USAGOLD Gold Discussion Forum Archive

USAGOLD Menu BAR

Welcome to the USAGOLD Gold Discussion Archives. The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets...

(Discussion Forum Hall of Fame)

(The Gold Trail)

("Thoughts!" by ANOTHER)

The opinions posted by all guests are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of the public discussion shall therefore not be construed as an endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.

FORUM ARCHIVES

Select date of the archive you wish to view

Month Day Year
Archives date back to September 22, 1998

WELCOME TO THE ARCHIVES!

(View Today's Discussion) (View Previous Day's Discussion) (View Next Day's Discussion)

ARCHIVED DISCUSSION FROM 11/19/1999
All times are U.S. Mountain Time

View Yesterday's Discussion.

Black Blade (11/19/99; 23:51:10MDT - Msg ID:19463)
Why all the anxiety? Come now, it's only a movie
http://www.year2000.com/y2karticles.html
CORPORATE CENSORSHIP IN KANSAS CITY!

(Story updated 2:24 pm Mountain Time, 11/18/1999)

Y2K Newswire has now learned and verified that a consortium of businesses in the Kansas City area are pressuring the local NBC affiliate -- KSHB-TV, channel 41 -- to yank the Y2K Movie, due to air this Sunday. This business consortium, we were told, includes, "..many, many city governments, many utilities, and many other organizations in this region."

In a fax obtained by Y2K Newswire, Kansas City's Mid-America Regional Council (MARC) explains they asked Channel 41, "...that they either not run the movie or that they provide a disclaimer and news coverage of how well the region is prepared." The fax also claims Kansas City Power & Light
(KCPL) has written a similar letter.

Also in the fax: an admission that, "...there has been pressure from national groups not to show the movie..."

Y2K Newswire was told, in a telephone interview, this consortium also includes the local utility company: Kansas City Power and Light. Y2K Newswire learned, "It was a coalition representing a whole group in the Kansas City region. And that was the group that decided they wanted to send the letter [to suggest taking the Y2K Movie off the air]."

Y2K Newswire was also told that business consortium leaders had met with news staff to discuss the issue. "We've met with them, with the news directors, in talking about this, and they were certainly very responsive in that meeting in terms of wanting to ensure public safety if that became an issue..."

At press time, KSHB-TV had not responded to whether they would cave in to corporate pressure to yank the controversial movie.

Y2K Newswire spoke with an MARC spokesperson who confirmed the authenticity of the fax and reiterated concern that the movie might have unintended consequences, saying, "Our concern is for the safety of the residents of the greater Kansas City region. And anything that might create unnecessary worry regarding Y2K does concern us, yes."

But Y2K Newswire asks: if Kansas City area businesses are really concerned about the safety of residents, why don't they urge Channel 41 to run a safety-oriented Y2K preparedness education segment?

Interestingly, Y2K Newswire may agree that the Y2K Movie does not represent the apex of responsible television programming. Y2K Newswire suggests that replacing the movie with a documentary educating people about Y2K preparedness is far more constructive.

But don't expect business consortiums to rally behind this common sense idea. The Y2K Movie, apparently, isn't Must See TV.

EDITORIAL SEGMENT

Important Questions:

Where is the cry from businesses to banish TV violence? If they really care about the safety of the people, why do they tolerate televised murders and other gore?

If the businesses really care about safety, why didn't they urge the TV stations to air responsible Y2K education programs? Y2K Newswire is aware of one high-quality documentary that would help teach the people about Y2K: but affiliate stations refuse to run it, saying it's, "Too scary!"

Why do business consortiums believe they have the right to dictate what programs are appropriate for Americans to watch?

What does this say about the integrity of television stations who cave in to corporate pressure?

What about the advertising link? Don't these TV stations make their money from the advertisements run by the same companies urging them not to run the Y2K Movie? Isn't this, effectively, a form of advertiser blackmail? "You don't run the movie and we won't yank our ads..."

YGM (11/19/99; 23:45:32MDT - Msg ID:19462)
Gold Coated Shields???
Comments from one well respected......
(Sierra)Nov 20, 00:05 HAARP is a powerful atmospheric heater with multiple potential applications. It is based upon the work of the genius Nikola Tesla. From a militarily guarded ground antenna array in Alaska, tightly focused high frequency radio waves are blasted at a particular spot in the ionosphere. An extreme amplification of power results, the control of which enables the users to x-ray the planet, radically modify the weather at specific points, create a complete planetary shield, or simply operate the system as a dominator weapon. Among other things! For a complete exegesis, read Angels Don't Play This HAARP, by Dr. Nick Begich. He exposes the acquisition of critical patents by the DOD(through front companies), and examines the astounding capabilities which are specifically delineated in said documents.

Not angels indeed. The world as we see it is an illusion woven by the masters. Their control is extreme, extending beyond the financial, political, and military into space itself. Over 90% of shuttle activity is secret and military related. God only knows what other dominator weapons they have constructed in space.

For a slight hint, consider the 40 square mile array of solar panels being assembled over our heads right now. That's right, a 4x10 mile project which will capture the solar wind and convert it to microwaves. From a geosynchronous orbit, the microwaves will be sent to a corresponding ground array; they will then be converted to DC & fed into the power grid. The array could be used as a weapon by moving it over any selected spot & frying the brains of all below with a 45 second burst of microwaves.

We can wholeheartedly rely on the utterly controlled media to ignore these events and other critical developments.

YGM (11/19/99; 23:35:25MDT - Msg ID:19461)
Portugal Bilderberg Meet Exposed.........
http://www.bigissue.com/london/articles/0006.htm
Bilderberg meeting minutes leaked...........

YGM (11/19/99; 23:30:24MDT - Msg ID:19460)
Pen or Sword.............

Open Your Eyes -
Freedoms Evaporating
Fast In Canada
By Stephanie Fontaine <stephy34@hotmail.com>

11-18-99

By Stephanie Fontaine <stephy34@hotmail.com 11-18-99
�
November 12, 1999. Protesters, numbered fewer than 150, cold, tired, but not about to give up, made their way toward Canada's National Defence building in Ottawa. They were there not to destroy anything, or to harm anyone. They were there to make their opinions known. They were there to protest the rising rate of homelessness in Canada. Many of the protestors were themselves homeless, and were frustrated with the Government and its apparent lack of concern for the steadily-swelling domestic poverty rate. They were confronted by the police in riot gear and many were arrested.
�
November 18, 1999. Another protest, and this time they took it directly to the Parliament. There were 300 protestors, again many of whom were homeless themselves. They came bearing placards with slogans like "Homes, not Bombs". They were met by the RCMP, wielding pepper spray and riot clubs. They were beaten back and sprayed.
�
"About 150 RCMP officers dressed in the riot gear of helmets, shields and batons met them as they neared the Parliament buildings." - Canadian Press, Nov. 18 1999
�
We supposedly live in a Democratic society, and one of the tenets of such dictates clearly that anyone accused of a crime is innocent until he or she is proven guilty. Also, according to Canadian law, it is legal to protest an issue as long as no violence is incurred in the process of the protest.
�
"Everyone has the right to the following freedoms: (...) c) freedom of peaceable assembly; and d) freedom of association." Canadian Constitution, Part 1, Schedule B. Paragraph 2, Subsections c and d.
�
In both of these cases, the protestors were punished for participating in something that was not illegal. This is in direct violation of the Canadian Consitution which states that in order to be punished, one must first be convicted of a crime.
�
"Everyone has the right not to be arbitrarily detained or imprisoned." Canadian Constitution, Part 1 Schedule B. Paragraph 9.
�
Arbitrary punishment is not acceptable. Furthermore, arbitrary punishment without a prior conviction or even accusation of a crime is a prime characteristic of an Authoritarian governmental system, or, in simpler terms, a dictatorship.
�
Where does it end? There is far too much power in the wrong hands, it seems. Jean Chretien, currently the Canadian Prime Minister, in February of 1996, grabbed a man by the name of William Clennett, by the throat. He was charged with assault. The Justice Minister, Paul Begin, had had the charges retracted within two hours of their being layed. If only you or I could count on such swift and ultimately effective protection.
�
Perhaps, I was wrong in believeing that Canada was one of the last of the truly free countries. Perhaps I was mistaken in believeing that my government was just. There is far too much evidence to contradict that belief. Time and again, Canadian citizens have had their opinions ignored, overlooked, or just plain scoffed at. The incidents I have cited here are the most recent, but are by far not the only ones. In the past few years, protesters have been clubbed and sprayed so many times it's a wonder they haven't developed an immunity to it. Only in extremely rare cases have I ever heard of violent protests taking place, and even in these cases, the violence only began when the police were dispatched to "take care of things."
�
I personally know a few of the people who have participated in these protests, and would like to have attended them myself. If it had not been for my work schedule, I would have been in the front lines, pepper spray be damned. You can almost expect it, here in Canada. It is, sadly, almost a normal thing.
�
Students, the homeless, activists, blacks, gays, the poor... the list goes on and on. What do they have in common? They've been victims of police brutality. And it isn't simply about protesting, though it does, certainly, form a part of the issue. It's about abuse of power. It's about the politicians who are completely ignoring our right, as concerned citizens, to speak out. It's about losing whatever freedom we have now. All of us. Even if you aren't Canadian. Coming soon to a government near you...
�
It's all been said before, of course. Someone, somewhere, is always complaining about how his/her rights are being infringed upon. And maybe they are. But the question remains... what are they doing about it?
�
It's about free speech, and your right to say what you feel, without having to worry about whether or not your government is going to try to silence you. It may sound paranoid, but I can't stress how important it is. Ignoring it in the incubation stages will only lead to growth of the problem.
�
We are lucky, in that the problem has not progressed as far as it could have. We are in better shape than many other countries around the world. I will be the first to admit that I have not done enough research as I probably could have, and therefore have not included as many incidents as evidence as I would have liked to, but I invite you - no, I beseech you - to do the research yourself. I have only scratched the surface here, but I promise you that there is much more to be found. Open your eyes.
�
In Argentina, in Brazil... In American, in Ireland, how many rights have they stolen from you today? How many will they steal tomorrow? Do you even know? It's about time you found out. Especially now, as the millenium draws to a close. It will be the perfect time for political groups around the world to call for a state of martial law, due to the Y2K problem, if indeed there proves to be one. You may go in, but you may not get back out.
�
The pen, as they say, is indeed mightier than the sword, and in any case, there is no way to win peace with violence. If you have something to say, if you are uncomfortable with some of the liberties your government has been taking, there are many ways to get your point across. Often, a single letter from a single person is not enough - but do not let this discourage you. A petition calling for an investigation may get the ball rolling, as may a rally or a protest. At the very least it will attract publicity, which will force the issue out into the open. 300 people made the front page news. Were you one of them? If you want to be, you can be.

YGM (11/19/99; 23:27:46MDT - Msg ID:19459)
Clintons' on Ballot....
Elaborated On
As I understand it Bubba and Spouse weren't even on the ballot. Hence the term 'write ins'. The people speak, what many believe.................

Netking (11/19/99; 22:45:54MDT - Msg ID:19458)
Ross L (19455) Re Poll
Sir, The 2 living members of one family on the poll list is a joke, right?

apdchief (11/19/99; 22:02:48MDT - Msg ID:19457)
COMEX Inventory
Sir TC, or any other of the erudite knights/ladies:

In the 'Golden View', both registered and eligible inventories are reported. What is the meaning significance of 'registered' and 'eligible'?

My thanks in advance.....

Peter Asher (11/19/99; 21:17:58MDT - Msg ID:19456)
Town Crier
Thanks for all the time put into delineating the flows of money. I have been attempting to compute whether the printing of all the extra FRN's for year end withdrawal, will increase, decrease or not effect, the size of the Money supply. Secondarily, will that result be inflationary to prices quantitatively?

Regardless of that answer, the fact of money (Purchasing rights) being in wallets or under mattresses, makes it more tempting to purchase goods and services than when the money must be withdrawn from an interest bearing account.

RossL (11/19/99; 20:09:22MDT - Msg ID:19455)
(off topic) Top 25 Most Evil People of the Millennium
http://newyorkpost.com/millenium/mill_analysis3.htm

Top 25 Most Evil People of the Millennium

According to the NYPost Poll Conducted from 9/30/99-11/1/99 Among
NYPost.com

Users Poll Statistics
TOTAL Number of Votes Received 19184

Name #ofVotes %ofVotes

1 Adolf Hitler 1664 8.67
2 Bill Clinton 1625 <--Write in 8.47
3 Josef Stalin 1284 6.69
4 Pol Pot 919 4.79
5 Dr. Josef Mengele 783 4.08
6 Hilary Clinton 765 <--Write in 3.99
7 Saddam Hussein 710 3.70
8 Adolf Eichmann 641 3.34
9 Charles Manson 548 2.86
10 Idi Amin 514 2.68
11 Genghis Khan 441 2.30
12 Jeffrey Dahmer 428 2.23
13 Benito Mussolini 386 2.01
14 Ayatollah Khomeini 365 1.90
15 Ted Bundy 327 1.70
16 John Wayne Gacy 312 1.63
17 Ivan the Terrible 305 1.59
18 Fidel Castro 283 1.48
19 Jim Jones 279 1.45
20 Vlad the Impaler 276 1.44
21 Timothy McVeigh 275 1.43
22 Slobodan Milosevic 242 1.26
23 Marquis de Sade 222 1.16
24 Mommar Khadafy 218 1.14
25 Jack the Ripper 203 1.06

RossL (11/19/99; 19:37:11MDT - Msg ID:19454)
Bill Bonner

Bill Bonner of Agora, publisher of investment newsletters by Doug Casey and James Dale Davidson, among others. He sends out these email letters to subscribers.

* * * * * * * * * * * * * * * * * * * * * * * * * * *

THE IRONIC METAL

"They rang a bell."

That is how Dr. Kurt Richebacher explained why the price of gold exploded upward in response to a press release from 15 European central banks on Sept. 28. The central bankers declared their intention to stop selling gold...and to cap the leasing of gold and use of gold futures and options.

The gold carry trade, which had hitherto been a nearly risk-free way of making money, suddenly became treacherous. No longer could borrowers of gold count on a huge supply of central bank gold to depress prices. Borrowing gold at 2%, selling it and investing the proceeds at 5% is not exactly a trade that takes a lot of higher math. But when the price of gold goes up, you have to get out a pencil and do some calculations.

The difference between $250 an ounce...and $300 an once is 50 bucks. And since the gold carry trade involved an estimated 5,000 tons of gold...the amount of loss may have been on the order of $8 billion.

A lot of people lost a lot of money by selling gold forward...and many of the losers, as demonstrated so dramatically by Ashanti Gold, were the gold miners themselves.

No one knows exactly who took the losses...but it is likely that billions of dollars in short positions are still waiting to be resolved...with the speculators hoping for a deeper dip in the gold price that will enable them to get out with fewer losses. But in making their announcement, the central banks took off the market as much as 5% of all the gold ever mined, since the days of King Midas right up to the present. And with many sellers still caught in the squeeze...it is unlikely that the price of gold will fall. Marc Faber writes in "Forbes," "I very much doubt we will see prices fall below $280 an ounce ever again." But what will we see?

We live in a world of sin and sorrow. But it is not so much sin and sorrow that is reflected in the gold market, but confusion and irony. The sin and sorrow lie elsewhere.

King Midas had the touch, you will recall. Everything to which he laid his hand turned to gold. But as bad as this might have been for investors who were long gold at the time, it was worse for him. He hugged his daughter...and all of a sudden the sin of his greed turned to sorrow. Having a daughter of cold and silent gold may seem passingly attractive to those of us with the more common variety, but it takes little imagination to see that gold is no substitute for the flesh and blood of one you love.

If there is greed in the market today, it is probably not among the gold bugs. Until recently, they were too poor to be greedy. Even now they are barely able to pay off their credit card debt and maybe replace the living room carpeting. Greed will have to wait.

But tech and Net investors, on the other hand, have the Midas touch. Every silly Internet stock that comes along is golden. America's leading technology companies --
Microsoft, Intel, IBM, Cisco, Lucent and Dell -- are now worth more than all the gold the earth ever yielded. These are the Midas companies...worth $1.6 trillion, compared to the total value of all the world's gold above ground of only $1.3 trillion. You could sell the six techs...buy every bracelet, wedding ring and Kruggerand on the planet...and have enough change left over to buy every public company in Russia at 10 times the current market price!

In a better world, investors might enjoy the prospect of ever-increasing share prices for these six companies...and the other golden boys and girls on the stock market. The huge gains made this year on the Nasdaq's techs and Nets might just continue indefinitely. Morgan Stanley's Tech Index, for example, is up 105% in the last 12 months. And the investors who put their faith in these tech stocks hope to be rewarded with these extraordinary gains forever. But that would be a real fairy tale.

In our world, the sin of outsized expectations...which we will refer to here as "greed"...rarely goes unpunished. In fact, it is self-correcting. As more and more people chase the unrealistic profits -- new investors expect 22% per year for the next 10 years! -- the prices on the shares go higher and higher...to the point where it is almost impossible for them to merit their prices. That is Amazon's problem...not that it couldn't be a good business...it just can't earn enough to warrant the current stock price.

Everywhere you look in the high tech and Internet sectors, sin is rampant. Sorrow cannot be far behind. And that is why we maintain our keen interest in gold. It is an ironic metal...it shrinks in the heat of a bull market on Wall Street and the sunny expectations of investors and consumers. It expands in the cold, cruel world of sin and sorrow.

The irony and confusion is that the Fed is now pumping up the money supply...the dollar has been flooding the world for many years...savings rates in the United States have dipped lower and lower -- to the point where they're now negative...the average family is said to be unable to scrape together $1,000 in cash...people have a higher percentage of their assets in the stock market...at the highest prices in history... twice as high, in GDP terms, as preceded the `29 crash...

..and still the price of gold, in real and nominal terms...is far below where it was 20 years ago!

Says Marc Faber, "The sum total of credit instruments outstanding globally is growing by about 10% per year. Thus, it doubles in size every seven years...The global economy, however, expands by just about 3% per year...This sorry condition [uncontrolled credit expansion] will lead either to far higher inflation rates or to massive defaults. Consequently, gold will provide the only sound currency."

It will be a sad day for many people when the bubble pops. But it may be a happy day for those people holding gold. Where might the price go? Doug Casey offered some guesses in his recent issue. Dividing the U.S. gold supply by the money supply -- M1 -- he figured the price of gold should be $4,214 an ounce. Dividing the accumulated U.S. foreign trade deficit by U.S. gold holdings produces a similar number...about $4,000 per ounce.

These numbers may or may not turn out to be predictive...but they are certainly illustrative of the huge gap between the current price of gold and the fundamentals underpining its value.

Right now, gold is waiting for something to happen. It is waiting to see how much faith people have in Greenspan, the dollar, the bubble, the United States economy...and the Midas market. That faith can be shaken at any time...or it could run to new heights of ironic absurdity. We will have to wait too...and see.

I am off for the weekend...

Bill Bonner

* * * * * * * * * * * * * * * * * * * * * * * * * * *

TownCrier (11/19/99; 19:32:29MDT - Msg ID:19453)
The GOLDEN VIEW from The Tower
Wall Street....*YAWN*...let's move on.

It recently dawned on us here at The Tower what the most remarkable thing has been in the gold market this past week. That being the absolute non-event (price-wise) of the announcement that congress had reached a level of comfort to allow for the IMF use of gold in their debt-reduction plans for their Heavily Indebted Poor Countries initiative. The details haven't been clearly presented, so we don't know if the IMF Articles will be amended to accomodate a straight revaluation from the current SDR35 valuation (about $47), or whether the previously proposed convoluted book juggling will be required. The bottom line in either event is that no gold will be leaving the IMF coffers, but nevertheless, as any gold market observer who's been around for at least two years will attest to, it is remarkable that this news wasn't somehow trumped up into an excuse for a gold selloff. If you think back over the past couple of years and how every little ripple of gold news was interpreted as a shorting opportunity, with the attendant price decline. Evidence of a change in the wind.

Here was an interesting news blurb by Bridge News:
London--Nov 19--Gold analysts Harry Bingham of Van Eck Associates and
Mitsui's Andy Smith went head-to-head at the annual LBMA autumn seminar with
Bingham advocating the intrinsic value of gold while Smith argued that the
yellow metal's star has faded. Bingham said Thursday if the stock market "bubble"
burst, investors would be left holding nothing more than worthless paper,
but gold would still have value.

We can't argue with that. But we wonder if the LBMA will offer Mr. Smith a guided tour of their operation so that he needn't forever play the part of the fool. When you're at a conference sponsored by an organization that collectively facilitates over 1,000 tonnes of gold changing hands each day, to say gold's star has faded seems a little ill-informed, to say the very (polite) least.

Trading within its comfortable pre-auction, pre-holiday range, spot gold coasted higher in late NY trading, last quoted at $294.50, up 80�. On the futures market, December gold gained 60� to finish at $295.70...within the upper dollar of its three-dollar range.

COMEX Eligible stocks received a pleasant little injection of 32,148 ounces to its dwindling inventory, which stands at 117,076 ounces, now above 10% of total stocks housed there (974,721 ounces).

Yesterday, the open interest on COMEX December gold futures was reduced further as people step away from this particular brand of wager. Open interest fell 3,849 to 57,742 contracts on trading volume of 18,602.

The commitment of traders holding COMEX gold futures contracts has been released for November 16 (changes from Nov 9) Over this time period, open interest over all futures months was reduced by 20,909 contracts, with the short position held by non-commercials (we hesitate to call them "speculators" because it seems that even the commercials are speculators these days...confer Ashanti, for example) fell to 25,319 (-17,469).

Crude futures traded on the New York Mercantile exchange reached an intraday 9-year high at $27.00 in a burst of short-covering by contract shorts who didn't want to be held to delivery ahead of today's expiration of December crude futures contracts. A broker said, "They were panicking in the pits. The funds got out last week but the end users and locals held out to the end and they didn't have a choice but to cover unless they wanted to go to delivery." Would have been a fun thing to watch. December crude settled up 76� at $26.56. If you're looking for prospects of future inflation, there it is.

And that's the view from here...after the close.

Bonedaddy (11/19/99; 18:34:24MDT - Msg ID:19452)
Working at the car wash or Dog Doo by any other name.
Town Crier, I caught your post on the new golden coins.
Maybe that bad smell is fish? We certainly have become a society that prefers "symbolism over substance" as Rush is wont to say. Gold is a precious metal in short supply. Golden is a discription of its color. As I look around I see plenty that is golden, but darn little that's gold. The Susan B's likeness to the quarter is a problem the mint will certainly avoid this time. With the introduction of the new golden coin, I predict that car wash and video arcade operators will reap a windfall. Perhaps the local Food Lion will accept arcade tokens for a loaf of bread? I propose that the Knights and Ladies around this table refer to them as "scrubbies" (from the car wash) or some other designation that harkens back to thier humble nature. I'm going to have some fun with this one.

CoBra(too) (11/19/99; 18:14:46MDT - Msg ID:19451)
The old Wall Street Adage " Three steps and a stumble" ...
As noted in a "Midas" write up by old gold pro Peter Grandich is a classic sell signal for the equity markets. Even if this signal may be early and the FED still signals ample liquidity for keeping up the pretense of liquid markets. Don't fight the FED - remember 3 STEPS and a STUMBLE - has held true historically. Equity and $- bear market rallies spell bull maarkets in real money!
Go golden turkeys and enjoy your "Thanksgiving" weekend -
CB2

TownCrier (11/19/99; 18:00:46MDT - Msg ID:19450)
Some requested thoughts on the post by Allen(USA)...
Sir Broken Oak, in this response to your solicitation for comments, I have excerpted the key points to save space, and have offered comments as seemed appropriate. Thanks for sharing this post. My comments are identified with *****

From Allen(USA) (Why a gold based settlement system?):
Let's say that international business needs currency exchange stability in order to conduct cross border trade. Both parties to a transaction want the contract payment to be predictable. This is one of the reasons that the derivatives business is brisk these days ( 80+ trillion dollars in insurance outstanding at present ). Consider a gold transactional system to be the same kind of mechanism but without the vulnerabilities of derivatives.

Let's say that there is a burp in the currency system and the seller's derivatives model blows out and the contract was now a loser if payment were in currency ( US$ ) . The POG and currency exchange rates together reflect the 'burp'. Since the world reserve currency is the US dollar ... one can only conclude that the massive private gold markets are insurance against a dollar debacle.

*****or more accurately, against a complete fiat currency collapse. As we saw with the asian contagion and the domino like collapse of currencies, only such as gold "insurance policy" as nicely described in this post.--TC******

The gold which has been 'loaned' by CB's has not gone 'to market'. It has not left the CB vaults at all. That 12,000 tonnes has been pledged as backing for the private gold settlement markets. That is why they are charging 1% interest rate...

*******low interest rates would reflect the stability of gold's value over time, and would be appropriate for the natural expansion of physical supply. Agreed on the role of CB gold. We've had an extensive discussion of banking with dollars today, and banking with gold could be viewed in a similar light. Private depositors seeking a small return lend their gold for futher lending through such bullion banking operations as the LBMA. Having established itself as a large and vital business, it is not unthinkable that such a CB pledge could be in place for certain large or important despositors, or to stave off systemic collapse...analogous to the FDIC being implemented to provide a degree of depositor protection against a banking collapse in order to inspire original deposits. --TC***********

The LBMA specificly publicizes that it trades 37 million ounces per day which is the equivalent of about $9-10 Billion or about $2.5 TRILLION per year. Folks, THAT is not a commodities market. THAT is a money system. It and its companion markets ( of which we know nothing ) is THE insurance policy of world trade today. I can think that oil might use such a system as well as others who have tremendous exposure to the US$ in international trade.

*******The lines begin to blur between money and insurance, don't they? It would be easy to make the case that gold is functioning as the money, but the final currency conversion is done to facilitate further domestic commerse. --TC******

$2,5000,000,000,000 per annum...think about that please and explain to me why sophisticated international businesses would funnel this kind of transctional levels through the LBMA.

*****It's probably likely that what had begun as an honest attempt to gain legitimate monetary protection against a systemic collapse of the fiat currency system, eventually revealed itself as an avenue to be capitalized on by various hedge funds through the infamous gold-carry trade. That would certainly add more volume, and also disrupt what was originally a quasi-stable system of operation. --TC***********

I might add that the reason that 'Central Banks stand ready to lease increasing amounts of gold should the price of gold rise' ( AG ) has nothing to do with the price of gold or dumping this gold unto public markets per se, but has to do with keeping the gold exchanges of the world functional lest international trade freeze up altogether.

*******Actually, this quote seems to quite often be taken out of context, at least in my estimation. The Fed Chairman was speaking on the threat of private interests establishing a strangling pricing control over various commodity markets. In laying those fears to rest, I recall that he cited the example of widespread competition in oil preventing a complete market corner, and in the example regarding private manipulation of gold market, he cited his now infamous remarks...offered as a way to break the private stranglehold or incentive. It was not to be taken as a standard operating policy for central bankers. --TC**********

POG in US$ will indicate when the US$ has so been displaced from its throne.

********That's for sure.*******

TownCrier (11/19/99; 16:35:29MDT - Msg ID:19449)
Low-Tech Could Be Y2K Advantage for Italy
http://dailynews.yahoo.com/h/nm/19991119/tc/yk_italy_1.html
Ernesto Bettinelli, chairman of Italy's Year 2000 Committee said "Every country imagines that their problems are also those of other countries," but that is not necessarily the case. "In Italy water is not driven by electronic systems. You can count the number of electronic control systems for water on the fingers of two hands. The systems may be old and inefficient but they're not electronically controlled."

Not only is this next point a good one, but it is this "quaintness" that makes much of Europe such a popular destination for American tourists...
"The problem of food supply is very different in the United States and Italy because in the States they don't have the same network of small local shops," adding that "hypermarkets using fancy control systems" don't dominate the retail market in Italy as they do in other places...the distribution of food and other vital supplies is decidedly low-tech in Italy. The eggs and bread served in that nice little trattoria were probably wheeled in from over the hill; the baker getting his own supplies in like manner.

seeker (11/19/99; 16:22:27MDT - Msg ID:19448)
Nobel prize winner speaks on gold

Robert Mundell really seems to like gold(understatement)!
He's a Professor, a Nobel prize winner, and just an all around smart person it seems.
I think I like this guy.

http://www.go.com/Content?arn=BW1580-19991118&qt=www.netking.dircon.co.uk&sv=IS&lk=noframes&col=NX&kt=A&ak=news1486

Gold to Stay At Centre Stage in the World's Central Banking System
05:38 p.m Nov 18, 1999 Eastern

NEW YORK--(BUSINESS WIRE)--Nov. 18, 1999--Gold will continue to play a very significant role in
the world's central bank reserve
systems for much of the next century, said Robert Mundell, the new Nobel Economics Laureate,
today. The presentation, held at the
Waldorf Astoria, ushered in a new era for the legendary coin in the United States. It also marked
the start of an international initiative to increase gold investment demand.

Professor Mundell, who is the C Lowell Harris Professor of Economics at Columbia University, was
recently awarded the 1999 Nobel Prize for Economic Science. He was speaking at a press briefing
ahead of a major conference on gold as a reserve asset which is being held in Paris by the World
Gold Council.

He said that while the U.S. dollar was the most important reserve asset today, the growth in
total reserves of central banks around the world would ensure that gold maintained its place.

"There are $2,000 billion or reserves in the world's monetary system and that amount will double
over the next 12 years," he said. "The bulk of reserves today are in U.S. dollars, but the bulk
of that growth cannot be in dollars."

Professor Mundell said a large part of the growth might be in Euros but part of it would result
from a rise in the value of gold reserves. He said that he believed that the total physical amount
of gold in the monetary system was unlikely to change; while some central banks may sell gold others
would be purchasers.

"I think the total stock of gold in the reserve system in 12 years will be the same as now - I do
not see any huge shifts of gold out of the system. Existing stocks may be redistributed around the
system - I do not see the physical stocks of gold getting larger but if it maintains its position the
price of gold will have to go up."

Professor Mundell predicted that if the total amount of reserves were to continue to grow at 6% -
the rate of growth of the recent past and if the dollar and euro exchange rates remained
constant

- the price of gold could be expected to rise to around $600 an ounce by 2010. "I do not think
that is an outlandish figure. Gold is a good investment for central bankers."

He argued that gold would certainly be a reserve asset in the next century. "Countries will
simply not risk just holding paper currencies, especially if there is any change in the international
monetary system.

"Gold provides a stabilising effect in a world of entirely flexible currencies," he said. "The
world has only had 28 years of total paper currencies generate inflation."

He said that central banks have to think of the longer-term future. Although countries had learnt

from the experience of the 1970's and put in place defences against inflation, nobody could be
sure that these would be successful in preventing a return of inflation in all circumstances.

If there were an upsurge in inflation as in the 1970's, gold would have an important role as a
hedge.

Copyright 1999, Business Wire

Right on Robert!

-------------------A friend of gold is a friend of mine --------
Did'nt he recently cancell a speaking engagement on the topic of gold for some strange reason or
another?

TownCrier (11/19/99; 16:10:14MDT - Msg ID:19447)
U.S. Banks Brace for Cash Stockpiling at Year-End
http://dailynews.yahoo.com/h/nm/19991119/tc/yk_banks_1.html
For you history buffs, today's news is a classic replay of that by-gone era of bank runs that pitted the cunning of the banks in fostering ill-placed confidence against the well-founded fears of the depositors that their money was not actually available.

You may recall from the figure posted yesterday that the measure of M-2 money (circulating cash plus checking and savings deposits) is $4,600.5 billion (or $4.6 trillion if you prefer).

Currently there are $460 billion in Federal Reserve Notes (paper dollars) circulating in the United States and abroad, and the Fed ordered an extra $50 billion this year to keep on hand with the normal reserve level of $150 billion in vault cash.

Of that M-2 figure, $460 billion is already in physical circulation, meaning that there is $4,140 billion in account. This means that the banking system has $200 billion in vault cash to stand against potential withdrawals totaling $4.14 trillion. (You could get 5� for every dollar.)

Nevertheless, to maintain confidence, the banks are putting on a brave face, saying they have fleets of armored trucks standing ready to deliver sacks of money to branch banks and ATM's. (Can you imagine the panic that would ensue if people encountered empty ATM after empty ATM?) Banks also said they will keep their doors open if the teller lines are long.

A classic replay of a scene from American history or modern emerging markets.

CoBra(too) (11/19/99; 15:45:40MDT - Msg ID:19446)
My longer posts are not registering any more -
That's why my test posts show up - I'm a bit frustrated since I've felt I've had something o contribute -well never mind - it's snowing in the Vienna Woods and our inflation rate 0.8% Oct. vs 0.5% Sept. - due to oils price.

CoBra(too) (11/19/99; 15:38:00MDT - Msg ID:19445)
?
test tku

ORO (11/19/99; 15:36:16MDT - Msg ID:19444)
TC - The 3 M(st)ooges - U R Right
http://www.federalreserve.gov/releases/H41/Current/
The question of M-1 is of the part of the balance sheet on which vault cash is reported vs. what is reported by the banks as their liabilities. The Ms are the liabilities of the FRB system as a whole to the rest of the world. The vault cash is within the system and excluded from M-1. Just as the money is leaving M-1 from checking, it reenters M-1 as currency outstanding.

FRB balance sheet totals and main items
...................Change Since

Nov 17, 1999 Nov 10, 1999 Nov 18, 1998

ASSETS

TOTAL ASSETS
590,629 + 9,820 + 67,277

LIABILITIES
Federal Reserve notes
543,930 + 3,905 + 66,145
TOTAL LIABILITIES (653)
577,006 + 9,797 + 66,041

http://www.federalreserve.gov/releases/H6/Current/
M-1
Consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) travelers checks of nonbank issuers; (3) demand deposits at all commercial banks other than those due to depository institutions, the U.S. government, and foreign banks and official institutions, less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts and demand deposits at thrift institutions. Seasonally adjusted M1 is calculated by summing currency, travelers checks, demand deposits, and OCDs, each seasonally adjusted separately.

PS Note the behavior of the banks, re Gresham's law. The Federal agency securities ("good money") are being pulled out to 0 balance and the non-descript triparty Repos are thrown in with gusto ("bad money").
Treasury securities are bought on the open market so the banks can't excercize any choice there.

Delinquency data through June does not indicate a problem.
http://www.federalreserve.gov/releases/ChargeOff/del_all_nsa.txt
http://www.federalreserve.gov/releases/G19/Current/
Lending growth rates in consumer credit, however, have fallen, from growth at over 14% AR in 1994-5 to 4.4% in 97, rising to 5.4% in 98 (credit card borrowing during the refi boom), but falling steadilly since the Q1 99 stock market influenced rise to near 10%, to 5.2% in September.
Interest rates for 1999 on these loans have fallen to a hair over 15% from 15.7% in all of the 1994-1998 period. Since the drop in borrowing has not prevented the rise in sales (people are not borrowing as heavilly), indicating that there is another source for the money. Pinpointing the source of the new money is finding out who is borrowing. Those who are going into debt are the large corporations doing stock buybacks to cover dilution from stock options issuance and to make their earnings per share growth look better. Home mortgages are growing at a much lower rate.
Bond issues by the large corporations are deposited in banks for long periods, and in short term treasury securities, which is perhaps why M3 is growing so rapidly. Seems that people are using money received for paying down debt and moving money from checking into cash and longer term accounts. since cash is growing at a 7% rate and checking accounts are falling at a 5% rate as long term deposits (CDs) are rising rapidly.
http://www.federalreserve.gov/releases/H6/Current/

TownCrier (11/19/99; 15:19:06MDT - Msg ID:19443)
U.S. Bond Yields at 3-Week High on Concern Federal Reserve to Raise Rates
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=1fac7e0daba4278b08aca2678d9c5f9f
"It's hard to make the case we'll get a rally in Treasuries because of the inflation outlook and economic growth." Kevin Perry of Nvest Co.

George Adell of Starboard Capital Markets Inc said "The mindset going into the Fed meeting was that Treasuries would do better no matter what the Fed did. When that didn't happen, it scared people," (which prompted more selling and additional losses.) "The threat of further Fed rate increases certainly is there. That will limit the upside potential for Treasuries."

Statistics reveal that today's $34.1 billion worth of Treasuries traded through major brokers is one-third less than the average value traded on Fridays throughout last year's third-quarter.

Farfel (11/19/99; 15:07:03MDT - Msg ID:19442)
Parsing MARTY ARMSTRONG or How to Interpret a Liar
Who the hell is this guy kidding?

Put him in prison and end our pain, PLEASE!!!!!

____________

Parsing Marty Armstrong.....

What Will Tomorrow Bring

By Marty Armstrong

� Copyright November 18th, 1999 (or 33 days until Folsom Prison)

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

There is little doubt that the world seems on the brink of dazzling new
highs or the depth of despair (especially the despair I am facing when I end up spending several years in prison)

The US market has proven to be more than
just resilient, it has become the bug light of global economic
prosperity (especially to those who have been stealing their clients' money for several years). Unquestionably, the lure of the Internet has presented
perhaps the dawn of a new economic revolution within which history is
repeating itself once again. During industrial, automobile, space age
and computer revolutions, technology sprung from the heartland of
America leaving the rest of the world plying catch-up. For numerous
reasons, mostly taxation and regulation, Europe remains held captive (yes, I know, ANOTHER subconscious reference to my approaching imprisonment)
within the grip of its own bureaucracy that continues to prevent free
access and global standardization in telecommunications. These barriers
are dominant factors behind insuring that economic growth on the back of
this new age of economic revolution will remain very much an American
success story. Nevertheless, for as dismal as the European prospects may
be ( UK excluded...yes, I exclude the UK because it is not really a country, just a subsidiary of the United States and America's favorite "colony" ) , Asia appears to be the second brightest spot for
keeping pace with technology.

While the fundamental backdrop to this bull market would seem to be a
one-way street, we must consider the fact that no market trend with such
a strong momentum remains correction proof forever. It is simply not
possible for this bull market to surge higher month after month without
a serious correction to flush out the weak players. The real question is
dominated by the potential to establish a high in 2000 followed by a low
into 2002-2003 or do we see a sharp correction from a November 1999 high
into a May 2000 low followed by a rally into 2003?

This bull market has also been most impressive from the UK perspective.
With the single exception of 1980, every single year has held the
previous year's low since 1974. This is one of the most incredible bull
runs in the history of any market. Next year will be the 26th trading
interval from the 1974 low. Besides our composite cyclical models that
warn of a 2000 event (yes, I know this is all Bullsh_t but, hey, my subscribers have been buying this crap for years), the odds of continuing to make new highs beyond
2000 without some sort of a correction are not very high at all.
Something seems to statistically support a potential high by next year.

From Japan, the majority desperately wants to believe that the worst is
over (just like me, when are these damn indictments going to stop???). This is perhaps natural since it has been 10 years since the
bubble top (You see, the way it works is like this...if it affects Japan positively, we call it a bubble...if it affects America positively, we call it normal business). Unfortunately, our model was very specific. Unless a new low
materialized in 1999, then the risk of extending the bear market into
2002 would remain very much a dominant possibility. At this point in
time, the Nikkei absolutely MUST achieve an annual closing ABOVE 21,281
before it is safe to say that the low is in place. If this market
unfolds as would be expected, then any turn downward in the United
States or Europe will take the Nikkei with it into new lows for 2002. In
fact, this market must close at least ABOVE 17,019 in order to remain in
a position to rally further into 2000 before turning back down.

The German share market basis the DAX was one of the few markets in the
world that reached a peak in 1986 rather than 1987. This market has
historically been shifted one year ahead of the global economic
correlation basket. As a result, watching the DAX is very important. For
if the DAX fails to exceed its July 20th, 1998 high by May of 2000, then
this could be a significant leading indicator warning that a 2000 high
would still produce a serious correction into 2002-2003.

Gold is also a key market to watch as to discerning the future that lies (my favorite word...LIES, I love telling them!)
ahead. Our short-term out looked warned that the seasonal pattern for
gold was an early summer low followed by a rally into an October high.
That forecast has proven to be correct. Of course thanks to a lot of
false information about shorts and conspiracies (and if anybody knows about false info,baby, it's me!), a panic rally to the
upside unfolded. To set the record straight, neither the company, any
public fund, Japanese client or myself had any short positions in this
market (Yeah, we just like telling the world over and over again that gold is falling into the toilet for the helluvit! ). The CFTC never made any such announcement about gold positions.
Reports by such individuals on the Internet were simply made up like so
many other things GATA reports (and when it comes to making stuff up, hey, I fabricated my entire resume, I invented phony financial earnings for my Japanese clients, the list of my fabrications are endless. In fact, I'm such a miserable, chronic liar, then you, the reader, must be fully retarded to even give a second glance to my latest excretion filled with the usual falsifications, palaver, and utter nonsense). It is unfortunate that some Goldbugs
cannot see gold in a global context preferring to view shadow
conspiracies lurking around every corner (Hey, I'm not like those damn goldbugs. I don't believe in shadow conspiracies, I only believe in JAP conspiracies. Yeah, those damn Japs are trying to frame an All-American great guy like me...don't you see?? I'm innocent, dammit!! INNOCENT!! It was Republic Bank and Safra, they're the ones who made me do all those bad things!! I"M INNOCKENT!!!)
Just because our models have
been bullish on stocks and bearish on gold for many years does not
necessitate us being short 700 tons (OK, maybe only 500 tons short but not a ton more, dammit!!!) Of course, such accusations come
from people who are perpetually bullish and do not know how to be
objective since they themselves always forecast based upon their own
personal positions and assumes that everyone else does the same (Hey, I would never forecast based upon my personal positions. Steal a couple million dollars maybe...but never forecast, OK?) These
people may have helped to scare the gold mines out of their hedge
positions, but nobody is really interested in gold right now to form an
elite core of buyer (Well, OK, I suppose I might be interested in gold right now, I could sure use some of it to post bail, ARE THERE ANY GOLDBUGS OUT THERE WITH EXTRA GOLD WHO CAN SEND ME SOME SO I CAN GET OUT OF PRISON?????). Once the hedgers were scared out, the buying dried
up because unless the global timing is right, you cannot make a bull
market out of a bear market no matter how loud you scream.(And conversely I couldn't make the silver price drop after Warren Buffett staked a position, no matter how damn loud I screamed!!! AAAAIIIIEEE!!! OY VAY, did I get screwed on that one!!!!) Nevertheless,
the potential for gold to return to a bull market is very much linked to
the fate of the balance of the financial world on a clear correlated and
objective basis. It has been our fear that gold would rally prematurely
and fail to produce a sustainable trend once again going into 2000 (Acutally, it's been my fear that gold would ever rally since I am a notorious gold short spinmeister).

(For the sake of brevity and in order to preclude sheer reader boredom, the following summary is offered for the rest of Marty's excretions and fabrications....)

Bafflegab, bafflegab, bafflegab.

TownCrier (11/19/99; 14:56:36MDT - Msg ID:19441)
Crude Oil Rises as Inventories Seen Plunging Before Next OPEC Meeting
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=blk&bt=blk&s=9da72fcfbe982edd7ddc3806a289bd3e
Crude rose 3% (76�) on this last day of trading for the December contract after briefly visiting $27 per barrel. John Kilduff, senior vice president of energy risk management at Fimat USA Inc said, "It's hard to buy at nine-year highs, but people are doing it. It's scary to be short of fuel in any manner. We've got only a three-week supply of gasoline in this country." Global supplies are dropping by a million barrels per day, and the U.S. inventory is near a two year low. Saudi Arabia's oil minister reaffirms the commitment is to "the stability of the market." With supply cuts still in place and talk of extention beyond the original March deadline, the obvious conclusion to be drawn is that the desired "stability" will be sought at a higher pricing level, not a lower one.

Elsewhere we have read that Euroland is better positioned to absorb these higher prices without strains on inflation than they were in the 1970s, and due to their current economic structure, they are in a better position than is the U.S. to economically cope with today's higher oil prices...yet another factor propelling the euro to the forefront in future days, acing out the dollar.

Journeyman (11/19/99; 13:43:36MDT - Msg ID:19440)
What do IMF, Tony Blair, & Al Gore all have in common?
Nickel62 Re: MID# 19420 . . . . . . . . . . This is a bit outside my area of expertise, but let me take a shot at why IMF wants to "help" poor indebted countries, and is looking for money to do this, in this case by revaluing it's gold. . . . . . . . . . . 1st,IMF is really a banker's guarantee bank, and it is a predominently US organization with its headquarters in Washington D.C.. Current US Treasury Sec. Larry Summers was recently one of it's honchos. . . . . . . . . . . IMF has been taking heat for it's policies all over the world, which have been linked to the Asian currency debacles, to tripling the number of poor in Asia to 90 million, etc. The heat is severe enough to cause IMF head Camdessus to step down in mid term. IMF doesn't need more heat from more indebted nations going down the tubes. And particularly, IMF and the Big Boys don't want any more currency melt-downs, poor be damned, particularly because it's bad for the international, and especially US banking establishment. . . . . . . . . . . If I understand things correctly, IMF guarantees bank loans from established (predominently US-British) banking institutions to "poor" countries. Only when these countries default does IMF money become involved. IMF has been able to brag it never lost a dollar. It achieves this brag by getting creditor banks to bail- out potential defaulting countries by loaning them more money, guaranteed by IMF funds, so they can roll-over their debt. The Brady bonds are one example. Etc. IMF needs credible money to get the banks to accept IMF guarantees. . . . . . . . . . . But along with the loan guarantees comes a package of agreements the receiving government must implement to qualify. These involve making the receiving government "solvent," and invariably require higher taxes and fewer government services. This debt falls quite directly and quickly on the citizens the receiving government claims to own. This often leads to civil unrest in that country. Indonesia, Yemen, Ecuador, etc. are examples. Clearly there is the piper to pay sooner or later. . . . . . . . . . . Further, bailing out poor countries isn't really bailing out even the governments of these countries -- it's bailing out the banks that loaned these poor countries money. This is exactly what happened to the recent Russian IMF loans for example. None of that money went to the pensioners starving in the subways, etc. It all went to "bail out the financial system," that is, it went to make payments on previous loans made by foreign banks. In fact, those IMF loans will create more starving Russians because Russian taxes will go up. . . . . . . . . . . The very interesting thing right now is that England's Tony Blair, US's Al Gore, along with IMF, to name just a few, have all been singing this same "save the poor indebted nations" tune. Debt forgiveness, etc. has been the theme. This, of course, just means that future US & British taxpayers will pay the principle plus interest so the bankers won't have to absorb bad loans. That's your kids and grand-kids folks. . . . . . . . . . . But why all the emphasis right now? What defaults wait in the wings that we haven't heard about yet -- they're always denied right up to the day they happen. What do Tony Blair, Al Gore, and IMF know that we don't? Has the piper mailed his final bill? . . . . . . . . . . If I've gotten any of this wrong, Oro? Yellin? TownCrier?, please straighten me out. . . . . . . . . . . Regards, Journeyman

rsjacksr (11/19/99; 13:29:32MDT - Msg ID:19439)
FED DISPLEASED WITH BIAS DIRECTIVE
http://www.washingtonpost.com/wp-srv/business/feed/a21230-1999nov19.htm
Minutes of Oct 5 meeting disclosed today. (see link)

koan (11/19/99; 13:28:31MDT - Msg ID:19438)
Hi Black Blade
OIL at $26.80 (OPEC says it will hold production umtil next Sept) - I will be moving back into PM's on Monday - this is the writing on the wall - stocks and bonds just can't move against that kind of force with any effectivness. Thanks for the tips - I will follow up immediately.

TownCrier (11/19/99; 13:24:49MDT - Msg ID:19437)
Sir Peter Asher...and others... the money supply and banking multiplier
Your comment: "My perception is that all checking and savings that are 'converted' to FRN's must be replaced 9X by funds injected into the overall system (M-3?) or by loan repayment. But loan repayment only reduces M-1 if it brings cash home to the vaults, yes?"

Please see the recent replies to Sirs ORO and Hipplebeck, and the referenced archive post may help you to sort out the multiplier issue when funds are cashed out of bank accounts. The post on November 5th attempted to give a clear example.
As covered in that example, a loan repayment sends the principle part of the payment to money heaven while the bank keeps the interest portion as profit. As mentioned to ORO, physical money placed in the vault cash reserves is essentially in "money heaven" because it is not counted as part of M-1 or any of the others. So, if you repaid your loan with cash instead of check, the cash goes into vault cash rather than the incinerator so that they don't have to incur the expense of printing it again someday soon. But nevertheless, while in vault cash it's totally out of the money supply. (Not to be mistaken with cash you put in a saftey deposit box or your personal home vault...that IS counted as part of the M-1 circulating money supply.)

Not touched on in that archived reference is the reserve requirements on savings deposits. There is none. Banks are free to lend out the entire deposit. If the lent money finds its way into someone else's savings deposit, it can all be lent again. Theoretically, the multiplier on savings deposits is infinity. Withdrawal requests are satisfied by taking money from the vault cash which is on hand to satisfy the bank's reserve requirements on their checking accounts. As thoroughly explained in that archived post, the bank has two concerns: to replace vault cash funds sufficient to meet their reserve requirements on remaining checking accounts, and to balance their total assets against liabilities....which is to say, balance the total outstanding loans, bonds and vault cash (assets) against the total checking and savings accounts (liabilities).

The multiplier on money creation reveals the potential relative size differential between assets held as vault cash and the assets held in the form of mortgages, car loans, stocks, bonds etc. Checking and savings deposits are very liquid, and customers could flock to their bank to demand all of their funds at any time. Vault cash is equally liquid, but loans are not liquid. Because the total savings and checking could be called for at a moments notice, the bank would have trouble meeting these demands with their small amount of liquid assets. You see the problem.

If people wanted paper money nationally, there's a big problem because there simply isn't enough to go around. Not even close. Beyond that minor technical detail, the banks are faced with liquidating their illiquid assets after they've exhausted their tiny fraction of assets held as vault cash. This is where they try to borrow funds for the short term from other banks. If the problem is national, and no banks have extra reserves to lend to the banks that are short, they turn to the Fed as the lender of last resort who will accept the bank's illiquid assets as collateral for a loan of liquid federal funds (dollars) to meet their demands of mom and dad who are withdrawing their money. But again, the banks would at this point only be able to deliver electronic funds...the paper was gone long ago when the vault cash supply was exhausted.

Under no circumstances to banks want the party to end. They need people to keep money in checking and savings accounts so that they can use these assets to invest in things that generate a return for the bank...interest genrating loans, bonds, etc., all the while paying you a simple small interest for risking your money on their investment skills. Banks are simply corporations (but with special privileges on accounting) not much different than businesses like your neighborhood grocery store. Little Jimmy who grew up next door to you could start his own little bank if he wanted to. Banks, just like other businesses, are not immune to failure. The key point, however, is that they are very much like dominoes. When one bank falls, the central bank is often quick to step in to prevent the whole monetary system from collapsing. The thinking goes, just because little Jimmy was an over-zealous, greedy, risk-taking idiot, the whole network of mildly greedy risk takers shouldn't be brought to its knees.

Two quick points come to mind. The Fed has recently started floating the idea out loud that maybe they should let the troubled banks fail from now on. Watch yourselves out there, all you sweet innocents who are mildly gambling for a small interest return from these institutions.

The other point is that people have become sophisticated enough that fewer and fewer are leaving substantial money in their simple savings or checking accounts anyway. The banks are running lower and lower on this base level with which they can write loans and expand the money supply. After a mini-conference here at The Tower, it seems to us that the banking reform legislation and repeal of the Glass-Steagall Act of 1933 is a means to give the banks access to a wider source of funds with which to work their magic. Where savings accounts have dwindles and failed to provide the banks with adequate starting funds, perhaps they now will be able to tap into pension funds and insurance funds as their base point for money creation.

Frightening, isn't it. We were much more comfortable with little Jimmy working in the bakery.

That's the view from The Tower.

Netking (11/19/99; 13:18:37MDT - Msg ID:19436)
Market Sentiment
Comex Gold - Market Sentiment

Updated with the latest week for your info;

Date % Bullish
11/19/99 40
11/12/99 40
11/05/99 42
10/29/99 52
10/22/99 54

rsjacksr (11/19/99; 13:04:42MDT - Msg ID:19435)
Japan Plays Games With the Yen
http://www.stratfor.com/asia/commentary/m9911182216.htm
{SNIPPET} Japan's ruling Liberal Democratic Party (LDP) has announced that it will consider a re-denomination of its currency, converting 100 yen into one yen. Currently, there are about 105 yen to the dollar and 110 yen to the euro. Shifting the currency's decimal point will place the yen roughly on par with the euro and the dollar. The intended message: Japan is a major international player, with a currency - and economy - equal in importance to the U.S. dollar.

TownCrier (11/19/99; 12:02:55MDT - Msg ID:19434)
Sir Hipplebeck and money supply
http://www.usagold.com/cpmforum/archives/5199911/default.html
You offered: "m1 is down because everyone is putting everything they have into the stock market."

That would certainly seem like a reasonable conclusion, wouldn't it? But as shown in the post to ORO, you really need to follow the money to see where it goes. If you write a check for $1,000 to your broker to buy one share of Internet.com, he will pass that money along to the person who sold that one share. If he puts it in his checking account or simple cashes it, M-1 will not change. If he puts it in his savings account, M-1 will drop by $1,000, but M-2 will still be the same.

Anyone interested in more on this money supply business might want to have a look at yesterday's post "TownCrier (Msg ID:19371)"
And on fractional reserve lending in general, with an explanation of the Fed's repo operations, you can click the link above and scroll all the way down to this post "TownCrier (11/05/99; 03:17:20MDT - Msg ID:18379)" where I tackled the issue as explained in its opening remark:
"Sir elevator guy, thanks for asking the question that's on millions of minds...'I often read where you talk about the Fed processing billions in "overnight repos" Is there a place, or post, where I could read up on this mysterious process?'"

TownCrier (11/19/99; 11:36:22MDT - Msg ID:19433)
Sir ORO and money supply
Your comment: "The tricky thing about M-1 is that the vault cash, if I remember correctly, is included in M-1. Therefore, the withdrawal of cash will reduce vault cash and checking balance and increase currency (notes) outstanding. If this is how it works then there will be a net decline in M-1 which would drag through the rest of the M's. Do I have it right?"

A decline in M-1 need not put a similar decline in M-2 or M-3. In a quick example, if I took my entire checking account ($11.50) and put it into my savings account instead, M-1 would fall by eleven dollars, but M-2 would remain the same as before. Because M-2 counts both checking AND savings, the fall in checking is offset by the eleven dollar gain in savings.

On your first topic of vault cash, to include it in M-1 would be double counting. Those dollars are already built into and counted as part of the total transaction deposits which are on the liability side of the bank's ledger. Vault cash is on the asset side, and they merely lie in wait to give actual physical representation to some of the liability accounts in the event that depositors may come for their money. To build further on the above example, if I were to write a check to myself for $11, go to my bank and cash it, the bank would hand me eleven dollars from vault cash (which now enters circulation) and would also strike down my checking account by eleven dollars. Because M-1 counts both circulating currency and checking deposits, the transfer back and forth between these two types of funds results in no net change to the M-1 value.

I know that's more than you needed, but it was a good opportunity to educate any lurker who might be interested in how these things work. As I've seen written many times, the more you know about our monetary system, the more you appreciate and insist upon gold.

TownCrier (11/19/99; 11:13:09MDT - Msg ID:19432)
Fed says over-the-weekend system repurchases totaled $855 million
http://biz.yahoo.com/rf/991119/ly.html
Now that you know the size of the Fed's morning operation, take a look at the economists' earlier projections...like forecasting the weather.

"I have a fairly sizable add need for the week but funds are soft this morning so my guess is they could come in with a small repo just because they might want to meet some of the week's add need. There could be a coupon pass as well -- they seem to be in a buying mode and they can do those at almost any time." --Carol Stone, senior economist at Nomura Securities International

"They tend to add earlier in the week, so it will probably come in closer to $3 billion." --James Blumenthal, economist at MCM Moneywatch

Black Blade (11/19/99; 9:36:20MDT - Msg ID:19431)
Gold reserves
I was quickly reviewing yesterdays posts and I saw that townie mentioned the Robert Mundell post on gold as a reserve asset, however, I just noticed that Sir (lady?) Wotan had found it and posted it as well. The article does raise some interesting points. I am thinking that Mundell's projected POG of $600/oz in the year 2010 to be a bit low. The main body of his speech does bode well for gold. He does suggest that official gold reserves won't likely be increased in the nest 12 years. I am not so sure about that, but then what are the odds of the CB's ever getting back their leased gold that they carry on the books? hmmmm....

Gandalf the White (11/19/99; 9:35:58MDT - Msg ID:19430)
Long Password ?
What do you mean ? Mine is #GH3 (for GoldHeart#3)
<;-)

RossL (11/19/99; 9:33:57MDT - Msg ID:19429)
Goldy Locks Guy

According to a link posted earlier, China's production of gold last year was 172 tons. If one billion people each wanted just one gram of gold, they would need 1000 tons. Obviously, they would have to increase production and import gold to meet the demand.

USAGOLD (11/19/99; 9:33:27MDT - Msg ID:19428)
Today's Gold Market Report
MARKET REPORT(11/19/99): Gold continued its southerly direction this
morning in what traders termed a "relaxed" mode. Europe reports light
fund buying against the backdrop of the euro weakening against the
dollar to the roughly $1.025 lows last seen in July. Gold seems to have
bottomed in euros and is now on the rise again. Standard Bank suggests
that the euro is headed for $1.00 on Y2K fears and a "flight to safety."
Though that presumably means "flight to the dollar," gold might also be
a major beneficiary as suggested here yesterday.

We'll leave up yesterday's discussion on Y2K for our weekend readers
(Please scroll down.) All in all its a light news day so far. Have a
nice weekend, my fellow goldmeisters. See you here Monday.

Last Minute Y2K Prep Going on Both at Individual and
Institutional Levels --An interesting article appeared on Reuters a
couple days (Article Link) ago citing the rise in corporate bond
interest rates as a direct result of major corporations issuing bonds to
boost their liquidity in advance of the millennium. Similarly, as
reported in another Reuters story (Article Link), the Fed is doing
everything it can to assure its member banks that liquidity will be
there for them at the end of the year. Along these lines, when gold
interest rates surged to the 5% level a couple months ago, many analysts
attributed the spike to central bankers pulling in their lease pool gold
in advance of Y2K.

Christmas Gold Rush -- At Centennial Precious Metals/ USAGOLD, we
experienced a surge of Y2K-inspired interest yesterday after a quiet
beginning to the week. Y2K gold-buying has come in waves over the past
two years as concern has waxed and waned with investors. All in all, we
would characterize the gold buying over the course of 1999 as nothing
short of remarkable -- something alluded to in yesterday's World Gold
Council report on record worldwide gold demand. Much of that record
demand has been related to Year 2000 concerns (along with concern about
the stock market bubble, rising oil prices and inflation). We now do not
expect this buying interest to decline markedly before mid-December (if
it declines at all). Further, we do not see price at these levels as a
factor in dampening demand but more a lubricant -- especially overseas.
Trying to stay ahead of the curve, we have asked clients with Y2K
concerns to place their orders as soon as possible, and before December
10, to maximize delivery before December 31, 1999. At the same time, we
do not want everyone to wait until the first week of December to order.
If we get clustering of orders in that one week -- especially if the
same is occurring nationally -- it could present delivery problems as
well. Also, we have the Christmas postal rush coming up. So let this
serve as advance warning. Please order as soon as possible if you want
to make a final addition or adjustment to your gold portfolio and beat
the upcoming Christmas gold rush.

Please call 800-869-5115 (Ask for Mary Conway) if you have an
interest in receiving a trial subscription to our widely read
newsletter, News & Views: Forecasts, Commentary and Analysis on
the Economy and Precious Metals. Or you can go to our ORDER FORM
and submit your request by E-Mail. You will also receive our
introductory packet on investing in gold.

Goldy Locks Guy (11/19/99; 9:18:37MDT - Msg ID:19427)
china and precious metals
If China allows the trade of it's silver and gold, will that possible cause the prices to fall? Wouldn't that mean that more metals would be added to the markets? I meant to ask my broker about it today, but he's gone for the weekend.

Also, I really love this place but is it really necessary to have such a long and cryptic password? My small mind can hardly remember my phone number, much less this....I can only suppose that there is a reason for such a lofty password initiation? Thanks....Goldie Locks Guy

Goldy Locks Guy (11/19/99; 9:14:04MDT - Msg ID:19426)
Investing in Oil
Hi guys...(I hope you don't mind me asking this here)..I've been watching the oil market lately, and am interested in possibly investing in it before the end of the year.

While there is alot of speculation as to the effects of y2k, I'm feeling it's possible that oil would be a good investment, if indeed there are supply shortages due to the BUG.......

Question is, what would be the best avenue of investing? Futures contracts? I've mainly invested in precious metals so I don't know alot about stock or options or futures contracts.....I know this is off the topic of this Forum, so if anyone feels obliged to respond, you may email me at Magnison@aol.com......

Of course, gold and silver are my first choice, but I keep feeling like I'm missing out on an opportunity......

Black Blade (11/19/99; 8:54:27MDT - Msg ID:19425)
Gold as reserve asset, yes indeed.
NEW YORK--(BUSINESS WIRE)--Nov. 18, 1999--Gold will continue to play a very significant role in the world's central bank reserve systems for much of the next century, said Robert Mundell, the new Nobel Economics Laureate, today. The presentation, held at the Waldorf Astoria, ushered in a new era for the legendary coin in the United States. It also marked the start of an international initiative to increase gold investment demand. Professor Mundell, who is the C Lowell Harris Professor of Economics at Columbia University, was recently awarded the 1999 Nobel Prize for Economic Science. He was speaking at a press briefing ahead of a major conference on gold as a reserve asset which is being held in Paris by the World Gold Council. He said that while the U.S. dollar was the most important reserve asset today, the growth in total reserves of central banks around the world would ensure that gold maintained its place. ''There are $2,000 billion or reserves in the world's monetary system and that amount will double over the next 12 years,'' he said. ''The bulk of reserves today are in U.S. dollars, but the bulk of that growth cannot be in dollars.'' Professor Mundell said a large part of the growth might be in Euros but part of it would result from a rise in the value of gold reserves. He said that he believed that the total physical amount of gold in the monetary system was unlikely to change; while some central banks may sell gold others would be purchasers. ''I think the total stock of gold in the reserve system in 12 years will be the same as now - I do not see any huge shifts of gold out of the system. Existing stocks may be redistributed around the system - I do not see the physical stocks of gold getting larger but if it maintains its position the price of gold will have to go up.'' Professor Mundell predicted that if the total amount of reserves were to continue to grow at 6% - the rate of growth of the recent past and if the dollar and euro exchange rates remained constant - the price of gold could be expected to rise to around $600 an ounce by
2010. ''I do not think that is an outlandish figure. Gold is a good investment for central bankers.'' He argued that gold would certainly be a reserve asset in the next century. ''Countries will simply not risk just holding paper currencies, especially if there is any change in the international monetary system. ''Gold provides a stabilising effect in a world of entirely flexible currencies,'' he said. ''The world has only had 28 years of total paper currencies generate inflation.'' He said that central banks have to think of the longer-term future. Although countries had learnt from the experience of the 1970's and put in place defences against inflation, nobody could be sure that these would be successful in preventing a return of inflation in all circumstances. If there were an upsurge in inflation as in the 1970's, gold would have an important role as a hedge.

Black Blade (11/19/99; 8:37:40MDT - Msg ID:19424)
China Says Gold Firms Must Adapt To Free Market
http://invest.insidechina.com/business.php3?id=111100
First silver, and now gold. Interesting article about possible liberalization of China's gold market.

Broken Oak (11/19/99; 8:08:22MDT - Msg ID:19423)
Sorry about the repost. SteveH beat me to the punch.
We'll call him Hawkeye from now on.

Peter Asher (11/19/99; 8:04:43MDT - Msg ID:19422)
ORO, TC
Thanks ORO. My perception is that all checking and savings that are 'converted' to FRN's must be replaced 9X by funds injected into the overall system (M-3?) or by loan repayment. But loan repayment only reduces M-1 if it brings cash home to the vaults, yes?? Definitely a slippery sequence of events to try and get a grip on!

Broken Oak (11/19/99; 8:02:40MDT - Msg ID:19421)
Any thoughts on this post???
Date: Fri Nov 19 1999 06:56
Allen(USA) (Why a gold based settlement system?) ID#257351:
Copyright � 1999 Allen(USA)/Kitco Inc. All rights reserved
Yesterday I posted some thinking about gold trading as the private money system which works in parallel with the world currencies system. Here is an explaination of why this arrangement would be advantageous.

Let's say that international business needs currency exchange stability in order to conduct cross border trade. Both parties to a transaction want the contract payment to be predictable. This is one of the reasons that the derivatives business is brisk these days ( 80+ trillion dollars in insurance outstanding at present ) .

One way of assuring stable payment is through complex derivatives. This is still vulnerable to 'surprises', ie - your derivatives 'model' didn't take certain upcoming world events into account, etc.

Consider a gold transactional system to be the same kind of mechanism but without the vulnerabilities of derivatives.

Gold as money. Let's say that a contract for $100 million is inked. The standard derivatives are used, but also a transaction is arranged in gold as s backup option. At time of agreement let's say that the sellor wants the option of receiving either currency or gold depending upon the performance of the standard derivative insurance. The payment is set at $100 million OR $100 million/POG ounces of gold at the seller's discretion. So the buyer goes to the LBMA or equivalent market and buys an option for this amount of gold.

Let's say that there is a burp in the currency system and the seller's derivatives model blows out and the contract was now a loser if payment were in currency ( US$ ) . The POG and currency exchange rates together reflect the 'burp'.

The seller exercises the right to receive payment in his currency via the intermediate agency of a gold transaction. The buyer's gold purchase option kicks in and the transaction is made. The gold is sold and the seller is protected.

But the seller has the right to option the physical gold just in case.

Since the world reserve currency is the US dollar and since many of the sellers are not Americans one can only conclude that the massive private gold markets are insurance against a dollar debacle. Let's postulate a sudden catastrophy for the USA. Such as a monetary mismanagement or political upheavel which threatens the stability of the US$ ( or even remotely a nuclear exchange which brings about an economic catastrophy for the USA ) . Remember that there are events and experiences within living memory of failures in the US$ ( such as the 1935 dollar devaluation, WWII, the money printing which led to the 1960's gold withdrawls from the US Treasury by Europeans, the repudiation of the Bretton Woods gold clauses, the dual oil price ( US$ ) shocks of the 1970's, the interest rate spike in 1981-3, the Plaza Accord devaluation of the US$ to name a few ) .

It is my contention that private gold markets are being used as an insurance medium like a derivative but without the risk of 'surprises' and with the option to have physical gold as payment should that be considered advantageous. Let me further postulate that the recent ten years gold loan schemes which CB's have participated in have to do with liquifying these private gold exchange markets, not the publicized intention of getting a few % interest from a US bond.

The gold which has been 'loaned' by CB's has not gone 'to market'. It has not left the CB vaults at all. That 12,000 tonnes has been pledged as backing for the private gold settlement markets. That is why they are charging 1% interest rate..they have no real exposure since the physical metal does not leave their possession. In a default situation they will retain the gold. Markets like the LBMA have issued paper promises ( gold certificates ) which are traded as gold in the above fashion.

The LBMA specificly publicizes that it trades 37 million ounces per day which is the equivalent of about $9-10 Billion or about $2.5 TRILLION per year. Folks, THAT is not a commodities market. THAT is a money system. It and its companion markets ( of which we know nothing ) is THE insurnce policy of world trade today. I can think that oil might use such a system as well as others who have tremendous exposure to the US$ in international trade.

$2,5000,000,000,000 per annum...think about that please and explain to me why sophisticated international businesses would funnel this kind of transctional levels through the LBMA.

I might add that the reason that 'Central Banks stand ready to lease increasing amounts of gold should the price of gold rise' ( AG ) has nothing to do with the price of gold or dumping this gold unto public markets per se, but has to do with keeping the gold exchanges of the world functional lest international trade freeze up altogether.

Another aside. One reason why the US does not lease its gold is because a US$ debacle is not a US liability, it is the US$ holder's overseas who it would harm. This gold trading is design to mitigate the risks of the US$. Until the US$ has competition from the Euro we will not see US gold pledged into these markets ( as an insurnance ) . POG i US$ will indicate when the US$ has so been dispaced from its throne. I feel that AG knows that the only way for the USA to gain discipline in its dealing with its welfare state spending ( deficit spending in private as well as public spending ) is by being challenged by real competition in the monetary realm. He sees the Euro as that opportunity. Unfortunately for the USA the transition will be wrenching.

nickel62 (11/19/99; 7:29:03MDT - Msg ID:19420)
IMF gold sale by other means?What is the bottom line on this story?
http://www.ft.com/nbearchive/email-wsumq2dd0da.htmt
It appears all our politicans are in agreement always a dangerous signal. The IMF is going to revalue gold from $47/ounce to $300/ounce to free up $118 million for those poor over indebted countries. Why does this sound like the newest version of "Hi! I'm from the government and I'm here to help you?" If anyone can clarify the true meaning of this agreement please help me to understand what actually is going on.

phaedrus (11/19/99; 6:49:50MDT - Msg ID:19419)
@nickel162 re Gates investment
20 million bucks as a percentage of 90 billion...

that's about .02 percent.

Equivalent to you or me investing in a new pair of pants. Or maybe a set of snow tires.

nickel62 (11/19/99; 6:47:02MDT - Msg ID:19418)
Black Blade,CASH Resources Management
The management of Cash Resources is Archer Cathro a Yukon based mineral consultancy firm which has more experience in the Yukon than just about anyone.There expertise is widely respected in the industry and they control many of the most interesting deposits in the Yukon. The advantage you have with them compared to most wild eyed junior mining companies is they might really have the deposits that will actually get developed someday unlike many of their competitors.There are some very exciting mineral deposits in the Yukon and a world-wide increase in commodity prices versus the Canadian dollar cost basis of these deposits could be the facto9r that gets these deposits developed.

nickel62 (11/19/99; 6:25:53MDT - Msg ID:19417)
Breathlessness over Bill Gates' ownership of 10%of Pan American Silver1
Perhaps the various writers and commentators who are so convinced that Bill Gates' owning of 10% of Pan American Silver Corp. is somehow significant should ask themselves what percentage this would be (if indeed it is true)of his net worth? And whether this type of decision if he indeed made it really reflects anything.

Julia (11/19/99; 6:11:48MDT - Msg ID:19416)
Gandalf the White
Hi Gandalf!
You said yesterday, "Mundel's gold price prediction !
The Hobbits do believe that Dr. Mundell did NOT say $600 (six Hundred US Dollars)
--- HE SAID $6,000. (six THOUSAND)
<;-) "

Would you elaborate on why you believe that Dr. Mundell said, "$6,000" and not $600?

Thanks.
Julia

Hipplebeck (11/19/99; 6:08:30MDT - Msg ID:19415)
just a couple of simple opinions
m1 is down because everyone is putting everything they have into the stock market.
Oil is up because a war is coming over the pipeline routing problems.
Turkey is our spearhead.

RossL (11/19/99; 6:01:00MDT - Msg ID:19414)
(off topic) Y2K link
http://www.freedomcorner.com/megiddo.html
FBI - Project Megiddo

nickel62 (11/19/99; 5:55:39MDT - Msg ID:19413)
England's Gold Sale might have at least one positive outcome!
http://www.ft.com/nbearchive/email-ftibwcq2dff0e.htm
The British government might have bought United States support for Mr. Brown to become the next head of the IMF. What Britain loses the world gains. Masters of the Universe Unite! Maybe he is the only man capable of out-doing his predecesor.

SteveH (11/19/99; 5:36:36MDT - Msg ID:19412)
Allen (not Greenspan) speaks on Gold and Greenspan
www.kitco.com
repost:

Date: Fri Nov 19 1999 06:56
Allen(USA) (Why a gold based settlement system?) ID#257351:
Copyright � 1999 Allen(USA)/Kitco Inc. All rights reserved
Yesterday I posted some thinking about gold trading as the private money system which works in parallel with the world currencies system. Here is an explaination of why this arrangement would be advantageous.

Let's say that international business needs currency exchange stability in order to conduct cross border trade. Both parties to a transaction want the contract payment to be predictable. This is one of the reasons that the derivatives business is brisk these days ( 80+ trillion dollars in insurance outstanding at present ) .

One way of assuring stable payment is through complex derivatives. This is still vulnerable to 'surprises', ie - your derivatives 'model' didn't take certain upcoming world events into account, etc.

Consider a gold transactional system to be the same kind of mechanism but without the vulnerabilities of derivatives.

Gold as money. Let's say that a contract for $100 million is inked. The standard derivatives are used, but also a transaction is arranged in gold as s backup option. At time of agreement let's say that the sellor wants the option of receiving either currency or gold depending upon the performance of the standard derivative insurance. The payment is set at $100 million OR $100 million/POG ounces of gold at the seller's discretion. So the buyer goes to the LBMA or equivalent market and buys an option for this amount of gold.

Let's say that there is a burp in the currency system and the seller's derivatives model blows out and the contract was now a loser if payment were in currency ( US$ ) . The POG and currency exchange rates together reflect the 'burp'.

The seller exercises the right to receive payment in his currency via the intermediate agency of a gold transaction. The buyer's gold purchase option kicks in and the transaction is made. The gold is sold and the seller is protected.

But the seller has the right to option the physical gold just in case.

Since the world reserve currency is the US dollar and since many of the sellers are not Americans one can only conclude that the massive private gold markets are insurance against a dollar debacle. Let's postulate a sudden catastrophy for the USA. Such as a monetary mismanagement or political upheavel which threatens the stability of the US$ ( or even remotely a nuclear exchange which brings about an economic catastrophy for the USA ) . Remember that there are events and experiences within living memory of failures in the US$ ( such as the 1935 dollar devaluation, WWII, the money printing which led to the 1960's gold withdrawls from the US Treasury by Europeans, the repudiation of the Bretton Woods gold clauses, the dual oil price ( US$ ) shocks of the 1970's, the interest rate spike in 1981-3, the Plaza Accord devaluation of the US$ to name a few ) .

It is my contention that private gold markets are being used as an insurance medium like a derivative but without the risk of 'surprises' and with the option to have physical gold as payment should that be considered advantageous. Let me further postulate that the recent ten years gold loan schemes which CB's have participated in have to do with liquifying these private gold exchange markets, not the publicized intention of getting a few % interest from a US bond.

The gold which has been 'loaned' by CB's has not gone 'to market'. It has not left the CB vaults at all. That 12,000 tonnes has been pledged as backing for the private gold settlement markets. That is why they are charging 1% interest rate..they have no real exposure since the physical metal does not leave their possession. In a default situation they will retain the gold. Markets like the LBMA have issued paper promises ( gold certificates ) which are traded as gold in the above fashion.

The LBMA specificly publicizes that it trades 37 million ounces per day which is the equivalent of about $9-10 Billion or about $2.5 TRILLION per year. Folks, THAT is not a commodities market. THAT is a money system. It and its companion markets ( of which we know nothing ) is THE insurnce policy of world trade today. I can think that oil might use such a system as well as others who have tremendous exposure to the US$ in international trade.

$2,5000,000,000,000 per annum...think about that please and explain to me why sophisticated international businesses would funnel this kind of transctional levels through the LBMA.

I might add that the reason that 'Central Banks stand ready to lease increasing amounts of gold should the price of gold rise' ( AG ) has nothing to do with the price of gold or dumping this gold unto public markets per se, but has to do with keeping the gold exchanges of the world functional lest international trade freeze up altogether.

Another aside. One reason why the US does not lease its gold is because a US$ debacle is not a US liability, it is the US$ holder's overseas who it would harm. This gold trading is design to mitigate the risks of the US$. Until the US$ has competition from the Euro we will not see US gold pledged into these markets ( as an insurnance ) . POG i US$ will indicate when the US$ has so been dispaced from its throne. I feel that AG knows that the only way for the USA to gain discipline in its dealing with its welfare state spending ( deficit spending in private as well as public spending ) is by being challenged by real competition in the monetary realm. He sees the Euro as that opportunity. Unfortunately for the USA the transition will be wrenching.

ORO (11/19/99; 3:24:08MDT - Msg ID:19411)
TC - Vault cash
The tricky thing about M-1 is that the vault cash, if I remember correctly, is included in M-1. Therefore, the withdrawal of cash will reduce vault cash and checking balance and increase currency (notes) outstanding.
If this is how it works then there will be a net decline in M-1 which would drag through the rest of the Ms.

Do I have it right?

TownCrier (11/19/99; 3:08:21MDT - Msg ID:19410)
Sir Peter Asher
"The fact of M-1 & M-2 dropping while M-3 expands, could be the result of more FRN's in circulation due to Y2K withdrawals. That would lower the balances in M-1 and M-2 checking and savings, while requiring a nine fold increase in Fed funds to replace the lost fractionalization. Am I making sense here?"

FRNs in circulation are a component of M-1, and therefore M-2 also. To cash out of checking or savings *accounts* in order to have paper currency (or coins) in your *pocket* would not result in any change at all to the levels. That's why we suggested the M-1/M-2 drop as likely due to dollars being sent to money heaven (loan repayment) faster than mom and dad could borrow new dollars into existence...either because they have already tapped their credit capacity, or the banks are tighting their willing to lend in this environment. The more-than offsetting M-3 gains is money creation at the hands of the Big Boys.

TownCrier (11/19/99; 2:54:46MDT - Msg ID:19409)
After the Close: the GOLDEN VIEW from The Tower
"We're not rubes, and we won't be played for numbskulls." Such a thought should be on the minds of anyone who has intentionally (or through simple good fortune) had real gold coins pass through their hands.

Here's the story. Today marked the beginning of full scale production by the US Mint of their newly designed dollar coin, in itself, not such a bad thing. We welcome a functional dollar coin which is readily discernible from the other coins. The fatal flaw of the old Susan B. Anthony (SBA) dollar was that it was too similar in size, shape (round) and color (nickel) with the quarter. So similar that in casual use it became a nuisance. To avoid the need to retool vending machines that still operate with the SBA, it was decided that the new dollar would bear the same electro-magnetic signature, size and weight. So what does that leave for alternatives for a distinguishing characteristic? You guessed it...smell. The coins are going to stink.

Alright, alright, just kidding. The color will be different. The material chosen to match the physical charateristics and yet provide a distinct (de-stinked?) color is a manganese brass and copper alloy that will add a non-typical hue to the wide spectrum of American coin colors: nickel-grey, and copper...at various stages of tarnish. The new color should prove to be a rather agreeable and welcome addition...a sort of warm, yellow brassy color. It's beautiful, too, featuring a likeness of Sacagawea. Upward of 100 million should start hitting the streets in March, 2000. So what's the affront? It's this: the Mint and the media are calling it the "Golden Dollar." Excuse The Tower for this extreme view, but that's crap. (Hey, that explains the smell!)

The inspiration/confusion to call it the Golden Dollar obviously stems from the point that it is yellowish and metallic. As we said in the beginning, anyone who has intentionally brought honest money, gold, into their life through thoughtful acquisition of gold coins will not want to be a party to this farce. Again, don't mistake this comment...the coins are beautiful, and we look forward to using them. We just won't be calling them the Golden Dollar, and encourage others not to be duped into such carelessness. The distinction is an important one, and we don't feel lines between real money and fiat money need be unnecessarily blurred. It is just as easy to call it a Brassy Dollar, and that's what we'll do. Please join us if it suits you. It'll also give you many openings in conversations to talk to others about your views on gold and money if you should wish to pursue the topic further.

On a related note, the US Mint indicated that the demand for their American Eagle gold bullion coins has relaxed recently on people's diminishing fears over Y2K. (1999 Gold Eagle sales have already surpassed the Mint's 1998 total.)

Regarding the rationale behind such diminishing fears, we once offered this story of two naive parachute jumpers. As they freefall from the plane they talk on the way down about how long they should wait before pulling their ripcords. One says, "How about now?" The other says, "No, let's wait a bit longer." And so it goes, on and on. As they rapidly approach their final destination, the first jumper urgently asks for the last time, "How about NOW?!" And the second jumper, upon consideration of the nearness of the ground, says, "You know, we're so close to the ground now...from this height I don't think we'll need to use these 'chutes at all."

When a supposed event has a reasonably well-defined starting point, (or in the case of the parajumpers, a well-defined ending point) is it rational to alter your view during a time of business-as-usual when, by all accounts, it SHOULD still be business as usual? In our analogy, the jumpers semi-prepare by strapping on their 'chutes (they fully prepare by pulling the ripcord). It should be obvious that no matter what they do or don't do, the "proving ground" (nice one, huh?) or "moment of truth" won't be reached until the distance between themselves and the hard Earth is precisely zero. Same holds true with January 2000. Those individuals who were inclined to look after their own affairs and take some responsible measures toward self-reliance (not wanting to be a helpless beggar at their neighbors doorstep, or worse, have to rely upon the competence of Uncle Sam under a potentially nation-wide crisis) probably saw the benefits to preparing EARLY, overestimating the presence of similar instincts in their fellow citizens. Well, we still have several feet yet to fall before reaching the ground, and while some of us may be even now floating gently down with peace of mind, we wonder if those still in freefall will maintain their nerves of steel all the way to the end.

The Tower's guess it that people fall into three camps. 1)Those that are fiercely self-reliant and responsible who act early to stave off potential problems. (These are the same people who pick up a toy from the floor before they trip on it.) 2)Those that follow the crowd and have to *feel* the problem before they take action to stave off a worsening problem. (These are the same people who, upon tripping on the toy, will hold out their arms to help break their fall.) 3)Those that are fiercely independent like the first group, but have a fatalistic (or possibly arrogant) streak that locks them into inaction, even as group #2 are in full swing. (When it happens that they *do* trip on a toy, the fatalistic ones lead with their chin, the arrogant ones snivel and vow that "somebody's going to pay for this!")

We'd say group #2 is the largest, and as a herd they haven't started moving yet because a) the actions of group #1 were too small to be noticed (an assortment of deployed parachutes), and b) the early actions of group #1 certainly didn't make the ground get any close enough for them to *feel* the problem.

PAPER PERFORMANCE

The Nasdaq had its second heaviest day of trading (1,592,697,000) after yesterday's all-time record was set, and the Index gained almost 78 points (+2.38%) to close at a new record high of 3347. Winners edged out losers 2,330 to 1,737.
The DOW climbed above 11,000 with a gain of152 points (+1.40%) as 1,013,093,000 shares were traded. Despite the advancing index, stocks that declined today outnumbered those that advance on the New York Stock Exchange by 1,525 to 1,507 while those reaching new 52-week lows swamped new highs 143 to 89. The "undergrowth" is not that healthy, my friends, and when it pops, it is the high flying indices that experience the initial pinprick, signaling to ALL others that the end of the speculation is upon them all, whether they participated in the gains or not.

The 30-Yr Bond rose to a yield of 6.166% as the price fell by 13/32 in the third consecutive day of losses. Traders are blaming bond weakness today on competition from $7 billion in new corporate and agency securities and to the recent gains in crude oil prices and its inflationary impact. But we know that it really comes down to one thing...people see the stock market as a one-way ticket to riches and it's the only game in town competing for every available dollar. Here's an interesting notion for you...Tony Crescenzi, an analyst at Miller Tabak Hirsch & Co told Bridge News that the U.S. will likely have a healthy holiday season due to the stock market's recent gains (wealth effect on spending) and the prospects for Y2K-related purchases. What's interesting is that he sees bond prices suffering lower on the "problematic" situation of strong consumer demand for goods, and hence, inflation. It seems that if Y2K purchases of goods were seen on his radar screen as big enough to move upcoming economic data, surely the prospects for a direct impact on stocks and bonds from a corresponding shift in investment strategy as a result of Y2K would merit some larger degree of "problematic" concern. Oh well. Its not our playing field, and we've already tarried here too long.

Not a lot of gold news today. As we've seen before, when spot outgains the futures on one day, it gets snapped into line the next day. Gold traded throughout the 24 period in a narrow band, and spot settled lower 90� to $293.70 when lasted quoted in NY, meanwhile the December futures on COMEX settled only 60� lower at $295.1...the mid-point of its two-dollar range.

The only thing that changed at COMEX depositories today was their accounting. You may recall that yesterday we pointed out some apparent math errors. Today we have this note to share with you from an FWN source report:

"NOTE: Bridge corrects Scotiamocatta eligible gold previous total to read
60,495, not 63,596 as previously reported. The grand total is correct and
remains unchanged."

So, with that issue resolved to our satisfaction, together with the Republic National Bank of New York Eligible stock of 24,433 ounces, the total Eligible stock is 84,928. When combined with Registered stock at both vaults, the total under COMEX guardianship is 942,573 troy ounces.

Open Interest on the December futures continued its dwindling trend as contract positions settle against each other rather than simply trade out to a newcomer. Yesterday 18,634 contracts positions were swapped with a net settlement of 2,498 contracts, dropping the Open Interest to 61,591 for December gold.

OIL

NYMEX December crude futures terminate on Friday, and the price reportedly plunged on liquidation related selling after first attempting to break through its earlier established 3-year high of $26.80. It settled down 80� at $25.80. Those hoping for higher prices were temporarily dismayed by news that a strike was called off by the three main oil labor unions in Venezuela in order to reopen collective contract negotiations. The BBC reported that in the meeting held in Saudi Arabia among oil ministers from Saudi Arabia, Venezuela and Mexico, they called upon the other oil exporters to stick with the production cuts and avoid the temptation to capitalize on the higher prices by producing more than the agreement. In an issued statement, Saudi Arabia's Ali bin Ibrahim al-Nuaimi, Mexico's Luis Tellez and Venezuela's Ali Rodriguez called upon the other producers "to continue the path of compliance to maintain the gains of cooperation and bring the market to a sustained stability. While the market fundamentals point to a more balanced market, speculative aspects are contributing to recent price movements which warrant caution and vigilance from all market participants."

Hey, that last phrase about "speculative aspects" sounds like good general advice for those of us standing on the home soil of the biggest stock market bubble any living person has ever seen. Caution and vigilance are truly warranted.

And that's the view from here...after the close.

Black Blade (11/19/99; 1:43:06MDT - Msg ID:19408)
And one more for Nickel62
Inco (N:TSE,ME) recently returned to the negotiating table with the Government of Newfoundland over the development of the Voisey's Bay nickel deposit, which could result in production beginning at the site next year.

The talks, which were only rumours until Tuesday when an Inco spokesperson confirmed that it was meeting with the Tobin government, were being seen by many as a sign that Inco may be ready to rethink its position on the project, reported the Reuters news agency. The government refused to give Inco a mining permit for Voisey's Bay unless it agrees to build a C$1.0 million smelter in Newfoundland, which the company insists is not economically viable. Inco planned to
build only a mill on the Labrador site, and then ship concentrates to a smelter it already has in Ontario.

Inco announced in a press release that it was committed to reaching an agreement by the end of this year, and Reuters reports that the government confirmed that Inco had moved on its previous position. If an agreement merges from this latest round of talks, Inco says it will begin construction when the ice clears in June.

The fresh talks come as the price of nickel continues to rise. Tuesday's figures in London valued the metal at $3.63/pound, almost double its going rate of $1.87/pound last year when the Voisey's Bay talks seemed to collapse. Inco's shares closed Tuesday at $29.35/share after losing $0.45 in Toronto.

Black Blade (11/19/99; 1:37:39MDT - Msg ID:19407)
Small Au company in Nevada makes impressive Au find
These guys are creating a bit of excitement in gold country.

Ongoing drilling at the Ivanhoe property in Nevada is rapidly delineating extensive high-grade gold/silver vein systems, reported Great Basin Gold (GBG:VSE;GBGLF:NASDAQ). The company says that 40 recently completed holes confirmed feeder vein systems to the overlying Hollister gold deposit, which reportedly contains 2.8 million ounces.

Also, the company reports that drilling is outlining and extending multiple vein systems that trend east-west and dip to the south. Two vein systems, Clementine and Gwenivere, were reportedly confirmed over strike lengths of 1,400 ft and 800 ft, respectively. Gold/silver mineralisation was also extended over 500 vertical ft by drilling on sections along the trends. The Clementine and Gwenivere vein systems
remain open to depth and strike. According to Great Basin, vein intercepts graded between 0.25 oz/ton gold-equivalent to 5.77 oz/t gold-equivalent.

Black Blade (11/19/99; 1:25:31MDT - Msg ID:19406)
Producers are beginning to reduce silver hedges
TVX Gold (TVX:TSE,ME,NYSE) recently reduced its silver hedge position by one third, buying back 5.05 million ounces of silver written call options and selling 2.5 million ounces of its existing silver put options, at a net cost of $1.35 million. As a result of the reduction, the company says the revised silver hedge position now stands at 2.25 million ounces of long put options at a strike price of $5.06/ounce,
from December 1999 through to December 2000, and 10.6 million ounces of written call options at a strike price of $5.99/ounce from December 1999 through to December 2003. TVX estimates next year's silver production at 4.5 million ounces. (Nov 10/99)

Black Blade (11/19/99; 1:21:30MDT - Msg ID:19405)
Koan, welcome back to the forum!

Since you were into the silver game recently, the following may strike your interest. These guys appear to be new players.

Cash Resources (KSH:VSE) is moving away from coal mining to focus its activities on precious metals. The company recently signed a purchase agreement with that allows it to acquire Adrian Resources'(ADL:TSE,VSE;ADLRF:NASDAQ) 30% interest in the Hyland gold property in the Yukon, which will give Cash completed ownership of the property. The deal will give Adrian $45,000 for its interest along with a 1%
NSR, with payments capped at $1.5 million. The Hyland property reportedly hosts extensive gold/arsenic/bismuth
soil geochemical anomalies, one of which is centred on a 700 m by 200 m area of jasperoid altered limestone developed along a strong fracture zone. The company says that bulldozer trenches across the trend of the zone returned consistently elevated gold values with the best exposure averaging 2.3 grams per tonne (g/t) over 95.0 m. Cash also reports that rotary percussion drill holes also produced
significant results, including intersections of 3.0 g/t gold over 16.7 m and 1.1 g/t gold over 142 m.

In other news, Cash reported that two short exploration programs were conducted at its Mucho polymetallic property also in the Yukon. The company says that prospecting and soil sampling outlined an extensive system of silver-rich vein, skarn and replacement type mineralisation within a 3.5 km2 area of strongly anomalous silver/lead/zinc soil geochemical response. Other locally anomalous elements reportedly include gold, copper, arsenic, antimony, bismuth and tin.

The 1999 program also explored previously unrecognized veins, some of which are exposed intermittently within recessive weathering linears over strike lengths of more than 1,000 km. Where exposed, the veins are up to 8.0 m wide and are composed of massive quartz bands, gouge zones and crushed or silica cemented wallrock. Samples from different
veins returned silver assays of 19,480 g/t silver, 10,748 g/t silver and 5,436 g/t silver. According to Cash, chip sampling from widely separated outcrops and hand pits also returned encouraging assays including 421 g/t silver, 6.8% lead and 0.6% zinc across 130 cm, 712 g/t silver, 1.5% lead and 2.1% zinc across 30.0 cm and 279 g/t silver, 2.4% lead and 0.1% zinc across 80.0 cm.

The company says the 1999 results demonstrate that the veins have good size and grade potential, and adds that the next phase of exploration will consist of detailed prospecting and hand trenching along the veins with emphasis on areas where they cut brittle units or chemical reactive horizons that are suitable hosts for skarn or replacement btype mineralisation. (Nov 18/99)

THX-1138 (11/19/99; 0:08:59MDT - Msg ID:19404)
Y2K Computer Problem Blamed For Fire
http://7am.com/wires/freewire.htm
Y2K Computer Problem Blamed For Fire
Station Blaze
5:15 am PT, 18 November 1999
By Patricia Phillips

The Y2K computer problem has been blamed for a fire station blaze that started when a fireman left french fries sizzling on the stove as the crew rushed off to fight a fire.

It happened in Montreal, where historic Fire Station 26 went up in flames after an automatic breaker switch failed to shut the stove off. The firefighter's union blames the city's attempt to make computers Y2k compliant.

The city disabled the automatic shutoff system when it installed new Y2k-ready computers, according to Division chief Ronald Dubeau. However, he said that the safety system had been turned back on for allbut a few stations.

Not so, said the firefighter's union, which alleges that the breaker switches aren't working in most stations. In fact, the union is warning that more accidents may be waiting to happen as a result of the Y2K computer work.

The fire caused $500,000 worth of damage at the fire station and caused the relocation of its crews. Station Captain Jean Langlois said that he had repeatedly asked the city to fix the breaker switch system.

*It's a shame to see good french fries go to waste.

Click Here to view yesterday's discussion.

Permission to reprint is hereby granted where the USAGOLD name is cited along with our web address, mailing address and phone number. For electronic reproductions, citing the post heading and the http://www.usagold.com/cpmforum/ website address as the source is sufficient.

P.O. Box 460009
Denver, Colorado 80246-0009

1-800-869-5115 (US)
00-800-8720-8720 (EU)

303-399-6759 (Fax)

admin@usagold.com

Office Hours
6:00am - 5:00pm
(U.S. Mountain Time)
Monday - Friday

American Numismatic Association
Member since 1975

Industry Council for Tangible Assets

USAGOLD Centennial Precious Metals is a BBB Accredited Business. Click for the BBB Business Review of this Gold, Silver & Platinum Dealers in Denver CO

Zero Complaints

Thursday February 9
website support: sitemaster@usagold.com
Site Map - Privacy- Disclaimer
The USAGOLD logo and stylized gold coin pile are trademarks of Michael J. Kosares.
© 1997-2012 Michael J. Kosares / USAGOLD All Rights Reserved