme, lol. Again thanks for all your expertise because coming to USA GOLD is one of the highlights of my day and that's the truth. Take care all you Knights and lovely ladies and do have a wonderful holiday season. Rock The Victorian (11/15/99; 18:33:18MDT - Msg ID:19140) Tex - Gold Chart I saw the pattern you refer to, then it was gone, replaced by something more typical. It must have been an OOPs. I don't have any weighty words of wisdom to offer in my first post, but I would like to thank the many forum regulars who have provided so much diverse information and nuggets of wisdom in recent weeks. There have been many posts that particularly grip me with a profound sense that "This is Truth." Many times the finer points are hard to grasp, the concepts are difficult, yet something "clicks" and I feel certain that the words I have read will be proven true. Perhaps you all feel that way at times. I have always enjoyed reading well-written science fiction, and I also enjoy reading works written during the Victorian era. In both cases, the world view and cultural influences are quite different from our own time, but I can feel at home in either of these "alternate realities." Similarly, I look at the world today, and I can imagine a time in which people will look back on this era and wonder how we could have been so blind and foolish. It will all seem to obvious, then. I think we sometimes need to practice putting ourselves in that other mindset. We need to spend a few moments in that place and time where we are no longer the minority, the "contrarians," but are part of the future generation that knows as fact what we only suspect today. JLV (11/15/99; 18:20:38MDT - Msg ID:19139) Tex It does that all the time.Just between you and me, I think Bart drinks a lot. Shhh. Keep it under your hat. goldnbones (11/15/99; 17:58:54MDT - Msg ID:19138) (No Subject) http://www.globeandmail.com/gam/ROBColumns/19991115/RCOOK.html I was trying to find an article on-line which I read today regarding Cambior and hedging. It explained rather well (for the most part) what Cambior had done. The particularly dangerous tactic was to write (sell?) naked call options on more ounces than it could produce! (I hope I got that right....it still does not make any sense to me how a gold producer could do that) Now if I was a shareholder I should think I would want the head of the CFO for that.Anyway I also found the following article, which can also be accessed from the link provided. The fears that haunt the FedPETER COOKMonday, November 15, 1999Former U.S. president Richard Nixon knew what he wanted from the Federal Reserve Board chairman of his day, Arthur Burns. "You see to it: no recession," he told him after a first chat in the Oval Office. Were Bill Clinton or Al Gore to do the same today, their admonition to Fed chairman Alan Greenspan would be: "You see to it, please Alan: no Wall Street crash."With one year to go before Mr. Clinton marches into history and Mr. Gore marches, he hopes, into the White House, the last thing that both men want is for the U.S. economy to turn from miracle to mush.A record economic expansion, the lowest unemployment in 20 years, impressive productivity gains, still-low inflation -- all have come about with Mr. Clinton, a Democrat, in the White House and Mr. Greenspan, a Republican, running monetary policy on Constitution Avenue.But now the going is getting trickier. For almost the first time, few on Wall Street are sure whether Mr. Greenspan's Fed will raise interest rates when it meets tomorrow. And when Wall Street is uncertain, it is a nervous place.Were Mr. Greenspan and his fellow governors to opt for a rise, then they would no doubt follow it with words of reassurance. Perhaps these would work. Perhaps they would not, producing a few bad days on Wall Street. But the overall consensus is that the U.S. economy can be slowed gradually, as the Fed intends, and there is no great risk of things getting out of hand -- that is, of an inflationary spiral or a recessionary one. Moreover, even if something did go wrong and confidence was undermined, the Fed has scope to cut rates and the President and Congress to cut taxes.So is it all plain sailing ahead? Unfortunately not.The first point to make is that the timing of a rise in interest rates, which so worries Wall Street, is incidental. Higher U.S. inflation from rising wage costs and increases in oil and other commodity prices is an absolute certainty. In addition, the economic rebound in the rest of the world is about to end one of the chief restraints on U.S. inflation: the existence of a strong U.S. dollar. So interest rates will have to rise to deal with inflation, and the impact this has on Wall Street will have to be lived with. The only questions to be answered are when and by how much.The other point to make is that, while the U.S. expansion has kept going on and on, its longevity has not been without cost.As always in long expansions, there has been a buildup in leverage and financial imbalances. This has been obscured because the surge in borrowing by households and corporations has been based on surging valuations on Wall Street so that it has not shown up in terms of standard balance sheet measures of leverage. Superficially, the U.S. economy is firing on all cylinders. But this conceals record levels of private-sector debt that are only okay provided Wall Street continues to turn in a stellar performance.Moreover, individuals and companies have not always borrowed wisely. Many consumers are having trouble servicing their debts even though interest rates are low (U.S. personal bankruptcies are at an all-time high). And many corporations have borrowed not to invest in new plant and equipment but to buy back their own shares.In a recent paper titled The Dark Side of the Brave New Business Cycle, economists William Dudley and Edward McKelvey of Goldman Sachs in New York say that the growth in the U.S. private-sector deficit is alarming. It suggests that, if the dollar weakens and foreign money inflows lessen, there will be a sharp reversal in both U.S. financial markets and U.S. domestic demand.With Wall Street flying so high, Americans save less than nothing; household debt is 102 per cent of personal disposable income. However, if stocks were to start to turn down, they would alter their behaviour rapidly. A Wall Street crash would then produce a slump in the economy. And it is not clear that the Fed could respond quickly enough to it.For example if, as a defensive reaction to a fall in stock prices that produced a sharp decline in their net worth, Americans sought to raise their saving rate to 5 per cent over the next two years, it would mean consumer spending would lag behind income growth by more than $200-billion (U.S.) each year, say Mr. Dudley and Mr. McKelvey. That suggests a very severe recession indeed.The problem for Mr. Greenspan is that, faced with these kinds of numbers, he has regularly put on kid gloves to deal with Wall Street. And the more often he puts on these gloves, the less seriously his warnings about overexuberance and equity risk premiums are taken. Financial imbalances have grown even as conditions for handling them have deteriorated. The Fed cannot be tough because that would create the Wall Street crash no one wants. But it is running out of time to be excessively gentle. TEX (11/15/99; 17:37:15MDT - Msg ID:19137) Kitco Chart or Dive Bomber ? Anyone looked at the Kitco 24 hour chart lately ? I've never seen it do that ! YGM (11/15/99; 17:11:21MDT - Msg ID:19136) Financial Times/ Orlin Grabbe Site Borrowed Time for Dow & NASDAQ Leveraged FinanceTiptoeing Through the TulipsThe US, with a negative savings rate, continues to borrow from the rest of the world to buy stocks.It was when day traders began buying tulip futures that the professionals started to get nervous. The arrival in the Dutch tulip market of small-time investors - weavers, spinners, grocers - drawn by news of the rising prices of tulip bulbs, marked the beginning of "tulipomania". From that point, in about 1634, it was only a matter of time before the inevitable crash.On the surface, the parallels with the US are a little too close for comfort. According to Edward Chancellor's history of financial speculation, Devil Take the Hindmost, the hallmarks of the Dutch economy of the 1630s were optimism about the trade outlook, a thriving stock market, rising house prices and a consumer boom.In the US, the last three factors are closely linked. Consumers are spending more because they feel wealthier as a result of gains in stocks and real estate.More Americans now own shares, either directly or indirectly, than ever before. According to a survey published last month by the Securities Industry Association and the Investment Company Institute, 49.2m US households - nearly half - own equities, either as individual stocks or through mutual funds.Separate figures from the Federal Reserve, collated by Credit Suisse First Boston, suggest that equities now make up a record proportion of ordinary Americans' total financial assets: more than 60 per cent. The value of households' direct stake in equities is approaching $7,000bn, well over three times the 1990 figure, and represents some 40 per cent of the market. A further 30 per cent is held by mutual funds and private pension funds.Not surprisingly, who US investors are and how they might react to a market correction are matters of concern at the highest level. The Fed used to get nuisance mail from retired savers when it cut interest rates, because a reduction hit interest income. Now when it meets to discuss the possible tightening of monetary policy, as it does this week, the central bankers must consider the reaction of a market propped up on millions of mutual fund savings programmes, pension plans and, yes, day trading accounts.Day traders are, happily, the least of the Fed's worries. Most US retail investors are comparatively unmoved by stock market turbulence, according to the SIA/ICI survey.The typical equity owner is a married 47-year-old with household income of $60,000 and assets of $85,000. True, if this model of calm and stability is using the internet to trade he or she is probably trading at high volume - but only 11 per cent of US investors were trading online when the survey was conducted in January and February this year.The average investor is more likely to seek professional investment advice, views shares as a long-term investment (96 per cent) and does not worry about short-term fluctuations (83 per cent). In 1998, a pretty scary year for all financial markets, nearly half of those investors who owned individual stocks neither bought nor sold. And at least three quarters of those who sold stocks or mutual funds reinvested all or part of the proceeds in the market.That seems to back up the theory that retail investors "buy on the dips" in the market and that it would take a large jolt to dislodge them altogether. A market crash would dispel the wealth effect, but US consumer confidence has proved resilient in the past. Christine Callies, CSFB's US market strategist, points out that even after the multiple shocks of the 1987 stock market crash, rises in interest rates and increases in capital gains tax, "it still took two years before retail activity collapsed".So, a sustained dose of disappointment about returns from the equity market may be the only development likely to dent American shareholders' stoicism. Many investors now appear to believe that recent past performance is a guide to future results. According to PaineWebber and Gallup's monthly investor optimism index, shareholders expect returns from the equity market in the coming year of 15.7 per cent and average annual returns over the next 10 years of 16 per cent. At those rates it would indeed appear foolish to switch out of shares and that message is being peddled to a growing number of Americans.The problem is that while investors in large US company stocks have seen a compound annual rate of return in the 1980s and 1990s of more than 17 per cent, only two other decades since the First World War (the 1920s and the 1950s) have registered double figures. Tulips, anyone? The Financial Times, November 15, 1999 TownCrier (11/15/99; 15:52:42MDT - Msg ID:19135) ECB's Noyer says recent rate hike counters risks http://biz.yahoo.com/rf/991115/78.html Christian Noyer, vice president of the European Central Bank reaffirmed today that the ECB is holding to a policy that euro will be allowed to seek its own level of use due to market forces while the ECB acts in a capacity to facilitate price stability.Speaking to the Chicago Mercantile Exchange, he said of the ECB's November 4 decision to raise three key interest rates by 50 basis points each, "The interest rate increases are expected to counter the upward trend in the balance of risks to price stability which had been observed since the beginning of the summer, thereby contributing to sustaining a path of noninflationary growth over the medium term."He also gave what amounted to an assurrance that monetary policy would not become a mechanism to promote the favored labor scenario of the day, saying "Only comprehensive structural reform can remove the underlying impediments to higher employment."Noyer further added that use of the euro as an international currency by both private and public entities is "likely to increase" particularly if the euro area can maintain solid macroeconmic performence...you know, trade surplus, etc. In regard to its international use, however, he stressed that they have adopted a neutral stance and would leave development of such a role to market forces.Basically, he's saying to the world, you have a clear alternative now, you can see what we stand for, and the choice is yours to make. YGM (11/15/99; 14:58:48MDT - Msg ID:19134) Pervasiveness of Goldman Sachs Financial Times- Companies News / TelecomsMannesmann takes Goldman to court By William Lewis in New York and John Mason and Clay Harris in LondonGoldman Sachs, the US investment bank, on Monday temporarily withdrew as adviser to Britain's Vodafone AirTouch after Mannesmann, the German telecommunications and engineering group, told a UK court it was concerned about the potential misuse of confidential information.The unprecedented legal action came as Vodafone was poised to launch an unsolicited takeover bid valuing Mannesmann at E100bn.In an emergency hearing at London's High Court, lawyers for Mannesmann argued that Goldman possessed confidential information about a number of businesses run by the German group. These included, but were not limited to, Orange, the UK mobile telecommunications group, recently bought by Mannesmann. Goldman advised Orange's main shareholder, Hutchison Whampoa.Mannesmann was granted an undertaking by Goldman to halt work for Vodafone until a full court hearing on Thursday.Goldman said afterwards: "Goldman Sachs believes it has acted entirely properly and has pressed for an early hearing so it can challenge this action vigorously. The firm has agreed not to advise Vodafone with respect to Mannesmann, pending Thursday's hearing."Mannesmann has rejected Vodafone's mooted all-share offer, worth about E203 a share, as "wholly inadequate". Vodafone is believed to be poised to proceed with a hostile bid, perhaps as early as Tuesday when it reports interim results.Vodafone-Mannesmann is the most serious of a recent series of cases in which Goldman has found itself in an uncomfortable situation because of potential conflicts of interest.Goldman, for example, was one of the banks that sold cheap, high-risk derivatives to Ashanti Goldfields which were intended to protect the Ghanaian gold mining company against falling gold prices. They had the opposite effect, precipitating a liquidity crunch, when the price turned up.The US investment bank then emerged as an adviser to Ashanti on a takeover approach from Lonmin, another mining group, a bid which was conditional on a standstill agreement being reached with the derivatives group. Goldman said arrangements had been made to avoid any appearance of conflict.Eyebrows had also been raised in Germany by the plan for Paul Achleitner, head of Goldman's Frankfurt operation, to remain in an as yet undefined advisory role even after he moves in January to become finance director of Allianz, the powerful German insurer. The Allianz link has also caused concern at Axa, its French arch rival and another Goldman client. TownCrier (11/15/99; 14:54:06MDT - Msg ID:19133) canyonman and ORO You can think of the various Series of the paper currency as various editions of a book. For example, a book may be in its First Edition, printed in 1966, and in its Second Edition printed in 1971. No correlation at all.With the paper notes, when the decision is made that the design is to be changed, that year becomes known as the Series of the notes, regardless of subsequent printing schedules. Now that SecTreas Rubin has become a ghost of a bygone era, expect to see Series 1999 notes making an appearance...that is if the Treasury's Bureau of Engraving and Printing dared to pause the presses long enough to retool.As it is, the new "counterfeit-proof design" notes are all part of the Series 1996 "Edition." And while the new $100 note WAS introduced in March 1996, the new $50 note wasn't introduced until October 1997, and the 1996 Series $20 note was finally introduced in September of 1998. Again, when it is altered to include new SecTreas Summers' signature facsimile, I believe the Series will then be changed...just as it was when new security threads were added, etc. 714 (11/15/99; 14:41:30MDT - Msg ID:19132) Canyonman re: FRN's Just checked a dozen or so brand new $20. All dated 1996. Hmmm.... ORO (11/15/99; 14:19:18MDT - Msg ID:19131) Canyonman - Totally new to me This observation is new to me, I don't know whether that is because of the dating procedure or because of actual issuance.Do you have any new 20s to chech the date? ORO (11/15/99; 14:08:21MDT - Msg ID:19130) TC - Market discount rate The normal thing is to expect the market to respond this way only when the expected rise on Fed day is 0.5% rather than the 0.25%. That is good chances of the Fed will retain a high bias if it raises rates 0.25%. It would be a result of a prominent forecaster's work or a rumor from a Fed leak. The recent CRB rally, and the oil rally are probably being interpreted as elements that may frighten the Fed into "extra" action. It could also be a result of liquidity needs being so much higher than what the Fed allows for, that the question in the banking system is not at what rate the Fed will set the window, but how much liquidity it would be willing to extend at the official rate. This has not hapenned since Volcker's shock treatment. WilloTheWarthog (11/15/99; 14:02:20MDT - Msg ID:19129) TownCrier:Sweden's Goeran Persson Sees Euro Membership Up until about a year ago, the mainstream press in the UK was still running articles on the possible future inclusion of the UK as new states in the US. I haven't seen this in a while, and the Politicos are now ramming EU membership down the voters' throats. My take--they know what's going to happen to the dollar, and want to disassociate from the US ASAP. canyonman (11/15/99; 14:01:23MDT - Msg ID:19128) Missing Money TC-OROInteresting read on the big repo.Has anyone noticed the lack of new currency in the U.S.The dates here are all 1996 or before. Where is the 97,98 or 99 bills.The new money that out is all dated 1996. Did the mints shut down.Ive even checked with some friends in asia and europe. There bills are 1996 and before.Does anyone here have any US currency dated past 1996.any thoughts WilloTheWarthog (11/15/99; 13:51:20MDT - Msg ID:19127) TownCrier Haven't got today's close, but the trend on the 1 yr spreads is still widening. In my simple mind, this is bullish for gold and bearish for the dollar.Date Dec99 Dec00 Int Rate 12-Nov $292.10 $304.00 4.07%8-Nov $291.10 $301.90 3.71%5-Nov $291.00 $301.60 3.64%20-Oct $307.30 $315.80 2.77%5-Oct $326.00 $332.00 1.84% TownCrier (11/15/99; 13:36:39MDT - Msg ID:19126) Chinese Save Less, as New Deposit Tax Bites in Govt Bid to Spur Spending http://quote.bloomberg.com/fgcgi.cgi?ptitle=U.S.%20Economy&s1=blk&tp=ad_topright_econ&T=markets_fgcgi_content99.ht&s2=blk&bt=blk&s=52845648a4438fd4e57a30e5a47ce536 Here's another one for the books...the Chinese government has adopted measures to discourage people from depositing money in banks. Benny Chiu, research manager at HongKong China Bank Services Ltd explains that as the government imposed a 20% tax on interest from bank savings this month, "Chinese are directing savings from banking deposits to other forms of savings such as investing in stock markets or buying insurance."The government is hoping to hereby boost consumption to stimulate the economy. Chiu says, "People have the right to choose their own consumption. If they don't want to consume, then so be it. The government's job is to focus on investment, and then as the economy attains high growth, people's income will grow and they will consume."It would seem that Adam Smith's "Invisible Hand" has been replaced by a legislative one with a firm grip on the individual's neck. However, should these people opt for gold as their replacement for bank savings in consequence, we might reevaluate that assessment, calling it instead the guiding hand of wise elder. The jury is out, and time will tell. You will recall, however, that China is also moving toward free markets in gold and silver... Netking (11/15/99; 13:19:33MDT - Msg ID:19125) Steve H & All http://www.decisionpoint.com/ChartSpotliteFiles/ChartSpot07.html Steve H (19106) Looks like we picked right re:London/NY POG adjustments today.All - An interest rate rise tomorrow? - If so what to effect on the DOW/S & P 500. "If" this cut is agressive & with Y2K right on us it could add a little bit more heat to the fire. TownCrier (11/15/99; 13:16:24MDT - Msg ID:19124) Crude Oil Rises to 34-Month High, Above $25, on Supply Cuts http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=57290f011a66bfc26aedc11fbfd45e57 Obeid bin Seif al-Nasseri, the United Arab Emirates' oil minister, said "There is wide support among OPEC members to extend the current output cuts. In March we will be able to take the appropriate decision." His comments join the growing ranks this month as oil ministers for Iran, Qatar, Venezuela, Kuwait and Algeria have all suggested that OPEC may extend production cuts beyond March.One oil trader said "As long as OPEC cuts back, oil isn't going to do anything but go up, and we're going to get socked with heating oil bills" as winter arrives to the Northern Hemisphere. TownCrier (11/15/99; 13:05:54MDT - Msg ID:19123) Sweden's Goeran Persson Sees Euro Membership; Exporters Cheer http://quote.bloomberg.com/pgcgi.cgi?T=markets_newsfeat99.ht=&ptitle=EMU%20Top%20Stories&touch=1&s=375c07e27d0bedb42182ecdb08f44f64 Sweden's Prime Minister Goeran Persson said of Sweden in regard to joining the euro: "We have only two options, 'Yes, we want to enter now,' or 'Yes, we want to enter later.'"A poll reveals that Swedes remain evenly divided, though exporters feel Sweden should have joined from the start. The country is well on its way to meeting the Maastricht criteria. TownCrier (11/15/99; 12:53:34MDT - Msg ID:19122) Hear ye! Hear ye! There are two new additions to The Gilded Opinion http://www.usagold.com/THEGILDEDOPINION.html Grab your torch and travel down the hallway (via the link above) to the Gilded Opinion Index where you will find descriptions (and links) to the archive of commentary from various experts on the many aspects of gold within the world financial system.Please visit the two new arrivals, or catch up on those you may have previously overlooked. Joining the collection of golden commentary are "Why the Gold Industry is Being Destroyed and What to Do About It" by the courtesy of Lawrence Parks/FAME, and "A Perilous Dollar Standard" by courtesy of Dr. Hans F. Sennholz. As always, we welcome your questions and discussions, and invite you to hurry back to the Forum with your own revelations and discoveries. TownCrier (11/15/99; 12:28:41MDT - Msg ID:19121) Sir ORO What's your take on Fed Funds trading at a 0.5% premium over the FOMC's target rate? The largest departure I recall ever noticing was in the ballpark 3/16 to 1/4 percent, tops. ORO (11/15/99; 11:57:20MDT - Msg ID:19120) TC - Big Repo I think that this indicates large scale withdrawals from the US banking system. With 0.87% required reserves, 7 $B add requirement is generated either by a cash withdrawal of 63 $M, or new lending of 750 $B, since this is highly unlikely, the source for need is probably with withdrawals. Requested reserves on new borrowing are generally around 1/10 of new lending, translating 7 $B into 70 $B of fresh lending versus 70 $M of withdrawals, as most banks maintain 10% "excess" capital (not cash reserves but debt assets) and 10% excess reserves (vault cash and deposits at the Fed). Viewed in light of practice rather than requirement, a heavy weekend shopping spree could have caused this both through cash withdrawals and through credit card financing. The recent drop in interest rates should give new mortgage sign-ups a big boost, also showing up soon. Gandalf the White (11/15/99; 11:17:18MDT - Msg ID:19119) Hail MK Perhaps you could ask "Mr. Insider" about the NY COMEX opening today where the 'shorts' dropped the GC9Z over $3 with a massive block of sales, after being able to reach over $293 overnight! Question I have is, "Was GC leading the DUMP ?"<;-) TownCrier (11/15/99; 10:26:18MDT - Msg ID:19118) Fed adds $6.990 billion via overnight system repos http://biz.yahoo.com/rf/991115/ta.html Despite the Federal Reserve's larger-than-expected add on Friday, analysts saw a "moderate" add need remaining, and thought it was likely the Fed would add reserves to the banking system today through overnight system repurchase agreements...expecting $2 billion to $2-1/2 billion.This will make your eyes pop and your head spin...in early dealings, Federal Funds (the rate at which banks lend money amongst themselves) were trading at an astounding 5-3/4 percent, well-above the Fed's target for the rate at 5-1/4%. Either banks are anticipating a rate hike tomorrow, or else excess reserves are scarce and therefore funds are being dearly lent at a premium.Any thoughts, ORO, or others? SteveH (11/15/99; 09:58:16MDT - Msg ID:19117) 714 C-span. I read it did go down as planned but without C-span who allegedly was bought off. The poster said video tapes would be made available. 714 (11/15/99; 09:36:07MDT - Msg ID:19116) YGM re: C-Span 2 That show did not run on Saturday as stated around the internet. Some posters at Kitco made some follow-up statements that indicate the event did take place. But I have not been able to verify this. redhen (11/15/99; 09:32:17MDT - Msg ID:19115) test test 714 (11/15/99; 09:30:53MDT - Msg ID:19114) Stratfor.com SteveH, I too found Stratfor's IMF/economic analysis intriguing, but they seem to have bought into the "new paradigm" school of economics. They are correct: Camdessus failed to recognize the forces driving economic development. But (and that's one big BUT), Stratfor has bought the idea that the virtual economy of computer models and derivatives and intellectual property (NOT production!) has supplanted the real, old-fashioned economy of physical production. Without the glut of commodities, and manufactured goods for that matter, the virtual economy would come to a standstill (and will!). "Production has shifted in a way that is almost metaphysical. The hardware that runs a web server is much less valuable than the immaterial intellectual property that resides on the server. The decoupling of value from physical production, its shift to intellectual production, is a millennial shift whose full meaning will not unfold for many generations."This statement, from Stratfor's email alert, almost perfectly reflects the "new paradigm" economics. It is based on leverage, usury, and monopoly. Production has become metaphysical to a large extent. Yet it is based on the very physical production that it discounts. It is contracts, notes, derivatives, and statements that are manipulated to enhance or discount value, but which are but a chimera.I am left with the question, to paraphrase their email, what crisis will originate from an ideology of "intellectual production" that has led to an avalanche of investment decisions based on this new paradigm?God only knows... YGM (11/15/99; 09:21:51MDT - Msg ID:19113) JCS Rec'd this email This AM from a friend---C-Span-2 on Saturday Nov. 13th at 10am EST. There is a live broadcast fromthe National Press conference Club in DC and it will absolutely drop yourjaw! There will be lawyers, judges, Former criminal investigators from theIRS, FormerInternal Revenue officers, educators, professors etc. They will be unveilingabsolute conclusive PROOF that there is no law requiring ANY American tofile a 1040 federal income tax statement! It is handled from a position ofextensive research and certified government documents to back all claimsmade. A current Presidential candidate has offered a 7-figure bribe to stopthis info from reaching your ears!****** I saw a link to this the other day and the sender of this email and myself were wondering if the show ran??...YGM USAGOLD (11/15/99; 09:13:46MDT - Msg ID:19112) Today's Market Report in Full Server back on line....The Rest of the Gold Story for 11/15/99:MARKET REPORT(11/14/99): Gold was sideways this morning in early New York trade after a fairly active, up day overseas. Hong Kong reported short covering and London was quiet......The next Bank of England auction is scheduled for 11/29/99 -- 25 tons will be put on the block.......Keeping up with the ever-interesting Ashanti situation Bridge News reports: "The former mines minister of Ghana, Fred Ohene-Kena,has challenged President Jerry Rawlings and his advisers to an open forum to determine whether he is guilty of any wrong-doing relating to Ashanti Goldfields Company. The challenge by Ohene-Kena, an Ashanti board member, who was dismissed recently during Ashanti's financial problems with its hedging counterparties, follows scathing accusations made by President Rawlings earlier this week at a banquet he hosted for the British monarch.".......The Bridge report does not detail those scathing remarks........Stickling with Africa, Zimbabwe has pledged a "major part" of its national gold reserves as collateral for a loan from a Germany's BHF Bank...............The sun never sets on the gold market and the London Bullion Market Association is going to make sure of that when Y2K hits in another 47 days. The organization's quarterly, "Alchemist", instructs its members that "The office of LBMA will be used as a contingency meeting site in the event one or more members are unable to enter their own offices or communicate with other clearing members due to telephone line problems. The Bank of England has agreed to provide a secondary contingency site. It is anticipated that each Clearing Member will likewise offer contingency space to any other Clearing Member(s) in the event of difficulties to the extent that is practicable." And..."Each Clearing Member will lodge client statements, balance sheets and physical stock records in sealed confidential envelopes, together with a contact list detailing phone numbers of key bullion clearing staff with the Bank of England and the LBMA Executive, at the close of business 29th December, 1999."..... Now then, don't you feel better already?.........In the same publication Martin Murenbeeld says that "There is a second, political argument in favour of gold for these central banks. Trade fictions, indeed future economic wars, will be fought between dominant economic powers, so a dominant central bank may decide to hold more gold in its reserves and less of the other dominant currencies. Gold, after all, is not another dominant central bank's liability. It is this argument, I believe, which underlies a US reluctance to even consider selling gold.".....If Mr. Murenbeeld is correct, this will have enourmous positive implications for gold ownership in the long run...............That's it for today, fellow goldmeisters. See you back here tomorrow. JCS (11/15/99; 09:03:26MDT - Msg ID:19111) YGM (11/15/99; 08:42:04MDT - Msg ID:19109) Regarding the IRS, it would be a fitting end to an illegal organization. This is a segment of an article sent to me which outlines the circumstances surrounding the Federal Reserve Act and the 16th Ammendment which set up the IRS. I can only accept in faith that the information is correct, but post it here for anyone interested in reading. I could post the entire article if readers want me to."Article 1, Section 8, Clause 5 says that only Congress has the power to..."coin money, regulate the value thereof...and fix the standard of weights and measures.' Article 1, section 10, Clause 1 says that No State shall...make anything but gold and silver coin a legal tender in payment of debts..." The Federal Reserve operates in violation of the Constitution. Since Col. House helped establish the Federal Reserve Act, and believed in socialism, is the central bank concept Marxist? Plank 5 of Karl Marx's Communist Manifesto reads: "Centralization of credit in the hands of the State, by means of a national bank with State capital, and anexclusive monopoly." ‹ communist Manifesto by Karl Marx House also knew, that in addition to controlling a nation's monetary system, a method of taxation had tobe established, and in 1913, the 16th Amendment was passed. This graduated income tax was hailed by proponents as a "tax on the wealthy" (sound familiar?).Nothing could have been farther from the truth. As with the passage of the Federal Reserve Act, "Big Business" and the Wall Street bankers publicly denounced, but privately funded its promotion andpassage. Why? Through their influence in government circles, they insured the necessary loopholes in the bill were included - tax-exempt foundations. By the time the 16th Amendment was passed, they had already established the Rockefeller and Carnegie Foundations. Their wealth was allowed to compound tax-free while their competitors were saddled with tax burdens.The Amendment also allowed Congress to increase and broaden the tax on the general public. Until 1929, the size and cost of the Federal government was Constitutionally limited: it borrowed little money and paid little interest. The Depression years following the Stock Market Crash changed all this. With the country officially bankrupt in 1933, taxes could now be broadened and increased to finance government borrowing. Roosevelt's New Deal began the era of entitlements which are with us today. Two points must be made here: 1) The 16th Amendment was never properly ratified. This has been proven in court. Two of the 36 states that had allegedly ratified the amendment were California and Kentucky - There is no record of California's vote, and Kentucky legislators voted against it 22-9. This violates the amendment procedure of our Constitution, Article V. 2) The 16th Amendment has Marxist roots. Plank 2 of the Communist Manifesto calls for: "a heavy progressive or graduated income tax". USAGOLD (11/15/99; 08:51:12MDT - Msg ID:19110) Today's Gold Market Report: LBMA Makes Contingency Y2K Plans MARKET REPORT(11/14/99): Can't access the internet today. Must be an ISP problem.......Oil went over $25 in early trading on news that OPEC will likely extend production curbs.....The sun never sets on the gold market and the London Bullion Market Association is going to make sure of that when Y2K hits in another 47 days. The organizations quarterly, "Alchemist", instructs its members that "The office of LBMA will be used as a contingency meeting site in the event one or more members are unable to enter their own offices or communicate with other clearing members due to telephone line problems. The Bank of England has agreed to provide a secondary contingency site. It is anticipated that each Clearing Member will likewise offer contingency space to any other Clearing Member(s) in the event of difficulties to the extent that is practicable." And..."Each Clearing Member will lodge client statements, balance sheets and physical stock records in sealed confidential envelopes, together with a contact list detailing phone numbers of key bullion clearing staff with the Bank of England and the LBMA Executive,