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

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ARCHIVED DISCUSSION FROM 6/27/2003
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Black Blade (6/27/03; 23:47:35MT - usagold.com msg#: 105161)
Credit card delinquencies stay at record high
http://www.usatoday.com/money/economy/2003-06-26-credit-delinquencies_x.htm

Snippit:

WASHINGTON (Reuters) — Rising job losses and the uncertain economy kept credit card delinquencies unchanged at a record high level in the first quarter of 2003, the American Bankers Association said Thursday. Past-due credit card accounts made up 4.07% of all accounts, the same level as the last quarter of 2002, the ABA said in a statement. That rate remains the highest since the trade association began compiling consumer loan data in 1990. "New jobs need to be created and workers reemployed before there will be any significant improvement in delinquency rates," said James Chessen, the Chief Economist for the bankers' association.

Home equity loan delinquencies jumped to 2.02% of loans from 1.64% in the previous quarter, according to the ABA.

Auto loan delinquencies climbed to 2.41% of loans from 2.34%, the trade group reported.


Black Blade: Looking grim.



Black Blade (6/27/03; 23:35:08MT - usagold.com msg#: 105160)
Finally, the heat is on!
http://money.cnn.com/2003/06/26/news/companies/heatwave/index.htm

Analysts say warmer weather likely to spur retail sales, but they're keeping an eye on energy costs.

Snippit:

Energy costs going up

Michael Niemira, senior economist with Bank of Tokyo-Mitsubishi, said he's keeping an eye on rising energy costs and their implications for retailers and consumers as the summer gets underway. "The cool start to the season has been a problem for retail sales," Niemira said, "but escalating energy prices are something that both consumers and retailers have to incur. "

According to Phil Flynn, energy analyst with Alaron.com, natural gas, gasoline and crude oil supplies domestically are trailing last year's levels, while prices are creeping up. "So far the cooler weather hasn't put more pressure on the supply, but a hot scorching summer could definitely push prices higher," Flynn said. "When energy costs go up, the bills go up for consumers and it cuts into their discretionary spending. Consumers spend less on things like clothes and shoes. If gas prices escalate, that has the same effect. So retailers suffer as well," Flynn added.

Howard Davidowitz, chairman of New York-based national retail consulting firm Davidowitz & Associates Inc., has his concerns as well. "The energy cost in the equation is grossly underestimated," Davidowitz said. "The consumer is already stretched to the limit and doesn't have an extra $1,000 to pay if the home bill goes up." But he's cautious. "The fear is that energy costs could overwhelm the tax cut," he said. "If that happens, the long-term forecast for retailers doesn't look good."


Black Blade: Temperatures have been rather mild so far but the recent heat wave on the east coast may be a preview of what may come. The last time I checked the NWS and NOAA were both forecasting warmer than normal summer temperatures for July and August. Natural Gas storage injections should taper off soon as pipeline stripping is only a temporary fix and warmer summer temperatures will increase demand as "air conditioner season" kicks off. Also, nuclear generating capacity is much lower this summer as many plants are down for maintenance and repair due to boric acid corrosion and cracks in containment vessels discovered at some facilities. Another factor to consider is that Canada may not be much help this year as their storage levels are very low as well and increased drilling has not given much increased production this season. Mexico is likely to compete for additional US NatGas supply as that country is nearing an energy crisis of its own. We may get a clearer picture on the energy front over the next couple of months. We may yet be fortunate to have a deepening economic recession to offset demand along with moderating temperatures, but we should not count on it.



Black Blade (6/27/03; 23:01:58MT - usagold.com msg#: 105159)
The Bubble That Broke The World – Fekete
http://www.financialsense.com/editorials/fekete/2003/0627.htm

Snippit:

Bond speculators are sitting on a huge pyramid of paper profits they have accumulated as short term rates of interest rates were pushed down from over 20 percent in 1980 to a little over 1 percent in 2003. A measure of the pyramid is the Derivative Bubble, now $140 trillion strong, consisting mostly of bets that interest rates will fall further. We are witnessing the biggest bull market ever, in anything, anywhere, at any time in all history. There has never been a bubble of that size and ferocity before. Tulipomania, the South Sea Bubble, the Mississippi Bubble, the bubble of the Roaring Twenties all pale in comparison.

Lately, speculators have been itching to cash in on their huge winnings, especially in view of the fact that foreign private and official holders appear poised to reduce their holdings of U.S. Treasury securities. Greenspan knows that a bubble so big as this cannot be safely deflated. It could trigger hyperinflation. So he has recourse to a desperate gamble: he is bribing the bond speculators. As the barker at the fair, he is crying to them: "Hang on! The bond bull is far from getting tired! Don't get out, the fun has just started! Your next bet is on the house! Profits are free for the taking! No risks involved!"

Surely this is an unprecedented sight: the central banker bribing the speculators with promises of untold riches free for the taking. Nothing like this has ever happened in history before, and probably never will. The central banker tips you off to place your bet that the bond price will go up, and, bingo! You have won the jackpot.

It sounds crazy but is true nevertheless. All this would be very comical if there wasn't a sad part to it. The Greenspan announcement was designed to prevent prices from weakening and the stock market from collapsing. Yet its effect will in all likelihood be highly deflationary. Falling interest rates will ratchet down prices, and falling prices will ratchet down interest rates even more. As prices fall, the Fed raises the ante and buys more bonds, giving away more free gifts to the speculators. Both prices and interest rates fall into the abyss, and the economy is plunged into deep depression. The capital structure of productive enterprise is fatally weakened. Firms fall like flies in autumn. There is great pressure to cut debt and inventory. Cutting debt lowers interest rates, and cutting inventory lowers prices more. Those firms that can't do it fast enough are mercilessly forced into liquidation. There is growing unemployment, and falling demand will kick prices down further. Even some of the healthiest firms succumb as they could not collect receivables from their fallen brethren.


Black Blade: An interesting and thought provoking read for sure. I don't think many have really considered the possible outcomes of the Federal Reserve wandering about in "uncharted waters" should they employ "nonconventional means" to stimulate the economy. The more I think on the bizarre events of late and how desperately central bankers are intervening in everything from stock markets, bond markets, currency markets, and consider using untried methods to stimulate their economies, the more "surreal" this seems. But desperate times call for desperate measures.



Black Blade (6/27/03; 22:43:05MT - usagold.com msg#: 105158)
Market Wrap Up – Hartman
http://www.financialsense.com/Market/wrapup.htm

Snippit:

Since we usually contrast paper versus things, I thought it might be constructive to look at just the "things" that are being affected by a dollar that began losing value back in February 2002. By looking at the data table, you can see that the bull market in commodities began roughly in the second half of 2001 and the first half of 2002. During the same exact time frame, the dollar topped out and has been in decline ever since. These rising commodity prices will eventually result in some big inflation of consumer goods. Just ask yourselves if these are all going up in price, or does it just take more money to buy the same "stuff" because the money is not worth as much.

With more time it would have been interesting to see the commodity price increases on an annualized basis since the duration of each commodities bull market varies. For now, we can at least see the enormous increases in energy costs. Just three and a half years ago oil was under $11 per barrel, and now hovers around $30. High energy prices are going to make it difficult to keep costs down and grow the economy. Also note how the price of silver lags the other commodities by a bunch; $4.50 has been holding nicely, so it's time to do some catching-up. Once it starts, it will move very quickly.

Actually, one of the biggest things that hit me this week was the revision in first quarter GDP. I haven't heard much commentary on it, but the revision was HUGE, as the number was changed from 1.9% growth to only 1.4%. As it stands, economists are projecting growth of 3.3% for the third quarter and 3.5% for the fourth quarter. How can we possibly get there? They are revising first quarter way down, and saying the growth rate will more than double in the second half. I think they're stretching things a bit, unless the Fed has plans for really crankin’-up the money pump.


Black Blade: My sentiments exactly! I am sure everyone here already knows my take on energy and precious metals by now. Of course the cost of energy will make or break or break the economy as these costs drop straight to the corporate bottom line and deprive consumers of discretionary income for nonessential items (and sometime essential items too). With the so called "economic recovery" hinging on such razor thin growth numbers (if you really believe them in the first place), a relatively small rise in energy costs will leave the economy flat on its back. That is why there has been so much urgency in Washington DC lately with an emergency meeting to strategize over how to solve the looming NatGas crisis, a push to pass the President's "energy policy", the Federal Reserve chairman discussing natural gas shortages ahead of monetary policy during the most recent "Humphrey-Hawkins" testimony before Congress, deepening concern over the lack of oil production in recently conquered Iraq, etc. Even so, Wall Street has not really given much notice while crude oil, distillates, and natural gas hover at much higher prices at a time of the year when those prices are usually the lowest.

Then there is that last paragraph posted above from Hartman's Market Wrap. I too was amazed that Wall Street and the financial media just blew it off as Hartman is correct when he says that the GDP "….revision was HUGE". Without at least 5% GDP growth (to offset the booming surge in current account and trade deficits) the economy really can't grow. Certainly the economy can't even keep pace if GDP is projected to grow at such a pathetic rate. Somehow the US dollar has remained strong against other major currencies – but wait! How can that be?

Simply put the dollar isn't strong but rather the other currencies are just that much weaker than the weak dollar. The "currency war" should be a major concern for Wall Street as well, but here again the primates who run the street are asleep at the wheel and merrily proclaim "all is well" and even predict that grossly overvalued stocks are "cheap" and will rise to new highs in the "second half". Then too they talk of growing productivity – growth by cutting costs from firing workers and therefore fewer workers carrying the load – thus the remaining workers are more productive. The Federal Reserve even mentioned how GDP growth of greater than 4% is needed to create jobs (actually a higher rate of growth than that is needed but the miracle of statistical massage can make it appear to be much less).

Now that the Fed is for all practical purposes has run out of ammunition as far as further rate cuts are concerned, what is left in the arsenal? That leaves only massive dollar creation, especially with the "bias statement" following the latest interest rate cut clearly indicating that the Fed is more concerned about deflation than inflation. The plan is to "create inflation" presumably by creating an abundance of dollars. Then we hear that the Fed can use "nonconventional means" as a weapon to stimulate the economy – now we are talking of venturing into uncharted waters – talk about economic uncertainty! OK, so I have ranted longer than most can bear, but the long and short of it is that the price or value of commodities (or as Puplava says – "things") should rise and the value of precious metals should explode wildly upward no matter what the Fed and Treasury do. The very thought of George Bush and John Snow reaffirming their administration's commitment to the "strong dollar policy" is utterly laughable. Such a concept defies all logic and reason. Invest very selectively and position yourselves for a Hell of a lot of economic upheaval. As always, get out of debt and stay out of debt, stash some emergency cash for several month's expenses, accumulate Gold and Silver portfolio insurance, and start a nonperishable food and basic necessities storage program.


spotlight (6/27/03; 22:16:09MT - usagold.com msg#: 105157)
Convertble bonds
Gold mines issues of convertible bonds.
Anyone:
I would appreciate recommendations of a convertible bond in a
good producing gold ming company.

Sundeck (6/27/03; 22:15:04MT - usagold.com msg#: 105156)
Malaysia Advocating Switch To Euro
http://www.khilafah.com/home/category.php?DocumentID=7651&TagID=2
Snips:

"...
Malaysia, whose currency the ringgit has been pegged to the U.S. dollar since 1998, has become an unlikely advocate for the Euro.

Of late, the oil producing Malaysia has been advocating a review of international oil prices, currently denominated in dollars, to protect oil producers from the uncertainties of the currency market.

And Prime Minister Mahathir Mohamed has also been urging the private sector to use the Euro in their export trade believing the dollar was likely to depreciate further. Malaysia's largest trading company Petronas is estimated to have already lost about $159 million in profit because of the depreciating dollar, and Mahathir indicated last month the country was "earning 25 percent less" in revenue as a result of the weakening dollar.

The Malaysian statesman has never forgiven currency traders for bringing the country down to its knees in 1997-1998. During the Asian financial crisis, speculators send the ringgit from 2.5 against the dollar to 4.8, while the Kuala Lumpur Composite Index plunged from over 1,000 points to less than 300 points. Between the devaluation and the practical collapse of the Kuala Lumpur Stock Market, some $200 billion in market capitalization was lost.

...

All this emphasis on the euro is obviously music to the ears of the Europeans and the European Commission has welcomed suggestion for the private sector to use the euro in export trade. The EC's Ambassador to Malaysia Thierry Rommel told the local press it would be right to adopt the euro now due to the excessive depreciation of the U.S. dollar.

"With the ringgit pegged to the US dollar, Malaysia is 100 percent vulnerable to the fluctuations of the dollar and the ringgit is completely in the hands of the U.S. dollar," the ambassador said, suggesting a diversification into a basket of other international currencies was the best alternative."



Sundeck: Malaysia is only a small player on the world energy stage and Mahathir is leaving soon, so it is probably OK for him to be a strident and overt supporter of a switch to Euros. However, the real question is: "How much coordinated support is building for a change to Euro-denominated oil transactions?"

The great majority of oil reserves resides in Saudi Arabia, Iraq, UAE, Kuwait and Iran. Britain, the US and Australia - Bush's pet ~mouse:> - now have a massive military presence centrally in this region. Given the looming world energy crisis, I suspect they will not be easily dislodged. Other oil producing countries will have to weigh-up very carefully whether, pragmatically, it is worth their whiles rocking the oil boat in the sea of US dollars.

Must be some interesting shuttle diplomacy going on around the world at the moment...

:-)


silvercollector (6/27/03; 21:55:15MT - usagold.com msg#: 105155)
Belgium
I read your post and to be completely honest I can't get past the image of FOA declaring why gold SHOULD be worth much, much more back in 1997/1998. Where is he now?

Granted gold is worth a little more than in 1997 but where is that 4 digit stuff promised 5 years ago?

You don't need to tell me what I believe, I will tell you first hand. I am Joe Six-Pack, the real McCoy. I am a brazen John Doe, a little smart for my britches, a couple dollars to blow because I have worked and saved diligently. I want my couple dollars to earn me a million, I am not an ego-maniac, I am proud and I have seen the bullsnot that's been going on in the courts and newspapers for the last few years. I work in the I.T. world so don't attempt to snow me with techno-babble, I've been there, got the T-shirt. I did the Y2K panic, I fixed the servers and the periherals, don't tell me the economy is a little slow. I had a broker for a while until I fired him so I know the drill.

I measure time the same way Cavan Man measures boxes so I believe what's in front of my eyes. We can't confirm how much silver is coming out of China so why do we need to assume how much gold is going in? We have no numbers on China so why do we pretend to know, we state it's numbers when it's to our advantage? I've heard the new gold exchange is a double-edged sword, apparently there's an abundance of new money waiting to bring new supply to market. No one dares to mention the vast supply coming out of China, 'free' enterprise is a two-way street , yes?

So since I'm John Doe, JP6 Pac, let's play a game this week-end. For sport shall we. When John Doe decides to buy gold this thing will take off, this tidbit has been discussed and agreed numerous times.

Let's pretend that I am representative of thousands and thousands of pre-born gold bugs and perhaps dozens and dozens of lurkers on this board.

Why do I, John Doe need to buy gold and what is the most obvious, compelling reason?

Thanks.



glennh10 (6/27/03; 21:15:29MT - usagold.com msg#: 105154)
For those of us who "opt out" of the paper system
There were some interesting discussions yesterday about how TPTB might take a dim view of those holding gold when the paper system finally cracks and lets go. No doubt, we won't be loved for taking steps in advance to protect ourselves, to survive and perhaps prevail outside the almighty "system". Thinking people they don't need, or appreciate.
For those posters who might be old enough to remember the coin shortage of the 1960's (or have heard about it), here's a related story. The mint started clad coin production in July 1965. Although a serious coin shortage existed, the gov't asked the commercial banks to separate the silver coins they received from commerce, and return them to the Fed, and exchange them for the new clad coins from the Fed. While this was going on, they blamed the cause of the coin shortage on collectors, who, they claimed, were hoarding silver coins! I was a collector, and I was in also contact with other collectors. At that time, I knew of none who were in possession of any substantial quantity of silver coins (other than date and mintmark specimens). There's an interesting book (out of print) about clandestine silver coin melts that took place during the late 1960's, "The Big Silver Melt", by Henry A. Merton, 1983. It reads like a work of fiction. It also has tables of coins (dimes, quarters, halves) by date and mint mark,estimating the maximum remaining.

Anyway, I would bet a (very small) gold piece, that when the time comes, we'll be blamed for either (1) causing the "problem", or (2) frustrating the "recovery". One's preparation includes (1) gathering some gold (or silver) insurance, and (2) be ready to be (unjustly) blamed or accused. It will be fun and interesting, to say the least. Cheers.

steady (6/27/03; 19:48:25MT - usagold.com msg#: 105153)
planetary gold
Nasa to search for gold on uranus!

CoBra(too) (6/27/03; 18:28:06MT - usagold.com msg#: 105152)
Gangreenie ...
Belgian's quote:
"Flood the globe with green paper, so THEY * HAVE * TO USE IT !!!"

I would put it into a slightly different context. Flood the world until there's no way to get rid of it! ... and that may be why the rest of the world is still mesmerized - as the rabbit in front of a coiled CoBra - to escape the toxic, or risk to its organic (systemic) collapse!

Tourniquets may help for a short while, though in the end, if you don't get the real antidote - all sysgems will lock up.

The only antidote to the berserk use of the FED's printing press is real money - GOLD!

After - party - thoughts ... cb2





TownCrier (6/27/03; 16:17:35MT - usagold.com msg#: 105151)
Federal Reserve intervenes today, adds $8 billion
Today's open market operation took the form of five-day repurchase agreements, 60% of which was collateralized by mortgage-backed securities accepted at a rate of 1.140%, significantly above Treasury collateral accepted at 1.049 which backed 20% of the operation.

R.

Dollar Bill (6/27/03; 15:38:53MT - usagold.com msg#: 105150)
'$_$'
http://jessel.100megsfree3.com/RepoActionAnalysis.jpg
Link is to a chart of Fed Repo action

Belgian (6/27/03; 15:10:34MT - usagold.com msg#: 105149)
@ Silvercollector
You believe in the "status quo" and strongly doubt that a massive revaluation of POG (into the thousands $-€) will correct, drastically, that status quo !
I do think that we do approach Big changes that will look different than what we have known up until now. There is NOT only ONE reason, but thousands of reasons, why this change will happen ! We are constantly summing up these reasons, overhere. Extremes do stop the small cycles that you mention, and put an end to a BIG Grand cycle. More precisely, and end to the present world's " $-reserve-currency".

The dollar is "your" currency but it is the world's "reserve" currency ! Call it our "second" currency.
The currency in wich we are supposed to "capitalize" (Yep, Gresham). The "real" meaning of dollar-standard" doesn't exist anymore ! You and many other people, with you, seem to think that this is simply impossible, and therefore Amen.

On the subject of "different" price-inflations, one can fill another library. An enormous confusing subject, not in the least because of hysterical interventionist manipulation
of these price-inflations as the consequence of permanent currency depreciation. The dollar(reserve) wants to remain the "standard" and will keep trying to remain so for ever.
With any means (falsifications-coercion) and at any cost !
Absolutely normal for an ambitious America, but increasingly less normal for a growing part of non-Americans ! And it is here that you seem to have your major doubts. It keeps me argumenting...friendly smile !

One of the latest, going to extremes "extremes", that struck me was...Servicing $-Debt, takes 15% out of GDP ! 1,7 Trillion $ per year to serve the Debtberg. More than 15% out of the US GDP of (+/-) 10 Trillion $. If we should compare GDP with revenue ...many businesses would sign for a profit range of 15% on their revenue. May I call this debtberg an "extreme" situation that the dollar...dollar-reserve...dollar-standard is carrying !?
Do you think that this will go away with another cyclette (little cycle) ? No Sir, it will get worse, up until it cracks.

Note that China is increasing its CB reserve-level ! No details of course. What does this say about the ($) currency in wich the chinese are making their fortunes ?
The liberalization of Gold in China has as main reason that they know very well how important fluctuating currency exchange rates are for world trad dominance ! They play this currency game-war for as long as it works and produces enormous profits for them. The 1,2 Billion chinese are a very ambitious group of folks with high aspirations on world dominance-independance. And they are not the only ones who prepare-anticipate the dollar's demise from its reserve function and standard status.

This is the main idea behind Gold's future im-studentical-o.

A big majority around the globe never attached much "value" to their local currency and up until now, capitalized on/with their second currency, the US$. The chinese clearly signaled they are going to prefer Gold above the dollar, not as their second currency but as consolidation of their individual/state, wealth ! They have many reason for making this choice. They suspect that the dollar is not credible anymore and will collapse as the last standing man, standing no more. Imploding under its own accumulated DEBT !
Debt, created for the sole purpose of surviving as reserve currency for as long as possible. And up until now, the globe agreed, fulhearty with this principle.

That is why we can't point to one particular "event" (or timing) that will cause the dollar's demise.

But slowly and surely, less and less people, are "using" the dollar ! The dollar's master wants to counteract-neutralize this with its different policies of "dollarization" (cfr. Iraq). Flood the globe with green paper, so THEY * HAVE * TO USE IT !!!

Amen.




TownCrier (6/27/03; 14:35:33MT - usagold.com msg#: 105148)
Gold, Fed rate cuts, and negative real interest rates for the dollar
http://www.usagold.com/gildedopinion/Congdon.html
A few Reuters excerpts:

HEADLINE: COMEX gold steadies before weekend, quarter end

NEW YORK, June 27 (Reuters) - COMEX gold recovered Friday from a new 7-week low and disappointment over Wednesday's smaller-than-hoped-for U.S. interest rate cut, with options-linked buying and quarter-end squaring helping to steady prices.

The gold-currency relationship was not as tight as it has been lately, with bullion starting higher even before the euro tried to rally back from its own 6-week low to the dollar.

Gold has benefited from the Fed's 13 easings since 2001 and the fall in nominal U.S. interest rates to 45 year lows this week, which have brought negative real rates and eroded the value of the dollar.

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

Set against this modern context, in our latest addition to the USAGOLD Gilded Opinion, Tim Congdon wrote nine months ago the following assessment on the topic of returns and negative real rates as part of the overall reserve currency equation and international decision-making process.

"...this study has argued that dollar has to fall heavily against other leading currencies, with its exchange rate down by perhaps between a quarter and a half, to facilitate a resource shift of 4% - 5% of GDP into the USA's balance of payments. On the one hand, the dollar seems irreplaceable; on the other hand, it looks thoroughly unattractive. How is the conundrum to be resolved? And is this where gold can make a comeback?

"Much will depend on the return on dollar assets. It is worth emphasising that the dollar may be losing value relative to, say, the yen, but dollar bonds could still give a better overall return than their yen-denominated alternatives because they have a higher yield. If the yield on dollar assets rises to persuade international money managers to keep them, dollar assets will remain worthwhile investments even in a weak-dollar environment. Gold has the serious disadvantage that, by itself, it offers no yield. It is true that an income return can be secured nowadays by gold loans in the derivatives market, but the return is modest compared with that available in dollar bonds. Gold could overcome this drawback only if the real return on dollar paper assets were to be hit by rapid inflation. If inflation were to exceed the interest rates on dollar deposits and bonds (as it did in the 1970s), the negative real return on dollar assets would cause wealth-holders around the world -- including governments and central banks -- to reconsider the investment merits of gold. If the gold price were rising in line with or faster than the general price level, the return on gold would be above that on dollar paper assets. Gold would again be a more attractive reserve asset."

"...it must be true that a sudden collapse in the dollar's external value is likely to feed back to the USA's domestic inflation rate. As Preeg has warned in The Trade Deficit, the Dollar and the US National Interest, the most serious threat from the payments deficits is "the familiar syndrome of financial markets tending to overshoot equilibrium levels when reacting to perceived imbalances," with the result being "an excessively large decline in the dollar". Although policy-makers around the world accept that exchange rates are set by market forces and are understandably reluctant to meddle with currency fluctuations, they need to be alert to the dangers of continued large American payments deficits. They cannot avoid the message that such deficits will have to be countered -- sooner or later -- by a fall in the dollar; they also cannot deny that, if the dollar's fall is too large and compressed into too short a time-scale, it will raise American inflation and shatter the confidence in paper assets built up in the 1980s and 1990s."

Visit the URL given above to access the Congdon analysis.

R.


TownCrier (6/27/03; 13:58:10MT - usagold.com msg#: 105147)
Yen overnight rates hit record negative low
http://biz.yahoo.com/rf/030627/markets_japan_callrate_1.html
HEADLINE: Japan overnight call rate weighted avg at -0.004%

TOKYO, June 27 (Reuters) - The weighted average of Japan's key overnight unsecured call rate fell to a record low of minus 0.004 percent on Friday, the Bank of Japan said.

Negative rates have been common over the last several months in Japan's money market, where a vast majority of market players want to, or need to, lend cash and few need to borrow.

Negative interest rates have emerged as banks lend funds at negative interest rates rather than keeping money at the BOJ.

These banks do not lose money and can afford to lend at a minus rate because they have access to funds carrying even bigger minus rates in the euroyen market using currency swaps.

The BOJ's "quantitative easing" policy has made some foreign banks uneasy about leaving too much money in their BOJ account, fearing the central bank's policies could damage its balance sheet.

The Bank of Japan has been flooding the market with a huge amount of liquidity -- about 10 times more than it needs to operate normally -- as part of its quantitative easing policy.

----(see url for article)------

How long will the Japanese people, collectively with massive paper savings, continue to have enough confidence in the yen's future value to prevent a larger rush to gold?

Call Centennial today and beat the rush.

R.

Topaz (6/27/03; 13:38:37MT - usagold.com msg#: 105146)
@Boilermaker.
The Dollar trend reversal had legs before the rate cut B'maker and I don't think, given the size of the Global FX Market, we'll see a return to the 92-94 Index area any time soon.
The Euro (60odd % of the Index) may be suffering a lack of confidence as a result of the Trichet pre-announcement...and of course there's the deflation thing, which is consistent with a Bond sell-off. (flight to Cash)
Empirically, with the Fed now enarmored, via the Discount Window, to put on a Welcome Home Parade for Big Float, I'd expect to see the yield curve reflecting a contrived normalcy from now 'till the Election...and Euro parity between now and then. Gold, under this scenario, will meander down to 320...Dow 10K and all will be just peachy...BUT! ...at ANY moment, it could blow up in their faces....DON'T WAIT to secure your Bullion Immunity Shot.

USAGOLD / Centennial Precious Metals, Inc. (6/27/03; 12:55:36MT - usagold.com msg#: 105145)
Build your base with bullion... at our cost + 1% ($3.50)!
http://www.usagold.com/gold-coins.html






a nation of one (6/27/03; 11:21:05MT - usagold.com msg#: 105144)
@silvercollector (6/27/03; 09:29:55MT - usagold.com msg#: 105138)

"So the system is now erratic, out of control, a monstrous bubble containing a collective of asset bubbles. Where do we go from here, what is the endgame?"

*** When a wheel wobbles, it usually falls off.




Socrates964 (6/27/03; 10:46:04MT - usagold.com msg#: 105143)
Euroyen carry trade
If my analysis below is correct (i.e. that Japanese institutions have been backing up the truck with treasuries) they must be in the process of having their heads handed to them on a plate given today's sell-off.

Mr Gresham (6/27/03; 10:17:40MT - usagold.com msg#: 105142)
missed a thought below
"Because it forces people to bet against themselves -- and each other -- that their money will be safe on loan to the banks."

It puts the onus for not collapsing the system onto the PEOPLE themselves, rather than the fiduciaries who are supposed to be holding their savings. The message is: "If you try to take your money out, you'll collapse the system, you won't get it, and IT WILL BE YOUR FAULT!"

Wow! I really want to play in a game like that. But big scams, big lies, have a way of catching on in human culture, and having longer-than-deserved life cycles, don't they? Why IS that?

And the recent hints of threats to TAX their bank savings that are not being spent -- why, that goes right along with Zero Reserves and 1% interest rates, doesn't it? That piece of idiocy is the criminals attempting to browbeat the public with a backhanded confession to what they have done already: disappeared your savings.

Next, we'll be treated to a round of media touchyfeelies about upended financial/Enron types seeking therapy, changing "lifestyles", getting in touch with their "Inner Banker", attempting to "start over" after the Great Banking Collapse. Awwwwwwwww.... (As I complete this thought, repulsed as I am, I realize that this one is likely to come true. Watch for it! Yeccch!)

Meanwhile, the tone I'm hearing from them is: "Let's hurry up and get it over with. You've been taken. Even we are bored with our game. Let's get the next one started." All the panache of a peep-show operator in Times Sq. (which is probably where a lot of
middle America's hard-earned investment cash entrusted to Wall St. ends up)

As you can see, I AM Mogambo'd out -- time to get out for a walk in some fresh air...




Socrates964 (6/27/03; 10:11:10MT - usagold.com msg#: 105141)
Boilermaker
Not an expert on Euroyen, but the fact that there are no takers for Euroyen suggests that the market expects the Yen to appreciate against the dollar. Otherwise it would be a lucrative carry trade.

This may be because Japanese banks bought loads of treasuries, hung on for funding until the last minute in the hope of cheaper $ funding (on the back of the Fed decision) and created a log-jam of demand.

If the US$ strength is the result of this process, then the implication is that it will weaken again from early next month onwards, although I don't know enough about the market to judge whether the size of the above effect would be significant.



Mr Gresham (6/27/03; 09:42:18MT - usagold.com msg#: 105140)
Why is fractional reserve banking dishonest?
http://www.dailyreckoning.com/
Because it forces people to bet against themselves -- and each other -- that their money will be safe on loan to the banks.

With 100% reserve, no problem. 50%, or 20%, or some such, might be manageable under the predictable cycles of commerce that create demands for liquidity. (Farming seasons used to have a big cyclical effect on banking liquidity in the 19th century.)

But ZERO? What does that do, or say, to us?

They are MATHEMATICALLY FORCED to watch for signs that their money might disappear in a panic, ("why, Bill; your money's in Bob's house over there, and Fred's" -- had to get that Jimmy Stewart classic out of the way ;)

Mathematics screams at them to be on alert, but they are coached by authority not to worry. And -- THEY DON'T! What a set-up!

The present effective 0% reserve is impossible to sustain -- forever -- unless people resign themselves to losing the real value in their deposits every so often.

But I guess it goes along with (sub-) 1% interest rates. Heh-heh.

Think about 1% interest. At a certain point in life, you are discounting your remaining years of life. If I wanted to retire at 60, and had no savings, but could borrow a million dollars at 1%, I would be crazy not to. (I know, a 20-year loan would cost a few points more.) I'd NEVER HAVE TO WORK AGAIN! I'D BE DEAD BEFORE I HAD TO PAY IT OFF. And, especially if I converted my new "savings" to the right form.

Sorry for shouting, but I think I've got Mogambo overdose (link above) -- the guy is trippin' lately! And who can forget the 5-word summation to his previous Nobel Prize essay: "Buy gold, you freakin' moron!"


admin (6/27/03; 09:30:51MT - usagold.com msg#: 105139)
MK's Gold Commentary & Review
http://www.usagold.com/AMK/MK-gold.html
Updated.

New QuickNotes.
New Important Links: The Longshoreman-Philosopher, Eric Hoffer, a tribute by Thomas Sowell


Introducing "America's Deficit, the Dollar & Gold" by Dr. Tim Congdon, now available at our Gilded Opinion Page. An important 52-page essay.

From QuickNotes:

"The upshot of Dr. Congdon's analysis is that foreign governments may opt to acquire gold reserves in the face of on-going dollar weakness -- as the last standing logical alternative to inflated currencies. That by the way coincides with Nobel prize-winning Robert Mundell's similar conclusion. The search for gold reserves though presents a nettlesome problem: Any central bank wishing to obtain gold will have to do so from out-of-the-ground mine production or from investor holdings. During the last shift in gold reserve balances in the 1960s and 1970s, the United States sent a substantial portion of its reserve to the Europeans (roughly 12,000 of 20,000 tonnes). There is no such ultimate gold provider this time around."

Dr. Tim Congdon was at one time one of the so-called 'Wise Men' advising the Blair government on economic policy. Our thanks to Dr. Congdon and the World Gold Council for kind permission to reprint this article. There are also some interesting theories as to where the dollar is going vis a vis the euro -- theories proven to be absolutely on the money thus far.

____________

silvercollector (6/27/03; 09:29:55MT - usagold.com msg#: 105138)
Belgium
There was an essay not long ago that discussed the concept of inflation a la devaluation of confetti.

The question was raised that if, for example, over a generation from 1970 to 1995 ALL assets and prices increased by a factor of 10 and if because of this 'controlled' inflation debt was being made smaller then what would be the harm.

It is apparent that the inflation/devaluation has become fractured, asset inflation has not filtered evenly across the board, SM soar , then bonds soar, then real estate soar. It is the bubble syndrome that many write about. The bubbles are created, exist and are burst. The crooked and inside fed monsters are 'in' the correct bubble at the time of inflation and leave coincidentally just prior to the bursting. It is the poor laymen that gets caught on the wrong side of the bet during each bubble era.

So the system is now erratic, out of control, a monstrous bubble containing a collective of asset bubbles.

Where do we go from here, what is the endgame?

TIA

Mr Gresham (6/27/03; 09:20:14MT - usagold.com msg#: 105137)
Capital Formation
You see, the absence of capital formation IS the psychology, and the condition, of Third World countries. So that is where we are headed.

In 3rd world countries, guys stand around on street corners exchanging various currencies that are under differing degrees of gov control or pressures. (In response to previous gov or financial elite mistakes or plunderings.)

We are a bunch of currency speculators, if you will, which is pretty much the end result of finance capitalism in the absence of capital formation being applied to real, productive businesses.

We are speculating on the return of a sound currency, but if your crystal ball had told you, in 1980, that humanity was about to embark on another surge of fiat mania, you would have held your nose and wisely placed your bets in that arena.

Being a street-corner moneychanger is a dicey occupation, but it is the REAL CONDITION of finance under a currency regime change. Get used to it.

I'm not sure where I got off from my original thought of Capital Formation, but I realize upon asking myself, that I am very able to think of examples of the opposite, which is what I have seen all around me most of my life.

(FOR EXAMPLE: Is the promulgation of oil-drilling and refining equipment to extract a disappearing resource for frivolous consumer use a shining example of net capital formation??? Individually, yes; societally, no.)

I have NOT seen many examples of real capital formation in public view in recent decades of finance capitalism. (I think most real capital formation must happen QUIETLY(!), out of the spotlight, and away from the headlines.)

(I have also seen some impressive comparisons of ethnic communities forming, and de-forming, capital among themselves. Korean and Chinese immigrants as the star examples. African-Americans taking backward, or mis-directed steps.)

In the absence of a well-learned roadmap to capital formation among us less-disciplined races (tee-hee -- watched one too many films lately about the Brits "taming the wogs"), the best form of capital management is to hold your "currency" in physical gold, until we can get legs under our economic behavior, and capital can be put to productive use.

There has always been risk in employing capital, and gov has always interfered at various levels, to varying degrees.

It's just that now, when you hear the sirens in the distance, it's a good time to gather your winnings, walk out the back door of the casino, and be out taking an innocent neighborhood walk in the night air.

silvercollector (6/27/03; 09:18:35MT - usagold.com msg#: 105136)
Belgium, Ari
A couple quotes from the esteemed:

"Do people "really" know-realize, that price-inflation has very little to do with the costs of the products-services, but... EVERYTHING WITH THE PERMANENT DEVALUATION OF CONFETTI !!!"

"How safe do you think your individual wealth will be in the form of money, paper, and contracts when the whole solvency of the U.S. is called into doubt?"

Belgium,

I think more realize what you're saying than you give credit for. The cheeseburger phenomona has been discussed often. We collectively kicked around the concept of all items that are 10X more 'expensive' since the '70's. I believe everyone appreciates that a gallon of gas remains a gallon of gas, it is the 'confetti' that has shrunk. Another concept that has been toyed with most extensively is the 'pockets' of inflation. If indeed the confetti has shrunk by a factor of 10 let us say for example, why have numerous items inflated 10 times while others have inflated less or not at all?

Ari,

I imagine my 'paper' assets will be on thin ice "when the whole solvency of the U.S. is called into doubt?" Let me ask a question or thirty. Why will the solvency of the U.S. be called into doubt? Are there not numerous countries in a similiar or worse 'boat'? Will the U.S. be the first country to be called into doubt? Is this why it is prudent to leave U.S. assets now? Is it imminent that U.S. solvency will be questioned? Will the U.S. be able to satify creditors or will there be a paper avalanche? Is it imminent that U.S. confetti, namely the U.S. dollar, will burst into flames and we will have harmful inflation, a la hyperinflation? Is this imminent, is this a guarantee? Will other fiat currencies such as the Euro, the Yen, other 'dollars' etc. experience the same fate or is this upcoming crisis limited to the U.S. dollar only? Why? When? How do we know that gold is the ticket? If energy is the up and coming crisis of the next generation why not hold proxies for energy? Are the oil producing countries buying gold because when the oil is gone only gold remains? Is gold a proxy for energy?

TIA

Tevye (6/27/03; 09:16:01MT - usagold.com msg#: 105135)
(No Subject)
!
"price-inflation has very little to do with the costs of the products-services, but... EVERYTHING WITH THE PERMANENT DEVALUATION OF CONFETTI "

Thanks Belgian. It's nuggets like this that keep me reading the forum.

Gold. Its tradition!
Tevye.

a nation of one (6/27/03; 08:30:46MT - usagold.com msg#: 105134)
@ Boilermaker (6/27/03; 05:48:37MT - usagold.com msg#: 105133)

I think it means that present dollar activity is based on what the dollar did in past years, during this season,
and that it isn't related to anything of substance. The explanation also describes certain tactical needs
perceived by the entities involved. These moves would be, therefore, artifacts of minor technicalities,
manifesting due to traders' methods. While such actions can have an effect, as we see, the underlying
realities remain unaffected.


Boilermaker (6/27/03; 05:48:37MT - usagold.com msg#: 105133)
Negative Interest
http://biz.yahoo.com/rf/030627/markets_japan_minusrate_2.html
Snip
Reuters
UPDATE - Overnight euroyen rate tumbles to minus 9.0%
Friday June 27, 6:16 am ET
By Yoshiko Mori

TOKYO, June 27 (Reuters) - The overnight interest rate in the euroyen deposit market fell sharply on Friday to minus 9.0 percent -- a world record negative rate -- as non-Japanese banks got out of yen positions ahead of half-year book-closings.

The drop in the yen rate also reflected, via currency swaps, a seasonal rush for funds in the dollar market.

Many institutions, particulary Japanese banks, had waited for a widely anticipated Federal Reserve credit easing this week before securing funds for June 30 book closings.

comment
Does this suggest recent $ strength is due to seasonal factors and will reverse next week? If so the POG may respond accordingly. Could one of our currency experts please explain what this means?
It also suggests that fiat currencies are becoming more unstable. Sort of like rearranging the deck chairs on the Titanic.

Belgian (6/27/03; 02:02:11MT - usagold.com msg#: 105132)
@ Ari # 105113 (Batman/Meyers/Leigh)
More of the same...Do people "really" know-realize, that price-inflation has very little to do with the costs of the products-services, but... EVERYTHING WITH THE PERMANENT DEVALUATION OF CONFETTI !!!

Combine, "debt" and "devaluation" and realize on "what" this "MODERN", global economy, is builded upon.

One never gets the "equal" value in barter-terms for his/her production or service. Rising debts and increased depreciation of the confett-numeraire for settlement is a downwards spiral. Each next one gets less "value" than his previous producer.

This is what they WRONGLY call "inflation" wich should rather be named GENERAL DEVALUATION ! But this term sounds oh so terribly negative because it names the "system" on wich the global economies do thrive, now and in the past.

The more we must live with the "wrong" (false) notion of "profit", the more this particular economic system must be kept on running with an ever increasing degree of general-concerted "Intervention" that rises in complexity and becomes therefore un-manageable.

I think that the evolving dollar-management is bringing us much closer and faster to the impossibility of further good Interventional management. The chances of a general systemic collapse do increase dramatically if and when the global economy stays at it is now for much longer, and/or detoriates even further. Things will become absolutely un-manageable and drastic measures will be needed to bring drastic changes. Needles to remind how Gold fits into all this high probabilities.

Note how many (all) analysts (?) run out of "diagnosises", to explain the causes for what is happening ! A strong indication to me that they don't dare to bring up the "real" reasons for the increasingly, more strongly percepted, malaises.

There is much,... MUCH more, going on, out there, than the simple unwinding of the known,, many "bubbles". Those same
detoriations that always existed, are rapidly evolving into "extremes", not locally but globally ! And therefore much more likely to become un-manageable, anymore.



Topaz (6/27/03; 00:18:22MT - usagold.com msg#: 105131)
Dollar, Bonds and Gold.
http://www.futuresource.com/charts/multicharts.asp?symbols=DX1%21%2CTYXY%2CFVXY%2CGCM03&period=D&varminutes=&bartype=line&bardensity=LOW&r=&go.x=9&go.y=9
DX (Sept) is halted from 2200 'till 0300 (or thereabouts) explaining the anomoly Spot/Sept. Usually 40 odd points above Spot...Watching this spread with interest.

Topaz (6/27/03; 00:10:39MT - usagold.com msg#: 105130)
How high the Moon?
http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=d12
We see the 50 day MA crossed and another sharp decline in Bonds in the offing which bodes well for Cash-Dollar Bulls. If the momentum isn't continued ie: Yield rise-Dollar fall...well, it won't be pretty!
Will follow up with $/B/G Link.



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