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ARCHIVED DISCUSSION FROM 2/23/2005
All times are U.S. Mountain Time
(Yesterday's Discussion.)
Gonlyold
(2/23/05; 20:49:43MT - usagold.com msg#: 129599)
Financial Bandages
I'd like to comment on one item, not necessarily in it's context, that TC's msg # 129521 brought out. TC said, "As excessive local demand (for cash) brought down banks that could not provide the supply..."
OK, let's see if my thoughts are correct concerning bank runs.
Simply put, what would happen if we didn't have the fractional reserve component in our banking system, and the banks could only lend depositors' money? Would we ever have to face a run on the bank? The only reason a depositors money would not be in the bank is because it was loaned out. Then the depositor would have recourse not only against the bank, but against the borrower as well for the return of his money. But at least he would have something of value, based on what the borrower did with the borrowed funds of course, instead of nothing or some a percentage of a discounted fiat paper. (At least that's how the system could have evolved under a fractional-reserve-less system. I believe the consumer would have had a higher degree of security. Who knows how the laws would have evolved and been written.)
If we didn't have the fractional reserve component then we would not be having discussions about how to fix the system, whether it be going to a gold backed system or whatever.
So, the answer appears to be stop trying to put bandages on the banking system in an attempt to fix it, but strike at the root and eliminate the fractional reserve component.
Before you think I'm completely in La-La Land with this thinking, I should add that even naive me could only begin to contemplate the problems that financial planners would have if we did this. After all, the financial tentacles that propagated under this existing FR system are massive and intricate.
So perhaps the answer is to slowly phase it out. And isn't one way to slowly phase it out is by not using credit? (I'm aware that money is borrowed into existance, but I did say slowly.) If people started using cash, wouldn't that fix our our financial system and insure its' integrety?
slingshot
(2/23/05; 19:24:29MT - usagold.com msg#: 129598)
Ned
"Possum" The other white meat!
Slingshot---------;0)
Goldendome
(2/23/05; 18:33:32MT - usagold.com msg#: 129597)
Oh the losses they must be booking
@ Federal Reserves: "Oh the losses....."
Well, let's look at it. Just simply done, in dollar terms...the dollar has lost about 30% hasn't it over the last--say, three years? And, the Asians have collectively about $2 trillion of our bonds, so, just doing a cursory figuring here, and I'm probably way off but let's look.
Uhh, $ 2,000,000,000,000 x .30 = $ 600,000,000,000 in dollar losses. Is that possible?
That's a lot of Zeroooooos. Six hundred billion in losses.
Black Blade
(2/23/05; 18:27:09MT - usagold.com msg#: 129596)
Market Wrapup - Hartman
http://www.financialsense.com/Market/wrapup.htm
Snippit:
The second piece of news that came early had much to do with damage control after yesterday's announcement from South Korea that they intend to diversify foreign reserves away from the U.S. dollar. This morning the dollar gained after Japan and South Korea said they have no plans to reduce their holdings of U.S. dollars. Taiwan also jumped on the bandwagon by saying they haven't been selling the U.S. currency. There you have it…now South Korea is telling us they were just kidding around with talk of reducing their exposure to U.S. dollars.
South Korea is the fourth largest holder of U.S. Treasury debt following Japan, China and Taiwan. It's interesting to see three out of the four countries come out to rescue the dollar. Toshi Honda, a currency strategist in London was quoted in Bloomberg today saying, "They're trying to put out the fires caused by the comments on diversification yesterday." The way the markets are trading right now, it doesn't look like they believe today's backpedaling comments. The dollar index is higher by 0.42 to 82.83, but gold is also higher by a dollar from yesterday's close. This looks like some decent follow-through from yesterday's gain of $7.20 an ounce, considering the dollar is stronger today. With gold holding support at $432, we should be poised to test the prior high around $455 before moving on to the next level around $480 to $500. Spot silver moved lower this morning to find support at $7.26 before bouncing back to $7.41 for the close. I thoroughly expect both metals to move higher as the dollar weakness continues to unfold through the balance of the year.
Black Blade: Nice tidbit about yesterday's US dollar plunge and today's quick talking carnival barkers saving the day. Meanwhile the horrific twin deficits ensure that the dollar will plunge again and much further.
Ned
(2/23/05; 18:00:57MT - usagold.com msg#: 129595)
I'm in trouble........are we in trouble?
A conversation with the better half goes like this, we had been talking about economic/social distress:
Me: I'm worried about the future.
Her: Well we can get my mother and your mother and go up to the cottage.
Me: ...and then what?
Her: Collect 'welfare' (social security)
Me: ...collect welfare, there's no money.
Her: We can collect welfare from the government.
Me: The government would have no 'money'. You and I and your mother and the government would have no money. What do you 'buy' anything with? How do you buy food?
Her: ...............................
We are in seriously bad shape.
Federal_Reserves
(2/23/05; 17:31:03MT - usagold.com msg#: 129594)
Strange dealings
Yesterday South Korea said it was selling dollars. The dollar tanked on the news. Well, that was pretty dumb thing to say. Why would anyone with a big holding admit they are selling before they are done? Anyway they took it back today, and the dollar went up, so I guess they are not done. These ASIAN banks all piled into dollars together, I guess they need to try to sneak out before the dollar collapses. Oh the losses they must be booking!
melda laure
(2/23/05; 17:16:28MT - usagold.com msg#: 129593)
Are they spending "money" or "stocks"?
http://www.financialsense.com/fsu/editorials/2005/0221.html
Stevens : "The Baby Boomers command trillions of investable funds. If they change their spending habits, we will feel it."
I agree with the last half of your statement. Though to be precise, they own trillions in "various securities". You see, the problem with being the 100 ton gorilla is that nobody wants your chair: it's far too big. How will they exit this "equity" chair in exchange for a "bond" chair? Slowly! (we hope). Certainly the asians have many bonds they want to sell- they just dont want US equities in exchange! Though I have no doubt that (if it is perceived to be in his interest) Mssr. Greenspan will provide the liquidity for this transaction.
China, Japan, Korea. Too many bonds, not enough gold.
Burdensome Boomers. Too many equities, and low rent hobbit holes- not enough gold.
The difference is the boomers dont know it yet. Asia on the other hand sees no way to accquire the MASSIVE amounts of gold it wants. The gorilla needs many hobbit chairs in a market that is sized only for hobbit sized purchases).
TownCrier
(2/23/05; 14:58:08MT - usagold.com msg#: 129592)
Red-hot metals near new highs, funds hungry
http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh60536_2005-02-23_20-32-46_sp142119_newsml
LONDON, Feb 23 (Reuters) - Industrial metals like zinc and copper hung near multi-year highs on Wednesday, and gold retained its allure on renewed investment fund buying against the backdrop of a tattered dollar, commodity experts said.
...demand from major metals consumer China showed little sign of abating, pushing profits up by double-digit numbers.
"There was quite a bit of doom and gloom about up until last week, but all of a sudden things have perked up again," said Angus MacMillan, minerals strategist with Bache Financial.
"There has been a fresh insurge of fund money in the base metals complex."
Same for precious metals. Gold consolidated after following rising currencies on Tuesday to a seven-week high.
China has been driving metal demand growth. Its economy expanded a breakneck 9.5 percent last year, sucking in about one-fifth of world copper supply...
Japanese and Chinese steel mills were accepting price hikes in excess of 70 percent in iron ore prices.
^----(from url)----^
On top of conventional market demand, gold will shine as central banks continue to come to terms with the politcally untenable situation of a U.S. Dollar-centered universe of reserves.
R.
TownCrier
(2/23/05; 14:40:51MT - usagold.com msg#: 129591)
Oil has a new 50-ish floor?
http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh60128_2005-02-23_20-10-43_l2391029_newsml
NEW YORK, Feb 23 (Reuters) - High-flying oil prices gave back a small portion of rapid recent gains on Wednesday as producer-group OPEC sought to assure traders it would not let prices rise too high.
Even so, prices held near $51 a barrel, after rallying almost 6 percent on Tuesday...
Oil prices have risen more than $5 in the last two weeks and are within striking distance of the record $55.67 a barrel hit last October.
Traders said there was some risk of profit taking from the huge move on Wednesday, but that generally prices looked well supported in a new, firmer range.
"Oil has surged into a new paradigm above $50 (for NYMEX crude) where it spent much of last October," wrote brokerage Refco in a report.
Crude eased after Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah, also OPEC's president, said the group would act to cool oil prices if they kept rising.
"If the prices rise further there will be a reaction from OPEC to help lower these prices," said al-Sabah.
^-----(from url)----^
Of note is the indication that nothing will be done to bring prices down from the present level. Comments by OPEC officials, that action will be taken only to attenuate additional pricing pressures, should be seen as very similar to those we hear from various monetary officials regarding the potential for interventions to ensure orderly exchange-rate movements.
And since this is a dollar-based price we are talking about here, the right interpretation is that the dollar has lost its position in the driver's seat. Seen more clearly, the dollar's value is being set by the $-price level that OPEC/oil determines.
If the dollar system has lost grips its long-held power (through derivatives) to affect the pricing of oil, one has to wonder how much longer bullion banks will risk operations if they too are now exposed to a new paradigm of pricing that isn't controlled from the dollar side of the equation.
Choose gold and don't sweat the outcome.
R.
Goldilox
(2/23/05; 13:59:53MT - usagold.com msg#: 129590)
"Suit of clothes" indicator
A brand name clothier is hammering CNBC with adds for new suits for $450.
Perhaps it's an omen for the POG in the near term.
Need a new toga?
USAGOLD Daily Market Report
(2/23/05; 13:33:51MT - usagold.com msg#: 129589)
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Wednesday Market Excerpts
Comex April gold futures solidified their recent press higher Wednesday by confirming support at the $433-per-ounce level and ending the session above the $436 mark for the first time in 2005.
April gold closed up 30 cents $436.10. The benchmark contract added 1.7 percent in Tuesday's dealings.
In a bullish sign for the precious metal, gold held firm despite a modest recovery in the U.S. dollar.
"A day of consolidation is by no means a bad thing with $428 to $432 now likely to be an area of support rather than resistance," said James Moore of TheBullionDesk.com.
"The market simply needs to hold above $430.50 to keep the rally intact," market analyst Dale Doelling said.
----(see url for 24-hr news, market prices)---
Stevens
(2/23/05; 13:09:26MT - usagold.com msg#: 129588)
Federal Reserves...
That's the whole point...they will be and, in fact are now, spending money for retirement. This is when things change. A major shift from making money to spending savings and investments. Follow the money.
Gandalf the White
(2/23/05; 13:01:47MT - usagold.com msg#: 129587)
"CALLING" Lady Waverider !! <;-)
Perhaps your self-learned techniques in Reading Charts, (in which you now have a "PhD"), would be of benefit to Lady Whitewaterwoman.
Care to share your thoughts ?
"Chart TA for fun and profit", is one of the Hobbit's slogans.
<;-)
Whitewaterwoman
(2/23/05; 12:38:48MT - usagold.com msg#: 129586)
I see...
...Gandalf! Looks like the dollar had too much to drink on President's Day, celebrating a long weekend. Now there'll be a long hangover. ;)
My moniker may be apropos to the charts, but I chose it because one of my sports is whitewater kayaking. To continue the chart analogy, I AM trained in swiftwater rescue, and financially I prefer a yellow and white rope lashed to a commodity-strewn shore.
Y'all credit me with too much knowledge. I don't know the phases, and am just learning about wave theory and formations. But I'm listening...
Gandalf the White
(2/23/05; 12:34:12MT - usagold.com msg#: 129585)
BUT, TownCrier ---
The health of a special account is not hurt by its unrealised losses, a Ministry of Finance (MOF) official said ---
===
This is VERY TRUE, as unrealized losses DO NOT HURT, UNTIL the loss is REALIZED ! THEN the hurt may cause HARA KIRI !
<;-)
Federal_Reserves
(2/23/05; 12:29:56MT - usagold.com msg#: 129584)
STEVENS> Boomer money
Follow the money?
What if those 70million in boomers bummers have to spend their savings to support themselves?
What happens to bonds and stocks then?
Both drop I guess.
Save today, pay tommorrow.
Gandalf the White
(2/23/05; 12:15:04MT - usagold.com msg#: 129583)
Look Lady Whitewaterwoman!! <;-)
http://charts-d.quote.com:443/1002980432830?User=demo&Pswd=demo&DataType=GIF&Symbol=DX00Y&Interval=10&Ht=600&Wd=800&Display=2&Study=MA&Param1=13&Param2=0&Param3=&FontSize=10
The US$ Chart looks like it has a HANGOVER this morning !
<;-)
TownCrier
(2/23/05; 11:37:42MT - usagold.com msg#: 129582)
MOF says Japan FX account not hurt by unrealised losses
http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh44858_2005-02-23_08-29-36_t221241_newsml
TOKYO, Feb 23 (Reuters) - The health of a special account that holds Japan's foreign currency assets acquired through intervention is not hurt by its unrealised losses, a Ministry of Finance (MOF) official said on Wednesday.
Massive currency market interventions in the past have racked up unrealised losses in the budget's special account over the last few years. The losses are expected to rise to around 11.4 trillion yen ($109.5 billion) by the end of March next year.
[Japan's yen-selling currency intervention is financed via borrowing yen by selling short-term government paper, whose yields are much lower than yields of foreign securities, such as U.S. Treasuries, that Tokyo buys for its foreign reserves. The major factor causing an increase in unrealised losses in the special account is the yen's rise against the dollar.]
But Kiyoto Ido, head of the ministry's international bureau, told a parliamentary committee that such losses will not be realised unless the ministry sells all the foreign assets held in its international reserves, or sell dollars for yen.
"Given the current situation, that is not something we can imagine," Ido said.
...Japan has had the world's largest foreign reserves for more than five years. At the end of January the reserves stood at $840.966 billion, of which $696.978 billion was in securities and $124.225 billion in cash. The rest includes IMF reserve positions and gold.
Ido said the ministry conducted intervention in 2003 and early 2004 to prevent speculative and excessive currency movements ...
"At that time, there were geopolitical risks such as the situation in Iraq and excessive attention was given to the U.S. twin deficits. Although the U.S. economy was fundamentally strong, there was strong speculative dollar selling and we took action against it."
^----(from url)-----^
The next time you buy some more gold, or anything that's imported, you might want to consider the relative cheapness of the cost and pause to thank Japan for its selfless and heroic efforts to keep our dollar from falling into a spiral of weakness.
'Thank You' cards and letters can be sent to the Japanese Ministry of Finance at the following address:
3-1-1 KASUMIGASEKI CHIYODA-KU
TOKYO
100-8940
I'm sure they would be glad to hear a few words of appreciation from some of the beneficiaries of all their dollar-buying efforts.
R.
TownCrier
(2/23/05; 11:18:19MT - usagold.com msg#: 129581)
HEADLINE: Bush Didn't Discuss Dollar At EU Meeting
http://www.nasdaq.com/asp/quotes_news.asp?cpath=20050223\ACQDJON200502231118DOWJONESDJONLINE000639.htm&selected=9999&StoryTargetFrame=_top&mkt=WORLD&chk=unchecked&lang=&link=&headlinereturnpage=http://www.international.nasdaq.com/asp/gmWorldNews.asp&headl
MAINZ, Germany (Dow Jones)--The dollar didn't come up as a subject of discussion when President George W. Bush met with European Union leaders on Tuesday or German Chancellor Gerhard Schroeder Wednesday, National Security Adviser Stephen Hadley said Wednesday.
Hadley downplayed the significance of a report that the South Korean central bank would adjust its holding of currency reserves and reduce its holdings of dollars.
Officials at the Bank of Korea said late Tuesday that the bank was not planning to sell dollars from its current reserves, but may buy non-dollar assets as it builds up its reserves.
Hadley said it's not news if a central bank shifts its holdings of dollars because central banks do this all the time.
^-----(from url)-----^
Nothing more than the standard fare of shallow political words to try to soothe a stirring giant back into slumber.
R.
Stevens
(2/23/05; 11:17:15MT - usagold.com msg#: 129580)
My Take: Greenspan's Cunundrum
In testimony before congress, Alan Greenspan described the level of long bond interest rates, as a conundrum. He's not the only one scratching his head over this subject. Most economists and investors have been predicting a rise in long rates. So naturally, rates promptly fell to 4%. I myself am on the record as expecting a 5 handle on the 10 year bond in the latter part of this year.
If we are all to be wrong, and I am not conceding that possibility yet, there are only a few possibilities that would explain an unusually low long rate. Either we are going into a slowing economy and/or deflation. If this is true, real rates will remain high, but nominal rates will decline. Evidence of this will show up in the GDP and CPI numbers. If the CPI falls and GDP falls from the present 3% to 4% rate to eventually a negative number, then expect long rates to continue down. I don't buy this explanation, but it is possible.
I think it is more likely another possibility -- demographics. I have been saying for a couple of years now, that I expect the markets to start discounting the unfunded liabilities this Nation owes ( which is caused by demographics ) sometime in 2005. I have never defined the shape this discounting will take, and for good reason -- I have no idea. But I can tell you what to look for.
As the Baby Boomers start planing for their retirement, all 77 million of them, they will take certain actions, and those actions will have consequences. I believe the dramatic rise in home prices in popular retirement spots are part of those consequences. The point is, follow the money. Where the money flows so will the Economy. Greenspan's conundrum, could be a result of the Boomers shifting away from risky investments, such as stocks, to more conservative investments, such as bonds, and even tangibles.
The Baby Boomers command trillions of investable funds. If they change their spending habits, we will feel it. If they change their investing philosophy, we will feel it. It's like the old adage, "where does a 500 pound gorilla sit? " Answer: "Anywhere it wants." Well, anywhere the Boomers put their money is a place to take notice of. This unusual, lower than expected long bond interest rate, could be signaling a shift in money flows.
No one seems to be talking about it yet, but it is only reasonable to expect that some sort of shift in money should already be taking place and probably going to be taking place for years to come.
If retirement money continues to pour into second and third homes, we could be at only the beginning of the real estate "bubble." If the money is seeking safety, then bonds and gold may be two recipients. Interest rates may stay low, while gold could continue to climb. Yet neither of these traditional economic and monetary signals will be signaling anything. Lower interest rates and higher gold prices will not be signaling either deflation, inflation, or recession.
No, it will simply be a shift of values, a shift of funds, and therefore will require a reassessment of the economic and monetary landscape. It is defiantly worth keeping our eye on.
TownCrier
(2/23/05; 11:01:31MT - usagold.com msg#: 129579)
Why worldwide savers choose gold
http://www.irna.ir/?SAB=OK&LANG=EN&PART=_NEWS&TYPE=HE&id=20050223195855
HEADLINE: Inflation in Iran pegged at 14.8 pc year long
Tehran, Feb 23, IRNA -- Inflation in Iran rose to 14.8 percent to ... the ninth month of the Iranian year which started on March 20.
^----(from url)----^
Because monetarily-denominated contracts of incomes and expenses (such as wages and rents) largely net out against each other, and because new contracts can factor in inflation expectations, people tend to accept inflation (local currency depreciation) in stride without social upheaval, or even fretting overmuch.
So while people can generally tolerate an erosion of their transactional currency, what they can't afford to tolerate, however, is an erosion of the value of their life's accumulated savings which has been set aside to serve them during lean or retirement years. That is why they universally turn to gold. Time tested, Mother Nature approved. Gold -- it does a body good.
R.
TownCrier
(2/23/05; 10:40:13MT - usagold.com msg#: 129578)
HEADLINE: Dollar rises as South Korea rejects buy-back plan
http://www.FinanceGates.com/Items/south_korea_dollar.html
February 23 -- South Korea's central bank said it has no option to sell its dollar holdings so far. The dollar rose on the news.
In last night's press release issued in Seoul the Bank of Korea said it was planning to invest more in non-government securities, rather than sell dollars and buy assets in other currencies. It did not comment whether it planned to invest new reserves.
^-----(from url)-----^
That hardly passes for tradable "news". I think the dollar is experiencing what's referred to as a "dead cat bounce" more than any sort fundamental reaction here.
R.
Rimh
(2/23/05; 09:47:56MT - usagold.com msg#: 129577)
TC
Thanks!
Dollar Bill
(2/23/05; 06:15:14MT - usagold.com msg#: 129576)
.,.
Can anyone make sense of the actions of the saudis?
Are thier decisions based primarily on the short term interests of the royal family?
Is the monthly checkbook balance of the saudi princes the only real factor that inpacts decision making there?
TownCrier
(2/23/05; 00:55:22MT - usagold.com msg#: 129575)
For Rimh
http://www.usagold.com/gildedopinion/brown-imf-gold.html
Archived here...
R.
Rimh
(2/23/05; 00:08:51MT - usagold.com msg#: 129574)
MK's logic
Wowsers! I missed the original post, but what intuitive logic! Brown's '99 performance is already etched in history as colossally foolish but, no doubt, absolutely necessary for the bullion banks at the time. This latest cameo appearance is almost like a comedic finale if the coming consequences weren't fairly dire. Thanks MK!
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for quotes and purchase information.
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