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ARCHIVED DISCUSSION FROM 12/20/1999
All times are U.S. Mountain Time

View Yesterday's Discussion.

pdeep (12/20/99; 21:05:55MDT - Msg ID:21428)
Oro
What you have said about the dot.coms is a textbook case (if you read the Austrian textbooks) of malinvestment. That is, an investment taken as a result of cash being available below the natural rate of interest that results in businesses overestimating the markets for goods and services produced. In fact, it is beyond a malinvestment, since at least with a malinvestment the investment is undertaken in good faith, more or less. Perhaps "misinvestment" is a better term.

It seems as if the very foundations of the equities markets, which are to provide a venue for generating investment capital based on information about the future markets for the goods and services, have been turned upside down. Capital is flowing based on information on where capital is flowing, rather than on information regarding the underlying business prospects of the companies. The system is recursive, in a positive feedback loop, and disconnected from economic reality.

Which also means that capital is not flowing where it should be flowing based on market knowledge.

Untenable situation in the long run, or even the short run at this point.

Peter Asher (12/20/99; 20:53:47MDT - Msg ID:21427)
Steve
Until various statistics come out, and currency and bond trading start, in the NY morning, the Globex is not a high volume operation and not much of a directional indicator. Around 7:00 AM EST, the real action starts; including the (WE suspect) PPT activities that attempt to manipulate price momentum. The latter, of course, won't be worth Bogie's "Hill of beans" when it's really needed. Try standing in front of a panicked mob, and yelling "Stop!"

BTW All your indicators were after hours trading, except your -167 Dow which was the earlier, day period. The numbers do indicate a narrowing of the premium of futures over real time though'such as the - 167 future vs. a -113 actual. That is a negative indicator. But, wait till the big guns open up in the morning and then see if the markets move with or against the futures when they open.

Other than that, you could slay a goat and look at it's entrails, but you'd have to be sure that A.G. didn't sneak in during the night and feed it Maggots.

— (Ref. - Petr Strauss, in the Mini-series 'Masada')



tedw (12/20/99; 20:52:57MDT - Msg ID:21426)
Freedom of Information Act response
http://www.usagold.com

I received the following FOIA response today from the Department of the Treasury. (On 12/12/99 I requested to be
sent the Treasury Department documents which answered GATA's
11 questions posed in Roll Call (see GATA's open letter to Alan Greenspan at www.lemetropolecafe.com)

******************************************************
Dear Mr.-------

Your letter dated December 12,1999 in which you cite the Freedom of Information Act was received on December 13.1999.

The FOIA does not obligate any department or agency to answer interrogatories or to engage in discussions in order to respond to a request. Neither does it obligate agencies to create new records to respond to a requesters questions.
Therefore, we are forwarding your letter to the Treasury Department outside the provisions of the FOIA for publicly
available information on these subjects. They will reply directly to you.

Sincerely,
Louise Bennet
Information Disclosure Officer

*********************************************************
Anyone want to bet I never hear from the Treasury Department? Im going to take this response and forward it to my congressman and ask him to get answers from the Treasury Department.

I think the FOIA could be useful but perhaps one would have to ask with relative specificity for the documents which
answer GATA's questions. If any body has any suggestions along those lines I would like to hear them.

Of course, I could go into Federal District Court and try and compell an answer to these questions.Maybe I will.

pdeep (12/20/99; 20:48:30MDT - Msg ID:21425)
Creditors Howling at the Full Moon
If the Fed cannot show any restraint with its irresponsible largesse vis a vis the financial markets, then it will take creditors holding that US paper to provide a reality test.

However, as a small-time "creditor" who has foregone consumption, I get kind of worried that it's an uneven match. Because the Fed can, and will, with the stroke of the keyboard, reduce the value of the credits, if that is what it will take to balance the books. And I suspect that the time of "balancing the books" is upon us, as all debts, in the end, must be paid.

Hence, I'd rather turn those green pieces of credit-paper into something a bit more immutable. Like gold perhaps....



ORO (12/20/99; 20:46:13MDT - Msg ID:21424)
pdeep - ArMAZZedON
I visit some dot com stock bulletin boards. The levels of incoherence among the newbies, and the level of cynicism among the traders and experienced investors are both astounding.

Ignorance among the new (includes some who have been putting money into these for two years) is to the point of not knowing a company's revenue in relation to price, not knowing that a company is normally valued according to reasonable expectations of profits in the future, not realizing that the media circus around dot coms is a product of advertizing by the internuts and the financial firms that sell them to the markets, which accounts for 70-80% of new ad business.

The newbies at times don't even know what the business of the company is, who else is in the market competing.

The cynic traders don't care. They choose stocks by technical signals, news, or just screen for low float companies and check them for faborable news that might come. They buy baskets of stocks rather than one carefully chosen one, because they are saying that they can't figure out which will survive and thrive, so a shotgun approach should hit the future leader stocks as well. The naif is voting for a company rather than investing in it. Using the same criteria he would use for a book or CD or even a politician he likes.

Experienced investors just hold their nose and jump in because they have yet to see an end to the novice money coming in, and understand that excitement has more to do with a stock appreciating, than its basic value.


pdeep (12/20/99; 20:19:45MDT - Msg ID:21423)
Slip Slidin' Away
It would appear that most of the tech-yuppies chasing the Oracles of Amazon do not know a Long Bond from James Bond. Hence the crazy divergence between Nasdaq and the rest of the markets.

SteveH (12/20/99; 19:54:29MDT - Msg ID:21422)
Help me out here
www.mrci.com
Something appears to be brewing here for tomorrow or am I just seeing the moon in the man?

Market Mth Open High Low Last Change Date Time Ask Bid
S & P 500(CME)(Globex) Mar 1434.50 1435.00 1432.20 1433.00 -1.80 12/20/99 18:35 1433.00 1432.90
S&P 500 Futures Premium 2275 2595 1411 1491 -774 12/20/99 18:27
S & P 500 E-Mini(GLOBEX) Mar 1434.20 1434.70 1432.00 1433.00 -2.00 12/20/99 18:32 1433.20 1432.80
NASDAQ 100(CME)(GLOBEX) Mar 3444.00 3445.00 3439.00 3443.00 -3.50 12/20/99 17:17 3442.80 3442.00
NASDAQ 100 E-Mini(GLOBEX) Mar 3439.00 3442.50 3438.00 3442.00s -5.00 12/20/99 17:23 3447.50 3442.00
DJIA Index(CBOT) Mar 11435 11459 11245 11260s -167 12/20/99 13:25
DJIA Index(CBOT)(Proj. A) Mar 11256 11260 11243 11255 -5 12/20/99 18:16 11246


Also, did you see that l t bond yield today?



TownCrier (12/20/99; 19:45:19MDT - Msg ID:21421)
The GOLDEN VIEW from The Tower
A fairy tale ending to a fairy tale economic expansion...

As the U.S. lurches through these final months toward its longest continuous economic expansion in the nation's history, each turn of the page reveals that all is not not right in Jack's world. For starters, we hear that a witch has moved into that quaint gingerbread cottage across the street. But more distressing of all is the condition of root-rot that has developed on that towering beanstalk at the end of the block. With the Nasdaq Composite Index setting a new record, that beanstalk gets higher and more worrisome...with the threat of its collapse hanging over the neighborhood like a stormcloud. With the index up 70% on the year, the creaking and festering of the base has us continue to keep our eye's skyward, thinking it now well past time for Jack to be making his getaway with the goose that lays the goldedn eggs or else come tumbling down in a heap with the giant, the beanstalk, and all else...including his hopes, dreams, and perhaps his delusions of grandeur.

What are the signs of this root rot? The world continues to demand a premium to be coaxed into holding U.S. dollars. The 30-year bond, denominated in the very same currency that has been fueling this remarkable economy (fertilizer for the beanstalk,) has been sold off yet further in a continuation of a trend that has been relentless all year. Today it lost another 24/32 in price, and the yield at 6.428%--the highest in over two years--still fails to entice investors. On the broader New York Stock Exchange, declining issues continue to outnumber the advancers, today being no exception. The losers beat winners by 1,816 to 1,292, and those probing new depths of dispair for the year outnumbered the new highs by 279 to 85. Even on this day of new record highs, the powerhouse itself, the Nasdaq Stock Exchange, had losers outpacing the gainers by 2,419 to 1,871. New 52-week Nasdaq lows are almost as numerous as the 200 that are in the throes of a mania, the lows vs. highs being 169 to 193. As we said, it's high time Jack makes his getaway with that goose, and hope that when the stalk falls it's in the direction opposite is house.

The metals markets were said to be subdued as we enter the final stretch of this holiday season. Obviously, even in limited trade the price is capable of moving either up or down, and today that direction was UP. Spot gold was last qoted in NY at $283.80, up 50¢, while the derivatives traded on COMEX also gained 50¢. After trading in a very narrow range of $285.30 - $286.50, February gold futures settled at $286.

To anyone having doubts as to the relation of these COMEX derivatives to real gold, have a look at these numbers. When November was young, there were more than 100,000 outstanding contracts for December gold futures. As of yesterday, only 88 December contracts remained in open interest, and with todays announcement of delivery intentions on another 23 of these contracts, the total that have been tapped for physical rather than cash settlement equals 8,176 contracts (representing only 8% of these contracts.) Most of these COMEX market players are simply looking to use this specific trading avenue to wager on the future price, and either settle their gains or losses with cash prior to contract expiry, or extend their contract position into a more distant one. In that regard, the open interest on the February gold futures now has reached 72,184 contracts.

Those who have their gold in storage in the depositories under COMEX guardianship opted for no changes in these arragnements today. Registered and Eligible inventory held steady at 1,228,082 ounces.

And finally on this slow news day, the expiration of the January crude contract prompted liquidation that dropped the price by 29¢ to $26.45 per barrel.

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

ORO (12/20/99; 19:44:14MDT - Msg ID:21420)
TownCrier - IMF debt trick
So, I reworked the structure for the IMF transaction, what do you think now?
The IMF, rather than taking the cash to settle the debt, thereby destroying dollars, as it would as a bank being repayed, takes the gold as cash settlement of the loan ammount. Leaving it with the original cash. Gold reserves are (still) the only way a bank can issue cash that is not backed by debt. Raising the gold price has a tremendously positive effect in reducing indebtedness - but it will provide an inflationary boost to the "real cash" monetary base - Once their appetite is wet by this action, it would be just a matter of time till they show active encouragement for debtors to pay in gold. The gold payment is much better than "creating" money, since it eliminates debt while keeping cash outstanding alive, even without new loan issuance.
Originally 17.5 $B in 1933, growing only at the rate of loan default. I am collecting data about this so that I can investigate its statistical history, data is hard to come by.


................ .. Brazil ................. . IMF ................... ......... ..... . BIS*
Before......... -2 $B debt ......... +2$B loan...... *
......... .........2 $B cash ......... 7 m oz at $48=$330 M*
......... ......... ......... ......... ......... total 2.33 $B
*
IMF sale ........7 m oz @ $282... +2$B loan......*
........ ........ -2 $B debt........ . . .2 $B cash*
......... ......... ......... ......... ......... Total 4 $B*
*
IMF takes .... ......... ........7 m oz at $282=$2 B....(gold "retires" loan - used as money) *
gold to settle........... . ...(2 -0.33=1.67 $B profit booked)*
debt ......... ......... ................... 2 $B cash (gold payment "saves" previously created cash *
......... ......... ......... ......... ......... Total 4 $B*
*
IMF Deposit................ ......... +2$B deposit...... . . . . -2$B deposit = BIS liability*
at BIS ......... ......... ......... ...... 7 m oz at $282... ......+2 $B loaned out *
*
The loan on the IMF's books was provided from the member country currency deposits and lent out to the HIPC borrower. The spent borrowings were deposited by the sellers of "stuff" to the HIPC at the BIS (directly or indirectly). Interest payments from the new deposit at the BIS can reduce HIPC loans outstanding.

Every time the IMF does this, they are reducing future debt demand, without reducing cash supply - equivalent to creating money - though this is not the way the Fed created it according to the previous table . - Anyway, is is still the only non gold "real cash" created for the $ economy since the greenback period of the Civil War. It has no liability attached to it - though they did channel it through to the BIS.

This version allows for an extra 330 $M.

The table is marked with * to denote ends of lines. If the * are not at the end of the lines, copy the it to a text editor and straighten the lines up so that the only line breaks in the table are those after a *.


beesting (12/20/99; 19:43:27MDT - Msg ID:21419)
Correction
Last post Step #6 amount should be $23,778,000.....beesting

beesting (12/20/99; 19:31:59MDT - Msg ID:21418)
TownCrier #21415 IMF loan.
Townie'see if this makes sense,U.S. Agriculture loans are similar to this.

Step #1-IMF makes an additional loan to Brazil of $4,222,000 represented by 100,000 ounces of Gold.(Gold book value $42.22)and adds amount to existing Brazil loans.
Step #2-Brazil revalues 100,000 ounces of Gold to $28,000,000.(market price $280 per ounce)
Step #3-Brazil pays back new loan of $4,222,000 immediate-ly and subtracts that amount from $28,000,000==$23,778,000.
Step #4-Brazil pays back $23,778,000 owed from previous borrowings.
Step #5-IMF subtracts new loan amount from Brazils outstanding balance.($4,222,000).
Step #6-IMF subtracts an additional $23,000,000 from Brazils outstanding balance.
Step #7-IMF revalues 100,000 ounces of Gold(which never left vault) received as payment from $4,222,000--TO--$28,000,000.
Step #8-On paper only to be legal, the BIS is the intermediary.
I don't know if this is how it actually worked, but for book keeping purposes this should work,or some-thing similar....beesting.

Netking (12/20/99; 17:54:32MDT - Msg ID:21417)
I'll try that link again.
http://www.kitco.com/LFgif/au75-pres.gif
Sorry for my previous attempt..."The Bug" trying to attack this expensive hardware perhaps!

Netking (12/20/99; 17:37:19MDT - Msg ID:21416)
POG @ December 2000
http://www.kitco.com/cgi-bin/yearly_graphs.cgi
What will this chart look like one year from now?

TownCrier (12/20/99; 15:15:36MDT - Msg ID:21415)
For ORO, FOA, or others on IMF's gold revaluation
Last Friday I commented on the IMF's gold-revaluation operation with Brazil, noting both that the newly created dollars (as an offspring of the value of gold) would naturally be inflationary (as they would add to the world's supply of dollars,) and that these would be remarkable dollars in the sense that because they were born of gold instead of born of debt (trough borrowing,) they did not represent a future obligation to be repaid. I was pleased to see from your response that we are in substanstial agreement on these points.

What puzzled me in my musing aloud at the Forum was in regard to how the IMF would manage its books. The problem as I saw it was like this: As you well know, the same dollar cannot be used more than once in the repayment of loan principle...in much the same way that a slice of bread can't feed a person more than once. They are both "consumed" in the process. The bread is digested while the dollar is stricken from the ledgers. In last week's IMF gold operation, Brazil played the role of facilitator (as a debtor in good standing) in this laundering affair, whereas the ultimate beneficiary may eventually be Uganda or some other such Heavily Indebted Poor Country. The problem I was trying to resolve on Friday specifically was twofold.

1) With Brazil effectively paying off its latest loan installment with gold at market values, where does the IMF fill its obligation to "consume" this equivalent dollar supply as is normally done by writing down the ledger entries? I had carefully studied your follow-up mini-ledger, but that seemed to require that the IMF repurchaced the gold from Brazil with cash, which then served as the ultimate means of Brazil's debt settlement. I would be happy to accept this solution, but the attached IMF statement makes no reference to such an extra step as this. You be the judge...

2) Aside from Issue #1, it appears that the cash payment from Brazil (ostensibly in purchase of the gold) is deposited at the BIS, while at the same time the IMF books are adjusted to reflect the "receipt" of the same gold at market value...seemingly creating new value at TWO places at once (cash in the BIS account AND higher gold on the IMF books.)

Could the answer to my two-fold difficulty be that the IMF then writes their gold back down to SDR35 in value, therewith canceling out the corresponding principle value from the Brazil loan repayment (described in Issue #1,) and also thereby eliminating the double increase in value (from Issue #2) on both the BIS and IMF balance sheets? At the end of this operation, the ledger issues on the Brazil loan would be properly squared away, and the newly created dollars would be held free-and-clear (unencumbered by debt) within the BIS account.

Any additional thoughts? The only part that seems a bit of a stretch on my part is the unreported notion that the IMF would in the end still be carrying their gold at SDR35, with the gains from marking to market represented solely by the new, unencumbered BIS account.

The referenced IMF Brief on the mechanics of their revaluation scheme is as follows...
------------------
From IMF News Brief No. 99/62 (September 27, 1999):

Off-market transactions in gold by the IMF will entail separate but closely linked transactions between the IMF and member countries that have financial obligations falling due to the IMF.


--In the first step, the IMF will sell gold to a member at the prevailing market price, and the profits from the sale will be placed in a special account [at the BIS] and then invested for the benefit of the HIPC and ESAF initiatives.
--In the second step, immediately following the first, the IMF will accept, at the same market price, the same amount of gold from the member in settlement of that member's financial obligations falling due to the IMF.

The net effect of these transactions will be to leave the IMF's holdings of physical gold unchanged. No gold will be released to the market, and thus there will be no impact on the supply and demand balance in the market. The IMF's gold holdings accepted in settlement of members' obligations (the second step above) will be recorded at a higher value in the IMF's balance sheet, and acceptance of this gold (instead of currencies or SDRs) in such settlements will reduce the IMF's liquidity, by the amount of profits transferred for the benefit of the HIPC and ESAF initiatives (under the first step above), and its net income. [end excerpt]

longj (12/20/99; 15:08:07MDT - Msg ID:21414)
top five in my opinio...bbl
I'd do a discussion of these five, maybe later tonight...

** Introduction of the EURO
This provides a consolidated challenge to the USD.

** BOE auction announcement
Feeds overhang paraniod investors fears to support dollar illusion.

** Goldfields buying at the second BOE auction
Demonstrates producer support for gold price, fires a bow shot across hedgers path.

** Ashanti/Cambior Derivatives nightmare
Obvious soiling of shorts, for several shorts.

** Washington agreement
Agreement to limit sales and leasing.

ORO (12/20/99; 14:20:01MDT - Msg ID:21413)
PH in LA - defaults workarounds and settlement
The US has always had a rather sunny view of itself coupled with this intollerance of others doing to the US what the US has done onto others. In 1919 the Russian nationalization was following the US pattern established with the seizure of assets of the citizens and corporations of Axis powers upon its entry into WW I.

Assets of US corporations in the Middle Eastern oil patch were nationalized after the 1971 default by the US. I would dare say that the oil states have nad a settlement plan in force with the US long before the 1971 default. Before that, assets of French, Dutch, English and US oil companies were seized in the 1950s.
If the US was so intollerant of this kind of behavior - as I agree with you they are, why did the US not retaliate at those times? The 50's saw the subsequent takeover of former Anglo-French-Dutch assets by US companies. I would take that to mean that there was more for US firms to gain in the future from this than they had to lose immediately.
In the 60s, the US had gone on an asste shopping spree in all countries. Countries that had just a few years back nationalized European assets. If there had not been some kind of prior agreement about the dismantling of the old collonial structure and the creation of a new one headed by the US financial system, why would have US companies plunged headlong into the same places where their European contemporaries had just faltered?

Thus, the 70s asset seizure and subsequent oil embargo has much to do with reaching a pre-negotiated settlement of what was expected in 1969. Dollars received for the purchase of drilling rights were defaulted, the drilling rights and the equipment put in place were taken in settlement. What could Europe take as settlement at that time? There was nothing much to take. They could only hope that the dollars they had accumulated would buy enough oil to supply their needs.
Europe was like A.A. Milne's Eeyore with a punctured baloon (US $) and an empty jar (oil). Not happy with the prospect of pulling the deflated baloon from the empty jar and putting it back in for the rest of history, the US was pledged (again) to focus its resources on meeting the Soviet challange with the help of the whole world.
Hence the workaround with oil backed dollars and their free market bidding for gold as the exchange structure replacing direct US dollar redemption. The arbitrage of gold to dollars was being done through oil, rather than directly.

This changed when the US came back to solvency with gold over 800 $/oz in 1980. There, a new structure was created, that structure was modified in 1987, and has held since that time till last year. What this structure was exactly is difficult to discern, however, through some interesting relationships, it could be seen that cash US currency outstanding (a major component of M1) has been kept on par with new gold outstanding (both paper and physical). This suggests that the new deal of the 1980s was that of exchanging oil's dollars for "gold bonds" or contracts for future delivery and for private "gold accounts" backed by European gold. Europe, just like the US before it, has reneged on the guarantees after coming to a new settlement with oil. A settlement that circumvents the US and its currency altogether. The abrupt stop to EU and Japan's US bond buying in 1997 is very obviously matched by the abrupt stop in the growth of dollar/gold contracts in the LBMA at the same time. (There was another spurt of growth around the time of the BOE announcement.)

Current dynamics:
The current expansion of M1 probably a result of the momentum of the old deal continuing after the enormous gold paper issuance of Q3 1999, when gold bottomed. I estimate that at some point in Q3 1999 there were an extra 6000 tons of new gold paper that had hit the markets. US based sellers were matched in (large?) part with European buyers unloading their positions. The BOE sales and the preceding and subsequent raids on gold were not just intended to lower gold prices, but to unload English positions into US hands, just as Deutsche Bank unloaded its paper on Morgan in the previous quarter.
The US banks may be set up to hold the golden bag, as their share of gold banking (and their outstanding obligations) has grown from just over 1/4 in 1994-5 to some 40% or more last quarter. Their holdings include the obligations of North American gold producers ABX and Cambior in particular, who sold so much of their production forwards in the previous year or so. London, in the meantime, is losing support of South African miners, who seem to have figured out the situation and want less business (if not none at all) going through London.


JCTex (12/20/99; 13:13:32MDT - Msg ID:21412)
Journeyman
Now dad-gummit, Journeyman, there you go again: wanting to call a spade a spade and talk plainly so that people can understand you. This is NOT politically correct, nor will it be smiled upon by your government superiors. You must be more careful in your suggestions.

phaedrus (12/20/99; 12:46:09MDT - Msg ID:21411)
bonds
bonds go crashy crashy, stockymarket no like

march bond down 17 points at 2:45 EST

TownCrier (12/20/99; 12:41:35MDT - Msg ID:21410)
Japan government pulls a well-worn trick from the U.S. playbook in willful creation of a record budget deficit
http://news.bbc.co.uk/hi/english/business/newsid_572000/572442.stm
The spending-spree that Japan's government affectionately calls a budget for year 2000 amounts to politicians venturing 85 trillion yen ($825 billion) where the free-market apparently fears to tread. This proposed "economic recovery scheme" will lift the nation's budget deficit to 9.4% of gross domestic product while the national gross debt climbs to nearly 133% of GDP.

TownCrier (12/20/99; 12:23:35MDT - Msg ID:21409)
An excellent retrospective on the significant events of the euro's first year
http://quote.bloomberg.com/fgcgi.cgi?ptitle=U.S.%20Economy&s1=blk&tp=ad_topright_econ&T=markets_fgcgi_content99.ht&s2=blk&bt=blk&s=b02ea4afcf1cc2f166a044fd268dc6f2
Bloomberg throws a fictional one-year birthday party for the young currency, and reviews some milestones (such as surviving a war in its back yard) along with who would and would not make the guest list. Pleasant reading for a Monday.

PH in LA (12/20/99; 12:18:12MDT - Msg ID:21408)
American tradition of "tolerance" towards international default
"...Hence the traditional US tolerance of default - and its practice by our institutions at all levels. The tradition dates back to the founding of the country..." ORO (12/20/99; 11:51:27MDT - Msg ID:21405)

Perhaps, ORO, the US is perfectly willing to exercize tolerance towards their own defaults, however, I would call the US reaction to outright default and confiscation of American assets outside of the US singularly "intolerant". Witness the cases of Russia's 1919 revolution and Cuba's revolution. In both cases the US reaction was a "fight to the death" in retaliation in hopes that no other nation would ever be tempted to try the same thing.

ORO (12/20/99; 12:14:39MDT - Msg ID:21407)
Continued from previous
Sorry, chopped the copy/paste.

The G20 forum is most probably inteded to resolve the issues of the upcoming US default on the post 1971 debts. The participants would be more likely to rework the systems into a semblence of the old settlement systems. While the countries are holding US government debts, their corporations are holding private market US debts and Emerging Market debts denominated in dollars. The private creditors of Europe have a much greater stake than the governments, and the governments do not want to weaken the private positions. In the interest of coming to settlement, dollar debt of private and Emerging Market entities is to be converted to Euro debt. As transition to Euro debt progresses, the dollars outstanding would be eliminated in part. The dollar destructive settlement may cure some of the dollar overhang problems before the markets lock up in an attempt to liquidate what remains outstanding.

pdeep (12/20/99; 11:53:42MDT - Msg ID:21406)
Liquidity Squeeze
http://www.siliconinvestor.com/tools/bond_mkt.gsp
Anybody notice what is happening to short term rates? I thought for a minute there was a typo!


previous close latest change

3 month 4.81 5.54 0.73

6 month 5.12 5.83 0.71

1 year 5.26 5.97 0.71

1 year rates almost up to 6%. This is nothing short of amazing, given the kind of Fed intervention outlined below.

ORO (12/20/99; 11:51:27MDT - Msg ID:21405)
TownCrier - 21390 -
Wonderful summary of a great history of default. The history of the US.

It is an interesting observation on success, that sees it as a product of many failed attempts. The risk being taken by the entrepreneur is statistically ill fated (90% failure within 5 years). In this country, the cost of the failure was reduced and the stigma of failure in both business and credit standing have been ameliorated for the benefit of those attempting the creation of future wealth through innovation and trial of new business concepts. Hence the traditional US tolerance of default - and its practice by our institutions at all levels. The tradition dates back to the founding of the country.

The international "common law" view of contracts among nations, does not share the US view of default being benign - "we tried this new business idea, it looked good, worked for a while, then failed" - in their books, the original obligation is outstanding until it is settled in good-faith compromise. Bygones are not gone. Intermediate arrangements are just that, temporaty workarounds.

The G20 meetings include gold holders, gold debtors (US) and by proxy of gold - dollar creditors (EU, Saudi,Japan, China) and dollar debtors (US, Argentina, Indonesia). This forum is dilutive to the power of the US.



TownCrier (12/20/99; 11:32:22MDT - Msg ID:21404)
No surprise here...Fed again provides more money (reserves) to the banking system
Analysts who regularly track this activity have admittted that going into the year-end it has become more difficult to predict what form of adding operation the Fed will choose each day...though add they must. They say that the primary factor influencing the Fed's open market operations these days is the demand for cash which "continues to increase daily" according to a morning Reuters report today.

In all, the Fed added $5.158 billion in temporary and permanent reserves through a combination of operations so far today. $2.7 billion was added through 10-day repurchase agreements, $1.555 billion was added through overnight repos, and most recently the Fed shovelled in $903 million in permanent reserves through an outright purchase of Treasury securities dated January 2000 - June 2001.

Gandalf the White (12/20/99; 11:31:25MDT - Msg ID:21403)
OK -- MK ! NOW you have done IT !
Did you have to tell all about my forthcoming Fifth BoE adventure? Mr. Gates is having doubts now. Shhhhhh!!
<;-)


Galearis (12/20/99; 11:19:10MDT - Msg ID:21402)
"dead market" conditions for pms
Here I be in the midst of frantic Christmas last minute preparations and I cannot stay away from the riviting "action" in the precious metals market. I realize I transgress a little on this particular topic, but I have been watching some bizarre (for me) events on the New York silver market. I have been on to Bill Murphy about this (who also feels something is really amiss) but I rather feel his irons are in other fires right now and he has little time to address my concerns. The "bizarre" events I refer to more specifically revolves around the very little trading activity in this market.

For the last two to three weeks it has been rare indeed to see any trades whatsoever past 11:30 am out of Comex. I repeat, apparently NO TRADES WHATSOEVER. I know that this is not what is meant in the ordinary sense as a dead market (the sense that no supplies exist to meet demand kind of dead market), but could we have here the preliminary to the crisis market explosion in this pm? As I write this I realize that there are some 73 M. oz of silver in Comex, of which less than half of which is available (is not registered). Of this latter available metal an unknown quantity (and probably not an insignificant number) is unrefined bullion. This would indicate approaching dead market conditions, and since I am sure there has been little historical experience (my conjecture here) for such a condition I hazard a tentative speculation FWIW. The lack of activity suggests to me (at least subjectively) that there is profound wariness of participants in this market. Are the traders of Comex this afraid that their paper kingdom may oh too soon reveal its insubstantial nature and hence sit back petrified and breathless in trepidation?

Comments PLEASE!? This is really bothering me.

Now back to the Christmas grind. Ho Ho Ho Ho......

Journeyman (12/20/99; 11:16:33MDT - Msg ID:21401)
US Government: Calling a spade a spade.
A, I think the word is "stole" not "confiscated" when US (or any) government behaves like a criminal, we shouldn't excuse the behavior by mincing words. The US government, in cahoots with the Federal Reserve, STOLE it's citizens' gold in 1933, and in effect, STOLE the gold it was holding in trust for "foreigners" when don Richard Nixon "closed the gold window" in 1971. Regards, Journeyman

beesting (12/20/99; 10:16:15MDT - Msg ID:21400)
Sales trigger mini Gold rush.--In China.
http://www.kitco.com/_a/news/3960.htm

Individuals in China have not been allowed to own,buy or sell Gold since 1949.
In Beijing the sale kicked off on Dec. 10 ,in three days 700 peices of Gold were purchased (U.S.$600,000).Gold bar sizes are 50, 100, 200, and 500 grams each.
**The metal is still a top choice for most individuals to MAINTAIN AND ENHANCE their wealth**.
Complete story at above URL.....beesting.

Cavan Man (12/20/99; 09:57:41MDT - Msg ID:21399)
A $20 Six Foot Santa
FOA 21351 : "For, we believe that it was the wholesale blind following of accepted western money views that created this generation of question-less savers".

Yesterday evening after reading the above post, I received a call from my Sister. She wanted to tell me there was a special at a local discounter on 6' plastic Santas for $20. I told her I didn't think we'd need one. Then, she put my brother-in-law on the phone; he asked me if I knew anything about state sponsored bonds to finance college educations. I told him "no", I did not and that I was not inclined to participate with government in college savings plans for MY children. I further told him at this point in time, I would only consider investing in US Treasuries or gold. There was a prolonged silence and then the question; "because of Y2K?". I said Y2K had nothing to do with it. He quickly said, "well OK, let me put Chris back on".

As I gain more knowledge and understanding of the economic and monetary issues that affect my family from the Roundtable here, relations with family and friends get, "curiouser and curiouser". I want to thank all of you sincerely. The coming year should be very interesting.

Keep the faith. I am off on a posting holiday in respect of this most Holy Week (in Christendom).

Happy Holidays. The best is yet to be!.....CM

USAGOLD (12/20/99; 09:54:17MDT - Msg ID:21398)
Important Addition to Contest Rules:
Each of your five choices must be listed like a newspaper headline:

For example:

"Gandalf the White Purchases Entirety of BOE Fifth Gold Auction"

Onward, my fellow meisters.......into the fray. Let knowledge and courtesy be your hallmarks; wisdom your guide.

I think as you put this together you will discover as I have that 1999 has indeed been an interesting year for gold.

SteveH (12/20/99; 09:53:30MDT - Msg ID:21397)
Gandalf
How can they claim? They can cry foul. How can we have our cake and eat it too. That would be my take. What powers do they have to make good. Now that is a question for OTHERS.

USAGOLD (12/20/99; 09:45:02MDT - Msg ID:21396)
********* CONTEST****CONTEST****CONTEST************
I think a lot of the meisters are going to be hanging out at the FORUM during this pre-Christmas week despite wild dashes to the Mall, food and beverage outlets, and other preparatory activity, so I thought it would be a good time to have an important year-end type of contest. I hope posters find the time.......

For a French Rooster (.1867 pure gold ounces), list the TOP FIVE EVENTS for THE GOLD MARKET in 1999 with a short explanation as to why each was important. This must be followed by a review of the events and their impact, as a group, on the psychology of gold investors. That review should be at least 30 words. Length of review is not as important as content!! Each entry must be headed with ***MY TOP FIVE EVENTS for GOLD MARKET 1999*** (surrounded by stars as shown here)

The contest will run between now and Thursday 12-23-99 Midnight Mountain Time. Timing will not play a role in the selection of winners. The posts are grouped and read as a group and we won't tell you how we paste them up -- first in, first listed or last in, first listed, or at random. Content and quality of the post are the keys.....

There will be two runner-up silver Eagles prizes.

One entry per poster, please.

First time posters will receive a Silver Eagle for entering the contest, but you must do two things:
1. Participate in the contest. Off subject posts do not count
2. You must e-mail us that this is your first post or you won't get the Silver

I will post my TOP FIVE on Friday morning after the CONTEST is officially closed. You're winning will not be contingent on agreement with me but the strength of your argument. The winners' announcement might extend into the New Year depending upon year end schedules.

I just thought it might be fun to recapitulate.......

I want to take this opportunity to wish all our posters and lurkers Happy Holdays! I would like to especially thank our regular posters for making this one of the most interesting and informative stops on the internet. We've come a long ways from where we began, and built something here of which we can all be proud. May God bless and keep each of you and your families during these happy year end celebrations and into the New Year...... MK

USAGOLD (12/20/99; 09:16:29MDT - Msg ID:21395)
Today's Gold Market Report: Y2K Back on Radar Screen
MARKET REPORT(12/20/99): Gold is sideways in typically featureless
early Monday trading. In the London market, the yellow was $2 higher in
"light short-covering out of Asia" and a dip in dollar/yen. Interesting
to note that some London traders agree with the assessment we made here
several days ago here: "Gold is likely to push higher towards the end of
the year, boosted by millennium bug fears and physical demand in thin
market conditions," reports Reuters. Though we continue to see gold
buying motivated by Y2K concerns, many buyers are also voicing concerns
about the over-valued stock market and the underlying downtrend in most
stocks not visible to the general public -- a downtrend that could
become part of the public consciousness in the New Year.

The following Bloomberg report out of the Mid East published yesterday
is also raising concerns:

Dhahran, Saudi Arabia, Dec. 19 ( Bloomberg ) -- Gulf Arab states
responsible for half the world's oil reserves may not be adequately
prepared for the year 2000 computer problem, the United Nations and
U.S. government officials said.

Computer failure and resulting disruption to production and
transportation facilities in the six Arab Gulf states -- Saudi Arabia,
Kuwait, Oman, Qatar, the United Arab Emirates and Bahrain -- could
boost oil prices, which have already more than doubled this year.

Governments and companies in the Middle East won't be ready for the
date changeover on Jan. 1, 2000, due to a lack of funding to deal with
the ``millennium bug'' computer glitch, the United Nations has said in
a report.

All in all it might not be as quiet a year end has some have forecast.
"As every year, the year-end liquidity will be very tight and
additionally this year, the demand for liquid assets will be even
stronger as a result of Y2K," one Swiss dealer told Reuters.

That's it for today, fellow goldmeisters. See you here tomorrow.

tedw (12/20/99; 09:06:19MDT - Msg ID:21394)
Gas shortage ,Y2kand gold
http://www.usagold.com

Good article on gas "gauging the gas supply"

WWW.Worldnetdaily.com

Gandalf the White (12/20/99; 08:27:23MDT - Msg ID:21393)
Thanks SteveH and T.C.
Those really helped, BUT of course generated MORE questions. One thing the Hobbits still do not understand is: -- like the Silver Dollar Certificates, or the Silver Certificates, and the Gold Notes, -- These were "called" and one had only a certain length of time to redeem them and then they "expired" and only became "paper" rather than having exchange "privileges". --- Question = How can anyone, (like the BIS) just because they keep their books in a certain manner, think that they still have non-terminated rights? How can anyone make their own rules? If someone defaults, they have wiped the slate clean and everyone starts at step one again !! --- What am I missing here ?
Thanks <;-)

Jon (12/20/99; 07:00:27MDT - Msg ID:21392)
Y2K-experts now say to expect only minor glitches
Saw an article in local paper this AM that claims de Jager,Yardeni,Yourdon- and, yes, even Gary North! are toning down the doom and gloom. de Jager plans to be sipping champagne on a transatlantic flight at the stroke of midnight NY eve.
Goldfly, in response to your comment in msg #21381, DC's expected Y2K problems were widely commented on TV and newspapers several months ago.

dracip (12/20/99; 05:03:34MDT - Msg ID:21391)
Bubble and the new paradigm
http/www.usagold.com
Remarquable article by Mark Hulbert in Sunday N.Y.Times bu8

TownCrier (12/20/99; 04:28:11MDT - Msg ID:21390)
Hi Gandalf the White
Was just doing a late security sweep of The Tower here and saw your line of questioning on the screen. I might be able to satisfy some of your curiosity until such a time as FOA gives your post his attention.

Where you asked, "What is the basis of the BIS having a claim on U.S. gold AFTER the convertable was changed ? -- Are not the laws the same for the BIS as they were for the U.S. citizens and the rest of the world ?," you also provided the germ of the answer with the earlier repost of FOA's quote, "Something the BIS would have a major say in as they could attach it at the old $42 rate....if current international law demands the compensation of German slave labour and Swiss Gold value reparations, all hell would break lose for the payment of dollar backed gold confiscated in 71."

In answer to your questions, "Whose gold was confiscated in '71? -- And by whom ?," maybe it would have been a tad clearer if FOA would have altered the order of his wording to "...payment of gold backed dollars confiscated in 1971," meaning that through the sudden termination of dollar/gold convertibility, the US government essentially confiscated the gold that was represented by all of the dollars still held in international accounts as of August, 1971. That's where the Bank for International Settlements comes in...this is an issue of "international settlement" after all. The accountability to which the Germans and Swiss are being held were given as other examples where the passage of time AFTER-the-fact doesn't easily and by itself undo old contracts or right old wrongs and defaults.

Here are some comments that might be helpful from the Hall of Fame:

From Aristotle:
-------Upon the 1971 declaration by the United States that redemption of dollars for Gold would be terminated, the entities in receipt of dollars for balance of trade settlements had no difficulty recognizing this as an outright default on payment contracts. The scramble was on to make sense of this new payment system in which the dollar was no longer a THING of value (a small amount of Gold), but was now reduced to a CONCEPT of value; an undefined unit with which the world would denominate the amount of value in contracts for goods and services. The problem ever since has been in coming to terms with the meaning of value for this shifting and undefined unit, and its vulnerability for mismanagement and abuse.
+
Jelle Zijlstra, who became head of the Bank for International Settlements, said while with the Bank of the Netherlands in regard to the 1971 severing of Gold from the dollar, "When we left the pound, we could go to the dollar. But where could we go from the dollar? To the moon?"
+ [...snip...]
...let us take a look at the dollar itself. The dollar and the world was pegged to Gold via the post-WWII Bretton Woods agreement in which $35 was convertible to one ounce--but for foreigners only, not U.S. citizens. The rate for international currency exchange was coordinated through the International Monetary Fund (IMF), with each currency pegged to each other through the dollar and Gold. The U.S. economy steamed along nicely in the 1950's, producing half of the world's oil as I've already stated, and half of the cars that burned up this oil. By the arrival of the 1960's, American industry was buying foreign factories, equipment and raw materials. In addition, the government was spending for its foreign bases and troops, and Vietnam was funded largely in the red.
+
An overhang of dollars was developing overseas, and while at first the foreigners were reassured that the Gold guarantee of the dollar was solid, as ever more dollars piled up, ever more of them cashed in the dollars for Gold. General de Gaulle summed up the sentiment, saying that America had "an exorbitant privilege" in ownership of the key-currency. By that he meant that the dollars America was able to issue via simple printing carried the same value in trade as the dollars that had to be earned by other nations through meaningful productivity. It quickly became clear that too many claims had been issued on the limited Gold, and President Nixon was prompted to close the Gold exchange window in the face of a certain run on the Treasury.----------

From Aragorn III:
-----------Prior to 1971 the dollar was truly money (gold standard defined the dollar as gold) in the international economy, freely convertible with gold, with an equivalency of 1 oz. @ $35 -- FIXED, no questions asked! (Though it is fair to say there was squawking from time to time when overseas paper came home for redemption). Unfortunately, the U.S. had painted itself into a corner and was trapped. Here is how it happened.
+
Prior to 1933 the U.S. was on a gold standard domestically, also, at which time the equivalency was 1 oz. @ $20.67 -- fixed, no questions asked. A bank would readily exchange paper currency for the equivalent gold currency on demand. There was a general confidence in the banking institutions, and people were content to use their paper dollar equivalents, and further, were content to let their deposits remain in the bank. Fractional reserve lending privileges allowed banks to expand the money supply--YES...even while on a fixed gold standard! As long as not everyone together would choose to withdraw their money and convert the paper proxies for the gold dollars, this fractional reserve lending privilege did not cause any apparent problems. Did prices stay reasonable as the dollar still appeared "good as gold"? I give you... The Roaring Twenties! When the attendant stock market bubble popped in 1929, the financial system, and much necessary confidence began to unravel, and the bank run became a probationary event for the Olympics. In 1929, 659 banks failed. In 1930, 1352 banks failed. In 1931, 2294 banks failed. Late 1932 and early 1933 witnessed this trend swell to envelop not small or isolated banks alone anymore, but entire communities and statewide banking institutions. (I will tell you that by 1933's end, nearly half of U.S. banks had disappeared...such is the "privilege" of issuing excessive claims on money that cannot be backed through this fractional reserve system!)
+
You can see why the Roosevelt Executive Order of a bank holiday effective March 6, 1933 was something other than a trip to the beach. In this year, 4004 banks failed, or else were found to be unfit to reopen at the end of the "holiday". In the following year, only 62 failed. Why? Because as you already know, it was at this point that President Roosevelt took the money (gold) out of the domestic dollar, and it should be obvious to us all that a crippling bank run is no longer a threat when a bank need not be held to deliver real money. It could easily deliver the ledger numbers endlessly in portable paper form. A bank run becomes meaningless because the people are not at risk of being cheated by arriving too late, they have all already been cheated 100% in full! The government knew international parties would not fall for such trickery, so the gold convertibility was maintained, but only after defaulting on the paper dollars they held by redefining their equivalency to 1 oz. @ $35 (as was maintained from this point until the Second World War, and reaffirmed at Bretton Woods until 1971).
+
With domestic U.S. companies and citizens now subject to the inflationary dollar supply through fractional reserve lending, and a new dollar that even with the best confidence was not as "good as gold" within the U.S. borders, the anticipated effect of higher wages and higher prices was soon to follow. Here is the trap we fashioned for ourselves. The U.S. dollar would easily buy overseas products, as simple math and occasional "confidence reassurances" (by testing the success of convertibility) proved that to be paid $35 was truly to be paid one ounce of gold. Foreign goods were then priced accordingly, and imports flowed to American shores in due course as we spent down our national gold savings. And what of our balance of trade...the exports?
+
Domestically, with higher wages and prices reflecting a paper dollar rather than a gold dollar, American goods were not a bargain to foreign shoppers. The dollar itself (gold) was the best deal they could get from America in exchange for their own goods, and this money would then be used to shop where a gold dollar was properly held in value...anywhere but America! U.S. imports rose and exports fell against each other until the risk of gold exhaustion caused President Nixon to end international convertibility in 1971. This was essentially a world-scale replay of the 1933 Roosevelt action for the same reason...too many claims had been created on the gold money, and when the confidence for convertibility eroded to bring about a "bank run", the paper system failed to continue in its former manifestation. In the 1930's, gold was made available only outside the U.S. and the paper "price" rose from $20.67 to $35...a 70% increase. In 1971, the paper currencies lost their attachment to real money everywhere else in the world, and gold found a paper "price" in the many hundreds. So ended a time period of an fixed notion of a dollar's value.
+[...snip...]
These various gold contracts have been a temporary patch in the monetary system, filling a niche in the economic environment of the world. You see why the dollar failed in 1933...too many claims issued on the available gold. You see why the "new dollar" failed in 1971...too many claims issued on the available gold. You see why the "new patchwork currency" of paper gold contracts will fail in due course...too many claims issued on the available gold. The caution is that more is in jeopardy than only the viability of this paper gold system. The dollar stands to fall with it as the excess paper side is firmly attached to dollars. In the 1920's, you might run to the bank with your "paper side of the deal", and the bank would be expected to make the contract "whole" by honoring the gold side or else it would FAIL trying--with no where else to turn. The parallel in today's system is that you might run to your contract writer (bullion bank) with your "paper side of the deal", and when the bank cannot itself produce the gold to settle the claim, it will have no choice but to turn to the spot gold market (if central banks will not stand for the clearing of gold reserves--such as the U.S. would not in 1971!) to buy gold with dollars, or else FAIL the dollar and themselves in the attempt.----------

Gandalf, from that you get a better vision of the significance of FOA's statement that "all hell would break loose." Just as the price was seen to rise back then following the default on convertibility, and just as we would expect a stunning rise today when general awareness sets in that the current reality of the paper gold market is a replay of the international dollar prior to 1971, try to imagine how things would be FAR TIGHTER (physical gold not available to fulfill obligations) if America had to also make good on delivery of one ounce for every 35 dollars in accounts on which the BIS knows the U.S. defaulted. More on the framework for "all hell breaking loose" as we continue on to FOA from the Hall of Fame and the failure of paper gold and the dollar...

From FOA:
------------Indeed, politically one must wonder; why support a system that is built upon a "strong dollar" policy for the benefit of only one country? This rift was opened wider during the last two years as the very "strong dollar policy" that flowed from the US, is the very catalyst that has helped destroy the assets in nations now absorbing most of the IMF flow.
+
A major item that has been part of this US support structure for the dollar was the G-10 policy on gold. The falling gold price, as seen in the world reserve currency has contributed immensely to the ongoing settlement of all trade in dollars. Indeed, the very continuation of the world trade system. Leading the dollar support component of trade was the use of crude oil settlement in dollars. That one item required practically every nation on earth to buy dollars (or at the least run a positive dollar trade balance with other dollar holding countries) to pay for oil. (NOTE: this post assumes the reader has retained the knowledge presented in the USAGOLD Hall of Fame posts [http://www.usagold.com/halloffame.html])
+
If a low gold price (indicating a strong dollar) could induce an overflow production of oil, then oil prices in dollars would fall. A steady, neutral or falling price of oil was always an indication that the settlement of oil in dollars would continue side-by-side with the purchase of BB [bullion bank] leveraged gold securities. In addition, the continued physical function of the established world gold markets was paramount in holding this oil support for the dollar. When the day comes that the paper contract gold markets are seen as "in question", the flow of oil will slow and its price in dollars will rise. From early this year, this process has begun.
+
The beginnings of this change was born in the success of the EMU [European Monetary Union]. With that Euro creation, the ECB/BIS [European Central Bank, Bank for International Settlements] has slowed, stopped and now reversed it's support to lower the price of gold in dollars. In effect, for them, the world's reserve currency position is now slowly changing towards the Euro.
+
Every day, new evidence emerges that shows Euro liquidity becoming as deep as the dollar with little threat of "dirty float" interventions in exchange rates. The fact that Euro interest rates have remained below the dollar rates indicate this currency's long term perception of strength.
+
The ECB can now slowly phase out dollar reserves as the Euro assumes more of the world trade settlement function. A function in and of itself, that will further lower the dollar's world need, use, and therefore, value. Because the US still runs a trade deficit, it still ships a surplus of dollars to most countries. In today's new Euro world, the dollar exchange rate will eventually be forced to fall enough to balance this flow. Further, a falling dollar will release ECB dollar reserves as fair game to buy physical gold from any and all entities. However, this buying will most likely be through the BIS and member CBs, not the over leveraged LBMA [London Bullion Market Association] or world gold paper.
+[...snip...]
During the last several years, the dollar-established gold exchanges created more paper gold than existing gold could ever cover. All done in an effort to create additional world support for a strong dollar. The middle of last year it became apparent that the successful Euro launch would, in time, remove most of the major physical (sales and lending and lending guarantees) support from this marketplace. The result was an IMF/dollar move to sell the physical gold of others into the paper gold arena. In as much as this supply would help, the continued further building of "fractional gold paper" has completely overwhelmed any ability for large physical stocks to cover it. I believe, the BOE sales have been part of a last ditch effort to salvage their London gold operations. Truly, the last round fired in this final battle.
+[...snip...]
Today, gold has just become set free as "money". In time, officials will review their need to "lend" gold for a return, where as they may "revalue" gold to create a increasing reserve source. As gold rises, there will be "no contest" in this conflict of thought. [TownCrier's note: FOA posted this on (9/19/99), ONE WEEK BEFORE the Washington Agreement was announced to the world.]
+
With physical gold being quickly withdrawn from a position of support for the established world paper exchanges, the imbalance will become very visible in "lending rates". As these rates rise, the gold pricing market as we all know it will grind to a halt. I am sure it will be closed for "renovation"; use your best imagination. In 1968, on 15 of March, the US asked for the closure of the London gold markets. On 1 of April it reopened, fixing in dollars for the first time. This time I expect the official dollar gold markets will not reopen for a long time.
+
It was pointed out to me that our great world gold market is the most liquid it has ever been. The members have many reserves and even insurance companies to back them. I completely agree! They will not fail one investor with the lack of cash settlement for all remaining, unsettled claims. The dollar/IMF block of countries will print whatever money is needed to clear out this arena. Just as the US once before called in gold and settled up in "local gold backed cash" because the foreign dollar gold loans had failed, this time will they call in "real gold paper" and settle in "absolute fiat cash".---------

And I'll leave you with FOA's salient concluding remarks: "Buy physical gold to hold. In the time to come, this money in the hand will outperform any investment you have ever known. Few today accept just how high physical gold will rise. Be a part of the "physical gold advocates" and tell a story your grandchildren will grow tired from hearing! (large smile)"

Gandalf, I've certainly left out equally important information in selecting these excepts, and therefore encourage everyone to read the works in full located at the link found at the top of the Forum cleverly disguised as this: "(Hall of Fame / Important posts 6/99 to present)".

SteveH (12/20/99; 04:25:20MDT - Msg ID:21389)
Gandalf
Allow me to throw my two cents into the pot. I believe FOA is referring to people overseas taking gold-backed dollars as a reserve currency to hold in currency accounts with the full knowledge that the dollar was indeed gold backed at $42 per ounce. When President Nixon defaulted on the gold standard, those left holding gold-backed dollars could no longer exchange them for any form of official gold. In short, they were left holding a non-golden bag. The BIS must have been holding lots of gold-backed dollars and probably have kept them on their books until such time as the US decides to revalue gold.

Netking (12/20/99; 03:17:30MDT - Msg ID:21388)
Trade Internet stocks for gold stocks.

TRADE INTERNET STOCKS FOR GOLD STOCKS

By Marc Faber
Forbes Magazine
http://www.forbes.com

The world's gold mines produce about 2,600 metric tons
of gold annually, worth $30 billion. If Bill Gates,
beleaguered by Washington, is looking for an investment
with a future, he might sell his Microsoft shares and
buy two years of gold production. Here's why he would
be well-advised to switch.

A year ago the fundamentals of the gold market were
poor. Persistent selling by central banks bent on
diversifying their reserves depressed its price. But
recently European central banks stopped unloading the
metal. That led to a price surge of 20 percent from its
low, to a recent $320 per troy ounce (31 grams). This
marked one of financial history's most remarkable short
squeezes, and may be the start of a solid turnaround.

There's a strong argument to be made that, sooner or
later, we'll see a new bull market for gold.

Let us briefly consider the present fundamentals of
gold. All the gold that is above the ground -- that is,
every bit of it that has been mined since King
Solomon's reign -- amounts to 120,000 tons, worth $1.3
trillion. The gold is mainly in the form of jewelry and
coins, and bars held by central banks. Compare this to
the $1.6 trillion market value of the six largest U.S.
technology companies: Microsoft, Intel, IBM, Cisco,
Lucent, and Dell. Or to the $30 trillion value of the
global bond market. So there is comparatively little
gold around.

Still, as wealth spreads to developing nations, it's
logical that demand for gold will grow, particularly
for jewelry.

Take India, a poor country with a gross domestic
product per capita of a mere $300. In 1998 Indians
bought 800 tons of gold. That's one gram of gold per
person. Now, if everyone in the world bought just 1
gram of gold per year, it would amount to approximately
6,000 tons, or 2.5 times the annual supply of newly
mined gold. Should every man, woman, and child in the
world decide to buy 1 ounce, then the demand would be
twice as large as all the gold available outside the
central banking system.

Forget antitrust-troubled Microsoft. Gold is on the way
back as a store of value. Gold, of course, costs money
to store and insure; stocks and bonds, by contrast, pay
dividends and interest. Indeed, if companies generate
earnings in excess of the inflation rate and are
reasonably valued, then they probably will deliver over
time a higher return than gold. But companies also can
be unprofitable. And they can be savaged by inflation,
expropriation or taxation.

Similarly, bonds can default or be denominated in an
unsound currency. The sum total of credit instruments
outstanding globally is growing by about 10 percent per
year. Thus, it doubles in size every seven years and will
reach $1 quadrillion in 37 years. The global economy,
however, expands by just about 3 percent per year.
Inflation and the growing complexity of our financial
system explain part of the disparity. But another part
of the bond story is uncontrolled credit expansion,
courtesy of our central banks. This sorry condition
will lead either to far higher inflation rates or to
massive defaults. Consequently, gold will provide the
only sound currency. Do not put your faith in the
dollar, the euro, or the yen, dependent as they are on
the whims of ill-informed central bankers and
politicians.

That's a longer-term consideration, though. For the
present the question is whether the new strength of
gold will last. After the recent surge it may run into
some profit-taking. Yet, despite the cherished beliefs
of short-sellers who have an outstanding short position
exceeding 4,000 tons, I very much doubt that we will
see gold prices fall below $280 ever again. We have
greater demand and we have the fading of the central
banks from the market. The downside risk is, therefore,
about 10 percent; the upside potential is unlimited.

When a market gives a strong signal by breaking out
after an extended bear run, the participants usually
can't tell at once why such a move occurs. Just the
same, the troubles of U.S. equities and the dollar have
occurred during gold's upturn. And that may be more
than a coincidence.

In the inflation-ridden 1970s, gold was a store of
value that hit $850 per ounce. And today I would rather
own half the world's available gold than all the
world's Internet companies, valued at about $500
billion and (many of them) losing money.

Thus, Bill Gates, go for it. Switch your $100 billion
into gold. By selling Microsoft, you are getting out of
a crowded trade because everybody owns tech stocks. And
by buying more than two years of annual gold supplies,
you will force the shorts out of business and drive the
price close to $1,000.



Strad Master (12/20/99; 01:16:38MDT - Msg ID:21387)
Y2K and NASA
I see that there has been some Y2K discussion here and I thought it might be interesting to relate a news report I heard about the Space Shuttle "Discovery" having finally gotten off the ground. The radio reporter said that the mission is now only going to last 8 days instead of the planned 10 because of "Y2K concerns". They want to make sure that their baby is safely on the ground before the rollover. Hmmm... NASA is worried that their super-sophisiticated computerized flying machine isn't fully Y2K compliant (haven't they had time to test it out?) and we're supposed to have confidence in our local bank?

Gandalf the White (12/20/99; 00:37:32MDT - Msg ID:21386)
Request to FOA
Hail FOA -- You said about the discussed Ft. Knox gold audit, "Something the BIS would have a major say in as they could attach it at the old $42 rate." -- "Let's be serious here, if current international law demands the compensation of German slave labour and Swiss Gold value reparations, all hell would break lose for the payment of dollar backed gold confiscated in 71." -- "Both the official and private levels would be after any gold backing our present dollar. The only way the US gold could come into play would be with a new currency."
Please go slow here and help me and the Hobbits understand your thinking. -- My little west coast Western type mind is not understanding your thoughts. -- What is the basis of the BIS having a claim on U.S. gold AFTER the convertable was changed ? -- Are not the laws the same for the BIS as they were for the U.S. citizens and the rest of the world ? -- Also, what is ment by "all hell would break lose for the payment of dollar backed gold confiscated in 71." -- Who's gold was confiscated in '71? -- And by whom ? --- Thanks FOA and here is to a golden 2000.
<;-)

SHIFTY (12/20/99; 00:05:19MDT - Msg ID:21385)
scrappy
If nothing happens I have a grub stake that won't quit for a long time.

SHIFTY (12/20/99; 00:01:41MDT - Msg ID:21384)
scrappy
Just wait till the week after xmas when everybody that has not prepared try's to do so the week before.
I spent my summer preparing insted of prospecting.
I'm not a gambler.



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