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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 12/28/2003
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Goldilox (12/28/03; 23:51:15MT - usagold.com msg#: 114260)
Eagles for a car?
@ Caradoc

"After the devaluation, I might be willing to let some Eagles go if a small handful would pay for an automobile."

I trust you meant a NEW auto, as a tube of Eagles can get any number of used cars already, especially in the deflated used car market.

Caradoc (12/28/03; 23:38:19MT - usagold.com msg#: 114259)
Gold at 413.00 bid (+1.20); Silver at 5.78 (+0.04)
These interim highs aren't bad for the beginning of an "off week." Looks like we'll need log-log paper to chart the change in the rate of change for 2004.

Best analogy for POG is still the basketball being released from the bottom of the swimming pool: shoots up fast, goes higher than the level it would have floated at, and ends up where it ought to be. My crystal ball says that anything over $3,640 per ounce is frothy. If it's like the previous high over $800, plan to take profits within a day or two of network TV talking about people taking grandma's trinkets to the smelter.

With recent US Eagles being denominated as fifty dollars, my 3,640 figure would allow a better than 70-to-1 currency devaluation. ("Sorry about that, Japan. You too, China.") After the devaluation, I might be willing to let some Eagles go if a small handful would pay for an automobile. Could be that for convenience I'd even accept paper dollars at that rate if I knew that fifty of them could be exchanged for the real thing. Of course, that's only true for the newer Eagles. The MS-64 Saint Gaudens are another story altogether.

Caradoc

Gonlyold (12/28/03; 23:27:19MT - usagold.com msg#: 114258)
Just Remembered...
It's the Globalhawk, not the Goldenhawk. Must have had gold on my mind.

Gonlyold (12/28/03; 23:24:40MT - usagold.com msg#: 114257)
Interesting Insite Applied to 911 & the Pentagon
Goldilox said (msg #114148),

"Finally, the above ground portion of the dome at DC is very much smaller than any skyscraper and very low to ground, so it would be a very difficult target to hit with anything but intelligent guided munitions.

When the Isrealis bombed Iraq's reactor, they used fighters armed with the best laser guided bombs and their finest pilots in order to get the job done. Anything less than a fully armed fighter or bomber would be totally ineffective."

Although GL was referring to nuclear installations, I find his statements appliicable to the 911 tragedy at the Pentagon. Many feel that a pilot could not have the ability to fly an airplane into the Pentagon but that a missile, even perhaps the drone Goldenhawk(? I think that's the right name), could have done the job. It's interesting that GL inadvertantly collaborates this "conspiricy" theory.

BTW, to those of you who had replies to my post about the eqalities of gold, fiat money, and Who Owns the Gold, some weeks back, I haven't forgot about those requests. It's just that in trying to go back to my archives, i.e., stored boxes, to present the documentation, I find that I didn't keep all my info in one place. Had to give up and am presently seeking current sources. Do be patient. I have it on my list. Probably another month or so as it's not high on my list right now.


Goldilox (12/28/03; 23:17:30MT - usagold.com msg#: 114256)
Singapore's Economic Woes
http://www.channelnewsasia.com/stories/singaporelocalnews/view/63512/1/.html
snip:

SINGAPORE : Much uncertainty and fear brought Singapore's economy to its knees this year. Painful measures had to be taken to keep the economy afloat, save jobs and maintain Singapore's competitiveness. Singapore's economy started the year with much uncertainty about the war against Iraq. But what took the market by surprise was the outbreak of SARS.

The economy was hit, with Gross Domestic Product contracting 3.8 percent in the second quarter, sparking fears of another recession. But it rebounded in the third quarter, rising 1.7 percent as fallout from SARS eased. Massive lay-offs were carried out across all sectors of the economy.

Goldilox:

From Admin's news posts, this article highlights the effects that imbalances are imposing on the asian microeconomies as the "sleeping tiger" awakens. Singapore, a nation not previously plagued by layoffs, is joining the ranks of "bone pile" victims. . . dem bones, dem bones.


DummyANI (12/28/03; 23:02:18MT - usagold.com msg#: 114255)
What will happen, if gold bullions are disappeared from the LBMA ?
http://www.goldensextant.com/commentary26.html#anchor25233
@Boilermaker (12/27/03; 07:35:23MT - usagold.com msg#: 114167)

According to the LBMA graph-data, gold trading volumes on the LBMA are as follows.
The 45-th month (from March 96) 27.5 million ounces per day equal to 855 ton per day
The 90-th month (from March 96) 14.5 million ounces per day equal to 451 ton per day

The above declining data indicates that the declining ratio of trading volumes is equal to 13 / 45 equal to 0.2889 million ounces per month ( 8.98 ton per month).

In Nov. 2003, the average trading volume is 13.7 moz per day( 426 ton per day). A simple predicting data are telling that in Oct. 2007, gold bullions are disappeared from the LBMA.

Nov. 03 13.70 moz (426 ton per day)
Feb. 04 12.83 moz (399 ton per day)
Jan. 05 09.94 moz (300 ton per day)
Dec. 05 06.48 moz (201 ton per day)
Nov. 06 03.30 moz (103 ton per day)
Oct. 07 00.12 moz (004 ton per day)

It is very interesting to see that until Dec. 2004, gold bullions are supplied only at 309 ton per day, this is nearly a quarter of Oct. 1999 level.

D-ANI: Buy a gold, sell a Yen


Gold Standard (12/28/03; 22:21:23MT - usagold.com msg#: 114254)
Charting - @Clink! & Lady Waverider

The scales have dropped from my eyes!

It is the RATE of change that a log scale will clearly show, rather than the change in actual comparative value.

Fr'instance, if I charted the POS against the POG over the last 12 months or so, it would show a higher trendline in a log chart as opposed to an arithmetic chart.

Glory be! I'm going to end up as a tea-leaf reader!

Many thanks, friends!

Cheers! GS

Caradoc (12/28/03; 22:12:33MT - usagold.com msg#: 114253)
Thoughts for Agingfast
No one here has disagreed with the historical inverse relationship between Fed funds rate and POG that you posted some days ago. Some (including me) are actually interested in any implications for the future. You have repeatedly been asked whether you believe the US dollar will continue as the world's reserve currency. The apparent intent of these questions was to ascertain the extent to which you believe the historical inverse relationship may have implications for those making investment decisions today.

Yet you refuse to answer the questions. Instead, you use CAPITAL LETTERS to scream that there really has been an inverse relationship over recent decades while making snide comments to those you say don't understand what you've been saying. Could be that most of the readers of this forum understand you very well indeed.

Your haughty attitude in claiming expertise in subjects ranging from economics to ancient history (while failing to deliver the goods) reminds me of a kid in my neighborhood during the summer between third grade and fourth grade. Among other things, this nine-year-old claimed to possess a copy of the first Superman comic book. Quite enviable at the time if true. He even had a couple of the younger kids in the neighborhood following him around asking for details and regarding him with some sort of awe. You know what, Agingfast? None of us liked him and we all avoided him as much as possible. Despite that, I would hope that during the last half century he accomplished one or two things in his life that would give him the sort of quiet self-respect that would make it unnecessary either to brag about himself or to attempt to score points by attacking others.

I'll close with a few lines from "Disiderata" (approximately, "Things to be desired") by Max Erhman:

Go Placidly amid the Noise & Haste &
remember what Peace there may be in silence.

As far as possible without surrender
be on good terms with all persons.

Speak your truth quietly & clearly;
and listen to others, even the dull & ignorant, they too have their story.

Avoid loud and aggressive persons,
they are vexations to the spirit.
If you compare yourself with others,
you may become vain & bitter;
for always there will be greater & lesser persons than
yourself.

Caradoc



Clink! (12/28/03; 21:55:19MT - usagold.com msg#: 114252)
Charting @ Gold Standard
Now there's an open-ended question ! If I can reply without oversimplifying, the whole purpose of charting is to allow the human eye to discern a pattern which is not readily evident by merely looking at tables of numbers. It really depends what you are trying to see. On a linear scale, a change of a fixed amount will show up as the same vertical distance whatever the starting point. On a logarithmic scale, the same percentage changes will show up as the same vertical distance. Why would you use one or the other ? As an example, take the value of MZM over the last few years. On a linear chart, you can see that it is curving up, which allows you to say that, all other things being equal, it will increase more in 2004 than in 2003. But by how much ? Well, if you plot the same thing on a logarithmic chart, the slope of the line corresponds to the rate of increase of MZM. If it's a straight line, it will increase by the same percentage amount in 2004 as in 2003. If it is a rising curve but is bending over to the right, it means that the rising tendancy is slowing. If it is curving up, that indicates that whatever was causing it to increase in the first place is not only still doing it but the effect is getting more powerful.

So, in general, you use linear plots to see changes, and logarithmic ones to see rates of change. There is no hard and fast rule about timescales or the size of changes.

Hope this helps,
C!

Remarx (12/28/03; 21:39:15MT - usagold.com msg#: 114251)
Congressman Ron Paul on the Stealth Patriot Act II
http://www.whitehouse.gov/news/releases/2003/12/20031213-3.html
Comments of Ron Paul, Congressman for Texas on HR 2417 :
It appears we are witnessing a stealth enactment of the enormously unpopular "Patriot II" legislation that was first leaked several months ago. Perhaps the national outcry when a draft of the Patriot II act was leaked has led its supporters to enact it one piece at a time in secret. Whatever the case, this is outrageous and unacceptable. I urge each of my colleagues to join me in rejecting this bill and its incredibly dangerous expansion of Federal police powers.

Waverider (12/28/03; 21:37:20MT - usagold.com msg#: 114250)
Gold Standard
http://www.marketmasters.com.au/articles/chartingtraps.php
http://www.crbindex.com/techtip/tipv2n15.htm

I am new studying TA but my understanding is that when there are significant percentage movements in prices (as with Gold and Gold stocks), log scales provide a more accurate visual perspective than arithmetic scales. Actually, keep in mind that "semi-log" scales are used as the time axis is still linear whereas the vertical distances represent percentage price changes (the distance on a log chart from 10-20 is the same as from 40-80). The advantages are that comparisons at different price levels are more valid and the slope of the chart is more accurate for trend analysis as it reflects exponential functions (see the Hang Seng Index examples). If you look at the DOW example provided, you'll see that obfuscation of the long-term perspective actually tends to occur with the arithmetic scale. A dataset can be charted on either scale and TA software programs allow for both. I'm actually not too crazy about math and I'm not at the point of constructing my own charts yet so someone more experienced than I may have comments to add. Cheers,

Waverider

Ten Bears (12/28/03; 20:50:42MT - usagold.com msg#: 114249)
Scatter shooting

Druid, thanks for the economagic link. An interesting comparison of data available at that site is the relationship of total annual tax revenue to total government annual interest payments. (One reason why over the last several years interest rates have been lowered.)

Melting Pot, thanks for your enlightening post this weekend

OT, "Old age generally cures the arrogance of youth." Yet there is one among us who professes great old age but posts with a cocksure arrogance. If he would but reveal the youth formula that produces such an apparent age reversal, some of us old geezers might find a way to put it to more pleasurable use than argumentative posts at a sound-money advocates site.

Toolie (12/28/03; 20:40:56MT - usagold.com msg#: 114247)
Eleven Guidelines for the Respectful Poster
http://www.usagold.com/cpmforum/tools/guidelines.html
Melting pot-(not related to link or subject.) I really enjoyed your post yesterday. It was tops! I could feel your enthusiasm.

R Powell (12/28/03; 18:40:36MT - usagold.com msg#: 114245)
That was quick
Now the dollar is down. All the listed currencies except the British pound are down. If they're all down, what are they down against? Oh, btw, POG is up a bit.

R Powell (12/28/03; 17:43:13MT - usagold.com msg#: 114244)
Dollar stronger
It's just light overnight trading but the dollar is up slightly. Will tomorrow see a relief rally after a holiday market break that saw nothing unusually horrendous of a man-made killing nature? Not that the usual violence is acceptable but, thankfully, there was nothing spectacular.

I just finished "Gold Wars". I would not be at all surprised, after having finished the book, to find out that the author has been among us for many years. Thanks, Mr. Lips, for the book.

I believe "The Dollar Crisis" is next. Santa left a copy for me under the tree. Thanks Santa. I still read with pen and ruler for underlining so that I can quickly review. My poor brain needs repetition to attain comprehension and some retention. Poor old brain!
I'm ready, let the markets open !!!
Rich

Gold Standard (12/28/03; 15:15:34MT - usagold.com msg#: 114243)
Charting generally

To anyone of charting/mathematical inclination at the Table:

As a non-mathematician, I was under the impression that logarithmic scaling on graphs was only useful (and, indeed, statistically valid) where the dataset has the potential to increase (or decrease) exponentially. Say, for instance, like the 10 year POG in 2009. :)

Where we have a dataset within finite bounds (say, for example, the Dow, Nasduck or S&P 500) I am at a loss to ascertain any advantage in using a logarithmic scale. Indeed, a log scale visually highlights changes in data at the lowest points of the scale, and visually clouds similar or greater changes at the upper end of the scale.

To my untrained eye, this exaggeration of low points and obfuscation of the upper points adds nothing to the visual statistical analysis of the chart - can anyone explain in simple terms why a log scale is necessary?

Cheers! GS
PS Thx for your help, Randy!


Liberty Head (12/28/03; 14:11:07MT - usagold.com msg#: 114242)
a nation of one
a nation of one,

I think you may have made some false assumptions about my beliefs.
Your questions seem more like statements disguised as questions, false statements at that.
My belief is only that participating in 401k plans to obtain the matching funds may be better than not participating at all.
Like any other card I'm dealt, I endevor to play it as well as I can.
Furthermore, I assure you that I generally hold elected politicians in the lowest regard possible, Ron Paul excluded.

I hope that clears things up.

Best Wishes



Goldilox (12/28/03; 13:58:24MT - usagold.com msg#: 114241)
Santa's elves left out in cold
http://news.bbc.co.uk/2/hi/europe/3343909.stm
snippit:

"Something will definitely be missing this Christmas." Santapark operators say they had no choice but to cut their elf staff down to size."We used to have 120 people on a monthly salary, which was ridiculous," , managing director Wille Rajala told AP. "Now we are down to three full-timers. "The work is seasonal so we have to cut costs in all possible ways."

Elves in cave

Santapark is visited by tens of thousands of people a year, nearly all of them during the main winter opening season. They are shown into a huge cave where the attractions include elves selling souvenirs. But critics say there is nothing to draw people back for repeat visits, and few attractions built around the Christmas story. The park, which opened in November 1998 near the Arctic Circle, is not in profit and has six-figure debts.

Santapark was built in a former bomb shelter which needed further excavation and huge technical investment. It is thought that the huge set-up costs are among the financial impediments.

Goldilox:

Oh, dem bones . . . it looks like even Santa is suffering from budget deficits.

Goldilox (12/28/03; 13:44:17MT - usagold.com msg#: 114240)
More Retailers are making a point of "No returns"
http://www.nypost.com/business/44221.htm
snippit:

This may be the season of many happy returns - but not for harried holiday shoppers looking to exchange unwanted Christmas gifts.
Retailers have been steadily ratcheting up restrictions on their return policies, in an attempt to lower what they say are the high costs of funneling all that unwanted merchandise back to their store shelves.
Most retailers now require receipts before taking back unwanted goods - even on gift items. Some go a step further. Best Buy, for instance, charges a 15 percent "restocking" fee on consumer electronic products that have been opened.
Britt Beemer, founder of America's Research Group, which surveys thousands of consumers during the holiday season, estimates that five years ago 45 percent of Americans returned or exchanged some item after Christmas. This year, he expects only 15 percent of Americans to do so - in part, because of increasingly restrictive return policies on the part of retailers.
Consumers in his surveys have cited frustration with store return policies - including the annoyance of walking around with a store credit - as one reason they are increasingly turning to gift cards. Sales of gift cards, a credit card that functions like an old-fashioned paper gift certificate, are expected to increase 20 percent this year to $45 million, according to Bain & Co.
Wal-Mart has said higher demand this year for gift cards, which aren't counted as revenue until they are redeemed, may boost results later in the season.
"Retailers have become much more restrictive on returns," Beemer said. "It's been one of the biggest shifts in retailing."

Goldilox:

Keeping receipts is always a good idea (or paying with a card to create an electronic trail), but retailers are even less interested in refunding revenues in a year that has brought little or no sales growth.


Waverider (12/28/03; 13:22:38MT - usagold.com msg#: 114239)
Druid
http://www.hussman.com/hussman/html/datapage.htm
Thanks for the data link...here's another that may be of interest to you. Cheers!

Boilermaker (12/28/03; 13:06:27MT - usagold.com msg#: 114238)
Year End Musing
I've always been fascinated by the sheer size of the stock market and the fact that it's perceived value is based upon the last trade for each of its components. More and more the financial health of the US and many of its people is based upon the stock market. It's become our national bank account, essentially supported by IRA's and 401K's. The constant flows of savings that are directed into stocks have created a sense of wealth that appears real to most of us.
Low interest rates have recently increased the proportion of savings that are directed to stocks vs. interest bearing assets. These same low interest rates have encouraged the withdrawal of home equity and other forms of debt expansion in favor of consumption. The stock market has become essential to the survival of the American Dream.

Then along comes an Enron or a Parmalat that reveals the intrinsic value of a corrupt company. But how many people aside from the tiny group that we know as the USAGOLD Forum are aware that the US$ and the economy that it supports is an Enron walking. We are but one trade away from financial oblivion.

Boilermaker

Goldilox (12/28/03; 13:06:19MT - usagold.com msg#: 114237)
Why is Enron Corp. still eligible to receive U.S. taxpayer money?
http://www.commondreams.org/views02/0613-01.htm
snippit:

"Enron's decision to file for Chapter 11 bankruptcy protection forced the company to forfeit its energy trading operations in the United States and to sell some of its assets.

But a large number of its overseas ventures remain intact. Even as it faces shareholder lawsuits and congressional inquiries, Enron plans to emerge from bankruptcy by carrying on with its global energy services.

Through numerous consortia and subsidiaries, Enron continues to be involved in energy markets in countries throughout the world. Its present assets in Latin America alone include stakes in gas and electricity companies in Brazil and Venezuela, pipelines in Colombia and Bolivia and power plants in Panama, Guatemala and Puerto Rico. In many of these countries, assurances have been given that the problems Enron has in the United States will not affect its local operations.

U.S. taxpayer money has helped build Enron's global empire. A new report by the Institute for Policy Studies in Washington shows that since 1992, Enron-related projects have received more than $4 billion in U.S. government financing. Other public sources such as the World Bank and the European Investment Bank contributed an additional $3 billion."

Goldilox:

I have pondered in the past that ENRON seems to be evading serious legal action as the "Swordfish" of the real world. Here's more evidence that the "oil and gas" powers consider themselves to be "above" the rest of the population. Once the Iraqi adventures are "contained", look for flare-ups in South America. The mineral and resource companies are screaming about the "socialist" leanings of South American leaders who want to control their own natural resources, while the same resource giants involve western banks and government funds to get their deal done. Given South America's general mistrust of the WB and IMF, it may degenerate from business dealings to political argument when the going gets tough in the trenches.

A lot of new mining operations are coming on line in South America. Add this to the burgeoning oil industry in Venezuela and Bolivia, it's not hard to see trouble brewing closer to home next. Funding and press messages will most likely be focused to the "war on drugs", as this works so well to demonize the opposition. Unfortunately, political meddling tends to disrupt rather than enhance resource production, so a likely result is that gold and oil production can expect to suffer setbacks in Sud America.

a nation of one (12/28/03; 13:02:02MT - usagold.com msg#: 114236)
to Liberty Head (12/28/03; 01:46:19MT - usagold.com msg#: 114226)

While reading your post, it seemed that two questions needed to be asked.

1. Why did you believe that retirement plans sponsored by governments are primarily in the interest of the individuals who put their money into them? And,

2. What caused you to form the impression that men who seek to get themselves elected to public office are interested in the public good?

The likelyhood that pog will increase is more in agreement with the perception that expansive governments ultimately are more harmful to their own people than useful, and it is less in agreement with the possibly deluded impression that responsible individuals really need any kind of powerful government.

Druid (12/28/03; 12:30:26MT - usagold.com msg#: 114235)
Bone Pile
http://www.rense.com/general46/pick.html
"NEW YORK (Reuters) - U.S. corporations are picking up the pace in shifting well-paid technology jobs to India, China and other low-cost centers, but they are keeping quiet for fear of a backlash, industry professionals said.

Morgan Stanley estimates the number of U.S. jobs outsourced to India will double to about 150,000 in the next three years. Analysts predict as many as two million U.S. white-collar jobs such as programmers, software engineers and applications designers will shift to low cost centers by 2014.

But the biggest companies looking to "offshoring" to cut costs, such as Microsoft Corp. (MSFT.O: Quote, Profile, Research) , International Business Machines Corp. (IBM.N: Quote, Profile, Research) and AT&T Wireless (AWE.N: Quote, Profile, Research) , are reluctant to attract attention for political reasons, observers said this week."

Druid: This pace is going to be much faster then what is projected.


Druid (12/28/03; 11:56:40MT - usagold.com msg#: 114234)
Data
http://www.economagic.com/


For any of you who enjoy parsing through time series data, the linked URL leads you to a fairly large compilation of government data. Parse with care. Enjoy.

Paper Avalanche (12/28/03; 11:53:43MT - usagold.com msg#: 114233)
@ Agingfast
Your last post provides the critical element by which the flaw of your thesis can be readily demonstrated. At the start of your second or third paragraph you mentioned..

"More than 20 years ago..."

Precisely.

Your mistake is common among novice investors - that is to assume that past performance is indicative of a certain and constant relationship between two variables in the future.

Your argument is predicated on the relationship between fed funds and gold in 1980. In 1980 the political landscape of the world did not allow for the replacement of the dollar as reserve currency. It is different this time.

My rejection of your argument is based on my understanding that all fiat currencies have a finite life time. Your incorrect assumption, IMO, is that the dollar will be the world reserve currency ad infinitim. I believe that you are wrong. Recent changes in world markets (i.e the Shanghai and Dubai exhanges, the introduction of the Euro which espouses the free gold concept, the liberalization of physical gold ownership for 1.5 billion Chinese citizens) seem to indicate that the world is ready to abandon the US dollar as the reserve currency.

Perhaps a better understanding of how systems which are based on exponential growth must inevitably collapse under their own wieght would allow you to better see the flaw in your argument.

PA

Goldilox (12/28/03; 11:35:10MT - usagold.com msg#: 114232)
401K limitations
@ Liberty Head

One bear market 401K option is to examine all the investment options and be ready to switch to something like money market ASAP when interest rates start to rise and quell the rally.

Protecting 401K assets in a bear market can be difficult. Matching funds may require a vestment period - essentially freezing them in the account. It might be worthwhile to bug your HR rep about expanding the available options, reminding them of most 401K's dismal 2001-2 [negative] performance. Often the one responsible for 401K administration is monitoring insurance and other benefits simultaneously. This person might have little investing experience and no input beyond sales pitches from the brokerage trustors. If you can make a good case, you might make some friends in HR. If you are not executive level, see if you can convince one of them to back you to save his or her money from oblivion, as well.

My 401K's had very weak bear market options available, so I exercised my once a year option to transfer funds to my IRA. If you can and choose to do this, there are many options available, including a gold IRA trustor to whom CPM will happily refer you.

It's your money, stay informed and proactive.



Agingfast (12/28/03; 10:48:30MT - usagold.com msg#: 114231)
Paper Avalanche
I'd be baffled by your rejection of historical perspective and the current bullish implications (for the POG) of the correlation between peaks and troughs of the fed funds rate and the POG -- except for the fact that you admit that you're frequently wrong.

More than 20 years ago the Fed's fears of price inflation were reflected by extremely high fed funds rates (and longer rates) and a sharp rise in the POG. But gold, being older and wiser than the Fed, sensed that those high rates would eventually lead to declining price inflation. Therefore, though you may choose to deny it, the price of gold discounted that development and peaked in 1980, in advance of the final peak in the fed funds rate in 1981.

More recently the exactly opposite situation has prevailed. The Fed's fears of price deflation have been reflected by extremely low fed funds rates (and longer rates) and by a rise in the price of gold. Gold sensed that those low rates would eventually lead to higher price inflation. Therefore, though you may choose to deny it, the price of gold discounted that development and troughed in 2001, in advance of the final trough in the fed funds rate, which may still lie ahead.

I can understand your angry rejection of these facts and their bullish implications for the POG, since you admit you are wrong so often, but I'm surprised that your opinion and your anger are shared unanimously, or nearly so, by other forum members.

misetich (12/28/03; 09:48:12MT - usagold.com msg#: 114230)
Barron's Interview with Hugh Hendry - by Vito J. Racanelli
http://www.barrons.com/
Snip:

Q: Today, liquidity is being pumped in by Greenspan, then?
A: Yes. The mechanism is the government-sponsored enterprise sector in America, the Fannie Maes and the Freddie Macs. The U.S. has nationalized the credit-creating process, previously the preserve of the banking sector. Freddie and Fannie can borrow money at almost the risk-free rate. At times of anxiety, they are profit-motivated to expand their balance sheets because government bond yields, the risk-free rate, fall during times of risk aversion. The spread widens between riskier assets like mortgage-backed securities, which Fannie and Freddie buy, and Treasury bonds. The combined balance sheet of Fannie and Freddie is $3 trillion, 30% of the U.S. economy. The annualized growth rate in September and October of their balance sheets was 50%. Now when people talk about M2 or the old monetarism, it hasn't kept pace with the disintermediation, which has gone on in the economy. It doesn't include agency paper. The money supply looks as if it's waning. It's not. There's enormous dollar creation. You can control the domestic price of money. Short-term interest rates have not gone up in America because of this economic Frankenstein. But you can't control the external price: The dollar is weakening versus everything, even versus the ruble.

The response to the crash since March 2000 has been to create even more money. Just as it was 300 years ago. We've created a tidal wave of liquidity, with the Dow back at 10,000. But in doing so, strange things have happened. Gold has broken its 25-year downtrend and has now established an uptrend. The CRB index is at a nine-year high. Oil prices didn't come down after the Iraq war concluded. Strange things are going on in the world at large. But not strange to a citizen of Paris in 1720.
............................
Q: Does this implicitly suggest that you believe in the 20-20 reflation view more than the super-bear scenario?
A: Yes and no. The reinflation scenario is manna from heaven for these stocks. But in deflation, it is ultimately an ownership of these tangible, finite resources if we have the depressionary scenario. Commodities had a very good relative performance in the 1930s. But in a deflationary scenario, you are going to lose money in all equities. You would lose less quickly with some of these. That's where you really want to be in gold. Gold's got nothing to do with mining. Gold works both ways. If we have the deflation scenario, it will be hoarded, on monetary demand rather than on economic demand.
.......................
Q: Is that what you think?
A: It's more than possible. It's broken its 25-year downtrend. Because they're not making any more gold. Whereas [Japan's central bankers] have made a $150 billion worth of yen this year. They've done the same in Hong Kong, and Fannie Mae and Freddie Mac are growing their balance sheets of $3 trillion at a 50% rate. That's why the euro could go to $1.80. The pound sterling could hit $2.20 in 18 months. In that world, gold takes care of itself.
....................

Q: Because everyone thinks interest rates inevitably are going to go up next year?
A: Yes. One eventuality may be that the currency market precipitates a crisis. Currencies have a tendency to overshoot and quickly. The currency market says, 'Let's take it to $1.25 or $1.30...then let's go to the level where if the U.S. is concerned, it will start raising short-term rates.' At that point, you expose the Fed because the Fed will not raise rates. The Fed has taken a bull market in equities and put it into the housing market. The Fed can't raise rates. They have to say, 'You know what, 90% of our population don't have passports, but they have houses. Let the dollar go. You know what? We'll survive.'

The Fed needs to get the 10-year bond yield [now around 4.2%] back to 3% to keep refinancing moving. [Otherwise,] you might have to retrench your consumer spending -- 73% of the economy. Savings will rise, you become more deflationary in your outlook. Bonds work in that environment. The Fed probably can't succeed in getting yields back down to 3%, which is probably why I'm bearish.

********************
Misetich

The Feds are up against the huge currency market. Something is bound to give.

All Aboard The Gold Bull Express














Melting Pot (12/28/03; 09:39:51MT - usagold.com msg#: 114229)
The Value of Money
http://www.libertyhaven.com/regulationandpropertyrights/bankingmoneyorfinance/valuemoney.html
How Government Creates Money:

Why and how do our "monetary authorities" create such massive quantities of money that inevitably lead to lower money value? During the 1940's, the emergency argument was cited to justify the printing of any quantity the government wanted for the war effort. During the 1960's, the Federal government through its Federal Reserve System was printing feverishly in order to achieve full employment and a more desirable rate of economic growth. Furthermore, the ever-growing public demand for economic redistribution inflicted budgetary deficits, the financing of which was facilitated by money creation.

How was it done? The Federal Reserve has at its disposal three different instruments of control which can be used singly or jointly to change the money supply. It may conduct "open-market purchases," i.e., it buys U.S. Treasury obligations in the capital market and pays for them with newly-created cash or credit. Nearly all the money issued since 1929 was created by this method. Or, the Federal Reserve may lower its discount rate, which is the rate it charges commercial banks for accommodation. If it lowers its rate below that of the market, demand will exceed supply, which the Federal Reserve then stands ready to provide. Or finally, the Federal Reserve may reduce the reserve requirements of commercial banks. Such a reduction will set Federal Reserve money free for loans or investments by commercial banks.

It does not matter how the new money supply is created. The essential fact is the creation by the monetary authorities. You and I cannot print money, for this would be counterfeiting and punishable by law. But our monetary authorities are creating new quantities every day of the week at the discretion of our government leaders.

This fact alone explains why ours is an age of inflation and monetary destruction.

The Desires of individuals for Larger or Smaller Holdings:

The most important determinant of purchasing power of money under this heading of "money-induced factors" is the very attitude of the people toward money and their possession of certain cash holdings. They may decide for one reason or another to increase or reduce their holdings. An increase of cash holdings by many individuals tends to raise the exchange value of money, reduction of cash holdings tends to lower it.

This is so well understood that even the mathematical economists emphasize the money "velocity" in their equations and calculations of money value. Velocity of circulation is defined as the average number of times in a year which a dollar serves as income (the income velocity) or as an expenditure (the transaction's velocity) . Of course, this economic use of a term borrowed from physics ignores acting man who increases or reduces his cash holdings. Even when it is in transport, money is under the control of its owners who choose to spend it or hold it, make or delay payment, lend or borrow. The mathematical economist who weighs and measures, and thereby ignores the choices and preferences of acting individuals, is tempted to control and manipulate this "velocity" in order to influence the value of money. He may even blame individuals (who refuse to act in accordance with his model) for monetary depreciation or appreciation. And governments are only too eager to echo this blame; while they are creating ever new quantities of printing press money, they will restrain individuals in order to control money velocity.

It is true, the propensity to increase or reduce cash holdings by many people exerts an important influence on the purchasing power of money. But in order to radically change their holdings, individuals must have cogent reasons. They endeavor to raise their holdings whenever they foresee depressions ahead. And they usually lower their holdings whenever they anticipate more inflation and declining money value. In short, they tend to react rationally and naturally to certain trends and policies. Government cannot change or prevent this reaction; it can merely change its own policies that brought forth the reaction.




DryWasher (12/28/03; 08:43:18MT - usagold.com msg#: 114228)
Promoting the well-being of "Earth's finest residents"
@ Aristotle (114205)

Thank you sir for that Gentlemanly clarification, but yes I understood your meaning at the time, and those other meanings never even crossed my mind.

Very Respectfully
DryWasher

Melting Pot (12/28/03; 08:13:15MT - usagold.com msg#: 114227)
Where Did The Money Go?
http://www.gold-eagle.com/editorials_03/chuhran122903.html
The essay "Where Did The Money Go," could have been titled "M3 Exponential Growth vs. Fed Funds Rate."

I have been observing the recent debate on "MZM v Fed Funds Rate" with keen interest. Let me point out IMO when push comes to shove the FED and USA Inc. will just print Weimar style making any debate on the subject matter moot and void for want. Secondly, there has been no independent audit of the system since it's inception, hence the data employed in the observation may not be accurate or reflect proper accounting procedures, Enron, World Com, Parmalat, ect., et al comes to mind! Thirdly, the FED would have us believe that inflation is dormant and tamed when "in the real world" where hedonic measures are meaningless, signs of a massive inflation are reflected in the general prices of subsistance goods and services (food, fuels, housing, medical, insurance, utilities, etc.).

Policy Steady, Inflation Dormant-McTeer
http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=4046838

The '12 Days' Index Shows a Record 19% Increase

SNIP:

True love, at least when it comes to the gift-giving kind in the classic carol "The Twelve Days of Christmas," would cost an eye-popping $65,264 this year - a record 19 percent increase over last year's price tag.

For nearly two decades, at the beginning of the holiday season, a Pennsylvania financial services firm has tallied the cost of the assorted tokens of affection detailed in the medieval carol - from the lone partridge in a pear tree to the dozen drummers drumming.

This year, the price had its biggest jump since the firm, PNC Advisors started putting its Christmas price index together in 1984 as a tongue-in-cheek analysis of the economy.

Jeff Kleintop, chief strategist at PNC Advisors, attributed the abrupt reversal from 2002, when the index fell 7.6 percent, to rising costs of skilled labor. A case in point, he said, piping pipers and drumming drummers both rose a steep 22.8 percent this year from last.

http://www.nytimes.com/2003/12/25/business/25costs.html?ex=1387774800&en=d4a3d371dc8d2477&ei=5007&partner=USERLAND

Again there is much evidence that the "quality" of the data is lacking and wanting for accuracy at best and at worst it is downright fraudulent. Thus the scientist or observer is working with corrupt or erroneous data and hence the probability of the thesis will be erroneous in toto. Of course they lie, what else can they do at this apex, the banking system, inflationary taxation and fractional reserve/usury scheme is in jeopardy of discovery by the masses and/or destruction by the K winter.....

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford

"Should government refrain from regulation (taxation), the worthlessness of the money becomes apparent and the fraud can no longer be concealed."*****"By this means [inflation] government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."--John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).

Where Did The Money Go?

*****The first chart shows M3 Velocity against the Fed Funds Rate. Again, M3 Velocity is basically the speed at which the broadest measure of money supply circulates and is turned over creating economic activity. This gives you a rough idea of the temperature of the economy.*****Taking a look back to the beginning of 1990 notice how flat M3 remained all the way through 1995. There was a $300 billion rise in M3 over those 5 years with a corresponding $770 billion rise in GDP. In other words, it took a 38 cent rise in M3 to generate a $1 rise in GDP.*****Between March '95 and March 2000, we experienced a $2.3 trillion rise (~+50% in 5 years, WOW!) in M3 while we only gained $1.6 trillion in GDP. What? Now it took a $1.43 rise in M3 just to get a $1 rise in GDP.*****Between the Nasdaq top in March 2000 and the end of the recession (pink shaded area) we only grew GDP by $90 billion while M3 grew by another $1.2 trillion. Remember, this was period of time where the Fed initiated most of the 13 rate cuts while M3 velocity was plunging and failing to respond to that Fed stimulus. Over these 18 months it took a M3 growth of $13.33 to achieve a $1 rise in GDP. That M3 growth was not translating into growth in the GDP.*****

End of Snip:

The "MZM v. Fed Funds Rate" question is answered by the essay and accompanying charts contained in "Where did the money go" because to state the proposition is to answer it!

The Fall of Rome and Modern Parallels

*****Rome also suffered from the bane of all welfare states, inflation. The massive demands on the government to spend for this and that created pressures for the creation of new money. The Roman coin, the denarius, was cheapened and debased by one emperor after another to pay for the expensive programs. Once 949o' silver, the denarius, by 268 A.D., was little more than a piece of junk containing only .02% silver. Flooding the economy with all this new and cheapened money had predictable results: prices skyrocketed, savings were eroded, and the people became angry and frustrated. Businessmen were often blamed for the rising prices even as government continued its spendthrift ways.

In the year 301, Emperor Diocletian responded with his famous "Edict of 301." This law established a system of comprehensive wage and price controls, to be enforced by a penalty of death. The chaos that ensued inspired the historian Lactantius to write in 314 A.D.: "After the many oppressions which he put in practice had brought a general dearth upon the empire, he then set himself to regulate the prices of all vendible things. There was much bloodshed upon very slight and trifling accounts; and the people brought provisions no more to markets, since they could not get a reasonable price for them; and this increased the dearth so much that at last after many had died by it, the law itself was laid aside."*****
http://www.libertyhaven.com/theoreticalorphilosophicalissues/history/fallrome.html

Good day!

Liberty Head (12/28/03; 01:46:19MT - usagold.com msg#: 114226)
RE: Wallenwein's latest

Goldilox,

Thank you for posting the FSO article.
It is right on, brother.
Unfortunately, like lots of folks, I have a 401k that doesn't have a "get out of the stock market" option. We may quit our job and pay the hefty taxes and penalties. It's a tough choice. Do we retire early or do we keep working for less and less? Heck, if the market falls enough we could lose more than we earn all year.
Oh where's the crystal ball when you need one?
TGFG

Best Wishes


Liberty Head (12/28/03; 01:00:46MT - usagold.com msg#: 114225)
RE: MZM Graph #114170

I agree, there is a general inverse relationship between MZM growth and the FED Fund Rate. However, since the graph does not have a vertical scale, it would be difficult to determine from the graph if the quantitative statements are accurate or not. Superimposed graphs without scales should always send up a red flag.
Nonetheless, as many have stated previously, any expression of deflation will first be detected in the sectors with the biggest debt bubbles.
After Uncle Sam wages, are not compensating for the dollars decline.
I'm afraid there will be a growing number of folks sleeping under bridges that used to own half million dollar homes.
The POG is a good reference indicator of our dollars value.
Commodities, the true center core of our economic universe will maintain their value independently from the fiat dollars we tend to measure with.
Stay out of debt, own things lots of other folks will want and consider moving to New Zealand. :-)

Best Wishes


Goldilox (12/28/03; 00:09:54MT - usagold.com msg#: 114224)
FSO - Wallenwein's latest
http://www.financialsense.com
snippit:

"But this is not an article about why the dollar will keep falling. That subject has been dealt with at length in virtually every other ‘euro vs dollar’ article published online, and in even more detail in every issue of the Euro vs Dollar Currency War Monitor. This article is about what to do once you realize that this drop won't stop.

If you realize that, you immediately know that, at some point, the falling dollar will kill the recovery - which really is the only thing worth knowing. How long it takes, time-wise, before that happens is rather irrelevant.

What's the difference whether it will happen tomorrow, three months from now, or maybe in a year? The only difference that makes is that it determines how much time you have left to prepare for that event - if you are wise enough to prepare!

Too many Americans have no idea whatsoever that this threat even exists."

Goldilox:

I've seen enough articles on what to do to "protect myself" that I believe the public must be hearing the message that the dollar is toast. How much longer until the real battle to put in a floor? That's an important question. Hyperinflation? Maybe, but perhaps more likely capitulation and reorganization. DX=80, 70, 60? I sure can't say, but at some point brakes will be applied. . . we'll see how well they function.

IMHO, the political situation will have less effect than most of the pundits would have us believe. If the republicans are retained, we get four more years of borrow and spend. If the demos win we get tax, borrow, and spend. Either way, the US government is addicted to increased spending, and our economy is in such sad shape that cutting gubmint spending would drive unemployment to the Moon and GDP through the cellar. Neither party can stomach the consequences of that action. The stage is set for another "inflation bubble" like 1979-80. If the demos do win, the repubs will say, "See he's as weak as Carter. Inflation is rampant." Gold coins are showing up all over the TV, so I assume that many of the powerful availed themselves of government "gold sales" to transfer public gold to their private stash, and now they're ready for the masses to jump on the band wagon.

That's why gold and other commodity assets are such sure bets for asset growth right now. The ride may be a bit rough for the players in the paper game, but that's why they call it gambling. Buying and storing physical gold in the early stages of an inflation event is currently a no-brainer.

Selling appropriately to profit is MUCH harder. Some say to "play" the rises; some say hold until topping signs are clear; some say hold until the US $ is completely debunked. These messages are much less clear than the buys, and only time will help us sort out the validity of each.

Got gold? Hey Rich, I capitulated and bought some 1964 Kennedy halves today (90% silver). What better way to show my colors in this upcoming election year?




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