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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 1/2/1999
All times are U.S. Mountain Time

jinx44 (1/2/99; 22:22:53MDT - Msg ID:1609)
Bank Runs(out of cash)
There are about 100 Million households in the US. With an admitted figure of $150Billion in cash reserves plus the additional $50Billion being stored, that allows each US household to withdraw $2000 each for Y2K related purposes. That leaves $0 for business transactions. The only cash or money available if the lights go out will be what is in physical possession. What about the $5Trillion or so of money market accounts and demand deposits?? They will vanish from the system for the duration of the emergency. As for Switzerland, over the past several years, swiss banking has been co-opted for MLATs and treaties with the USTreasury for drug-induced fishing(revenue)expeditions. The world banks are a sieve for private information ever since The USG stole the PROMIS software from Inslaw. If Y2k is the trigger, martial law and asset repatriation and confiscation will be the standards by which we eke out our sorry socialist lives in the near future. I have no doubt the USG will do whatever neccessary to maintain power and control. What will our masters leave us with in the new fuedal age??

ET (1/2/99; 22:18:16MDT - Msg ID:1608)
Usagold

Yeah - that would be tough. As I told you earlier, after following this issue for several years, I do believe that for the most part utilities, telcos, and the payment system should remain mostly intact. There hasn't been much effort spared in these areas, especially the last 12 months or so. It pays to prepare nevertheless. There are no guarantees.

On an unrelated note - have you or anyone else been able to determine the exact amount of gold assigned to each Euro? Did the total gold backing come in at 15%? Is it too early to be asking these questions?

Thanks for the site - you deserve the praise.

ET


USAGOLD (1/2/99; 21:28:30MDT - Msg ID:1607)
ET...
I see your point and it is well taken. I also agree that the bigger problem will be maintaining the value of the dollar in the face of euro introduction. Next week could be interesting.........

To be sure, I haven't considered the Y2K related problem with the banks as important as the power companies and telephones. Let's face it no matter what the banks do, if the power goes off, we're in trouble. Agreed?

ET (1/2/99; 20:52:11MDT - Msg ID:1606)
Bank runs

Usagold - my observation is based on a couple of factors. First, how much money do people actually keep in the bank anymore? Real estate, equities, credit instruments, gold and silver all take the place of cash. None of these are generally found at the bank. I would suspect that most people just don't have a lot there nor could they take it home for any great period before it makes its way back to the bank because they needed to spend it on something or pay a debt. It doesn't matter anymore whether it is 'green' cash or 'electronic' cash, it is all the same. As long as credit/debit cards work, there is no reason to secure green cash, it is inconvenient. I believe that will be the banking industry's message this year. Secondly, the reference to the 'value of money' refers to the Fed's ability to maintain the purchasing power of the dollar. The banks will not be able to guarantee this. Ha - neither will the Fed! Hence gold or other hard assets might be a better choice for investment purposes but cash is about all you have for paying bills and such. So my point in the end and why I don't believe bank runs are going to be a big problem is that little green cash is needed to maintain commerce if credit/debit cards remain working. You can go to the bank and yank your cash or you can simply write a check or use your debit/credit card and they are equally money in the vendor's eye. The vendor is guaranteed payment if the bank authorizes the card upon use. I think once people realize this is the case, bank runs won't have near the significance they did in the past.

ET


ET (1/2/99; 20:28:56MDT - Msg ID:1605)
Clint H

Good strategy. Might also be helpful to park the gold account in Switzerland where it is beyond the reach of US authorities and can be easily converted and transferred upon your request. I know of people who have done exactly as you suggest, but the gold account is offshore.

ET


Clint H (1/2/99; 17:22:56MDT - Msg ID:1604)
Play The Game

From Clint H

Much has been written about preserving wealth and protecting purchasing power by owning gold. Reading the post #1581 by PH in LA promped me to post an idea.

There exists an opportunity to increase wealth by implementing the proper plan before the big event, the coming global depression. This opportunity did not exist before the last depression because the price of gold was fixed. It will not exist again for several decades once the dominoes start falling.

Here are factors that must be considered in labeling this a good or bad idea. Consider Y2K, the EURO, the overvalued stock market and the possibility of hyper-inflation. (you decide the importance of each) These factors could push gold prices up as valued in US$. Also assume a bottom gold price at $300 US. If gold were to bottom at $200 and stay there the following would be a bad plan.

If you believe gold will go to $1000 - $6000, this can and will work. The key is found in the words written on all US currency, "This Note Is Legal Tender For All Debts Public And Private." Until the US currency is changed as a result of inflation or hyper-inflation, debts or mortgages can be paid in US$. This is a plan based on contracts to be paid in US$.

Example: Purchase assets now that will be held thru bad times and have a high value in the future. Purchase now at little down and low long term payments. Let's assume a $100 thousand mortgage on a like priced asset. Low down with low monthly payments. Set aside a trust fund of gold bullion for $100 thousand at $300 per ounce. If nothing happens, it's even money except for interest paid.

Assume gold goes to $6000. You now have $2 million in US$ exchange rate. Sell 5% of the gold for US$ to cover the US$ contract of $100 thousand. Use the 95% left over ($1.9 million US$) for normal deal making during the depressed times.

Paying bills that do not have assets attached gets a person even but does not increase wealth. It only spends gold.

The banking system uses fiat money to create leins against assets of value. Most valuable assets in the US will revert to the banking system in a severe deperssion because most carry some form of morgage. To most, cash flow to make morgage payments will be impossible. It's not fair but it is the system.

Play the system but play it backward.

The opinions are my own

Clint H


USAGOLD (1/2/99; 16:49:25MDT - Msg ID:1603)
AEL/ET
If I understand what you are talking about:

You are getting close to the legal argument about what constitutes money. I think the reference to "the value of the money" as opposed to its accessibility is the key discussion. I think if you have some legal representation that the money was there on deposit as of your last statement you may believe that you have that money, but in a court of law it might come down a burden of proof issue. In other words can you prove that the money was there? The bank could always argue that you withdrew it. We are dealing no longer with whether or not paper is money, but whether or not silicon book entries are money. Neither are and that is the root of the problem. I am not as certain as you that bank runs will not be a problem. The stories of multi-million conversions of dollars to gold are the child of this problem. There might be some advertising as the year progresses that one bank is better prepared than the other; or even that a euro deposit in Europe might be more Y2K proof than an American counterpart.

It would be interesting to hear the opinion of a legal expert on the matter of proving that you have x amount of dollars deposited at y bank. Perhaps one practical step would be to have a statement pulled on 12/30.

ET (1/2/99; 16:31:13MDT - Msg ID:1602)
AEL - Going to cash

I posted the following analysis to csy2k regarding the collapse of banks that is being speculated. DD and Mr. McIsaac are posters to that group. Post follows;

Subject:
Re: Guaranteed Collapse Of Banking
Date:
Thu, 31 Dec 1998 22:16:36 -0600
From:
ET <gearsXOUT@idir.net>
Newsgroups:
comp.software.year-2000
References:
1 , 2




It might be a good idea to actually examine what happens when people
withdraw money from the bank. Initially, they take it home, but they
still have to pay bills. Is it more convenient to leave money in the
bank or pay your bills with cash? In either event, the cash ends up
back at the bank. Busineeses have bills to pay, and to pay them they
must put the cash back in the bank. DD has made this point several
times, in his own idiosyncratic way. <g> The only bank run that is
possible in my view is one comprised of taking excess cash, over and
above monthly cash. I don't know how much excess cash people keep in
banks, but as a percentage of other investments, it is likely small.
Now if people try to liquidate all investments, that would be a
different story, but I can't assign an extremely high probability of
this happening at this time. I think Mr. McIsaac is entirely correct in
his view that banks will do their best to reassure customers that their
ability to process checks and credit cards will remain intact. I would
expect their arguments to be very reasonable and honest. The honesty
part is regarding the ability to access such money, not the value of
such money. <g> From what I can gather about the processing of
transactions, it appears that for the most part this end of the
remediation work is going about as good as any out there. I expect we
will know more over the next few months as systems start to look
forward, but if the problems are minor and don't effect commerce in any
great way, I would suspect the industry's ability to handle the rollover
seem pretty good. I don't foresee bank runs as being the demise of the
banking system. They have plenty of other problems to keep them busy.

ET

End post;

Comments?

ET


Gandalf the White (1/2/99; 16:24:33MDT - Msg ID:1601)
redtail's 15 seconds of FAME
AND note that Colin Semour quotes redtail from the USAGOLD FORUM on his Brittish web page !
<;-)

USAGOLD (1/2/99; 16:22:11MDT - Msg ID:1600)
Redtail...On the Fringes of Reality....
Frank Veneroso is a gentleman and his contribution to the discussion and research on gold is invaluable, however, I would have thought his comment more palatable if he had read ANOTHER's postings. I think if Mr. Veneroso took the time to read ANTOHER's postings as a body of work, he would recognize at the very least the educational importance of ANOTHER's work which certainly supplements, aids and supports his own. If he comes to the same conclusions having read ANOTHER's work, then I would have to take what he has to say about it. His thinking is to be respected.

Let me just say this: Both have made breakthroughs worth noting on the all-important subject of gold. Veneroso's have to do with the algebra of gold; ANOTHER's the theology. One appeals to the left side of the brain; the other the right. Where Veneroso relies on the formula; Another relies on the intuition. With Veneroso the future price of gold is quantifiable; with ANOTHER anything is possible. What is interesting about both is that their knowledge of the gold market apparently comes from contact with European central bankers and major traders in the yellow metal. Both believe that an exceedingly high dollar price of gold is possible if the current leasing/derivative strategies promoted by the bullion banks breaks down.

Does one have more to offer than the other? Not really. Both have great value to the gold advocate and investor and I wouldn't restrict my store of knowledge by rejecting one or the other. I might add that when Veneroso's work on central bank gold leasing (some 4000-5000 tons when he first broke the story) first came out, he was accused of being on the fringe in some circles. Now his thinking has become mainstream and there few involved in gold who do not accept that something other than free market forces is at work in the gold market.

An educated aware, gold investor is the most important weapon we have against the forces of fiat money. ANOTHER and Frank Veneroso have both contributed greatly to that end.

SteveH (1/2/99; 15:57:15MDT - Msg ID:1599)
Goldfly response
PC=President Clinton

USAGOLD (1/2/99; 15:54:52MDT - Msg ID:1598)
Break our the champagne!
Didn't know if you guys saw it but Colin Semour's Financial Pages in Britain awarded USAGOLD FORUM! the runner-up position for best gold site behind Kitco Discussion Group.

Go to: www.users.dircon.co.uk/~netking/finan.htm

Thanks for the recognition, Colin, and while we are passing out kudos, I would like to compliment you on your excellent site as well as your solid, on-going contribution to the internet in general and gold's cause in particular. I'm glad you're on our side. Happy New Year, fellow goldmeister.

Goldfly (1/2/99; 14:52:49MDT - Msg ID:1597)
*** Gandalf- My brother!
Ok, just to make it different- 290.60


Next contestant! Come on down to the POG is right!

Gandalf the White (1/2/99; 13:57:31MDT - Msg ID:1596)
"Great Minds"
MK What you have said before about "Great Minds" must surely be true ! As Goldfly has also confirmed that the close of the Feb Gold contract (GC9G) will be $290.50 ALSO !
Does this mean that when you see that it comes true, that you will make duplicate awards ?
<;-)

AEL (1/2/99; 09:47:22MDT - Msg ID:1595)
Cash

GETTING CASH OUT OF THE SYSTEM: A PRIMER

This item appeared on a Y2K newsgroup recently. The subject was an
unconfirmed rumor of some new draconian cash-withdrawal (rationing)
restrictions. This particular item offers an excellent list of
how-to ideas.

Mark my words: Today's "unconfirmed rumor" will be tomorrow's
reality, for reasons that should be obvious after reading the USA
Today analysis below. Think and act, now. -- AEL

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

michael,

If properly presented as a temporary measure due to Y2k (oops, an
admission that Y2k is very real, very serious), then it might get by,
though the limit is laughably too low for many people. As a general,
permanent policy -- highly unlikely.

In either event, counter-productive currency hoarding would begin as
soon as this hits the wind, a black market would quickly spring,
forcing many normally law-abiding citizens into criminal activity,
and "mostly cash" transaction businesses would immediately see a
surge in popularity, though small, discretionary purchases would
begin to suffer.

Some work arounds:

Have accounts for your wife and each of your dependent children. Then
have each withdraw the maximum each month. Load 'em all into the car
the first Saturday of each month and head to the bank. Then barter
your "excess" currency for other goods and services, probably at a
discount.

Open mutliple bank accounts for the sole purpose of pulling extra
currency, as needed.

Use your business/hobby to tap extra currency as needed.

Seek out people who use very little cash (e.g., retired parents) and
have them deposit your personal check (this would appear to be a
"gift" to them). Then, have them immediately withdraw the cash for
you.

Buy your stuff at places that will allow you to write a check for
more than the items purchased and who will give you the difference in
cash.

In an emergency, take cash advances against a credit card.

If the Feds make all of the above illegal, it's time to find some
other place to live.

-- Nathan (nospam@all.com), December 29, 1998.



AEL (1/2/99; 09:45:10MDT - Msg ID:1594)
USA Today Poll

From an email newsletter: good analysis (the news behind the news):


Y2Knewswire.com

Date: Fri, 01 Jan 99 17:27:51
Subject: Y2K Alert - 1/1/1999 - USA Today poll reveals banking threat

USA TODAY POLLS REVEAL THREAT TO BANKS [News]

USA Today proudly announces, "Y2K bug fears subsiding," quoting from
a poll that indicates only 35% of those polled expect "major
problems" compared to 48% last June.

Story details at: http://www.usatoday.com/news/ndswed10.htm

BUT WHAT'S THE REAL STORY? [Commentary]

But the headline belies the right story. There are only two ways
rational people reduce fear: they either see evidence of Y2K repairs
being completed or they reduce fear by getting prepared. And what
we're seeing in this case is a dramatic *increase* in the number of
people planning to undertake major preparations. (Poll numbers quoted
below...)

It's also important to note there are two categories of questions the
pollsters asked here: 1) Questions about personal preparedness, which
the respondents are highly qualified to answer, and 2) Questions
about the general impact of Y2K on society, which the respondents are
almost universally not qualified to answer.

Once you realize this, the poll responses start to take shape. On the
answers the public is least qualified to answer, the picture shows
that Y2K fears are subsiding. But on the answers the people are
qualified to answer, it shows that things are headed into the danger
zone. We'll explain in great detail why this is true. Keep on
reading...

THE WILD GUESSES

On the questions the poll participants are not qualified to answer,
their answers still reveal a trend toward concern. The USA Today
headline mentioned only one statistic. There are many others that
paint a different picture, such as:

* 16% of the general public is now "very concerned" about the Y2K
problem, compared to only 7% a few months ago (taken in a different
poll)

* Over 1/3 think the Y2K problems will last for several months.
Another 1/3 think the problems will last several weeks.

* 6% of the respondents now believe Y2K will result in disasters
that could cause loss of human life (a few months ago, almost nobody
believed this. A year from now, everyone will believe it.)

* 25% think Y2K will seriously affect the U.S. economy in a negative
way

.. but as we've pointed out, these numbers are all but worthless. No
member of the "general public" is qualified to provide meaningful
answers about what will happen to the world when Y2K hits. Even the
best "experts" agree that the end result is largely unpredictable. In
addition, the opinion of the public has rarely been a reliable gauge
of what will happen in large, complex, unprecedented situations.

THE IMPORTANT ANSWERS

But there's a part of the USA Today poll that *does* provide
meaningful information. And when you look at this information
closely, you realize how little the public really understands Y2K.
That's because their own answers of what they're going to *do* about
Y2K contradict their wild guesses about what those actions will
*cause*.

Here's the best example: the poll revealed that 16% plan to withdraw
ALL their money from the bank. 31% plan to withdraw and set aside a
"large amount" of cash. While previous polls have revealed similar
plans from people in the information technology industry, this poll
shows that not only is the general public planning on withdrawing
their cash from the banks, it provides numbers that, if followed,
would without question deplete the entire banking system of its cash.
Bank runs and bank holidays would likely follow.

Here's how the numbers work out: the banks currently hold
approximately $44 billion in cash reserves. This is reportedly going
to be shored up by the Federal Reserve at some point in 1999 with up
to $200 billion in cash reserves that they claim to have set aside.

Banks currently owe depositors approximately $3.7 trillion. That's
money the banking customers have deposited with the banks. The USA
Today poll reveals that 16% of the customers plan to withdraw ALL
their cash. 16% of 3.7 trillion is $592 billion.

In cash.

Look at the numbers again: the banks have $44 billion. The Fed has an
extra $200 billion. The people want $592 billion. But the banks don't
have it.

THAT'S NOT THE END OF IT, THOUGH

This is only considering the 16% who said they would take out
everything. What about the 31% who said that would withdraw and set
aside a large amount of cash? What impact might this have?

While it's difficult to put a number on such vague statements, we'll
suppose that $2000 is a "large amount of cash" for the average
American household. You can run the same calculations with $1000 if
you wish: the results still lead to massive bank failures.

If 31% of the 100 million households each withdraw $2000, you'll need
another $200 billion in cash. While there's some overlap here with
those in the 16%, we're still talking about hundreds of billions more
in U.S. currency than exists on the entire planet. (Less than $400
billion in U.S. currency is currently in circulation around the
entire world according to Federal Reserve estimates, and only about
1/3 of that is in the United States.)

WHY HAS THIS CONCLUSION SLIPPED PAST EVERYONE?

The polls are now nationwide news, but the conclusions we've just
demonstrated here are only being pointed out by a handful of people.
If the people answering these polls are to be believed, their actions
will, without question, deplete the entire system of cash. The banks
and the Fed are going to have to come up with a solution here, and
there are only a few months remaining.

Think about this: to run a nationwide poll that concludes people will
withdraw *at least* $600 billion in cash from a system that currently
only holds $44 billion, and then to print a headline that claims
fears are subsiding completely sidesteps the important point here. It
is time to ask that question: what will the banks give people when
they run out of cash?


THE REAL HEADLINE

Had USA Today considered the obvious ramifications of the poll
results, the headline *should* have been this: "Y2K To Collapse
Banks." Of course, this would have been *far* too frightening for the
general public to handle, so a positive headline was chosen instead.
Nevertheless, the underlying truth still exists. We are now facing a
monetary crisis of unprecedented proportion. Our current banking
system has never been faced with a global, simultaneous forced
conversion of the money supply to cash. These things aren't supposed
to happen in a stable economy, and the fractional reserve nature of
the banking system simply wasn't designed to deal with this event.

Make no mistake: the banking system as we know it will soon be
history. It *must* undergo radical changes to survive. The USA Today
poll numbers demonstrate this with uncanny clarity. It doesn't
necessarily mean you'll lose any money, it just means you might find
yourself using electronic money at some point rather than cash. Cash
obligations are quickly becoming a deadly liability to banks. But in
the turmoil, nobody really knows what might happen. That's why other
people are taking their cash out: just in case.

Remember, on the questions the poll participants are most qualified
to answer, (that is, what will they DO) they've indicated they will
collectively bankrupt our current banking system. This is no longer
mere speculation. The public has spoken, and they have said they will
bankrupt the system in their desire to withdraw their cash.

Y2KNEWSWIRE has predicted the Federal Reserve will not allow this to
happen. It can't allow it. Cash will somehow have to be restricted,
rationed, or made illegal. The mass conversion to cash will be
halted, and it will happen in the next 12 months.

OTHER USA TODAY POLL RESULTS

The poll also reveals that 26% plan to stockpile food and water. This
is very encouraging, and it perhaps explains why some fears are
subsiding. This number is MUCH larger than what we've seen in the
recent past. Now a full quarter of the population is planning on
taking action. Once Clinton addresses the nation on Y2K, that number
will leap to 50% - 75% of the population. Remember, the Red Cross is
now recommending a one-week stockpile of critical supplies, including
cash. This recent announcement was a great leap forward in Y2K
preparedness progress, because it liberated "preparedness" from the
realm of whackos into the mainstream.

As it turns out, the only crazy people are now those who aren't
getting prepared.

NOT GONNA FLY

Almost half those polled revealed they plan to avoid air travel
on or around 1/1/2000. Smart choice.

CONFIDENT THE GOVERNMENT WILL WORK

Here's the most fascinating result of the poll: over 2/3 are
confident the U.S. government, including all federal offices and
agencies, will have corrected the Y2K problem in time.

This is again strong evidence the general public is poorly
qualified to comment on anything other than their own private
plans. To see that 2/3 of the people actually believe the entire
federal government will operate without a hitch is to understand
how little these folks really understand about Y2K. For the
record, the federal government continues to award *itself* a
failing grade on Y2K progress. Several agencies won't be finished
until 2002 or later, and even the best-prepared agency, Social
Security, won't be finished until June of 1999. And it's been
working on the problem for two years.

There's really no question here: the federal government will
experience some Y2K-related problems. Perhaps large ones.
Two-thirds of the general public are going to find out they were
wrong.


Goldfly (1/2/99; 08:24:54MDT - Msg ID:1593)
***GC9G Prediction $290.50
It will go up a couple days, will go down a couple days, then it will go up again on Friday.

Really it depends on the hedge funds and whether they take the offensive early in the year. Possibly every one will just kind of wait and see, in which case gold would be up by about ANOTHER three dollars.

GF

SteveH- Who is PC?

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