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ARCHIVED DISCUSSION FROM 5/18/2000
All times are U.S. Mountain Time
(Yesterday's Discussion.)
Elwood
(05/18/00; 23:00:30MT - usagold.com msg#: 30825)
History Repeats - The Death of Bretton Woods
(This was an old letter that I researched for a debate with an economist.)
Bretton Woods worked just as intended up until early 1965 when the French announced they were tendering up to $300 million for conversion (Hazards of colonialism, I guess). This kicked off 5 years of beggar-thy-neighbor policies on the part of the Europeans and Americans against each other, nearly all of it due to irresponsible monetary debasement. The whole episode would have been hilarious except for the damage they caused to their own citizens.
Pressure from the Americans came when Johnson ran the SEA war while, at the same time, spent hand-over-fist on his Great Society programs. Later Nixon compounded the problems with even more spending programs and his continuation of the war. They couldn't raise taxes (they were already high) so they debased the money.
In November 1967 the British blew $1 billion in the forex markets trying to support a debased pound before devaluing on Nov 18 from $2.80 to $2.40. Before they devalued they hit the IMF up for a loan for $3 billion, but were handed their hats and shown to the door. After this debacle the sterling zone countries fell like dominoes: Denmark, Iceland, Ireland, Israel, New Zealand, Spain, a few others.
The French devalued in August '69 and the Germans later that summer. Both of these are interesting stories in their own right, the French for their timing, the Germans for their innovation, but we'll save that for another time. So far, so good. Bretton Woods was holding. That brings us to 1970. Enter the Arabs.
During 1970 OPEC asserted itself. In May the TAPline (Trans-Arabian Pipeline) from Saudi to the Mediterranean coast was interrupted in Syria. This drove tanker tariffs to their highest levels ever, before or since. In September, in what has become known as the Libyan price controversy, Libya raised posted prices and increased the OPEC tax rate from 50 percent to 55 percent followed by Iran and Kuwait in November. For strike three, in December OPEC met in Caracas and declared the Libyan tax to be the new OPEC tax and, furthermore, OPEC would adjust its posted prices to reflect changes in currency exchange rates. Later, OPEC enforced the tax by announcing that failure to pay the tax by any nation would result in an embargo.
This was the first supply shock of the 70s. The effect was to reduce the world oil supply by approximately 1.3 million barrels per day (mbd) through December of '70. This is compared to the approximately 2.4 mbd reduction at the height of the '73/'74 embargo.
All of this raised eyebrows on both sides of the Atlantic. To settle the Libyan price controversy there were two groups of talks, one in Tehran, the other in Tripoli. The one in Tripoli was the more significant. Libya, negotiating for itself, Saudi Arabia, Algeria and Iraq, was able to get about a 50% base price increase, 2.5% annual allowance increase plus additional allowance for inflation and finally an increase in the OPEC tax rate to 60 cents. Talks concluded on April 2, 1971.
With the Arabs now insisting on fair prices for their oil everyone knew that the Bretton Woods scheme was done for, because none of them intended to do anything about the debasement of their currencies (except maybe the Germans who relearned the lessons of '23). Yet, no one wanted to be the one remembered as the guy who brought down the financial system of the entire world.
Then, on Saturday, July 31st, Venezuela announced they were nationalizing their oil. That was enough for the Brits, and they moved in the following Monday. This is per Paul Volcker through John Connally's book. They say the Brits came in on Monday the 2nd with the request that they would be tendering $3 billion, their whole forex reserve of dollars, for conversion. The Brits have a different story, and their amount is the $750 million currency swap that they executed on Friday, Aug 13. Originally they had asked for $2 billion on the swap but were turned down. Since they had requested the conversion for Monday Aug 16, Nixon acted on Sunday after that famous Camp David meeting. At the time of the notice of tender by the Brits there was approximately 10.1 billion in reserves. The outstanding claims for it were over 70 billions.
Bretton Woods survived all the despicable monetary machinations that we Westerners perpetrated against each other during the sixties. Four months after the April 2, 1971 agreement on the Libyan price controversy in Tripoli and a couple of days after Venezuela began nationalizing their oil, Bretton Woods died in the mad dash of the dogs after the scraps.
The closing of the gold window angered the Arabs terribly. With them, revenge is a holy thing. In response to Nixon's action they immediately raised prices and began nationalizing western assets in their countries. Libya, Iraq, and Iran all started nationalizing. Yes, they hated Israel, and they still do. Yes, the Yom Kippur War was a factor in the '73 Embargo, but that was more for political cover directed at the folks back home. The Arab oilmen were just that, oilmen. They weren't soldiers. They wanted to get Nixon for what, to them, was a humiliation by a moneychanger. They wanted to hurt the men who they thought were trying to cheat them out of a fair price for their oil.
(end of letter)
Today, we seem to be in that twilight zone between the settlement of the Libyan price controversy (Washington Agreement) and the action by the Venezuelans(?). Everyone knows the system is dying, but, it seems, no one is ready to make the first move. I keep remembering something Another said to the effect that this was a way to end dollar settlement for oil without war.
CoinGuy
(05/18/00; 22:59:24MT - usagold.com msg#: 30824)
USAGOLD...
MK,
You hit the nail on the head, if the new Roman Empire wants to defend their currency, they need to step up their gold reserves to 30% as rumoured. Look at the correlation between the pound and their currency strength since the beinning of the BOE auctions. Your answer is right there in the chart. Don't think so, ask a Canadian.
should've bought those CD's in euros...
Coinguy
SHIFTY
(05/18/00; 22:24:18MT - usagold.com msg#: 30823)
Saudi Billionaire
Now this guy needs to buys some gold to balance his holdings.
Black Blade
(05/18/00; 22:19:43MT - usagold.com msg#: 30822)
Gold weakness could trigger return to hedging (From miningweb.co.az)
Lets hope that producers don't start up hedging in desperation. There is a ray of hope however. read on:
Renewed gold price weakness to near eight-month lows disappointed but did not surprise most UK and South African analysts. The metal fixed in London at $272.80 on Thursday (18 May) down from 273/oz the previous day.
Philip van Klapwijk of London consultancy, Gold Fields Mineral Services, says there simply isn't an ideal mix for a strong gold price at the moment. The approaching summer months in the Northern Hemisphere are usually quiet ones for gold demand while the next UK gold auction – another 25 tons will be sold – signals volatility in the price, Van Klapwijk says. He offered qualified comfort, however: "There's a chance gold will bounce back ... a little. There is usually physical support at $270 per ounce." GFMS forecast a trading band of $265-$305/oz in its annual review.
South African gold producers are comforted by the continuing weakness of their currency to the US dollar. One South African analyst said operating margins for local gold producers are now as good as in 1993/94, ranging between 25-30 per cent. However, a failure to control costs had put pressure on most South African gold producers. Cash costs increased at all but a few individual mines in the March quarter. This included operators such as Harmony Gold Mining Company which is renowned for its miserly cost control habits. Even Anglogold, the premier South African stock, suffered a poor March quarter.
He said the strength of the dollar, gaining on the 50-basis point increase in US interest rates rise, is not helping bullion. "Fundamentally, the gold market is very strong and very over-sold. But we expect gold to remain under pressure for some time. In any event, this is seasonally a bad time for gold," he says. The fear among dealers is that once through $270 per ounce, gold could collapse to about $260/oz.
Independent technical analyst, Clive Roffey, believes gold is ready to bounce: "The recovery is so close, I can smell it," he says. He believes bullion could smash through $330/oz, forecasting slight corrections along the way.
Hedging now tempting
A consequence of the weakening gold price will be the growing attractiveness of forward sales. A host of major gold producers, including Placer Dome, stepped back from their aggressive hedging policies believing limited forward selling was a tonic to the market from which all producers could benefit. But recent comments by Barrick's Peter Munk that hedging had in fact helped the market, captures the change in sentiment towards revenue protection.
"The contango has been north of five per cent for a while, and with US interest rates ticking up, it must be getting very attractive for some people to hedge," an analyst said. The contango was as much as six per cent a year in some cases. "There has been little producer hedging but as the contango becomes more attractive it is more tempting to lock things in," Van Klapwijk added. A report from Reuters quoted dealers saying that the Australian producers were most partial to forward sales. "Australian producers (were) expected to sell more forward gold if the Australian dollar continued its fall against the US dollar," the report said.
By: David McKay
SHIFTY
(05/18/00; 22:16:49MT - usagold.com msg#: 30821)
Saudi Billionaire buys Internet Stock
http://www.worldtribune.com/tout-3.html
Sorry for the bad link. This should do it.
$hifty
SHIFTY
(05/18/00; 22:11:47MT - usagold.com msg#: 30820)
Saudi Billionaire buys Internet Stock
http://www.worldtribune.com
$hifty
Elwood
(05/18/00; 21:58:13MT - usagold.com msg#: 30819)
USAGOLD (05/18/00; 21:04:27MT - usagold.com msg#: 30813)
I think ANOTHER would say look at the ECB. They do not raise their rates while the Fed rate increases accelerate. Which currency needs to be defended?
MK, I think that the Euro folks ARE purchasing gold. Just not publicly (yet).
Elwood
ORO
(05/18/00; 21:43:13MT - usagold.com msg#: 30818)
Henri - Re - Grabit concepts
My point regarding your post is this:
Government is not good at determining what "fair" is. For the government official, "fair" gets him more responsibility and authority with less accountability.
In the excercise you engaged in you kept a sense of subservience to government, as if saying "please do the right things" despite keeping powers that make for a strong disincentive to do so.
In common law, though the Judiciary is within the government, it is operated at the initial level by Juries and grand juries. They can disregard the legislation and the prosecutor's case and convict, acquit, indigt, release, or decide for defendant or plaintif according to their understanding of both the application of the statutes and whether the law is appropriate or not.
That we need to jump through so many hoops to reach a jury trial is a symptom of the diseased state of government as it tries to avoid equalization of the playing field in court - i.e. "fairness".
I guess that I feel you are accepting government as a general proxy for the will of the poppulace at large, and in some way representative of their interests. Quite frankly, it isn't either. The staffers of the mechanism for the excercise of violence are not suited for sympathy, sensitivity, fairness, etc.. They will do their utmost to "look good" to superiors, to the publc, etc. But will stay beholden to those who promise them a better future.
USAGOLD
(05/18/00; 21:35:44MT - usagold.com msg#: 30817)
oldgold
I agree that gold selling does not help currencies in the long run, and I think if you have read my stuff over the years you would see that this isn't a new position for me. The United States though sold roughly 12000 tons of gold if memory serves to keep the price of gold at $35. In the eyes of U.S. and British policy makers however, this was defending the dollar. In reality, the best defense of the dollar in the long run would have been to resist printing currency to purchase good overseas. Sound familiar? There's no limit to the shortsightedness of politician, or a political party, trying to get elected particularly if monetary policy can be used to grease the wheel.
At any rate, I thought I was very clear that I encourage the Europeans to purchase gold as a defense of the euro not sell it. My original question to Another was to gauge what Europe might be thinking at a time they were publicly debating the level of gold reserves in ECB. Following along the lines for a purpose for everything under heaven, I was curious why they wanted gold in their reserves in the first place.
Solomon Weaver
(05/18/00; 21:32:44MT - usagold.com msg#: 30816)
(No Subject)
http://www.simplex.co.il/fed/finetune.htm#t1
MK
Was just reading this link...I do not agree with all the author has to say...but he makes the interesting point that the real crash in stocks must be preceded by the weakening of the institutions supporting it.
oldgold
Yes I will agree with you...let's see a $50 spike in gold like we saw in September and see if lease rates jump up.
On the other hand, I am not sure if this "future" observation will prove today's correlation between gold lease rates and the liquidity available through leasing. (Isn't it one of Another's things to prove today by looking at the future??).
Just seems that TPTB in gold have a lot to gain by having the lease rates at historic levels....volatility in lease rates have been an indicator of the market (outside of paper and spot prices)...now with the world's hedgebooks looking like an old ball of silly putty is it not putty....
The liquidity that the lease rates provide is a liquidity which is also dependant upon the willingness of counterparties to step into either side of a lease....so if the rates are low, but the rate of new leasing is not high, this means that a factor outside of lease rates is controlling the willingness of large counterparties to "create liquidity" by "borrowing" gold.
Poor old Solomon
oldgold
(05/18/00; 21:18:07MT - usagold.com msg#: 30815)
USA Gold
I may be dense, but I cannot see how selling gold could help the Euro under any circumstances. European gold sales can only help the dollar.
oldgold
(05/18/00; 21:10:06MT - usagold.com msg#: 30814)
Solomon Weaver
Interesting speculation on gold lease rates and liquidity. But it remains just speculation at this point.
I for one will not buy the argument that low lease rates no longer imply high liquidity until I see a big jump in POG with lease rates remaining low. I very much doubt I will ever see that. But stranger things have happened under the sun.
USAGOLD
(05/18/00; 21:04:27MT - usagold.com msg#: 30813)
Poor Old Solomon. . ."Gold Will Take No Prsioners."
The euro is a trailblazer and it has taken the heat as a result. This business of nation building can be difficult at times, as we are seeing. Overall though I think they are on the right track despite some of the problems.
A long time ago, I asked Another if the Europeans would buy or sell gold to defend the euro. So far they have done neither. I wonder what he would say about this now. (??) I would suggest the ECB consider buying gold to defend the euro. Contributions from the nation states to ECB reserves are fine, but adding to the overall reserve would send a very clear message about the future of the euro as opposed to its competitors. There is a very clear message emerging that a private gold owner in Europe will benefit from his or her ownership should the euro falter and that this message is officially sanctioned -- far from the message U.S. policy makers are fostering here.
I note with relish that U.S. policy makers have stated publicly that this country is not a gold seller, that our gold reserve will remain intact. I think this is because of Europe's choice on reserves. We are at a watershed for gold and this has been frustrating to some of the goldmeisters as the past few years have seemed interminable, but the unwinding of the short gold position is going to take time, and gold will move once the central banks decide that its moving won't undermine its endangered counterparties and the system as whole. Once that is over, and we may be rapidly approaching that time, gold will move with a vengeance. As Robert Guy from Rothschilde said last year just before the Washington Agreement was signed, "Gold will take no prisoners."
To be sure, the Europeans are not holding gold because they think gold does not have a future. The United States is not making noise about a sacrosanct gold reserve because it believes there is no future role for gold in the official sector. To the contrary, they are holding it because they think it does have a future. The U.S. will have to compete someday in a tri-currency world and there are those in monetary policy community who understand this.
This will mean not only protecting the reserve we have but developing a policy to acquire the reserve we are going to need -- both here and in Europe. If the gold mining industry truly wanted to advance its future, it would not be sending $18 million (as the owners of Gold Avenue have recently announced) on a website, but $18 million to finance the political parties in the United States and Europe which are interested in advancing and expanding the euro concept of gold reserves. This is the real future for gold.
I no more believe that the euro is a failure at this point than I do that Europe is a failure. I think it is experiencing growth pains, and I think that Another is right: It will someday pick up some of the reserve currency load as the United States realigns its own currency to gold and deals with its debt problem. I think this is what G-7 is planning, and in the end it may be the best policy (if I'm right). For gold investors, this will mean a much higher dollar price someday. It will also mean a time of economic hardship in the United States as the adjustment is made, but not as bad as it would have been had the euro never existed. It will be dangerous time, but more hopeful for those who understand the nature of money. Those who own gold will be immune to the type of disaster that would occur if the above outlined attempt to stabilize the international economy fails. However, if we continue on the path we are now on, the future holds even more danger. A financial collapse would then come into the picture. Some would say, that we have already stepped foot on that road, never to return. I have not yet decided whether or not they might be correct.
YGM
(05/18/00; 20:59:13MT - usagold.com msg#: 30812)
Repost...Concerning Email Adresses Gov't & GATA
http://www.goldworld.net/rollcall.htm
From: Josh Wright <joshwright@g...> Date: Fri May 19, 2000 1:29am Subject: About GATA's Washington D.C. Ad
GATA's ad (Gold Anti-Trust Action)was originally
released on the internet in PDF format.
GoldWorld.Net created a HTML version of the original
text published in Washington D.C. in "ROLL CALL",
the paper most read by the U.S. Congress.
This HTML version added a few things to the original ad.
Namely the biographies, email addresses, phone numbers,
and websites of the politician this publication was
addressed to. I know we all was to encourage Congress
to do the right thing. All the contact information is
there so that they know we are here.
This document can be accessed at
http://www.goldworld.net/rollcall.htm
Also the GATA website has the ad, but
without the contact information.
http://www.gata.org/latest.html
Please contact these members of Congress.
Josh Wright
GoldWorld.Net webmaster
http://www.goldworld.net
Leigh
(05/18/00; 20:38:42MT - usagold.com msg#: 30811)
The Eloquence of Golds Revenge
http://www.sharelynx.net/temp/GoldsRevenge.htm
Golds Revenge's AMAZING poetry has been gathered by Sharefin into a beautiful webpage. If you love gold, you'll want to read this. Thanks, Flierdude, for posting the link.
Solomon Weaver
(05/18/00; 20:29:20MT - usagold.com msg#: 30810)
How to get Euro in IRA???
An investment question:
I currently hold a large portion of my IRA in a money market account....I want it there available so that I will have money to reenter the market later (only stocks I hold are NEM and PAAS).
Now that the dollar has done well against the Euro, I consider that denominating some of those funds into Euro would be good.
Is it better to buy Euro govt bonds or Euro corporate money market instruments. If so, any recommendations on specific "safe" holdings which a "stock broker" can buy.
Poor old Solomon
Solomon Weaver
(05/18/00; 20:20:15MT - usagold.com msg#: 30809)
tea time
WOW -- I gotta get some of that type tea !
Can you really see all that in those leaves ?
<;-)
......
I gotta get off the stuff....but it is not nearly as bad as some of the things I saw in my college days when we used to drink magic mushroom tea.
Poor old Solomon
Elwood
(05/18/00; 20:18:58MT - usagold.com msg#: 30808)
Second for JD
I'll add a second to USAGOLD's nomination for John Doe. It goes great with what I'm doing currently: trying to make my way through Volume 1 of Rothbard's "Conceived in Liberty."
John Doe (05/18/00; 17:51:10MT - usagold.com msg#: 30797)
Mr. Doe, I can't remember any previous posting you've made here, so welcome, friend.
Solomon Weaver
(05/18/00; 20:14:48MT - usagold.com msg#: 30807)
of John Doe and USA gold
MK
I am currently in the middle of re-reading the "Sovereign Individual"...which bears the central thesis that the use of global communications technology is a Metapolitical event which will force central governments to return to providing economic solutions...considering that as much as %50% of United States Federal Income tax is paid by the top few percent of "entrepreneurs" (those whose capital so far exceeds their needs that they will invest anywhere), and that the "gold standard" of debt instruments is the USA Treasury Bond, a very small portion of the population can make major changes.
When one understands the compelling arguments in this book, that although the details are unclear, the "weakening" of national activities seems to be in the cards, does it not seem obvious that any "legislation" to create "global religions and currencies" are only doomed to be washed away with the rising tide???
I see the Euro not as an attempt to "politicize" Europe into a "United States of Europe", but rather as an attempt to create a fiat currency which goes beyond the interests of a give nation...the learning curve on today's Euro will benefit the world as we strive for new fiat models (disconected from politics). The Euro is the "concept seed" of a future which can hold any number of separate Sovereigns (including individuals) under a single money...gold and other mechanisms will reinforce discipline. The dollar on the other hand is an attempt (through dollarization) to "cast a net of political influence" across the globe. In the end, the targets are the same...but as the zen teachers understand, the goal is the path itself...
poor old Solomon
Gandalf the White
(05/18/00; 20:03:33MT - usagold.com msg#: 30806)
Sol's Tea Leaves !
WOW -- I gotta get some of that type tea !
Can you really see all that in those leaves ?
<;-)
Solomon Weaver
(05/18/00; 19:51:50MT - usagold.com msg#: 30805)
Liquidity in the gold market
A few nights ago there was some discussion about how much liquidity there is in the gold market...a and that a low lease rate implied high liquidity.
This topic has been rolling around in my head these days...and now with my Earl Grey tea I am trying to read the leaves....
Can any of you out there follow this train of thoughts???
1. The "gold market" where "leases" are born is a "members only" kind of place....like belonging to the big gold trading country club.
2. GATA recently posted on how the gold derivatives position of J.P. Morgan has grown dramatically, and it has been postulated that Morgan was acting as a buyer of last resort helping many bullion banks unload out of the money gold short positions (restructuring the paper markets) and since Morgan had relocated to England it also serves as a way to move the dangerous elements of the gold paper markets offshore out of the regulatory hands of USA Govt.
". Then, during the last half of
1999, Morgan more than doubled its total gold
derivatives, taking them from $18.4 billion to $38.1
billion, amounting to 43 percent of the total for all
banks. What is more, Morgan's over-40-percent dominance
stretched across all maturities. In the fourth quarter
alone, it increased its gold derivatives with
maturities over one year by more than 80 percent to
$17.1 billion from $9.4 billion, which may well answer
the question of who sold Barrick the calls." Reg Howe
3. If this is the case with Morgan, and Morgan is holding a large short position (heavily laden with lease contracts), then Morgan is extremely exposed to dramatic increases in the Lease Rate...Let's be hypothetical and say that $15 billion dollars of Morgan's gold exposure is acutal leases...this would mean that a 1% increase in lease rates would cost them $150 million in a year.
4. So we have this huge concentration of gold carry trade being "consolidated" into one large place (that will allow a more simple bailout negotiation if needed, and will allow the bail out to focus on other non-gold positions as well).
5. Central Banks gain because J.P Morgan has helped reduce the risk of a single Bullion Bank defaulting and causing a stampede....so in exchange for this, they create a new "gold leasing market" where the "rules" are actually different....meaning that the "lease rate" which goes against Morgan's books is the "official (and low) lease rate...but anyone who really wants to lease gold will pay a higher rate.
6. Just like gold price is no longer a proxy for expectations about inflation, the gold lease rate is no longer a proxy for liquidity.
Poor old Solomon
USAGOLD
(05/18/00; 19:47:08MT - usagold.com msg#: 30804)
My dear -poor - old Solomon. . .
http://www.usagold.com/INFOPACKET.html
I think you would agree that this was particularly insightful:
"A global government will not work any better than a global religion would, and a global currency will not succeed any better than chopping down
every other type of plant in the jungle for the sake of a single one."
In Europe now, gold has been among the best currency plays not just for now but the future. We are beginning to see that as the euro goes down, gold will rise ( like the sunrise viewed by Dr. Moneywise on the cover of Gold Almanac 2000 -- to see it click on link above.) and take an ever more significant nominal position in euro reserves. If you owned gold in Europe, you have gained significantly because the gold price has risen and price on everything else has remained relatively stable (while the euro has fallen). And you do not have to hope for the U.S. government and economy to provide that strength. This policy I believe gives gold a special place in Europe -- in a monetary sense an inspired protection similar to the inspired, time-honored legal protections built into the U.S. constitution.
This is what our own Mr. Doe points to as the benefits of currency diversity.
So let's celebrate diversity!
Mr. Doe: Sorry to talk about you as if you weren't here. Once again, an excellent post.
Solomon Weaver
(05/18/00; 19:25:11MT - usagold.com msg#: 30803)
Second nomination for John Doe #30797
MK yes this is a very simple and clear post which deserves to be saved for future guests...
"A healthy, dynamic, evolving system requires a continuously varying multiplicity of inputs."""
John wouldn't it be nice if one of the inputs to today's system would be a real gold and silver market???
FYI in systems theory, a "healthy" system is one which has a wide set of boundry conditions outside its usual midpoint...for example...a healthy gold market could go to $1000...just like oil went from $10 to $30. An unhealthy system is one which becomes unstable even at conditions moderately distanced from the current condition.
Poor old Solomon
USAGOLD
(05/18/00; 19:21:02MT - usagold.com msg#: 30802)
By the way. . .
The posting today has been extraordinary. I mentioned as much to Townie earlier today -- and out of the clear blue, for no apparent reason that I can put my finger on. My compliments to today's participants. It's been a special day. It seems this Forum has a rhythm of its own detached from the markets or any other external factor I can put a finger on.
Thanks. And special thanks to all the new members who've pulled a chair to this Table Round.
I would direct all to take note on the movement in the CRB and the building of the inflation phenomena seemingly beneath the radar. Oil went over $30 today. Platinum up almost $20 today. Commodities are moving up. Got permission today from James Turk to use a new article he has written on inflation in the commodity sector. We'll get it up at the Gilded Opinion as soon as possible. Mr Turk says: ". . .the run-up in CRB cannot easily be blamed on bad weather, poor crops or oil embargoes. We are seeing a fairly broad-based rise in the index, which can really mean only one thing -- the Dollar is being inflated."
He concludes: ". . .I think the big jump in the Gold price will probably begin in the last half of the year."
Watch for his in-depth treatment of the subject at a GILDED OPINION near you .......soon.
Solomon Weaver
(05/18/00; 19:15:37MT - usagold.com msg#: 30801)
(No Subject)
http://washingtonpost.com/wp-dyn/articles/A63590-2000May13.html
The slow pfffffft of a "stock market collapse"
Link has some data on up days vs. down days...
HI - HAT
(05/18/00; 19:12:34MT - usagold.com msg#: 30800)
Journeyman Parts 1 ; 2 ; 3
Thankyou for all your effort. It is very GOOD stuff.
To me what you have written about will always be immortalized in how the Capitolists operated and acted towards the Free Marketeers in Atlas Shrugged.
The mind set and honoring of clean achievement in Galts Gutlch was a delicious symghony that elevates Man to on high.
Gold was revered.
A toast to you, and to everyone in Galts Gultch.
The simple ways are what makes way for the Glory.
USAGOLD
(05/18/00; 19:06:07MT - usagold.com msg#: 30799)
Hall Nomination. . .
I would like to nominate John Doe's #30797 for the Hall of Fame...Hardly a John Doe rendition in my book, but the sort of insight that puts the flame on the candle. Thank you , John Doe. Is there more where that came from?
Looking for seconds............
Elwood
(05/18/00; 18:36:22MT - usagold.com msg#: 30798)
Free Markets, Capitalism
Market - an environment created for the purpose of exchange
Free Market - a market devoid of intervention
Capitalism - a social system based upon private ownership of the means of production.
John Doe
(05/18/00; 17:51:10MT - usagold.com msg#: 30797)
Journeyman
"Or, a little less harshly, a capitalist is someone who wants to buy from a free market, but sell into a restricted (protected) market, where he/she is protected from competition."
I like this, as it reminds one of the vertically integrated monopolies of Old, which apparently have never left us. They've just learned to better work the system they've always controlled to yield more palatable "perceptions" among the general populace. Both verticality and monopolism have been downsized, virtualized, and decentralized. They still remain, de facto, but not in hard copy form that one can easily point to and demand redress and reform.
Monopolism is, was, and always will be the heart of the matter. What are Fascism and Communism but the utter, bald-faced, Totalitarian monopoly of political and economic thought? Freedom and Monopolism are, were, and always will be diametrically opposed. Any monoculture is stifling, inherently counter-productive, and doomed to destruction. Yet, the current moneyed interests and power-hungry never cease to see or admit this situation. Rather than designing and implementing equitable, sustainable systems, they instead endlessly pursue various forms of monopolism in wave after wave of failure and destruction, all in the name of temporary (or lineal?) advantage.
A global government will not work any better than a global religion would, and a global currency will not succeed any better than chopping down every other type of plant in the jungle for the sake of a single one. A healthy, dynamic, evolving system requires a continuously varying multiplicity of inputs. Nature tells us as much and, in my opinion, nature has it exactly right. Good government needs a two-way flow of corrective feedback and new ideas and the free means to inspect, select, and apply the corrective feedback and new ideas. Likewise, a healthy economic and monetary system requires multiple viable choices among freely operating investment vehicles, stores of wealth, and transmissions of value. What passes for Capitalism these days actively and forcefully subverts both the proper functioning of a rational, viable governance and a long-term, sustainable, equitable economic and monetary system.
Enjoyed your dissertation on Capitalism, you are now promoted to Master. :o)
TownCrier
(05/18/00; 17:48:36MT - usagold.com msg#: 30796)
Of Herculean dollars and the crouching euro...a play in two acts
http://biz.yahoo.com/rf/000518/l18148205_2.html
ACT ONE -- Whither goes the dollar and company?
Marshall Gittler, head of global currency risk at Bank America in Hong Kong was qoted by Reuters: "People who lived through the collapse of the bubble in Japan are worried that the U.S. equity market is about to collapse. They've been burned so many times by taking positions in foreign assets only to see the yen move 10, 20 percent in a week. They don't have any confidence in a long-term uptrend for the dollar...and are simply conservative in their international investment outlook." Reuters buttresses that sentiment with a report that five of Japan's largest life insurers had abandoned plans to shift around 900 billion yen offshore in foreign investments, opting instead to reduce forex risk.
So while the Fed tries to bolster the dollar with the highest interest rates seen in nearly 10 years, New Zealand tried to follow suit with their own 0.5% rate hike, but their dollar is bouncing along at 15 year lows. Similarly, the Bank of Canada raised rates only to see their currency falter also. A U.S. bank dealer in Tokyo told Reuters, "The feeling is that no one can keep up with the tightening going on in the U.S. and if they try, it'll be the ruin of their economies."
ACT TWO -- Does euro-land fret with the rest?
European Central Bank President Wim Duisenberg said he was vigilant, but not overly concerned about the euro's external exchange and the risk of imported inflation. As he explains it, 85% of all trade (imports and exports) by euro members were among each other, meaning that the euro exchange rate affects only 15 percent of all trade flows.
There's a deep monetary/economic lesson in there, somewhere.
Leland
(05/18/00; 17:32:05MT - usagold.com msg#: 30795)
Just Plain, Simple Truth...Kudos to Bill "Fleck"
"Every week
the national debt is published in
the back of Barron's, and if you
look at where we are this year versus last year, routinely we're about $100
billion higher, even as the government claims we're running a surplus; some
weeks it's less, some weeks it's more. At any rate, a few readers got the
idea that I was saying we add $100 billion to the debt each and every week,
which would annualize to $5.2 trillion. That would clearly be a serious
problem, since that's about the total size of the current national debt. I hope
this clears up any confusion: We are increasing the national debt at a rate
that's in the neighborhood of $100 billion annually, and the rate can be
checked every week."
SHIFTY
(05/18/00; 16:09:33MT - usagold.com msg#: 30794)
PONZI
Nasdaq 3,538.71 + Dow 10,777.28 = 14,315.99 divide by 2 = 7,157.99 Ponzi
Down 49.36 Ponzi points!
TownCrier
(05/18/00; 15:55:13MT - usagold.com msg#: 30793)
Give thanks to the FOREX and COMEX!
http://www.usagold.com/onlinestore/special.html
Blessed by the trading action on the foreign exchange (currency) markets, and by the appropriate disinterest in CONTRACT "gold" on the New York Commodity Exchange, the dollars in our pockets may now be exchanged for a greater quantity of gold than it could fetch just a few short days ago. So while the various coins and bars remain as yellow, as heavy, and as intrinsically valuable as they ever have, a given quantity of dollars today may be exchanged for more of the precious metal than they could when this week began.
To wit, our special on-line offer of German 20 mark gold coins has been amended to reflect this herculean dollar, and the exchange rate is now $76 per coin. The decision to act, or not, on these developments is entirely up to you.
"You have to choose (as a voter) between trusting to the natural stability of gold and the natural stability and intelligence of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold." --George Bernard Shaw (1856-1950)
lamprey_65
(05/18/00; 15:28:04MT - usagold.com msg#: 30792)
From Bridge News...
NYMEX, 15 traders sue NYBOT, NY Clearing Corp, Klein: NYMEX
New York--May 17--The New York Mercantile Exchange (NYMEX) and 15 of its members Wednesday filed a class action complaint seeking a temporary restraining order and injunctive relief to block the New York Board of Trade (NYBOT), New York Clearing Corp (NYCC) and Klein & Co Futures Inc from using innocent third party customer funds to meet margin obligations on the NYBOT. (Story .21057)
Comments?
Hill Billy Mitchell
(05/18/00; 15:28:01MT - usagold.com msg#: 30791)
Official release
http://www.bog.frb.us/releases/H15/update/
Official: Federal Reserve Statistical Release
Release Date: May 18 2000
Rates For Wednesday, May 17, 2000
Federal funds 6.25
Treasury constant maturities:
3-month 6.05
10-year 6.48
20-year 6.58
30-year 6.18
upside-down spread FF vs long bond = (.07%)
Journeyman
(05/18/00; 14:41:49MT - usagold.com msg#: 30790)
Apologies @Aragorn III
King Aragorn III (I'm not completely unaware of your lineage), I didn't intend to dissect your excellent post so unceremoniously. I tend to get sucked into the details, as you so accurately observed. I have, as have you, recognized that some of the posters here have unresolved conflicts in their thinking, especially about short-term wealth parking alternatives, governments, and other things. Your post teased many of these out into the open. Perhaps your message got through where mine have failed.
High regards,
Journeyman
Journeyman
(05/18/00; 14:12:32MT - usagold.com msg#: 30789)
Capitalism vs. free markets Part 1, @gidsek msg#: 30750, HI - HAT, ALL
"If you have a mind to Journeyman, I'd be interested to hear you
draw a distinction between capitalism and free markets. Seeing
you contrast the two as you have done made me realize that I
can't define the difference properly." -gidsek msg#: 30750
Sir gidsek, you're not the only one with difficulties in
distinguishing between "capitalism" and "free markets." It's
taken me decades of sporadic reading and thinking to straighten
it out for myself. I'm sure others "got it" quicker, but, well,
we all proceed at our own chosen speed. The fact this
distinction isn't widely understood explains a great deal of the
confusion in the economic and political arenas.
Free market is the easy part. A free market is a
theoretical geographical area in which people can trade
anything they own for anything others own and are willing to
trade --- and at what ever "price" they agree to without any
coercion --- and no interference by ANY unwanted third parties in
any way what-so-ever. No rules, regulations, orders, or
controls. No taxes. No protections for either "buyers" (those
with "money" to trade) or sellers (those traders who want to
trade FOR "money") unless they agree to such between (or
among) themselves.
As I think you can see, we don't have any free markets in
the united States, except perhaps in the case of private
transactions that ignore all the rules, regulations, orders and
controls - - - and don't pay any sales taxes to unwanted third
parties. We here in the freest country in the world have
something else. What we have is capitalism.
Free markets have NEVER been very popular, particularly with
establishment businesses. These businesses have their reasons.
The word "capitalism" was coined by Karl Marx as a pejorative
term aimed at the ways he observed many businesses, especially
the bigger ones, functioning in his day. They still function in
a similar fashion.
Ironically, Adam Smith, THE father of free trade and author of
"Wealth of Nations" ran head-on into similar observations more
than a century before, causing him to burn the latter portion of
his life's work just before his death, apparently in disgust.
What did these two men with very different political agendas see?
What they saw was the results of businesses, when ever
possible, using all sorts of manipulations, the most
effective requiring government complicity, to defeat free
markets and the inherent competition free markets, by their
nature, guarantee. It's my contention that it was this
business-government matrix and it's results that underlay
both Marx's perceptions and Smith's disgust. U.S. President
Dwight David Eisenhower apparently saw the same type of thing
himself when he warned in his farewell address of the "military-
industrial complex." This is just a subset of the "government
industrial complex."
This all sounds somewhat innocuous, but a look at some early
examples will give you an idea of just how seriously people
dislike free markets and free trade.
"_(h) The countryside was cut out of trade in the Middle
Ages._
'Up to and during the course of the fifteenth
century the towns were the sole centers of commerce and
industry to such an extent that none of it was allowed
to escape into the open country' (Pirenne, _Economic
and Social History_, p.169). 'The struggle against
rural trading and against rural handicrafts lasted at
least seven or eight hundred years' (Heckscher,
_Mercantilism_, 1935, Vol. I, p. 129). 'The severity of
these measures increased with the growth of 'democratic
government' . . . .' 'All through the fourteenth
century regular armed expeditions were sent out against
all the villages in the neighborhood and looms or
fulling-vats [in which cloth was dyed] were broken or
carried away' (Pirenne, _op.cit_., p. 211)." -Karl
Polanyi, _The Great Transformation_. (Boston: Beacon
Press 1957), p. 277
Seven or eight centuries of "struggle against rural trading," not
to mention a century of loom-stealing and vat- smashing does seem
to indicate a rather serious dislike, don't you think?
The government's payoff is it gets to use businesses as it's tax
collectors. In America today, for example, who collects sales
tax? Who collects so-called income tax? Who collects FICA
(Federal Insurance Contributions Act or "Social Security") tax?
Journeyman
(05/18/00; 14:11:14MT - usagold.com msg#: 30788)
Capitalism vs. free markets Part 2, @gidsek msg#: 30750, HI - HAT, ALL
Things are more underground, more civilized today, but the same
anti-competition practices and government complicity
are still there. Today, however, they're more circumspect and
the most effective are hidden under the ruberic of
"regulation" and "consumer protection." Yes, I know that's
perverse, but it works better for them that way. A few
examples:
"[U]nder the licensing provisions," says Rep. John
Dingell, chairman of the House Energy and Commerce
Committee, "we give the broadcasters an absolute
federally supported and sustained monopoly which
denies anybody else the right to broadcast who
does not have a license." -"The 'Fairness
Doctrine': Keep It Buried!" by Jorge Amador, THE
PRAGMATIST, Feb. 1994, pg. 10
"Essentially airline regulation was an organized
attempt to keep out competition." -Alfred Kahn,
chairman and chief architect of the Civil Aeronautics
Board (CAB), from an episode of "Economics USA"
produced by the Annenberg CPB project, aired on NJN
920705 [CAB was the bureaucracy which regulated airline
fares and routes. ed.]
*Bill recasts phone, cable law* Senate allows firms to
offer competing services By Barbara Woller -USA TODAY,
JUNE 16-18, 1995 front page headlines
All organizations fear competition because it could put them out
of business if someone else satisfies their customers
better - - - or for that matter, if the product they produce goes
out of fashion. And I do mean ALL organizations:
The Russian Orthodox Church got a bill through the
Russian Parliament prohibiting "foreign" missionarys
because Billy Graham, etc. are luring Russians away
from the Russian church. Yeltsin hadn't signed the
bill yet. -CNN, July 15, 1993
He signed it later.
The way to run a pyramid company was defined by AMWAY, when after
being harrassed by the government, it finally went to AMWAY for
the regulations governing operations of such a company. Needless
to say, AMWAY gave ITS rules, which now constrain all AMWAY's competitors.
The practice of government going to the biggest in an
industry for the blueprint for "regulating" that industry is now
standard operating proceedure.
Journeyman
(05/18/00; 14:08:46MT - usagold.com msg#: 30787)
Capitalism vs. free markets Part 3 @gidsek msg#: 30750, HI - HAT, ALL
In short, to Adam Smith's chagrin and Karl Marx's delight,
businesses and governments work together, defeating free
markets in all sorts of ways. While this has always been
"the way of the world," it's now comming out of the closet:
The media officially dubs Japan "Japan Inc."
"The United States needs a new kind of capitalism
as they already have in Germany, Canada, and
Japan, where there is close cooperation between
business and government." -John Chancellor
commentary, CBS's _Sunday TODAY_, November 10,
1991
"Ross Perot wants to move into the twenty-first
century and, like the European countries, have a
partnership between business and government where
government helps business compete." -Perot's
designated surrogate on _Good Morning America_?,
Friday October 30, 1992
It was reported today that the sale of a large
number of jumbo jets to Saudi Arabia has become a
contest between French and American aero-space
companies. President Bill Clinton intervened in
the negotiations on behalf of the American
companies, McDonnell Douglas and Boeing. -CNN,
21 Aug. 1993
The Republicans shouldn't cut foreign aid because
80% of it goes directly to American companies
operating overseas. -pro foreign aid spokesman,
C-SPAN 24 May 1995 ~~0800
The Central Intelligence Agency is stepping up
efforts to discover "who in foreign countries is
bribing who else in order to get contracts that
American companies are losing." according to James
R. Woolsey, the CIA director. -International
Herald Tribune, Hong Kong, Wed. Dec. 18, 1993, pg.
3
"The Japanese have now seen that US business is in
partnership with the US government, and they had
better sit up and take notice." -Lee Iococca
after Jan. 1992 trip to Japan with George Bush and
other US Auto CEOs
The Clinton administration announced a joint venture
with auto makers to develop a more efficient gasoline
engine. -CNN Sept. 29, 1993 ~14:32 EST
*PHOENIX -- Twentieth Century Fox will launch an
animation* division by building a $100 million studio
that will employ 300 people here. The state has
committed $300,000 to train workers. -*USA TODAY*,
Aug. 3, 1994, pg 6A
*SIOUX FALLS [South Dakota] -- State officials pledged
$1 million a year in annual* debt reduction for the
next 10 years to keep meatpacker John Morrell and Co.
in Sioux Falls. -*USA TODAY*, NOVEMBER 11, 1994, pg 4A
"Partnerships between business and labor need to
be translated from local agreements into national
policy." -Speech by Bill Clinton July 26, 1993
from CNN
"There is a coalition between old line Russian
communists and industrialists," according to
_McNeil Lehrer News Hour_. "Industrialists [i.e.
the commisars who ran the state enterprises
before] are real partners in the Russian
Government now." -Yeltsin cabinet minister,
_McNeil Lehrer News Hour_, November 30, 1992
If you've been thinking "fascism" here, give yourself five gold
stars. That's right, I'm suggesting that "capitalism," is, as
Marx suspected, a somewhat mild and early stage of
fascism. Of course "communism," fascism from a different
direction, didn't exactly foster free markets either.
That's right, neither fascists nor communists like free
markets or free trade. Once govenments take hold, societies
always evolve towards one or another form of fascism.
What's NAFTA and GATT all about then, you ask? Well, they CLAIM
to be about free trade. In reality and true to fascist form,
they've been perverted into an attempt at _equally restricted_
trade.
Conclusion: The only connection between free markets and
"capitalism" is that "capitalists" ingenuously claim they
like free markets, while at the same time taking every
opportunity to destroy them, or to encourage governments to do it
for them.
Or, a little less harshly, a capitalist is someone who wants to
buy from a free market, but sell into a restricted (protected)
market, where he/she is protected from competition.
Regards,
Journeyman
Journeyman
(05/18/00; 13:31:38MT - usagold.com msg#: 30786)
Ah, sorry folks!
I've been trying to send that post, as you may unfortunately discover, since early this morning. I don't know what keeps going wrong, but, well, just ignore the earlier versions. Since we have a LIFO [Last In, First Out] forum format here, you will encounter them further down.
Apologies,
Journeyman
YGM
(05/18/00; 13:25:52MT - usagold.com msg#: 30785)
Bank Derivative Exposure 1995 & 1999
What Banks are Safe......
Remember when Gold started it's manipulated downward trend...1995 right after the Bre-X fraud perpetrated by JP Morgan standing behind the fall guy...David Walsh Bre-X Pres..........The opening salvo in Gold Bashing and the beginning (IMNSHO) of the Great Gold Caper......
Well @ 4th Q /95 Banks held $16.86 Trillion in Notional Amount of Derivatives exposure...
....@ 4th Q /99 the same banks held $88.2 Trillion...
..If Gold goes North, many Banks would fail due to the various Derivative instruments they've over exposed to......Some Banks have exposure value 100's of times over their asset base........
Better believe Greenspan when he says that institutions are never too big to fail and that the bailouts are NOT a fact of life.....Do you know the exposure of your own Bank????? Find out for the sake of your financial future. ......YGM
Journeyman
(05/18/00; 12:46:13MT - usagold.com msg#: 30784)
Capitalism vs. free markets @gidsek msg#: 30750, HI - HAT, ALL
"If you have a mind to Journeyman, I'd be interested to hear you
draw a distinction between capitalism and free markets. Seeing
you contrast the two as you have done made me realize that I
can't define the difference properly." -gidsek msg#: 30750
Sir gidsek, you're not the only one with difficulties in
distinguishing between "capitalism" and "free markets." It's
taken me decades of sporadic reading and thinking to straighten
it out for myself. I'm sure others "got it" quicker, but, well,
we all proceed at our own chosen speed. The fact this
distinction isn't widely understood explains a great deal of the
confusion in the economic and political arenas.
Free market is the easy part. A free market is a
theoretical geographical area in which people can trade
anything they own for anything others own and are willing to
trade --- and at what ever "price" they agree to without any
coercion --- and no interference by ANY unwanted third parties in
any way what-so-ever. No rules, regulations, orders, or
controls. No taxes. No protections for either "buyers" (those
with "money" to trade) or sellers (those traders who want to
trade FOR "money") unless they agree to such between (or
among) themselves.
As I think you can see, we don't have any free markets in
the united States, except perhaps in the case of private
transactions that ignore all the rules, regulations, orders and
controls - - - and don't pay any sales taxes to unwanted third
parties. We here in the freest country in the world have
something else. What we have is capitalism.
Free markets have NEVER been very popular, particularly with
establishment businesses. They have their reasons.
The word "capitalism" was coined by Karl Marx as a pejorative
term aimed at the ways he observed many businesses, especially
the bigger ones, functioning in his day. They still function in
a similar fashion.
Ironically, Adam Smith, THE father of free trade and author of
"Wealth of Nations" ran head-on into similar observations more
than a century before, causing him to burn the latter portion of
his life's work just before his death, apparently in disgust.
What did these two men with very different political agendas see?
What they saw was the results of businesses, when ever
possible, using all sorts of manipulations, the most
effective requiring government complicity, to defeat free
markets and the inherent competition free markets, by their
nature, guarantee. It's my contention that it was this
business-government matrix and it's results that underlay
both Marx's perceptions and Smith's disgust. U.S. President
Dwight David Eisenhower apparently saw the same type of thing
himself when he warned in his farewell address of the "military-
industrial complex." This is just a subset of the "government
industrial complex."
This all sounds somewhat innocuous, but a look at some early
examples will give you an idea of just how seriously people
dislike free markets and free trade.
"_(h) The countryside was cut out of trade in the Middle
Ages._
'Up to and during the course of the fifteenth
century the towns were the sole centers of commerce and
industry to such an extent that none of it was allowed
to escape into the open country' (Pirenne, _Economic
and Social History_, p.169). 'The struggle against
rural trading and against rural handicrafts lasted at
least seven or eight hundred years' (Heckscher,
_Mercantilism_, 1935, Vol. I, p. 129). 'The severity of
these measures increased with the growth of 'democratic
government' . . . .' 'All through the fourteenth
century regular armed expeditions were sent out against
all the villages in the neighborhood and looms or
fulling-vats [in which cloth was dyed] were broken or
carried away' (Pirenne, _op.cit_., p. 211)." -Karl
Polanyi, _The Great Transformation_. (Boston: Beacon
Press 1957), p. 277
Seven or eight centuries of "struggle against rural trading," not
to mention a century of loom-stealing and vat- smashing does seem
to indicate a rather serious dislike, don't you think?
The government's payoff is it gets to use businesses as it's tax
collectors. In America today, for example, who collects sales
tax? Who collects so-called income tax? Who collects FICA
(Federal Insurance Contributions Act or "Social Security") tax?
Things are more underground, more civilized today, but the same
anti-competition practices and government complicity
are still there. Today, however, they're more circumspect and
the most effective are hidden under the ruberic of
"regulation" and "consumer protection." Yes, I know that's
perverse, but it works better for them that way. A few
examples:
"[U]nder the licensing provisions," sa
YGM
(05/18/00; 12:21:29MT - usagold.com msg#: 30783)
Lamprey_65......Oil/Gold Equation?
GUNS=OIL + OIL=GOLD + GOLD=MORE GUNS....
Vicious circle.........Go for the Gold & forget the oil.....Guns are for protecting Gold, not acquiring it (smile)....YGM
lamprey_65
(05/18/00; 12:19:17MT - usagold.com msg#: 30782)
Oh, yes...of course
The equation could also remain the same if the price of oil were higher in dollars.
Crude now back over $30 a barrel as I write this!
lamprey_65
(05/18/00; 12:11:45MT - usagold.com msg#: 30781)
Gold for Oil
IF an arrangement exists regarding gold for oil, I would expect any such equation to mean that the higher the dollar, the lower the price of gold priced in dollars or the equation would have to be changed. Of course, changing the equation would necessitate more gold per barrel.
Anyone have any thoughts on what this equation might look like?
YGM
(05/18/00; 11:40:22MT - usagold.com msg#: 30780)
Mind Boggling or What....
http://www.bis.org/press/index.htm
Press Releases
<Picture>
BANK FOR INTERNATIONAL SETTLEMENTS
CH-4002 BASLE, SWITZERLAND
Press releasePress enquiries: +41 61 / 280 81 88
Ref. No.: 14/2000E
18 May 2000
The global OTC derivatives market at end-December 1999
The BIS is releasing today its semiannual statistics on positions in the global over-the-counter (OTC) derivatives market for end-December 1999. These statistics constitute the fourth set of data released under a new regular reporting framework on OTC market activity. They include the notional amounts and gross market values outstanding of the worldwide consolidated OTC derivatives exposure of major banks and dealers in the G10 countries (see attached tables)1.
After adjustment for double-counting resulting from positions between reporting institutions, the total estimated notional amount of outstanding OTC contracts stood at $88.2 trillion at end-December 1999, an 8% increase over the $81.5 trillion reported for end-June 1999. This represents a significant acceleration relative to the first half of 1999, when business had expanded by a mere 1% from the previous half-year. Similar growth patterns have been reported by other surveys of OTC market activity2.
The return to growth of the OTC market was essentially concentrated in the interest rate segment, with an increase in outstanding contracts of 11% over the previous half-year period (to $60.1 trillion). By contrast, there was a further contraction of foreign exchange instruments, which declined by 4% (to $14.3 trillion). The reduction of activity in this segment had been particularly pronounced in the first half of last year (17%), in the wake of the introduction of the single European currency. The much smaller equity-linked and commodity segments expanded the most rapidly of all underlying risk categories, with increases of 20% and 24% respectively (to $1.8 trillion and $0.5 trillion).
While the acceleration of activity in the interest rate compartment was fastest in the swap markets (15% to $43.9 billion), the expansion of business in the option market was fairly sustained (10% to $9.4 trillion). The forward rate agreement market, which had experienced a sharp increase in the first half of 1999, contracted (by 5% to $6.8 billion). Thus the reduced rate of growth seen in the first half of 1999 can be attributed to this unwinding having run its course. However, it also reflected the introduction of the euro. The expansion of euro zone instruments slowed sharply relative to the previous reporting period (to 6% from 21%) as the introduction of the single currency eliminated interest rate arbitrage activity between the various legacy currency segments. Of note, business in the US dollar returned to rapid growth (to 17% from 4%). The reduced presence of leveraged funds appears to account for a redistribution of activity among counterparties back towards the group of reporting dealers (50%).
The most recent data on the OTC interest rate market confirmed the rapid development of non-dollar instruments. Indeed, while euro- and yen-denominated contracts accounted for the bulk of market expansion, the increase in dollar business was marginal. This enabled the euro-denominated sector to increase in size and reinforce its lead over the US dollar segment (34% of outstandings versus 27%). The lethargic pace of activity in the latter segment is somewhat difficult to reconcile with reports of growing use of interest rate swaps as hedging and positioning alternatives to US Treasury securities, and of brisk millennium-related activity. The withdrawal of certain US-based financial institutions since the crisis in the second half of 1998, the paring down of market-making capital by some institutions and/or the adoption of more conservative risk management policies might have reduced market liquidity and, therefore, hampered business. The data for the second half-year also show that the swap market remains the preserve of financial institutions. Such entities (both reporting dealers and other financial institutions) accounted for all of the increase in activity in the second half of 1999 and for 91% of outstanding contracts. Positions involving non-financial customers increased marginally. In fact, in spite of the buoyancy of capital market activity, such users have barely increased their recourse to the swap market since the BIS began its survey of OTC markets.
In the area of currency instruments, the stock of outright forward and forex swap contracts was stable following the sharp drop resulting from euro-related consolidation in the previous period. This was not the case with the stock of currency options, which declined for the fourth consecutive half-year period. Meanwhile, business in currency swaps continued to exhibit a steady upward trend. A look at the currency breakdown for all types of foreign exchange positions reveals that activity moderated in contracts involving the three major world currencies, with the most pronounced decline being in yen contracts. Although the review period was marked by rising currency volatility, which could have been expected to fuel turnover, the steady strengthening of the yen against the two other major currencies might have led to a drying-up of some option products involving the yen, such as barrier options3. Moreover, the lower level of activity in currency derivatives might also have been the result of subdued business in the underlying markets. Informal estimates by market participants suggest that there has been a sizeable decline in foreign exchange turnover in the major centres since autumn 19984. As in the market for interest rate products, the share accounted for by financial institutions rose further.
The equity-linked sector revived in the second half of last year, with growth in outstandings of 20% (to $1.8 trillion). Business is likely to have been fuelled by the very strong performance of global equity markets during the review period. The most striking development in this market sector was the particularly pronounced increase in business with non-financial customers.
Commodity derivatives markets were also highly active, with outstandings rising by 24% (to $548 billion). Transactions involving gold, the largest single component of the commodity derivatives market, were particularly buoyant. The review period was eventful for the broader gold market. The metal's price, which had followed a downward trend for much of the year, rose sharply in late September following an agreement among central banks limiting official gold sales over the next five years.
Estimated gross market values in the second half of 1999 rose by 7% (to $2.8 trillion) but their share of reported notional amounts remained stable at 3%. Such values exaggerate actual credit exposure since they exclude netting and other risk reducing arrangements. Allowing for netting, the derivatives-related credit exposure of reporting institutions was much smaller ($1 trillion).
------------------------------------------------------------------------
1The notional amount, which is generally used as a reference to calculate cash flows under individual contracts, provides a comparison of market size between related cash and derivatives markets. Gross market value is defined as the sum (in absolute terms) of the positive market value of all reporters’ contracts and the negative market value of their contracts with non-reporters (as a proxy for the positive market value of non-reporters’ positions). It measures the replacement cost of all outstanding contracts had they been settled on 31 December 1999. The use of notional amounts and gross market values produces widely divergent estimates of the size of the overall market and of the various market segments.
2For example, data released by the International Swaps and Derivatives Association show that the outstanding stock of interest rate swaps, currency swaps and interest rate options grew by 11% in the second half of 1999. This was appreciably faster than in the first half of the year, when business had expanded by only 3%. Quarterly data published by the US Office of the Comptroller of the Currency on holdings of derivatives by US banks (largely OTC contracts) also showed more rapid growth in the second half of 1999, to 5% from zero growth in the first half.
3A barrier option is an option for which the payoff pattern and survival to expiration depend not only on the final price of the underlying but also on whether the underlying will reach or go through a set price (barrier) during the life of the option.
4See "A look at trading volumes in the euro", BIS Quarterly Review, February 2000, pp. 33-35.
ss of nep
(05/18/00; 11:36:40MT - usagold.com msg#: 30779)
Some of you may like this.
http://www.silentbrowser.com
Date: Thu May 18 2000 11:45
gwyz (Surf the Web with total privacy\anonymity...) ID#44161:
http://www.silentbrowser.com
- - - -
Have Gold - Will Travel
YGM
(05/18/00; 11:17:10MT - usagold.com msg#: 30778)
Support a Fellow Gold Advocate and GATA Soldier..
http://www.egroups.com/subscribe/GoldWorldNet?referer=1
Josh Wright of Gold WorldNet site has given us another venue to vent and share info....Gold World is not in competition w/ MK & USA Gold so we may want to drop in & leave a comment or two...to my way of thinking there's never too many places for Gold Bugs to hang out and this is just one more......I'm sure we can all support this effort and see where it leads.......Just another Trail in the Gold Hills......Go GATA
......YGM.
Henri
(05/18/00; 11:14:55MT - usagold.com msg#: 30777)
ORO - On currency
Note: In my defense, I did stipulate the terms of your comment see#7
SNIP
7) Allow the people to own the money as was intended by the US Constitution. This would require the repeal of the Federal reserve act.
UNSNIP
Henri
(05/18/00; 11:08:17MT - usagold.com msg#: 30776)
ORO
Thank you for the engagement on these issues.
Yes you are right. The terms of any contract should be those agreed by the participants. I used the example of gold as an easily recognizable representation of a thing of enduring value. A formidable estate as collateral however would need to have some further agreement as to how it would be liquidated protioned off or otherwise.
I only meant to present how I thought things could work given the representation of wealth as gold coexisting with an overlay of mandated currency usage. Certainly, in a land of opportunity the mandate to use a currency at all is suspect to be sure.
That is why I stipulated what I considered to be good credit as the escrow of funds 10X the amount drawn on the line of credit or the actual borrowing of only 10% of the allowed creditline. This allows margin for error in the "valuation" of the underlying asset in currency terms ("funny business" by the authority). The marking to market on disposition of the escrow, if it is not paid off in currency and must be relinquished to the loaner of the currency, makes it capital "at risk". This procedure I did not mean to "codify", I only presented what I thought would be a prudent course of action for myself and my own assets.
If there is a structure that enforces contract law, then those who write contracts in that jurisdiction should supply the monetary support of that structure. "protection money" and an escrow lending agreement is a contract for sure.
It would be nice if they would have said "...shall pass no laws. But that would not have been too realistic as the ingenuity of man to work any "system" is all to real.
ORO
(05/18/00; 10:41:51MT - usagold.com msg#: 30775)
Henri - Commodity money, tar and feathers
The solution to Aragorn's question has been there forever.
Leave government outside the decisions respecting money.
Let people decide how to contract with each other, how to bank, how to borrow how to lend, and most of all: to decide in what units they would like to do so. Government should only enforce contracts as they are written, holding bankers to their promisses and allowing them the positive and negative consequences of their judgement.
People do not need the patronage of government to make their decisions. They can hire debt rating agencies. If the rating agencies fail, they would be able to compete on the merits of their record and when they do not do their job "on purpose" they should be prosecuted for breach of contract and for fraud.
I propose that government have no choice but to accept as legal tender what people have chosen to use as money and do so at the exchange rates and proportions in which the money is used in trade, debt, and cash holdings. Government should have no choices in the matter. A choice would imply that government has a possible preference. A preference is a policy. All government policy is suspect, and government should not be allowed to have such dangerous discretion.
Follow these principles:
The best currency is no currency.
The best debt contract is the one into which both sides entered with full understanding of what they are doing.
The best money is that which people choose of their own accord. It may - or may not - end up being gold and silver. One should remember that both these metals were the choices of governments made under the influence of bankers. Who knows, the "monetary basket" may include S&P depositary receipts or Wilshire Total Market Index units along with gold, silver, copper, nickel and grain elevator receipts or gasoline certificates.
-------------------
Wouldn't it have been great if the constitution were to just say "Congress shall make no law" and the president shall just look pretty?
ORO
(05/18/00; 10:08:14MT - usagold.com msg#: 30774)
FOA, AragornIII, Aristotle
http://hotyellow98.com/maui/DEPRESSION.html
The URL above has a great discussion of McFadden's attack on the Federal Reserve system in the Senate.
The logic of his argument is simple and impecable. It can be summarrized as follows:
1. The Federal Reserve, like all Central Banks, is the instrument of a bank cartel through which government FORCES upon their people the use of bank debt as money.
2. That Central Banks and Debt Money are economically destructive by the nature of their business.
3. That when given the choice, people voted against parties and candidates that support Central Banks. That despite this poppular opposition, every democratic nation, and many who are not, have instituted Central Banks.
4. That the US passed the legislation in secret and without quorum, that Wilson, the President who signed it into law was completely under control of Col. House.
5. That every kind of crime was committed in the creation, operation, maintenance and utilization of this system.
6. That debt money has no possibility of stability and must increase debt loads in a spiraling debt inflation. That inflation transfers purchasing power to the bankers and their associates. That cessation of the expantionary spiral results in a chain of default that transfers wealth from the people at large to the banks that cash in on the security posted against loans.
7. That the great banks operate in tandem to time their inflation and deflation so as to create crisis.
8. That history has shown that central banks were used, and are used today, for the purpose of transferring resources from one country in support of its enemies.
9. That bankers behind central banks have done their best to maintain military conflict where they could by supporting both sides through the issue of government debt. That the indebted governments fall under more thorough control of the bankers so as to make all but the most impassioned political impulses of the poppulation carry any weight in government decision making.
10. That the governments of most nations have subjected themselves to the interests of these bankers.
I say to Aragorn
Debt money is bad on a national level. Therefore all modern currencies are bad, since they are all debt currencies. A global debt currency is worst. It allows grand theft on a scale from which none can escape, find recourse to, nor otherwise avoid. No people can opt out of a global currency, once established, because of the disaster of default on transnational obligations specified in that currency. The management of a global debt currency is outside the authority of any people.
Government.
Government is brute force. All structures of government for a free peoples must be so very tightly limited that a government official need go through many steps and tests to excercise authority, and must be kept personally liable for his actions at all times.
All governements in existence today are successors to Feudal governments established by the strongest armed bandits of their time. As their cleptocratic nature dictates, governments have routinely moved to expand and deepen their power, their allocation of the resources of any economy, and their control over the rest. The officials of government in dictatorial societies take their spoils directly. In a democratic system, the officers of government use their positions to further their own interests through exchange of favors or through their self-serving ideological zeal.
National government is best suited to protect people against other governments, domestic and foreign. Checks and balances must be strong enough to keep government preoccupied in fighting against itself.
The Jeffersonian view of the PEOPLES INTEREST in government still reflect Washington's view of government as a dangerous tool. So much so that Jefferson found it necessary to repeatedly tie the hands of government and clarify its purpose, yet it was to no avail, and the power of government was taken over by the same powerful interests Jefferson fought throughout his life.
I repeat what I said before, government power will be used to plunder its people and its friends and allies if there is some profit to be had by any possessor of capital or by government officers themselves through the use of this power. For this reason, only the most narrow powers should ever be bestowed on a government. The people must stand vigil constantly so as to catch those attempting to expand government power and boot them out.
If not, people find themsleves outside the ballroom built out of their own hide looking at the great splendor within, feeling desperate in their misery as others enjoy the product of their efforts.
Economically;
I say again that there is nothing but damage in debt money. It is a negative sum game. It transfers resources from those who produce to those who can't or won't for the simple reason of banks having a carte blanche to allocate resources through the issue of unlimited money to selected borrowers. Though the system has been flattened and broadened, there is still a advantage to the great banks in this allocation.
Only debt money issued at full liability of the owners and officers of banks and only to the extent it is accepted willingly can avoid the economic losses inherent in current fiat debt money.
Henri
(05/18/00; 10:01:08MT - usagold.com msg#: 30773)
Aragorn III Post #30763
Thank you for the kind words concerning my previous posts.
You are right. Is is far simpler to point out the fallacy of the structure which exists than to propose one that would work better. Alas your queries are mine as well and in calling the world as it is now commonly perceived (nay, as it commonly exists for those entranced by the illusion)foul, I am obligated to advance a solution. Is it no wonder so many remain silent and only read the ongoing commentary rather than engaging it?
Your query:
"...what expectations you have for those charged to be custodians of your currency. What point would be reached for you to declare them to have failed utterly, and what advice would you offer in the discharge of their duties?"
__________________________________________________________
Here is my tentative response:
I have been gently brought around to the perspective that gold has enduring value and will retain such even in the face of the manipulation of its apparent valuation in terms of currency. As such, gold should never be lent directly. If the wealth represented by gold is to be utilized, then it should be done by the offering of it as collateral for a loan of currency. The credit line of the loan should be of fluctuating value relative to the "valuation" of the asset held in escrow. The amount of currency drawn on the credit line should not exceed 10% of the collateral valuation. This is known as credit worthiness. With such an arrangement, the fee charged for the use of the currency should be very low as there is very little risk associated with the transaction. The presumption is that the amount of the loan is sufficient to generate more currency in a commercial endeavor than is needed to pay the fee for usage and the profits of said endeavor (that being excess currency generated after paying protection fees to that entity commonly charged with upholding the contract law of the land)are able to be converted back into something of enduring value. Such an arrangement must be kept on a schedule which is restrained to an increment of time that is a small fraction of the projected lifetime of the currency borrowed. One should never engage in such a transaction in a currency that is beyond its lifetime and on life support. The escrowed wealth should be held by a reliable third party for a small fee and in such a way that the escrow agent has no access to the wealth but is liable for its integrity. A three way SDB comes to mind. The box cannot be opened without all three parties or their trustees being present. This should be done on a regular schedule so that the integrity of the escrowed wealth is validated. That portion of the escrow which is drawn (10%) is the amount considered at risk and the escrow agreement must be written such that the provider of the wealth may liquidate at any time the conditions of the loan by the transfer of 10% of the wealth to the loaner of the currency thereby making free and clear any and all encumberment of the asset base. The loaner of the currency should never be allowed this same priviledge nor should any of the three parties be able to further encumber the collateral by writ against its valuation. The collateral should never be placed on any public books of any of the three entities as an asset; however, the paper contract representing the fee structure of the time arrangement should only be recorded. That paper contract, not representing any value other than future fees to be paid must not be sold or transferred without the agreement of the three parties. Such transfer can be imagined if the lender becomes insolvent and wishes to terminate the arrangement prior to the contract specification.
Notice that in the above, the individual holding the wealth, retains control of it at all times and does not subject it to any threat other than the ability to liquidate 10% of the wealth in escrow. This is considered "capital at risk". The timing of such an liquidation should be solely at the discretion of the borrower of the currency (the owner of the wealth at risk).
At the time of such liquidation, the credit line is marked to market. The contractual obligations of the borrower to repay the loaned currency are terminated and there may be no further connection or encumberment of the business venture funded by the escrow arrangement.
That someone would be charged to be the custodian of my currency (as opposed to money or wealth)would imply that they could return real value for its temporary usage. If I am to bond it to their care for some increment of that illusion called time, at the conclusion of the agreement I should expect that the return (interest) be able to be converted to something of enduring value. It would be currency that I lend, not wealth, but perhaps wealth at risk. If I have created value in my commercial endeavor as described above beyond the carrying cost of the operation, the business plan should allow for the termination of the escrow agreement first and foremost before any currency can be utilized for a purpose beyond business at hand. In this way, the profit generated by the business allows settlement of the escrowed account in currency and any excess is profit. This profit may then be put at risk by loaning the currency (not the now free and unencumbered wealth) to a third party who promises some return. A more prudent business plan is to generate sufficient capital to free the escrowed wealth and then use the profits to accumulate more wealth (at least equivalent to the original credit line-10% of the wealth originally escrowed). Further profits generated by the business may then be placed "at risk".
As a guiding principle, they (the borrowers of my currency)must acknowledge the concept that it is indeed my currency that I lend them. And not their currency to use in risky ventures of which I have no knowledge. In other words, they should not put my capital at risk without my explicit approval.
I would consider it a breech of trust for that set of laws which protect the sanctity of the escrow arrangement to appropriate the escrowed wealth without my having committed any act which they might call "illegal". There was a provision in the business plan of the commercial endeavor to include the payments to the authority guaranteeing the sanctity of the business environment. Therefore, no illegal act was intended. The other breech would be for that authority to deny me the right to convert the currency of my profits into a medium of enduring value (more wealth).
I hope this expose on my current thoughts on wealth and business helps to explain my thoughts on money and freedom to engage in business. As you can see, for this to work, one must first have wealth to put "at risk". It takes wealth to make more wealth. That said, the primary objective for freedom to accumulate wealth is to first become debt free. It seems incredible to me now that I have been debt free for many years, how much easier it is to be comfortable living on an income that most people (and more importantly the local authority) would consider to be poverty level. Think of it...I am in a low tax bracket yet enjoy the comfort and lifestyle of many far more encumbered than myself. Taking the standard deduction is actually a government subsidy for me. Assuming of course that I acknowledge their authority to tax my commercial endeavors...which I currently do since they allow me to continue to accumulate wealth.
As to what advice I would offer the authorities in the discharge of their duties, I propose the following:
1) do not overly encumber the people and under no circumstance should the unborn or child or the elderly (over 75)be encumbered or taxed. The elderly who have resided in the country long enough to have accumulated wealth sufficient to carry them should not be taxed during their remaining life nor should their estate be taxed when passed on to their children. It should not matter in the least whether such beneficiaries are residents or not.
The elderly who come here live from abroad that have sufficient wealth to carry themselves should not be taxed. But they should not be allowed social benefit payments subsidized by those that are in residence and working.
2)Educate the masses to the benefits of being debt free and reward the accomplishment of such status. Interest from savings at a bank should not be taxed. If wealth is utilized to generate an ongoing commercial endeavor, the profits from such an endeavor should not be taxed beyond the normal (and marginally acceptible) draw already taken from the endeavor itself.
3) Practice what you preach. Do not encumber the people beyond their carrying capacity (That point which the govt must borrow against the future earnings of those not yet working or not yet born.
4) provide a safe and reasonable legal structure to guarantee the sanctity of contracts. Allow contracts to be made with any entity in the world. Only encumber business that falls under the jurisdiction (protection) of the law. Whether it is owned by residents or foreigners. Foreigners will invest here since the structure allows the accumulation of wealth. Do not encumber the people with social programs or large bureaucracies.
5)Punish the vertical integration of business, and reward the horizontal integration of business with greater or lessor encumberments.
6) Outlaw the engagement of derivative trading beyond simple futures delivery contacts and simple put/call activity (assembly of complex-multicomponent or index derivatives swaps etc.) Do not "bail out" industries or banks. Allow this punishment for excessive risk to assert itself.
7) Allow the people to own the money as was intended by the US Constitution. This would require the repeal of the Federal reserve act.
8) maintain a balance of fair and just power between the federal and state jurisdiction. Allow the affairs of the people to be overseen by common law. The affairs of business may be retained under admiralty law. When the state is found to be corrupt, punish it with exertion of federal authority. When the state operates efficiently and with integrity reward it with unprecedented freedom.
9) when a group of states find that the federal govt has become oppressive without justification, they may petition the remainder of the states represented within the senate for the orderly return to constitutional mandates.
USAGOLD
(05/18/00; 08:51:23MT - usagold.com msg#: 30772)
Today's Market Report
5/18/00 Indications
Current
Change
Gold June Comex
273.20
-0.60
Silver July Comex
5.01
-0.03
30 Yr TBond June CBOT
93~21
-0~10
Dollar Index June NYBOT
112.06
+0.07
Market Report (5/18/00): Gold was off marginally in the early going. Most market observers
expect the market to remain in the current price range for the remainder of the week as we ramp up
to the Tuesday Bank of England auction. Strong sentiment in favor of the dollar is also keeping
gold within a stone's throw either side of the $275 mark. For those looking to make a purchase,
the next two days might be a good time to do so. The market tends to trade down before BOE
auctions and up after. In addition, we are at 8 month lows with Financial World News (FWN)
reporting good physical demand at these levels. "At the moment demand has died down a little to
allow the BOE auction to pass and take prices briefly lower, but physical demand remains buoyant
and dip-buying around these levels will be the shape of things next week," a dealer said. The big
players looking to fill orders tend to do so at the expense of the Bank of England. The Asian
market reports sluggish trade. Europe is reporting good physical demand probably related to euro
weakness. Standard Bank reports that "New York pressured [the London] market lower." They
also report a wave of "short selling" on the COMEX yesterday driving prices lower.
That's it for today, fellow goldmeisters. Have a good day. We'll see you back here same time,
same place tomorrow.
Elwood
(05/18/00; 08:51:22MT - usagold.com msg#: 30771)
From the Trail: FOA (04/03/00; 20:58:36MDT - Msg ID:15)
http://www.usagold.com/goldtrail/
"More importantly about the WA, the total existing contracts held at signing time were allowed to continue without any draw down criteria (gold to cover) over the 5 yr. term. Over time, this will squeeze the dollar physical market in an effort to fill existing paper commitments. In effect, the BIS now has it's hand on the gold valve and is controlling the contract filling flow at will."
Trail Guide, are you saying here that it's the BIS people who (since the WA) are behind the flow of gold from the earmarked accounts of the Fed, and not the American administration delivering into a dying system? Do you have any ideas as to where the additional flow, that over and above the earmarked stock(20+ tonnes per month through Feb), is coming from? Thanks.
Elwood
Twice Discipled
(05/18/00; 08:19:06MT - usagold.com msg#: 30770)
@nugget101
Please send an e-mail to USAGold and asked for Twice Discipled's e-mail. MK -- Permission granted. I would like to talk.
nugget101
(05/18/00; 08:00:45MT - usagold.com msg#: 30769)
Twice Discipled msx30577 (Tax avoidance)
I've been researching this subject for years now and have found that Lynn Merideth has been pretty well discredited. I would also be wary of Irwin Schiff. I suggest you dig further. I've come to the conclusion that it doesn't matter that you have the law on your side, the IRS is a bully and will do what is pleases. They also have deep pockets whereas you and I have to make a living and feed our family. If you find a good solution post your email so we all can benefit.
Good luck.
DaveC
(05/18/00; 07:05:43MT - usagold.com msg#: 30768)
God Help Australia
I was talking to a newly-married couple from Australia yesterday on a train in Italy (where I live). They are traveling around Europe. They told me that the Aussie government has finally passed a 10% VAT (or GST for you Canadians) tax. The woman said something like "I'ts no big deal. It just gets passed on." And the gent chimed in "Yea, only the last one in the chain pays it. The problem is all the paper work because everyone in the chain has to collect it." They said New Zealand has had it for a long time. I got the impression they are tax-numb.
What was even sadder is she told me that she works for an internet company and she said her stock options were now worthless.
God help Australia.
DaveC
(05/18/00; 07:00:26MT - usagold.com msg#: 30767)
Secrets of the Temple
"After years of inflation," Paul Volcker told the audience in the autumn of 1979, "the long run has caught up with us." The message was clear to every member of the Federal Reserve Board, even to those three reluctant governors who had recently voted against even a modest increase in the Discount rate. In the last half of September, their worries about imminent recession were contradicted by the new data on economic output coming in from the Commerce Department. Despite all the forecasts, the economy wasn't tipping into a contraction; it was accelerating again.
And despite the Fed's gradual efforts to slow things down with measured increases in interest rates, the banking system was actually accelerating it's lending. Bank credit was expanding at an annual rate of more than 20%, and, as Fed officials heard from worried bankers, a lot of that new credit was going into speculative ventures - businesses and individuals borrowing in order to buy things on the rising prices, speculative investments from gold and silver to real estate. They were betting that inflation would drive prices much higher. The smart speculator would then sell the commodities or other tangibles, repay the loans and reap a smart, quick profit.
Speculation did not look like a risky bet: the overall inflation rate was near 13 percent and the price of oil was increasing at an alarming rate of more than 6% a month-an anuual inflation rate of nearly 80 percent. Gold had jumped 28 percent in value in a single month, reaching a record $411 an ounce. The price of silver, in the same period, had increased by a staggering 53 percent, up to $16.89 an ounce.
"The specter of 1929 was raised by me and others," Governor Coldwell said. "Look, we're on the verge of going into a hyperinflation in the United States."
While that sounded much too apocalyptic, the frenzy of borrowing and buying did resemble the potential for a classic speculative bubble, one of tose fevers that has occurred periodically in economic history. The marketplace losses touch with real value and plunges forward in an orgy of aquisition. Whether it is stocks or bonds, corner lots in big cities or underdeveloped swampland in Florida, speculative bubbles all derive from one conviction: the buyers are convinced that in a few days or weeks or months they will become sellers and unload their purchase at a profit. Bubbles always collapsed eventually; the fever broke and prices fell drastically. Then speculators were forced to sell at a loss. They failed and so would banks that lent them money to take their gambles. That is approximately what happened to Wall Street in 1929, when the bubble of financial speculation burst and the stock market collapsed.
From Secrets Of The Temple - How The Federal Reserve Runs The Country by William Greider
Black Blade
(05/18/00; 06:30:06MT - usagold.com msg#: 30766)
Wakeup Morning Call!
Source: Bridge News
Asia Precious Metals Review: Gold stayed at $273 with sluggish trade
By Hiroyuki Fujiwara, BridgeNews
Tokyo--May 18--Spot gold stayed at around U.S. $273 per ounce with sluggish trade on Thursday in Asia after an overnight slip, dealers said. The absence of buyers led gold slightly weaker but players were hesitant to decide price directions, they said. Platinum was steady following overnight firmer NYMEX, while profit-taking continued to prevent prices from surging, the dealers said. Overnight gold's slip to 7-1/2 months low in the U.S. market discouraged players from buying gold on Thursday, the dealers said, adding that market sentiment remains weaker towards the next U.K. Treasury's auction on May 23 Meanwhile, players expect $270 could be the next strong support and buying from physical dealers is expected to underpin gold around the level, they said. Many local jewelry makers continue to buy gold from hand to mouth as they do not want to increase stocks, but further price decline might attract some bargain hunters to start buying more, the dealers said. Players have confirmed the strong support line at $500 for spot platinum in the past few days, dealers said. They said some speculators on the Tokyo Commodity Exchange (TOCOM) resumed to open fresh buying positions on Thursday after taking profits on the previous day. However, a lack of fresh incentives prevented platinum prices from extending the early morning gains in the sluggish market, as TOCOM players expected 1,500 yen per gram could be a strong resistance for the benchmark April 2001 platinum contract, the dealers said. Platinum's lower 1-month lease at about 45%, compared with above 60%
last week, also kept players hesitant to buy platinum aggressively here, they said.
Black Blade: Same ol song and dance. Everyone is just waiting to see how Au will go, and see who will make the first move.
Munk defends Barrick's gold hedging strategy
Toronto--May 17--Peter Munk, the founder and chairman of Canada's Barrick Gold Corp., set the record straight about the company's gold-hedging strategy by saying it has set apart the company as the leader in its industry. Munk distinguished between Barrick's low-risk means of hedging gold production and the more speculative method used by some other mining firms. (Story .21590)
Black Blade: Suppose that he got his start by playing 3 card monty when he was a child? Nice try at the "snow-job" Pete. According to Gold Fields Minerals Services LTD, hedging in 1999 amounted to 11% of the 4,079-mt world gold supply - some 445 mt. Barrick has sold forward 3 years production!
TVX Gold to consolidate shares
Toronto--May 17--Canada's TVX Gold Inc. on Wednesday said it is seeking approval from its shareholders for a share consolidation on a 5-for-1 basis at its annual shareholder meeting on Jun 27. This move will allow TVX shares to remain listed on the New York Stock Exchange, which introduced a requirement that all listed companies maintain a minimum trading price of US$1.00 per share. (Story .22265)
Black Blade: Add insult to injury, gold companies now reduced to reverse stock splits just to remain visible on the Big Board! Others are likely to follow.
S Africa's AngloGold allays investor fears on Zimbabwe
Johannesburg--May 18--South African gold producer AngloGold has allayed fears that South Africa was poised to follow Zimbabwe on the road to economic breakdown, pointing out that the South African economy was in better shape now than in any time in the past 25 years. (Story .12893)
Black Blade: Indeed, there is no comparison to the problems of Zimbabwe's economy to S Africa. Zimbabwe is a dictatorship run by a madman (Mugabe), and S. Africa is a relatively stable democratic republic lead by a weak-willed president (Mbeki). Albeit both have very high crime rates.
ORO
(05/18/00; 06:05:36MT - usagold.com msg#: 30765)
OldGold - Patience
The line of thinking presented here on the topic stressed that oil would go first because of the lack of physical gold and credible contracts for future delivery.
The 50% decline in volumes on the LBMA and the fall in COMEX volume fall in line with this reasoning.
The fact that the bankers joined together rather than each running for their lives (what ANOTHER expected them to do under the circumstances), illustrates the same point. The fact that Morgan (probably no longer "guaranteed") took on the bulk of the positions from BT (a Deutche sub), seems to have taken on the positions of Republic (an HSBC sub) and perhaps some from Credit Swiss (First Boston's positions or CS positions) - it all comest to it being a symptom of a problem of lack of liquidity in the gold markets.
Whether Morgan is doing this with a clear guarantee of bail-out, whether it is the "sacrificial lamb" (like Summers), or whether it is doing so out of arrogant belief in its ability to control the market through diversion of bullion buyers to other avenues, it is a dangerous step.
I said that I suspect that the British traded their loyalty to the US/IMF side in return for maintaining London's preeminence in financial markets (soon to be shared with Frankfurt). I believe FOA said so explicitly as well. The appropriate deal to save them would have included unloading the gold liabilities of English bankers - (i.e. banks backed by BOE) onto US bankers backed by the Fed.
---------------
Journeyman -
You do such a marvelous presentation of the concepts. So concise. Bravo.
I have been reading slowly and carefully though www.wealth4freedom.com
For the most part, they took Mises' view from outside and turned it inside out into a view from inside, put in the first person.
It is quite shocking to see it condensed that way.
Aragorn III
(05/18/00; 05:44:40MT - usagold.com msg#: 30764)
For Oldgold
"The idea that gold has been surpressed to keep oil cheap is on of the most idiotic ideas ever. ... Saudi prices are investing heavily in the US stock market -- they could not care less about gold for the most part."
When we see a well-dressed man dash for a phonebooth, need we conclude the "obvious" intent that he must make an urgent call, or can we rightly see that a matchbox is too small to suffice as a hasty makeshift shelter from the sudden or threatening downpour? To draw the broader conclusion that standing in a phonebooth is somehow testimony that such a man is utterly without a home seems faulty beyond merit to suggest.
I hope this is helpful to you in some way.
got gold?
Aragorn III
(05/18/00; 05:14:07MT - usagold.com msg#: 30763)
Gandalf the White and PH in LA..."The Return of the King"
I must counsel you to exercise caution with your well-intentioned (and appreciated!) literary references of this nature, lest the uninitiated visitor be led to believe my posts may contain more merit than is warranted. I am to be the last person to lead another beyond the exercise of their own clearest thought and free will.
PH, your observation, "I noted that you had not posted since November 24, 1999." It would seem that I sat down at the Thanksgiving table and found that I had very much for which to be thankful.
Gandalf, it was nice of you to seek tidings of this errant Ranger in these past few days. You, especially, will be glad to know that true to the Red Book's lore of my namesake, I too have been kept busy in the assembly of a most special "Grey Company" to keep a watchful eye upon the lurking perils pressing at the wild borders of "the Shire". If, as you say, your hobbits have sewn gold into their vests or breeches, then they have brought about the very best protection of self-defense, reducing in essence my offered service to being little more than that of a night-lite within a well-secured household...perhaps comforting for the little ones, but otherwise and nonetheless completely without value.
Yet, if this voice has been silent for overlong, it can only be for two reasons: development of these various projects has consumed much thought and time; and moreso, I am sure it benefits nobody to suffer through such commentary as this when other voices continue to convey the messages so well. Truth, as you know, is not determined by election--to be awarded to the position receiving the most popular votes. Some here have laid it quite bare, making it an easy path to find for others to follow if they will. I would do well not to offer these distractions--for as surely as I might embark on such frivolity as to reveal non-interest-bearing gold assets (closely held physical metal) to comprise the bulk of my own quantifiable wealth, there would inevitably emerge inquiries seeking investment insights based upon the composition of the remnant non-gold fraction...missing the true insight entirely.
Henri, I am pleased that you saw the good humour intended in my post. You have offered many nice posts, and I hope you continue to share your candid thoughts on the nature of money and investments, and what expectations you have for those charged to be custodians of your currency. What point would be reached for you to declare them to have failed utterly, and what advice would you offer in the discharge of their duties?
Journeyman, you honor me with the thorough scrutiny you gave to my post, though I fear it breaks down woefully when each line is called upon to stand alone. Working as a whole, the post was to convey the tendency of a people to run with what sounds good, coming down variously on both sides of an issue, never actually pursuing a personal *Resolution*. While I indicated such limbo takes its toll on attaining a degree of peace, such "peace" was not intended to equate with "sleep"--as we do find ourselves to be "living in interesting times". Such "peace", as you will likely agree, can be attained even during times that action is called for by forming personal internally-consistent convictions through thoughtful arrival at a guiding philosophy and understanding. It must be taken as a whole, for the post was structured (perhaps inartfully so with weak parts) to reveal how many are seen seeking to benefit by insistently standing upon the very foundations they purport require a prompt tearing down.
You offered, <<Our founding fathers knew the truth about government --- ALL government --- over two centuries ago: "Government is not eleoquence, it is not reason; it is force, and like fire, makes a dangerous servant and a fearful master." -George Washington>>
Yet, we would do well to balance or resolve that sentiment with this from one I deem to be of greater stature than George Washington:
"We hold these truths to be self-evident,
THAT all men are created equal,
THAT they are endowed by their Creator with certain unalienable RIGHTS,
THAT among these are Life, Liberty, and the pursuit of Happiness.
THAT to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.
THAT whenever any Form of Goverment becomes destructive of these ends, it is the RIGHT of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate
THAT Governments long established should not be changed for light and transient causes...But when a long train of abuses and usurpations, pursuing invariable the same Object evinces a design to reduce them under absolute Despotism, it is their RIGHT, it is their duty, to throw off such Government, and to provide new Guards for their future security."
Obviously, those are the good words of Thomas Jefferson.
You objectively provided that,
<<"The problem with such organizations as the Federal Reserve
is that while they indeed function as "private
corporations," they pretend to be branches of government.
At least in the case of the Federal Reserve, it would more
accurately be described as a clandestine fascist
(capitalist) corporation in cahoots with government, and it
couldn't have been brought into existence or continue to
exist without explicit government force and threats of force
choking off it's natural competition. Thus fascist bankers
get the best of both worlds and "the people" get the worst.
Free market banking would give us banking variety on the
same order as the variety we now find in food choices and as
free markets do, also give us control at a very personal
level." -J.>>
And yet, while this is a powerful argument, why is it that a goodly portion of those who gather at this knowledgeable table remain reluctant to take the "high road" by seeking the wealth of gold as their profit, preferring instead to use the gold industry and its derivative markets merely as their vehicle to deliver them to prosperity while they remain entrenched within and supporting (though not verbally) the system offered by this "clandestine fascist (capitalist) corporation in cahoots with government"? In my "fire and ice" post, I sought to question aloud whether this particular and specific group of "gold" investors suffered any pangs from a crisis of conflicted conscience. (To be sure, those in the majority seeking a similar prosperity within the existing system but doing it elsewhere (such as internet stocks?) are not likely to feel conflicted by their actions because they do not similarly have the first notion of these gold/currency/banking issues as openly discussed here.)
In this regard, I relished your mature observation, and shall allow it to be the good anchor for my otherwise poorly constructed post.
<<Indeed, there are many gamblers here on this site (and
elsewhere), and they have every right to gamble on Uncle
Joe's IOU --- or any other paper or electronic IOUs (gold
futures/options, etc.) they choose. They don't have a
legitimate gripe if they lose, however. -J>>
And yet, who will it be to stand firm as necessary to remind the masses they have no legitimate gripe when one day the chips do in fact fall as they are destined to do so? If only we could get your good message printed upon cereal boxes...
got gold?
oldgold
(05/18/00; 04:16:27MT - usagold.com msg#: 30762)
gold and oil
The idea that gold has been surpressed to keep oil cheap is on of the most idiotic ideas ever.
Oil prices have exploded while gold continues to sink into the toilet. Cheap gold has not prevented oil prices from taking off. Saudi prices are investing heavily in the US stock market -- they could not care less about gold for the most part.
This particular emperor has no clothes at all.
SteveH
(05/18/00; 02:13:37MT - usagold.com msg#: 30761)
Letter to my friend Leroy
Leroy,
GATA's Goldgate continues to enfold. I too believe that the Gold market manipulation by the US and the Brits to be the biggest scandal about to ever enfold. Why? Gold was purposely removed from the spotlight and then shorted for 20-years. During that time, large efforts were made to discredit it, yet all the while it remained more than a commodity -- central banks still hold it as a currency and gold still plays a role if not the major role of valuations of major currencies. Yet we are led to believe that it has no value but industrial. In the meantime, secret deals are cut to ensure a little bit of gold goes along with a little bit of oil. Cheap gold has been used to provide cheap oil. That is correct. The purpose, it would seem, of the large gold short position was to make sure that oil actually stayed cheap in US dollars. Bullion banks loaned money to the mines who sold the contracts for the return of gold to pay back those loans to the bullion banks, who in return sold the contracts to oil interests. Oil money provided gold mines with funds whose gold then went to the oil countries as it was extracted. More and more of these contracts were made until the number of years gold was hedged forward has become untenable. Throw into the mixture the concept that if gold were to rise to the price that would curtail demand, it would make the dollar devalue significantly and signal the true state of monetary inflation as the number of dollars to buy gold has increased dramatically in recent years.
Now the gold loans and short position has reached epic proportions. That the problem was known by certain high level persons whose former employer was a major bullion bank, which has been known to be the biggest paper-gold (gold contracts) dealer during any of the recent price run ups in gold, appears to be no coincidence. This is why GATA is focusing in on the Exchange Stability Fund of the US Treasury department. It seems that all the fingers are pointing there. In the meantime all efforts to point out this major fault in the cinderella economy go unheard by the watchdog organizations that are meant to or should pick up on such a major problem. Evidence of this is the large of amount and proper timed news reports that bash gold, especially during recent gold price rallies.
Evidence of major collusion amongst the Brits and the US comes recently in the form of the widely publicized British Gold Auctions whose primary purpose almost seems to cap the price of gold. The one time that gold did rise $85, after one of the auctions, two major gold mining companies ran into financial stress as their hedge positions put them in serious jeapordy of bankruptcy, which merely confirms the above.
SteveH
Usul
(5/18/2000; 1:19:48MT - usagold.com msg#: 30760)
Magnum Force
A market's got to know its limitations.
Chris Powell
(5/18/2000; 0:47:16MT - usagold.com msg#: 30759)
Washington buzzes about GATA
http://www.egroups.com/message/gata/460?
Clinton administration moves against GATA
as Washington starts to buzz about the
gold issue.
To subscribe to GATA's dispatches by email
and get them immediately so you don't have
to go look for them, send an email to:
gata-subscribe@eGroups.com
Journeyman
(5/18/2000; 0:46:42MT - usagold.com msg#: 30758)
Capitalism vs. free markets @gidsek msg#: 30750, HI - HAT,
"If you have a mind to Journeyman, I'd be interested to hear
you draw a distinction between capitalism and free markets.
Seeing you contrast the two as you have done made me realize
that I can't define the difference properly." -gidsek msg#:
30750
Free market is the easy part. A free market is a
theoretical geographical area in which people can trade
anything they own for anything others own and are willing to
trade --- and at what ever "price" they agree to without any
interference by ANY unwanted third parties in any way what-
so-ever. No rules, regulations, orders, or controls. No
taxes. No protections for either "buyers" (those with
"money" to trade) or sellers (those traders who want to
trade FOR "money") unless they agree to such between (or
among) themselves.
Free markets have NEVER been very popular, particularly with
businesses.
As I think you can see, we don't have any free markets in
the united States, except perhaps in the case of private
transactions that ignore all the rules, regulations, orders
and controls - - - and don't pay any sales taxes to unwanted
third parties. We here in the freest country in the world
have something else. What we have is capitalism.
The word "capitalism" was coined by, I believe, Karl Marx as
a pejorative term aimed at the ways he observed many
businesses, especially the bigger ones, functioning in his
day. They still function in a similar fashion.
Ironically, Adam Smith, THE father of free trade and author
of "Wealth of Nations" ran head-on into similar observations
more than a century before, causing him to burn the latter
portion of his life's work just before his death, apparently
in disgust.
What did these two men with very different political agendas
see?
What they saw was the results of businesses, when ever
possible, using all sorts of manipulations, the most
effective requiring government complicity, to defeat free
markets and the inherent competition free markets, by their
nature, guarantee. It's my contention that it was this
business-government matrix and it's results that underlay
both Marx's perceptions and Smith's disgust.
This all sounds somewhat innocuous, but a look at some early
examples will give you an idea of just how seriously people
dislike free markets and free trade.
"_(h) The countryside was cut out of trade in the Middle
Ages._
'Up to and during the course of the fifteenth
century the towns were the sole centers of commerce and
industry to such an extent that none of it was allowed
to escape into the open country' (Pirenne, _Economic
and Social History_, p.169). 'The struggle against
rural trading and against rural handicrafts lasted at
least seven or eight hundred years' (Heckscher,
_Mercantilism_, 1935, Vol. I, p. 129). 'The severity of
these measures increased with the growth of 'democratic
government' . . . .' 'All through the fourteenth
century regular armed expeditions were sent out against
all the villages in the neighborhood and looms or
fulling-vats [in which cloth was dyed] were broken or
carried away' (Pirenne, _op.cit_., p. 211)." -Karl
Polanyi, _The Great Transformation_. (Boston: Beacon
Press 1957), p. 277
Seven or eight centuries of "struggle against rural
trading," not to mention a century of loom-stealing and vat-
smashing does seem to indicate a rather serious dislike,
don't you think?
The government's payoff is it gets to use businesses as it's
tax collectors. In America today, for example, who collects
sales tax? Who collects so-called income tax? Who collects
FICA (Federal Insurance Contributions Act or "Social
Security") tax?
Things are more underground, more civilized today, but the
same anti-competition practices and government complicity
are still there. Today, however, they're more circumspect
and the most effective are hidden under the ruberic of
"regulation" and "consumer protection." Yes, I know that's
perverse, but it works better for them that way. A few
examples:
"[U]nder the licensing provisions," says Rep. John
Dingell, chairman of the House Energy and Commerce
Committee, "we give the broadcasters an absolute
federally supported and sustained monopoly which
denies anybody else the right to broadcast w
Journeyman
(5/18/2000; 0:41:29MT - usagold.com msg#: 30757)
Capitalism vs. free markets @gidsek msg#: 30750, HI - HAT,
"If you have a mind to Journeyman, I'd be interested to hear
you draw a distinction between capitalism and free markets.
Seeing you contrast the two as you have done made me realize
that I can't define the difference properly." -gidsek msg#:
30750
Free market is the easy part. A free market is a
theoretical geographical area in which people can trade
anything they own for anything others own and are willing to
trade --- and at what ever "price" they agree to without any
interference by ANY unwanted third parties in any way what-
so-ever. No rules, regulations, orders, or controls. No
taxes. No protections for either "buyers" (those with
"money" to trade) or sellers (those traders who want to
trade FOR "money") unless they agree to such between (or
among) themselves.
Free markets have NEVER been very popular, particularly with
businesses.
As I think you can see, we don't have any free markets in
the united States, except perhaps in the case of private
transactions that ignore all the rules, regulations, orders
and controls - - - and don't pay any sales taxes to unwanted
third parties. We here in the freest country in the world
have something else. What we have is capitalism.
The word "capitalism" was coined by, I believe, Karl Marx as
a pejorative term aimed at the ways he observed many
businesses, especially the bigger ones, functioning in his
day. They still function in a similar fashion.
Ironically, Adam Smith, THE father of free trade and author
of "Wealth of Nations" ran head-on into similar observations
more than a century before, causing him to burn the latter
portion of his life's work just before his death, apparently
in disgust.
What did these two men with very different political agendas
see?
What they saw was the results of businesses, when ever
possible, using all sorts of manipulations, the most
effective requiring government complicity, to defeat free
markets and the inherent competition free markets, by their
nature, guarantee. It's my contention that it was this
business-government matrix and it's results that underlay
both Marx's perceptions and Smith's disgust.
This all sounds somewhat innocuous, but a look at some early
examples will give you an idea of just how seriously people
dislike free markets and free trade.
"_(h) The countryside was cut out of trade in the Middle
Ages._
'Up to and during the course of the fifteenth
century the towns were the sole centers of commerce and
industry to such an extent that none of it was allowed
to escape into the open country' (Pirenne, _Economic
and Social History_, p.169). 'The struggle against
rural trading and against rural handicrafts lasted at
least seven or eight hundred years' (Heckscher,
_Mercantilism_, 1935, Vol. I, p. 129). 'The severity of
these measures increased with the growth of 'democratic
government' . . . .' 'All through the fourteenth
century regular armed expeditions were sent out against
all the villages in the neighborhood and looms or
fulling-vats [in which cloth was dyed] were broken or
carried away' (Pirenne, _op.cit_., p. 211)." -Karl
Polanyi, _The Great Transformation_. (Boston: Beacon
Press 1957), p. 277
Seven or eight centuries of "struggle against rural
trading," not to mention a century of loom-stealing and vat-
smashing does seem to indicate a rather serious dislike,
don't you think?
The government's payoff is it gets to use businesses as it's
tax collectors. In America today, for example, who collects
sales tax? Who collects so-called income tax? Who collects
FICA (Federal Insurance Contributions Act or "Social
Security") tax?
Things are more underground, more civilized today, but the
same anti-competition practices and government complicity
are still there. Today, however, they're more circumspect
and the most effective are hidden under the ruberic of
"regulation" and "consumer protection." Yes, I know that's
perverse, but it works better for them that way. A few
examples:
"[U]nder the licensing provisions," says Rep. John
Dingell, chairman of the House Energy and Commerce
Committee, "we give the broadcasters an absolute
federally supported and sustained monopoly which
denies anybody else the right to broadcast w
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