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

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ARCHIVED DISCUSSION FROM 2/18/1999
All times are U.S. Mountain Time

Peter Asher (2/18/99; 23:52:41MDT - Msg ID:2548)
Stranger
That's the other Peter Asher, He and Gordon were a British rock group before Peter became James Taylor's Manager. In 1965 I was in the Manhattan book listed as a designer and I got all sorts of phone calls from "teeny boppers" who couldn't differentiate such complicated language.

My point about paper trade in msg 2427 was that the quantity of this activity keeps growing as our true productivity increase, sucking out the affluence by distribution of the work of the producers to producers and non producers alike. By true productivity I mean the useful value of a man's labor hour increases dramatically with technological advances (while the standard of living of society expands at a lesser rate. That is the summation of the paper trading effects on value. However within the totality of the global trade event there are pluses and minuses. Selling paper gold lowers the price of the physical. If one bought up the paper futures, the metal would trade higher until they were executed. When the buying and selling of Bonds and currency makes Brazilian wheat cheaper world wide than our wheat sells for less also.

It's the tail wagging the dog again. Prices are not determined by the true value of the product but by the alterations of prices through the supply and demand quantities in the paper trade. There's more on this in the fourth paragraph of #2400 on 2/14 PM.


Aristotle (2/18/99; 23:32:32MDT - Msg ID:2547)
Richard,Oregon--Thanks for joining in!
You are absolute right--no doubt about it--on your statements about supply and value, etc. That is how I see it too. But in regard to *ownership*... let's take a closer look.

You said, "I believe that when I own something, I can hold it and do with it as 'I' please."
Bingo. Right you are. Your next statement lays bare the truth of the matter.
"Paper greenbacks - I can cut them, burn them, or trade them for something else."
Not so fast, you Hacker and Slasher! Drop that match, Sancho Panza! All that glitters isn't gold, and all that burns isn't yours!
True, you are free to destroy (or cherish!) everything you own. You are not free, under penalty of law, to destroy money of the United States of America, Inc.

Think of dollars as something that you may make use of, but cannot lay a claim of ownership on.

Richard, we've made good progress here. Well done! ---Aristotle

Gandalf the White (2/18/99; 23:13:46MDT - Msg ID:2546)
APR Au
At 1:00 am. Friday morn in NY the afterhours trading on the APR Au contract is at 287.60 ! This is exactly the prognostication of one HopeingII who has been "sitting on the pot" for what seems as ever. HopeingII, both the Hobbits and I are impressed. Even with everyone pushing for higher levels, the price is frozen at your number.
Chok dee (good luck).
<;-)

Richard, Oregon (2/18/99; 23:08:53MDT - Msg ID:2545)
Just A Little Bit Different!
I believe that when I own something, I can hold it and do with it as "I" please. Paper greenbacks - I can cut them, burn them, or trade them for something else. The same holds for Oz's of Au. Both are ONLY worth 'what someone else is willing to give me for them'. Generally, the more of it (Au or greenbacks or, for that matter, whatever!) in existence, the lesser the value becomes (to someone else). Is there any doubt that the more paper money printed the lesser the true value becomes? Can you own paper money? Sure! If I convince you that 100 Geo. Washington's is worth a trade for your 1967 Camero, we have a deal and we both switch ownership of said property. Then. . . .what each (100 GeoW's or the Camero) is worth to somebody else is another story.

Aristotle (2/18/99; 22:10:00MDT - Msg ID:2544)
Alright, Twain, I can picture a gold Maple leaf resting in one of the pans.
Now let's have some of your good info...enough to tip the scales. I like your delivery!

Stranger (or Peter): When you're refering to an old post Msg ID: #, would it be too much trouble to give the day of posting also? Rooting around in these infernal archives can be a bear without that info. For example, I recall a time that Aragorn (I think(?)) tried to request our use of terms OTHER THAN "inflation" and "deflation". I recall that Gandalf chimed in (or was it Goldfly?) that that was good advice. ANYWAY, I tried to find that post to repeat it. Because as worthwhile as Stranger's recent post was, I still don't know what to make of it because I don't know if his terms refer to money supply or prices. HELP!!!

Aragorn III--if you save your posts, or know where it is...how 'bout a little help here? ---Aristotle

Aristotle (2/18/99; 21:51:19MDT - Msg ID:2543)
Usul---You make a good point, and raise the level of complexity!
Just as Gandalf did when he demanded a clarification of the meaning of "own".
Initially, the line of questioning was intended (and still is(!)) to compare and contrast the qualities of a dollar and gold. Yet, as you rightly remind us, not all gold is created equal! Your post clearly reminds me that if you don't *have* the gold (as in "in your pocket"), then you really can't be sure what you have, exactly.

Peter--Goldfly makes an excellent point. I think what we're eventually working toward here will be a startling discovery for many...

The Stranger (2/18/99; 21:33:08MDT - Msg ID:2542)
Peter
Thanks. I reread 2427, per your suggestion. I believe I understand you to say that gold, as well as other commodities, might perform better were it not for the tendency of so many to trade in paper surrogates rather than the tangibles themselves. Would the depletion of central bank gold reserves and the recent acceleration in paper money creation around the world qualify as at least an ancillary example? If so, why wouldn't higher prices for just about anything tangible inevitably result, anyway? Perhaps that is your point.

Peter, please forgive me if I am butchering your ideas. I have a pretty keen grasp of the obvious. The inobvious takes me a while.

By the way, do you ever hear from Gordon?

Twain (2/18/99; 20:34:11MDT - Msg ID:2541)
'scuse me folks...
But can anybody here relate to me what an ounce of information is quoted for....

I got plenty to sell if'n your willin to pay. Though there's some who'd call it somethin else.

Seems, Mr. Gore's been spending way too much time hanging out in Aspen waitin for his crystal to vibrate.

Goldfly (2/18/99; 20:30:20MDT - Msg ID:2540)
Peter Asher
Peter, that works until that hat-check girl says:

"But sir, we don't honor *those* claimchecks any longer."

Then who owns what?

GF



Peter Asher (2/18/99; 20:24:59MDT - Msg ID:2539)
Aristotle
You own that claim check like any other; because you have it in your fist or your pocket. If you want it to say property of, well thats probably a certified check. (The kind that if its stolen, you don't lose the money)

Goldfly (2/18/99; 20:24:37MDT - Msg ID:2538)
Usul--

The base of the pillar?



Gandalf the White (2/18/99; 20:18:58MDT - Msg ID:2537)
WELCOME Usul
Happy to see someone else as old as I. Thou speakith my old tongue !
<;-)

Usul (2/18/99; 20:12:14MDT - Msg ID:2536)
Ownership
1546: Heywood, Proverbs:- For alwaie owne is owne, at the recknynges eend. That which is not held close, is it truly owned? Time has a way of separating goods from their owners, in the past this was through pillage and destruction, with just a crock of gold in the ground to
testify to an unfortunate's (unsuccessful) attempt to preserve their fortune. When goldsmiths became bankers,
at first the gold they held safe for their clients was truly owned, but later through the invention of fractional reserve claims on the gold, (paper money) the clients' gold was stolen by stealth. "To offer much to him that asketh
but a little, is a kinde of deniall" [1631, Mabbe, Celestina]- to offer much paper instead of that which has
intrinsic value; gold; or to offer much gold in the form of
leasing, short selling, or forward selling, this does
deny the true value.

Aristotle (2/18/99; 20:07:24MDT - Msg ID:2535)
Bless you, Peter Asher!
I'm hoping to generate a lot more response on this topic, even if it is just to echo what someone else has said.

I like your idea that it is parallel to a claim check...in and of itself it is not worth owning, but you had darn-well hang onto to the thing if you want to get your coat back after the party. And it gets worse! If you stay at the party for a long time, when you eventually turn in your coat-check claim ticket, you might not get the same good-quality coat as if you had redeemed the claim check shortly after arriving.
Does anyone care to suggest that you do, in fact, OWN the claim check? It's still open to debate.

But to risk skipping ahead, IF there were to be printed on the dollar "PROPERTY OF:_________________", what would it say on the blank space? The bearer's name?

Gandalf the White (2/18/99; 19:55:50MDT - Msg ID:2534)
Turbohawg --- more info please
I'm sorry to say, but happy to be, gone from the Land inside the Beltway for many many years. Having seen the reports on the speech algore gave in Southeast Asia to the gathered head of states, where he lectured them on "how to" -- does he have control of his discussion matter and is really that dumb, or is he just a figurehead and reads the script given to him ? Sure would like to know.


Aristotle (2/18/99; 19:53:26MDT - Msg ID:2533)
turbohawg--this is remarkable
"Forget the Gold Standard, we now operate on the information standard"
--Al Gore to World Economic Forum;Davos, Switzerland 2/18/99

Forget the Gold Standard?? Why would he say such a thing??

For all practical purposes, the gold standard ended in 1933 with an unconstitutional act by FDR. Oh sure, the standard endured on the international scene until 1971 when an alarmed President Nixon closed the Treasury's dollar/gold redemption window. Americans were consuming a greater share than they were producing--as measured by the trans-border flux, and gold settled the account. Naturally, if/when the gold ran out, the international parties would say, "Hey, we can't sell you anything else...your money's no good anymore." Nixon anticipated the event by saying, "Boys, you're just gonna hafta take our paper for what it's worth. You be the judge." Bam! The fiat money creation kicked into high gear, and the presses have been smokin' for 30 years now. Which brings me back to my point...

Thirty years. And Al Gore dares to mention something as illrelavent as the gold standard in that context?? Hmmmmmmmmmmmmmmm...makes you wonder. And this talk of IMF gold sales? They don't want to sell it to raise money. Heck, that's just a rouse. SOMEBODY wants or needs that gold, and brother, there's no other source of gold to be had.

Unless you check my pockets, that is.

Peter Asher (2/18/99; 19:52:10MDT - Msg ID:2532)
Stranger & longj
I think golds still stagnant for the same reason wheat is down, probably getting below domestic crop value. Also why many countries are having to sell their wares cheap and import dear. There is an identity in the behavior of gold and that of international commerce in general. The mechanisms of paper gold are identical to those of paper trade (currency). Trading for profit in the rights to things rather than things themselves has become the controlling factor of price asked and obtained, and therefore value. It is apt that Ayn Rands "Atlas Shrugged came up last night as that story as I recall dealt with this kind of situation only being halted by the producers saying "I quit". Did you see my Msg#2427 on Feb 15 PM ?

Peter Asher (2/18/99; 19:31:46MDT - Msg ID:2531)
Aristotle
That dollar (FRN) isn't a thing to be owned. It's a claim check. You can claim something with it in the USA, at what ever value it will be recieved at, that day. In other words to own it you have to convert it to somthing that is ownable.

The Stranger (2/18/99; 19:23:49MDT - Msg ID:2530)
longj
Why hasn't gold responded yet is the same question I keep asking, and I have been helplessly waiting for months for an answer. If reinflation is what's coming, shouldn't gold haved begun PREDICTING it by now?

Part of the reason it hasn't, I think, is human nature. I remember the early Eighties. Volker tightened the money screws so hard that inflation was doomed. Yet it took people YEARS to believe that disinflation was for real. Some guy named Howard Ruff had a book out which I think was called "How to Survive and Win in the Inflationary Eighties". He had his own TV show, and people used to crowd into his seminars. Even after the recession in '82, there was widespread expectation that inflation was coming back. For some reason that you can probably explain better than I, the masses always seem to discern what's coming by extrapolating what has already happened. When it comes to major shifts in the economy, people just don't seem to want to believe until they have no other choice.

Another reason, I suspect, is that, darn it, reinflation of an economy that has been disinflating for eighteen years just ain't gonna happen overnight.

And finally, I believe that the gold carry trading is for real. I certainly hope it is at any rate, because, if it is, the rally, when it comes, will be all the more powerful.

Peter Asher (2/18/99; 19:23:45MDT - Msg ID:2529)
Steve! Opinion from the senior chartist please
This weeks Comex Spot chart on Kitco seems to be inordinatly choppy. A very unusual pattern of constant spike squiggles on all three days. Any signifigance ???

turbohawg (2/18/99; 18:53:28MDT - Msg ID:2528)
Algore
Received this today by way of a Congressional staffer ... I believe it speaks for itself.

Al Gore to World Economic Forum
Davos, Switzerland
2/18/99

"Laissez Faire has caused so many of the world's problems."

"Forget the Gold Standard, we now operate on the information standard"

"The private sector needs to bear more of the burden"

"The problem is that so many investors are unwilling to invest in places where they have previously suffered losses."

"The enterprenuerial spirit is essential to economic growth."

Hoooooooo Boy

Gandalf the White (2/18/99; 18:21:11MDT - Msg ID:2527)
Oops, almost missed this one !
Fuji Bank To Securitize 30 Bln Yen
Worth Of Credit Card Loans
TOKYO (Nikkei)--Fuji Bank (8317) will securitize 30 billion yen worth of credit card loans as euro-denominated bonds for sale to overseas institutional investors and others, bank sources said Wednesday. This will be the first such move by a Japanese bank. Tokyo-based Fuji has an outstanding balance of 300 billion yen in credit card loans to individual customers, the largest among Japan's city banks. It hopes to expand credit card lending, a key retail banking function, by boosting loan capability through the securitization. Fuji Bank has set a coupon rate on the 2-year bonds at 50 basis points above the London Interbank offered rate. Its London securities subsidiary and Banque Paribas will lead-manage the issuance. The bonds have already obtained a AAA rating from U.S. and U.K. ratings agencies, the sources added. Recent deregulation moves have simplified procedures for the sale of credits; banks can now not only consolidate small-lot credits but also securitize the resulting credit. Fuji's 30 billion yen securitization will consolidate 130,000 credit card loans.
(The Nihon Keizai Shimbun Thursday morning edition)
*****Is this not placing another layer of paper on paper ?
<;-)


Gandalf the White (2/18/99; 18:12:57MDT - Msg ID:2526)
Time HONORED Japanese methods
Friday, February 19, 1999
Banks To Eliminate 20,000 Jobs In 4 Years

TOKYO (Nikkei)--Japan's 15 major banks plan to reduce their combined work forces by 13.8% over the next four years, the institutions informed the Financial Reconstruction Commission on Thursday. The cuts were outlined in reports submitted in conjunction with the banks' applications for infusions of public funds. According to the reports, the banks aim to cut 19,631 employees from their combined staffs, estimated at 142,651 as of the end of March. The reductions are expected to shrink their payroll by almost 6% from this fiscal year's projected level of 1.47 trillion yen. Sakura Bank (8314) will carry out the largest cuts, reducing its payroll by 3,500 employees. The 15 banks are expected to request a combined 7.45 trillion yen in public funds, 73.1% of which, or 5.45 trillion yen, will be received by issuing preferred shares convertible to common stock.
(The Nihon Keizai Shimbun Friday morning edition)
******Can you see the Yen hitting the Geisha's fan ?

Buena Fe (2/18/99; 17:53:46MDT - Msg ID:2525)
Hope Against Hope
Although I may lose tomorrows price prediction by the widest margin (Hee Hee(A guys gotta be able to laugh at himself)), I can't get rid of the notion that when this baby uncorks' $292 or there abouts, its gonna be a straight line (5-10 trading days) to $317-325 before she even stops to catch her breath. Maybe if I wish hard enough?

The action in the CRB index this week smells of a classic spike bottom. I can't seem to be able to put it all into an eloquent essay, but the picture in my minds eye (bonds/rates, commodities, currency volatility, CB's/Fed/Treasury disaray etc.) and the sense in my gut says that we a very close to the completion of a significant shift in sentiment and perception of the financial world around us.
Maybe this next G7 meeting will unveil some kind of "random event" that will trigger the last phase....
Awh forget it I'm just rambling!
Keep Well!

longj (2/18/99; 17:23:05MDT - Msg ID:2524)
intrnal phase error 9999
Well, after looking at the post from The Stranger, it looks like I'm the one with the problem. Why is gold lagging these inflationary signs? Is it just that there has been so much forward selling that demand can't keep up with the supply? We have had record consumption for the last quarter of '98 and are seeing record bullion coin sales. It seems like the demand side is picking up steam, and with the miners losing money at these hedged delivery prices...... maybe that supply is going to dwindle off and prices will then recover.....it seems like the paper gold/futures market might also be a cushion to the anticipated reaction of a small physical market with a larger cash/paper market.....many traders don't want the metal, just the profits........JOPO.

Aristotle (2/18/99; 17:20:47MDT - Msg ID:2523)
Gandalf--finding the gold
I can almost picture your hobbits panning for gold in the Baranduin (Brandywine) River. Silly hobbits. EVERYONE knows the River Isen is the place to be...but who wants to pass thru Tharbad to get there? Yikes! Actually, it would be the RETURN trip that would be of concern. As Aragorn would likely say...

Got portable property?

Hey, Usul...this baby is built for speed--how 'bout taking her for a REAL test drive? Zooooooooom!

Usul (2/18/99; 16:57:02MDT - Msg ID:2522)
Test
Just a test...Testing system

The Stranger (2/18/99; 16:55:53MDT - Msg ID:2521)
Gentlemen....
I heard Ron Insana refer to the producer price numbers on CNBC today as "shocking". I often listen to his "Ticker Talk" editorials, though I didn't today. He is one very smart cookie, as far as I am concerned.

Then, all day long, I listened as a steady stream of analysts went on air to declare that the price increases were basically "just" food and energy and not to worry. (Last month it was "just" tobacco).

Recently, I wrote here that I sometimes think that most gold bugs feel so defeated that they no longer even expect inflation. Nowadays we are all supposed to pin our hopes on some approaching cataclysm, if not the outright collapse of civilization. WE hear that Japan is going down the drain, or Y2K is going to bring back the stone age. Okay, so as long as gold heads for the stratosphere, making us all rich in the process, does it matter what made it happen? Well, maybe, maybe not.

But we have had three interest rate cuts from the Fed in the last six months. Each one was followed by HIGHER bond yields. Last week the yield even broke an important resistance area when it pierced 5.4%. Why would that happen if the world economy were headed for deflation?

The point is, all of these "experts" that keep telling you not to worry about inflation are WRONG. They say what they do primarily because predicting more of the same is comfortable to them. It seems safer. Our job, as investors, is to see the future, and, gentlemen, I say we got a glimpse of it today. Deflation, we hardly knew ye.

Gandalf the White (2/18/99; 15:58:06MDT - Msg ID:2520)
Aristotle questions
OK, now you have done it! When the Hobbits read the last words of your post, a thought picture entered their collective minds at once! "--gold spring into existance." They pulled out the calendar, determined that, in this part of Middle Earth, Spring was just around the corner, and all the Hobbits immediately went out to condition the suction dredges and diving equipment as they all know that placer gold comes from the spring runoffs moving the sandbars and opening Mother Nature's treasure house. BUT, I do not think of this as being exactly that of what you ask.
<;-)

longj (2/18/99; 15:41:58MDT - Msg ID:2519)
gold inflation/deflation
I think that Jastrum may have a phase problem in his analysis. Gold market movements tend to anticipate future inflation trends and deflationary events. This movement tends to come in bursts well before the trends play out. So a lack of performance during an inflationary trend may just be that gold has already reacted. Similiarly, for deflationary environments gold leads the trend. This is consistent with the "sensitive" nature/attribute of the gold markets. JOPO.

Aristotle (2/18/99; 15:26:27MDT - Msg ID:2518)
Gandalf, Gandalf...
Nothing is ever quite as simple as one would think! You raise a valid point that we must address right away or else we'd be shooting at different targets.

By use of the word "own" in my question i intended the meaning "retain the ultimate claim", that is, no entity can demonstrate a superior claim of 'ownership' or 'right' to the property in question.

My, I think this question might be beginning to answer itself... Here's something to get the thoughts started...think about where dollars and gold each spring into existence.

Gandalf the White (2/18/99; 14:42:46MDT - Msg ID:2517)
Aristotle
Just so that we all start at the same place on this road to learning, I setforth the WEBSTER'S definition of the word "own" as you have used it. This is as a VERB and as such means, "to have or hold as property" ! See, right there we have a conundrum ! -- have and hold are two very different items and would fit either of your posed questions. This may be the major problem as one must use different terms to define who has full rights of "ownership". BUT, if you wish to trade me your Au for my dead presidents, right now, we can discuss this in length and then when you wish to have me sell you back the same Au, we can barter for the trade. Have you a firstborn ?
<;-)

Aristotle (2/18/99; 14:12:32MDT - Msg ID:2516)
A question worth debate--
"Do you own the dollar that is in your wallet?"

I don't recall any past discussion occuring on this most important of topics. I'd sure like to get the general impression of everyone. Although I'm not claiming to *know* which is the *right* answer, consider this question also:

"Do you own the gold in your pocket?"


USAGOLD (2/18/99; 10:10:28MDT - Msg ID:2515)
Steve H....Jastrum and the Price of a New Suit
Between 1933 and 1979 -- and inflationary period according to Jastrum -- gold appreciated 2500% from $35 to $875 in dollar terms. So unless, I am missing something, the argument is flawed. In my view, gold protects against inflation or deflation and it makes no difference in what order they arrive. I think a better way to interpret Jastrum's numbers is to say that gold appreciates in deflations as long as the government mandates and maintains a price while all other commodities plummet. I do agree however with the idea of Jastrum's Golden Constant. In the long run, gold reflects fully the value of a currency. I keep going back to the dictum about a quality new suit -- that one ounce of gold will always buy a quality new suit. When an ounce of gold exceeds in currency terms a new suit, it is overvalued. In 1979, when a quality suit ran in the $300-400 range, gold was overvalued. Today with a quality suit running in the $600 to $700 range, gold is undervalued -- a state of affairs worth noting. Where Jastrum's Constant has application is in understanding that no matter what political pressure is brought to bear on the yellow metal, it will eventually find its true value. You can count on it.

turbohawg (2/18/99; 10:04:10MDT - Msg ID:2514)
Japan's economic death spiral ...
Illustrates the lengths to which the power structure of govts are willing to go to maintain their chokehold during this turning in man's history. They're not going down without taking everyone else with them. A scene similar to this one is likely to be played thoughout the world in the not-too-distant future.

http://biz.yahoo.com/rf/990216/brp.html

Tuesday February 16, 11:04 pm Eastern Time

Japan on the road to ruin, say Warburg analysts
By Jim Parker
SYDNEY, Feb 17 (Reuters) - Japan is on the road to ruin, which no amount of pump priming or monetary easings can avoid, senior Japanese analysts from broker Warburg Dillon Read said here on Wednesday.

The policy shift towards a weaker yen announced this week would only postpone the eventual day of reckoning, they said.

"The Japanese government is stumbling on the road to ruin. It's too late, there's no way out," Warburg's Japanese political analyst Shigenori Okazaki told a media briefing.

The consequence for financial markets was a "sell Japan" scenario, starting with equities, then bonds and finally the Japanese yen.

"The hole is so deep right now that it's becoming very difficult to think of a positive risk case for Japan," Warburg's senior forex/interest rates strategist Cameron Umetsu said.

'Monetisation', the process of printing money to cover the flood of government bond issuance, was now inevitable, although would be introduced gradually, Umetsu said.
"It's a question of when, not if," he said. "They are heading towards a major shift in the policy regime which is essntially yen negative."

The yen went into reverse on Tuesday after Japan policymakers publicly encouraged a weaker currency and acted to ease a glut in the government bond market.

The dollar stood at 118.10/20 yen by 0400 GMT on Wednesday, compared with 118.65/70 yen in New York late on Tuesday. The dollar surged more than three yen in New York overnight, its biggest one-day gain in a month, to reach 118.90 yen, its highest point since December 9, when it traded at 119.45 yen.

In an interview with Reuters Television on Tuesday, Ministry of Finance official Eisuke Sakakibara said the G7 would also accept a weaker yen as a result of the BOJ's credit easing last Friday.

"Sakakibara's comments yesterday certainly suggest that reality is biting," Umetsu said.

However, the policy change carried major dangers in raising the risk of capital flight, a sovereign debt downgrading and stagflation.

"The whole idea of a 110-120 comfort zone for dollar-yen has gone out the window," Umetsu said. "It's very dangerous to assume that the yen in a monetisation scenario will weaken gradually. This will reinforce the perception that dollar-yen is a one-way bet north."

Depreciation of the yen would also take the pressure off policymakers to restructure the Japanese economy to stimulate consumer demand.

"The whole question of structural reform is off the table again," Umetsu said.

Okazaki said monetisation offered the easy way out for the Japanese government, whose economic stimulus measures, concentrated on wasteful public works spending, had backfired.

He predicted the government would resort to massive tax hikes after the next general election, sending the economy into a long and deep recession.

"The current policies are not going to lead to an autonomous recovery," Okazaki said. "Japan is like the Titanic. You can keep pouring in fuel, but the boat is still going to sink."

The Stranger (2/18/99; 10:03:15MDT - Msg ID:2513)
Steve
What are you, an insomniac? You post at some pretty odd hours.

I read about Dr. Jastram's findings with some interest. As usual, I don't know enough about a subject to put up much of a challenge. I do know about the behavior of gold vis a vis inflation/deflation in my lifetime however, and I think the experience contrasts diametrically with Jastram.

I remember when me father retired in the late Sixties thinking he would get by on his stock market gains (funny - a lot of people are apparently doing that now). When the great inflation arrived in the Seventies, he wound up dumping his stocks and buying an apartment building. As it turned out, he did quite well. He would have done even better, perhaps, had he bought gold.
I retired two years ago, thinking, like my father twenty-five years ago, that I would get by on MY stock market gains. Last year, I became convinced that the Fed was reversing course and had adopted a pro-inflation strategy. I decided to do the same. Only, like many of my generation, I have my money in IRAs, so, instead of buying an apartment building, perhaps, I bought gold mining shares. I might have bought oil stocks or REITs. I might have bought gold coins. But, an apartment building, per se, won't go into an IRA. Neither, obviously, will antiques, persian rugs or any other collectibles. It seems to me that this distinction alone will make gold even more popular than it was last time.

Gandalf the White (2/18/99; 09:09:12MDT - Msg ID:2512)
GOLDHEARTS -- that is !
darn fingers
<;-)

Gandalf the White (2/18/99; 09:07:21MDT - Msg ID:2511)
Keep the upper lip stiff you Goldhears !
Not to worry, the Hobbits are still singing "I've got aUUUU Babe!!!"
<;-)

USAGOLD (2/18/99; 08:37:41MDT - Msg ID:2510)
Today's Gold Market Update: Producer Prices Jump Higher. Energy up 1.8%; Food up 1.6%
MARKET UPDATE (2/18/99): Gold recovered somewhat this morning from its early week battering still basking in the glow of the spectacular demand numbers released yesterday by the World Gold Council and ignoring the dollar's strength against the yen. Yesterday's WGC Demand Trends report put gold demand in the fourth quarter 1998 at a record. Japan's government is committing patricide against the yen as the world's top finance ministers prepare to go toe to toe at a G-7 conclave this weekend in Bonn. Public attention is being directed toward discussion on currency target zones (Please list under the "Never Will Happen" column) while the finance ministers privately will be discussing ways to keep the world economy glued together with the money printing presses rolling in Japan and China casting nervous glances across the East China Sea wondering if yen patricide is an invitatition for it to devalue its already wobbly yuan. (Please list under the "Likely Soon" column). Meanwhile, our own Mr. Ruben, not given to suicidal impulses with respect to the U.S. economy and the dollar, politely put down the prospects of currency target zones for the obvious reason: It would take U.S. monetary policy out of American hands and put it directly in the hands of the European Union. One would hope that such enlightenment would not be a passing phenomena. It is comforting to hear Americans defending American interests even if it is in the arcane world of currency values. We hear so much these days about consolidating worldwide financial interests and not enough about what certain economic policies might mean to the people living in the countries under consideration beyond the effects on the sacrosanct financial sector.

As for gold, London traders were calling the market "a bit short" after Tuesday's nuking of gold at the open with one "fund" selling 6000 gold lots -- that's a lot of gold. It has taken most of the first part of this week to recover from that single sale. Meanwhile, producer prices leaped .5% with energy and food leading the way in double digit fashion. Food was up 1.6% and energy -- 1.8%. The last time we saw numbers like that people were lining up at the gas pump, gold was soaring and the president lusted in his heart not in the Oval Office. My, how times change. ..

And so it goes, my friends. We will update if the producer price news translates to anything worth talking about in terms of the price of gold. Have a good day, my fellow goldmeisters.

The Stranger (2/18/99; 07:43:18MDT - Msg ID:2509)
.5%
Well, producer prices rose .5% this month. Last month they were up 1.1%. Last month it was mostly tobacco. This month it is food and energy. We've had a steady parade of analysts telling us that there is no inflation. Ha ha ha. When are people going to wake up? Compare these numbers with what we were seeing one year ago. RAPID MONEY CREATION ALWAYS MEANS INFLATION. This is not rocket science.

SteveH (2/18/99; 05:43:01MDT - Msg ID:2508)
April gold now $287.20...
going to try for a few more winks. Let's see how the price handles that.

Hey, found this most contrarian paradigm buster at the bottom of Kitco. Had to read the whole thing to find it. Most interesting:

Date: Thu Feb 18 1999 00:10
aurator (The Golden Constant------reprise------) ID#257148:
Copyright © 1999 aurator/Kitco Inc. All rights reserved
Bill2j your Wed Feb 17 1999 20:01

With all due respect you have further confused me. You
stated that gold is NOT a hedge against inflation. I assume
that means you agree that it loses value and purchasing
power over time due to the ravages of inflation. If it loses
value and purchasing power over time why would I want to
invest in it.

----
I apologise for confusing you, Bill2j, personally I find life very confusing, especially that part of it in which one is
endeavouring to pursue facts, if one cannot truly pursue "truth" one would have thought that pursuing 'facts' should
be easier, eh?

Anyway, I am grateful to you for your question, it gives me the opportunity to post once more, almost my first post
to this site almost 2 years ago. My first posts merely asserted that gold was no hedge against inflation, they
garnered no responses. So I had to dig up the notes I made when I first read Jastrams' book about 10 years ago,
when my goldbuggery drove me to many public libraries in New Zealand to read what I could about GOLD.
Fortunately I made good notes, especially on some of the tables in his book.

I would dearly love a copy of this book, but don't feel like paying an ounce of gold for the privelege of owning an
autographed copy, the only ones apparently available.

So, forgive me for my windy introduction, and for discombulating your belief in gold as a hedge against inflation,
here is the original post, now with a couple of extra footnotes.

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



Date: Wed Apr 30 1997 23:34 aurator ( jesthefaxmon ) :
Mad dog: your 02:53 on deflation, this is a table reproduced from Dr Roy Jastram's *The Golden Constant*.
Apologies if this look wierd, I've tried before to get tables here but am defeated by Macintosh to Windows
translators. The table should be in 7 columns but technical gremlins...
Purchasing Power of Silver & Gold in Inflationary cf Deflationary Times. The table shows the change in General
Commodity Price Index cf the change in the Price of Silver and Gold

INFLATIONARY

Years | CMdty Price% | Silver% | Gold%
1623-1658 | 51 | -34 | -34
1675-1695 | 27 | -13 | -21
1702-1723 | 25 | -18 | -22
1752-1776 | 27 | -22 | -21
1792-1813 | 92 | -33 | -27
1897-1920 | 305 | -61 | -67
1933-1979 | 2149 | 241 | 27


DEFLATIONARY [General Commodity Price decline]
Years Price% |Silver%|Gold %
1658-1669 | -21 | 27 | 42
1813-1851 | -51 | 69 | 70
1873-1896 | -45 | -6 | 82
1920-1933 | -69 | 32 | 251

While the study [1979 from memory] is not without limitations, it does show that you're crazy to hold gold during
inflation, and crazy not to hold it during deflation.
•Avoid experts who say gold is a good hedge against inflation.•

Auroelf; Your 22:39 of april 29 "Trouble with charts is we see what we believe" is the most honest recognition I've
yet seen on kitco on the limitations of any kind of TA.
How about: I wouldn't have seen it if I hadn't believed it.
Or :
How do you know that what you know is not what you believe?
Anyone care to guess on which side of his tunic the village idiot will dribble tomorrow??
Great Site, highly addictive, despite my antipodean contrariness.
Thank you all for your generous input.


-----------------
Jastram's Conclusions, in his own words:
INFLATION:
"Gold is no hedge against inflation of a prolonged character.
Even worse, it lost purchasing power consistently and seriously in each inflationary episode"
DEFLATION:
"In all four delations purchasing power of gold appreciated handsomely" - " The Golden Constant: The English and
American Experience 1560-1976, Roy Jastram

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

Here, in Jastram's words, is a summary of his findings:

" The evidence drawn from the English experience for 400 years is clear. Gold is no hedge against inflation of a
prolonged character. Even worse, operational wealth ( purchasing power ) consistently and seriously in each
inflationary episode.... From 1897-1920, a person would have lost two-thirds of his operational wealth just by
holding gold in bars from the beginning to end. And this was in the golden age of the gold standard."

What about deflation? Jastram continues: "Four pronounced price deflations took place in the four centuries
recorded, with the three most severe occurring since 1800. In all four price recessions operational wealth in the
form of gold appreciated handsomely. When one sees that just by holding gold for 13 years from 1920 to 1933,
operational wealth would have increased 2 1/2 times, one realizes that gold can be a valuable hedge in deflation,
however poor in inflation."


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


Nevertheless, gold does maintain its purchasing power over long periods of time. The intriguing aspect of this
conclusion is that it is not because gold eventually moves toward commodity prices, but because commodity prices
return to gold [the retrieval phenomenon].
Roy Jastram The Golden Constant. p. 175

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

I hope this answers your question:

"Why would I want to invest in it"


We in NZ are dependent on primary produce for most of our revenue and export. Primary Commodity prices
have been in a decline for the past 2 years, and, dollar adjusted for a lot longer..

I hope this helps.

Congrats Peter!

Steve

Peter Asher (2/18/99; 04:29:51MDT - Msg ID:2507)
Yeltsin's still got some life there!
Well, if there's no Wall Street Bear to run gold up the tree, we'll just have to settle for the Russian one.

Spot up 1.50 & GCJ9 up 1.1 (delayed)

Aragorn III (2/18/99; 00:07:46MDT - Msg ID:2506)
News, revisited.
This is a follow-up to what I pointed out earlier today--German Undersecretary of Finance Heiner Flassbeck expressed concern of the booming stock market, "it would be fatal for Europe if that American bubble burst now."

You should appreciate that Japan holds nearly this same thought, but upon a variation of the theme.

Europe wants a strong consuming American economy to fuel European economic growth. A brisk export demand helps as they push for full employment. Where goes the DOW, so goes consumer spending. The concern is a macroeconomic one, not a monetary one--the euro structure is their shield against a collapse in US Treasuries (and dollar decline). The barb is that despite the direct insulation against this, the eventual falling bond market likely would drag stocks down and consumer confidence with them. The "man on the street" has come to associate prosperity with stocks, and holds little knowlege of Treasuries. Woe is he that does not understand the dollar stands upon bonds alone.

Japan also wants a strong consuming American economy as the flow of fuel to the sputtering economic conditions. They are caught upon the fence in the worst of positions; having adopted a national fiat monetary system, yet retaining the honorable management style of a gold standard. Unlike the U.S., they opt to earn their monetary credits through trade exports to others, while the U.S. does not hesitate to generate monetary credits through bond issuance. Under the fiat system, in the normal course of the "business cycle" the contraction of the money supply is a consequence of the money cancellation phenomenon upon debt repayment. There is a relative shortage of Yen, and "honor" will not allow simple U.S.-style money creation. Woe is he that does not understand the Yen stands upon the dollar alone (very nearly so).

Japan cannot easily liquidate the vast monetary reserves for conversion to Yen. First they must sell the U.S. bonds for dollars, and this they ARE doing--carefully! Selling was curtailed during the uncertainties of the impeachment proceedings...the effect would have been amplified. That is why Friday, upon the announcement for acquittal, the Bond was sold with vigor. Now you see the timing in some degree. As bonds are sold, supply and demand gives an ever lower price for the progression of sales. Next, these ever shrinking dollar payments must purchase Yen on the foreign exchange market. Again, each successive wave of dollars seeking what Yen may be available for the desired repatriation to Japan will result in ever less-favorable exchange rates. Many bonds will ultimately yield few Yen.

For now, the Yen is as strong as the dollar it stands upon, but the position is precarious. Selling dollars to buy Yen is to erode the pillars of the Yen's foundation, yet the Yen grows stronger in the dollar/Yen exchange rate?! But look further! As all bonds are sold, and all Yen are bought, and the dollar goes to zero as the Yen goes to the sky...you are laughing as you see that this new strong Yen now stands on NO foundation! To save the economy, Japan must indeed sell bonds cautiously, but to save the Yen these dollars must bid for gold directly as the replacement foundation of monetary reserves. To maintain honorable Yen management, they might with great honor peg the Yen value to the obvious new value of gold...it would be priced at thousands of dollars for each small ounce. Not that gold itself has changed...only the great recognition. And the small value of the dollar!

got gold?

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