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ARCHIVED DISCUSSION FROM 6/28/2000
All times are U.S. Mountain Time

(Yesterday's Discussion.)

SHIFTY (06/28/00; 23:49:17MT - usagold.com msg#: 32981)
Gandalf
http://www.remarq.com/read/32203/q_tWQh4DakAsAAAAA?idx=0&si=msg&q=%2BSouth+%2BAfrican+%2BReserve+%2BBank&srn=FIRST
Gandalf : This is a month old. I don't know if this is connected. I came up with this at dogpile.

$hifty



May 25, 02:26 AM
Good Ole Boy
Message 1 of 1
SA Reserve Bank Facility for Zimbabwe since 1987

CAPE TOWN -- The central bank of Zimbabwe receives an unconditional overdraft facility from the South African Reserve Bank, according to Finance Minister Trevor Manuel.
In reply to a parliamentary question this week, he said the SARB established the overdraft facility for the Reserve Bank of Zimbabwe in 1987.

It was renegotiated on an annual basis, and was last extended at the end of 1999, Manuel said.

The overdraft is fully secured by bills issued by the Land Bank of South Africa and purchased and held by the Zimbabwe central bank. -- Sapa

--
Regards

Brian
Umtata
Eastern Cape
South Africa



Gandalf the White (06/28/00; 23:17:49MT - usagold.com msg#: 32980)
Help
The Hobbits sure need help to understand what is going on here !!! -- Anyone care to try and explain the items in this quote ? -- TIA
<;-)
--------
"Meanwhile, the South African Reserve Bank confirmed that it had borrowed $1.5 billion in gold for credit facilities. Analysts and economists said the reason was that it was probably cheaper to borrow gold than cash. However, it is thought the gold in question was borrowed from a counter-party and at some 70 basis points above the gold lease rate. This was standing at the relatively high level of six per cent." (from Sir Shifty's last post)


SHIFTY (06/28/00; 22:42:12MT - usagold.com msg#: 32979)
Gold gains as pressure stays on US interest rates
http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B24225690C00689250?OpenDocument

Gold price gains have not surprised the market despite a decision by the US Federal Reserve to keep the lid on interest rates. The Fed warned, however, that inflation worries would not ease unless the economy started to slow. Economists have pencilled in August as the month when a hike in interest rates could be announced. In anticipation of the announcement, the gold price traded up more than $5 per ounce from about $285/oz earlier in the day in Europe to $292.20 per ounce in New York.

At the New York close, the latest ask on gold was at $292.70 an ounce. The metal moved up strongly in Europe earlier in the day as investors waited for a decision on US interest rates.

The response of gold must be pleasing to gold bulls who were alarmed at the apparent sluggishness of the metal earlier this year when the tech-rich Nasdaq took a tumble. Some analysts speculated that bullion had lost its allure as a traditional store of wealth once and for all.

Meanwhile, the South African Reserve Bank confirmed that it had borrowed $1.5 billion in gold for credit facilities. Analysts and economists said the reason was that it was probably cheaper to borrow gold than cash. However, it is thought the gold in question was borrowed from a counter-party and at some 70 basis points above the gold lease rate. This was standing at the relatively high level of six per cent.

"Our information is that the Reserve Bank is borrowing the gold rather than lending it out. It is probably just introducing some liquidity to boost reserves," an analyst said. JP Morgan economist Peter Worthington said investors were also still short and had been riding their short positions for some time. "Investors are quite likely still closing out positions," he said.

Despite the recovery in the gold price, South African gold equities showed some reaction. Although the All Gold Index was up 1.23 per cent to 1010.30 points. Harmony Gold, which moves strongly with the gold price, gained R1 to end at R37.50 a share on the Johannesburg Stock Exchange. Anglogold, the world's largest gold producer, gained R4.20 to end the day at R277.20 a share.
By: David McKay
Return to
Gold








Mr Gresham (06/28/00; 19:51:13MT - usagold.com msg#: 32978)
Gold Uptick
Hmmm... The Big Boys must be pretty close to having their other investments "distributed" and their private gold stashes, well, stashed away. "Let the GS and Morgan shareholders eat their shares, let the FRN holders eat their inflationary recession -- We've got ours. The paper game was good while it lasted, but it's our life's work to find and play the next good game in town. Let 'er rip!"

A saying from the world of Poker (which I could stand to learn about to aid my development of finance, negotiation, and more): "If you're in the game for 15 minutes and haven't figured out who the patsy at the table is, the patsy is you."




Leland (06/28/00; 19:45:45MT - usagold.com msg#: 32977)
Applause When a Newspapaer Will Print Something Like This!
Alice in Algorland

PAUL GREENBERG

Alice must have been asleep for the longest time, for when she awakened, it
felt like no time at all. Everything looked new and not nearly so frightening,
and she was very hungry. She remembered something about a curious tea
party at which she'd had no tea, and the other guests were so . . . well, she
must have been dreaming.
"It's -- About -- Time -- You -- Woke -- Up," came a loud, clear voice.
Alice looked all around, among the rocks and in the high grass, even
behind the tree she'd been sleeping under, but there was no sign of who had
spoken.
Then she stretched and yawned and thought of tea cakes and home, and
leaned back against the tree, and closed her
eyes . . .
"Don't -- Do -- That," came the voice again. "You'll -- Hurt -- My --
Trunk."
At that she looked up, for this time Alice was sure it hadn't been her
imagination. And there, so high up in the tree she could barely make them
out, were some eyes, and a nose, and some big shining teeth. The tree's
earth-tone leaves rustled in wooden gestures, and it seemed to be smiling. A
fixed smile. She knew it was rude, but she couldn't help staring. By now she
had talked to a gryphon and a mock turtle and a dormouse and a March
Hare and a whole pack of playing cards, but this was the strangest
animal/vegetable/mineral yet.
"Haven't -- You -- Ever -- Seen -- an -- Algor -- Before?" came the
voice.
"Oh, yes, sir, many times," said Alice, not wishing to appear rude, or
more mystified than she was.
"I -- Doubt -- It,'' said the Algor. "For -- There's -- Only -- One -- of --
Me --Though -- I'm -- Inevitable -- Inescapable . . . .''
And insufferable? thought Alice, though she was much too polite a little
girl to say so. She noticed that the Algor was still talking, slowly, loudly, and
yet his smile never changed at all. She wondered if it was painted on, but
hesitated to ask.
"Why do you speak so loudly?'' she asked instead. "And so slowly and
clearly?"
"So -- Even -- Silly -- Little -- People -- Like -- You -- ‚an --
Understand -- My -- Complex -- Thoughts -- About -- Global -- Warming
-- and -- the -- Internal Combustion -- Engine and . . . ." the Algor went on.
"But you sound as if you're talking down to people," Alice complained.
"Well -- How -- Should -- a -- Tree -- Talk -- to -- People?" the Algor
asked. "Up?''
Alice didn't know how to respond to that.
"Community outreach," a squeaky little voice said.
"What was that?" asked Alice, who was growing weary of strange
interjections, and getting even hungrier. She decided to pay no attention to
this latest distraction.
"Pay -- No -- Attention -- to -- It," said the Algor.
Naturally Alice immediately did, and suddenly, out from behind the Algor,
a strange bird came waddling out, sporting spats and a brown derby.
"Who are you?" Alice asked, for she'd quite forgotten her manners by
now, and didn't wait for a proper introduction. Though who would have
made it she had no idea.
"Al Batross is the name," said the new arrival, taking a puff on his cigar.
"What do you do?'' asked Alice, who had decided she'd never learn
anything about this strange place if she didn't ask.
"I just hang around the Algor and try to make him interesting," he said.
"Is that all?" asked Alice.
"It's quite a lot," said Al Batross.
"Don't -- Listen -- to -- Him," said the Algor.
Alice suddenly wanted to hear what Al Batross had to say.
"Community Outreach," said the bird, tipping his derby.
"What's that?" Alice wanted to know.
"It's where you sit around and pay $12,500 to have dinner with the
Algor."
"Not -- So -- Not -- So," said the Algor, his voice louder and slower and
clearer than ever. "Pay -- No -- Attention -- to -- That -- Little -- Bird --
Behind -- the -- Tree."
"Fundraiser," continued Al Batross, letting a little ash fall off his cigar.
"What's that?" asked Alice.
"It's where you sit around and pay $12,500 to have dinner with the
Algor," said Al Batross.
"It sounds like an awful lot," said Alice, wondering how many shillings and
pence that would make, and how many teacakes it would buy.
"Not -- So --Not -- So," said the Algor.
To which Al Batross only looked up and shouted:
"Fund-related Event!"
"What's that?'' asked Alice.
"It's where you sit around and pay $12,500 to have dinner with the
Algor," replied Mr. Batross.
"That's -- So," said the Algor. "That's -- So."
"But they all mean the same thing," said Alice.
"It's not the meaning but the words that count," explained Al Batross,
leaping up to a lower branch.
"Oh, I see," said Alice, not seeing at all.
"You mean you hear," said Al Batross. "You can't possibly see any
difference."
"Oh, yes, I hear," said Alice, now seeing nothing at all but a kind of fog of
words that was settling over the whole scene. She was beginning to feel a bit
dizzy.
"See no fund-raiser, hear no fund-raiser, talk no fund-raiser. Only a
fund-related event," explained Al Batross from his perch. And he added:
"No Controlling Legal Authority!"
"Who -- Said -- That?" asked the Algor.
"You did," replied Al Batross.
"I -- Did -- But -- I've -- Learned -- My -- Lesson," said the Algor.
"And -- I -- Will -- Never -- Say -- It -- Again."
He seemed so dejected that a few of his leaves came fluttering down.
Alice felt almost sorry for him till she noticed he was still smiling his smile.
"Oh -- I -- Do -- Wish -- that -- the -- Janetreno -- Would -- Hurry --
Up -- and -- Do -- Nothing," the Algor sighed.
"What's a Janetreno?" asked Alice, though she wasn't sure she wanted to
know.
"She's hard to describe," said the bird, tilting his derby to one side and
scratching his forehead. "She always does nothing but not until she takes her
sweet time."
"I see," said Alice, not seeing at all.
"Soft money," said Mr. Batross. "That's the ticket."
"It sounds squishy to me," said Alice.
"That's what I thought, too," said Al Batross, "but it's better than hard
money."
"I really don't know the difference,"
Alice admitted.
"Neither -- Did -- I," the Algor swore.
"Whatever you say," said Alice, but, like everything else in the woods, she
was no longer paying attention to the Algor.
"Stop -- Daydreaming -- and -- Pay -- Attention," said the Algor. "This
-- Is -- Important -- Everything -- I -- Say -- Is -- Important. -- Equally."
But by then Alice was on her way.
"I'm sorry I have to go," she shouted back, not meaning a word of it. "But
I have to find a rabbit hole."
"A -- Rabbit -- Hole!" she heard the Algor say in the distance. "That's --
Exactly -- What -- I -- Need."

Paul Greenberg is the Pulitzer Prize-winning editorial page editor of
the Arkansas Democrat-Gazette.

(With a Bow to Paul, And Fair Use Protections Apply)

TheStranger (06/28/00; 18:07:14MT - usagold.com msg#: 32976)
Inflation Update
http://cbs.marketwatch.com/archive/20000628/news/current/fed_preview.htx?source=htx/http2_mw
This is taken from CBS Marketwatch today:

"Speculation about the August [FOMC] meeting intensified Wednesday after the
Commerce Department reported a strong rebound in durable goods
orders in May, nearly reversing April's decline. April's drop had been
seen as evidence of a slowdown in factory orders, but now it looks more
like random statistical noise.

Another blow to the doves came Monday when the National Association
of Realtors said existing home sales rose 4.3 percent in May. That's
moving in the wrong direction and puts into question whether interest rates
are high enough to slow the economy..."

Stranger's Note: All one can say about Fed policy to date is that they have taken their foot off the accelerator. Clearly they have not applied the brakes. Yes, I know it is easy to criticise from the sidelines. The responsibility faced by the Fed is grave indeed, while we here can simply slip into the woodwork when we are wrong. But consider this: Greenspan cannot ignore energy prices the way Wall Street would like him to. To succeed, policy must now at least partially reverse increases in oil and natural gas as well as create at least some unemployment at the margin. Anything short of that may dampen the rate of growth, but it will not stop the proliferation of inflation. This is why so many respectable economists believe the term "soft landing" is an oxymoron.

The next shock to the markets will be the news THIS SUMMER that evidence of inflation is snowballing and that the economy is not slowing sufficiently to do much about it.

One corollary, if I may: the scenario I am describing (of slowing growth and more inflation) probably means, among other things, that the dollar is now past its peak for the time being and that the euro has finally made an intermediate term bottom. After all, growth in Europe is accelerating now and may even surpass that of the U.S. before this year is out. Could an evolving awareness of these developing realities be helping to pressure dollar gold prices upwards? Absolutely.

ORO (06/28/00; 16:25:59MT - usagold.com msg#: 32975)
Aircrew on banking question
"aircrew (06/28/00; 14:19:43MT - usagold.com msg#: 32972)
Banking question
I've been following FOA/TG's messages and have had a fascinating education to say the least, but many questions as to how and why (best left for another day). His postings led me to find out more about banking and I think I have somewhat of a handle on how it transpires. Could someone please tell me if the following scenario is correct or incorrect:

A Worker in my hometown recieves $1750 in cash for the sale of his vehicle and puts the FRNs in the Hometown Bank. The 1750 FRNs are put in the Hometown Bank vault, and become the basis (called the reserve ratio)for some amount of new lending ability for the bank.
Using a 1.75% reserve ratio, this lending ability comes out to be $100,000."
==> I should point out to you the folowing: 1. reserve requirements are only 0.9%, and apply only to M1 - demand accounts such as checking accounts (not money market checking) 2. CDs and other time accounts (not demand accounts) have no direct reserve requirement but for a 0.2% FDIC insurance deposit on the FIRST 100000.

"A Borrower wants a house from Seller that costs $100,000. Hometown Bank is willing to make a loan for $100,000 to Borrower. Hometown bank writes an ENTRY into Borrower's checking account for $100,000. Borrower writes a check to Seller for the full $100,000. Hometown Bank now removes the $100,000 ENTRY from Borrowers checking account and puts an ENTRY for $100,000 in Seller's Checking account. Borrower now must now make payment to Hometown Bank over a period of time, say 20 years."
==> The bank has a liability to Seller still outstanding:
Hometown bank:
Assets . . . . Liabilities
100000 loan . . 100000 to Seller
1750 deposit . . 1750 to Worker
. . . . . . . . . .100 to loan officer paycheck
. . . . . . . . . . 50 to cover mopney transfer paperwork
101750 total . .101900 total
Bank balance: -150

I want to make a point here, so lets look at this circumstance:
Seller's side:
Seller deposits his check at UBS in Switzerland and converts it into a Swiss Franc account
UBS sells the dollar check balance to Swiss National Bank for SF
SNB sells dollars to Fed for treasury note
The SF issued by SNB are backed by treasury note

Hometown Bank's side:
Faced with the draw of 100000 from Seller, they approach Big Time Bank that holds Treasuries and sell BTB the loan to raise "cash" (account balance at Fed) for settlement with UBS of Switzerland and the SNB.
BTB sells the Fed treasuries to raise "cash" to buy loan from Hometown Bank.
BTB later sells the loan as part of an Asset Backed Security - or Collateralized Mortagage Obligation Bond issue held by Worker's Pension Fund.
BTB will have cash and will park it for a short time in Treasuries till the next opportunity comes along

Fed's point of view:
Fed has printed up the "cash" in the middle of all this. It put "cash" in the SNB account for settlement with UBS of Seller's check. And the SNB cancelled the "cash" by trading it for Treasuries held at the Fed. Net result 0 new cash
Fed printed "cash" to buy Treasuries from BTB, that needed "cash" to buy the Loan from Hometown Bank, that needed "cash" to settle Seller's check.

Net "cash" created:
100000 dollars - backed by Loan now held at BTB pending securitization.
100000 dollars' worth of SF - backed by dollar treasuries held in reserve for SNB, say for the purpose of buying oil at some future date.

Treasuries essentially left the US and went overseas, and in process created dollars in the US and foreign currency. The point is that any security moving across the border creates cash, and that dollars and other currencies are created as a result of the cross border movement. It is also intended to show that the SNB is acting to undo the effect of Seller's investment decision in preferring SF to dollars by absorbing the dollar supply and issuing SF. It is a countermarket action that is as likely to be politically driven as it is to be economically driven.


Back to yours:
"For Worker's original $1750 FRN deposit he will recieve about $1400 over a 20 year period. For lending the money to Borrower the Hometown Bank will receive repayment of $100,000 Borrower initially borrowed plus another $100,000 in "interest" for a total of $200,000. Hometown Bank has an obligation to Seller to honor the $100,000 check drawn on Borrower's checking account and it must add to Worker's checking account the $1400 it owes him. This leaves, $98,600 ($200,000 - $100,000 - $1400) for the Hometown bank owners to use as they desire, i.e., hiring more tellers, or buying a new building, or distributing dividends, or just purchasing a new car for the bank president. In other words, from Worker's original deposit of $1750, Borrower labored for 20 years, and from HIS labors, Bank purchased real tangible assets. (Yes borrower did get a house out of the deal, BUT it seems he gave a good portion of his life and he certainly labored harder and gave more than anyone in Hometown Bank)."
==>Now let's look at the original balance at Hometown Bank and think about what happens when Seller just keeps his check at Hometown Bank as a 5 year CD as part of his savings for retirement.

5 years later we look at the situation again, assuming Worker gets a 4% interest on his checking account, the mortgage is at 8% and the competitive CD rate is 6%, the deposit is used for reserves against Seller's CD which sits at the Fed with no interest:
Assets . . . . Liabilities
94000 loan . . 134000 to Seller
44000 Payments on loan
1750 deposit . . 2130 to Worker
. . . . . . . . . .100 to loan officer paycheck
. . . . . . . . . . 50 to cover money transfer paperwork
. . . . . . . . . .240 to cover billing
139750 total . .136520 total
Bank balance: +3230


This should help you put in perspective the operation of the bank and its actual profitability.
This in reply to your:
"This scenario is not meant to be facetious. I am trying to "wrap my head around" this whole concept and this is how it appears to me based on what I've read here and elsewhere. I am trying to figure out if this is how it really happens. I think."




TownCrier (06/28/00; 16:13:21MT - usagold.com msg#: 32974)
Sir aircrew and banking
Good question. The average man-on-the-street has given this matter very little time for thought or study. I'll try to help you out where I can.

The scenario you've described is actually more aptly seen as an analogy of the collective banking system written on the small scale of an individual bank. In that regard it functions well. In truth, however, when evaluating the process for an individual banking corporation as you have done in your example, the corporation cannot lend any more money than what they have received as deposits.

If that original $1750 deposit represented the entirety of the bank's holdings, they could lend up to but not more than $1750 if it were deposited into a savings account, or they could lend $1575 if the money were put into checking (there is a 10% reserve maintenance requirement on transaction accounts, but none on savings.) You can see the obvious problem the banking corporation has if its depositor wants to withdraw his funds prior to loan repayment, and also another potential problem from a default on loan repayment from the borrower.

Please let me know if there is more I can do for you on this. Also, the recently posted comments by ECB Chief Economist Issing may cast a small amount of light on this for you, too.

TownCrier (06/28/00; 15:46:18MT - usagold.com msg#: 32973)
Thought provoking material on banking and electronic money
http://www.ecb.int/key/00/sp000628.pdf
The above link is for those of you who are handy with downloading pdf files (such as our newsletter) and are interested in reading more about the state of current monetary and banking theory and discussion. The pdf file is a lecture for the Center for Financial Studies delivered today in Frankfurt by Professor Otmar Issing, ECB Chief Economist and Member of the Executive Board. The lecture is "New Technologies in Payments--A Challenge to Monetary Policy" which provides some thought provoking material to possibly stimulate additional gold discussion here at the forum. And of course, where Mr. Issing touts "central bank money" as superior to "electronic money" for various reasons, you can surely picture where "nature's money", gold, is superior to central bank money for some of these same reasons and others beside.

These are some excerpts from throughout the course of his lecture that may get you to think about money and banking matters in ways that you haven't before. A chance to form new thoughts, or to reaffirm your old ones, is almost always a worthwhile opportunity. And now, Mr. Issing to the lectern...
------------------------------
A wide range of innovations has taken place over the last years in the field of banking and payment systems. These have had, or are likely to have, significant consequences for payment habits and for the structure and functioning of markets. Moreover, they will influence the way monetary policy is conducted.

Of course, it is extremely difficult to predict in which direction and to what extent further innovations in these areas might evolve. Some think it might be conceivable that in some remote future, monetary policy might be meaningless, or that central banks will no longer play an important role in economic policy making. However, predictions in this direction would amount to pure speculation. Today, I do not want to enter the hypothetical world of Fama and Hall, in which central banks play no role in monetary policy and money loses its role as a unit of account. I will be less farsighted, but more concrete. I want to focus on foreseeable developments in payments technologies and possible effects of monetary policy.

My line of argument is as follows. I will first outline developments in the field of large value payments, these being mainly interbank payments. Here, I am going to discuss consequences both for systemic stability as well as for the demand for central bank reserves. The second area that I will speak about today is electronic money. I shall discuss how this new phenomenon might pose a threat to the conduct of monetary policy and what should be the response of regulatory authorities to that.
[...]
Generally, credit risk in net settlement systems has increased because the value of transactions made via payments systems has risen significantly. Indeed, in the large value payment systems in the European Union, an amount equalling annual GDP is turned over every six to seven days. As a consequence, the daily liabilities of banks versus each other have increased dramatically and often exceed the banks' capital. As a result, the banking sector has become more exposed to systemic risk.

Suppose that a bank that is a net debtor to the banking community is unable to honour its claims. Its failure might lead to the failure of several of its trading counterparties, and, by a domino effect, potentially also induce losses for other banks. A well-known example for such an event was the failure of the Bankhaus Herstatt in 1974. Herstatt was heavily engaged in foreign exchange transactions. It was closed down by the German authorities after the European markets had closed for the day, but while New York was still open. At the time of its bankruptcy, it had received transfers in Deutsche Mark from its US trading partners but had not delivered the corresponding amounts of US Dollars to them. As a consequence, its American counterparties experienced significant liquidity problems, and the payment system handling foreign exchange transactions in the US, CHIPS, was disrupted so severely that it led to a collapse in the US dollar/Deutsche Mark trading.
[...]
Free banking
Electronic money is private money that competes against central bank money as a medium of exchange. This phenomenon immediately calls to mind the historical experience of free banking where private banks were allowed to issue private currencies. One of the strongest advocates of abolishing the central bank's monopoly in the creation of money was von Hayek. He proposed to enable private banks to issue their own currency, thereby creating competition. Banks could issue non-interest-bearing certificates and open cheque accounts on the basis of their own distinct registered trademark. Different banks would issue different certificates. These currencies would then trade at variable exchange rates.

Von Hayek believed competition between different currencies to be particularly conducive to price stability. This would be achieved via a discovery process. Only those currencies that built up a reputation for providing stable purchasing power could survive competition. On the other hand, banks that failed to build up such a reputation would lose consumers and be driven out of business. Consequently, such a system would eventually only leave room for stable currencies, and lead to a non-inflationary outcome. Electronic money bears some similarities to this vision. Issuers of different types of electronic money may indeed compete against each other to attract customers, and could do so in a way closely resembling the one envisaged by von Hayek.

Nevertheless, there are arguments opposing this view. Let me mention a few. First, in the discovery process envisaged by von Hayek, bad issuers are driven out by the fact that they have recourse to inflationary issuance. This suggests that the discovery process itself could be characterised by inflation. Second, if the discovery process was successful such that a single stable currency did emerge, there is no guarantee that the new monopolist would not engage in inflationary over-issue, with the aim of maximising seigniorage. Last, but certainly not least, the role of the currency as a unit of account would be undermined: there would be not just one price for each given good, but n prices, where n is the number of existing monies. This would unduly complicate the price system, whereas one of the principal benefits of monetary economies is that of making prices transparent, thereby facilitating exchanges. Money should be the numeraire, that is the unit for quoting prices, for negotiating contracts, and for performing any economic calculations. A unique numeraire is the most efficient solution to this co-ordination problem. The loss of a unique unit of account could therefore induce significant efficiency losses for the economy. I conclude that, while Hayek's ideas are stimulating, the merits of unregulated competition of electronic monies are, to say the least, ambiguous.
[...]
The primary objective of the European Central Bank (ECB) is to maintain price stability in the euro area over the medium term. The price level is, as we all know, the inverse of the price of money in terms of goods. Therefore, developments that affect the money supply mechanism, such as electronic money, are very relevant from the viewpoint of the ECB's primary goal.
[...]
The central bank's ability to influence money market rates rests on its monopoly in the creation of base money. This monopoly matters because banks need to hold central bank money to undertake economic transactions with their customers. If the central bank reduces the supply of reserves, short-term interest rates are affected. Banks would tend to lower the amount of credit given to customers, which in turn indirectly affects economic activity. The advent of electronic money or any other new payment form will not change this monopoly position, because central banks will continue to be the unique providers of central bank money to the banking sector. Electronic money poses no threat to this position.

The question is, however, whether new payment technologies will reduce the necessity for banks to hold central bank reserves, and in the extreme reduce the demand for base money to zero. In the latter scenario, the central bank would maintain its monopoly, but it would be useless. The ability to steer the price level in the economy through the supply of central bank money would be lost.
[...]
Can such a development pose a threat to the conduct of monetary policy? How likely is such a scenario? I believe: not very much, as both private agents and public authorities are likely to have an interest in maintaining to some extent more traditional forms of payment. First, consumers might want to maintain some degree of anonymity when making payments. Complete anonymity, however, can only be guaranteed when paying with cash. Consumers might thus rather hold a combination of both cash and other types of payment devices. Second, settlement in central bank money has an advantage over settlement on an issuer's books in both its safety and finality. True finality can only be achieved when settlement occurs in central bank money. Security is a key feature of any payment system.
[...]
Electronic money is being considered by some the main future challenge to central banking. I believe this is only partly true. There will always be a need for the element of security, confidence, and information that central bank money contains. Unregulated electronic money cannot provide such a fundamental precondition, which is, I believe, at the heart of the well functioning of a market economy. Therefore, I do not believe that electronic money will become a threat to monetary policy in the near future.

Nevertheless, in order to ensure that under no circumstance the central bank loses its ability to preserve price stability and to maintain the unit of account function of money, a certain degree of regulation is indispensable. With the regulatory requirements that I have outlined, the ECB will continue to provide a monetary framework in which the goal of maintaining price stability can be achieved.

aircrew (06/28/00; 14:19:43MT - usagold.com msg#: 32972)
Banking question
I've been following FOA/TG's messages and have had a fascinating education to say the least, but many questions as to how and why (best left for another day). His postings led me to find out more about banking and I think I have somewhat of a handle on how it transpires. Could someone please tell me if the following scenario is correct or incorrect:

A Worker in my hometown recieves $1750 in cash for the sale of his vehicle and puts the FRNs in the Hometown Bank. The 1750 FRNs are put in the Hometown Bank vault, and become the basis (called the reserve ratio)for some amount of new lending ability for the bank.
Using a 1.75% reserve ratio, this lending ability comes out to be $100,000.
A Borrower wants a house from Seller that costs $100,000. Hometown Bank is willing to make a loan for $100,000 to Borrower. Hometown bank writes an ENTRY into Borrower's checking account for $100,000. Borrower writes a check to Seller for the full $100,000. Hometown Bank now removes the $100,000 ENTRY from Borrowers checking account and puts an ENTRY for $100,000 in Seller's Checking account. Borrower now must now make payment to Hometown Bank over a period of time, say 20 years.
For Worker's original $1750 FRN deposit he will recieve about $1400 over a 20 year period. For lending the money to Borrower the Hometown Bank will receive repayment of $100,000 Borrower initially borrowed plus another $100,000 in "interest" for a total of $200,000. Hometown Bank has an obligation to Seller to honor the $100,000 check drawn on Borrower's checking account and it must add to Worker's checking account the $1400 it owes him. This leaves, $98,600 ($200,000 - $100,000 - $1400) for the Hometown bank owners to use as they desire, i.e., hiring more tellers, or buying a new building, or distributing dividends, or just purchasing a new car for the bank president. In other words, from Worker's original deposit of $1750, Borrower labored for 20 years, and from HIS labors, Bank purchased real tangible assets. (Yes borrower did get a house out of the deal, BUT it seems he gave a good portion of his life and he certainly labored harder and gave more than anyone in Hometown Bank).

This scenario is not meant to be facetious. I am trying to "wrap my head around" this whole concept and this is how it appears to me based on what I've read here and elsewhere. I am trying to figure out if this is how it really happens. I think.


TownCrier (06/28/00; 14:01:53MT - usagold.com msg#: 32971)
Fed keeps interest rates on hold for the present time, cites "rapid advances in productivity" yet sees "heightened inflation pressures"
FOMC Press Release -- Release Date: June 28, 2000

The Federal Open Market Committee at its meeting today decided to maintain the existing stance of monetary policy, keeping its target for the federal funds rate at 6-1/2 percent.

Recent data suggest that the expansion of aggregate demand may be moderating toward a pace closer to the rate of growth of the economy's potential to produce. Although core measures of prices are rising slightly faster than a year ago, continuing rapid advances in productivity have been containing costs and holding down underlying price pressures.

Nonetheless, signs that growth in demand is moving to a sustainable pace are still tentative and preliminary, and the utilization of the pool of available workers remains at an unusually high level.

In these circumstances, and against the background of its long-term goals of price stability and sustainable economic growth and of the information currently available, the Committee believes the risks continue to be weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.
-End-

SHIFTY (06/28/00; 13:39:11MT - usagold.com msg#: 32970)
Henri
Henri , I was thinking that, because GSR usually tracks gold so well. Also the diomond test is about to finish!

Henri (06/28/00; 13:33:08MT - usagold.com msg#: 32969)
Shifty
Just a guess here. I am reminded that Franco-Nevada was "sold down" weeks before the merger with Gold Fields was announced. I am not so naive as to believe that no one knows about such a merger until the day it is announced. By selling it down, big houses are able to eventually procure shares for their best (institutional) clients at bargain prices well before the announcement of a merger. Could be GSR is the next company that is involved in a consolidation move

SHIFTY (06/28/00; 13:30:07MT - usagold.com msg#: 32968)
Knallgold
You took the words right out of my mouth!

Knallgold (06/28/00; 13:26:38MT - usagold.com msg#: 32967)
test
forum down?

SHIFTY (06/28/00; 12:03:12MT - usagold.com msg#: 32966)
GSR
What is going on with GSR today?

Farfel (6/28/2000; 11:22:10MT - usagold.com msg#: 32965)
@EB - Sorry my friend but I did NOT attend the TVX meeting
Date: Wed Jun 28 2000 11:17
EB (Farfull shows his uggerly self again at the...) ID#3398:
TVX shareholder meeting....... ( snippet ) ...
******
"What went wrong with this company?" asked one shareholder. Another said he had bought 20,000 shares
at $6.50 ( U.S. ) and another 5,000 at $9.50 ( Canadian ) a share.
******

I feel your pain Farfed..... ( not ) ... I ABSOLUTELY wouldn't be suprised one bit if, in fact, that was the
illustrious F*..... heh heh heh....

away..... to watch the rally..... and sell into it.
Éß
--------------------------------------


@EB, nice to hear from you my old friend. Hope all is going well.

It is my understanding that there appear to be a number of interested parties swarming around TVX, hoping to pick up the company for cents on the dollar. Those parties are said to include the gold-linked bondholders (apparently Paloma Partners, a "vulture" hedge fund, is rumored to be the largest bondholder), Normandy, Alpha Group, Deutsche Bank, etc.

From all indications, the Greek mines are thought to be the ultimate gold treasure whose extraction costs make them some of lowest cost gold deposits in the northern hemisphere. The TVX short players have done their best to disparage the value of those assets, so far with a good deal of success.

On the other hand, Batista seems determined to dig his feet in the sand and resist efforts to take the company away from him. With 18 million shares in hand (or around 3.6 million, after the reverse split) PLUS a whole new batch of options with a strike price around 3.5 dollars, then he seems to believe the reverse split will be successful.

Although most reverse splits are not successful, this one may end up a positive surprise. That is because TVX is going through a reverse split solely to satisfy the requirements of the bond indentures rather than as a desperation effort resulting from potential corporate insolvency. In fact, most companies undergo reverse splits only because their financial position has deteriorated dramatically and apparently such is not the case with TVX, as best as I can determine.

So TVX continues with strong cash flow and profits (excluding recent write-offs). There don't appear to be any more extraordinary write-offs coming down the road, the new president seems to have done an effective job in cleaning up the company.

After the reverse split, TVX will have a much reduced float (only some 40 millions shares) so any notable upspike in gold will send the company stock flying much faster than the old days when its total float approximated 200 million shares. For example, if gold were to pop $20.00, then TVX stock could jump 6.00, post reverse split, in the bat of an eyelash.

The bondholders are no longer in a position to threaten the company now that it retains its NYSE listing and they are not really a consideration for approx. two more years. By that time, I believe TVX should have sold (maybe 25%-35%?) interest in the Greek mines to another gold producer that may cover the majority of monies owed the bondholders.

That's what I know about TVX, unfortunately could not attend the meeting. I have not been to Toronto in some time but someday hope to visit and see my sister and her kids.

Thanks

F*



TownCrier (6/28/2000; 10:48:41MT - usagold.com msg#: 32964)
Sir Hill Billy Mitchell
Your question yesterday prompted my fairly good recollection of a post that was selected as one of MK's contest winners in December of 1998. With that reasonable timeframe for a targeted search I sent a torch-bearing lad deep into the gloom of the archives to cast light upon a possible answer for you.

In your post, you said, then asked:
"You know, I was thinking. With the Yen carry they could print more yen for delivery purposes. With the Euro carry trade they can print more Euro for delivery if needed.

Of course they cannot print more gold for delivery if demanded. That point has been well made previously on this forum. Pork bellies can't be printed for delivery if demanded either. Same would be true for copper or any other non-precious hard asset.

Just seems to illustrate once again how utterly worthless those pieces of paper can become when we hear the "thunder in the night".

Who was it that coined the phrase, 'thunder in the night'?"
---
Sir HBM, while I'm not certain of the circumstances surrounding the ORIGINAL coining of the phrase in the wider world, as far as this forum goes, this is what The Tower's errand-boy brought forth when he re-emerged (covered with cobwebs) from the archives. It may (or may not) be what you had in mind, but I doubt that I can convince the little scamp to venture down there again...I didn't realize he had a touch of arachniphobia. Tough to find good help these days...
------------------------------
"This euro is not a homogenized manifestation of the mark, franc, or lira of your experience. The euro marks the return of a "gold standard". The quotes are used because this is not the Gold Standard of your father, or of your grandfather. This is YOUR gold standard...a modern treatment for a modern world. History is a wayward teacher, as no two events are alike. There is one lesson, however, that you must not fail to learn. Modern monetary events do not grow from a seed to a mighty oak in the Town Square for all to see. They are instead as lightning in the night. Witness Roosevelt's gold confiscation in 1933, or dollar revaluation 2 years later. Witness Nixon's closure of the "gold window" in 1971. Lightning in the night. While some might stoop about looking for sprouting acorns, I suggest you join me as we watch the storm clouds gather while the sun sets in the west!

Just as "electronically denominated assets" require prudent evaluation and protection against the unknowable impact of Year 2000, likewise, dollar-denominated assets require prudent evaluation and protection in advance of the unknowable Year 1999 return of the euro/"gold standard". It is while crossing such thresholds that gold demonstates its role as money, par excellence. Do not worry that gold does not reveal currency weakness as the threshold draws near--use this to your advantage. Only with hindsight, in the illumination of the lightning flash will the value of gold be seen by one and all.

The reason for gold ownership is a monetary event. This storm will occur in four weeks. The rain and lightning will come from this storm, yet actions of Messrs. Greenspan and Rubin may forestall the thunder. Mark this...the fate of the dollar is nevertheless sealed." --Aragorn III (12/4/98; 17:28:31MDT - Msg ID:1155)

Leigh (6/28/2000; 10:37:30MT - usagold.com msg#: 32963)
Town Crier
Thank you for your thoughtful answer, Town Crier! I was afraid you would think it was a frivolous question.

SteveH (6/28/2000; 10:10:03MT - usagold.com msg#: 32962)
Well, isn't this interesting
An unexpected uptick in the POG. $293.30 and rising! (futures).

Kitco spot pog is $291.50, up $6.00!!!!

Tenacity!

TownCrier (6/28/2000; 10:08:24MT - usagold.com msg#: 32961)
Interesting thought, Lady Leigh
You are certainly reading more into it than I did and by doing so you raise a valid point regarding coins such as U.S. eagles that bear a legal tender mark of $50. Only the U.S. Government or its authorized agent has the ability to "create" something known as U.S. Dollar$. (If you or I tried it we would surely be jailed for counterfeiting.) As such, the issuing government could conceivably fancy the notion that they could one day issue a recall on *their* property--the U.S. dollars found in any form--paper or coin.

But no, while that may be a legitimate concern to many confiscation-minded individuals, in this particular talk by Mr. Zoellner, I think it is safe to say that issue of mintage was not what he had in mind. After all, he is himself a central banker, and in speaking about central banks looking to find "risk free" assets I rather doubt they would be concerned with the prospects of confiscating gold from themselves because it was minted in one form versus another. Thanks for raising a good point, however. And on that same topic of legal tender coins, that specific concern has faded even further for many of the pre-1933 coins from the euro region -- such as the gold German 20 marks or the gold French angels and roosters -- where the euro has replaced those legacy currency units as the official legal tender currency. (The actual euro-denominated coinage and notes will be released in January 2002.) The same situation is true for the Uruguayan 5 pesos gold coin that was recently offered. That old peso currency unit was replaced by the New Peso as legal tender in 1975, which was then replaced again in 1993 by a "newer" peso. You not only capture the protection available against posible confiscations thanks to the pre-1933 status, but you also avoid any possible legal tender sticking points that you've mentioned. How's that for peace of mind?

USAGOLD (6/28/2000; 9:42:39MT - usagold.com msg#: 32960)
Today's Report: Comments on the Paris Gold Conference
http://www.usagold.com/Order_Form.html FOR AN INFO PACKET ON GOLD INVESTING
6/28/00 Indications
 Current
 Change
Gold August Comex
290.40
+2.90
Silver July Comex
4.97
+0.01
30 Yr TBond Sept CBOT
96~23
-0~02
Dollar Index June NYBOT
107.14
+0.16


Market Report (6/27/00) Gold powered higher this morning on
inflationary concerns and the belief that Fed inaction on interest
rates will send an even stronger inflationary message down the
road. This thinking encouraged short covering which came into the
COMEX late session yesterday, continued in the Hong Kong market
last night when Australian producers decided it was time to cover,
and carried into the New York open. Rumors yesterday had Goldman
Sachs leading the short covering.

Browsing through the reports from the Financial Times gold
conference, one hopes that there's something going on behind the
scenes to bolster gold, because there's precious little happening
on the surface if press reports are any indicator. The fact, as
reported by Bridge News this morning, that one mining executive
believes other mining executives ought to concentrate on the
"bottom line growth" is not my idea of news, but let's face it,
this is the same group that was merrily selling its own industry
down the river a few years ago through grandiose "hedging"
programs -- until shareholders began asking them what in the world
they thought they were doing. Then the Ashanti debacle came along
and it was like the ice bucket of Gatorade at the end of the big
game. Only this wasn't the "boys" celebrating. It was a nasty
wake-up call. A gold mining firms shares could plummet when gold
was rising!!

Psychologically, it seems, the industry has yet to recover from
the Ashanti ordeal and the pall it cast on the industry, nor has
it recovered from it in a public relations sense. Let's just say
that all gold mining concerns are under suspicion and being
watched closely by their shareholders, and leave it at that for
the purposes of this quickly assembled daily report. Somehow I
don't think allying itself for gold promotion programs with the
very financial firms that offered to paddle the canoe down that
river is the best way to win those gold investors back. It might
require something a little more overt -- an extension of what
Chris Thompson and Gold Fields did when they surprised London with
its purchase of gold at the second Bank of England auction -- a
bold and effective strike at the heart of the enemy that sends a
clear message to gold's detractors and rallies its advocates.
Discussions about the latest project on tap, the bottom line, and
merger prospects, though I do not want to diminish their
importance, just aren't going to cut it. Gold investors, in my
view (and I know one or two), would like to see a proper defense
of the metal itself and the industry in which they've invested
their money.

Having said all that, I recognize that it may be moot point. The
onset of a worldwide inflationary economy might undo the damage
that has been done, no matter what the mining industry decides to
do about its sagging fortunes -- and that's both the heaven and
the hell of it. And that might be precisely what's behind gold's
recent stubborness as it valiantly attempts to go once again
through the $290 mark.

So it goes. . . fellow goldmeisters. See you back here tomorrow.

Mr Gresham (6/28/2000; 8:51:43MT - usagold.com msg#: 32959)
Martin A. via Sky Blue Monthly
http://skybluemonthly.freeservers.com/sbm/sbm00n.htm
Did anyone see this analysis of the gold derivatives market? (Halfway through it, so no commentary.)

Leigh (6/28/2000; 8:28:51MT - usagold.com msg#: 32958)
Town Crier
Dear Town Crier: Do you think he possibly meant non-legal tender gold -- gold not formed into bullion coins? Remember what FOA hinted at a while ago about the possibility of legal tender gold being called in?

TownCrier (6/28/2000; 8:17:58MT - usagold.com msg#: 32957)
Update to WGC's weekly market commentary
http://www.usagold.com/wgc.html
A notable excerpt from this week's review:
----
At the Financial Times World Gold Conference in Paris central bankers from France and Austria suggested that the fall in the supply of US bonds could make gold look attractive to investors looking for a credit risk free asset.

The Banque de France's Herve Ferhani said "one factor that has affected capital markets is the possibility of a dearth of credit risk free assets. If the risk appetite of central banks has not increased then this move to risk free paper may have to be rebalanced - there is the question whether gold could be part of the solution."

The Austrian central bank's Peter Zoellner agreed saying "gold in its original form is not someone else's liability so it is practically risk free. The (bond) buyback programmes of some governments could lead to a lack of assets of highest credit quality. To the public gold is something real with a physical existence, unlike abstract foreign exchange."
---

Interesting comment. Gold...in its "ORIGNAL form"...
It is certainly instructive that Mr. Zoellner felt compelled to provide that distinction about gold. How often, in your own discussions of gold do you feel it is necessary to let your audience know you are not just referring to gold, but that you are in fact referring specifically to gold in its ORIGINAL form (and I don't mean veins or nuggets). What he meant by "original form" in his statement was gold in PHYSICAL form. And what this should tell you is how very pervasive financial gold DERIVATIVES have become in the world (and mind) of the modern banker...otherwise the distinction would not have been carefully asserted.

Journeyman (6/28/2000; 7:39:34MT - usagold.com msg#: 32956)
Re: National Emergency @Perplexed msg#: 32953

A quick read of the Executive Order referenced by The Privateer indicates it is intended to block garnishing of payments made to the Russian Government to bribe them to convert the enriched uranium in Russian warheads into reactor grade uranium which is no longer directly suitable for bomb-making. The idea is to defuse the possibility of nuclear war.

The problem is the Russians expect, because of court actions here, to have those payments blocked. As a result, they have suspended degredation of their weapons-grade uranium.

My GUESS is that the Russian Government owes payments to American, etc. banks. These loans were made to Russia largely on the basis of guarantees made by IMF & World Bank, and defaults by the Russian Government followed the collapse of the ruble, summer/fall 1998, which the Russians lay more or less correctly at the feet of IMF. It's not too far a stretch to suggest this particular EO precludes banks from attaching these payments as part of their attempts to be paid what they think is owed them.

Essentially, if I read this correctly, Clinton is telling the banks they can't get this particular money. The idea is to get the Russian Government to resume what is essentially Russian disarmament. In a sense, this is the Russian Government conmen shaking down the IMF conmen.

If indeed the program decreases the possibility of nuclear confrontation, the motivation behind this particular EO is probably sound.

If indeed the GUESSES I'm making are correct, this blocking of court action is not according to western bankruptcy laws. That's probably what prompted the EO.

The EO mechanism is extremely dangerous and other ways could be found to solve the problem. EOs are nearly always the victory of apparent efficiency over individual rights and the U.S. Constitution.

Regards,
Journeyman


Henri (6/28/2000; 7:24:38MT - usagold.com msg#: 32955)
Perplexed Msg#32953
As I understand it, the US has been in a state of "financial" emergency renewed by a succession of Presidents and their executive orders for many years. It may have started with Roosevelt's "New Deal" but I am a bit foggy on my history in that regard.

Black Blade (6/28/2000; 6:35:49MT - usagold.com msg#: 32954)
Morning Wakeup Call! The Continues!
Sources: Various
THE FAR-EASTERN FRONT:

Asia Precious Metals Review: Gold steady after overnight gains
By Hiroyuki Fujiwara, BridgeNews

Tokyo--June 28--Spot gold was steady on Wednesday in Asia following overnight gains in the U.S. market, dealers said. Some short-covering supported prices, while profit-taking capped gold at about U.S. $287 per ounce, they said. Platinum recovered overnight slip slightly, but profit-taking weighed on prices, the dealers said. Short-covering from Australia supported gold early in the morning, while some physical dealers in Singapore started profit-taking after prices reached $287, the dealers said. Selling interests could cap prices at about $287-288 as the physical dealers bought gold at about $282-283, they said. Spot gold is likely to stay in the rangebound between $282 and $288 without fresh incentives, the dealers said. Gold trading volume remained in the thin level ahead of the U.S. Federal Open Market Committee meeting later today, they said. Bargain hunting underpinned platinum after overnight slip, the dealers said. Tokyo Commodity Exchange (TOCOM) platinum futures opened weaker from Tuesday on profit-taking following the weak NYMEX, they said. TOCOM players were hesitant to buy platinum in the morning after most contracts hit all time highs on Tuesday, the dealers said. News that Russia exported 7 tonnes of platinum to Switzerland also discouraged players from buying, they noted. Meanwhile, traders said the platinum was sent to banks in Switzerland as another collateral for Russia's debits. They said good revenue on steady crude oil prices could prevent Russia from selling precious metals immediately. TOCOM platinum mostly recovered morning losses towards the close on short-covering triggered by speculative buying, the dealers said. Recent sluggish supply from Russia continued to keep players being optimistic for platinum, they said.

Black Blade: That Gold trading range keeps inching up. Aussies short-covering……..what? After the TOCOM defaulted on PGM trades earlier this year, why would anyone play TOCOM games? Russian Pt? A spit in the ocean, and still no Pd delivered. Otherwise, overnight trading action relatively calm.

Gold takes cue from currency action
REUTERS

Gold remained within its current range in European trade yesterday morning. "The key numbers on gold are US$282 and $285, a break of either would create some interest," a dealer said. Gold was drawing inspiration mainly from currency movements, dealers and analysts said. "Gold bounced from support at $282 as US dollar weakened, particularly against the Australian dollar," said Frederic Panizzutti of MKS Finance. Trade had also been thin since the beginning of the week because many market participants were attending an industry conference in Paris. Spot gold was indicated at $284.10-$284.60 an ounce in London morning trade, compared with New York's close of $283.65-$284.35 on Monday. The precious metal was fixed in the morning at $284.20, against $284.05 on Monday afternoon. Asian spot gold ended weaker from New York's close on Monday and traders said the market, suffering its most sluggish period in years, was expected to be locked in a $3 range. "It has been very very quiet. We have not seen the market this quiet for a long, long time," a trader said. "This is first time ever that we are seeing basically zero activity in the market." Gold finished trading in Hong Kong at US$283.40-$283.90 an ounce. Tael gold closed HK$12 firmer at $2,632.

Black Blade: Lets see, weaker US dollar, stronger Aussie Peso, = short covering, followed by margin calls, = banks owning bankrupt Aussie producers. Yeah, that's about right.

HK gold executive says China holds key, but not yet
Sara Marani

PARIS, June 26 (Reuters) - As China widens its doors to global trade, with accession to the WTO in sight and a blueprint for gold market reform nearly implemented, industry players eager for new opportunities were advised on Monday not to be too hasty. Vincent Chow, group general manager of Chow Sang Sang Holdings which makes and retails gold and gem-set jewellery, advised making a ``reality check'' before speculating on the short-term future of the jewellery market in what he termed greater China -- also embracing Taiwan and Hong Kong. Gold jewellery demand figures for 1999 compiled by industry analysts Gold Fields Mineral Services ranked China third with six percent of the world market, behind the United States with 13 percent and India with 20 percent. Jewellery last year accounted for around 76 percent of total gold demand. ``Will the retail gold market in China take off once liberalised? Several factors must be considered including saturation, competition and global trends,'' Chow told delegates at the Financial Times gold conference which brings together producers, analysts and investors for a two-day meeting. On saturation he said domestically made goods -- though weaker in styling and workmanship -- satisfy the demand of much of the consuming public, illustrated by Shanghai's gold jewellery demand declining from a high of 22 tonnes in 1993 to nine tonnes in both 1998 and 1999. ``Then there's competition. One of the reasons why interest in gold jewellery seems to have declined may be the increasing availability of a whole gamut of competing goods and services...within the industry, platinum jewellery has been getting a lot more attention than gold,'' Chow said. Among reasons for this preference he listed a shift in taste towards white metal and also the fact that platinum is subject to fewer bureaucratic controls. Thirdly, global trends affected demand in the Far East in that gold was now no longer seen as having special status as a hedge against inflation and currency devaluation.

CHINA AS THE GREAT EXPECTATION

``China is the great expectation -- everyone is hanging on to the Chinese market. You know, if everyone in China bought four ounces it would use up all overground stock,'' Chow told Reuters after his speech.``But to see any substantial increase in the demand for gold jewellery in greater China, we'll have to wait for the rest of the population -- those in the central and the western regions, the rural areas -- to catch up with the coastal provinces in terms of wealth,'' he added. China's entry into the World Trade Organisation (WTO), widely expected before the end of 2000, will spur reform of gold trading in China and Hong Kong.``For the time being, I personally do not think anything exciting will come out of the greater China market, liberalisation or not. Or course I do hope, for once, I shall be proved wrong,'' Chow said.

Black Blade: This could partly answer SHIFTY’S question. China could be key.

THE WESTERN FRONT:

Producers see global marketing as key for gold
By Sara Marani

PARIS, June 26 (Reuters) - The gold industry needs to embark on a global marketing campaign to ensure steady consumer demand as it continues to consolidate, gold producers said. Gathering for a two-day sector conference, miners and analysts agreed more needed to be done if gold was to compete with diamonds and platinum as a desirable -- and generally more affordable -- product for consumers. "How can we produce something which ultimately needs a consumer and then do nothing to promote the product to that consumer?" Kelvin Williams, executive director of marketing at leading producer Anglogold , told Reuters on the sidelines of the annual Financial Times gold conference. Williams said Anglogold was joining with investment bank CSFB to take the initiative, but that the whole industry needed to contribute to a marketing project to ensure success. "There has been too much emphasis on supply and not enough on the great attributes of gold -- it can effectively sell itself if someone manages the marketing," Williams said. Terry Burgess, chief executive of Australian miner Delta Gold Ltd , said, "The whole industry needs to lead the way. The (industry-funded) World Gold Council (WGC) can certainly be involved, but it should not have to coordinate on its own." He added, "Until now, companies have made gold and sold it off and not gone on to the next stage -- producers now need to get more involved."

PERIOD OF CONSOLIDATION

Marketing was seen as especially important for gold as the industry consolidated. Earlier this month, North America's Newmont Mining Corp and Battle Mountain Gold made a merger pact, which came soon after a deal uniting Canada's Franco Nevada Corp and South Africa's Goldfields Ltd . The Canada-South Africa tie-up created the world's number three producer, ranking it just behind Newmont -- the second largest globally and the leader in North America -- and then Anglogold. "There will certainly be more consolidation, but it has got to add value. If the quest is just to get bigger market capitalisation then that won't work," said Delta's Burgess. Consolidation built strength in the sector and so boosted the price of gold stocks, long considered part of the so-called old economy and so less favoured. "A combination of consolidation, steady demand and a good marketing campaign can only be a recipe for success," said one analyst. Recent figures from the WGC showed world gold jewellery demand rose seven percent to 701 tonnes in the first quarter of this year compared with the same period in 1999."That's where we need to focus our marketing -- in jewellery. If we can crack that, then we've done it," said Emilio Camponovo, board member of Finorasa, Italy's leading gold importer. "Jewellery makes up about 85 percent of gold demand so that's what we've got to target," he said.

Black Blade: OK, lets see, WGC can spend some add dollars, get Snoop Doggy Dog and Iced Tea to act as spokesmen to get the Rapper crowd back in line and promote gold chains and gold teeth. Yep, I can see it now, Mr. Dog as gold spokesman. And need a slogan, "Gold, it's yellow", "Gold, it's heavy" , "Gold, I can Whup ya up da side o’ da head with it", Yeah, right. I think this gold ad campaign needs some work.

Gold industry consolidation seen gathering pace
By Sara Marani

PARIS, June 27 (Reuters) - Gold producers said on Tuesday they expected to see much more consolidation in a sector that has recently seen a wave of mergers. Speaking on the last day of the Financial Times gold conference, executives from leading mining companies agreed that more consolidation was not only inevitable but also desirable. "More corporate consolidation activity from the major gold producers will surely follow," South Africa's Harmony Gold Mining Company chief executive Bernard Swanepoel told delegates. "We believe the industry is on a far better footing today compared to five years ago and further rationalisation is expected to take place -- it is inevitable. We are not in specific negotiations with anyone but are always open to opportunities," he later told Reuters. He expected more regional consolidation, but saw nothing to stop cross-regional mergers taking off, too. "Investors are truly international, the funds are international and the mining companies will become so. The two big announcements are just the beginning of cross-boundary international onsolidation," he said. Earlier this month a pact between North America's Newmont Mining Corp. and Battle Mountain Gold was swiftly followed by a merger bringing together Canada's Franco-Nevada Corp.and South Africa's Gold Fields Ltd . "As an industry we have to move away from hedging and focus on giving shareholder value. We must work towards consolidation and marketing," said Wayne Murdy, Newmont's president. "We have an industry that's sick, it's not returning on its investment," he added. "The bottom line is that it's not keeping pace with financial markets, and capital is going to ultimately be denied. We're not exploring to replace reserves so production is going to go down. The industry has got to be extremely efficient...I think that will drive consolidation." Terry Burges, chief executive of Australian miner Delta Gold Ltd , told Reuters, "If there are synergies that are obvious they have to be considered, but it's got to add value."

Black Blade: Like a strange game of musical chairs, who will be left standing when its all over?

Meanwhile, S&P Futures up +3.50, Fair Value +5.99, indicating a moderately higher bounce on Wall Street at the open if these levels hold till then, oil up $0.12 at $32.18/bbl, NG off its all time highs -$0.085, Au up +$0.50 at $286.30, Ag unchanged at $4.93, Pt up $4.00 at $588.00, and Pd up $1.00 at $658.00.


Perplexed (6/28/2000; 6:21:01MT - usagold.com msg#: 32953)
National Emergency
Good morning fellow gold nuts. After fastening your seat belts, click on http://www.the-privateer.com/gold6.html
Now, consider the possible implications, and review the powers granted to FEMA under these conditions. Until this is recinded, technically we are being governed under martial law. Is this "emergency" merely a pretext to set the stage for dealing with the looming financial conflagration? This could be a long, hot, summer, and a very bumpy ride.

Still Perplexed

Silverbaron (6/28/2000; 6:19:47MT - usagold.com msg#: 32952)
Dollar Index model of the price of gold
http://expage.com/pogvsdollarindexdaily
Updated with a short projection of the correlation, through next week.



wolavka (6/28/2000; 4:37:01MT - usagold.com msg#: 32951)
!st stop on train ride
303 then 325

Leland (6/28/2000; 3:49:38MT - usagold.com msg#: 32950)
Here's Another "Funny" Number...The 10-Yr. Inflation Adjusted Treasuries
June 28, 2000


Key Rates

Here are the daily key rates from
The New York Times.

-------------------Tuesday
-----Monday ---Year Ago

PRIME RATE ---------- 9.50 ------
9.50 ------- 7.75

DISCOUNT RATE ------- 6.00 ------
6.00 ------- 4.50

FEDERAL FUNDS(x) ---- 6.50 ------ 6.63 ------- 4.91

3-MO. TREAS. BILLS -- 5.65 ------ 5.68 ------- 4.69

6-MO. TREAS. BILLS -- 5.94 ------ 5.95 ------- 4.90

10-YR. TREAS. INF(xx) 4.08 ------ 4.08 ------- 4.01

10-YR. TREAS. NOTES - 6.08 ------ 6.10 ------- 5.92

30-YR. TREAS. BONDS - 5.94 ------ 5.98 ------- 6.06

TELEPHONE BONDS ----- 8.19 ------ 8.33 ------- 7.81

MUNICIPAL BONDS(xxx) 5.93 ------ 5.93 ------- 5.55

(x) Estimated daily average, Dow Jones Markets

(xx) Realized dollar amount rises with inflation

(xxx) Municipal Bond Index, The Bond Buyer

Sources: Salomon Smith Barney; Telerate; The Bond Buyer

(Fair Use For Educational/Research Purposes Only.)






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