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ARCHIVED DISCUSSION FROM 12/30/2004
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Flaccus (12/30/04; 20:21:36MT - usagold.com msg#: 127827)
Townie/Locke
Townie, thanks for putting up the Locke.

The socialists would love to blow holes in the Locke description of the human condition, production and profit. But the truth of the matter is that he hit the nail on the head. People like Thomas Jefferson, Benjamin Franklin and the clock-maker Rittenhouse -- the founders of the American Philosophical Society (google it) -- knew what Locke was talking about. They built a Republic on the principles.

The socialists, on the other hand, even now will refute it to their graves, throw reams of mumbo jumbo at us and expect us to bow at (what they see as) their overwhelming intelligence. These are the Fabians -- the modern counter-revolution -- the monarchy of the left. Jefferson (with Madison and Franklin et al) gave Locke's argument political currency -- nearly 100 years after it was written -- and based the Declaration and the Bill of Rights on it. The power to govern was not invested in the divine right of kings but in the will of the people -- the philosophical concept upon which the Republic was built. THAT is what Locke was attempting to bring forward -- and therein lies his genius. Reread the Declaration with these thoughts in mind.

In reality, that same argument has appeared and reappeared at this forum with regularity over the years and under different guises: There are those who describe reality, like Locke, and invite us to accept and react to it AS IT IS -- NOT AS SOME WISH IT TO BE. These are the pragamists. The Republicans with a capital "R".

Then there are those who manipulate reality and want us to join them in the manipulation. They would put themselves above the God Locke describes and pays homage to. These are the socialists and idealists, the empiricists and the etichicists, et al. . . . . And they will believe that we don't understand what they are really saying when they say it. But in their view, the ethical position will always be that once we've earned it, we've got to share it.

There will always be a group who puts their faith in and accepts that philosopy, and then there are those, like most of the posters here, who understand the utter and complete vanity of those attempts (Eden revisited).
Maybe "that" more than anything else separates those on this side of the fence from those on that.

Once again, thanks for elevating the discussion here to a higher level. I can only hope for my own sake that it continues.


Toolie (12/30/04; 18:09:38MT - usagold.com msg#: 127826)
‘Gulf Dinar’ Could Be a Boon for Region: Study
http://www.arabnews.com/?page=6§ion=0&article=56834&d=31&m=12&y=2004&pix=business.jpg&category=Business
Snip: SHARJAH, 31 December 2004 — The "Gulf dinar" — the common currency that the Gulf Cooperation Council (GCC) member states plan to have in the year 2010, will have far-reaching implications, including a big boost to inter-GCC trade, and could help the region's countries diversify their economic base away from hydrocarbons, says a research paper.
….
A strong independent Gulf dinar that the GCC uses to invoice its oil sales will not only provide the region with substantial seigniorage revenues but would also become the strongest currency in the Muslim world and one which Arab and Muslim states may choose to hold and peg against as an alternative to the US dollar.
Once established, the GCC leadership may decide to invoice their hydrocarbon sales in the Gulf dinar, moving away from the current dollar pricing system.
There are some clear incentives for doing so. The Gulf dinar would have great potential to become a reserve and anchorage currency, providing the GCC with significant seigniorage revenues. Furthermore, it could become the reserve currency of choice for Islamic and Arab central banks for a combination of religious and political reasons.
….
Moreover, pegging to the dollar alone has meant that GCC interest rates are de facto broadly determined by the US Federal Reserve. As a result, the GCC states’ monetary policy is based on US economic conditions rather than those of the GCC. Generally when oil prices are high, the US Federal Reserve is prompted to lower interest rates in order to avoid an economic downturn caused by higher input costs. While at the same time the effect of higher oil prices in the GCC economies creates massive increases in liquidity, this combined with relatively low interest rates can create asset price bubbles. Indeed, US monetary policy is likely to exacerbate the pro-cyclical tendencies that are prevalent in the GCC economies. (end snip)


melda laure (12/30/04; 17:31:45MT - usagold.com msg#: 127825)
Of the three forgotten laws.
Sir invisible hand:

Empiricist you say? Hmm... I apologise, you see I keep hearing this old indian say "what make him think apples want be picked or deer want be lunch?". I think if you examine his thinking you find that his concept of God is important- is it empirical? Perhaps it is a cultural problem (well, let's call it a cultural postulate).

Put another way: If I flood my wheat fields in the off season to provide more room for migrating geese, that is my business. But you, (living in the ON-season home of the geese) though you do nothing different, yet you benefit from more birds also.

You and I exchange nothing, and I have merely acted in my own interest. Yet you benefit if you happen to like geese (and you would also suffer if you dont!). The web of life is very messy - quite beyond the simple model Locke proposes. To sketch it for you, my actions though they do not lay claim to all the geese in common, yet they affect them all. Capital Destruction (of which Sir GAB has noticed) should not too lightly be measured in dollars, nor in %GDP. But I wouldn't be too hard on Locke; and let's not ask the old indian to elaborate too much on what the deer think, or what the apples want, lest we both drown in the same ocean. Suffice it to say, when I charge lunch, the world dies a little bit, and when I buy an ounce paid in full, the world recovers a bit (or at least- the credit monster bleeds a tiny little bit more).

Townie: how I wish I had a spare billion with which to "enron" FNM into oblivion! What a bunch of fascist 401k shenanigans! An honest barbarian at least never lies about the fact he will now commence to pillage then plunder.

Sir Reserves: "misfortunes will happen, and not always in season".

Live in blessedness, nin mellyn.
Na Alyai i Vinya loa laurea.

USAGOLD Daily Market Report (12/30/04; 16:29:34MT - usagold.com msg#: 127824)
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Thursday market excerpts

Gold futures closed higher on Thursday in last-ditch trading before the New Year's holiday, as a lower dollar helped boost the precious metal above previous three-week lows, traders said.

Adding to the currency-based bounce was moderate dealer interest in the yellow metal at cheaper prices following Wednesday's bout of year-end fund liquidation, they added.

Gold futures extended early gains on the year's final day of trading on the New York Mercantile Exchange, winning back some of the ground lost in Wednesday's sharp sell-off, ending down 1.9 percent on yesterday's session. The precious metal chalked up a gain of 5.4 percent for all of 2004, on the heels of appreciation of 19.5 percent in 2003.

New York metals will be shut on Friday in observance of New Year's Day, which falls on a Saturday this year.

"There were not too many market participants in today, and so there's a bit of book squaring," said Paul McLeod, vice president of precious metals at Commerzbank. "We ended right back on the 50-day moving average, so we'll see how it breaks in the new year." The market should stay volatile into 2005, but gold's upward trend is likely to continue after prices rose nearly 6 percent this year, McLeod added.

COMEX February gold rose $1.40 to $438.40, within a session range of $434.70 to $439.80.

Trading sources have said the tsunamis that killed at least 120,000 people across the Indian Ocean coastline from Indonesia to Africa sparked limited safe-haven buying in gold this week because investors, especially those in earthquake-prone Japan, were already on holiday.

In the foreign exchange, the dollar weakened after a below-consensus snapshot of regional U.S. business activity kept it under selling pressure.

The euro rose to $1.3625 in late trade, not far from Wednesday's record high at $1.3646.

Most currency traders believe the dollar's downtrend is intact and, therefore, the euro's bull run should have further to go in 2005, which in theory should bolster gold prices.

----(see url for full news, 24-hr economic newswire)---

Gandalf the White (12/30/04; 14:12:51MT - usagold.com msg#: 127823)
There is the US$ Chart --- Back down to around 80.50 AGAIN !!!!!! <;-)
http://charts-d.quote.com:443/1002980432830?User=demo&Pswd=demo&DataType=GIF&Symbol=DX00Y&Interval=10&Ht=600&Wd=800&Display=2&Study=MA&Param1=13&Param2=0&Param3=&FontSize=10
Gather the YELLOW, as the year end BARGIN SALE is nearing the END !
The WIZ is looking for a GOLDEN '2005' !
See you all next year.
<;-)

USAGOLD / Centennial Precious Metals, Inc. (12/30/04; 12:18:10MT - usagold.com msg#: 127822)
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TownCrier (12/30/04; 11:26:35MT - usagold.com msg#: 127821)
The problem with pensions
The problem is that in the blink of an eye the rules can be changed on you.

Earlier this week I was talking with a gentleman I know who is an employee of a large American corporation, a producer of various manufactured goods.

The company is fiddling with its 401(k) pension program and is making changes that are decidedly odd, to put it kindly.

Taking effect at this year's end (Dec 31st) the company is "freezing" its employees existing 401(k) accounts. What that means, exactly, is that all of the money that has been paid into those particular accounts will remain in the employee's name, however, it will no longer be invested according to the employee's prior selection of investment options, and will thus cease all potential of earning returns (or losses, as the case may be) for the employee.

For years prior to this time, employees had been able to contribute tax-deferred money from their paychecks into their 401(k) accounts, and the company kicked in matching dollars up to 3 percent of the employee's salary. It was certainly a nice enticement for employees to use this vehicle to build a monetary nest egg. During this time, the accounts were administered by a major US investment bank, and the employee could allocate his account among 13 different investment alternatives, ranging from a relatively low risk, low yield money market fund on one end of the spectrum to higher risk mutual funds specializing in various mixtures of foreign and domestic bonds and stocks on the other end. Obviously, the performance of an employee's account depended greatly upon his selected allocations, and overall performance was typical of the market -- meaning, gains could be found, but losses were plenty to go around.

As these accounts are to be frozen, they will simply cease to accrue investment returns (and losses) to the employee's account and will become a fixed number on the quarterly statements. Quite like a cashier's check that has been sealed in an envelope and put under the mattress while the long years pass until the day of your retirement.

Imagine your frustration if you had accumulated $100,000 in this account, only now to discover that it shall no longer be able to generate for you any kind of return -- not even a simple annual two-, three-, or four percent from the boring "low risk" money market investment option.

Now here's the kicker. Aside from freezing the existing accounts, the company isn't really offering anything materially different in its "new" 401(k) program going forward. They will simply start brand new accounts for each employee. For future contributions the company will continue to provide the dollar-matching exactly as before, the accounts will be managed by the same investment bank, and the employees will be given the same 13 investment alternatives to choose from.

The net result for the employee is that a lifetime of paper savings has now been locked up, "frozen" from possibility of either gain or loss, and as for getting gains (or losses), the size of his new account is now $0.00, that's right, zero, and must be once again built up with his paycheck withholdings.

We pondered over the various implications, and both wondered if this was a company-specific event, or was it part of a wider phenomenon.

Consider what it means for this "idle" pool of millions upon millions of dollars from this company's frozen 401(k) accounts. Surely it'll still get plied into financial use somehow. Will the subsequent returns (gains or losses) accrue to the company, or will they be absorbed by the investment bank?

If this is part of a wider trend, how did it come about? Is the pool of frozen money meant to protect everyone from excessive market volatility or losses that are foreseen coming down the pipeline?

Wouldn't it be better to have gold instead of this sort of corporate malarkey? To have it fully under your control? True, to choose gold instead of the company's pension program you won't be getting any of their matching dollars, but then again, you won't be getting the rug pulled out from under you, either. Plus, you'll gain the liquidity of having your assets always available for immediate use -- you won't have to wait until termination of employment to do with it as you wish.

R.

Federal_Reserves (12/30/04; 09:37:49MT - usagold.com msg#: 127820)
Estimated Tsunami losses 120,000 dead
Now exceed the atomic bomb losses of WWII.

"In Hiroshima, of a resident civilian population of 250 000 it was estimated that 45 000 died on the first day and a further 19 000 during the subsequent four months. In Nagasaki, out of a population of 174 000, 22 000 died on the first day and another 17 000 within four months."

The Hoople (12/30/04; 09:13:26MT - usagold.com msg#: 127819)
Marke Talk
I too saw the lame explanations for the little gold downdraft yestersay. One that particularly galled me was the one that gold bugs were disappointed the Tsunami didn't have a greater adverse effect on the financial markets. I don't know anyone here on this site that is that callous to human suffering or desires ill-will to lift their portfolio. That is a vicious label I resent. Gold is protection from fiat fiddling, to some it can be speculative, but never will I desire my gain to come from others suffering. There are many good reasons to own gold, I doubt if any of the besieged Tsunami countries that do own gold have even thought about it one way or another. They are suffering too much and survival is the first priority.

TownCrier (12/30/04; 08:17:24MT - usagold.com msg#: 127818)
Fed gooses System
In addition to the operation described previously, the Fed's trading desk has just completed another foray into the open market -- this time purely with a cash-injection motive. Through a round of overnight RPs the Fed accepted Treasury collateral and pumped $6.75 billion into the cash reserves of the nation's banking system at a rate of just 1.9 percent, seriously looser than the FOMC target. A generous gift of pre- rate hike liquidity for the banks on the receiving end of this operation. Bob's your uncle.

What trouble is stirring below the calm surface to bring this about?

Choose gold and leave the worrying to others.

R.

USAGOLD / Centennial Precious Metals, Inc. (12/30/04; 08:02:53MT - usagold.com msg#: 127817)
What you need to know before you buy your first ounce of gold...
http://www.usagold.com/ProductsPage.html

Q. In your book, The ABCs of Gold Investing: Protecting Your Wealth through Private Gold Ownership you start the chapter by saying "Who you do business with is one of the most important aspects of gold investing." Why is that?

MK. Most, if not all, of the progress an investor makes towards realizing his or her goals with respect to gold ownership hinges on that relationship. Unbiased, objective advice from one's gold advisor is a key element. So are market information and education. Pricing, product selection, fulfillment and on-going support also rely on that relationship. Above all, it is extremely important for gold buyers to match their objectives with the type of gold they buy. Positive results in all of those areas depend upon a strong relationship with a gold firm. That is why it is important to spend some time finding the right one.

Q. Can you briefly describe some of the pitfalls a beginner might be on the look out for?

MK. The biggest trap investors fall into is buying a gold investment that bears little or no relationship to his or her objectives. Take safe haven investors for example. That group makes up 90% of our clientele, and probably a good 75% of the current physical gold market. Most often the safe-haven investors simply want to add gold coins to their portfolio mix, but by the time they finish talking with a typical national firm, they might end up in a leveraged gold position, exotic rare coins, or being diverted into silver or platinum. Others drift into gold stocks or gold futures which in reality are proxies for real gold ownership and could actually act opposite the intent of the investor. There's nothing wrong with any of these non-physical investments per se, it's just that none of them is really a safe-haven. The investor should bear this in mind. The question investors must always answer for themselves is "How will this investment serve me should the economy or financial markets suffer a major disruption?"

USAGOLD / Centennial Precious Metals, Inc. (12/30/04; 08:01:53MT - usagold.com msg#: 127816)
What you need to know before you buy your first ounce of gold...
http://www.usagold.com/cpm/aboutcpm.html

Q. How does USAGOLD / Centennial Precious Metals position itself among its competitors with regard to credibility, reputability and pricing?

MK. USAGOLD / Centennial Precious Metals has always been considered one of the most reputable firms in the business and it's always been that way. We have placed literally thousands of ounces of gold with investors and our repeat business and referrals are both very strong. That doesn't happen unless you know what you are doing and your clients know that you know what you are doing. If I were to sum it up, I would say we combine the first rate services and research that you would expect from a very large firm with the favorable pricing you would expect from a smaller, client-conscious firm.

TownCrier (12/30/04; 07:26:37MT - usagold.com msg#: 127815)
Fed continues support of mortgage-backed securities
Trading this morning in line with the FOMC target rate of 2.25 percent, the fed funds market showed no particular want for additional cash. However, that didn't deter the trading desk for the Federal Reserve System from putting its hand into the open market to gently continue its support for the realm of mortgage-backed securities. The Fed took all comers at 2.3 percent (and higher) through a round of 14-day RPs. In the process, the reserves of the nation's commercial banks were thus pumped up with $7 billion of the Fed's newly created cash.

As this has been the story all week long, I can't help but ponder how serious the underlying troubles are becoming with Fannie Mae.

R.

USAGOLD / Centennial Precious Metals, Inc. (12/30/04; 07:05:00MT - usagold.com msg#: 127814)
Make a risk-free request -- to help you enter the gold market with grace and confidence.
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MarkeTalk (12/30/04; 00:23:32MT - usagold.com msg#: 127813)
One Explanation for Today'Gold Price Decline
Today's surprising selloff in the precious metals in the aftermath of the devastation in Southeast Asia was attributed in some quarters to the belief that Asian governments affected by the tsunamis will need to raise cash to rebuild their economies. It is rumored that both Thailand and Indonesia have some gold which could be sold. This rumor coupled with very thin holiday markets allowed a small number of Comex gold contracts to drive prices down by almost $9.00/oz. The real test will be next week in early January 2005 when all market participants are back from their holidays and vacations. This brief selloff could very well provide the pullback which investors have been anticipating.

GC

Black Blade (12/30/04; 00:05:30MT - usagold.com msg#: 127812)
The Crashing US Dollar

Some notable comments in recent days:

Investors are betting the Bush administration won't try to stop the dollar's decline because it will help narrow the U.S. trade deficit from an all-time high, said Matt Cobon, who manages currency risk in London at Deutsche Asset Management. The European Central Bank has offered no sign it's prepared to stem the slide, which has pushed the U.S. currency toward a third consecutive annual drop versus the euro, he said. ``The U.S. has a very benign policy towards the dollar and policy makers recognize there needs to be some adjustment in the currency,'' said Cobon at Deutsche Asset, which oversees $70 billion. ``For the ECB to intervene, you'd have to see the economic situation in Europe worsen considerably from here. They would have to start signaling to people they were also prepared to cut rates and we're not there yet.''

Bush's policy of letting markets set exchange rates is unchanged, U.S. Treasury spokesman Rob Nichols said on Dec. 23 in an e-mailed response to a question about the administration's stance, after the dollar dropped to $1.35 per euro. A day earlier, he said the U.S. has ``a strong dollar policy.'' (Black Blade note: excuse me while I choke)

The U.S. needs a weaker dollar to shrink the record deficit in the current account, said Laurence Meyer, a former Federal Reserve Governor, in an interview on Dec. 23. The current account is a measure of trade, services, tourism and investments. The gap widened to $164.7 billion last quarter. ``The current account is unsustainable and the dollar is going to fall,'' said Meyer. ``It's part of an unwinding of global imbalances and on balance is a good development.'' (Black Blade: Ditto that!!!)

``Amid bearish sentiment for the dollar, the steady performance of the Japanese stock market will probably support buying of the yen,'' said Minoru Shioiri, senior manager of the treasury and foreign exchange division at Mitsubishi Securities Co., a unit of Japan's third-biggest lender.

``We're still biased toward a weaker dollar,'' said Todd Elmer, a currency strategist in New York at Barclays Capital Inc., a unit of Britain's third-largest bank. As for U.S. officials, ``it's quite clear they're following a policy of benign neglect,'' while in Europe, ``we're not yet at that pain threshold'' where they'll ramp up efforts to curtail euro gains.

"The dollar is in a decline that will continue for years to come," Jim Rogers, co-founder of the Quantum fund with Soros in 1969. "Somebody's making a whole lot of money, if not the hedge funds."

``The dollar is in for more of the same,'' said Callum Henderson, head of global currency strategy at Standard Chartered Plc in Singapore. ``The likelihood is the European Central Bank will let the euro run up at least a bit more, and the U.S. has no interest in doing anything about the dollar.''

``There are massive deficits in the U.S. and policy makers there don't care that the dollar is slumping,'' said Jens Peter Soerensen, chief analyst in Copenhagen at Danske Bank A/S, the No. 2 lender in Scandinavia. The dollar will probably trade between $1.35 per euro and $1.37 for the next year, he said. A statement from Bush is needed to stem the dollar's decline, which at some point will become a ``matter of prestige'' for the U.S., Soerensen said. The Fed also will need to comment on the dollar because currency traders and investors no longer believe the Treasury Department's statements on the dollar, he said.


Black Blade: The US dollar must weaken due to soaring Trade, Current Account and Budget deficits. So far the US Dollar has reached an all-time low against of $1.3638 against the euro. The Bush "Strong-Dollar Policy" is at the very least ludicrous if not downright insane (which explains the "benign neglect" comments above and as I have pointed out numerous times over the last couple of years). The US needs a "Weak-Dollar Policy" to stimulate US exports and to buy back unsustainable debt. Hell, the Current Account, a measure of trade, services, tourism and some investments, grew to a record $164.7 billion in the last quarter and the budget deficit was a record $412.6 billion in the year through September. This has been financed by foreign purchases of Treasury debt (mostly from Asia and primarily Japan and China). The US Dollar has lost 5.2 percent this year as measured by the Federal Reserve's Trade-Weighted Major Currency Dollar Index and has dropped 15.8 and 9.3 percent in the previous two years. Clearly there is a trend here and to me that does not sound like much of a "Strong-Dollar Policy". This rapid decline of the US dollar over a three-year period has not happened since the early 1980's and we now how precious metals markets reacted. The strategy seems rather straight forward – sell US Debt to unsuspecting foreign investors followed by a weakening of the Dollar followed by a buy-back of US debt with cheaper dollars to "clear the books" and close the gap in the Current Account deficit. Quite nifty eh?

Many think that the crashing US Dollar is the sole reason for the recent rapid rise of the so-called "anti-dollar" (Gold that is). Yes, Gold is a currency that is not backed by a government's debt but has "intrinsic value". A more compelling reason for owning Gold (aside from the "investment" or "portfolio insurance" aspect) are the sharply changing dynamics of "supply-demand". Many mining companies have been lax in exploration in the past several years and deposits at current operations are fast reaching depletion or at least are becoming uneconomic at current prices (despite higher Gold prices). Also consider that many miners are still buried under what are now unprofitable forward sales hedging agreements. The big boys have resorted to buying smaller competitors to build reserves. Gold production is expected to decline over the next five to seven years (at least). This alone should be very supportive for precious metals. Another problem going forward is the lack of experienced exploration staff. Mining companies have slashed staff and many of those people will not be coming back. US universities are not graduating students in the field and many have simply closed natural resource programs. It is similar to the staffing problems experienced by the petroleum industry today.

Another point that can be made is that inflation is back. US Government agencies report a "benign" inflation rate of just over 2%. Unfortunately this comes at the expense of having to "massage" inflation data through phony data measure massagers such as "hedonic deflators" and "seasonality" (the government method of calculating "pro forma" – that is what it would be if they didn't have to account for all the "bad stuff"). Real inflation is nearer to 12%. Perhaps more important is the fact that we are now in a period of "negative real rates". A quick review – "negative real rates" occurs when real inflation is greater than nominal Fed rates (currently only 2.25%). When this has happened in the past Gold has outperformed. This is the case today and looks to be the case for several years to come.

The recent fall in the Gold price may just be another "buying opportunity". Some analysts are "surprised" that there is no "tsunami rally". Actually I would think that there would be a slight temporary decline because this tragedy in SE and Central Asia occurred in a major Gold and Silver buying region leaving many scrambling to rebuild lives and others to prepare by getting together basic needs in case of another calamity (the mindset outside western thought is quite different than our "live for the moment" mentality). In short, the only advice now is to get out of debt and stay outta debt, stash enough cash for several months expenses, accumulate Gold and Silver portfolio insurance, and start a storage program of nonperishable food and basic necessities.





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