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Welcome to the USAGOLD Gold Discussion Archives. The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets...   (Discussion Forum Hall of Fame) (The Gold Trail) ("Thoughts!" by ANOTHER)   The opinions posted by all guests are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of the public discussion shall therefore not be construed as an endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.

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ARCHIVED DISCUSSION FROM 5/27/1999
All times are U.S. Mountain Time

View Yesterday's Discussion.

beesting (05/27/99; 21:28:37MDT - Msg ID:6808)
Try this URL on last post.
http://www.bloomberg.com/markets/asia.html
Sorry!

beesting (05/27/99; 21:23:37MDT - Msg ID:6807)
Asian stocks continuing tumble at this hour.
http://bloomberg.com/markets/asia.html
Hang Seng Stock index(Hong Kong) down over 300 points at 11:06 E.D.T.
Another false alarm,or a real crash starting???.....beesting

Beowulf (05/27/99; 21:02:58MDT - Msg ID:6806)
Haven't heard any news on Gold sales in a while
Well, I see Gold is on the rise in overseas trading. I wonder why we haven't heard anything about IMF gold sales in a long time. Geez, when the price was higher we heard that junk about 10 times a day, now nothing. Not even a peep.

Currently gold stocks have been a good investment for keeping wealth from declining, despite all the negative comments from CNBC and the like. Imagine if you had gotten out of all those internet stocks at their peak and bought NEM or HM. How much difference would you have lost, or saved? NEM has been very strong recently despite the low price of gold, and was at a lower price when gold was much higher.

I still prefer the physical though. I have a good feeling gold price will be rising from now on.

Do you want to get a good night sleep without worrying about margin calls? Get gold, you'll love the good night sleep it brings.

beesting (05/27/99; 20:46:14MDT - Msg ID:6805)
@THX-1138 msg.6802
I don't know who compiled that list of what I assume are invitees,but I did notice 2,of what I consider important things to comment on:
First, where was Alan Greenspans name and why was he omitted??
Second'seems like every major securities firm(the firms who may be responsible for the huge amount of Gold paper shorts) have at least one or more representitives invited.....Again front row seats to world economic events as they unfold.......beesting

beesting (05/27/99; 20:24:41MDT - Msg ID:6804)
Haven't we heard this before-Asian markets follow wall st. down.
http://biz.yahoo.com/rf/990527/blo.html
Everyone has probobly heard this already today:NYSE down 253 points 9th largest point fall on record in points terms.
Nikkai-225 down 229.78 points at 0015 G.M.T.
Quote from above URL: There will be major weakness this morning.There is no consensus on where the bottom is.

How many corrections have we lived thru since this bull market started?
Most major Gold mining shares went up slightly with heavier than normal volume, despite the lowest spot price of Gold in over 20 years.....Front seat chairs to an ever change-ing econmic world......beesting

THX-1138 (05/27/99; 19:04:44MDT - Msg ID:6803)
Possible insite into the New World Order, and Clintons motives
http://www-douzzer.ai.mit.edu:8080/conspiracy/communism2.html#metatop


This is a lengthy article. Could take more than 2 hours to read. Very thought provoking

THX-1138 (05/27/99; 16:24:34MDT - Msg ID:6802)
List of attendees to the secret meeting in Portugal on June 3
http://www.worldnetdaily.com/bluesky_exnews/19990526_xex_clinton_pope.shtml
Take a look who is on this list.

The traitor himself - Bill Clinton
Warren Buffet
Goldman Sachs employees
etc.

Impressive.

PH in LA (5/27/99; 15:20:47MDT - Msg ID:6801)
Probing the downward limits
CASSIUS:

Please do not let this post stand in place of a reply from FOA on the question of $280 as a floor below which the BIS would buy gold to support the price. I would be as interested as anyone else in his answer.

Nevertheless, please do let me speak to the issue within the framework of an interpretation of Another's THOUGHTS, which I have followed for some time. (I, also, have seen this point used as an excuse to disparage the whole of their thoughts on those other boards.)

Another's famous remark seemed to refer to a reality that existed "at that time" and was probably never meant to mean that gold would "never, under any circumstances" be allowed to fall below that figure. The reality that seems to be unfolding right now looks to me like a desperate move by the bullion banks to keep the POG falling so that it cannot rise. We have watched several times as the price approached $290 (and above) that the short sellers jumped in with a concerted effort to push it back down. There was never any other reason to be seen for such dramatic moves downwards. No international flare-ups, no changes in Fed policy (or any other CBs'), no new revolutions breaking out, not even a default declared by a major country (ie. Russia). No, it was the approach of a breakout in the price that summoned forth the collusion between short sellers to drive down the price. This happened several times.

FOA said today that the short sellers are very aware that the price must "continue" to fall for them to remain solvent. Merely keeping it below an arbitrary point (such as $280) no longer keeps them afloat. This makes complete sense to me. Since they are unable to cover (without driving up the price as demand for physical continues to grow) they must continue to roll over into ever lower prices.

This cannot go on forever! With a rising price, there is no ceiling. That is why the inflation game has worked for so long. And why it could theoretically continue without end. How high is up? There is no limit. Prices can literally go up forever. Witness the DOW. Mathematics places no limit on its trajectory. Not so in the case of a falling market such as the gold market.

The rules of logic tell us that gold will never be given away free. That is the limit to which it can fall. The short sellers do have a limit. They must be feeling it now. Asking themselves how they could have been so stupid.

With his post today, FOA seems (to me) to be saying that today's reality is that the BIS is standing aside while the short sellers dig themselves in deeper and deeper. With each new manipulated lower price it becomes that much more difficult for them to ever cover their folly. The Bank of England is throwing in the towel. By settling accounts with a few of the shorts, releasing gold at these low prices to selected members of the LBMA and calling it a sale. It is not! Only selected (read indebted) parties will be allowed to "bid" on that gold. Can we imagine a department store announcing a "sale" to which only persons with large outstanding balances on their department store credit cards (that are probably in default, too) would be allowed to attend? That would not be a "sale". It would be a "bailout".

FOA is a very articulate writer. I, too, would look forward to his own clarification of this point, even though I do not find his story at all contradictory.

canamami (5/27/99; 14:44:45MDT - Msg ID:6800)
Apologies to FOA
FOA,

I have been heavily pressured at work, and did not note your post# 6766 before I posted today. Is it your position that the BIS will not intervene to protect the POG at $280, or any level, given the existence of the Euro? How does this theory jibe with the Euro's declining value in relation to the $US? When did you arrive at the conclusion that the BIS will not, or no longer, ensure the POG stays above $280.00?

I look forward to your return, to hear your contributions to the discussion.

Thank You,
canamami.

Usul (5/27/99; 14:44:24MDT - Msg ID:6799)
Europe Gold Prices Go Tumbling
http://biz.yahoo.com/apf/990527/europe_tum_1.html
"Gold sank to $268.20 a troy ounce in early trading in
London,down 90 cents from Wednesday's closing price and the
latest in a series of 20-year lows, before recovering
somewhat to finish the day at $268.80..."

"The last time gold traded at these levels it was on the
rise, headed for a peak of $875 an ounce in January 1980..."

"However, some analysts foresee a rebound in gold prices due
to strengthening demand in Asia and the United States and an
unusually large number of speculators who are committed to
buy gold at an unspecified future date. ``All this leads
to the conclusion that the current price drop is actually
over now. There will be a correction,'' said Wolfgang
Wrzesniok, who heads precious metals trading for the
investment bank Dresdner Kleinwort Benson. Demand is
stronger now in Asia, where countries like South Korea
and Thailand are recovering from a financial crisis, and
jewelry manufacturers need more gold than the world's
producers can satisfy, Wrzesniok said from his office in
Frankfurt. Walker said he expected gold to rebound and
predicted that it could increase to as much as $305 by the end of the year..."

Nice to see a positive side for a change... Only $305???


tlc (5/27/99; 14:42:54MDT - Msg ID:6798)
paper gold contracts
I am puzzled by the statement that there is an excess of paper gold "shorts" in the market. It is my opinion that you cannot just open a "short" position without an offsetting "long" position being created.
Can anyone shed some light on this for me?

Goldsun (5/27/99; 14:23:33MDT - Msg ID:6797)
Special Theory of Exchange Relativity
Yesterday's Market Report obliquely referenced a question which has been puzzling me. Say a Soros style speculator sought to seriously squeeze some shorts. Sorry. The obvious approach would be to use one of the smaller volume exchanges. How would London react to the Hong Kong price being run 10 or 20 usd? Although I've only been watching gold a short time, the lack of such action leads me to suspect something prevents it. Plausible possibilities include London simply ignoring the Hong Kong price and opening near the NY close or the presence of affiliates of the prominent players so that our speculator would be facing the same money in any exchange.
Goldsun

The Flying Scotsman (5/27/99; 13:06:08MDT - Msg ID:6796)
The Scot

A passing point.

If you refer to the Australian All Ords graph ( or the Dow ) and refer to the LTCM bailout date last October, and then refer to the Aussie Gold Index ( or the US$ gold price) graph, you will notice a interesting situation.

The above graphs clearly show that the Markets are actually "under written" by the short selling of Gold. The Markets are not solely dependent on the US economy.

Presntly, the Aussie markets lead the way down on all/most index groups, and the American markets lag behind the Aussie markets by two weeks.

The current situation of severe short selling of gold could be interpreted as a "final attempt" to keep the markets afloat.

Gold represents a "hole in the bucket", so how will they fix it ?! I would suggest they cannot.

The Markets and Gold, currently represent two opposite sides to a coin, effectively both controlled by Rothschild proxies.

Lets flip that coin again........ a GOLD coin !



Cassius (05/27/99; 12:09:10MDT - Msg ID:6795)
FOA's msgs 6766 and 6783
http://www.usagold.com/cpmforum/tools/post.html
FOA, I have perused your two last msgs at length, and one question that plagues me is that your thesis seems to be based upon the POG being not allowed to recede below $280. How do you account for this e.i., I have seen some posters at other sites use this fact to disparage your logic. My own thoughts are that $280 shouldn't be inviolate, but should the price break significantly, we're all in deep do-do and all bets on your scenario are off.
Also, could you please expound on your statement (msg #67660)"One can also see why the US will encourage a higher "world" price for gold, even as it's native market is destroyed!" This isn't intuitively clear to me why the US would do so. Thanks for your shared insight. Cassius

The Scot (5/27/99; 10:46:54MDT - Msg ID:6794)
WORLD CURRENCY
Question: To those who think that a "One World Government" is the only path to world peace. Would not there be those who feel a "One World Currency" would be the path to promote world trade. With the electronic world link (Internet) why not a "World Electronic Dollar" ???? The Scot

koan (5/27/99; 10:39:20MDT - Msg ID:6793)
24 hour trading
One last post this morning: I think in the next few years we our going to see a very rapid expansion of online trading around the clock and around the world. This may have very profound impact on the economies of the world. For one thing what you will really have is on line gambling (more skill than gambling) by the whole world 24 hours a day. As any good poker player will tell you, the best poker players always win the money, except if the game is rigged.

koan (5/27/99; 10:30:31MDT - Msg ID:6792)
sorry pushed wrong button
continuing below post: y2k, I believe, will create some problems, and some may be serious, but will not appreciably affect the mkts or our societies. I know this is an unpopular position on gold forums. But someone has to say it and I do not think I am the only one who feels this way.

koan (5/27/99; 10:23:48MDT - Msg ID:6791)
y2k: a problem not a disaster
An investor or trader can only be successful if he or she accurately analyzes the mkts.

koan (5/27/99; 10:17:54MDT - Msg ID:6790)
G and S floors
Well gold has still not closed below $268 which, I have felt was impenetrable, but it is close, and I see it did touch $267.9 intraday. We shall see. I will apply the egg on my face if gold closes below $268. Silver: A few years back silver fell into the upper $3.60 range- can't remember exact price. But for many years prior to that silver had a very strong impenetrable floor at $4.82. I am thinking at this time that the mkt may use that old floor $4.82 and ignore the $3.50+ as an aberation. It feels to me like this blood bath is almost over.

The Scot (5/27/99; 10:09:57MDT - Msg ID:6789)
(No Subject)
CROSSROADS:

I think your sequence is 100% accurate, my only addition would be that this could all take place before 12/31/99 maybe as early as late October. The Scot

Crossroads (5/27/99; 9:57:21MDT - Msg ID:6788)
Just a hypothesis
 Y2K, real or imagined, will cause a run on banks.
 Lack of ability to cover the "run" will create panic.
 In the hysteria Joe Q. Public will lose "faith " in the U.S. $.
 A time lapse will create a chaotic environment.
 "Americans" will gladly accept any conditions from the Federal Government if it will restore "order".
 The chaos will give way to martial law at the stroke of Clintons’ pen through the power of Executive Order.
 Americans would be "OK" with this, since a recent so-called-poll indicated that about ½ of the public supports the idea of giving up freedom to have security.
 Implementation of either digital currency or the Euro.
 Anyone caught attempting to use a currency other than that which has been deemed "acceptable" will suffer disciplinary action.
 Order will be restored and a new peacekeeping force will be implemented.
 An even larger % of the people will agree that we cannot live without government intervention.


USAGOLD (5/27/99; 9:29:58MDT - Msg ID:6787)
Today's Gold Market Report: Central Banks Cannot Print Gold
MARKET REPORT(5/27/99): Gold lifted its head above the foxhole this morning to
survey the apparent aftermath of one of the most severe short selling attacks the metal has
ever endured. For the moment the battlefield is quiet though most in the industry really
don't know what to expect next. Some analysts say the short-covering will have to begin
soon; others say that the shorts will just roll over their positions and continue the attack.

One thing is certain: We are quickly approaching a price level where only a handful of even
the world's largest gold mines can remain in operation. That fact must weigh heavily on the
gold carry trade which relies on that production to repay much of the 8000 tons of gold that
has been loaned out in recent years. As James Turk (Freemarket Gold & Money Report)
pointed out recently, "In contrast to national currencies, all of which can be created by
bookkeeping entries. Gold cannot be created out of thin air by any accounting technique."
Is this the prime motivator behind the recent BOE announcement? After the British
government put extraordinary pressure on Europe's central banks to sell, followed by even
more heavy handed tactics to get the International Monetary Fund to sell its gold,
Chancellor of the Exchequer Gordon Brown returned home from the recent IMF meeting in
Washington empty-handed -- the IMF would not be selling its gold. It wasn't two weeks
later that the announcement was made that it would be the Bank of England that would be
selling gold.

All of this smacks of problems in foggy Londontown that go beyond the run of the mill
institutional failure that would require printing a truckload of sterling and rushing it to the
scene. Perhaps there might be more wisdom to Turk's words than revealed in his matter of
fact statement: You can't print gold. When a domestic counterparty in the gold carry trade
gets in trouble, you can't print money to bail it out. Contractually, the loan must be paid
back in gold. If you go into the market for a large quantity, it would surely send the price
into rocket trajectory. If you can't persuade some other central bank to sell at these bargain
basement prices, the domestic central bank would then be forced to sell its holdings to
defend the integrity its banking system -- a flow of events that should force every central
bank in the world to take note of what's going on the gold market these days. If the mines
are forced to close, where is the gold going to come from to repay the loans? Default, and
the prospect that you didn't lend the gold at all, but inadvertently sold it (at historically low
prices, looms in the not so distant future. This means that some other central bank may have
to bail out a counterparty (and lending central bank) with gold from its vaults. Now you
know why Gordon Brown put on the full court press to find gold. Until proven to the
contrary, I continue to believe that the circumstantial evidence points to gold bailout in
Britain and that this gold being auctioned by the Bank of England will never see the light of
day. If that were not the case, the auction would have been made public and not restricted to
London Bullion Market Association members and certain approved central banks. If I am
correct and wind of it gets to the markets, an immense short covering rally could be touched
off -- the likes of which have never been seen in the gold market before.

There is little in the way of gold news so far today. Have a good day, fellow goldmeisters.

The featured article in this month's News & Views centers on government finance in an
article entitled "The Financial State of the Union." I'm sure it contains many
surprises for our readers. There is a great deal of difference between what our government
leaders are telling us and the reality with respect to the government's books. This issue is
one or our best and most informative. Please go to our ORDER FORM or call Marie at
1-800-869-5115 for a Free Copy of News & Views -- our widely read monthly newsletter
-- and introductory packet on gold ownership.

Cavan Man (5/27/99; 9:00:26MDT - Msg ID:6786)
Bubbles DO Burst
Scot:

I have seen a bubble burst firsthand. I was thinking the other day about the oilpatch (specifically Hou,TX) in 1981. I moved there because of the boom. Cities in the North of the US were in pretty tough shape economically. Houston at that time was a "wide open anything goes" type of social and economic community. Prices for all sorts of goods and service were inflated by the excesses; from a bottle of beer to a down hole forging. You know the rest of the story. It took a long time (in years) for the economy to recover. The root problem was not the sole reliance on oil thus their quest for economic diversification after the crash. In my view the unsustainable level of economic activity was to blame.

The Scot (5/27/99; 7:16:08MDT - Msg ID:6785)
World economy in quicksand
"The fate of the world economy is now totally dependent on the growth of the U.S. economy, which is dependent on the U.S. stock market, whose growth is dependent on 50 stocks, half of which have never shown any earnings." Paul Volker, former chairman of the Federal Resurve, 5/21/99.

Cavan Man (5/27/99; 7:03:21MDT - Msg ID:6784)
FOA: More on Gold
Thanks for that last posting. It's not that I can't understand what you are saying or that I don't believe you are right. I have come in late in Act III and I'm trying to play catch up. What to do or not to do; quickly? My intuition tells me pro-Gold is the right position.

FOA (5/27/99; 6:44:13MDT - Msg ID:6783)
More on Gold.
SteveH (5/26/99; 20:15:31MDT - Msg ID:6767)

An addition to my #6766.
SteveH,
I missed your earlier question. The physical buying of gold, in coin and small bullion form is the smallest portion of real demand. As such it is the easiest to supply. "Big money", of world proportions does not travel into these areas. I have written of this in other posts. Over the years, the large private and almost private holders of gold physical have slowly sold it to purchase paper gold. This trend is the very action that multiplies gold ownership and supplies the demand deficit. Large holders still consider their new paper as gold. A good deal of that paper is as good as the real thing, but some of it will have to be converted into a Euro currency in the future. That trade
will be to the benefit of the holder, if it has ECB genealogy.

One of the reasons this trend worked so well is because the US went for it, early on. A falling gold price encouraged a strong dollar and offered Western dollar holders an avenue to hold gold in leverage form. An action they will, no doubt regret, later, as it has taken the form of stripping gold from western hands. For them, this new allocation allowed for free dollars to earn a return. Do not confuse these entities with non-western dollar reserve holders, as they (mostly) purchased straight gold future certificates (with BC backing) using resources as the leverage, not gold. Usually, this was the actual gold in the CB vaults as it was leased out, but never moved. Truly,
this was the source of the same money that went into mine forward sales (barrick?). The gold and the money stayed in the CB house and control. The entire above outline is why some analysts (Ted Butler?) cannot understand why the gold doesn't physically move, yet physical demand is being supplied. This conversion process was accounted for in the LBMA volume, as it became evident after gold fell below $360US. It was then, and only then that LBMA announced these
huge monthly transactions. Truly, it was here that one could witness the dollar being removed from it's reserve status. For many, it was the only public conformation they would ever get.

I think this view of "one world electronic currency" is a "joke" on investors. The entities that are now locked into standing behind short positions are trapped and will be saying anything to get investors to sell physical into the market. The black hole they are sinking into will crush them from the weight of all the further paper sales they must now make.

As the ECB faction has aligned itself with physical gold and cut off any new supply, the mines found themselves in the only position of having to continue to sell forward because they are part of the dollar gold market (see my #6766). A process of taking in ground gold reserves from the
stock holders. The entire industry of mining and trading dollar future gold is failing. Even now their paper has value only if the fabricated dollar gold price continues to fall. The time has arrived to witness the final destruction of the US market for gold. As the authorities have taken the stance of allowing this action to play out, it will later create a phenomenal spike in the "real" physical gold
market as all futures "lock up "from lack of backing. They will become worthless because the only way to support them is by selling more paper short, an action that will be stopped when it can but political votes (by you're SEC?). It's an obvious contradiction, that is becoming visible to
everyone. In such an atmosphere, I expect the US to state that the futures gold market is a threat to the public good and allow only physical sales (at huge increases in dollar price). I would also not be startled to see the BIS take this moment to buy gold. The dollar would "implode"
worldwide! Now you can see why many of the local US Bullion Banks are now truly trading for their lives.

I believe many investors ( myself included) are executing "final" transitions into physical gold. As events play out, this course of action should be a rewarding one.

I will be busy for several days. FOA




Cavan Man (5/27/99; 6:30:38MDT - Msg ID:6782)
Golden Truth 6775 Electronic Currency
Perhaps that is the end game. Could the catalyst be Y2K? That would be supreme irony. Y2K crashes the banking system, people get "unglued" and in comes Big Brother with the solution. Would people really believe gold is worthless because they say it is so? Could electronic currency in conjunction with the internet be the reference in St. John's Revelation? Food for thought eh? Do I believe that? Well, if electronic fiat currency is the future, that should take awhile to play out. The fundamentals still point to gold moving higher. Is it only in the US that the majority of people believe in this "new economy" whereby the old, trusty economic textbooks can be thrown out? That would be important to know. If there were a calamity as appears likely in some form, most people would sacrifice freedom I think in order to hang on to their goodies. I don't know what to think. Perhaps a better and more worldly mind than mine could weigh in on these musings.

canamami (5/27/99; 6:03:41MDT - Msg ID:6781)
Brief Musings
I only have time for a couple of sentences.

1. The POG is not completely unimportant, even for hardcore physical gold buffs. Would one still feel the same about gold if it were valued at $10.00 per ounce, to use an extreme example?

2. The recent and continued price slide appears to me outside of the realm of the hypotheses of FOA/Another and must subject those hypotheses to further examination, to any person who seeks objective verification of hypotheses. Obviously, the BIS is not intervening to hold the POG at $280.00. The POG has dropped more than a $5 to $6 fluctuation from about $283.

Our friends are learned, and I eagerly look forward to their input on this, IMHO and respectful opinion, unpredicted weakness.

Thank You,
canamami.

ss of nep (5/27/99; 5:59:06MDT - Msg ID:6780)
Say What
Does the plot thicken, or is it just more of the same ?????

An interesting story here, about 250 pages, I have only
scanned a bit of it so far .

http://www.in-search-of.com/frames/new_world_order/one_world.shtml

http://www.in-search-of.com/frames/new_world_order/one_world_2.shtml

I think that I have read Atlas Shrugged about 5 times ......
BUT ....

Those of you that have a liking for Ayn Rand just may
change your point of view.
Do a search for Atlas Shrugged in the 2-nd of the above
two links.

Gold is cheaper now then 2 weeks ago, get more,
find a hiding place then
run away.







The Flying Scotsman (5/27/99; 4:08:42MDT - Msg ID:6779)
Farfel.............Gold Price

G'Day,

Weel, it lokks like the Gold price is going down like a "pork chop in a synagogue".

This current compression of the gold price, how long can it last ? If as FOA infers that there are now two "Gold Camps", which one has the deepest pockets ?

The "other" markets, well they appear to be in and out like a fiddler's elbow.

Aye

SteveH (5/27/99; 2:39:27MDT - Msg ID:6778)
Hello? Dah?
Date: Thu May 27 1999 02:06
AUwolf (By Martin A. Armstrong) ID#254130:
Copyright © 1999 AUwolf/Kitco Inc. All rights reserved
http://www.TheEuroBank.Com/2CHARTS.HTM

Perhaps for the very first time in financial history, a completely new
problem has arisen with regard to the introduction of the Euro. On
December 31st, 1998 one Euro was politically finagled to converge in value
to one ECU. While this simple financial swap was easy to accomplish by
increasing the basket of EMU currencies to equal the value of an ECU, the
technical consequence of this conversion has raised some very interesting
problems to say the least. The ECU was of course the last attempt by
Europe to create a single currency that ended in a dismal failure. This new
introduction of the Euro had to also address all the outstanding bonds that
had been issued in terms of ECUs. A failure to swap the old ECU for a Euro
would have left a defunct currency somewhere in the middle of Limbo. As
Germany swapped an East German mark for a West for political reasons,
the same can be said of this swap of Euros for ECUs. This politically
motivated swap of ECUs into Euros introduces a major problem because
there is a mismatch of history creating two very different pasts for the
Euro. Depending upon your perspective, this political swap of ECUs into
Euros may cause a serious disruption in currency trading by technical
oriented hedge funds. While the popular view taken by the majority has
been that the Euro is merely a continuation of the ECU, nothing could be
further from the truth.

The Euro is NOT the ECU in terms of historical value, technical perspective
or economic history. While the marketplace may be taking the position that
the Euro is merely a continuation chart of the ECU, our models suggest
otherwise. Attaching the Euro to the previous history of the ECU is largely
incorrect due to the inclusion of the British pound and other EC currencies
in that are excluded in the new Euro. The ECU and the Euro have two
completely different historical patterns from a trading perspective as well
as economic. The ECU reached a major high in 1992 while the Dmark
reached its high in 1995 along with most other EMU currencies. It was the
collapse of the pound and its withdrawal from the ERM in 1992 that led to
the demise of the ECU. It is clear that the Euro cannot possibly be viewed
as a mere continuation of the ECU without rewriting the economic history
of Europe and the dollar. A continuation of the ECU as the Euro suggests
that the dollar NEVER declined into a major low in 1995. Such a rewrite of
history is as if we were to say that the 1987 Crash never took place. Given
the fact that the majority of statistical services as well as the exchanges
themselves have adopted the ECU data as the new Euro, there is a serious
risk that significant confusion among traders and fund managers may
surface in the months ahead.

There can be little doubt that the correct approach would be to create a
hypothetical Euro based upon the final conversion locking rates for the
Deutsche mark and adjust the data backward in time for the individual
movement of all the 11 member currencies. This approach would at least
produce a correct economic view of the Euro albeit much more
complicated. Such a time series would illustrate the inability of such a
locking rate to hold over long periods of time, as has been the case even for
the ERM. However, a third perspective is also possible assuming that the
ECB ( European Central Bank ) will succeed at least for several years in
holding the 11 member currencies together. In this third scenario, given the
fact that the construction of the Euro has entailed a convergence process
to the Dmark ( all 11 member states are attempting to achieve matching
interest rates with that of Germany ) , it would make more sense to use the
Dmark as the historical basis for the Euro rather than the ECU. A Dmark
based adjustment for the Euro would at least make sense due to the fact
that Germany is the core economy upon which the ECB will establish its
monetary policy. Any central bank focuses upon its core financial centers
when establishing its monetary policy. The Fed cares less about Arkansas
than it does about California and New York. The Bank of England does not
worry about economic conditions in Bath or Bristol compared to London as
the Bank of Canada focuses its monetary policy upon Toronto rather than
Alberta. Thus, the ECB will also largely ignore economic conditions in Spain
or Italy compared to Germany. Therefore, a Dmark Euro based adjustment
will more closely approximate the monetary policy objectives of the ECB
suggesting that a historical view should be biased toward Germany.

Still, a Dmark based Euro perspective largely ignores the economic turmoil
witnessed in France, Spain and Italy during the 1960s. Nonetheless, the
Dmark based Euro does maintain an overall picture of historical EMU
member currency behavior than the unadjusted ECU time series. When we
take both series and correlate them through our computer models, the
entire long-term perspective is significantly different. Due to the fact that
the ECU reached a high during 1992, the ECU continuation for the Euro
would imply that a 6-year bear market has already been in place. A Dmark
based Euro produces a high in 1995 more in line with the true low for the
dollar even against the Japanese yen. In this case, the Euro has just
completed a 3-year bear market at the end of 1998.

Due to the fact that the majority of the industry is using the incorrect ECU
continuation data, we will cover this perspective as well as what we feel is
more appropriate being the Dmark adjusted basis for the Euro. With time, it
should become clear which data series is more relevant on a forecasting
basis. The ECU continuation version is like taking the NASDAQ stock index
and tacking it on the Dow Jones Industrials. But either time series still
shows that at the end of 1998 the Euro has been declining for either 6 years
or 3 years. New lows for the Euro in 1999 will warn that a further decline of
4 or 3 years will be the likely outcome.

In any event, the Euro remains under pressure. Despite the fanfare, the
technical perspective for the Euro is clearly illustrating a bear market
ahead. This technical perspective is most likely reflecting the real
underlying problems for the Euro centered around the primary question of
economic convergence. We must face the facts that even the reunification
of Germany has still failed to produce impressive results on the economic
convergence perspective. If Germany has utterly failed to bring about
economic convergence within its own borders after nearly 10 years, can we
really expect a new converged economy to emerge in Euroland within an
immediate time frame? There is much to workout when it comes to
economic and social convergence within Europe. The technicals are clearly
warning that the Euro is not off to a good start and that a reality check is
not far behind

SteveH (5/27/99; 2:31:37MDT - Msg ID:6777)
August gold now...
$269.20.

Spot gold now...

$268.80.

Farfel (5/27/99; 0:08:28MDT - Msg ID:6776)
Martin Armstrong...DECEIT & MORE DECEIT..
Martin Armstrong will say anything to ensure that his gold and silver shorts are protected.

I mean he will say ANYTHING.

Martin Armstrong claims the whole world is moving to electronic currency.

Isn't that interesting?

When I look out the window, I see a world becoming increasingly confrontational....I see a breakdown in global consenus...a rekindling of a "cold war" between America and China...between America and Russia...and to some degree between America and the Middle East.

I see a world in which techno-paranoia is developing rapidly as we move toward the Y2k critical point.

Electronic currency under the guidance of computers...with the Y2K bug lurking around the corner???

Global consensus on an electronic currency...in which the US Dollar is king...at a time when the US is facing challenges all around the globe??

It won't be happening tomorrow...or within a year...maybe not for one long time.

Not until the various ruptures are healed. That takes time.

Go back to your old lies, Martin.

They made more sense than your latest BS creations.

And cover your precious metal shorts quickly....before you really get hurt.



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Wednesday February 8
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