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

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ARCHIVED DISCUSSION FROM 10/27/2000
All times are U.S. Mountain Time

(Yesterday's Discussion.)

SHIFTY (10/27/00; 23:49:06MT - usagold.com msg#: 40137)
RossL
http://www.bloomberg.com/welcome.html
Check GSR and Goldfields LTD (GOLD) at Bloomberg.
They show GSR @ .56 up .06 and volume @ 40,600
Goldfields @ $2.88 up .06 volume 93,000

Most of the time I watch on the AMEX site . They show no volume today.


$hifty

tg (10/27/00; 23:23:48MT - usagold.com msg#: 40136)
Deflation- hold on to your gold
more thoughts on the deflation/hyperflation debate.

From aztec d'oro at metropole cafe.

"The Future Inflation Gauge is a lead indicator on future inflation.
Lead time is 10 months, it is consistent 91% of the time, never has missed a turn in the cycle of inflation.
Also it has only a 9% rate of false alarms.

Overall, it is the best and most trustworthy economical indicator with regards to inflation.

Its smoothed annualized growth rate dropped to -1.1 in September down from 1.5% in August from 3.7 % in July from 7.5 % in June, after 8.3% in May, 14.4% in April, 13.7% in March, 14.2% in February, 14.7% in January and 15.9% in December 1999.
The institute said the gauge was pulled down by factors as purchasing manager's deliveries and slower growth of real estate loans.

The trend is clear; within the next 10 months, the indicator is telling us that US Inflation will be negative or close to it, barring any earth-shattering occurrences in the meantime, like oil going to $50 or $60.

This is the real inflation expectation...The government will not need to hedonize this figure if current trends continue."

Looks like a deflationary enviroment to me.

My take on this. Look around you, how many of your friends and relatives are up to their eyeballs in debt. We all now that the U.S public have a negative savings rate. People are spending more than they can afford.
Good times dont last forever, we all know that at least a recession will come. And what do people do when they lose a little confidence in the economy? They dont go out and borrow more, they are already mortgaged to the hilt. They are more likely to stop spending and sell some of their assets, driving prices down. Such a cycle tends to have a snowball affect. No matter how much the Fed pumps up the money and loosens the credit, you cant make a horse drink if it is already over quenched.
Japan is a prime example of how a goverment is trying to induce its public to spend and borrow. Interest rates are close to zero, and it is spending astronomical amounts of money on civil utilites that are not needed, just to get the public to spend and borrow. Regardless of all this effort, Japan is still in a deflationary spiral.

What I have writen is overly simplistic and devoid of the depth of knowledge of say Traveller and Trailguide, but human nature and actions are simple and predictable. The public will not borrow more and will panic in the next economic downturn.

One more note. A survey was carried out to determine how often so called economic experts got the next move in the economic cycle correct.
They were right only 30% of the time. In other words, if you tossed a coin you would have a better chance of predicting the future.
When two intelligent minds like trailguide and traveller cant agree, then you should start listening to your own instincts.







RossL (10/27/00; 23:11:37MT - usagold.com msg#: 40135)
Al

Libertarianism is the psychology of freedom. It is LIBERTY.

First, I am a libertarian. I am not a republican. I will not vote for "w"

Second, I ask you what exactly would be wrong if the US were to split up into independently governed political zones that honored the constitutional interstate free trade provisions.


R Powell (10/27/00; 22:12:03MT - usagold.com msg#: 40134)
Credit card checks

Good to see your name again Mr. Soloman Weaver!
Very interesting information which I'll have to read again in the morning as I'm half asleep. It's after midnight here in MA.
I'm always looking for small signs that will foretell when the bubble will burst and from what you've just given us, I'll add that when Providian Bankcorp stops sending me checks (simply cash the check for any purpose and we'll automatically increase your credit limit) on a weekly basis, then I'll know it's time to short the market and stock up on groceries.
Good post, thanks and good night.
Rich

tg (10/27/00; 22:11:52MT - usagold.com msg#: 40133)
JustamereBear- the link you requested
http://www.princetoneconomics.com/
enjoy

beesting (10/27/00; 22:05:15MT - usagold.com msg#: 40132)
Price of Gold Jewellery/Jewelry!
Thanks,Galearis,aunuggets, and Lady Leigh,for the help in understanding the other market for Gold. So, if the public is buying about 3200 tonnes of Gold per year for jewelry
a "short squeeze" in Gold has to come, at some point!
Patience is a virtue!

P.S. ANOTHER predicted all Gold paper would lose value, before Gold will rise, so far right on the money, only the timing is uncertain.....beesting.

Al Fulchino (10/27/00; 21:25:56MT - usagold.com msg#: 40131)
Journeyman (10/27/2000; 12:29:44MT - usagold.com msg#: 40103
<Oro, don't read this>

Journeyman, Good day!.. All your secession talk has reminded me of the man who predicted the "Balkanization of America". Yep, you and others probably guessed it. Pat Buchanan.
Why is Libertarian style secession any better than the fascist or socialist style secession. Oh, maybe someone has the idea that they have re-invented the wheel? While their ideas are better, they still miss the point. And they practice intellectual self righteousness.

Secession can come in two ways most of the time, both movements, if ultimately successful will leave us, first like a Russian Federation of States, and later even less than that. Buy your gold now if that happens. And run for the hills. The first group of secessionists hates all that is good. Things like real money, and real men. People who fit in this category, are Bill Clinton and Louis Farahkan. The second group sees what is wrong with the current system of things and resent what they see. The trouble is that they are willing to get rid of much good to achieve their goals. People who fit in this category are some from this forum and the Libertarian crowd. The people in the middle see what is wrong with the first group and like much of what the second has to offer, with the exception of one important thing. They recognize that that second group lives mostly in their mind via intellect and resentments. The second group is willing to risk losing the strength that comes from a singlularly strong and moral United States. They think in their intellectual ecstasy that all will be wonderful if they can just stay by themselves in the corner of one state or region of the country and practice their philosophy as if no outside force will ever resent their freedom and try to overrun them. Their ideas are good they think to themselves. Too bad no one understands their good ideas, they muse.My secessionist friends and my libertarian friends, you have your best chance in a strong, United States, that extends from the shores of the Atlantic to the coasts of Oregon, Washington and California. And from Canada to Mexico. Cut up this best chance mankind has ever had at you and your offsprings own risks.

Lastly, someone is going to come at me and lecture me on the American Revolution/Secession. When in history has a Secessionist movement been led my men of such moral moderation? Neither fascists or socialists were they. Guided by an inner knowing....a confidence (con - fidio), with fidelity to a spirit of Truth were these men and women.

At that watering hole I leave you. Drink or walk on by. <smile>

auspec (10/27/00; 20:58:49MT - usagold.com msg#: 40130)
Cavan Man/Capitulation
Cavan Man Alert- Careful my friend, you sound like you are on the brink of CAPITULATION!!! It is very much in vogue in our arena these last few months {summer is over and gold/mining shares are supposed to be rising, right?}, yet this temptation is to be denied. This is the market bottom at final capit of longtime goldhearts.
The hypothalamus takes over and tells us to SELL, SELL, SELL, yet this is typically the best time to BUY {call Colo}. As hard as it is to see the monthly statements down month after month, it is also a tremendous opportunity to be able to accept these "market gifts" and hope they will continue into the future, as a lifetime's wealth is accumulated. If you see $200 POG is that the time you are planning on selling or loading up the truck? My wife will consider having me taken away, but if we see Au that low we will be looking at a 2nd mortgage on house.
Hold that line there left flank!!! Best to the Faithful!
auspec {am now pretty much rested up and celebrated out from CLHE-HoF campaign and looking for the NEXT CAUSE}.

Solomon Weaver (10/27/00; 20:56:41MT - usagold.com msg#: 40129)
(No Subject)

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The Credit Bubble Bulletin - by Doug Noland

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Mehrling on Minsky
October 27, 2000











Financial instability abounds for markets both at home and abroad. Stocks and indices are demonstrating historic volatility, with the NASDAQ100 trading in astonishing intra-day ranges of 4% Monday, 5% Tuesday, 6% Wednesday, 8% yesterday, and 5% today. It is not, however, just tech stocks as the S&P Bank index traded in a 4% range Tuesday and 3% yesterday and today. From last Wednesday's lows, the Dow has surged 935 points, or 10%. Yet it took the NASDAQ100 only a few trading hours to rally 11% off of yesterday's trading low. For the week, the Dow gained 4%, while the S&P500 declined about 1%. The Transports gained better than 2%, the Morgan Stanley Cyclical index 3%, and the Morgan Stanley Consumer index rose almost 4%. The Utilities dropped 2%. The small cap Russell 2000 and the S&P400 Mid-cap indices declined about 2%. The NASDAQ100 dropped 8%, the Morgan Stanley High Tech index 6%, and the Semiconductors 9%. The Street.com Internet index lost 5% and the NASDAQ Telecommunications index declined 8%. Even the Biotechs succumbed to a bit of selling, declining 2% for the week. The financial stocks outperformed, with a strong rally in the banking sector seeing a 4% gain for the S&P Bank index. The Bloomberg Wall Street index had a marginal advance for the week. Year-to-date, the New York Financial Index has gained 16%.



Conditions were unsettled in the credit market as well, although selling in Treasury securities helped take the edge off of the widening spread dilemma. For the week, 2-year and 5-year Treasury yields jumped 12 basis points, while the key 10-year note yield added 8 basis points to 5.71%. Long-bond yields increased 2 basis points. Mortgage-back yields increased 11 basis points to 7.45%, while agency securities outperformed with yields generally rising six basis points in the range of 6.6%. The benchmark 10-year dollar swap spread was unchanged at 114. There continues to be little good news in the battered junk bond market, with liquidity nonexistent and spreads continuing to widen for many issues. The dollar index ended the week unchanged after a virtual "meltup" early in the week gave way to selling into week's end. Many currencies have been under intense pressure, especially throughout the emerging markets, and we continue to see generally dislocated global currency marketplace.



Importantly, but certainly not surprising considering the environment, bank credit growth has come to a halt, with loan growth stagnating and bank security holdings actually down a notable $32 billion during the past five weeks (to $1.3 trillion). At the same time, broad money supply (M3) expanded $25 billion last week, with savings deposits increasing $20 billion and "repos" rising $5 billion. During the past 3 months, broad money has grown at a rate of 8.9%. For 12 months, M3 has expanded by 10.2%. The growth in broad money supply is unrelenting and money market instruments are major fuel for this historic monetary expansion. Since the end of June, money market fund assets have surged $120 billion, or at an annualized rate of 23%. For now, I assume the aggressive Wall Street-sponsored non-banks have "pedal to the metal," as the increasingly cautious (impaired?) banks are forced to think more about risk control. From recent earnings releases, we see the subprime credit card lender Providian increased managed receivables 34% year on year, and at American Express, lending receivables surged 33%. And with mortgage refinancings running at the most rapid pace since last December, there is a particularly convenient mechanism for the GSEs to aggressively expand system "money" and credit – to "reliquefy."



We'll begin with a bit of "compare and contrast." First, an excerpt from Challenges for monetary policymakers, a speech given last week (October 19, 2000 ) by Alan Greenspan:

"Whether we choose to acknowledge it or not, all policy rests, at least implicitly, on a forecast of a future that we can know only in probabilistic terms. Even monetary policy rules that use recent economic outcomes or money supply growth rates presuppose that the underlying historical structure from which the rules are derived will remain unchanged in the future. But such a forecast is as uncertain as any. This uncertainty is particularly acute for rules based on money growth. To be sure, inflation is at root a monetary phenomenon. Indeed, it is, by definition, a fall in the value of money relative to the value of goods and services. But as technology continues to revolutionize our financial system, the identification of particular claims as money, near money, or a store of future value has become exceedingly difficult. Although it is surely correct to conclude that an excess of money relative to output is the fundamental source of inflation, what specifically constitutes money is a notion that has, so far, eluded our analysis. We cope with this uncertainty by ensuring that money growth, by any reasonable definition, does not reach outside the limits of perceived prudence. But we have difficulty defining those limits with precision, and within any such limits, there remains significant scope for discretion in setting policy.

Evidence began to accumulate in the early and mid-1990s that prospective rates of return on capital were rising. This was implicit both in the marked rise in investments in high-tech equipment and in the updrift in estimates of the growth of long-term earnings by corporate management, which were reflected in the projections of securities analysts. Nevertheless, we could not be certain whether what we were observing was a short burst of productivity gains or a more sustained pickup in productivity growth. The view that we were experiencing a sustained pickup gained plausibility when productivity growth continued to increase as the expansion lengthened. But importantly, only after we could see evidence in other economic behaviors and in readings from asset markets that were consistent with accelerating productivity did we begin to develop confidence in our analysis."

Now, a bit of "contrast." While traveling in Australia in September, Dr. Steve Keen (a good mate and very gifted and iconoclast economist and writer!) from the University of Western Sydney was kind enough to share with me a research paper written by Dr. Perry Mehrling from Barnard College titled "The Vision of Hyman P. Minsky." It was published in the Journal of Economic Behavior & Organization Vol. 39 (1999). At the time, Dr. Keen stated, "I think you will like it." Well, I loved it. It is an outstanding piece of research as Dr. Mehrling splendidly illuminates key aspects of the brilliant thinking of Hyman Minsky; a vision of the world of finance that could not be more pertinent to the present environment. It could also not be further from the thinking of our present central bankers and most of the economic community. Particularly now that we have entered a period of acute financial instability both domestically and internationally, it is most opportune to delve further into Minskian analysis.

Dr. Mehrling's paper describes how Minsky was an "institutionalist" and, critically, how the economy was "monetary in character." The key is to focus on individual economic units – companies, individual households, financial institutions, governments and countries – and concentrate on monetary flows between the various units. Using a Minsky perspective, one would certainly ignore the current "New Era" fixation on new technologies, productivity and GDP growth, in favor of rigorous analysis of money flows, credit creation and, particularly, the status of various debt structures. Importantly, money is the "most real thing" - "the veil of money is the very fabric of the modern economy." And as Dr. Mehrling points out, money is nothing more than a form of debt – someone else's liability. Indeed, the stability of the entire system hinges on the soundness of individual liabilities and the overall debt structure. This is a fragile arrangement, as it is subject to self-reinforcing – boom & bust - debt and institutional dynamics. "There is nothing underneath, as it were, holding it up." As we have discussed in previous commentaries, Minsky saw recurring cycles fostering a drift from "sound" to "Ponzi" finance, and inevitable collapse. Since Dr. Mehrling does such a wonderful job expounding Minsky thinking, better to let him do it in his own words. I've excerpted four paragraphs from his exceptional 23-page paper.



"In these (capitalist) economies, so (Minsky) seems to have thought, financial processes take on a life of their own, so that their logic effectively becomes the logic of finance. In Minsky's own early words: "Capitalism is essentially a financial system, and the peculiar behavioral attributes of a capitalist economy center around the impact of finance upon system behavior" (Minsky, 1967). This is the core insight that underlies all of Minsky's work, and distinguishes his work from that of other economists. According to Minsky, we need to understand finance not because it is an important part of our modern economy, but because it is the very heart and motive force of that economy."



"Generally speaking, the tendency is to move from robust finance to fragile finance – this is the Financial Instability Hypothesis – and this is so because in a world of uncertainly, especially endogenous uncertainty, expectations about the future have little objective foundation so that mistakes are inevitable. To be sure, economic units have their own understanding of how the economy works – they have a ‘model of a model’ as Minsky liked to say – that they use to form expectations about future cash flows. The important point is that any attempt to forecast which of the myriad possible futures will actually be realized come down to an attempt to forecast the forecast of one's fellow economic units. Concretely, the cash commitments of each unit depend on the cash commitments of every other unit. The whole web of interlocking commitments is like a bridge we spin collectively out into the unknown future toward shores not yet visible. Mere ideas about the future become realities as they become embedded in financial relations, but inevitably over time the reality embodied in the pattern of cash commitments diverges from the reality embodied in the pattern of cash flows. Inevitably our ideas about the future are wrong, even when we all agree, indeed especially when we all agree. Just so, widespread belief in the 1960's that economists had learned to tame economic fluctuation led units to the ‘euphoric’ view that future cash commitments were relatively unproblematic, and once this view became embedded in the structure of debt contracts, it became a constraint on future action. The bridge of commitments reaches far out into the future as units (understandably) mistake their common model of reality for reality itself. Robust finance gives way to fragile finance as ‘margins of safety’ are eroded and commitments leave less and less room for possible shortfalls of cash flow."



"In Minsky's vision, business cycle fluctuations of employment and income are mere surface manifestations of the deeper fluctuation in financial conditions along the scale from robust to fragile and back again. Like Schumpeter, Minsky understood fluctuation as the way in which the capitalist system grows, but for Minsky the underlying process was not absorption of technological change but rather the expansion and validation of financial commitments. What worried Minsky was the prospect that, left to its own devices, the financial system would operate to amplify rather than to absorb the naturally cyclical process of growth, as each commitment provides the support for others on the way up, and as default on some commitments undermines other commitments on the way down."



"One might think that asset prices are the most obvious symptom (of financial conditions turning from one of balance to imbalance), but Minsky focused first on what he viewed as the more direct symptoms that appear in the mechanism of refinance. By definition, speculative financing arrangements require periodic refinance, at which point both borrowers and lenders get to take a second look at the balance between the borrower's future cash flows and future cash commitments in light of the changed financial conditions in the economy as a whole. Any evolution toward fragile finance is therefore bound to show up as increasing difficulty rolling over debts as they mature, difficulty that may manifest itself in various ways depending on the institutional framework, but which ultimately shows up as increased demand for bank lending because banks are the lenders of last resort to non-financial economic units. Significantly, banks are themselves speculative financing units that face their own problems of refinance both because of their extreme leverage and because of the short-term character of their liabilities. Thus, the ability of banks to help other units refinance depends on their ability to refinance their own positions. Problems of refinance generally are thus bound to show up as problems of bank refinance particularly. It follows that one way to track the state of financial conditions is to keep a close eye on the operation of the mechanism through which banks refinance their activities."



Talk about "hitting the nail on the head!" "Any evolution toward fragile finance is therefore bound to show up as increasing difficulty rolling over debts as they mature…"

We find this final paragraph fascinating, and believe it is critically pertinent to the increasingly hostile current environment. We have written extensively on the explosion in money market assets (short-term corporate debt obligations), with particular focus on asset-backed commercial paper and other sophisticated vehicles that have been used to finance this historic credit bubble. We've highlighted how the major money center banks have created hundreds of billions of "leveraged loans" (much of this very weak credits to finance the historic "telecommunications arms race") that were then syndicated throughout the system. We have also discussed how, through "structured finance," Wall Street had created an amazing alchemy for turning risky assets into "money." And, of course, we have discussed the vital role played by derivatives throughout this the entire crazy process to disguise risk, while in reality systemic risk grew exponentially.



The bottom line remains that enormous quantities of poor credit were created in an episode of "Ponzi Finance" that not even the great Hy Minsky could have envisioned. But to keep this scheme running requires unwavering confidence and a continuous feeding of speculative credit excess. Today, however, confidence is waning, investors are fleeing risky assets, and financial market liquidity is faltering. Importantly, it appears that risky credits are increasingly losing access to the commercial paper market, with some borrowers apparently struggling to roll short-term debts. This is a big problem - the inkling of a severe liquidity crisis. First, this is bad news for bankers that have provided back-up lines of credit. Not surprisingly, it appears that nervous bankers are now scrambling to reassess their bank lines. This, then, comes as quite disturbing news for risk-averse commercial paper investors and money market fund managers, as they now scramble to assess which of their borrowers may lose their bank lines. So it becomes a dangerous game of "hot potato" – or who gets burned holding the bad paper. This is a much different game than it's been in awhile.



We continue to believe that the commercial paper market – a key source of monetary excess during this cycle – is a likely "hot spot" susceptible to serious trouble. As of last week, there was a total outstanding commercial paper of almost $1.6 trillion, having increased $190 billion (16% annualized rate) so far this year. By category, the financial sector has issued $1.25 trillion of commercial paper, with $122 billion (13% rate) new issuance so far this year. Non-financial commercial paper has expanded at a rate of 30% so far this year to $347 billion. There is $595 billion of Asset-backed Commercial Paper in the marketplace, up from $521 billion at the beginning of the year (17% growth rate) and $382 billion at the end of 1998. "Tier 2," or below-prime rated commercial paper, has expanded at an almost 70% rate so far this year to $130 billion. We would not be surprised if this extraordinary expansion was related to faltering liquidity in the junk bond market. This is an alarming amount of short-term borrowings for less than stellar credits, borrowers we would see as increasingly vulnerable in this environment. We see this as a critical weak link for the U.S. financial system.



Xerox, of course, has experienced trouble rolling its commercial paper. And, according to Bloomberg, Armstrong Holdings "failed to renew its $450 million one-year credit line as mounting asbestos-related claims led some banks to refuse to lend to the maker of vinyl flooring." Apparently some lenders backed away from Armstrong after Owens Corning filed for bankruptcy due to asbestos liabilities. There are 47 banks on the hook for $1.8 billion lent to Owens Corning. Quoting Bloomberg, "banks are also concerned that Armstrong might draw on a new backup credit line should the company be unable to tap the commercial paper market…Armstrong has used $350 million of its $900 million commercial paper." Yesterday, Moody's cut Armstrong Holdings commercial paper rating. The stock has lost about 75% of its value this month, falling to $

3. At June 30th, Armstrong Holdings had total liabilities of $3.4 billion with shareholder equity of $694 million. There are also a myriad of highly-leveraged finance companies that remains at the edge, many with significant short-term debt outstanding.



And with banks on the hook for loans, derivatives, bank lines, security holdings, and such, it is of little surprise that investors are increasingly nervous holding bank debt. This week, lower-rated bank and finance sector debt spreads widened as much as 14 basis points, while spreads for mortgage-backs and agency securities narrowed. There was no relief, however, for the beleaguered corporate debt market as spreads widened across the board between 2 and 8 basis points. It doesn't help that the list of problem corporate credits grows by the week.



Kudos to Dow Jones’ Joe Niedzielski for his article "Chase Transfers $920M of Credit Risk With LANCE Deal." "Chase Manhattan Bank has become the latest global banking group to shed a portion of credit risk from its huge loan portfolio with the completion of a $920 million operation know as a synthetic securitization of commercial and industrial loans. These deals, a product of Wall Street financial engineering, have become increasingly popular in the past 12 months…In its latest deal, announced Monday, the credit risk on a $920 million portfolio of commercial and industrial loans was transferred to a special purpose vehicle, or trust, known as Leveraged Asset Notes for Credit Exposure, or LANCE 00-1…The transaction is further supported by the issuance of $46 million of credit-linked notes that were sold to investors. The notes were rated triple-B-minus by Fitch."



Basically, such a structure allows Chase to transfer credit risk from a pool of credits to "investors" willing to purchase lower-rated but higher-yielding securities. In many of these types of sophisticated structures, securities are largely immune from credit losses until "settlement" at the end of a designated term, such as three or five years. Such structures conveniently create securities that are both difficult to value and quite sparingly, if at all. We worry that such securities are susceptible to abuse and hold potential to be destabilizing for the system down the road, like so many other securities and structures that have been created during this protracted credit-induced boom. Coincidently, just a few minutes after Mr. Niedzielski's article was posted, Bloomberg ran an article "Pension Changes for ABS, CMBS, Coming Soon, Morgan Stanley Says."

"Changes to the rules limiting pension fund investments in commercial mortgage bonds and asset-backed securities may come at the end this month or early next month, according to Morgan Stanley Dean Witter & Co. The changes were proposed to ERISA, or the Employee Retirement Income Security Act, and were entered into the Federal Registry for a 45-day comment period, which ended last week…



Once the Labor Department publishes the rule changes, they become effective, Morgan Stanley wrote. The changes in the their original form would allow pension plans to buy bonds rated as low as ``BBB-'' backed by pools of residential and commercial mortgages and auto, manufactured-housing and home-equity loans, a market estimated at $100 billion. Pension funds are currently limited to investing in ``AAA''-rated mortgage and asset-backed securities."



Interestingly, then only a few minutes later another headline pops up on my Bloomberg screen: "Labor Department Expects Little Delay in Pension-Plan Changes."



The Labor Department expects to publish and enact proposed changes that would allow private pension plans to buy lower-rated asset-backed debt either next week or the week after, a Labor Department official said. The changes were proposed to ERISA, or the Employee Retirement Income Security Act, and were entered into the Federal Registry for a 45-day comment period, which ended last week. The Labor Department received three comments, none of which were ``earth-shattering'' or likely to give rise to any changes in the original proposal, said Ivan Strasfeld, director of exemptions at the Department of Labor.

The proposal will allow purchases of bonds rated as low as ``BBB-'' backed by mortgage, auto, manufactured housing and home-equity loans, of which there are about $100 billion outstanding. They were originally seen as too risky, though investors now say lower-rated asset-backed securities have proven to be at least as safe as the stocks and junk bonds pension plans can buy."

All I can say, is "I don't like the smell of this." First, there is Chase Manhattan (and certainly the other aggressive lenders/securities firms/derivative players) working diligently to create sophisticated structures and securities that transfer the risk of their ill-advised lending onto the marketplace (let's not forget the Orange County bankruptcy fiasco caused directly by positions in GSE structured notes sold to a county official with insufficient skills to recognize and appreciate the extreme risk embedded in the securities!!!). At the same time, the Labor Department is quietly working to change the rules allowing pension money to purchase risky securities. Again, this just doesn't look right, and this will be an absolute outrage if institutions now try to offload credit risk onto the unsuspecting. While it is quite likely too late in the game to protect the American taxpayer from risky lending by the GSEs, can we at least keep ERISA pensions free from high-risk securities?



GSE Watch



Going forward, it is certainly our expectation that the government-sponsored enterprises will take extraordinary measures to perpetuate the current bubble. We also expect, in an environment fraught with increasingly tumultuous financial markets, that Wall Street will "circle the wagons" and work diligently to support the GSEs - their ever faithful "liquidity backdrop." Today, the stock of Fannie Mae traded to a record high and Freddie Mac is not far behind. The message is loud and clear, "Fannie and Freddie, get out and buy securities, lend aggressively, and expand your assets!" We read with curiosity the sanguine comments from one major Street firm: "We favor Strong Buy-rated Fannie Mae and Freddie Mac as the best defensive stocks in our sector in the face of a slowing economy. Not only are their mortgage portfolios insulated from credit risk by layers of private mortgage insurance. But also widening spreads, which might accompany uncertainly over the economy, would allow them to accelerate portfolio growth."



This week, Bloomberg ran an article "Fannie Mae Sitting Pretty Atop Mortgage Mountain – for Now," where it quoted Franklin Raines, FZ° Ltô2ˆ�3;p2o 2qXNA�0øð2o €½x½p2o N˜.$`> ÿÿÿÿ 2q˜½`€€½x½p2o`DBN˜Ltô> 2p2o 
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Solomon Weaver (10/27/00; 20:55:46MT - usagold.com msg#: 40128)
(No Subject)
The Chicago Police Department said about 550 pounds of gold were shipped in five metal boxes from the west African nation of Benin.

Only three boxes were found in the Air France terminal, and those were not the same boxes used initially to ship the gold, police said.


Cavan Man (10/27/00; 20:25:28MT - usagold.com msg#: 40127)
Hello Leigh
My best to you

Cavan Man (10/27/00; 20:21:09MT - usagold.com msg#: 40126)
Ross L
No Joy In Mudville
All the key players are slowly losing control. There are large icebergs straight ahead. These "giants" are not infallible. The game is being played by all so as not to upset (too badly) global stability and global financial equilibrium. Each is playing to win without wrecking the board game for the future enjoyment and enrichment of all. At some point though, one player or a combination of players will break ranks.

Their concerted actions are in violation of natural law and order. May God have mercy on us all.

Leigh (10/27/00; 20:17:20MT - usagold.com msg#: 40125)
Cavan Man
Hey, CM, you've got to put your money somewhere, and would you really want it in the stock market these days? Think of how owners of Intel or Cisco or Microsoft "loathe" thinking about their investments right now.

Remember what Golds Revenge (whatever happened to that guy?) wrote last spring - something about "gold hates nobody; it just sparkles and shines."

Cavan Man (10/27/00; 20:07:15MT - usagold.com msg#: 40124)
A Confession
Has nothing to do with price action but, I am beginning to loathe "gold" despite my solid belief in its purity, honesty and financial utility even, I dare say, necessity. Something is terribly wrong. I can feel it in my bones. Yet, the risk of not owning gold is simply too great. Good night and I am taking a few days off and away. Kind regards...CM

RossL (10/27/00; 20:00:52MT - usagold.com msg#: 40123)
Euro
http://home.columbus.rr.com/rossl/gold.htm

The chart of the Euro sure does look ominous, doesn't it? Happy Halloween


RossL (10/27/00; 19:55:37MT - usagold.com msg#: 40122)
Another one bites the dust?

I was just reviewing some gold stock prices. GSR had zero volume today, and only a few thousand shares a day lately. Does anyone know about this one?



Cavan Man (10/27/00; 19:54:46MT - usagold.com msg#: 40121)
Trail Guide
RE: Reg Howe commentary on BIS
Hope I am not the only one who is very interested in hearing your take on this information. Thank you.

Galearis (10/27/00; 19:09:45MT - usagold.com msg#: 40120)
@Beesting on metal to retail pricing spreads....
In Canada, and I presume the US as well as most of the west, price mark-up of low end mass produced gold jewellry (not the true objets d'art) tends to be on average 10 times gold metal content. This also factors in purity, of course. Used jewellry is generally marked up 3 times etc. Most of the time the stones, if any, are of such a poor quality as to be a negligible factor in the price.

One wonders often why many just don't jump on a plane to Singapore for a buying spree. It would pay for the trip if one bought in any weight. The sightseeing would be a bonus.

The fun part at home is to find used gold jewellry and buy at spot. Oh what a challenge!

It is getting harder as of this week. (smile)

aunuggets (10/27/00; 18:09:51MT - usagold.com msg#: 40119)
Leigh - State Quarters....
.
Hi Leigh,

Saw your mention of the state quarters series below. Wish I was in the area for the Coin Show, but unfortunately will be on the opposite side of the country. Have been noticing many "error" state quarter pieces on one of the auction sites of late......very interesting off center strikes that I thought would make a neat collection, perhaps one for each state, all struck off-center ! Gee, so much time, so many things to play with, and so little money......(grin)

aunuggets (10/27/00; 18:00:17MT - usagold.com msg#: 40118)
Beesting
Jewelry Gold.....

It's important to remember that wholesale and retail jewelry markets are worlds apart as far as pricing is concerned.

First, you have wholesale "base pricing" which includes the basic cost of production, i.e. the metals involved in a piece, cost of casting and finishing, and labor. Normally, at the wholesale level, this is based on the spot price x pennyweight of the particular alloy plus a small profit in the materials, casting, finshing, and so on. This for a "blank" or unset piece of jewelry. This pricing factor is usually tied directly to the current spot price of gold or other metal involved for most wholesale establishments.

From this point, the "blank" or unset piece of jewelry goes to the retailer who sets stones, does final finishing, sizing, and other needed work to make a "saleable" piece of jewelry. This is also where the vast majority of the "cost" of the finished piece is added. Each step in the process, from the casting of the metal, mining and cutting of the stones, middlemen involved in marketing any or all of the components, etc. adds to the cost and a profit margin is obviously figured at each level. But it is "usually" the final retailer that adds the greatest expense or profit to the final price, running from perhaps 200 to over a thousand percent mark-up. So when you consider such mark-ups, it is easy to see why jewelry at the "retail" level may show little if any price variation as spot gold prices rise and fall. Fact is, the gold content of most jewelry pieces, and especially the higher-end pieces, is but a small fraction of the "cost" or "value" of the piece. The "mounting" is often the least expensive component in the mix, and so it takes a pretty significant increase or decrease in the spot gold price to effect the overall price of the final product. As a quick example, an engagement solitaire sporting an "average" 1 carat diamond may retail in the neighborhood of $4000.00, while the gold mounting itself may cost the jeweler less than $100.00, very insignificant in relation to the total.

Most pricing differences seen with the rise and fall of the spot markets are at the wholesale level, but even there, an average mounting (a 14 karat ring for example) contains but a small fraction of an ounce of gold, so the total final cost of the jewelry piece is only slightly effected. With most jewelry pieces with a retail price under about $500.00, there is more of the "cost" attributed to the labor and mark-up involved than the actual materials used in it's production. This even tends to carry through to much higher priced items until better quality and higher value precious stones come into play at somewhere along the $1000.00 retail level. Just general guidelines of course.

Leigh (10/27/00; 17:52:34MT - usagold.com msg#: 40117)
Baltimore Coin Show
Are any USAGOLDers going to the Baltimore coin show tomorrow? My son has a recital in Gaithersburg, and I am thinking of swinging by the show in search of state quarters.

Leigh (10/27/00; 17:50:15MT - usagold.com msg#: 40116)
megatron
About what time on Saturday morning does "Action Man" come on (Eastern time)? I'd love to see it!! Is your name listed among the credits?

Leigh (10/27/00; 17:45:49MT - usagold.com msg#: 40115)
beesting
Hi, beesting! I wish I could help you, but with the exception of the little gold bracelet I bought last year at the Vietnamese store (the one in Cranston), I've bought almost NO jewelry since I got married. That's what happens when you turn into a wife and mom!! I seldom go out, so there's no place to wear it.

One thing I always notice though, is how often jewelry counters have "sales," often as much as 50% or more off. Could that mean something?



beesting (10/27/00; 17:12:37MT - usagold.com msg#: 40114)
Question for Lady Leigh, and all those who follow the Gold jewellery market.
Since 1996,when I obtained my first Krugerrand, I have been close-ly following all these Gold forums.The Gold forums talk mostly about bulk Gold and numismatic Gold coins, and the POG. However, according to Anglogold 80% of the yearly Gold sold is in the form of Gold jewellery.
Here are some approximate figures from the WGC on 1999 world Gold consumption:
2550 tonnes produced.
Under 4000 tonnes consumed.
Now if we use the 80% jewellery figure supplied by Anglogold we get about 3200 tonnes used for jewellery and only about 80 tonnes used for dental, coins, and other.
In 1999 the U.S. Mint alone sold 61 tonnes of American Eagle Gold coins, so that leaves 19 tonnes for, other, Gold coins, and dentists worldwide in 1999.

Here is my question:
Does anyone know if retail or wholesale prices of Gold jewellery have been dropping in U.S. dollars the same as bulk physical Gold and Gold coins, and paper Gold???

Observations:
In the last 10 or so years I've seen more and more men wearing Gold.
In the U.S. lots of people display their personal wealth in the form of vehicles and fine homes.
In many other countries, with populations far exceeding the U.S., personal wealth may be displayed in the form of Gold jewellery....and some speculation......I think China and South Africa know very well the annual Gold consumption figures, and China's small 15 tonne per year amount purchase is calculated so the current supply demand factor = "POG" is not affected.
Wouldn't anyone in a long term buying mode want the best possible prices? A 50 tonne per year order could cause a short squeeze in world supply, sending prices higher.Also of note; the Chinese want physical Gold, they don't trust normal channels,LBMA,COMEX,OTC, or the BIS, buying directly from the South African Gold Mines.

Thanks in Advance.....beesting.


White Hills (10/27/00; 16:51:45MT - usagold.com msg#: 40113)
Black Blade, Yes, but
I bow to your superior knowledge and respect your opinions. However I will point out the determination and planning that went into the EU and their launch of the Euro. I will critize them for not issuing actual currency in a more timely manner which has hurt their immediate objectives. Who would have thought 30 years or so ago that not only would they build a tunnel under the Channel but would have united East and West Germany into one country again and lead the way to a new Europe(except Another)? My point being that the objectives of the EU are well planned and one should look at the results so far and judge them on those. White Hills

Mr Gresham (10/27/2000; 16:02:23MT - usagold.com msg#: 40112)
Iraq & Euro -- Thoughts While Driving
Didn't Saddam use to work for CIA, and Geo. Bush, and all them?

Wouldn't discrediting Euro by his association with it at this time be a nice currency war ploy?


justamereBear (10/27/2000; 15:35:21MT - usagold.com msg#: 40111)
Black blade 40088 Henri 40092 CoBra(Too_) 40092

Black Blade
I have never believed that so many cultures, with so many languages, with so many political forces, and so many long term irritants could, in practice, make the Euro work on a long term basis.

Sorry to hear about the malaria. Be Well.

Henri 40092 Thank you.

CoBra(Too) 40105
Thanks, that was the information I needed.
Don't particularly recall you hanging yourself. I suppose I enjoy debate, but I am resposible for my own decisions and make up my own mind, despite what I might or might not say in debate. I doubt there are many people here that walk on water. Getting opposing viewpoints is why I, at least, am here. Composing ones thoughts sufficiently to articulate them does wonders for clearer thinking, and I need all the help I can get. No offense offered or taken.

That Princeton economic department is becoming more and more interesting to me. They seem to have a great deal of what appears, on the surface, to be eccentric thinking. When you look closer, it seems to work in practice, and, in the end, you can't argue with that. (especially in the airy fairy economic field.) They have done some fascinating work on cycles as well.



Leigh (10/27/2000; 15:26:36MT - usagold.com msg#: 40110)
Azteca de Oro
http://www.lemetropolecafe.com
Azteca de Oro is back. (Interesting guy!) He thinks the only way out of the dollar mess is to crash the system and start over with a new reserve currency: Euros or...gold.

aunuggets (10/27/2000; 15:15:14MT - usagold.com msg#: 40109)
Shifty # 40079
.
Don't know about the "pink money", although there were rumors of it years ago (early 80s I believe).

As far as gold not "trading" below $250.00, my only question would be "why ?". Certainly nothing magical about the $250.00 level, although I can see problems when "production equilibrium" is reached, i.e. average cost of production.

No doubt the greatest majority of au is traded on the commodities markets, but let's not forget all the physical "traded" daily in the form of Krugerrands, Maple Leafs, Eagles, Philharmonics, fractional Europeans, etc. I don't see "the price" (any price) putting an end to such trading for the average Joe, and actually buy the majority of my own holdings in just those forms, week in and week out at the local coin dealer's shop (most at or very near spot by the way).

I think too often that we all continue to see the forest but not the trees, and surprisingly there is alot of good and useful information bumping around on the street at most friendly neighborhood coin dealers and pawn shops when it comes to the gold markets. These guys have a finger on the pulse of the market via the public, other dealers, refiners, comex, and pretty much any other source you care to mention (including this forum....grin). There is alot more to the term "trading" than what might usually be observed, whether 100 ounce contracts in "The Market" or street selling of a Sovereign or two here and there.

Throughout most of the 80s and 90s, I dealt alot with a particular shop in a nearby city, and became well acquainted with the owner, who kept a good stock of coins and bars for the most part. These ranged from 1/4 ounce waffers and coins through the standard 1 ounce pieces up to 10 ounce Suisse Credit bars and an occasional kilo now and then. Orders were placed out on a weekly basis to keep "stock" in line with sales, but one could almost always guage the market sentiment based on what was available in the display case (remember, no internet - instant access information age before about '95). By watching "local markets", premium spreads, and most of all supply-demand factors, it was not difficult to predict most of the major run-ups in the spot prices along the way. In my 20s and 30s then, there was a group of us who had formed an "investment club" of sorts, pooling 10 ounces each au and "trading" our base in and out of price moves, eventually liquidating the pool at the rate of almost 45 ounces each over a period of some 4 years. Not too shabby considering spot prices closed considerably lower than they had opened at the beginning of the endeavor.

Still accumulating......and watching for $250.00 ! (smile)

SALMON (10/27/2000; 14:55:34MT - usagold.com msg#: 40108)
Thank you YELLER!

Thank you Yeller! And welcome to The Family Table.


Leigh (10/27/2000; 13:47:46MT - usagold.com msg#: 40107)
Black Blade
Get well soon, Black Blade! Malaria is nasty and hard to get rid of; hope you don't have a bad case. Why don't you send your e-mail address to Peter so that Gandalf can send you your vial of gold flakes? Gandalf has offered them to all Founding Members of the new Hall of Fun! WHAT, you didn't realize you were a Founding Member???

wolavka (10/27/2000; 13:04:51MT - usagold.com msg#: 40106)
Now you will have some fun
Gold starts up!!!!!!!!!

Dollar is dead!!!!!!!!!!!!

Like swiss franc!!!!!!!!!

CoBra(too) (10/27/2000; 12:42:29MT - usagold.com msg#: 40105)
@justamereBear
Your latest 40085 - PEI - is Princeton Economic International (I believe), where the former boss Martin Armstrong is awaiting prosecution - if justly - is anybody's guess ...
Personally, without any prejudice as to any wrongdoings, I would believe, since most of his analytically derived predictions have been not only close, some even too close to today's reality, that M.A. acted accordingly may have been his demise. ... There's much more out there happening, which won't be answered in any court - as it may well be too big for even the court to survive - ... and so I'm sorry for Martin, smartin(g) in a dungeon, may it be, that MA is guilty, or not. The question is - is he guilty of being too smart - in the sense of seeing through the collusion "pro US-$" at all costs - or did he talk to openly about whaat he's seen?
cb2

PS: justamereBear ... I apologize, using you for hanging myself in my own rambling thoughts a couple of days ago -
I would offer to explain, though don't, I beg, always take me too seriously - kind regards - cb2



Sierra Madre (10/27/2000; 12:41:54MT - usagold.com msg#: 40104)
Thoughts on the Euro and other garbage currencies
The trouble with the Euro, and the rest of the garbage that passes for money today - I am inpired by Black Blade's comments earlier today - is that the Euro, to be specific, is the product of PhD minds. These people are a menace. They live in ivory towers where reason is divorced from everyday life. Thus, they can invent all sorts of intellectual contructs and feel quite at ease with them. They are, one and all, UTOPIANS.
Not so with the great unwashed. The mass of the great unwashed, general humanity, is not composed of intellectuals. It is composed of very plain and simple people who will have nothing to do with theorems.
That is why silver and gold will forever remain money. They are tangible, which means touchable; they do not have to be visualized, they are touchable. This is money which the most ignorant of the great unwashed can understand.
The great unwashed will prevail, this is unquestionable. They always have, and always will.
There will be a return to reality, as the whole edifice of our debilitated world economy crumbles, and it will probably be accompanied by a bloodbath like none ever seen before, as crazed masses of the unwashed riot, rape, burn and pillage whatever they can. That is where the Utopians are taking humanity.
Out of the ruins, perhaps a new civilization will emerge. The present one is done for.
See "The Gods of the Copybook Headings" by R. Kipling.


Journeyman (10/27/2000; 12:29:44MT - usagold.com msg#: 40103)
Secesssion @goldfan msg#: 40076, ORO

Hi goldfan!

Thanks for tickling my fancy on the relative prosperity of those areas who have disassociated from empires and distant governments. Never thought of that before. Will look closer if I ever get the time.

I suspect secession is always in order -- if you don't want you and your neighbors looted by the elitists in a city far far away. Who DON'T know better what's good for you -- "He can't even run his own life, I'll be damned if he'll run mine." as the lyrics go.

There are more and more secessionist movements around the world every day. There are, for example, three serious ones in Italy I believe. No doubt everyone here knows about the Quebec sessionist movement. There's also a healthy one, or so I've heard, in Canada's western provinces.

Northern California wants to secede from Southern California -- or is it the other way around. Recently The Valley, etc. are trying to secede (dis-incorporate) from Los Angeles. There is, I understand, serious talk of the South seceding from the "union" for the first time since the First American Civil War.

This is all understandable when taxes are correctly understood as "user fees paid by someone other than the user." Governments broker the deal as to who gets the loot, and it usually goes to the geographical areas with the most political clout. For example, in the small town I live in, which has many severely blighted areas, the "Redevelopment Authority" chose to redevelop my neighborhood, one of the nicest in town.

People are beginning to catch on to the fact they're being looted and want to secede. There are other good reasons too.

Regards,
Journeyman

YELLER! (10/27/2000; 12:23:04MT - usagold.com msg#: 40102)
Money where your mouth is.
To all mining stock investors with ammunition for the big move… let's remember that the heavily hedged miners will not need our support.

goldhunter (10/27/2000; 12:19:47MT - usagold.com msg#: 40101)
Gold HAS Value...


$1.5 million in gold discovered missing at Chicago's O'Hare airport

This is a headline from earlier today...Seems the thieves must read this site too...humor...

Oh by the way, Aristotle, Oro, FOA, what is that you were saying about the "counter-party" risk and the safety of physical gold? Seems like a physical owner is "short some" today...

milos (10/27/2000; 11:48:48MT - usagold.com msg#: 40100)
KISS it
Don't you think it normal that ECB global reserve growth would occur at a discount to the FRB as it approaches equilibrium reserve status in volume.
Moreover, from a demographic point of view, don't you think it has the potential to surpass FRB liquidity considering the potential of washing into the balcans and former soviet states.
The Euro is alive and well, at any time the puppet masters can swing the digits towards it as the gold flow goes to zero.
Get yourselves the real thing while you can!


TheStranger (10/27/2000; 11:38:40MT - usagold.com msg#: 40099)
@The Prolific Black Blade....
...or should I say "the thought-provoking Black Blade.

Good to see your handle BB. I think your paragraph below deserves some embellishment.

"I see that the Invisible one has just reported on the UN allowing the Iraqis to use Euros in their transactions for oil. What will this do for the Euro? I'm afraid not much unless the other oil producers follow suit. Iraq is still considered a rouge nation by it Arab brethren. The 8-year war with Iran didn't win many friends among even those considered pariahs in the Arab world. The Turks just as soon Saddam go back to murdering Kurds with biological weapons. The Kuwaitis and Saudis among other moderate Arab nations are scared s%#$-less of Saddam should he amass another large army. The list goes on."


Stranger's Remarks:
I don't think it is splitting hairs to say that Saddam is still considered a rogue nation by other arab LEADERS but not necessarily, as you imply, by most arabs.

Virtually all arab OPEC nations are ruled by dictators, who, like all dictators, rule by means of suppression. As such, these guys may fear Saddam not so much for his army as they do for the heroic status he sometimes enjoys in the hearts of their citizens. He is, after all, the one arab leader who has dared to stand up against the west.

Anyone tempted to underestimate this internal political threat implied by Saddam's popular support need only consider the civil unrest which erupted in many arab cities during the Gulf War. The Sadat assassination, the overthrow of the Shah of Iran and the current fighting in Ramallah are all examples of what can happen when disinfranchised moslem extremism boils over.

Particularly in Saudi Arabia and Kuwait, we have examples of lightly populated countries ruled by plutocrats who control some of the world's most critical natural resources. This circumstance alone makes for a constant threat of political instability - even without Saddam in the picture. But, WITH Saddam - and the veneration he can command in the streets, no arab ruler can afford to be dismissive.

Of course, some Arab leaders are forced to juggle these concerns with the important financial and/or military support they get from the United States (who, by the way, really is considered a pariah by many common arabs). For this reason, I think it is wise always to watch what is DONE in the Middle East rather than what is SAID.

What does all of this imply with respect to the potential for proliferation of Saddam's Euro oil-pricing scheme? Not much, perhaps. But, because of the issue's capacity for popular support, I wouldn't reject it out of hand.

wolavka (10/27/2000; 11:34:19MT - usagold.com msg#: 40098)
appears
they will close dec between 265-266. no advice.

ORO (10/27/2000; 11:22:01MT - usagold.com msg#: 40097)
BlackBlade - Euro and gold as non government funds
Gold of the gold standard times was used as currency by a large number of nations of differing customs and languages, with separate governments... Yet the non-nation-specific means of exchange worked very well. The same "problems" you point out for the Euro would have applied to free market money as well.

The point of the matter is that having a currency outside the direct control of a single government used throughout a diverse grouping of nations is a positive in encouraging trade by lowering inter EU trade costs even relative to fixed exchange rates. Lower trade costs would bring increased volumes of trade and better productivity as actual advantages are no longer masked by government manipulation of exchange rates withing the EU. Consider that internal tariffs within the EU were eliminated some time ago. Up till a couple of years ago, EU governments were very quick to capture the increased trade through heavier tax burdens. This is changing now as governments of the EU states are pressed to lower tax burdens in order to attract business investment and avoid entrepreneurial immigration.

Eventually, the EU countries will benefit due to increased trade whether or not the Euro is strong internationally or not. Considering that the main causes of Euro declines are carry trades and heavy international borrowing (ex EU borrowers), this weakness has to be temporary - since the Euro debt situation is inherently structured to reverse.



wolavka (10/27/2000; 11:07:00MT - usagold.com msg#: 40096)
Henri
Fear, nobody wants to go home over week end.



wolavka (10/27/2000; 11:04:49MT - usagold.com msg#: 40095)
dollar
yesterdays top, march headed for 114. no advice but good for gold

Galearis (10/27/2000; 10:54:58MT - usagold.com msg#: 40094)
@ Black Blade
the EEC
Try thinking of the European community in terms of what is the reality of Canada. Essentially the countries within the union become provinces. Europeans should be used to this mix (up) and that is perhaps why the Danes rejected the joining - they have their own multi-cultural quagmire within their own little country and may not be as open to adding to the whole (turmoil). The difference (and perhaps the weakness of this process of unification) IS on the cultural side. In Canada we KNOW about the instabilities caused by cultural/dominance tensions. In a word: Quebec. In Quebec it is cultural autonomy within the rest of Canada. In the rest of Canada it is Canadian autonomy (stability) with Quebec as the nationalistic rogue.

The country of Europe will be an interesting experiment, indeed!

Wish them luck for all our sakes!

G.

Henri (10/27/2000; 10:50:19MT - usagold.com msg#: 40093)
US$
Looks like the greenback is taking some punishment today whaaazzzuppp Wolavka?

Henri (10/27/2000; 10:46:19MT - usagold.com msg#: 40092)
Justamerebear #40085
PEI is "Prince Edward Island", a province of Canada...north of Nova Scotia and west of New Brunswick on the Atlantic Coast. Beautiful place which I visited this summer with my family.circa 46.5 degrees latitude/68 degrees West Longitude

White Hills (10/27/2000; 10:43:38MT - usagold.com msg#: 40091)
Euro
Iraqi being allowed to accept Eros for Oil is the Camels nose under the tent. Could this be the beginning of the EVENT we have discussed to bring the Dollar down? Would other oil producing countries then begin to say me too/ They would have a good argument. The EURO is a serious threat to the dollar and as many have said on this forum it is not that the EURO is weak but that the DOLLar is to strong. The strong Dollar policy of the US can't continue much longer. What happens when that policy changes? White Hills

wolavka (10/27/2000; 10:30:45MT - usagold.com msg#: 40090)
Wheat
get you some, and get more gold.ship next time to midway

Henri (10/27/2000; 10:11:56MT - usagold.com msg#: 40089)
Desperate times require Desperate measures I guess
http://www.cnn.com/2000/US/10/27/missing.gold.ap/index.html
1.5 million in gold missing @ Chicago's O'Hare airport

Black Blade (10/27/2000; 10:01:04MT - usagold.com msg#: 40088)
RE: SteveH, Goldfly, and Mr. Gresham
SteveH: Good to hear from you. As I said, I'm out of my environment on this issue. There appears to be a confidence problem with the Euro. I tend to agree that perhaps it isn't that the US Dollar is strong, rather it is that all else is so weak in comparison. Still, I find it hard to imagine that 11+ countries with different languages, cultures, etc. and ever changing governments can keep this union together. For their sake, I hope they can. I guess that all they really can do is accumulate gold and US T-bills for reserves, as other currencies look really weak. I'm still trying to figure all this out though. Thanks, Black Blade

Goldfly: I think you're right. I knew that I heard that somewhere before, but my jewish friends tend to get a bit peeved, and then say "But Israel is the land of milk and honey." Hmmmmm..........

Mr. Gresham: I think that the currencies are linked to the Euro, but that was also based on agreements that national debts would be below certain levels, and various other agreements in the Maastricht Treaty. It appears that the rules don't apply once you're in. Italy has already fallen outside the guidelines in regard to the national debt, and I believe that Spain has a few problems in that regard as well. A falling Euro is definitely good for US tourists. I might even go visit friends in Barcelona, Valencia and Taragon before long. I will add an interesting study in currency confidence tonight (US Time) if I get the chance. - Black Blade

PS, wouldn't you know it. The day I land in SE Asia, I end up contending with a bout of malaria. I'm shaking off the effects still, but am a bit tired. I'll check in later tonight. Cheers - Black Blade

Mr Gresham (10/27/2000; 9:34:56MT - usagold.com msg#: 40087)
Euro -- Black Blade
Isn't the Euro just the basket of 11 currencies pegged together at a fixed exchange rate? Their may be new difficulties imposed by such a convergence, but beyond that is the ability to buy European goods/services/assets at bargain prices. The market should take care of speculators who have only a short-term short-selling view.

I was surprised when I saw the real estate booklets this Spring in Italy for hilltop farmhouses (yes, fixer) in Tuscany for $80,000. I always had thought Europe was more expensive than USA in every category, especially real estate. Thank you, Euro, I sez to meself -- I'll be back with a pocketful of dollars. (In my dreams)

I picture it as a balloon being pulled underwater, the farther it goes down, the higher it jumps up.

Euro now may seem a cheap way to get DMarks, the former semi-reserve currency in many places outside Germany (Eastern Europe), so I would be watching Germany to see if they are backing away from the Union.


Goldfly (10/27/2000; 8:59:33MT - usagold.com msg#: 40086)
Shifty Pink money?

I think it was several different colors for the various denominations.....

I think it was Ron Paul (him again!) that outed this a long while back.

I guess there is a huge stash of this stuff just waiting for the right occasion.....


justamereBear (10/27/2000; 8:57:39MT - usagold.com msg#: 40085)
tg 40071

What is PEI that James Smith is from? Do you have a link?
So far I really like this guys thinking. Thanks for the post.

Goldfly (10/27/2000; 8:56:28MT - usagold.com msg#: 40084)
Duh....

Golda



Goldfly (10/27/2000; 8:55:56MT - usagold.com msg#: 40083)
Black Blade - Bad Joke......

That was Gold Mier's joke!


wolavka (10/27/2000; 8:18:05MT - usagold.com msg#: 40082)
okay
now you did it!!!!

Buena Fe (10/27/2000; 8:11:10MT - usagold.com msg#: 40081)
AUgustUS (10/27/00; 07:52:53MT - usagold.com msg#: 40078)
Amen!
Thats a keeper.........I submit it for a HOF nomination.

The Invisible Hand (10/27/2000; 8:09:30MT - usagold.com msg#: 40080)
It's official: those who want euro payment for oil are mavericks!
Friday October 27, 7:31 am Eastern Time

Oil Steady As Wary Dealers Watch Mideast

LONDON (Reuters) - Oil prices held above $31 on Friday as cautious dealers awaited formal confirmation that the United Nations will allow maverick producer Iraq to be paid in euros, a condition Baghdad has set for continuing crude exports.

Iraq's rejection of the dollar for its oil sales is widely regarded by diplomats as a politically-inspired protest against U.S. support for U.N. sanctions against Baghdad.

Tension between Israelis and Palestinians contributed background support for market sentiment amid warnings of more suicide bomb attacks by militant Palestinian groups.

Benchmark Brent crude was 17 cents off at $31.75 a barrel after settling 60 cents higher at $31.96 on Thursday.

U.S. light crudes were 24 cents off at $33.47.

Iraq was the sixth biggest crude supplier to the United States in August and any stoppage of its exports would strain the U.S. supply system, where crude stocks are already near 24-year lows.

Markets were wary ahead of a weekend break in dealing, noting the world body will not rule until next week on Iraq's demand for euros rather than dollars, the currency of oil trade.

Some said prices would ease only when the world body makes an official ruling.

``Perhaps some of the sell-off will occur when the change is formally confirmed, but more likely the gains stayed because of a realization that Saddam is willing to use oil for political gain,'' said London brokers GNI.

An Iraqi source told Reuters on Thursday Baghdad was likely to suspend oil sales worth five percent of world crude exports from November 1 if Washington objected to a plan by Baghdad that it be paid in euros rather than dollars.

The move followed an Iraqi government decision last month to halt all dealings in the greenback to confront what it called daily ``American-Zionist aggression,'' an apparent reference to U.S. support for the Gulf War curbs.

The International Energy Agency said an Iraqi suspension of exports of 2.3 million barrels per day worth some $60 million would shock the international energy markets.

But the White House said it did not matter in which currency Iraq was paid for its U.N.-monitored sales because under Gulf War sanctions Iraqi revenues are controlled by the world body.

``The fact is that whether it's in euros or dollars, we have control of his (Iraqi President Saddam Hussein's) pocketbook, so that we make sure that the revenue from the oil-for-food program is used for food and medicine and not for tanks,'' said White House National Security Council spokesman P.J. Crowley.

Diplomats at the United Nations said the Security Council appeared likely to allow the euro payments.

An assurance from an OPEC delegate that Saudi Arabia and other producers would be ready to fill the gap if Iraq sales were lost also helped undermine the rally.

The U.N. sanctions committee will meet on Monday to discuss the Iraqi proposal for euro-denominated payment.

``In principle, we have no problem with it,'' said one member of the council's sanctions committee on Iraq. ``There's nothing in the resolution that says what currency is to be used.''

Oil traders are also waiting to see if OPEC will implement a price band mechanism and hike output by 500,000 bpd.

The informally-agreed mechanism stipulates a half a million bpd rise in cartel output if the price of a reference basket of crudes stays above $28 a barrel for 20 consecutive working days.

The trigger for the mechanism is Friday, but markets may have to wait until Monday for an official announcement.

The OPEC basket stood at $31.14 a barrel on Thursday.

But analysts believe the Organization of the Petroleum Exporting Countries (OPEC) will struggle to deliver fresh supplies as most members are already pumping at full throttle.

Only Saudi Arabia has any significant spare capacity, but it is already producing 500,000 bpd above its official OPEC ceiling and is not expected to pump beyond that, analysts say.

SHIFTY (10/27/2000; 8:05:53MT - usagold.com msg#: 40079)
2 questions
gold price and pink money
2 questions for anyone who may know.

I have been told by a friend that gold will stop trading if it hits $250.00 per oz. Any thoughts on this?

Also I have not heard anyone discuss PINK MONEY. I heard about the USA having pink money all printed for an emergency. That was about 10 or 15 years ago. Any thoughts on this one?

$hifty

AUgustUS (10/27/00; 07:52:53MT - usagold.com msg#: 40078)
Re : Trail Guide : Does a name give any credibility at all ?
An extract from Trial Guides' message 40028. "Now many "Western Gold Bugs" are deep in the mud with no easy way to reconcile to the changes we said were coming? Who knows? Especially as things keep progressing right along these lines. In their position it's hard to reverse yourself. "

Having made a request in one of my earlier posts for some clarification on "who" is behind the move to help shed some light on world developments - it occurred to me that it is really not important. It is far more important that this information is being made available to the world's public for their CONSIDERATION. This is greatly more important than from whom it comes. As a man thinketh, so is he. Consider the thoughts, not the thinker !

Above all, become a thinker for yourself. The sooner people start thinking (and acting) for themselves, AND for the general good of ALL society - the sooner we will see a world that is free from racial, religious, financial, political, gender and other "prejudices". They are all illusions - just as the derivative market as an indicator of "value" is an illusion. The "busting" of the financial illusion is most probably going to be a great revealer of many other illusions - as well as being a precursor to returning society to more fundamental concepts of "basic humanity".

South Africa is a very good example to draw from in this regard. A political system was in place that was obviously unconstitutional, unfair, and designed to "protect" the interests of a "minority". The words of wisdom, compassion, foresight and aspiration for the "common good" of ALL the people in S.A. - were sprouted from the minds and souls of people like Archbishop Desmond Tutu, Mr Nelson Mandela and others. They were considered "Terrorists". Would it have helped you to know who had spoken Their words. Definitely not. You would have discounted them immediately. In fact, some still do (smile). To be a critic : "In their position, its' hard to reverse yourself"

Equally, as everybody is becoming more and more aware, it does not mean that when a person like President Bill Clinton, Mr Greenspan, Mr Summers or Goldman Sachs spokespeople speak - that they are really speaking for the "common good" - or that they are qualified to speak on behalf of "humanity as a whole". Who's council would you take in hindsight - that of the "terrorist" Mr Nelson Mandela, or that of the "people's choice" - Mr Clinton ? Do you take Mr Greenspans' - Pro-gold view, or do you take Mr Greenspans' apparent Anti-gold view ? Does the name give any credibility to the "thoughts spoken". Apparently not.

Are Trail Guide and Another : "Terrorists" ? Maybe, maybe not. Are Trail Guide and Another : "Anti-Terrorists" ? Maybe, maybe not.

One of my favorite expressions is along the lines : When you are right - Time is on your side. Consider all the information presented to you - and act accordingly.

Trail Guide and Another : my impression is you may have all the time in the world (grin). Thanks for sharing some of it - with us. As you alluded to - once things really get going - there will be even more time - just to watch - and be silent.

To all the other posters - not mentioned - thank you too. Sitting here in the middle of the class as a lurker enables one to listen to the comments from those at the front of the class, those at the back of the class, and to take little notes as required.

Remember, its your thoughts that count ! Keep them coming.


wolavka (10/27/00; 07:44:40MT - usagold.com msg#: 40077)
comex gold close
depends; whose wearing them.

Like 274 please.

goldfan (10/27/00; 07:12:23MT - usagold.com msg#: 40076)
Journeyman (10/26/00; 18:54:05MT - usagold.com msg#: 40050)
Somewhere recently I saw a note to the effect that the island states of the North Atlantic have all done really well past 50 years or so, Iceland, Isle of Man, Jersey, Channel Islands, etc. while Newfoundland, and Prince Edward Island have only suffered since joining the Canadian confederation. Food for thought?? The Federal government in Canada has long thought it's ok to barter away access to Newfoundland fish for Saskatchewan wheat sales overseas.

FWIW

Goldfan

wolavka (10/27/00; 07:09:05MT - usagold.com msg#: 40075)
last post
not investment advice

wolavka (10/27/00; 07:07:54MT - usagold.com msg#: 40074)
Day trade
dec gold @ 264.40 ob

SteveH (10/27/00; 06:04:24MT - usagold.com msg#: 40073)
Gold is a commodity? Not!
http://nationalinvestor.com/9-00-gold%20limbo.htm
So, who is paying this guy for his opinions?

SteveH (10/27/00; 05:38:19MT - usagold.com msg#: 40072)
Black Blade
E-URO
You wrote well, imo. One thing I kept thinking about while reading is that the E-uro isn't week because of Europe, rather because of the strong dollar. And what makes the strong dollar strong is its demand as a reserve currency and its scarcity above debt repatriation. Your argument stated that it won't become the reserve currency or couldn't because it was toast. I believe the logic is slightly flawed but nonetheless compelling. I believe that the trump cards have not been played yet. There are several trump cards, one which is simply time. The other two are what makes a currency a reserve currency and that is oil settlement. With all its flaws that you speak of, none of them would hurt the Euro if it become the currency of oil settlement. Finally, you presume that a doubling of gold reserves (official) wouldn't have the same affect as 100% backing. It would.

tg (10/27/00; 05:37:10MT - usagold.com msg#: 40071)
from James Smith of PEI

The following makes a refreshing change from all the conspiracy theories and international financial dealings being talked about on the forum.

" To be a good technical analyst you have to be a bit more twisted
than the average. You can't see good news as good, you have to
see how bad is good and good is bad. Another way of expressing
it, you have to be contrarian. Stocks are bouncing back today
and gold is in a freefall...so what's not to like?

We have long held the view that gold must make New Lows
before a secular bull mkt in gold can begin. In fact we have a "Panic Cycle Week" due for gold & oil the wk of 11/06. So if gold sells off, making New Lows into wk of 11/06, it may very well end the bear mkt in gold and set the stage for a new secular bull mkt!! If gold does not make New Lows, ironically that's bad news for gold bugs. Failure to make New Lows could set up another false rally that will again give way to more selling.

One of the intriguing things that caught my attention a few weeks
ago is the fact that our system shows a Panic Cycle Week indicated for
both the DOW and the S&P the week beginning October 30th.
Just one week later ( wk of 11/06 ) we have a Panic Cycle Week due on
both oil and gold ( as I have already noted above ) . Put your thinking
caps on for a minute. This should have your brain spinning.

DEFINITION: "Panic Cycles" are the name we give to specific
periods in time when you can expect higher than normal volatility.
Typically the market will swing violently from one extreme to another.
Sometimes panic cycles will bring days when the market moves
strongly in only one direction. But it is more often the case that a
panic cycle brings wild swings in both directions.

It is very rare to have a Panic Cycle Week indicated on 4 major
markets within the span of two weeks. For you options traders
out there, this means you want to buy volatility over the next
few weeks. You don't really want to be selling vol in the near
future.

Let's assume for a moment that stocks continue to rally on Friday
and into early next week. You know darn well that CNBC will
bring on various "experts" ( read: brokers who want you to buy! )
to argue the point that we have seen the Lows in stocks and that you
should take advantage of the wonderful opportunity to buy stocks
on the cheap. This is what they do every time. They are predictable,
though rather sleazy in their approach.

We are saying you need to exercise more caution than normal
over the next two weeks. A lot can happen in a very short space of
time. You have to ask yourself why both gold and oil are indicated
for a panic cycle week the same week of the election! And if the
Panic Cycle Weeks on both the DOW and S&P are to bring
"panic buying," does it follow that you should be an eager buyer??
First, we don't know for sure that next week will be panic buying
in stocks. It could be panic selling! Second, you have to wonder
how this week could possibly be the Low for stocks if both gold and
oil are due for panic cycle weeks the week of 11/06. Remember
if gold continues to sell off into the week of 11/06, making New Lows,
this is bad....because it ends the bear market in gold.

It dawned on me a few weeks ago that Saddam might very well
take advantage of the extremely low inventory picture to stop
Iraqi production---right before the election. It just did not seem
accidental to me that we have a panic cycle week for oil the same week as the election. Now, today we see in the news that this indeed may happen. Saddam is reportedly threatening to halt production of Iraqi oil
unless the UN agrees to Iraq's demand to allow payment in EUROS
instead of dollars.

Panic Cycles are like over-the-horizon radar. They can tell you things long before the event takes place. This may explain why the CIA
were so intersted in our models over two years ago. PEI made a public
forecast of the impending Russian default two months before the event.
You're thinking that was luck....apparently the CIA didn't think it was
luck.


Could stocks rally strongly next week? In other words, could the
panic cycle week indicated for both the DOW and the S&P bring "panic
buying"? Yes, this is clearly possible. In fact today's retest of
support may have set the stage for a strong rally, perhaps more so in the S&P and the Nasdaq, less so in the DOW. The DOW did NOT retest
support today, and is now bumping up into Daily Trendline Resistance.
Only if it breaks out above this DownTrend line, can it manage to continue a rally.

By now I hope you are completely confused. That would be good.
What you need to realize is that Panic Cycles can bring either or both
Panic Buying and Panic Selling. You can't lock your mind into one view
on the market. You have to maintain an open mind.

But one market that I will be watching very closely over the next few
weeks is gold. If we do get New Lows, then as I've said before,
it suggests the Secular Lows are not that far off....in time. In price
terms we cannot rule out a move to $195-215 area. In any case,
picking the bottom in price is not so important. It is sufficient to
know that once you've seen New Lows ( below $252 ) you probably are getting
close...in time.

Why is that important? If gold is about to bottom and start a
secular bull market, what does that tell you about stocks? Can
stocks continue to rally at the dawn of a new bull market in commodities
with gold finally chasing after Oil?

The answer is Yes and No. Our view is that the next few years will
be much more of a "stock pickers" environment. Throwing darts
to pick your stocks will no doubt outperform the broker recommendations
on CNBC, but that still wont' leave you very happy. You will need
to pick your stocks carefully. Pick stocks that can do well in a
rising inflationary environment. Some of them can do very well, but
others will get killed.

You might be wondering, "What if gold doesn't make New Lows?
Does that mean the commodity bull market is not going to happen?"
The answer is no. Commodities can still rally while gold trades down.
We've seen that already in the last few years as oil tripled and gold
meandered sideways and down. But I believe commodities would
have a more impressive run once they are all in sync...ie once they
all go up together.

One of our stronger long-term predictions is that oil will
conservatively reach $60-100 range no later than November 2002. 2002 is a Panic Cycle Year. If you just think for one minute how much chaos
can occur during a Panic Cycle Week, imagine what a Panic Cycle Year can bring!!! It is the difference between one standard
deviation and 3 standard deviations from the mean."



wolavka (10/27/00; 05:16:18MT - usagold.com msg#: 40070)
say good-bye
to u.s. dollar.

The Invisible Hand (10/27/00; 04:55:21MT - usagold.com msg#: 40069)
'They' still don't get it!
"you must be crazy to demand payment in a weak currency like the euro" said the interviewee in today's 10:30 GMT BBC World Radio World Business Report concerning Saddam's decision regarding oil payment.
I made of course a mistake by headlining in msg#: 40065 that the UN had allowed Saddam to be paid in euro. The headline had to be that it is expected that the U.N. will allow Baghdad to be paid in euros.
Are the UN sanctions on gold (smile) to be lifted?




Black Blade (10/27/00; 04:52:11MT - usagold.com msg#: 40068)
Requiem for the Euro

FORWARD:

I am not nor do I pretend to be an expert in international currencies, currency trading, or currency arbitrage. I do look at the big picture of world events and the world around me. I have come to the conclusion that the new currency called the Euro has several problems to overcome. The new currency called the Euro looks as if it may prove to be a failure. There are several reasons for this. It is difficult to understand how 11 or more countries with different languages and cultures can agree on anything, let alone a single currency that is accepted across borders and relies on all member countries adhering to agreed policies as outlined in the Maastricht Treaty. For the Euro to work as a strong currency, it would appear that Europe must be politically united. There have been two attempts to force the issue of a united Europe, once under Napoleon Bonaparte and once under Adolf Hitler. Obviously no one in his or her right mind would like to see such a repeat of history. The question is: Can Europe peacefully unite economically and politically?

The larger countries will likely have grater control over fiscal policy regardless of the desires of the smaller countries. The Danes recently refused to give up their sovereignty by refusing to join the EU. There is little interest on behalf of the EU to back up and strengthen the Euro in light of the recent Euro devaluation. This is similar much in the same way that gold has suffered at the hands of gold producers. The major problem being a lack of confidence. Just as gold producers have shown that they have no confidence in their product – gold, the guardians of the Euro have shown that they have no desire to support the Euro. European Central Bank President Wim Duisenberg has all but admitted that there will be no support for the Euro and that has essentially given the green light for speculators to grind down the Euro and flee toward perceived safe haven currencies such as the US Dollar and Swiss Franc. Even the Swiss are prone to tie in the franc to the Euro. Confidence in the Euro has been shaken and it appears that the damage has been done where the Euro is not likely to have a significant role as a reserve currency. This was an opportunity that was missed and Europe is likely to fall back into a confused tangle of multiple currencies and trading partners that lacking fiscal discipline. Does this mean that the US Dollar is destined to be the world's reserve currency? What about the role of the second most powerful currency – gold?

NO CONFIDENCE:

On September 28, the Danes voted in a referendum against joining the EU Euro currency and giving up their sovereignty to what appears to be another nail in the coffin for the Maastricht Treaty. It looks as if the Danish Krone is here to stay. Who could blame them? The Swedes and Brits appear poised to follow in the Danes footsteps as well. The rejection is likely to boost anti-EU sentiment in Norway as its government is preparing for eventual EU membership. The vote is also a disappointment to Finland, an EU member, as it could delay the Swedish vote and possibly membership, as Sweden is Finland's most important trading partner. Denmark is one of the few countries where the people were allowed to vote. Obviously this is a wake up call for the EU. The EU should pay attention and wake up to what the people of Europe are thinking. They have no confidence in the Euro.

Denmark's rejection of the Euro is likely to make politicians in Britain and Sweden think long and hard before presenting this turkey for a vote by the people. There have been difficulties with several EU members keeping to fiscal guidelines that are outlined in the Maastricht Treaty (most notably Italy). The EU is coming apart at the seams and will probably collapse under the weight of the restrictions of the Maastricht treaty as member nations find themselves either unable or unwilling to comply with demanding fiscal policies. This problem will only intensify as the multitude of European governments change hands over time. The Euro may just die a slow death as the EU will have to live for several years with a split between the 11 EU members that have adopted the Euro – 12 when Greece joins in January, and the three that haven't, Denmark, Britain, and Sweden.

NO EU SUPPORT (WHO IS THIS DUISENBERG ANYWAY?):

The Euro fell sharply against the dollar to be on par with the currencies of other emerging markets. The comments by European Central Bank President Wim Duisenberg caused currency traders to debate the likelihood of intervention should the Euro lose ground in face of Middle-East tensions. He suggested in an interview with the Times of London that it wouldn't be appropriate to intervene if the Middle-East crisis sparked a sharp fall in the Euro. Excuse me! Just what does Mr. Duisenberg think his duties are as guardian of the Euro? He also suggested that participation by the US in an intervention is less likely as the US November elections draw near. Well, what clearer signal do you need to sell short the Euro? Is it any wonder that the Germans and French were initially opposed to this buffoon taking over as the ECB president? He in effect gave a green light to currency speculators by suggesting that the ECB would sit on their hands. Duisenberg and US Treasury Secretary Larry Summers are at odds as how to describe the failed September 22 currency intervention. Now we learn that the FED was opposed to the intervention, but were "persuaded" by VP Al Gore.

Duisenberg said to Larry Summers: "Couldn't you say that the strong dollar is in interest of the United states, but an ever strengthening dollar is neither in the interest of the United States nor in the interest of Europe?" According to Duisenberg, Summers replied "I'll think about it." Of course there are other reasons for the apparent failure of the Euro such as the dollar's perception as a safe haven currency and oil, which is priced in dollars. David Gilmore, a partner of Foreign Exchange Analytics, an Essex, Conn., firm that advises institutions on global currency markets put Duisenberg's inept leadership in perspective: "He seems to relish controversy, fails to learn from his mistakes and ultimately invites the market to come bury, not praise him." Obviously, the removal of Wim Duisenberg is a step in the right direction toward salvaging the Euro.

Perhaps Duisenberg should take a queue from Cheeta's (AG) playbook when talking publicly about the Euro. At least Cheeta has enough sense to talk in convoluted riddles so nobody knows what the hell he's talking about. The problem is so dire that Germany's Chancellor Gerhard Schroeder has had to come forth to state that the Euro is undervalued based on EU economic strength. The Bank of France Jean-Claude Trichet also came out of his cave and said a strong Euro was in Europe's best interest. The Euro looked to rise on rumors of Duisenberg's possible resignation, causing some traders to buy the Euro. If anything, that is an indication that he has lost credibility and damaged his market standing. To save the Euro, it may be necessary for the EU to meet and discharge this buffoon.

WHAT THE HELL IS AN EURO?

Has anyone ever seen an Euro? Is it coin, scrap of paper, or digital electrons floating around the ether? I don't know of anyone who ever saw one. They are as rare as leprechauns, gnomes, or chicken lips. This does not inspire confidence among the people, who are used to deutschemarks, lira, francs, pesetas, etc. The Euro was officially launched in January 1999 and since has lost 30% of its value. Delaying the minting of coin and scraps of Euro notes for three years was a huge mistake. It appears to have some success as it works for trade across borders as local currencies are tied to the Euro, however, something tangible would build confidence better among the peoples of Europe than this lackluster approach to a currency that is expected to rival the US Dollar or Swiss Franc as a reserve currency. As it is, the Euro has about as much relevance as the Baht, Ringgit, or Rupee, and could be on par with those currencies in short order.

HOW TO SALVAGE THESE DAMAGED GOODS:

Significantly raising interest rates on the Euro along with sopping up excess Euros couldn't hurt either. Interest rates at 4.75% are not competitive with the US Dollar interest rates north of 6%, and reducing the supply of Euros would help balance supply with demand. Even selling foreign assets such as US treasuries, bonds, etc. when those foreign currencies become too strong relative to the Euro. The higher interest rates for the US Dollar vs. the Euro is also not good for attracting investment in the Euro. The point is to create a strong Euro currency that can compete with the US Dollar as a reserve currency and to attract foreign investment. Of course this begs the question: What to use as a reserve currency (or commodity) to back the Euro? I think you already know where I'm going with this, but I'll continue on. The Euro is supported with reserves of various currencies and about 25% gold. The Euro was initially launched with 15% gold backing, however, with the devaluation of the Euro that percentage of gold reserve backing has risen. There was speculation about a year ago that the gold reserve backing would be increased to 30%. It is doubtful that the increase in gold backing was intended to result from devaluation though. The best of all possibilities of course would be to back the Euro completely with gold as the Swiss franc once was – the IMF be damned. That is not likely to occur of course, but it would significantly strengthen the Euro and result in the Euro as a safe haven currency. With all-important commodities such as oil and gold (OK, I said commodity but bear with me on this) priced in US Dollars, the Euro is at a distinct disadvantage.

The US markets have become increasingly volatile, and foreign as well as domestic investors are now becoming aware that their investments are at risk. In the event of a market meltdown these same investors will begin a flight to quality. A gold-backed Euro would be a safe haven (as good as gold!). Unfortunately the socialist oriented societies of Europe simply do not have the discipline required for a gold standard. Even the Swiss have chosen to take the path to the servitude by unlinking their Franc from gold. If the EU were to use a gold standard and price gold in Euros, this would be interesting to see if they could take the ball out of the US court. Some will say, "but we are bound by agreements and treaties." The US and many other countries have never adhered to treaties when they were not in their best interests, so why start now? I do not know if such an arrangement could succeed and this is not my area of expertise. As my houseboy in Myanmar (formerly Burma) is fond of saying: "Sir, I am but a simple man." Perhaps Dr. Robert Mundell, 1999 Nobel laureate has an answer to the Euro Dilemma. His speech on "Exchange Rates, Currency Areas and the International Financial Architecture," (also found in the Gilded Opinion) attempts to design a method for firming up the Euro through pricing bands. Though he does not advocate a gold standard (he advocates a fix exchange rate band). He also suggests the minting of a 100 Euro gold coin to heighten interest in the Euro. This would help give a stamp of credibility to the Euro.

CONCLUSION:

The Euro is toast. There is a severe lack of confidence in the Euro currency, and confidence in any currency
is most important. The EU is not unified in it's support of the Euro currency and does not have the unified support of the people of Europe. The inept ECB leadership (Duisenberg) has failed by not supporting the Euro. Without a unified plan of support and EU leadership committed to defend the Euro, then at best, the Euro is destined to be on par with other third world currencies, but ultimately it is most likely destined to fail. Am I wrong here? Is it just that the US Dollar isn't strong, but rather the rest of the world's currencies are so pathetically weak? Regardless, Gold has performed very well against the world's currencies except against the US Dollar. Gold appears to be the best competitor against the US Dollar and this would certainly explain why there are so many US interests who are against a rising gold price. When the US Dollar plummets, the rest of the world will follow. That leaves gold (maybe even with silver and PGMs) as the only real alternative since it is not based on faith or credit of some country's debt. Obviously the Euro is not going to be much of a threat.

-Black Blade


Black Blade (10/27/00; 04:50:34MT - usagold.com msg#: 40067)
Hello all!

I'm out of country so I have not been able to post. My services were required in SE Asia again. I certainly have a lot of catching up to do so I will have to print out several more pages before I head into the field again. I just ordered some Uruguayan Pesos from the castle so they should make a nice addition to the collection.

I see that the Invisible one has just reported on the UN allowing the Iraqis to use Euros in their transactions for oil. What will this do for the Euro? I'm afraid not much unless the other oil producers follow suit. Iraq is still considered a rouge nation by it Arab brethren. The 8-year war with Iran didn't win many friends among even those considered pariahs in the Arab world. The Turks just as soon Saddam go back to murdering Kurds with biological weapons. The Kuwaitis and Saudis among other moderate Arab nations are scared s%#$-less of Saddam should he amass another large army. The list goes on. However, should other large producers do the same by accepting Euros for oil, then the ball could be taken out of the US court so to speak. Saddam gave the UN until Nov. 1 (this coming Tuesday) to comply with his demands before he turned off the spigot as he said: "the dollar is the money of the enemy." Of course, the US is losing whatever influence and friends that it has in the region because of its support for Israel to the detriment of the Arabs (it is an election year after all). Personally I think that the US should just wash their hands of the whole mess, besides, the best Moses could do was lead his people around the Middle-East for 40 years and then pick the only place without oil ;-) Sorry, bad joke. The point is we need the supply of cheap oil to fuel the economy, and we support Israel at the same time. This is a very slippery tight rope act. After a few thousand years of warfare, I very seriously doubt that there will ever be peace among these peoples. Perhaps the best thing to do is to let them duke it out to the finish so the rest of the world doesn't have to deal with their insanity. But I digress.

I wrote a few thoughts about some articles that I read on the flight about the Euro and though they may have been addressed in other postings (I still have a lot to catch up on), I may be pilloried for my thoughts on the subject. I am not am expert in the area of currency speculation. But I have written a couple of posts about currency (especially the Euro), and perhaps the learned knights will help me clarify my thoughts on the subject. Hey that's what it's all about right, thanks in advance. I will try to check in when time permits but I no longer have a satellite link and must use the office internet link when I'm not in the field. I will be back in a couple of days though.

- Black Blade


RossL (10/27/00; 04:18:43MT - usagold.com msg#: 40066)
Peter Asher #: 40063

Peter said:
"I don't see anything about where that gold is coming from and how a quantity of it can exist to back the ongoing unspent demand of the ROC's economy. The Gold backed Nation-state money supply would have to equal the gross ROC product produced during the time span of the median rate of transaction turnover."

Journeyman #: 40050
"The traditional rate evolves to be 500 collars per gold oz."

The rate of collars to gold would float to the equilibrium rate of exchange, would it not? (implying that 1 oz. of gold would have a lot more worth in Journeyman's scenario than it does now in the u.S.)


The Invisible Hand (10/27/00; 04:00:52MT - usagold.com msg#: 40065)
U.N. 'allows' Saddam to be paid in euros
Friday October 27, 1:57 am Eastern Time
Oil Slips As Worries of Suspension Ease
SINGAPORE (Reuters) - Oil prices steadied on Friday as fears of an imminent halt to Iraqi exports eased slightly on expectations the U.N. will allow Baghdad to be paid in euros, a condition Iraq has laid for continued flow of its crude.

U.S. benchmark crude futures stood at $33.64 per barrel at 0429 GMT, edging seven cents down from the day-earlier close.

The contract surged 75 cents higher to $33.71 in New York after an Iraqi source said Baghdad would likely suspend oil sales from November 1 if its proposal for euro payments was rejected.

Iraqi crude flows, controlled by the U.N. under sanctions imposed on Baghdad following the 1990 invasion of Kuwait, account for about five percent of world exports.

Baghdad has been exporting about 2.3 million barrels per day of crude under the current eighth phase of a U.N. humanitarian oil-for-food exchange.

At current prices, the exports are worth about $60 million a day.

The U.N. sanctions committee will meet on Monday to discuss the Iraqi proposal for euro-denominated payment.

U.N. diplomats said on Thursday members of the Security Council appeared likely to allow payment in euros.

``In principle, we have no problem with it,'' said one member of the council's sanctions committee on Iraq. ``There's nothing in the resolution that says what currency is to be used.''

The United States said it made no difference what currency Iraq used.

``That fact is whether it's in euros or dollars, we have control of his (Iraqi President Saddam Hussein's) pocketbook so that we can make sure that the revenue from the oil-for-food program is used for food and medicine and not for tanks,'' said White House National Security Council spokesman P.J. Crowley.

Iraq was the sixth biggest crude importer into the United States in August and any stoppage of Iraqi exports would strain the U.S. supply system, where crude stocks are already near 24-year lows.

A U.S. government official said other major oil producing nations had given reassurances they would pump more oil in the event Iraq halted exports.

OPEC SPARE CAPACITY LIMITED

Oil traders are also waiting to see if OPEC will implement its yet-to-be tested price band mechanism and hike output in the coming days by 500,000 bpd.

The informally-agreed mechanism stipulates a half a million bpd rise in cartel production if the price of a reference basket of crudes stays above $28 a barrel for 20 consecutive working days.

The trigger for the mechanism is Friday, but any announcement is unlikely to come before Monday.

But analysts believe the Organization of the Petroleum Exporting Countries (OPEC) will struggle to deliver fresh supplies as most members are already pumping at full throttle.

Only Saudi Arabia has any significant spare capacity, but it is already producing 500,000 bpd above its official OPEC ceiling and is not expected to pump beyond that, analysts and lifters of Saudi crude say.

``I don't think the hike will lead to any significant increase in barrels. All the countries are virtually at capacity. The one country not at capacity, Saudi Arabia, is already producing above its allocation,'' said Gary Ross, chief executive of Pira Energy Group.



YELLER! (10/27/00; 03:42:58MT - usagold.com msg#: 40064)
First timer...
I'd like to dedicate my first !holler to a man who taught me much about the markets… the monster, as he calls it. I call him FISH …he puckers his lips when he ponders a question. Now somewhat frailer, he still gets up early each morning to put in his trading orders. Part of his daily routine is to listen to his wife reading news stories and yes, the discussions on the USAGOLD forum… periodically interjecting, with his severe Russian accent: HOGWASH! or BRRRILLIANT!

I first met him a year after he had jumped off a Russian freighter into the icy waters of the Pacific Ocean, in the days when iron curtains and concrete walls were still standing. Fish was a day-trader long before there was an internet. He showed me then… he's still showing me now.

FISH loves good questions… he says, they make more sense than answers. Just yesterday we spoke on the phone and he said: WHY GOLD GOES DOWN AND GOOD MINERS' STOCK GO UP, !ON THE SAME DAY? …I think he wants no answer.

THANK YOU FISH.

May my first time entrée be the signal for the yeller's turnaround.

Peter Asher (10/27/2000; 0:56:38MT - usagold.com msg#: 40063)
Journeyman
Pardon the "Shot from the hip" just now, I just got to the top of yesterday's page.

I don't see anything about where that gold is coming from and how a quantity of it can exist to back the ongoing unspent demand of the ROC's economy. The Gold backed Nation-state money supply would have to equal the gross ROC product produced during the time span of the median rate of transaction turnover.

Parsifal (10/27/2000; 0:51:08MT - usagold.com msg#: 40062)
JP Morgan flies British flag?
http://www.skolnicksreport.com/boterrorists.html
Over at http://www.skolnicksreport.com, a Chicago court reformer named Sherman H. Skolnick has a great deal to say on subjects tangential to gold. His investigations lead to evidence of corruption outside of Chicago and into international politics, economics, and, sometimes, gold.

In one of his more recent postings, in which he claims: "For well over a hundred years, J.P. Morgan & Co. have been the Queen's agents headquartered in New York." And later states: "To show their loyalty, J.P. Morgan & Co. traditionally have flown the Britsh flag at their Wall Street location."

Can anyone here please tell me if J.P. Morgan & Co. actually does fly the British flag at their Wall Street location? I am intrigued with this point. I'm not sure how I can verify this without going to Wall Street, and I think that maybe some of you who post here may have been to Wall Street often and remember noticing the British flag at J.P. Morgan & Co.

Here are some excerpts from the link posted above:
***
Through cryptic and little-understood derivatives, through oil futures, and other exotic gambling instruments, the Morgan interests and the linked banks and their holding firms, bet hundreds of billions of dollars that they could force up the price of oil, to their mutual corrupt benefit. In September, 2000, oil reached just short of $38.00 per barrel for crude. When the price nevertheless declined to about $31.00 per barrel, in October, 2000, Morgan and their gang and some 18 banks and their holding firms were in danger of collapse. About a trillion dollars was needed to bail them out, including reportedly Bank of America and their foreign exchange gambling units.
.
.
.
To divert attention from the threatened melt-down of Morgan and their oil gambling, Morgan's assets in brokerage, in the press, in government, began a concerted campaign to trigger-off old-timers, even younger types, of the possiblity of a later-day type of 1929 Crash. [In its simplest explanation, the Crash of 1929, was caused by the British withdrawing huge amounts of "call money" from Wall Street which had been financing margin accounts, Americans gambling on stocks at ten cents on the dollars. At the height of the deluge, Winston Churchil was sitting in the gallery of the New York Stock Exchange, keeping an eye on matters and personnally profitting by the instigated calamity.]
***

Parsifal



Peter Asher (10/27/2000; 0:47:48MT - usagold.com msg#: 40061)
Journeyman (10/26/00; 18:54:05MT - usagold.com msg#: 40050)
I's a bit hard to follow it all, but I think those 'Collars' have the same staying power as the Tulip Bulbs

Peter Asher (10/27/2000; 0:43:15MT - usagold.com msg#: 40060)
R Powell (10/26/00; 16:27:04MT msg#: 40035)
Better make that a gold PLATED brick door stop. Right after I posted my grand theory about the bid and asked spread demonetizing gold, ORO posted how that didn't occur in bank held bullion.

Just once, I actually agreed with Goldhunter and got blown out of the water.

ORO (10/27/2000; 0:24:45MT - usagold.com msg#: 40059)
Journeyman - currencies
Fiat currencies were a government imposed element of the markets. We talk much of the benefits of fiat currencies to governments that employ them on the grounds of their use as a taxing mechanism to provide government with more palatable means to confiscate the resources of the people than official taxation. We also discuss heavily the aspect of old line banking's benefit from fiat currencies in the collection of interest on the money supply, of the driving of business into the banks (where one can obtain interest on cash balances and thus escape some of the effects of inflation), of the benefit bankers could provide clients in the clients being the first to spend new money.

What we have not spoken much of is that the period of time where currencies were instituted worldwide was a very narrow slice of time, altogether 2-3 decades. Among the changes that took place in government policy at the time was the expansion of government accommodation of union interests in general and of trade unions in particular. Licensing was, till then, limited to very few occupations. The purpose of it then (and now) was not to assure capable professionals were plying their trade, but to restrict the consumer's choice as to who they can hire, and thus improve the licensed groups income through the imposition of state sponsored monopoly. Part of the game was that upon instituting registration and licensing procedures there was a "grandfathering" of existing practitioners, but further licenses were only granted to those who passed a test. The test was designed by union people and applied by the licensing agency of the state so as to be nearly impassable without prior knowledge of the answers. The union provided answers to the test questions to friends and relatives of the "core members".

In similar fashion, the state brought into existence what were formerly less common and less intensive tariffs intended to protect unions and their employers from foreign competition. The state itself instituted currencies as part of the mechanism by which citizens, their trade, and their organizations were separated from those of other states to assure complete government control of them. Such were tariffs in purpose in addition to raising revenues and "protecting" local industry. It was part of the process of delineating borders, and imposed a generalized cost on international trade. Since trade volumes are inversely and exponentially tied to trade costs (say a 20% rise in trade costs causes a 40-50% drop in trade volumes over time), the uncertainty of exchange rates due to currency fluctuations imposed such a cost, and brought about a severe drop in international trade volumes together with tariffs.

The US today is still trading less with the rest of the world, relative to its overall economy than it had in the gold standard era prior to the creation of the Fed. And that is despite the dollar being the reserve currency that is used by all nations for international trade.

The adoption of a non-government monetary system would benefit the world's people in improving everyone's lot in life. I would expect that the markets, once given an opportunity, would do so.

As to what constitutes an opportunity, it is likely a condition of currency flux such as experienced in the emerging nations repeatedly over the last few decades. Such as we went through once in the 70s, once in the 80s, and right now once again, in the millenial transition. I expect the popularity of gold settlement of trade both domestically and internationally (particularly the latter) to grow by orders of magnitude during a complete global currency crisis now that transaction costs can be reduced well below those of currencies because in gold settlement, credit is not allocated for the clearing and settlement functions.






THX-1138 (10/27/2000; 0:08:06MT - usagold.com msg#: 40058)
regarding previous post
Forgive any misspellings. I have a sticky "M" key.

THX-1138 (10/27/2000; 0:06:00MT - usagold.com msg#: 40057)
Current gold price and States leaving the Union.
To my eyes the continued low and falling price of the POG looks like a COMEX default. Higher COEX premius to get in the game and a dropping $ value of gold would indicate that the system is breaking down.



Of all the States that should leave the Union it should be Alaska.
They have 25% of US market in oil sales, gold mines, coal mines, forests, fish and game.
Stationed in a military strategic position on the globe.

What would happen if Alaska demanded payment in gold as royalties for letting oil companies drill for oil?



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