All times are U.S. Mountain Time
(Yesterday's Discussion.)
melda laure (2/26/07; 23:53:38MT - usagold.com msg#: 152709)
Will we have Another Strategy?
Sr Smiles, re Barrick.
My impression has been that the gold war was always nothing more than a rearguard action to defend the dollar... ergo, a dollar implosion in a frontal assault makes the current gold war strategy irrelevant.
I might here also ask Sir TC an little question: if Kirby's recent speculations on the status of US holdings is correct, then there is little reason for Europe to wait for delivery. Though perhaps that depends on who is acting bailiff?
melda laure (2/26/07; 23:45:39MT - usagold.com msg#: 152708)
they have called down deep heaven
http://www.financialsense.com/editorials/duarte/2007/0226.html
Earthly remedies? Or political ones?
Rocks, Paper, Scissors: resources, credit, swords. We face three simultaneous fights, over credit, over gold/oil, and increasingly open and overt hostilities. But that is just politics, that is to say, it is just economics: the sadness of the wars of men, if you like.
There ARE political "remedies"- that is to say, technical solutions, and honest remedies instead of more credit which is all the Amero can really provide. I doubt the physical resources of Canada and Mexico could make US debts good for long.
But Mikal has a point: no amount of rocks paper or scissors can save Florida from inundation, nor did mastery of the political economy avail King Canute. Tyrants enslave, but they cannot cause rain to fall nor the corn to ripen. Malinvestment will divest the Canute's of this age- too slowly perhaps. Earthly remedies work on indian time I suppose, soon enough.
Sir Black blade is right, prepare, and dont expect too much.
I fear events must now speedily outdistance our reach, and I am saddened that a more equitable solution could not be arrived at. And while I hope that the forum may continue to shine some light in the comming dark days, I would like to thank all here for their noble efforts, and I would encourage you all that although numenore is doomed, yet there will be a remnant (and perhaps a large one at that!) Liberty did not begin in 1776, nor will it end in 2012.
(Or as Gandy might say, "...think of the money at the end!"
smiles45 (2/26/07; 23:03:47MT - usagold.com msg#: 152707)
Correct Mikal Re: Gold
In my haste to post so much info, I neglected to say because the US Treasury, IHMO, has no more bullion. THPe would not leave such a stash or harvest there. Hence no physical audits have been forthcoming. The "deep storage" issue just came up on the last paper Treasury audit. Analyts conclude this is unmined ore in companies that were govt shills for years (Barrick).Or in yet nationalized companies.
The term 'deep storage " presents chilling visions of stockholders being paid FRNs for their shares. This by extension would involve the ETFs bullio hoards as well.
If investors believe you just buy PM shares & bullion then hold and they will reap profits. They will find it will not be that easy. As in 1933 you may wind up an unawful owner of PMs and forced t sell.
As you mentioned both Mexico & Canada together have vast PM resources as well as oil. Tack on a military missile shield and we have an imperious new North American Homeland. No Bill of Rights, no worthy jobs and maybe no American dream home. Where will this end? is foretold often in the bible. For I see no earthly remedy now/Peter
mikal (2/26/07; 22:04:29MT - usagold.com msg#: 152706)
@smiles45
Very interesting comments.
Re: "How to maintain control without having gold.", your title is not quite accurate for such a fine post.
You see, our country, or rather our continent as you say, is so rich in minerals including water it is envied everywhere. And there are Treasury and CB reserves in small, diminished tonnage supplemented by "legal" claims to mining stakes AKA "deep storage gold". There is executive orders and the state of emergency and martial law etc.
But that sometimes pales in comparison to the human resources for better or worse. The best outcome would
still involve more denial by the better-off segments of society that masses were being detained for political purposes and that unemployment was at depression-era levels.
What the tribal elders foresaw is coming to pass, that is the administrative turnover of that which was never really claimable because it is wild and free and has been taken for granted. But there will be more "turnovers" to come until the land returns to the people most able to respect it, the people whose heart belongs there, whose ancestors watch over it. They foresaw even the coming crisis which
no one will be able to deny.
smiles45 (2/26/07; 21:17:16MT - usagold.com msg#: 152705)
How to maintain control without having GOLD
http://66.218.69.11/search/cache?ei=UTF-8&fr=slv8-&p=Northcom&u=www.oilempire.us/northcom.html&w=northcom&d=LE6TEUVuN83Y&icp=1&.intl=us
Some posters may feel my last post maybe far afield or misguided. I assure it is not. The web below spells out control of the NorthCom Aliance. It also divide he wrld categoricall into oil regions, populace regions etc. I have followed this socalled Treaty that has developed between Mex-Can-US all without Congressional debate or approval.
Everything is neatly setforth. For instance. The US powerful Longshore and Tuckers will be replaced with ports in Mexico using cheap Mexican longshoreman. An eigthlane highway from mexico thru Texas to Colorodo will again utilize cheap Mexican truckers. Borders will become porus to illegal white slavery, drugs and military hardware.
If American laborers are motivated with violence they will be met by uncaring(as compared to US mlitary) South American mercenaries ready to enforce ths treaty vs upset uion workers. I quote now frm the article
"The creation of NORTHCOM announced in April 2002, constitutes a blatant violation of both Canadian and Mexican territorial sovereignty. Defense Secretary Donald Rumsfeld announced unilaterally that US Northern Command would have jurisdiction over the entire North American region. Canada and Mexico were presented with a fiat accompli. US Northern Command's jurisdiction as outlined by the US DoD includes, in addition to the continental US, all of Canada, Mexico, as well as portions of the Caribbean, contiguous waters in the Atlantic and Pacific oceans up to 500 miles off the Mexican, US and Canadian coastlines as well as the Canadian Arctic."
The Amero become the cntral issue as to it's rapid deployment or slow implementation. The Amero maybe used on an international basis with American stil using FRNs. Later it could be slowly introduced.
It is evident which way the winds are blowing here:
"The views expressed by Gen. Eberhart, the newly appointed commander of all U.S. armed forces within North America, are particularly troubling. In October 2002 Eberhart became head of the new Northern Command, responsible for homeland defense--the first time since America's founding that the command of all military personnel in North America has been centralized under a single officer. 32 So long as the military confines itself to its traditional role, the new homeland command is, in itself, no cause for concern. But Gen. Eberhart has repeatedly contemplated a broader role for the military. In September 2002, for example, Eberhart said, "My view has been that Posse Comitatus will constantly be under review as we mature this command." 33 He did not elaborate on what that "maturation" process will entail. ...
a powerful data-mining system called Total Information Awareness. 44 Such a system could potentially allow the government to track the routine activities of Americans, from travel plans to credit card transactions to medical records. In response to public outcry, Congress shut down the Office of Information .... Though some DARPA officials envisioned turning the system over to civilian law enforcement, it's clear that military officials were keenly interested in the technology. In November 2002 Maj. Gen. Dale Meyerrose, chief information technology officer for NORTHCOM, said: "I've been to [visit] Admiral Poindexter. He and I are talking about TIA."
In the middle of the sniper ordeal, Maryland governor Parris Glendening announced that he was considering using the National Guard to provide security at polling places on Election Day. 72 Consider the ominous image of armed soldiers surrounding American polling places. That is an image one would normally associate with a banana republic, not a free, democratic one. In the heightened threat environment of the post–September 11 world, there is a real danger that the military will be called in for any high-profile"/Peter
"
Silver Fox (2/26/07; 20:49:29MT - usagold.com msg#: 152704)
Flow5
Sir,
This is a magnificent forum comprised of stellar members who, under the prudent leadership of USAGOLD, are afforded easy access to those who seek the truth with regard to macroeconomics. You are probably aware that macroeconomics is an area normally filled with media misinformation & spin, and as such, is difficult to grasp what is really happening. I mean really, is Federal Government really serious when it reports three percent inflation? As the Great Mogambo would say; "hahaha". As one who has been appropriately reprimanded, I suggest that you cool your jets and appreciate the quality of these posts.
Good day to you sir,
SF
smiles45 (2/26/07; 20:46:26MT - usagold.com msg#: 152703)
Why is the spending virtually unlimited in UDS$
http://www.gold-eagle.com/editorials_05/rogers022507.html
Hello posters
I think the question really to ask is not about a new "real bills" reitroduction or not, but what will replace the USD$ as it devalues.It will not be gold backed fr sure.
Seemingly endless quatities of money have been spent on all kinds of programs ie: war on poverty, war on drugs, war on terror and now the war on us thru the loss of our civil liberties under the Bill of Rights.
My disappointment rests in the new Democrats that not have NOT even mentioned the reversing of the evils of outlawing Habeas Corpus, the initiation of Patriots I & II. The soon to be loss of Internet freedom of speech(New Ginrich) and the rigt to bear arms is next. The Military Act concerning the "posse commitatus" law now makes the military an allowable force within our national borders. Martial law, I call it.
With national I.D. cards laden with full biometrics (retinal readouts, finger print archived, voice imprint and RFIDs chips<trackable radio frequency of the holders>)is the mark of a govt gone burserk in control of its own citizens.Why would a govt want to now a citizens every move?
Within this article a logical precept and answer to the USD$ gone wild- here is a snip:
"It has become increasingly more obvious that the Federal Reserve is going to continue to devalue the currency. I still believe that the Federal Reserve is going to keep the USD$ going just long enough until the new North American regional currency is unveiled.
For those who aren't familiar with it, I am referring to the Amero. If this turns out to be the case and judging from all of the evidence of a forming a North American Union I believe that it is, the Federal Reserve won't defend the credibility of the USD$. They will just allow the currency to inflate to the point where we have a situation similar to that of the late 1970's and the solution will be the new regional currency."
The secrecy of the Noth American Alliance Treaty further demonstrates the stealth of the Bush people. Signed in Mar. 2005 it is planned for completion for 12/2008. Under this treat Mexico supplies cheap labor & a cheap mercenary armed forces <NorthCOM> and some PMs, Canada supplies Oil,natural resurces, PMs, (uranium, timber), but most highly prized is Canada's Hydroelectric power and stock of pure water.
The Amero is a surety after we have taken every last cent from American and foreign middle classes thru sale of bond, derivatives and credit swaps./Peter
Chris Powell (2/26/07; 19:52:57MT - usagold.com msg#: 152702)
Are central banks planning to prop up stocks directly?
http://www.ft.com/cms/s/b8d61278-c53e-11db-b110-000b5df10621.html
Central Banks Seek Riskier Assets
By Chris Giles
Financial Times, London
Monday, February 26, 2007
Central banks are becoming more active managers of their burgeoning foreign exchange reserves, seeking to increase the yield on their portfolios, according to a survey of reserve managers of the world's central banks published today.
Normally a secretive bunch owing to the conservatism of central banks and the scale of their investments, reserve managers told the journal Central Banking of rising pressures to provide their governments with decent returns in a low-yield environment.
When surveyed at the end of last year, many believed that there was no barrier in principle to investing in assets as risky as equities, although few were allowed to do so. But over a third of the central banks surveyed said their institutions had changed their investment guidelines in the past year.
The survey attracted responses from 47 reserve managers controlling $1,538 billion (E1,168 billion, £784 billion) under management out of a total of more than $4,700 billion controlled by central banks worldwide. Conducted under anonymity, it did not receive responses from China or Japan, which control nearly $2,000 billion between them.
Central Bank reserves have exploded since the start of the decade -- the amount of money under management was £2,000 billion ($2,911 billion, E1,519 billion) in 2001 -- as countries have sought to insure themselves against possible capital outflows and a liquidity crisis and some, such as China, have actively managed their exchange rates to prevent appreciation.
Now that most economists think that reserves have exceeded the required levels for insurance against financial crisis, governments are seeking higher returns from cash, which used to sit mostly in government bonds of advanced economies.
One reserve manager told Central Banking: "Large amounts of reserves increase attention paid by the public on the quality of reserve management and particularly on returns. This requires a more yield-oriented approach."
Another said the move to riskier assets had continued "since the asset classes in which central banks have traditionally invested in have, thus far, not suffered from a major default."
With these attitudes, reserve managers are following the rest of the investment community into riskier assets, rather than standing on the sidelines as they would have done years ago.
Rather than thinking there is a problem with moving into riskier assets just as everyone else is doing so, the reserve managers showed frustration that their internal investment guidelines prevent more risk taking. While only 7 percent of respondents could invest in equities, 44 percent thought there was a case for central banks to buy shares.
Chris Powell (2/26/07; 19:50:48MT - usagold.com msg#: 152701)
Malaysians increasingly see gold as money, not jewelry
http://thestar.com.my/news/story.asp?file=/2007/2/27/nation/16966428&sec=nation
Bullish About Bullion
By Edward Rajendra
The Star, Petaling Jaya, Malaysia
Tuesday, February 27, 2007
KLANG, Malaysia -- Soaring gold prices have led to a new trend among buyers, who are now buying more bullion in the form of coins.
Malaysian Indian Goldsmith and Jewellers Association adviser N.P. Raman said, "Many regular buyers are now beginning to look at gold purely as a financial asset, adding to their investment portfolio.
"Many women now choose to buy gold coins or even bars as investment, instead of jewellery as jewelry adds 25 to 30 percent to the cost, to cover craftsmanship," he said.
Raman said the current investment-led buying has led jewellery shops in the Indian business enclave of Jalan Tengku Kelana here to display more gold coins.
"Before the prices started to climb, we had two types of buyers -– the ones who bought gold to convert it into jewelry for special occasions, and young executives who buy gold for capital appreciation," he said.
Raman said parents are now saving in gold coins as an alternative to traditional insurance policies that tied them for a stipulated period.
Some people were even buying gold coins on an instalment basis, by "depositing" cash with goldsmiths every month.
"People are not waiting to see if the market is going up or down but are buying bullion as it is considered a hedge against inflation. Market watchers anticipate that the price of gold may surge to US$800 (2,794 Malaysian ringgits) an ounce soon, due to Middle East tensions," he added.
The price of gold yesterday closed at 78 Malaysian ringgits per gram.
Goldendome (2/26/07; 19:43:14MT - usagold.com msg#: 152700)
Sorry--eventually--people won't buy your system.
Flow 5: In a system of unlimited liquidity, seems that you're simply talking about Governmental counterfeiting—much more so than anything we have today, to solve all situations of financial crisis. And at that, what's the value effect on existing dollar account balances, holder psyche, etc.—if massive infusions are made, to dispel possible system failure, for example? Why not simply moves everyone's decimal point to the right one notch?
In either situation--extreme inflation or deflation, we would likely see massive withdrawals from the system –velocity—whatever we wish to call it, as people scurry to protect wealth and purchasing power in something real—not paper--that has no convertible value… And, in either case, you're still possibly stuck with your bank runs, now because of large inflation rather than deflation.
Even if successful in small "blowups" is it difficult to see that certain players will be favored over others?
The term money we have written and argued about here extensively before, things such as, a medium of exchange, a standard of account, and a store of value. It is important to remember that credit is not money. Credit is simply a call on the currency and a poor store of value—just ask a creditor in a BK proceeding. Currency is a call on goods and services and unbacked, generally has declining value. Only real, tangible gold and to a lesser extent silver, have been chosen as a store of value--money, over the centuries.
flow5 (2/26/07; 18:32:49MT - usagold.com msg#: 152699)
The Pervasive Error that Characterizes Economics
I am a belligerent hotdog. I was born "booted and spurred, ready to ride, legitimately by the grace of God". Why? In 10 minutes I reduced the world's maelstrom to a few small partial derivatives.
Economics is where the non-professionals preempt the field of the vacuous pseudo-professionals.
What is the source of the pervasive error that characterizes economics?
John Maynard Keynes gives the impression that the commercial bank is an intermediary type of financial institution serving to join the saver with the borrower when he states that it is an "optical illusion" to assume that "a depositor and his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the4 banking system can make it possible for investment to occur, to which no savings corresponds"
The Gurley-Shaw thesis, Reg Q, the DICMCA of March 31st 1980, the Garn-St. Germain Depository Institutions act of 1982, etc.
Thoreauly (2/26/07; 18:27:47MT - usagold.com msg#: 152698)
@ flow5 re: "This criticism was leveled at an outside article."
"Thoreauly, Pal. You haven't a clue."
Never mind that Pal and I differ on the issue of the RBD (I don't buy it; he does), the above statements are in conflict, as is your know-it-all attitude vis-a-vis the earnest search for truth that is the essence of this forum.
Pal (2/26/07; 18:20:20MT - usagold.com msg#: 152697)
Paths
Goldilox,
I appreciate your willingness to join the fray. I decided recently that I had spent enough time lurking this forum and felt I should post some of the 'points of interest' I come across in the hopes in helping others along their own personal path. I have my own path to walk which has been helped by many at this forum and notably by you. I have read many of the web and book sources you have presented over the last couple of years and you have enriched my life more than you will ever know. Thank you.
I felt it strange that Sir Flow5 would degrade the real bills doctrine even starting with initial posts without external references. I have rarely seen the RBD discussed in the past and thought this would be a good opportunity further my understanding and my hope was that others would appreciate my references so as to provide 'balance' to Sir Flow5's viewpoint. I DO appreciate the effort Sir Flow5 has put forward in his posts and because they are along different lines than I am used to reading I am sure they will take additional time and research on my part to soak in.
Thoreauly, I appreciate your reference to Robert Blumen. I have read some articles written by him in the past but had not realized he had written about the RBD. I will read the articles by him listed below that I just found when I have the chance over the next couple of days.
http://www.lewrockwell.com/blumen/blumen7a.html
http://www.lewrockwell.com/blumen/blumen7.html
http://www.lewrockwell.com/blumen/blumen8.html
http://www.lewrockwell.com/blumen/blumen9.html
-Pal
PS- My father-in-law would probably agree that I have no clue ;)
Topaz (2/26/07; 17:50:29MT - usagold.com msg#: 152696)
@flow5
Thanks for your input regarding free reserves and the "effect" lack of control therof had on the '29 depression. The "cause" you identified as public panic, can you elaborate on what you consider caused the "cause"?
Others here have taken a few swipes at your presentations (justified or not ...who cares!) ...what follows is certainly NOT in that vein, moreso a general observation if I may.
You identify the mechanism by which a similar scenario as '29 is impossible to replicate given todays monetary structure. We hear on a regular basis that stress-testing of the system has proven it's resilience. We are so proud of our abilities to thwart disaster of the known, measurable and quantifyable type ...and there's the rub!
A kid gets run over at an intersection, they install lights.
A wing falls from a plane, huge investigation, wing strengthened.
Man catches disease, bug ID'd, medication developed and deployed.
Financial system chokes, rules changed, system AOK.
All these processes are re-active given the circumstances du jour and yes, should those circumstances be replicated, we would have more than a great chance of fending off the unpalatable.
It is however the unknowable that will bring us to our knees.
In the above example, the locals had been warning about the dangerous intersection for years ...nothing was done ...etc.
Yes, a perculiar item are we humans, continually putting our proverbial fingers in the dykes.
Embracing the "honeymoon" with Mr Bernanke is another example of human frailty ...new broom always sweeps cleaner, don't they?
We can only hope our newfound control of all facets of the universe can be applied at least in part when said universe throws us that curve-ball it's become renowned for over the years.
God speed flow5.
flow5 (2/26/07; 17:29:32MT - usagold.com msg#: 152695)
Open Market Operations
The FOMC did 1.8 bill of permanent outright coupon purchases today.
ge (2/26/07; 17:19:57MT - usagold.com msg#: 152694)
Central Banking
Central banking is inflationary and inflated money either creates asset bubbles or flows into commodities. Asset bubbles burst with deflationary consequences; central banks create additional inflation to fight it. Simple!
Goldilox (2/26/07; 17:16:31MT - usagold.com msg#: 152693)
Trolling
@ Lackluster,
LOL - I don't think that was his intention, but we'll see.
I'm more used to this term as applied to Dodgers fans on a Giants board, or Harley riders on my BMW board, but I guess it applies here, too.
It must really tick off TPTB that their cannon fodder is no longer buying their delightful spin as "Gospel".
How "arrogant" of us.
Lackluster (2/26/07; 16:45:44MT - usagold.com msg#: 152692)
Attn. Goldilox
http://en.wikipedia.org/wiki/Troll_%28Internet%29
Here you go.
GOLD FINGER (2/26/07; 16:43:15MT - usagold.com msg#: 152691)
I am pragmatic on GOLD!
As the golden world turns~~
It dose not take essays upon essays for one to realize that holding solid assets like gold will preserve one's wealth. If the simple shop keeper in India has no problem holding silver and gold bars as a part of their over all savings plan, I would tend to believe that street smarts out way any economist THEORY! I see it all being retold before my eyes today......the golden story continues.
I LOVE MY GOLD!
GF
¾¼Ã--§¼Ò
Goldilox (2/26/07; 16:15:17MT - usagold.com msg#: 152690)
Fraternize
Flow5,
"Heretofore, I will not fraternize with the ignorant and arrogant."
Let's see, you won't help educate the "ignorant", and "arrogantly" call another man's research "tripe" without serious rebuttal.
Just what exactly is your motivation for posting?
Goldilox (2/26/07; 16:12:00MT - usagold.com msg#: 152689)
Depression Recovery
@ Flow5,
Your explanation sounds almost textbook, but leaves out the part about sending the confiscated US gold to rebuild Germany through agents of the Rothschilds and Union Banks. Before dropping all the economic "formulae" on us, you might look to the higher motivations as described in the Money Masters. The World world war to "cull the herd", used desruction and the rebuilding of infrastructure as a proxy for "progress", while the banksters were financing both sides of the carnage.
Your concern sems to be for "saving the banks", while confiscating the life blood of the citizens and putting them into soup lines. How many would have not been bankrupt if the government and FED (which had been in operation since 1913), were not "managing things" specically for the benefit of a few ultra wealthy banksters to the detriment of the populations.
Without the unabated liquidity and debt-financing you so avidly espouse, the bubble of the '24-29 might also not have happened, as debt ratios were fairly unbridled by the time of the crash.
flow5 (2/26/07; 16:11:00MT - usagold.com msg#: 152688)
Derisive remarks
This criticism was leveled at an outside article:
http://financialsense.com/fsu/editorials/2007/0226.html
Im' sorry, I have no sense of etiquitte. Heretofore, I will not fraternize with the ignorant and arrogant.
Sierra Madre (2/26/07; 15:50:24MT - usagold.com msg#: 152687)
Flow5: "this is tripe".
Sir: Yours is not the prevalent attitude on this Forum.
Derisive remarks are not the way to go.
You are, from your style, evidently a "technician". Most of us are here, because we are "fundamentalists". I, for one, am not brainy enough to be a technician.
It seems to me, that the technicians, who are blood brothers of the macro-economists, have royally screwed up this world. They have had all the answers. The wrong answers.
Take the highly prestigious "The Economist", which has money-skinned dinosaurs on its cover (Feb. 17th-23rd) with the legend: "The End of the Cash Era". This is a sequel to their highly mistaken "The Death of Gold" cover some years back. This is a technical production.
Do give us your insights into the future of gold, but, please tailor your remarks to the humble level of fundamentalists so we can better absorb your wisdom. I for one, accept that I am not bright enough to be a technician.
Gold is for turtles like me, not for hares.
SIERRA
flow5 (2/26/07; 15:49:09MT - usagold.com msg#: 152686)
Recover from the Great Depression
Actually the issuance of Federal Reserve Notes is deflationary, other things being equal, since the issuance diminishes the clearing balances and legal free reserves of the commercial banks. The Fed recognizes this fact and uses its open market power to replenish bank free reserves and prevent any unwarranted contraction of bank credit. In 1933 the Federal Reserve Note had to be collateralized by at least 40 percent in gold bullion or coin, and the remaining collateral had to consist of eligible comer paper, principally Trade and Banker's Acceptances. The problem was the banks had practically no eligible collateral. The first tentative step was to reduce the gold requirement to 25 percent and allow U.S. government obligations to provide the remaining collateral. The framers of the Federal Reserve Act did not believe that the credit of the U.S. government was inferior to that of the Federal Reserve Banks and the short term commercial paper of business; they merely believed that the volume of paper money should rise and fall with the level of business activity. They also had the naïve belief that this country was so big, so diverse in its commercial needs, that it needed twelve central banks. Had the present Federal Reserve System been in place at the beginning of the Great Depression, there would have been no Great Depression. We were not reduced to practically a barter economy because the banks were insolvent; we needed that condition because perfectly sound banks could not meet the liquidity tests imposed upon them by a panic-stricken public. One of the preconditions the U.S. needed in 1929 was a much larger national debt, and a willingness on the part of the Congress, the Administration, and the business community to tolerate an adequate expansion of the national debt. In 1929 the national debt was less than $17 billion, and the banks held only a small proportion of that amount. We needed a larger debt and a much more rapidly expanding debt in the 1930's, not only to "prime-the pump", but to meet the monetary management needs of the Fed. Note: Both Roosevelt and Hoover in 1932 ran on platforms calling for balanced budgets. The open market operations of the Fed require a depth of market that will enable the Fed to buy or sell billions of dollars worth of treasury bills on any given day without deeply disturbing the bill rates. Another of the many lessons from the Great Depression was the realization that if a financial panic is allowed to reach crisis proportions, monetary policy becomes useless, totally ineffective. For all of the Great Depression legal reserve management was impossible even though the Banking Act of 1933 provided for the coordination of all open market operations through the New York Reserve bank. (that is to say, before 1933 one FRB could be conducting operations of the buying type -- expanding credit, creating bank free reserves and laying the foundation for a multiple expansion of money, while another FRB was doing the opposite, -- conducting open market operations of the selling type) Before April 1933 any excess free reserves in the system were quickly wiped out by the massive "runs" on the banks. But even after bank failures were brought under control business confidence remained so traumatized the expansion of legal free reserves remained to a large extent excess free reserves. There were not enough credit worthy borrowers in the private sector (according to the bankers), and in the public sector there was an insufficient volume of government debt to absorb excess bank lending capacity. From 1933-1942 the centralization of the open market power was of little consequence. It was not until about 1942 that the member banks operated with no excessive amount of excess free reserves. After 1933, after we had a central bank and a coordinated Fed credit policy, the Fed pumped billions of dollars of free reserves into the banks; and nothing happened. There were years during this period when the excess legal free reserves held by the member banks were larger than the volume of required free reserves. The exercise of Fed policy was likened "to pushing on a string". Note: before 1942, and before the federal debt became a controlling economic factor, demand deposits fluctuated up and down with the business cycle. Commercial banks were commercial banks and when business demand for loans increased, demand deposits increased, and vice versa. Now the banks always remain fully "lent-up", they hold no excessive amount of excess legal lending capacity to finance business (or consumers), it is now used to acquire a piece of the national debt or other creditor ship obligations that are eligible for bank investment. World War II changed this and since 1942 the member commercial banks have operated with no significant amount of excess legal free reserves. Excess free reserves were, and should be, made equal to total free reserves minus the product of all deposit liabilities times the reserve ratios.
flow5 (2/26/07; 15:47:32MT - usagold.com msg#: 152685)
Recovery from the Great Depression
The loss of faith in the private commercial banks had become so pervasive by the end of 1932; banks were being forced to liquidate by the thousands. People everywhere were attempting to convert their demand and time deposits into currency. Thousands of towns and cities throughout the country were attempting to finance their daily commerce without a single operating bank. And by March, 1933, just before Roosevelt's "banking holiday" there were even entire states without a single operating bank. in the first 20 years of the Federal Reserve Act of 1913, there were over 20,000 bank failures. The intention of the framers of the Act was to establish a unified banking system under 12 central banks. There were many flaws in the original Act, one being the establishment of 12 rather than one central bank. The fatal flaw was not making membership in the System compulsory for all money creating institutions. And had not Franklin Roosevelt declared a "banking holiday" in March 1933, the lack of confidence in the banking system would have resulted in the failure of virtually every bank in the United States. Some unprecedented things have been happening since the coming of the "New Deal" in 1933. On a year-to-year basis, Federal Reserve Bank credit has always expanded. The same applies to commercial bank credit, and the means-of-payment money supply. The consumer price index has fallen on a year-to-year basis in only two years, 1937 and 1949. The chief factor affecting the level of long term interest rates since the early 1950's is inflation expectations, not the level of business activity. We now actually have a central bank. It is called the Federal Reserve Bank of New York. An amendment to the Federal Reserve Act in 1933 established The Federal Open-Market Committee and gave it the power to control Total Reserve Bank Credit. The Fed can now buy an unlimited volume of earning assets. (With the federal debt at over 8.7 trillion, and expanding, and billions of dollars of "eligible paper" available, the term "unlimited" is not an exaggeration in terms of any potential needs of the Fed.) In the process of buying Treasury Bills etc., new InterBank Demand Deposits (IBDDs) are created. These deposits can be cashed by the banks into Federal Reserve Notes, without limit, on a dollar-to-dollar basis. Today, the public, seeking to cash their deposits, would soon have a surfeit of paper money. A general run on the banks is impossibility. Where the Federal Deposit Insurance Corporation cannot handle the situation (Continental Illinois, for example), the Fed will guarantee the liquidity of the bank's deposits. In other words, a liquidity crisis leading to the wholesale failure of commercial banks is impossible. Where banks are allowed to fail, or are absorbed into solvent banks, customers never suffer losses if their deposit does not exceed $100,000. The fed intervened in the Continental case because many corporations, foreign and domestic, had deposits far in excess of $100,000. These institutional changes plus the numerous "safety nets" now provided business and consumers preclude a recurrence of a "Great Depression". In the period from 1929 – 1932 stocks were spiraling down, unemployment was becoming endemic, businesses were failing in increasing numbers, bank failures were accelerating, and millions of people were suffering severe malnutrition, there was not a single piece of legislation passed by Congress or action taken by the administration which had any significant effect in stemming the tide of economic disaster. In retrospect, the answers to the depression seem simple. We needed a central bank that could and would pump IBDDs into the commercial banks in a volume sufficient to satisfy the public's demand for currency, specifically paper money (currency is an asset the Fed does not, should not, and cannot control). In the control of the monetary aggregates, the monetary authorities are completely dependent on their power to control the volume of bank credit. They have no power over the volume of the Treasury's General Fund Account or the currency holdings of the public. It was not until 1933 that we began to unshackle our paper money from the numerous and unnecessary restrictions pertaining to its issuance. With the numerous types of paper money in circulation at the time, this would seem to have been a nonproblem. Here is the list: gold certificates, silver certificates, national bank notes, United States notes, Treasury notes of 1890, Federal Reserve Bank notes, and Federal Reserve notes. With that array of paper money there should have been plenty to meet the liquidity demands placed on the banks by the public. But the volume of each type that could be issued was so circumscribed by restrictions that even the aggregate group could not begin to meet the panic demands of the public.
Today we have only the Federal Reserve Note, and there is only one restriction placed upon its issuance. No Federal Reserve Note can be put into circulation unless there is a prior transaction involving the relinquishing by the public of an equal volume of bank deposits, and an equal diminution of the holdings of IBDDs on deposit with the Federal Reserve Banks; In other words, the issuance of our paper money contains no inflationary bias. Its issuance does not increase the volume of money. It merely substitutes one form of money for another form
The last vestige of legal reserve and reserve ratio requirements against the Federal Reserve Note, demand deposit, and inter-banks demand deposit liabilities of the Reserve banks was eliminated in 1968. Today the Federal Reserve Note has no legal reserve requirements, and the capacity of the Fed to create IBDDs has no legal limit. These IBDDs are owned by commercial banks; they are bank legal free reserves and can be converted dollar-for-dollar into Federal Reserve Notes. The volume of IBDDs is almost exclusively related to the volume of Reserve Bank credit. When Federal Reserve Banks expand credit, for example by buying U.S. obligations, the balance sheets of the Banks reflect an increase in earning assets and an equal increase in IBDD liabilities, i.e., legal free reserves
Topaz (2/26/07; 15:38:32MT - usagold.com msg#: 152684)
GoldBull 1 and 2 ..a brief comparison.
What is probably only noticeable by the Foreigners aboard, the Stage 1 GoldBull that began in Jan '05 was punctuated NOT by a $PoG rise ...in fact for the first 3 or 4 mth's, the $Pog was fairly comatose. The alternate currencies had started to ratchet up and were finally joined by Buck 6mth's later.
This current stage, from Jan '07 is different in that ALL the currencies are softening from the get-go.
We MAY get a pull-back here in line with flow5's erudite prognostications, relative to the monthly roll-over as PoG comes entirely under the influence of Bond BUT, with Ag locked and loaded the drop imo will be minimal.
Lets watch!
Goldilox (2/26/07; 15:29:08MT - usagold.com msg#: 152683)
Post a reference
@ Flow5,
You needn't post the entire explanation, but perhaps a reference or two would be appropriate, without, as you say, "monopolizing the entire board".
Goldilox (2/26/07; 15:27:22MT - usagold.com msg#: 152682)
"tripe"
@ Flow5,
You're always welcome to disagree with someone's thesis, but name calling without supporting rebuttal is counter-productive, and only drives people away from the discussion.
Please elaborate, and while you're at it, who is MVermont, and what does he/she have to do with setting gold and oil prices?
Tongue firmly in cheek, we're all here to learn, but you're not doing a very good job of explaining yourself, and aren't really responding to the questions asked of you.
Just my opinion,
-G'lox
admin (2/26/07; 15:22:41MT - usagold.com msg#: 152681)
Posting e-mail addresses
Against the rules here. Sorry.
flow5 (2/26/07; 15:18:33MT - usagold.com msg#: 152680)
Recovery from the Great Depression
If I posted the explaination, it would monopolize the board. It would take 3 or 4 separte posts. Thoreauly, Pal. You haven't a clue. If anyone want's to know the Holy Grail concerning the Great Depression, post you e-mail address.
flow5 (2/26/07; 15:07:00MT - usagold.com msg#: 152679)
http://financialsense.com/fsu/editorials/2007/0226.html
This is tripe.
flow5 (2/26/07; 14:57:02MT - usagold.com msg#: 152678)
The Allure of Gold
Some people prefer the devil theory of inflation: "It's all OPEC's fault." This approach ignores the fact that the evidence of inflation is represented by actual prices in the marketplace. The administered prices of OPEC (or gold) would not be the actual market prices were they not "validated" by (MVt)
Thoreauly (2/26/07; 14:54:58MT - usagold.com msg#: 152677)
@ Pal re: Sound Money Sound Society
The Real Bills controversy aside (though I'm inclined to side with Robert Blumen on the matter), what hit home with me was the conclusion:
Obstacles in the way of monetary education are enormous. A case in point is to realise the fact that the global clearinghouse for the system of irredeemable currency is a private company called the Deposit Trust and Clearing Corporation (DTCC). Its shares are closely held by multinational banks and financial institutes. DTCC's turnover in 2004 exceeded 1000 trillion dollars. More than half of this amount was generated by trade in government securities and foreign exchange derivatives. In comparison the combined GNP of all nations was a paltry 40 trillion dollars. In other words two weeks' turnover was all it took to clear transactions generated by the production and distribution of all the goods and services deemed necessary to keep the whole world fed, transported, clothed and sheltered for the entire year. The other fifty weeks' turnover was pure froth and speculation. This speculation is disengaged from the real world of most peoples lives yet controls the cost and value of money. It is made possible because the legal tender mechanism has created such an enormous quantity of tender that it constantly circles the globe looking for returns yet achieves no real economic action other than a speculative gain or loss. This derivative monster undermines the real economy and because it is growing exponentially each year it has prompted such luminaries as Mr. Warren Buffett to state that it is an aspect of the current financial structure that could cause a global financial crisis of incalculable magnitude. Many believe the time is now to start looking for the solution that will inevitably be required to fix the problem. The issue is not "if" the storm will arrive but "when".
USAGOLD Daily Market Report (2/26/07; 14:52:36MT - usagold.com msg#: 152676)
Page Update!
http://www.usagold.com/DailyQuotes.html
The Daily Gold Market Report has been updated.
If you are considering investments in gold we invite you to request our free introductory information packet detailing the products and services offered by USAGOLD ~ Centennial Precious Metals. We welcome your inquiry and look forward to working with you.
February 26 (Reuters, DowJones) -- U.S. gold futures finished higher on Monday as the combination of a weaker dollar and buying on dips pushed the precious metal within reach of $700 an ounce, a key psychological mark.
The COMEX April gold contract settled up $3.10 at $689.80, traded between $684.60 and $691.80, near its seven-month high.
A New York precious metals dealer said that gold rose on a lower dollar, after a report showed that central banks expected to diversify out of U.S. dollars to other currencies and commodities, a bullish signal for bullion.
Almost nine out of 10 central banks see ample scope for further currency and asset diversification of foreign exchange reserves, according to a survey of 47 central banks published by London-based Central Banking Publications on Monday.
The dollar slipped to near its lowest level in almost two months against the euro.
"People are still looking to buying opportunities on dips right now," the trader said.
Commitments of Traders data released late Friday showed that the funds were continuing to add to their net long positions in gold as of last Tuesday, plus prices have continued to climb since then.
The large non-commercials - essentially the funds - were net long 129,933 lots in Comex gold as of last Tuesday, up from 124,750 the prior week and more than double the 52,868 from Jan. 9.
Oil climbed above $61 a barrel as Iran's president, Mahmoud Ahmadinejad, declared Iran had "no brake and no reverse gear," ahead of a meeting of Western powers to discuss U.N. sanctions on Tehran amid Western fears it aims to produce nuclear weapons.
. . .(see url for full news, 24-hr newswire). . .
TownCrier (2/26/07; 14:48:34MT - usagold.com msg#: 152675)
mikal, I've been getting that occasionally, too
I'll mention it to Jeff and ask for a quick reboot. Hopefully that'll clear out the blocks from the post-processing routine.
R.
mikal (2/26/07; 14:43:49MT - usagold.com msg#: 152674)
@TC, Goldilox
Test. Problem posting
Goldilox (2/26/07; 14:42:15MT - usagold.com msg#: 152673)
Suckers Rally, or real demand?
@ Flow5,
It seems the demand for gold from non-bankster sources may be "unprecedented", as well.
Everything you have explained assumes that the Western money creators have "everything" under control. There seems to be evidence to the contrary.
If more and more people begin to disbelieve the pyramid, the scheme itself loses traction, especially if the western public and third-world resource nations start to disbelieve in unison.
flow5 (2/26/07; 14:34:35MT - usagold.com msg#: 152672)
Suckers Rally
If gold doesn't fall, then there's a new paradigm. The drop in member commercial bank adjusted "free" legal reserves is unprecedented.
TownCrier (2/26/07; 14:31:34MT - usagold.com msg#: 152671)
Goldilox, msg#: 152668
To that effect you'll want to remind readers of the added element of an inflated supply via the ETF sharelending operations. Viewed in totality, most fair-minded observers with clarity of thought will comprehend these ETFs to be just the latest in a long parade of paper floats to distract and beguile the public.
To be sure, the gold ETF is a useful tool in the price-management warchest of the various gold-related commercial/financial brotherhood, but by design it can be only of temporary/transitionary utility. And happily, it will probably prove to be the last significant bluff standing in the path of gold advocates between the current low-priced paradigm of papergold-based price discovery and the following hi-priced physical-based paradigm.
The first rays of dawn after a long dark night.
R.
Pal (2/26/07; 14:11:08MT - usagold.com msg#: 152670)
Sound Money Sound Society
http://financialsense.com/fsu/editorials/2007/0226.html
This article was posted just today at financialsense and is another proponent of real bills for anyone who might be interested.
SNIP
Apart from removing free market control of interest rates, the destruction of the gold standard had a disastrous effect on worldwide employment. The unprecedented unemployment that started in the 1930's and which is still very much with us but for the fig leaf of the welfare state (that pays workers not to work and farmers not to farm) was a delayed consequence of the legal tender legislation of 1909. Since the wage fund of the workers in the consumer goods sector was financed by the bill market, and no other way of financing it was available, massive unemployment threatened the globe. This event had been foreseen by German economist Heinrich Rittershausen. His prediction came true in the 1930s when up to half of the work force was idled. Economists failed to diagnose the problem correctly and America tried to solve the problem with "New Deal Socialism". Conditions for full employment in the world will not return until the wage fund has been re-established through the rehabilitation of a new gold standard cum real bills; however researching the question is forbidden. Young economists are brainwashed by the Keynesian and Friedmanite orthodoxy into thinking that the regime of irredeemable currency represents a great advance over "obsolete" metallic monetary standards.
ENDSNIP
-Pal
Goldilox (2/26/07; 13:52:57MT - usagold.com msg#: 152669)
An Update From Toronto
http://www.jsmineset.com/
snip:
Dear Friends,
Gold is plus $3.50 as I write this to you from Toronto, Canada. It has started to snow up here which seems to be a tradition whenever we are here in February. It is also storming in almost all areas of US military engagement. Should a war ever be de-politicized, it would either never start or finish well. The economic foundation via the Formula is fully in support of the gold price, but more so the geopolitical. In a sense that is most unfortunate. This demonstrates the nature of gold as a universal currency. Gold has no agenda, no allegiance and functions as honest money in a world of lies, corruption, overstatement and spin. $700 to $705 might well be a place certain interests will try and block gold, but their only hope is for momentary success. $761 is yanking at gold from the front with great power. $887.50, a break above $1000 and $1650 are putting their grip on the royal metal as well.
The Platform has turned out to be exactly what we had expected it to be. So will the balance of this generational bull market as it rolls out in front of us.
-Goldilox
A little cheer leading from JS for the impatient!
Goldilox (2/26/07; 13:48:54MT - usagold.com msg#: 152668)
ETF "degrees of separation"
Mentioned this once before, but thought we reached a significant milestone today.
The difference between spot Gold and the StrretTracks ETF (GLD) is now a full 1%.
$687 - $680.09 = $6.91
As time goes by, the ETFs eat up more and more value in overhead redemptions.
Flatliner (2/26/07; 13:45:46MT - usagold.com msg#: 152667)
@Gandalf the White
It would seem that the great wizard has access to some magic that is not readily available to others.
Gandalf the White (2/26/07; 13:31:22MT - usagold.com msg#: 152666)
There GOES the US$ !!!
DIVE, DIVE, DIVE !!
USAGOLD / Centennial Precious Metals, Inc. (2/26/07; 12:50:13MT - usagold.com msg#: 152665)
An inflation-adjusted suggestion toward a very reasonable price potential for gold...
http://www.usagold.com/order_form.html
Gandalf the White (2/26/07; 12:18:47MT - usagold.com msg#: 152664)
TA TA TAAAAAAAAAAAA ==> The "KING of the HILL" report !
The following THIRTEEN Goldhearts were at some point during the Monday COMEX session, "ATOP the HILL" !!!
===
$$$$ $691.2 $$$$ glockmaster19 (2/22/07; 16:35:32MT - usagold.com msg#: 152464)
$$$$ $691.1 $$$$ Tin Man (2/21/07; 20:08:52MT - usagold.com msg#: 152426)
$$$$ $690.1 $$$$ Goldendome (2/23/07; 22:55:15MT - usagold.com msg#: 152542)
$$$$ $689.0 $$$$ Rocky (2/23/07; 11:21:55MT - usagold.com msg#: 152507)
$$$$ $688.7 $$$$ Black Pearl (2/24/07; 23:14:54MT - usagold.com msg#: 152593)
$$$$ $688.0 $$$$ Goldilox (2/16/07; 11:26:32MT - usagold.com msg#: 152238)
$$$$ $687.8 $$$$ Lebieque (2/15/07; 03:55:18MT - usagold.com msg#: 152174)
$$$$ $686.9 $$$$ otish mountain (2/23/07; 17:20:44MT - usagold.com msg#: 152528)
$$$$ $686.0 $$$$ Clink! (2/23/07; 15:34:48MT - usagold.com msg#: 152524)
$$$$ $685.5 $$$$ Nathan Brazil (2/24/07; 21:52:47MT - usagold.com msg#: 152590)
$$$$ $685.0 $$$$ Toolie (2/15/07; 03:10:40MT - usagold.com msg#: 152170)
$$$$ $684.8 $$$$ Freedom (2/18/07; 13:37:59MT - usagold.com msg#: 152295)
$$$$ $684.6 $$$$ GoldSilverRatio (2/24/07; 11:04:16MT - usagold.com msg#: 152561)
===
COMEX April Contract GCJ07
Open $684.6
High $691.8
Low $684.6
Settle $689.8
Open Interest 238,989
===
THEREFORE with an ENTRY of:
$$$$ $690.1 $$$$ Goldendome (2/23/07; 22:55:15MT - usagold.com msg#: 152542)
Sir Goldendome is the MONDAY, "KING of the HILL" !!!
Congratulations
<;-)
flow5 (2/26/07; 12:16:47MT - usagold.com msg#: 152663)
Legal Reserves
198.3 101.5 0.58 0.31 2006-01-01 6.15
198.7 95.0 0.04 0.05 2006-02-01 6.25
199.8 93.5 -0.20 -0.08 2006-03-01 6.32
201.5 93.8 -0.17 -0.08 2006-04-01 6.51
202.5 94.5 -0.03 -0.07 2006-05-01 6.60
202.9 95.2 -0.23 -0.02 2006-06-01 6.68
203.5 94.8 -0.11 -0.02 2006-07-01 6.76
203.9 93.8 -0.33 -0.19 2006-08-01 6.52
202.9 94.7 -0.27 -0.06 2006-09-01 6.40
201.8 93.0 -0.85 -0.17 2006-10-01 6.36
201.5 93.6 -0.14 -0.14 2006-11-01 6.24
201.8 95.7 0.22 -0.16 2006-12-01 6.14
202.4 98.5 0.47 0.11 2007-01-01 6.22
90.9 -0.36 -0.17 2007-02-01
It seems there will be an inevitable drop in Gold corresponding with the large drop in reserves.
Topaz (2/26/07; 11:54:15MT - usagold.com msg#: 152662)
Wiz.
As I recall, one of the signposts on the Gold Trail was the besting of 400K OI @ Comex.
Are you buckled up?
Topaz (2/26/07; 11:44:21MT - usagold.com msg#: 152661)
Good pups!
http://www.freebuck.com/today.shtml
The relics did good today in the face of both a green Buck, rampaging green Bond and green SM's ...well, looking green around the gills anyway ;-).
To eke out a pair of unches against that background augurs well for the >700 brigade in the PoG contest methinks.
You go girls!
Gandalf the White (2/26/07; 11:39:50MT - usagold.com msg#: 152660)
LOTS more paper GOLD !!! <;-(
NYMEX Sets Daily Volume, Open Interest Records for Metals Futures Contracts
New York, N.Y., February 22, 2007 — The New York Mercantile Exchange, Inc., a subsidiary of NYMEX Holdings, Inc. (NYSE:NMX), announced today that it set daily volumes and open interest records for COMEX metals futures contracts yesterday.
Gold open interest reached 405,365 contracts, topping the 399,591 contracts on February 16.
On the CME Globex® electronic trading platform, gold futures traded a record 91,457 contracts, surpassing the 90,593 traded on January 23. Silver futures reached 32,217 contracts, exceeding the 24,959 contracts traded on February 20. Palladium futures traded 4,591 contracts, surpassing the 2,781 contracts traded on February 9.
NYMEX launched its physically settled futures contracts for trading on CME Globex during regular open outcry trading hours on September 5, following its initial offering of financially settled, standard–sized and NYMEX miNY energy futures contracts for trading on CME Globex on June 12. On December 4, NYMEX introduced full–sized and COMEX miNY metals futures contracts for side by side trading.
Access to electronic trading of NYMEX energy and metals products is available virtually 24 hours a day on CME Globex.
For more information, go to www.nymexoncmeglobex.com.
Chris Powell (2/26/07; 11:33:37MT - usagold.com msg#: 152659)
Gold council's ETF reaches $10 billion in assets
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070226005746&newsLang=en
State Street Global Markets LLC Press Release
via Business Wire
Monday, February 26, 2007
BOSTON -- State Street Global Markets LLC, an affiliate of State Street Global Advisors, and World Gold Trust Services LLC, a wholly-owned subsidiary of the World Gold Council, today announced that assets in the streetTRACKS Gold Trust (NYSE: GLD), the issuer of streetTRACKS Gold Shares, have surpassed $10 billion.
"A weak dollar, renewed inflation fears, and heightened political tensions across the globe appear to be increasing investors' appetite for exposure to gold," says James Burton, managing director of World Gold Trust Services. "As the first US exchange-traded fund to provide access to the portfolio diversification benefits of gold, the streetTRACKS Gold Trust has proven to be a popular solution for a wide array of financial advisors and investors who want cheap and easy access to gold's unique investment properties."
Launched by State Street and World Gold Trust Services in November 2004, GLD, the first U.S. commodity-based exchange-traded security, has emerged as one of the fastest growing ETFs in history. As of February 20, 2007, assets under management in the fund totaled approximately $10.2 billion, making it the seventh largest ETF by assets in the U.S.
"The success of GLD exemplifies our commitment to providing investors with precise access to markets that have previously been inefficient or not readily accessible," says James Ross, senior managing director of State Street Global Advisors.
* *
About World Gold Trust Services LLC.
World Gold Trust Services LLC is a wholly owned subsidiary of the World Gold Council (WGC) which is a commercially-driven marketing organization that is funded by the world's leading gold mining companies. A global advocate for gold, the WGC aims to promote the demand for gold in all its forms through marketing activities in major international markets. For further information, visit www.gold.org.
Goldilox (2/26/07; 11:09:14MT - usagold.com msg#: 152658)
Up into the close!
http://www.netdania.com/ChartApplet.asp?symbol=XAUUSDOZ%7Ccomstock_lite
Another day's chess match heads for the door stretching upwards.
flow5 (2/26/07; 10:47:17MT - usagold.com msg#: 152657)
The Fallacious "Read Bills Doctrine"
The pre-1914 banking theory that short-term, self-liquidating paper should be given preferential status still survives in the provision that the Reserve banks may rediscount only paper of this type. The provisions are of very limited importance now since most adjustments in reserve positions are made through advances or through the open market. To the extent that banks meet their reserve needs by direct borrowing from the Reserve banks they do so on advances on their own notes.
The demise of the so-called commercial loan theory of banking is due to several reasons: (1) The inadequacy of member-bank holdings of eligible commercial paper. There has never been an extensive "bill market" in the United States such as exists in Britain and in western Europe, and changes in the business structure and in banking lending practices after World War I have pushed this form of bank credit into oblivion. The decline was especially pronounced after 1929. (2) The mechanical difficulties of rediscounting customers’ paper referred to above. (3) A recognition of the basic fallaciousness of the commercial loan theory. It has been increasingly clear that "commercial paper" is often less liquid than some other types of bank earning assets, especially short-term governments, and even call loans on securities. Furthermore it is recognized that harmful inflations and deflations could result even though the commercial and the Reserve Banks confined their lending operations to "commercial loans." It is almost impossible to inject new money into the economy without causing an expansion of demands and a rise of prices. Increased production may take place if the bank credit is injected during a period when there are unemployed factors, but there will also be a rise in prices. And once the rise in prices is underway businessmen will need more "commercial loans" to finance even the same physical volume of business.
flow5 (2/26/07; 10:28:45MT - usagold.com msg#: 152656)
Federal Budget Deficit
As-of July 07
http://research.stlouisfed.org/fred2/series/GPSAVE --- gross private savings
http://www.federalbudget.com/
interest expense year-end 2006
To appraise the effect of the federal budget deficit on interest rates, it is necessary to compare the deficit, not to the debt to GDP ratio (a contrived figure), but to the volume of current savings made available to the credit markets. The current deficit (406 billion interest expense) is absorbing about 23 percent of gross private savings.
interest = 406 bill
gross private savings = 1715
406/1715 = 24% of savings as-of July 06
-------------------------------------------------------
http://research.stlouisfed.org/fred2/series/LOANINV?&cid=100
total loans & investments at all commercial bank 8309 bill
http://research.stlouisfed.org/fred2/series/ADJRESN/123/5yrs?cs=Medium&crb=on
adjusted reserves 94.8 July 06.
8309/94.8 = 87.6 bill (money multiplier)
wow, i forgot the carpenters rule! "measure twice and cut once"
Pal (2/26/07; 10:21:57MT - usagold.com msg#: 152655)
RE: Sierra Madre and Real Bills
http://safehaven.com/article-6706.htm
Sierra Madre,
I agree with your point and I would like to build on it if I may for those who are more fresh to this subject than I am. The above link goes into further detail about the real bills doctrine as described by Antal E. Fekete. To summarize his point he describes the doctrine of real bills as a clearing system for a gold standard. Basically, there is a gap in time from when goods are produced and the time when a consumer makes payment. The seller needs credit to purchase the produced goods first so that they can be ready for delivery to the consumer when the demand is presented. There are multiple reasons as to why this should not be inflationary. The first being that ultimately real goods are paid with unencumbered money, gold. The second is because this 'credit' would only last 91 days, as opposed to what we see now where it is permanent once it is created. The third is that because this credit 'self liquidates' it therefore cannot be fractionalized into 100x more credit. The nasty boom and bust cycles are caused by EXCESSIVE short term credit because credit is put into the hands of those who do not ultimately have the ability to pay(I call it fake demand). Gold is key to all of this because if the credit is created only to be ultimately paid in full with gold then it naturally provides a check to runaway production for demand that is not real. So the real bill is exists only long enough to fund the production of a good, get it to market, and paid for with real money. I liken it to the grease between the cogs of a machine that allow for the smooth intermeshing of systems. I have been chewing on this for some time and this is the first time I've had the opportunity to discuss the topic and further my own understanding with other viewpoints. I welcome any feedback and criticisms. I am here to learn. The system is broken and will collapse at some point. My hope here is to understand what did work in the past so that we can influence the lawmakers with solutions when the time comes to rebuild.
A further list of writings by Antal E. Fekete can be found at: http://safehaven.com/archive-8.htm.
-Pal
Henri (2/26/07; 10:21:20MT - usagold.com msg#: 152654)
@Sierra Madre
Right you are...broken...and everyone is afraid to sort through the wreckage to see how bad it was...like not sending the ambulance, police and firetrucks into an area devastated by a tornado.
Federal_Reserves (2/26/07; 10:19:42MT - usagold.com msg#: 152653)
Greenspan predicts possibility of recession
http://www.reuters.com/article/ousiv/idUSN2628450520070226
Looks for job claims to spike very soon.
Thoreauly (2/26/07; 10:03:58MT - usagold.com msg#: 152652)
"U.S. Dollar Drops Against Counterfeit U.S. Dollar"
http://www.theonion.com/content/news_briefs/u_s_dollar_drops_against
"We don't even accept regular U.S. dollars anymore," said Union, NJ 7-Eleven manager Rick Grove, echoing the sentiments of merchants nationwide. "We've gotten stung a few times taking in the real ones. I always tell my cashiers, if it feels fake to the touch, and you can't see both sides when you hold it up to the light, it's fine."
Gotta love The Onion.
Sierra Madre (2/26/07; 10:00:51MT - usagold.com msg#: 152651)
Discussion of "what is wrong with the system"....
Talking about "what is wrong with the system" is rather like the post-mortem discussion amongst a group of physicians as to what caused the death of such and such a person.
The man, or woman, or child, is dead. That is the fact; now, the cause of the death interests only the doctors who would like to know if it was really they who actually killed the patient, or it was it the wrong medicine, or was it the disease itself.
So. The world's economy has been killed. It is on life-support for the time being and may kick the bucket at any time. Talking about it, is all post-mortem discussion.
Have fun, fellow gold-meisters! Que sera, sera. Get some gold, the more the better. It will come in handy, be assured.
SIERRA
Goldilox (2/26/07; 09:43:27MT - usagold.com msg#: 152650)
Fractional lending value
@ Flow5,
"As the commercial bankers have agitated for lower reserve requirements, and have been accommodated by the Board of Governors, the multiplier for each dollar of reserves, has risen, and now translates into over $208 in earning assets."
The ratio of loans to reserves is ONLY 208:1. Then we we have nothing to worry about! LOL
Thanks for the info.
flow5 (2/26/07; 09:22:50MT - usagold.com msg#: 152649)
REAL BILLS DOCTRINE
In a "free" economy, prices have to have upward and downward price flexibility to sustain full employment. There is very little downward price flexibility, esp. in our real estate markets, and for this reason and others, the rate of change in monetary flows (MVt) must exceed the rate of change in real gdp by 2-3 percentage points. If monopolistic powers "administer" an upward shift in a price, the long-term effect will not be inflationary, but will be deflationary unless monetary flows "validate" these specific price changes, i.e., the price of oil in 2006.
The fallacious "real bills" doctrine is inflationary, that's my point, and the FOMC's seasonal accommodation is founded on the same theory, thus, it too, is inflationary.
Of course there is wealth transfer, and a declining standard of living for the vast majority of people. Using the base year of 1967, the CPI has risen by over 600%. While money, and the love of money, are not the root of all our present and pending problems, they play the major role.
All anyone who doubts the impact of the seasonal adjustments has to do, is examine cause for the recent run-up in gold and the recent decline in the exchange value of the dollar. Theses are largely short-term speculative moves, not long term ones. Open market purchases were of such a magnitude in this period that member bank legal reserves expanded at an annaul rate of 8%.
The monetary authorities use two tools to control the money supply, legal reserves and reserve ratios. Furthermore, the reserve assets that all money creating institutions are required to hold, should be of a type the monetary authorities can quickly ascertain and absolutely control. The only type of bank asset that fulfills this requirement is interbank demand deposits in the Federal Reserve Banks owned by the member banks. This was the original definition of the legal reserves of member banks in the Federal Reserve Act of Dec. 23, 1913 –(Owen-Glass Act) and it is still the only viable definition (pre-Dec 1959 requirements pertaining to assets). The time is long past for the Congress to require that balances (IBDDs) in the Federal Reserve Banks be the sole legal reserves of all banks. If this reform is not made all other reforms will be of little consequence.
From a systems viewpoint, commercial banks as contrasted to financial intermediaries, never loan out existing deposits (saved or otherwise) including existing DDs, or TDs or the owner's equity or any liability item. When CBs grant loans to or purchase securities from the non-bank public (which includes every institution and every person except the commercial and the reserve banks), they acquire title to earning assets by the creation of NEW money-DDs.
The current situation: Member commercial bank adjusted "free" legal reserves have dropped from 98.5 billion, to the extremely low figure of 90.9 billion. Therein is the largest reversal of the volume of total reserves since "Black Monday". As the commercial bankers have agitated for lower reserve requirements, and have been accommodated by the Board of Governors, the multiplier for each dollar of reserves, has risen, and now translates into over $208 in earning assets.
Paper Avalanche (2/26/07; 09:03:59MT - usagold.com msg#: 152648)
The paper avalanche commences at USPS
http://news.yahoo.com/s/ap/20070226/ap_on_bi_ge/postal_rates
Snip....
"WASHINGTON - The sting of rising postal costs could be eased a bit by the introduction of a "forever" stamp that would remain valid for first-class postage despite future increases.
The independent Postal Regulatory Commission scheduled a Monday morning briefing to announce its ruling on the Postal Service's requests to raise first-class rates 3 cents to 42 cents and to establish the permanent stamp.
If the commission agrees, the matter goes back to the board of governors of the Postal Service, which is expected to schedule any rate changes in May. The commission can also reject or modify the rate proposal and send that to the postal board for a response.
A key part of the plan is the so-called forever stamp, which would allow consumers to hedge against future rate increases.
The stamp, which would not show a denomination, would sell for the first-class rate at the time of purchase and would remain valid for mailing permanently, even if rates increase."
End snip
IMO, this would portend a Weimar style inflation just over the horizon.
PA
Henri (2/26/07; 08:59:53MT - usagold.com msg#: 152647)
$ rise not suprising to Henri
Here is my logic for what it is worth. There is a notional trillions of dollars placed about all sorts of financial derivatives, none of which are regulated or visible to any group of ordinary citizens and probably not even to govt agencies or even central banks. There is the distinct possibility that the banks which have written and/or underwritten these derivatives (primarily JP Morgan as well as others) know or can estimate the size of the positions stacked against any one line item and at all the various levels of price actuation (I think similar to futures and options price listings and the stop loss trigger points that floor traders have access to but not the ordinary players). What the bankers do not have a decent handle on is how the various positions in diverse instruments are interelated. Therefore, in this wholly theoretical and partially intuitive analysis, the systemic risk of these massive over the counter unregulated derivatives is unknown and uncontrollable. If an unanticipated event triggers a rout and massive liquidation of positions is triggered, the only means of controlling the chaos would be to slow down the execution of the liquidation in real time and "unwind" the positions gradually using an alternate database identical to the existing one to exploratorily and experimentally determine what the impact of unwinding each position will have on the overall systemic integrity, if they are conducted in that order. If it blows up, they try again with another combination that is more heavily weighted on the other side of the item that caused the systemic instability to see if that will work better. Needless to say that in this scenario, the very best clients would have their positions "taken care of" first, and the vast majority of chumps (obviously with more money than they can possibly use and who also thought they were majorly intelligent and protective of their stakeholders positions) who bought over-the-counter derivatives to protect every foreseeable circumstance (and can now therefore sleep soundly knowing their financial castle is well stocked with armament, food and water for a long siege) will have their positions wrung out like so much laundry when the washing machine breaks in mid-cycle. The boats that will float on this ocean of worry are those of the well connected...not to govts or central banks but to the individual banking institutions that underwrite the derivatives positions. Their pretty little laundry items will be sought after in the wash and retrieved first and their profits segregated from the ocean.
It is doubtful that there is an interbank knowledge base that is shared as they are competitors in this business, so the general size of each banks risk position for a given line item (be it a specific commodity or financial instrument (say 90 day T bills) may be known but they may be of a different nature as far as interlinkage of items. while this sounds good on the surface, when push comes to shove, the banks will have to cross-check their liquidation scenarios with each other to forestall individual bank collapse and the need to distribute the resulting risk among the remaining players before further liquidations are explored.
Does anyone believe this will happen overnight in a massive free-for-all liquidation drive? Who will buy when the little guy wants out? Is this experimental database, what they were looking at the night before the British fellow stood up and said, we have stared into the abyss...etc.
The first way out of such a treacherous situation would be to find out if there actually are counterparty's to each derivative position sold. The next step would be to examine each large derivative sellers positions and run them through all possible scenarios and some that are now thought impossible to make sure that they will remain afloat or if not what are the specific weak areas for which they have assumed the risk for others.
My thought is that by now this has been done and the answer has come back to the BIS/IMF and all the group of countries interested in maintaining a stable financial backdrop for their negotiations with each other.
And the answer is....drumroll...Print more money and give us more hard gold to sell to hold off the siege.
Gold must be but one of the many weak spots probably identified. Mere paper can close paper positions that are underwater, but only gold can close obligations written in troy ounces borrowed and sold. Printing more money can cover the action of any foreseeable paper financial debacle be they bonds, currencies or stock market index futures. The truly dangerous game is writing derivatives on things that can not be produced quickly and easily. Concrete, steel, oil, base and precious metals industries in an inflationary (by necessity) financial environment, stable or not, must increase the price of their production in order to be able to produce their product at a profit in the face of rising costs for labor, equipment and fuel. As these are the basic building blocks of growth, the wheels of progress slow until these industries can operate at a profit. If these industries are nationalized, the wheels of progress slow as well but due to inefficiency and corruption. Yes the resources in the ground should directly benefit the populations indigent to the area from which they are exploited, but only to the extent that their quality of life is matched to first world conditions in terms of health, education and the opportunity to engage in free enterprise (notice that I left welfare out of the equation) or for indigenous populations who collectively reject such trappings of alleged prosperity due to cultural/religious belief systems that their societies are not harmed by such activity.
Against all of this "the system" has what can be characterized as derivative constipation. Many bets are placed on the inevitable collapse of the dollar for it clearly must occur. Who underwrites these derivative positions? Will they profit if the dollar actually rises in the face of all evidence to the contrary? Can the dollar rise more easily at this point than fall? These are the questions that drive the dollar index. Can we relieve some pressure by changing the weighting of the basket of currencies stacked against the dollar? All these things will be tried before the banks will be forced to pay out against falling dollar positions.
slingshot (2/26/07; 07:50:26MT - usagold.com msg#: 152646)
Dollar
They are holding on to the dollar like two Cheasepeake Blue Crabs in a bucket.
Slingshot---------<>
Topaz (2/26/07; 03:12:33MT - usagold.com msg#: 152645)
e-Bond ...@flow5
http://www.futuresource.com/charts/charts.jsp?s=TYXY&o=&a=V%3A15&z=610x300&d=LOW&b=CANDLE&st=
e-Bond currently @ 8/32's green and a Green DXDollar ...this is the last throw of the dice to get PoG moving south I'd reckon.
Sir flow5,
Thanks for the lesson in monetary to's and fro's.
I'll stand corrected if they can turn it around from here. However, imo it's not simply a Dollar thing ...in fact I'd not be at all surprised to see 90-95DX and $PoG 1000 in the not too distant future.
A lot hinges on Bond yield, as PaperGold (as opposed to real gold) has a bit of distance built into it.
We can watch it together eh?
contrarian (2/26/07; 01:08:52MT - usagold.com msg#: 152644)
A Very Good Post from Gold-Eagle
http://www.gold-eagle.com/cgi-bin/gn/get/forum.html
All the things we have been discussing are coming to a head at once and it amazing the price of gold has only begun to respond. The cacal must be weary from working overtime pushing treasuries with flagging success, creating smokescreens, manipulating markets, hiding facts which keep embarrassingly popping out. The Moslem world is turning up the volume of war drums all over-Afghanistan awaiting a resurgant Taliban with the coming snow melt, North Africa heating up in several nations, lebanon and Palestine probablywaiting for Iran to signal when to start up again. Iran ever more vociferous, sent up a satellite, testing rockets and out right daring the world, Russia beginning to stand behind Iran and giving them deadlyaccurate missiles to thwart a pre-emptive strike. the US moving navy into postion. The Bush administration is coming apart at the seams. The nortgage and Housing sectors falling into ruin. Oil rising and the dollar falling again. Metal supplies dwindling and demand rising.
Lets talk the short list - the risk of "correction" -
what could it amount to?? I don't think very much. The last attempt to create a sell-off backfited the next day with a $23 rise in gold.
Some people are getting a bit leary because of the overwhelming positive postings lately. After getting bashed repeatedly you have to have some caution. Success and realization of a dream long awaited is strange sometimes, oddly it DOES feel a little spooky - unknown territory, the old "splash yourself with cold water to see if you are dreaming" routine.
I could be wrong and I certainly am not terribly educated and skilled in all of this, but everything that we have been discussing and watching and know to be determinants of the market are converging together in favor of higher gold prices at the same time.
Hold onto your hats !!!! The next month should be wild and very proftable. Expect a couple down days and to see every dirty trick possible thrown our way, but hang in if you can, they are really losing control on every front and it ain't gonna get any better for them!!
Goldilox (2/26/07; 00:34:20MT - usagold.com msg#: 152643)
Lending and inflation
@ Flow5,
I almost bought your arguments about "real bills", until I thought it through one more time. Once fractional reserve lending enters that equation, especially with the nearly non-existent reserve requirements that are in play currently, the "balancing mechanism" is skewed heavily toward the inflationary side of the scale, since money is then created "out of nothing", with no real "goods" to back it.
Wealth creation, from a currency perspective, is geometrically out-distancing wealth creation from a goods and commodities perspective. That can only fuel inflation, as do geometrically increasing government deficits. Real goods and Real Estate can only respond in one of two ways - command higher "prices", or completely drop off the demand scale. I think the former is a lot more realistic.
I have yet to hear any evidence that seriously contradicts my conclusion that we have been experiencing a hyperbolic wealth transfer scheme in reasonably uninterrupted progress since 1913. Even the deflationary "correction" of the 1930's was more than likely exascerbated by the Roosevelt admin's confiscation of "wealth" and subsequent pumping of "liquidity". While some might argue against this statement, it's harder to find fault with the realization that unabated liquidity and unbridled debt growth of the 20's brought on the crash in the first place.
If this is so, debt can only continue its hyperbolic race to infinity. The only other possible outcome is a complete breakdown of the curve itself, probably at the point where debt service becomes impractical. The overt manipulation of inflation, labor, and productivity numbers (and the transfer of earmarked gubmint funds, like SSI) suggests this may already be the case.
This breakdown is the "expected outcome" of all such Ponzi schemes. Isn't that why they are illegal for anyone but the government to proliferate?
As the Time Monks like to quip, "It's not a pleasant scenario for most everyone on the planet".
Sierra Madre (2/26/07; 00:06:39MT - usagold.com msg#: 152642)
Flow5: Not to go off on a tangent and unending controversy, BUT
It is convenient to recall that Prof. Antal E. Fekete has pointed out that commercial bills were NOT "the injection of new bank credit".
After the banking system had abandoned original principles of sound banking, that "injection" might have been the case.
Originally, though, the commerical bill was a pre-existent credit created on the basis of merchandise already produced, on its way to the consumer.
The banks did not create the commerical bills or facilitate them by their gracious lending, they were PURCHASERS of these bills, which were the most liquid, short-term earning asset the banks could hold on their balance sheets.
Real bills were hardly inflationary: they were self-liquidating and originated in produced goods.
But, I don't expect this will go far with you. Just inserted, "for the record".
And not that it makes much difference, at this stage, where the world economy is past the point of no return.
SIERRA
ViewYesterday's Discussion.
