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

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ARCHIVED DISCUSSION FROM 2/20/2003
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Chris Powell (02/20/03; 23:38:59MT - usagold.com msg#: 98115)
Who punched out Bill Murphy? Who knows?
Dollar Bill, when Bill Murphy got punched
out in Dallas a few years ago, he never
wrote anything about the race of the guy
who punched him -- he never saw it coming.
He's not humorless either ... or maybe
you haven't read his reference to the
Australian mining company just emasculated
by its hedge book -- the Sons of Gwalia
are now the Daughters of Gwalia.

There's a lot to laugh at in the world
economy -- and a lot to be angry at too.
Let's work for the right balance.

Black Blade (02/20/03; 23:27:51MT - usagold.com msg#: 98114)
Oil supply concerns burgeon
http://www.chron.com/cs/CDA/story.hts/business/energy/1786886

Snippit:

The nation's crude oil stockpiles are at the bare minimum, with less than two weeks' supply, and there is a growing concern that time is running out to replenish supplies should the nation go to war. The stocks needed to continue running refineries are at the lowest levels since after the Arab oil embargo of the early 1970s. There is no quick fix at a time of year when refiners normally start gearing up production to build supplies for the summer driving season. "It's very tenuous right now with inventories in the United States," said Ken Miller, senior principal in the Houston office of energy consultants Purvin & Gertz. Oil stockpiles dropped last week to just less than 270 million barrels as of Feb. 7, below the comfort level recommended by the Department of Energy.

The weather is not helping the situation, either. Cold blasts in the past few weeks have increased heating oil demand in the Northeast. The strike in Venezuela is largely blamed for the inability to replace oil inventories in the short term. U.S. inventories have declined about 20 million barrels since the strike began in early December. Venezuela has restored about half its pre-strike oil production of 3 million barrels per day. It may not be able to regain it all because so much work is needed to repair damage caused by the shutdowns in wells pumping heavy, hard-to-produce crude. On the supply side, oil imports are at their lowest since 1998, according to the Energy Information Administration. Even though imports are down, oil companies have been able to secure the oil they need, with much of it coming by tanker from Europe.

Black Blade: Of course the sharp inventory decline of distillates reveals another problem. Normally refiners begin to shutdown for maintenance about now and to prepare refineries for the switch from heating oil to gasoline refining. The cold weather has the refiners still working to put out heating oil supply and with yet another Artic Blast coming south into the Midwest next week possibly followed by another one the maintenance and conversion shutdowns will be delayed into spring just ahead of the summer driving season. Gasoline supplies are likely to be constrained leading to higher prices this summer. Some I have talked to say that a record $3/gallon for regular unleaded is not out of the question. And that's regardless of the outcome of an Iraqi military conflict. Then there are the numerous reformulated blends mandated by various local and state laws that only serve to complicate the process and can potentially lead to localized supply problems and substantially higher gasoline prices. "Interesting Times"



Caradoc (02/20/03; 23:03:11MT - usagold.com msg#: 98113)
Prometheus message 98092
Prometheus: You are too modest. What you've come up with is the backdrop for a good filmscript or a fantastic novel. Your protagonist could be either a sharp SEC investigator who fails to listen when he's told to back off or maybe the promising son-in-law of a banking family who has benefitted from the IPO thing but has begun to suspect how rotten the whole deal is. Either way, make him a former Green Beret who has stayed in shape. Through some combination of skill and luck, he survives the goons who are sent to take him out. With his house in flames behind him, he makes it to the nearest patch of forest, perhaps with a 7- or 8-year-old daughter in tow. From that point on, it's a standard Steven Segal flick with the plot twist that he uses the internet to take his message to the public, posting the gist of what he has discovered on whatever forums may be perceptive enough to receive his message.

If you want it to be upbeat, tell the story in a series of flashbacks, starting in AD 2020 with the grayhaired patriarch of a solar powered agricultural community in eastern Washington explaining to his granddaughter how things came to be the way they are.

Just be careful. Remember that some like to pitch Barry Sadler's death as a suicide.

GratefulForGold (02/20/03; 22:54:44MT - usagold.com msg#: 98112)
Nitty Gritty
I have appreciated several posts today. I, too, applaud Prometheus #98092, and Mr. Gresham's and Curious' comments and posts.

Prometheus, your topic and method of delivery is refreshing! Maybe I tend towards "conspiracies," but your theories rang my "truth bell." Being a simple person, I respond more to simple words, facts and conclusions. Many of the debates waged here are so finely tuned to minutae that I have to stretch to find relevance to my life.

May this castle continue to be a host to and of all "subjects." All are needed to foster a healthy realm.

Black Blade (02/20/03; 22:53:52MT - usagold.com msg#: 98111)
European Economies: U.K. Retail Sales, Factory Orders Decline
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_box.ht&s2=ad_right1_topfin&bt=ad_position1_topfin&box=ad_box_all&tag=financial&middle=ad_frame2_topfin&s=APlTNdBV3RXVyb3Bl

Snippit:

London, Feb. 20 (Bloomberg) -- Britain is losing its role as the engine of economic growth in Europe as consumer spending declines and factory orders dwindle. Retail sales fell 1 percent in January from the previous month, the biggest drop in more than a year, the government said today. Demand for manufactured goods fell in February at a faster pace than the month before, said the Confederation of British Industry, which pared its economic growth forecast. Europe's second-largest economy, which grew faster than the euro region for the past two years, is being hurt by dwindling exports, job losses among manufacturers and financial services companies and the cooling of a surge in house prices. The Bank of England, which this month cut borrowing costs to the lowest since 1955, last week reduced its growth forecast. "The U.K. economy is really starting to slow down," said David Page, an economist at Investec Bank U.K. Ltd. "It's a fairly weak picture and one of the prime causes of the bank's rate cut."

The U.K. economy grew 0.4 percent in the fourth quarter, half the rate of the previous three months. France's economy probably expanded 0.2 percent last quarter, economists said, while Germany didn't grow at all. "For the first time in years there is a genuine question mark over the consumer," said Geoffrey Dicks, an economist at Royal Bank of Scotland Group Plc. "The world economy is weak, with the hoped for recovery failing to materialize," said CBI Chief Economist Ian McCafferty. "Domestically there are signs consumers are less willing to spend." Consumer spending is also faltering in Germany where retail sales fell for a fourth month in December. In the U.S., discounts lured shoppers, causing January retail sales excluding automobiles to rise by the most since September 2000.

Black Blade: Economic data looks a little "grim" across the pond too. It's somewhat amusing that the US, Euroland, and Asia are weakening their currencies ("Currency War") to gain advantage for their exports and yet there are fewer and fewer consumers anywhere who are still spending on unnecessary goods. Consumers everywhere are pulling in their horns. I just may write up a piece on the recent developments that have come together in this huge jigsaw puzzle that is forming the basis of this "New Great Depression". It's going to get absolutely ugly and there's absolutely nothing that can be done about it either. Global economic calamity is a lock. In the end the only person you can count on for economic survival is yourself.



Black Blade (02/20/03; 22:37:18MT - usagold.com msg#: 98110)
Williams to Shed More Jobs, Assets After 4th-Qtr Loss
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_box.ht&s2=ad_right1_topfin&bt=ad_position1_topfin&box=ad_box_all&tag=financial&middle=ad_frame2_topfin&s=APlUJNhV5V2lsbGlh

Snippit:

Tulsa, Oklahoma, Feb. 20 (Bloomberg) -- Williams Cos., the second-largest U.S. owner of natural-gas pipelines, will sell $2.5 billion in assets this year to trim debt after posting a third- straight quarterly loss. Williams will sell assets such as an oil refinery in Alaska, the 6,000-mile (9,650-kilometer) Texas Gas pipeline and a 55 percent stake in Williams Energy Partners LP, the company said in a statement. Shedding businesses will help reduce its workforce by another 4,000, after the company cut 2,600 jobs last year.


Black Blade: Another 4,000 nonessential "bones" shuffle off to the growing "Bone Pile". Williams is just one more NatGas producer that will cut back exploration and production to save cash and sell from depleting storage assuring an energy crisis of epic proportions this year. It will get very ugly.



21mabry (02/20/03; 21:47:42MT - usagold.com msg#: 98108)
silver
Can some one give me some information on silver purchases.I have bought eagles rounds and 100 ouncers.I have also purchased junk bags,you pay less premium with bags now so I am buying junk silver now.Does anyone out there have any advice or thoughts.Is there a better form to buy that is more preferred by dealers when they buy back the metal. Thnx

Curious (02/20/03; 21:44:50MT - usagold.com msg#: 98107)
Prometheus message 98092
Bravo! Brilliant! Very perceptive! After reading and pondering your analysis, I went over to the Daily Reckoning site and saw an ad for APOG_ _ Reasearch and it listed their clients including the big names brokerage offices, famous financial newspapers, huge investment banks etc. and inspired by your line of reasoning I though of a brilliant strategy to further enhance the profits to be made. Read the excellent research, figure out which stocks could be pumped and dumped, recommend them highly, buy them as they started to move up, dump them near the top, and sell them short on the way down. Shares of stock in new IPOs could be given to the talking heads on TV as a reward for their assistance in informing the general public of these bargains available for these astute investors. Use the profits to buy additional gold that was depressed in value by the activities mentioned in your analysis such as gold leasing, and then in a couple of years when the system collapsed, the gold could be used to buy land, factories, buildings and other items that had been depressed in value by the depression that was caused by the high unemployment and the shipping of jobs overseas to low cost areas such as China. These could be bought for pennies on the dollar.

This strategy worked brilliantly except that they did not recognize the future problem that without a manufacturing base, there were not adequate sustainable incomes available to buy the production, items manufactured overseas were much cheaper and the trade deficit approaching $475Billion a year is unsustainable. The U S has become a service economy and when you get down to the bottom line the services of government employees, lawyers, accountants, and other services absorb income from others and although these numbers are added to the gross domestic product, in reality, they are transfer payments that do not actually contribute to production. For example a car accident, major surgery etc. contribute to the GDP but they also absorb income that could be used to purchase things if not needed to pay for services. After taxes, transfer payments and payments for services, the average working Joe does not have adequate income to buy what he needs. He has recently been borrowing like crazy trying to keep up but this has really been buying stuff that would have been bought in future years. This has been going on so long that he is tapped out and has no purchasing power left. Henry Ford was right when he paid his workers $5 a day (substantially higher than the typical wage at that time) so that they would have money to buy his cars.

How do we get out of this mess? When interest rates rise, debt burdens will be unbearable and additional millions will be forced into bankruptcy. When will people wake up and realize that gold and silver are the only store of value in these uncertain times? What a shame that there were no competent economists in Congress or government who could see this coming and take action when irrational exuberance was first recognized back in 1996. The perpetrators got off cheap with rediculously low fines. The $100M fine paid by one big broker is peanuts as compared to their profits from their activities.

Goldendome (02/20/03; 21:39:04MT - usagold.com msg#: 98105)
Pizz your #98100
Yes Sir, it can sure get lonely in Eastern Washington. You mentioned the lack of a "Rat Race" in Eastern Washington. You got that right. Two other things lacking are employment and currency. However, you can go dredging and sluicing to make up the drop in income. {Example, up around Orovile.}

Carl H (02/20/03; 21:30:31MT - usagold.com msg#: 98104)
@Belgian: Re: 98045
I don't understand this message. Please clarify. Thanks.


sector (02/20/03; 21:24:14MT - usagold.com msg#: 98103)
@Belgian A Forward Sale and then a leaseback would show up...in the Bank for International Settlements Survey
They would be two separate transactions. The high totals reported to the BIS would increase even more if a substantial number of central banks were engaging in this activity.

It's best to look carefully at an example:

Banco de Portugal [1999, 2000, 2001 Annual Reports, pp.299, 281]
___________________Tonnes--2001____Tonnes-2000____Tonnes-1999
Gold in the country___________172.7________172.7________172.7
Gold deposited abroad
____Demand deposits__________10.8__________9.7__________5.8
____Fixed-term deposits________41.8_________45.8_________61.1
Gold available _______________225.3________228.2________239.5
Gold related to swap operations__381.4_______378.5_________367.1
Gold unavailable______________381.4_______378.5_________367.1
[Totals]_____________________606.7________606.7________606.7

This table is nearly an exact copy of the table published in their annual reports and verified by the IMF website data for Portugal [As to total gold and gold receivables].

The gold related to swap operations is not in the bank because it has been moved. It is not "In the country". It has not been "sold forward and then leased back".

We don't know how much of the Bundesbank's gold, if any, is "In the country". They don't say. This is a significant fact in the gold mystery. Why don't they report with clarity?

Norway, Denmark also report clearly similar gold status conditions to Portugal. Norway went so far as to indicate they had to adjust the fineness of some returned gold because it came back a different fineness from when it left for the swap.
+++++++++++++++++++++++++

The issue of whether or not central banks have less gold in their vaults than the total of gold and gold receivables reported is settled by these representative examples given over the last few days for banks that choose to report the details of their gold holdings.

Indeed the BIS itself has lost a considerable amount of gold:

Year Tonnes % Chg.
1993 1372.33
1994 1259.51 -8.2%
1995 1269.70 0.8%
1996 1267.03 -0.2%
1997 1029.86 -18.7%
1998 881.74 -14.4%
1999 813.31 -7.8%
2000 657.70 -19.1%
2001 637.35 -3.1%

This gold was sold and used to suppress the price along with numerous other central banks. The aggregate total of forward and swapped gold reported to the Triennial Survey for all central banks is 16,000 tonnes. The gold is gone. It took that much gold to keep the price down. Gold was that strong.

The loss ratio of member gold at the BIS since 1993 is 46.5%. The ratio of 16,000 tonnes in reported BIS forwards and swaps of local central bank vault gold to the accepted central bank total of 33,000 ratio is 48%.

So we see a proportionality match which further confirms that the swap and forward participation of individual member banks [Portugal] seems to be in the same gold loss percentages as the aggregated figures of the BIS [Held-in-bars category] as a whole.

Mind you the held-in-bars BIS loss is unambiguous. The gold is gone. The BIS vault is half empty...just as the Triennial Survey data would suggest it should be.

It has been difficult to accept that 16,000 tonnes of central bank gold has been sold forward or swapped, that title has changed and that there are no trick lease backs simply because there are such powerful forces of disinformation operating in this and past gold wars. The GFMS in particular has been callously remiss in its blundering.

The over representation of gold loans, swaps and forwards was a topic at the October Santiago, Chile IMF Statistical Accounting Seminar [I first brought this to light two years ago]. The accountants were so upset about the central bank's undercounting that they refused to classify the loans and swaps at all. They specifically objected to the over statement of world gold reserves by each bank reporting that they BOTH retained title to loaned or swapped gold. Clearly only ONE bank had the title. The IMF heirarchy wanted to hide the true state of central bank gold reserves and their accountants wouldn't go along with the IMF trick.

I have obtained a representative Gold/Interest Rate Swap Contract from JP Morgan Chase's document files. I can assure you that there is an obligation to deliver real metal specified in ounces [Not a call option or some other instrument]. There is actually a box to check in that version of the contract.

Moreover, the International Swaps and Derivatives Association [ISDA] has a detailed base contract that must be vetted through the counterparty's legal departments because there are numerous very serious contract commitments and disclosures that must be complied with by BOTH parties. In particular--the definition of "Capacity" to deliver.





abudahhab (02/20/03; 21:10:59MT - usagold.com msg#: 98102)
Big change a comin!
In his last post, sector has provided us with a great wake-up call. The changes we face will happen quickly, without much warning and the final outcomes cannot be predicted in advance.

In August of 1914, Europeans thought that they were off to a war that might last only a month or two. Virtually no one saw the monster tsunami of change that was about to hit the continent and the world.

There is an old adage, "Everything tends to entropy". These entropic powers are now hard at work on our political and monetary structures. The decay and chaos from this process can take a long time to manifest. Just look at pictures of a human being at age 20 and then at age 80. At a critical point, the effects of entropy take the life from our bodies, which in turn further accelerates the decay process. Ashes to ashes, dust to dust......

Better git ya some gold!
abudahhab

Curious (02/20/03; 21:03:44MT - usagold.com msg#: 98101)
test
test

Pizz (02/20/03; 20:51:46MT - usagold.com msg#: 98100)
Sector
On Segregation of the US. . .

Already starting to see it on the west coast. The PNW is not going to want to pay more for power from "our" dams so as to ship it more cheaply to California.

California, without sufficient water and power, is toast, with the smart businesses and people bailing out.

Here in Washington State, we have the industiralized and urbanized Puget Sound and then about 3/4 of the eastern part of the state is orchards, wheat, power generaion etc.
The Eastern rural populations have less per capita income, but the State has to keep raising taxes and energy prices to support the growth and transportation problems of the Seattle area.

My wife is from the eastern side of the state, and myself from the western, and I run into quite a bit of smoldering rage from these people who seem to think they are supporting our extravagent lifesyles. A mini version of the world vs. the US.

As the budgets of states and municipalities crumble, and the debt markets implode with all government having to borrow more (from whom is going to be a good question) I too can see a senario where this country could break apart.

Myself, I'm doing my darn best to relocate to the eastern portion and get out of this rat race in Seattle (and I'm told we're not nearly as bad off with regards to rat races as other larger metropolitan areas.)

Funny thing about the rural, agricultural mentality. . .when I talk gold and silver they listen. It's a refreshing change. . .fits right in with militia meetings (there are a lot of local militias in this country)and tax revolts.

Have an interview with a country car dealer Saturday. . I wonder if he's thought about a used horse lot as a contingency plan - gold and silver as a medium of exchange only. . . .we can burn fiat to keep warm in the winter.

Pizz

ElGordo (02/20/03; 20:46:31MT - usagold.com msg#: 98099)
Japanese economy slows
Tokyo, Feb. 21 (Bloomberg) -- Economic activity in Japan fell to its lowest level in almost four years in December, a government report said today, as telecommunications and retailing slumped.

Japan's all-industry activity index fell 0.6 percent from November, seasonally adjusted, the Ministry of Economy, Trade and Industry said. Economists in a Bloomberg News survey expected a 0.2 percent drop. The index fell 1 percent in the fourth quarter from the third.

The drop in the index runs counter to a report last week showing that the world's second-largest economy grew 0.5 percent in the fourth quarter, led by a surge in exports. Economists said the all-industry index shows that the local economy is slumping as companies cut jobs to reduce costs.

"What you see in the all-industry number is that the export- led growth hasn't spread to the rest of the economy," said Hitoshi Asaoka, an economist at Mitsubishi Research Institute.
_____________
Weaker Dollar will not help here. Japan is probably in recession
at this time, along with Germany.

sector (02/20/03; 19:56:10MT - usagold.com msg#: 98098)
@Mr. Gresham: You are Clairevoyant
"The next "central banks" will be private banking individuals, families..."
The monetary system will change, the political system will change and the maps will change...in that order. It will be fast.

Six months prior to the Berlin wall's fall, the husband of my wife's best friend informed me that things in Ukraine were terrible and that the USSR was about to become "Extinct". This brilliant engineer, who always worked for himself and squeezed every dollar like a vise, was essentially self-sufficient in the far, far suburbs of North Central Illinois, had a short-wave radio and listened daily to his former homeland and its plans to rid itself from the hated Russians. It all happened so fast.

When the destruction of the dollar is complete the disintegration of the US will begin. Politically we are already split. Further Balkanization will occur...each region fending for itself -- under totally new rules. What will the new rules be? There won't be any.

The Iraqi war [Pray that this American Waterloo never happens and that it has all been a huge bluff] will have wrecked all remaining confidence in a just and decent government.

What do you have and what do you need? Really have and really need?

Formulate a plan to satisfy those two challenges. Gold will help immeasurably with the first.


Waverider (02/20/03; 19:35:46MT - usagold.com msg#: 98097)
VIP: DAILY GOLD MARKET REPORT
http://www.usagold.com/DailyQuotes.html
Snippit...
"The rise in energy costs are certain to put enormous pressure on U.S. business affecting both the U.S. dollar and the equities markets and giving more support to the precious metals as investors flee toward safe haven instruments...The fundamental case for gold has improved substantially with today's economic data releases and we are not quite finished yet as tomorrow we get the CPI data."

ElGordo (02/20/03; 19:34:06MT - usagold.com msg#: 98096)
Turkey wants Kirkuk and more!
http://www.dailytimes.com.pk/default.asp?page=story_21-2-2003_pg4_1
ëTurkey demands control of Iraq from US'

By Owen Matthews, Sami Kohen and John Barry


ANKARA: Turkey is raising its price for allowing US forces to invade Iraq from its territory. In early negotiations with the United States, Ankara spoke of sending in Turkish troops to set up a "buffer zone" perhaps 15 miles deep along the Iraqi border. This would prevent a flood of Kurdish refugees from northern Iraq, the Turks said.

But now, Newsweek has learned, Turkey is demanding that it send 60,000 to 80,000 of its own troops into northern Iraq to establish "strategic positions" across a "security arc" as much as 140 to 170 miles deep in Iraq. That would take Turkish troops almost halfway to Baghdad. These troops would not be under US command, according to Turkish sources, who say Turkey has agreed only to "coordination" between US and Turkish forces. Ankara fears the Iraqi Kurds might use Saddam's fall to declare independence.

Kurdish leaders have not yet been told of this new plan, according to Kurdish spokesmen in Washington, who say the Kurds rejected even the earlier notion of a narrow buffer zone. Farhad Barzani, the US representative of the main Kurdish party in Iraq, the KDP, says, "We have told them: American troops will come as liberators. But Turkish troops will be seen as invaders."

The White House did not respond to requests for comment; officials elsewhere in the administration played down the Turkish demands as bargaining tactics: "We told them flat out, no." But independent diplomatic sources in Ankara and Washington with knowledge of the US-Turkey talks say that while the precise depth of the "security zone" has still to be agreed, the concept is "pretty much a done deal," as one observer put it.

These sources add that the main US concern has been that US, not Turkish, troops occupy the northern Iraqi cities of Mosul and Kirkuk, and that Turkish troops merely surround but not enter the heavily Kurdish cities of Erbil and Sulemaniye. To get Turkey's assent to this, these sources say, the United States had to "cave" on its demand that Turkish troops be under US control.

Two days of tough negotiations in Washington last week failed to settle the other part of Turkey's price: a multibillion-dollar economic package. Turkish PM Abdullah Gul is now threatening to delay the all-important vote in the Turkish Parliament to allow US deployments in Turkey.

Pentagon officials acknowledge frustration at the problems Turkey's bargaining poses for the US military buildup. Turkish sources say that when Turkey's Foreign Minister Yasar Yakis met with President Bush on Friday, the president warned that the United States might open a northern front against Iraq without Turkish participation. But military sources say that would be close to impossible.

"Turkey is playing hardball," said Michael Amitay of the Washington Kurdish Institute. "But if the US agrees to these Turkish deployments, there is a real risk that the Kurds will start a guerrilla war against the Turkish troops." --Newsweek
_________
Stay tuned, the plot thickens


Mr Gresham (02/20/03; 19:23:31MT - usagold.com msg#: 98095)
Prometheus
Scenario? That sounds like history to me (well, the last few chapters to be written -- hmmm...e-mail to Greider?)

Motive, opportunity..."Behind every great fortune..."

Looting Ft. Knox? "So, Mr Prometheus, you have happened onto our little enterprise. Too bad you won't be around to see it succeed." "Nonsense, Goldfinger! Do you expect me to talk?" "No, Mr Bo- er, Prom -- I expect you to DIE!"

I'll be re-reading your little screenplay several more times this evening, both to nail it into my memory alongside events we have observed, and to suggest further tentacles that may reveal themselves in times ahead...

Daniel Druff (02/20/03; 19:05:11MT - usagold.com msg#: 98094)
Hoople
"Let's see, trade deficit, M-3, and gross public debt all expanding by 1/2 trillion annually. Maybe I'm just a dumb guy but surely we are on the highway to hell." Hoople

Your metaphore is instructive in more ways than one. Judgement Day for the Dollar Based Fiat System is fast approaching. Prior to that we should not be surprised to see run away prices, leading to War Time Restrictions including rationing, starting with gas.

Most of us here would argue that a rising price acts as a rationing device. The problem this time around is a run on tangible assets. All sorts of M3 going after "the stuff"...any "stuff" is better than "paper" in a situation like this one.

Investment for production will really slide as hording becomes fashionable.

We're on the right side of the gold market, no doubt about it. Those on the other side are not yet prepared to make a change which would mean losing some of their good deals. You can expect them to do their worst.

Thank you

Malfleur (02/20/03; 18:51:24MT - usagold.com msg#: 98093)
South African Gold Market: liberalisation v. nationalisation
A recent post here suggested that SA gold mines were under pressure from legislation which was a form of "pseudo nationalisation". But Feb 20 Mineweb reports;
"The South African government continued its revamp of its mining and beneficiation laws today with news that it would legalise the private ownership of gold in all its forms. Mineweb reports Minerals and energy minister, Phumzile Mlambo-Ngcuka, as saying that the ministry's new beneficiation bill would seek to extend ownership by South African citizens beyond coins. Mineweb also notes that market reaction has been generally positive. "

This would appear to be bullish fro SA mines and for gold in general.

Any views?

Prometheus (02/20/03; 18:50:53MT - usagold.com msg#: 98092)
Where's the Gold?
I've been following the debate between Aristotle and sector with great interest. I certainly don't consider myself to be very knowledgeable about the gold markets, and I wouldn't normally even try to intrude into the learned debate. But Belgian posed the question, today, about motives for the central bankers to actually physically transfer the gold out of the vaults. I've had this crazy scenario I've been playing around with in my head that might explain it. I haven't seen this addressed anywhere, so I thought I would throw it out for everyone's consideration.

Suppose there's a certain very well connected investment bank CEO who gets himself appointed to a high position in the government. Maybe he made a lot of bribes, er campaign contributions, to the new administration, or something. Anyway, after he gets appointed, he makes a name for himself as a brilliant operator, Mr. Fixit, and general all around Go-To-Guy for the new administration. When the Leader of the administration needs to get himself re-elected he naturally goes to Mr. Fixit for help. Mr. Fixit, with his extensive contacts in the banking and financial industry, knows exactly what to do. In fact, he has had a plan in the back of his mind all along just in case the opportunity came up. As a matter of fact, that's why he wanted to be in the government in the first place.

The plan sounds so audacious I can hardly dare to put it into words; but here goes. The easy part of the plan is to pump large amounts of money into the economy so that the economy is booming in time for the election - a time-honored tradition that everyone but the public seems to be aware of. But that leads to inflation, which is a big no-no with the electorate. So what to do? Well, the CPI can be "hedonicized," and wages aren't a problem, what with all of the "free-trade" agreements sending jobs offshore to cheaper labor markets. But what to do about that pesky inflation canary -- Gold? Well, Mr. Fixit has a solution for that problem -- a gold price suppression scheme. He has the central bank "lease" much of its hoard of gold to his former employer, and any other investment bank/bullion bank that wants in on the deal. The bullion banks then sell the gold, depressing the price of gold. The simple thing for the bullion banks to do would be to invest the proceeds in government bonds and pocket the interest rate spread -- the so-called gold carry trade. Nothing really controversial so far.

But what if our Mr. Fixit and his friends/cohorts at the investment bank/bullion bank are really audacious? They know that the public is demographically predisposed to be heavily invested in the stock market, and that they favor a certain sector of the market, which, with a little publicity, prompting, pumping, etc., could be easily pumped up into a speculative bubble. The investment bank/bullion bank also happens to be one of the leading IPO houses in the country. So they take the proceeds from the sale of the gold, and use it to finance a large number of IPO's. They basically turn the entire operation into a huge pump-and-dump, with all of the requisite friendly "analysts" and "journalists," etc. to tout the IPO stocks.

The company insiders get 50% of the stock in the IPO, the investment bankers and friends get 40%, and a 10% "float" is sold to the public. Since the public by this time is really in a stock-buying frenzy, and since only 10% of the stock is sold to the public, the prices of the IPO's have huge run-ups, 4, 5, or even more multiples on the first day of trading. After using some more of the proceeds of the gold sale to keep the IPO pumped up for the duration of the mandatory holding period, the insiders all dump their shares on the public. They walk away with a multiple (2x?, 3x?) of the proceeds of the gold sale.

Now's where it gets really interesting. The partners in the investment bank vote to pay out the profits from the IPO pump-and-dump operation to themselves as bonuses and pay raises. Really BIG bonuses! They take some of the bonus money and buy, for their private accounts, the gold that the investment bank is selling from its corporate account -- at a nicely depressed price, of course. Then they do an IPO on their own, heretofore private, investment bank, sticking the public with an empty shell of a company with a huge, impossible to close, gold short position on the books. And the central bank is left with empty vaults and a balance sheet full of "leased" gold. And the gold, which they now own as private citizens, is shipped to inaccessible off-shore vaults out of the reach of the angry public when they finally figure out what's happened. More probably, the partners buy their gold through untraceable off-shore accounts in the first place, and the public never finds out who bought the gold! Of course, they spread plenty of green paper all around the government, taking care to bring both sides of the aisle into the game, so nobody wants to see any ensuing "investigations" go too far.

Yikes! Could somebody actually do all of that? I don't know, maybe I'm way off base here. Maybe I'm about to join the distinguished ranks of "young men" who have earned Aristotle's opprobrium. But if it COULD be done, what a prize all that gold would make!
Think of all of the people who have held positions of power in the government in the past few decades. Do you think some of them haven't cast covetous eyes on the vaults at Fort Knox? If they could figure out a way to acquire some of that gold, do you think they wouldn't try it? I don't know -- I sure have enjoyed fantasizing about it! Yehaw -- wouldn't you like to have a nice, cozy, stash of bullion bars hidden away somewhere safe from the tax man? I would buy myself a nice villa somewhere in southern France, live like a "retired" king after abdicating his throne and fleeing with all his loot. Planes, yachts, racehorses, luxury automobiles, beautiful women, fine brandy! You want motive -- I'll give you motive! If this is totally improbable, just tell me to shut up and sit down, and I'll go back to lurking. But I had this crazy thing running in my head like a bad movie script, and I thought I would share it.

Of course, all of the above presupposes that sector is right, and that an actual transfer of the physical gold takes place. I don't know if the scenario is possible. I'm not all that sophisticated about the mechanics of the leases, forwards, IPO's, etc. Maybe the wiser heads at the forum could make more informed comments. But the scenario would provide a pretty strong motive for an actual physical transfer of the gold. It would create a strong incentive for ignoring/circumventing any legal niceties concerning actual transfer of the gold from the central bank vaults. Moreover, if intelligent, articulate individuals such as Aristotle, sector, and others here at the forum can't come to an agreement on whether the contracts require actual physical transfer of the gold, then what chance does the general public have of actually understanding the issues?

Somebody here at the forum, maybe Aristotle, said that the central bankers have too much of an attachment to the gold to see it get sold away from them. But what if they're looking at an approaching train wreck? And what if they decide that the system is beyond rescue, and they decide to pull off one final desperate loot job before the end comes? They would stop thinking like central bankers, and start thinking like private individuals acting in their own self-interest. That would make the actual physical transfer of the gold out of the CB vaults and into private hands a priority.
Besides, isn't that what a lot of US are doing?

Sorry to roil the waters with all of this palaver. I'll shut up now.

P.



ElGordo (02/20/03; 18:35:31MT - usagold.com msg#: 98091)
Some estimates of cost of war
http://www.stuff.co.nz/stuff/0,2106,2278193a12,00.html
CANBERRA: A short war with Iraq could cost the world 1 per cent of its economic output over the next few years and more than $A1 trillion ($NZ1.1 trillion) by 2010, Australian researchers said in a report yesterday.

A long war could more than triple the costs, they said.

The compounding effects of rising oil prices, extra budget spending and economic uncertainty could cut $A173 billion from the world economy in 2003 alone, said the researchers, Reserve Bank of Australia board member Warwick McKibbin and Centre for International Economics executive director Andrew Stoeckel.

Basing their projections on two scenarios - a short war with a year or two of rebuilding or a long war lasting five years with five years of rebuilding - the researchers said conflict would sideswipe private investment and probably push equity prices even lower.

"The conclusion is that even a short war will have a significant and noticeable impact on the world economy, but on current projections of world growth would not lead to recession," they said.

"Even a short war could cost the world 1 per cent of GDP (gross domestic product) per year over the next few years."

While the United States was expected to bear the brunt of the war costs, Britain, Australia and several European countries would have to boost budget spending and Japan would probably be a large contributor to the rebuilding phase, the report said.

"Iraq and some other Middle Eastern countries are assumed to spend considerably on defence, represented by an increase in defence spending by Opec," it added.

Oil prices were projected to initially rise 90 per cent above a baseline of $US25 per barrel. Under a short-war scenario, the price spike would quickly dissipate and the world oil price would fall below $US25 after the war was over, the report said.

It warned that the investors' uncertainty would compound the rise in oil prices, even in a short-war case.

"Altogether, there could be a drop of investment in the United States of over 8 per cent below baseline in 2003 and 2004. The fall is less for Japan and Europe, given the assumptions for their contribution to a war and rebuilding."
______
War could raise inflation.



Brett Woods (02/20/03; 17:52:14MT - usagold.com msg#: 98090)
IMF recommends swapped gold excluded from reserves, or included as reserves?
http://www.bsp.gov.ph/statistics/sdds/table11.htm


"1 Beginning January 2000, in compliance with the requirements of the IMF's reserve and foreign currency liquidity template under the Special Data Dissemination Standard (SDDS), gold swaps undertaken by BSP with foreign financial institutions shall be treated as collateralized loan. Thus, gold under the swap arrangement remains to be part of reserves and a liability is deemed incurred corresponding to the proceeds of the swap. Further, accrued interest payable shall now form part of BSP's short-term liabilities. "

***
Sector gave reference to this statement made on the website of the Central Bank of the Philippines, yesterday in his msg#:97968 and it was discussed, but I thought I'd draw attention to it again since I was just looking over the source link above.


Black Blade (02/20/03; 15:55:58MT - usagold.com msg#: 98089)
Good Gold Presentation - CNBC

John Roque, a technical analyst was just interviewed by Ron Insana and Sue Herrera on the gold market. He is definitely bullish and explained the case for a secular bull in gold. He discussed the secular bear market some and explained that gold is in a solid uptrend. No sneering from the shows hosts - in fact they actually appeared to be fascinated. There is a growing acceptance of precious metals in the financial media after droning on over the years about "barbarous relics" and other such drivel. I think that today's dismal economic data has turned a few heads toward the metal of kings. These should be very "Interesting Times" for the markets. I was watching a taping of Dubya and his Democrat host in Georgia today - he appears to be gaining support in some unlikely places for his fiscal stimulus and tax cut package. Desperate economic times like these require the most drastic actions. However, it will take a lot of time to turn this giant ship into the wind and in the meantime more attention will be focussed on precious metals. "Interesting Times" indeed.

- Black Blade

Off to the gym!

Black Blade (2/20/03; 15:06:39MT - usagold.com msg#: 98088)
Emerging Energy Crisis - An Old Nightmare Resurfacing
http://www.bofasecurities.com/featuredresearch/content/docs/StorageFlash022003.pdf
Gas Storage Flash

Storage Declines a Record 15% from Previous Week

Natural gas storage withdrawals totaled 203 Bcf for the week ended February 14th. Storage levels fell 15% from the previous week to 1.17 Tcf, the largest single-week percentage decline in history. The withdrawal number was larger than the consensus estimates of 194Bcf, last year's withdrawal number of 124 Bcf, and the five-year average of 95 Bcf. The storage differential to the five-year average continued to widen for the sixth straight week to 461 Bcf. Excluding the effect of weather 3.5% colder than normal last week, the differential to weather-adjusted injections/withdrawals (12-week moving average) declined further to negative 33 Bcf, the lowest levels ever calculated.

Drilling must increase. So far this heating season, storage withdrawals have averaged 111 Bcf/week wider than five-year average withdrawals. Even if withdrawal numbers remain in-line with its five-year average through the end of the heating season, storage levels would reach 726 Bcf by the end of March. At these levels, if drilling activity does not pick-up to counter the sequential declines in natural gas production, refilling storage for next winter will become problematic. As a result, the current storage trend remains bullish for natural gas prices, increases in drilling activity and thus, oilfield service stock appreciation. A resolution from the conflict with Iraq could cause crude oil prices to fall possibly resulting in a correction for oil service stocks.

(See link for rest of article)


Black Blade: Looks like my early calculations of a 205 bcf draw was close. Next week's are a bit more difficult based on heating days involved, etc. I will run the numbers and see what transpires. However, I differ some from the authors' conclusions in that I expect the ending storage in March to be much lower. These guys have to err on the conservative side though. We should see high NatGas prices running through the summer and even if drilling activity rebounds to record levels we will see a storage level "shock" next winter. This energy crisis will deepen significantly adding to inflation woes. Therefore a strong exposure in precious metals is definitely recommended. Even the brain dead financial pundits on CNBC are beginning to "wake up and smell the coffee". A new poll taken at the CEO conference reveals that 40% believe that we never emerge from recession and are still mired in one. Gee, no kidding. It was also noted that individual investors are "sitting on the sidelines". I have been hitting on that as well. Who in their right mind would be trying to catch "falling knives". Considering the grim economic situation and rising geopolitical concerns with an impotent government response get your houses in order. As always, get outta debt and stay outta debt, stash enough emergency cash for several months' expenses, accumulate Gold and Silver portfolio insurance, and start a storage program (at least you should already have one) of nonperishable food and basic necessities.



Mr Gresham (2/20/03; 15:02:17MT - usagold.com msg#: 98087)
Belgian, sector: Where did it go?
cytek -- thanks for the heads up -- keeping the system lockup meter in our view.

Belgian, sector -- Think privatization. This fits the most points of the POG control riddle, from the European point of view. Fits with the trend in US, then Europe, since the 80s.

The next "central banks" will be private banking individuals, families, partnerships out of reach of public and political influence. Giants.

Let the politicians and economists wring their hands over "growth" and "trade" and unemployment and inflation, etc etc. Banking has always stood outside of this wrangling, and the power of money will return to its natural controlling heights, believe the long-time bankers in the birthplaces of banking.

This is why they would buy as early as 1997 (or before) according to FOA, with several years of decline still ahead -- looking way, way out with their business plan. (I just don't understand why they'd be settling for paper ownership, over bullion in their own vaults. Maybe part of a "mixture" deal?)

This explains not only why Europe would "support" the dollar, to keep a world digital trading system alive for its new currency. Despite something of a gamble on its collective unity and working things out diplomatically.

But also to keep POG low, so that private ownership could take over most of the 15,000 tonnes. A piggyback agenda, that those with the most ambition would shepherd through the labyrinths of EU and ECB even as they build their own PARALLEL structures.

I think that, while FOA discusses most of this "free gold" philosophy in the context of ECB strategy, the reason that we find no "smoking memos" over the 30 year project of EMU, is that the public structure is to be a front (gold-holding, to be sure) for the real bankers behind the private curtain, holding an equal amount of bullion. And highly-leveraged to profit by it in a new banking system.

All the other banks, national or shareholder-owned, are expendable, as these private "knights on white horse" ride in to "save the day."

Of course there is no discussion. Public policy gives speeches. Private business maps its strategy privately, with plans for using gold the most private of all.

'Twas ever thus, saith Mr Natural...


USAGOLD / Centennial Precious Metals, Inc. (2/20/03; 14:33:58MT - usagold.com msg#: 98086)
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