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ARCHIVED DISCUSSION FROM 5/31/1999 All times are U.S. Mountain Time View Yesterday's Discussion. Goldsun (5/31/99; 23:56:56MDT - Msg ID:6962) BIS Board This has probably been covered before, but how does the membership of Alan Greenspan and Eddie George on the BIS board of directors relate to the IMF vs BIS scenario?The last time I encountered George Washington's vision it was attributed to Lincoln. No idea which, if either, is correct.Goldsun Aristotle (5/31/99; 23:27:24MDT - Msg ID:6961) A can of worms? Hope not. Still catching up on past post, I saw a topic that I should probably just let die in the past, but I found the essence of it disturbing to a degree worthy of chiming in after-the-fact. I don't intend this to be confrontational, so I won't name the poster or give an exact quote, but essentially he/SHE raised the thought for a second time, asking why persons of obvious intellect and economic knowledge have spent such time posting on the internet, suggesting that they would likely have something more important things to do with their time.What is THAT nonsense? Any reasonable extention of logic from that premise would have to incriminate every one of us gathered here as a crank or a moron. Does that thought apply only to the internet, or is it extended to other venues, such as the telephone? Must I invest in a Caller IQ box for my phone so that I may be sure the person calling is of sufficiently low intellegence that his calling intentions are noble? SheeeeeeeeEEEEEEEeeeeeeesh!Personally, I think the internet is a natural and appropriate avenue to draw out good, quality people to discuss matters that near and dear to them. If you are after a better mousetrap or chocolate chip cookie, there is probably a website for that. If Gold is on your mind, you've come to the right spot..."A clean, well-lighted place for gold investors" as MK says so well in his newsletter.Comraderie. Get you some. ---Aristotle Peter Asher (5/31/99; 23:10:14MDT - Msg ID:6960) beesting That's sort of what I thought, but I was afraid I was reading through Gold colored glasses beesting (5/31/99; 22:59:51MDT - Msg ID:6959) Peter Asher ,What does this mean?msg.6954. It may signify the very first semi-positive mainstream news release concerning Gold,in many moons.Are the masses being set up for a different view of Gold? We watch together......beesting beesting (5/31/99; 22:39:25MDT - Msg ID:6958) Press release from BIS 10 May 1999 Central Bank survey, http://www.bis.org/press/index.htm of Foreign Exchange and Derivatives market activity 1998:This may be old news to some.The daily average of global foreign exchange turnover is estimated at 1.5 Trillion.Global positions in OTC financial Deriatives contracts stood at 72 Trillion at June 1998.Click above URL for complete press release.Comment:To me 72 Trillion dollars seems like ALL THE PAPER MONEY IN THE WORLD,and BIG banks control the flow and keep track of all of it.Now doesn't,physical Gold ownership(coins,bars,etc.)give flow and control(of real money) to the holder? From Sir Aristotle:Want Sovereignty? Get Gold.......beesting Peter Asher (5/31/99; 22:35:46MDT - Msg ID:6957) Aristotle That has got to be one of the most satisfying compliments I have ever received on this comlimentable Round Table, Thank You. Peter Asher (5/31/99; 22:30:13MDT - Msg ID:6956) Caven Man But how do our problems compare to their (EU) problems. Aristotle (5/31/99; 22:30:00MDT - Msg ID:6955) Peter, you are to be congratulated This statement of yours is the clearest presentation of this idea I have encountered, and better than my own attempts to explain it to others. I think I should have cards printed up for distribution when this topic comes up. And I frequently DO bring it up because I think it is important for people to realize this. Kudos to you, good Sir! ---AristotlePeter said..."That's all people have, a share in a company. The only money that can be conceived of being IN the market, is whatever bid is on the floor of the exchange at that particular moment. If at noon tomorrow there are bids for 2000 shares of AMZN @ $50 per share, and nothing else, then in that moment in time, the total wealth factor of the company could be seen as $100,000. First guy to sell his 2000 shares is the one who "Gets (some of) his money out of the market." Peter Asher (5/31/99; 21:59:33MDT - Msg ID:6954) What does this mean? http://news.excite.com/news/r/990531/00/business-economy-mcdonough Metals and agricultural producers have complained of falling commodity prices for months. To end the slump, some have urged the Federal Reserve to use a market basket of gold and other commodity prices in setting U.S. interest rates. SteveH (5/31/99; 21:57:23MDT - Msg ID:6953) This is all enough to give one a quesy stomach... I believe the days of A/FOA parables are over. This is direct and to the point material that hints of urgency. Cavan Man (5/31/99; 21:38:59MDT - Msg ID:6952) To FOA I was just testing as you know. I thank you sir. You have taught me much. Your commentaries are very plausible. Whether you are right or wrong, I am "on board" and look forward to continuing my education. Thanks! Cavan Man (5/31/99; 21:31:50MDT - Msg ID:6951) On koan and to Mr. Asher koan: A balance sheet cannot be at the same time an income statement. Mr Asher: I love this country dearly but the signs (of problems) are everywhere. FOA (5/31/99; 21:30:30MDT - Msg ID:6950) One last note! Cavan Man (5/31/99; 21:18:07MDT - Msg ID:6948)FOA IF you are out there tonight....Mr. Cavan Man, I am a "less" than average bear that knows nothing except what other fine humans have taught me. I believe that when one displays credentials in public, it only proves how little understanding they truly have! I must go now, thanks FOA FOA (5/31/99; 21:19:02MDT - Msg ID:6949) Time to go. With the poor spelling in that last post, I should depart. Thank you all and please continue. FOA Cavan Man (5/31/99; 21:18:07MDT - Msg ID:6948) FOA IF you are out there tonight.... Sir: In addition to appearing to be smarter than the average bear (not of the golden type), you also seem to have a very different perspective on the world in which we live. With all due respect...are your credentials that good?I know you will be humble, yet objective to a fault.Thanks! FOA (5/31/99; 21:16:18MDT - Msg ID:6947) (No Subject) PH in LA (5/27/99; 15:20:47MDT - Msg ID:6801)Probing the downward limitsPH, Your support for open duscussion and consideration should be very encourageing to everyone. It is to me. Please find time to offer your views on these markets, as your concepts are important.thank you FOA Golden Truth (5/31/99; 21:13:52MDT - Msg ID:6946) Thanks To F.O.A Hello F.O.A Just wanted to say thanks for your time and energy you spend posting here. I also would like to appollogize if any of my posts are somewhat disbeliving with regards to what you and Another have to say. You have to admit that its a large leap of FAITH!! for me and i,am sure for others also,but after reading IN THE FOOTSTEPS OF GIANTS it does put things into better perspective. So all i can say is your Awesome F.O.A and if it wasn't for ANOTHER posting here i would have never have know the sheer Beauty of owning GOLD. For everybody else PLEASE READ "IN THE FOOTSTEPS OF GIANTS" it will demystify a lot of your questions. Thanks Again F.O.A GoldenTruth. Peter Asher (5/31/99; 21:13:16MDT - Msg ID:6945) FOA In shorting paper contract sales, does there have to be an actual long position created, or only financial surety that the short seller will be able to deliver per the contract obligation, at expiration. I have thought that the ability to 'falsify' the true value of gold (and other commodities) was that 'obligations' can be written, such as contracting to deliver something you don't have, at some future date, secured by credit worthiness based on net worth and margin. In other words, not creating or possessing anything physical, just contracting to come up with it. So, what we're calling paper gold, is really paper commitments to have it at some time in the future. Cavan Man (5/31/99; 21:12:29MDT - Msg ID:6944) To Goldfly again I forgot to mention.......Jefferson always considered Washington a bit of a dolt; I have never understood why. All of his (Washington's) writings which I have read indicate a profoundly good and wise individual with an excellent command of the King's english. FOA (5/31/99; 21:10:17MDT - Msg ID:6943) Comment canamami (5/27/99; 14:44:45MDT - Msg ID:6800)FOA,Is it your position that the BIS will not intervene to protect the POG at $280, or any level, given the existence of the Euro? How does this theory jibe with the Euro's declining value in relation to the $US? When did you arrive at the conclusion that the BIS will not, or no longer, ensure the POG stays above $280.00?I look forward to your return, to hear your contributions to the discussion. Thank You, canamami.Canamami, They gain more leverage against the dollar with each new gold short written. I believe they decided to allow the market to "implode" when it became apparent that the US was going to encourage gold. This political decision came about around the time that Mr. R. quit. As I said earlier, they now hold a sword over the market that everyone should be aware of. It could fall at any moment and end any further purchases of gold at today's values. I think the $280 price was based on an old formula they used long ago. I'll offer it later when I have more time. Also note that the Euro was never to rise against the dollar until the dollar fell from it's own weight. The Euro was to become the "fallback" reserve currency that received the flight from a failing IMF / dollar system. The BIS / ECB was very surprise that it opened as strong as it did. Many who criticize the ECB for not supporting it are the same ones who object to the "dirty float" and "rigged" dollar. Yet, here the ECB is trying to offer a fair, self evaluating currency and the speculators are crying for "intervention"! No doubt the same ones that currently "intervene" in the paper gold markets to save their skins. We shall see. FOA FOA (5/31/99; 20:47:00MDT - Msg ID:6942) Reply tlc (5/27/99; 14:42:54MDT - Msg ID:6798)paper gold contractsI am puzzled by the statement that there is an excess of paper gold "shorts" in the market. It is my opinion that you cannot just open a "short" position without an offsetting "long" position being created. Can anyone shed some light on this for me?tlc, Hello, usually, the short side of a contract must (theoretically) supply real gold to complete the transaction. The long side must supply currency to complete. True, every position offsets. The problem arises from shorts not being able to supply gold because they don't have it. It's not that there are excess "shorts", rather no excess gold. does this help? FOA Peter Asher (5/31/99; 20:43:46MDT - Msg ID:6941) Dollar / Euro Way back in the second Forum contest, Michael had listed the Euro as one of the four reasons to buy Gold. At that time, the championed belief on the Forum was that the advent of the Euro would create a demand for Gold due to the fact of direct collateral by the metal. At that time I believe the estimated amount was 20%. My view at the time (5 Dec.) was, "Much has been said about the potential of this "composite" currency to compete with the dollar. However, what quacks like the mark and the franc, also quacks like the lira and the peso. The Euro is, by packaging the Common Market, a currency equaling the dollar in its scope. But, the strength of the major currencies converting into it could be weakened by the historical vagaries of the other components. Therefore, the fact of UNPREDICTABILITY could actually drive assets INTO the dollar, and this could even be negative for Gold."Now, 6 months later, problems with Italy along with a general lack of cohesion amongst the EU, appears to have played this out. (As I quipped the other day, "A camel is a horse designed by a committee.") Two days later the Sunday paper inspired this post: <I just now read a Sunday feature on the Euro. The one item that jumped out was the claim that corporations will incur far greater expense converting their systems to use it than they are spending on Y2K. But also, many companies are putting off coming up to speed on the currency because they are immersed in Y2K preparations.It seems that "electronic transactions" must be denominated in Euros only after 2002.I'm just wondering if my theoretical argument on Friday, that the initial uncertainty might in factcause the dollar to go up, is what's mysteriously holding Gold down. This is a question, not anassertion.> Back in October, a Canadian investment service rated the major nations' Y2K preparedness as either "O.K.," "Warning," or "Avoid." Five Eu nations were "O.K.," five were "Warning," and Germany was "Avoid." I believe I saw a post the other day, suggesting that the Y2K threat was part of the negative pressure on the EuroNow let's look at this post:<<koan (5/20/99; 9:44:31MDT - Msg ID:6525) Future of US economyI would maintain that the US has never been in better economic condition, except for the trade deficit.The US has low inflation, low interest rates, control of an emerging world economy where it holds allthe cards: the computer hardware, software, Internet, markets, money, language(English future world language), management organization, accounting systems, laws, computer literatepopulace, best farmland, best factories, best transportation systems and best political system. We area full blown democracy!. These are the reasons the $ stays strong and probably will continue to doso. For all the US's faults we are like democracy: "a terrible system except for all others" (sic). Iwouldn't bet against the US economy. >>It seems that most of the rationale being set forth for the demise of the dollar has to do with our trade deficit and our money supply being so large. I know there is a lot of debate flying back and forth over hidden financial war games involving the BIS, IMF, Central Banks and maybe the Saudis and even George Sorros.. However, I prefer to evaluate currency as follows. Today, there was an announcement that Ford- Jaguar is taking a Porche frame and some Jaguar Salon technology, incorporating them into a format from the XK-120 (A gift from the Gods in the my 14 yr. old eyes, imported into the U.S. in 1948 and creating the term "Sport Car"), and producing what sounds to me like heaven-on-wheels. So I, as an American, have now had a sizable portion of my future earnings (as regards possesion fantasies) transferred from domestic to foreign spending. If I were to purchase that beauty in 2001 (along with a radar detector) the Euro would be stronger and the dollar weaker. If I paid for it by clear-cutting a couple of acres of hemlock and sending the logs to Japan, that would be good for the Dollar. If the Japanese than fabricated those logs into a precut Shinto-style lodge and shipped it to Colorado, the Yen would be stronger. On the other hand, if I instead sent those logs up the road to Boise Cascade and they made veneer or finish trim and shipped it to Japan, that would be even better for the Dollar. Creditors evaluate a debtor both by the amount of debt he carries and by his ability to service it. If a company is seen to have a strong earnings potential, they can borrow a greater percentage of their future earnings. Likewise, I perceive that the strength of a nation's currency is based on the interrelationship of balance of trade, balance of currency debt, productive capability and desirability of product.My belief and philosophy is that the nuts and bolts are senior to the trading games (certainly in the long run). Any earnings (read: "gleanings") from currency trading must piggy-back on the production chain of mine or cut, fabricate and assemble, market and ship, real world of economics.It would be interesting to quantify and compare the trade balance, currency debt, gross annual product, and asset value of the EU and the USA. We might find the real truth behind the current and future Euro-Dollar relationship. Maybe the figures will show that there is a logical reason for the dive towards parity, or maybe it's a smokescreen for a coming dollar disaster. Maybe the size 14-E stock market shoe has to fall, figuratively and literally, before it all plays out. For the moment though, the statistics are singing, "God Bless America."Copyright by Peter Asher, Memorial Day 1999. Cavan Man (5/31/99; 20:42:28MDT - Msg ID:6940) To FOA Sir: I am flattered to me mentioned in one of your posts at this forum (considering I have no idea of who you are). I need to take a shortcut. I might not live a quarter more although I hope I do! Cavan Man (5/31/99; 20:39:03MDT - Msg ID:6939) To Goldfly Sir: Your recent post concerning GW's "revelation" is of particular interest to me because of the historical context; also, because it reminds me of St. John (The Theologian/Divine)'s Book of Revelations. The description of the event(s) for each sounds very similar as narrated. Please provide me with more information! Thanks in advance.... FOA (5/31/99; 20:39:01MDT - Msg ID:6938) Comment -------------Cassius (05/27/99; 12:09:10MDT - Msg ID:6795)FOA's msgs 6766 and 6783-----Also, could you please expound on your statement (msg #67660)"One can also see why the US will encourage a higher "world" price for gold, even as it's native market is destroyed!" This isn't intuitively clear to me why the US would do so. Thanks for your shared insight. Cassius----Hello Cassius, I hope some of the recent posts added to your other stated considerations. As for the US anticipated actions? It's the only play available to them! They cannot sell their gold in quantity (see my other posts) and the current shorting is based on the "equity" of the local bullion traders, not the future supply of gold! That equity is at "major" risk as I write. The dollar "will" be devalued with a rising world gold price and there is nothing the US political factions can do to stop it. As I said before, they will make as much political hay out of an inevitable situation as possible. In that light they may close the paper gold markets as they begin to fail from non delivery (a future event). Then begin a series of verbal prouncements about "how much gold the US has" and "how much backing it provides for the dollar". Remember, gold is no longer the threat, the Euro is! Thanks FOA FOA (5/31/99; 20:23:16MDT - Msg ID:6937) (No Subject) -------------USAGOLD (5/27/99; 9:29:58MDT - Msg ID:6787)Today's Gold Market Report: Central Banks Cannot Print Gold---------Fine report USAGOLD! We should all read this again and save it! FOA (5/31/99; 20:17:39MDT - Msg ID:6936) Comment ---------canamami (5/27/99; 6:03:41MDT - Msg ID:6781)Brief Musings I only have time for a couple of sentences.1. The POG is not completely unimportant, even for hardcore physical gold buffs. Would one still feel the same about gold if it were valued at $10.00 per ounce, to use an extreme example?2. The recent and continued price slide appears to me outside of the realm of the hypotheses of FOA/Another and must subject those hypotheses to further examination, to any person who seeks objective verification of hypotheses. Obviously, the BIS is not intervening to hold the POGat $280.00. The POG has dropped more than a $5 to $6 fluctuation from about $283. Our friends are learned, and I eagerly look forward to their input on this, IMHO and respectful opinion, unpredicted weakness.Thank You, canamami.Hello canamami, I know you posted again about this, but I wanted to comment. If you have kept up with the massive writing here, I hope you were able to grasp some of the other fine points made by all. In addition I add: The range to purchase gold looks to be the same. Yes, it has dropped further (another 10 lower?), but as the shorts attempt to lower it, the physical market will, no doubt "discredit the paper market" through a large disparity in prices. Soon, one may not be able to purchase bullion as the entire system begins to break down. At the point of breakdown, physical may not be available, except at much higher prices. The "risk" is becoming obvious and clear, worldwide! We shall see. Thanks, FOA FOA (5/31/99; 20:02:57MDT - Msg ID:6935) Comment ---------------The Flying Scotsman (5/27/99; 4:08:42MDT - Msg ID:6779)Farfel.............Gold PriceG'Day,Weel, it lokks like the Gold price is going down like a "pork chop in a synagogue". This current compression of the gold price, how long can it last ? If as FOA infers that there are now two "Gold Camps", which one has the deepest pockets ? The "other" markets, well they appear to be in and out like a fiddler's elbow. Aye---------------Hello and welcome Scotsman! Your question of "which one has the deepest pockets ? Well it used to be that the one with the most gold made the rules and maybe it still does. Currently, it's the geopolitical group with the "world reserve currency" that holds the reins. However, this new open market for gold is about to award that title to a new entity. You see, it's not just "how deep the pockets are", but rather "what supports them that counts". FOA (5/31/99; 19:38:51MDT - Msg ID:6934) Comment -------beesting (05/25/99; 22:57:14MDT - Msg ID:6742)Gold seen well supported near lows.http://www.barney.co.za/reuters/may99/gold25.htmFlemings global mining group said in a report:The unique liquidity provided by Central Bank lending to the Gold market had prevented severe lease rate spikes, allowing the market to be played for the short side for extended periods.((3long years)).While it was hard to say when this dynamic would change, for now and while there was negative sentiment,"this structure creates an Achilles heel which invites attack,"Fleming said. Click above URL for more.------------------Hello beesting, Boy, "unique" is the right word! If I wanted to expand a market, the best way to do it is to offer almost "zero" rates to finance it, right? Then, after some 10,000 to 15,000 tonnes of gold were leased around, I would control the equity of every player by controlling the lending interest rates. The above "lease rate spikes" can easily be created by withholding supply through open bidding for gold! It's a political sword that the BIS now holds over the paper shorts. All the market can do now is keep creating short paper by using "company equity" instead of gold. In time, the entire paper gold market drowns in "fictional" sales and becomes completely discredited as a true physical supply source. What a mess for them! What a success for real gold! thanks FOA FOA (5/31/99; 19:18:33MDT - Msg ID:6933) Comment ----------USAGOLD (05/25/99; 20:37:01MDT - Msg ID:6735) Stever.......and All....."For those who say this has been an exceedingly long and dark period for gold, I would counsel that these cycles play out over many years period of time. The stock bear market that started on a constant dollar scale in 1965 did not come back to the level from which it first descended until1982-83. Similarly, the stock market high of 1929 was not reached again until 1942. Bear markets can be long and merciless but always darkest before the dawn. Gold's overdue, Steve, but I still wouldn't go out and load up future's contracts or call options."------Michael, A very nice post. I read it all. Your last item should give people an idea of how long term these things can be. We must all remember that the perspective that most analysts write from (the last Barrons article?) is only using the action of gold from 1975+/-! They do not allow the "history of paper currencies" to influence their thinking. The US dollar is only some 30+/- years old when one considers how long it has been off a gold standard. During that time it has created more debt than has ever existed during the use of "any" form of money! Truly, a failure of this modern paper would turn the current analysts of gold on it's head and make the wait seem like only a moment in time. We will see it happen and chronicle the results on this forum. thanks for providing it, FOA THX-1138 (5/31/99; 19:03:59MDT - Msg ID:6932) 1998 Bilderberg Conference Summary http://www.inforamp.net/~jwhitley/bild98.htm Here is a link that provides a summary of the 1998 Bilderberg Conference. It's interesting to note from reading it that the war in Kosovo was planned almost a year before it began. Also mentions a large deposit of OIL located in the Aegean Sea and possible tentions between Greece and Turkey for it. FOA (5/31/99; 18:57:01MDT - Msg ID:6931) Reply Cavan Man (05/25/99; 10:39:10MDT - Msg ID:6719)FOA & AnotherI am new to the Forum and the subject near and dear. With the help of this Forum I am learning a great deal. Many times in reading your posts I am uncertain as to the meaning. Could you recommend a short reading list for my continued enlightenment and edification? Many thanks!Hello Cavan Man, It has taken me a lifetime to grasp how money is used among nations. Hopefully, with the internet it will require only 1/4 a lifetime for you. However long it takes, I can assure you it is an interesting and useful endeavor. Sorry, I know of no short list? thanks for reading and discussing FOA (5/31/99; 18:43:56MDT - Msg ID:6930) Comment! -------TownCrier (5/25/99; 9:30:58MDT - Msg ID:6717)----Eddie Georte: British Gold Sale "A Very Sensible Portfolio Decision" http://finance.uk.yahoo.com/news/19990525/businessday/busstory142283.html"He (Eddie George) dismissed accusations that the policy was a device to prop up the ailing euroas 'conspiracy theory gone to extreme'.Towncrier asks: "What happened to the days when central bank reserves existed to defend one's currencies, not garner the best returns?"-------------------TownCrier, The above is only part of your post, but still an important part. Most of the public discussion concerning the BOE gold sales revolves around the obvious. Such as "they sold gold to bring reserves in line to join the Euro" or "they leased gold earlier and now this move is just to cover those leases gone bad" or it was "open manipulation because they announced it first in order to push down the gold price". My point all along was that they did none of the above. Your statement, TC, is the closest to the truth. Let me explain: If they (BOE) were selling gold as a direct course to join the Euro, they would have handled it exactly in the same manner as the Dutch and other EMU nations did. Sell the gold quietly and direct it towards contract completion. This was done quietly to bring the best trade and to deliver the gold into "private EMU friendly" hands. All of the pre EMU deals were done in this fashion and the BOE would have done the same "IF" the purpose was for "reserve balance" prior to Euro application. It is true that they are active in the gold leasing market. No one would expect anything less when the members of the LBMA are so very close to the BOE. I believe one of the members is the very agent for the government! (Someone here should be able to help confirm this for the group). However, this new sale of gold could never be used to "square the books" for gold already leased because the old leased contracts were done at a much higher price. The "auction" would have to be concluded at a much higher price than today for the numbers to match. A rare event, indeed! The open announcement of sales did move the dollar price of gold, but that was not the purpose of this "verbal action". They had no choice but to announce, because they (BOE) were about to sell "unencumbered" physical vault gold to LBMA members. It was an obvious public statement to show that the LBMA had a "line" on "freed up real gold" to satisfy "a pressing situation"! Someone in the world community needed to know that this "future" gold was available with no way to reverse the sale. A public statement does just that! The credibility of the BOE to perform was put on the line. Otherwise, the sale would have been held quietly and privately, over time, just as the EMU sales were. Back to your item, TC, "What happened to the days when central bank reserves existed to defend one's currencies, not garner the best returns?". Well you have hit the nail exactly upon the head. This BOE gold "IS" currency reserves and it was being used to defend the currency. Only, it was not the pound that was being defended, it was the dollar! As USAGOLD once said, some nations grow weary of using their reserves to back a foreign reserve currency, so to do the british grow tired. Because they were part of the IMF / dollar faction (thanks again Steve #6820), England used the services of the LBMA and the gold reserves of the BOE to help strengthen the dollar. They expanded the gold supply (and world ownership) by selling various paper gold securities. They did this because the dollar is "their" reserve currency also, it mainly backs the pound! Today, we come to a point where a major reserve currency change threatens every dollar holding nation, and London is in danger of becoming the "odd man of Europe" during this time. With the BIS having succeeded in leveraging the dollar into the brink of "implosion" Briton must make a dash for the EMU, even if the resulting "dollar slaughter" will destroy their LBMA through an exploding physical gold price. This, my friends, is what the BOE gold sale is all about. They are clearly saving a small portion of their bullion bank empire prior to EMU. The sale has nothing to do with "balancing reserves" to meet ECB criteria. Many words to make a small point. On to other comments. FOA SteveH (5/31/99; 18:33:56MDT - Msg ID:6929) Ascanti from kitco probably from gold-eagle:Date: Mon May 31 1999 18:25kapex (From Dan Ascani:) ID#275194:Copyright © 1999 kapex/Kitco Inc. All rights reservedInvestor Psychology: Caught In The Bubble Again The Economics Of The Internet and How It Works Today's Market View ©May 28, 1999 10:22 GMT -- "We're dying from a thousand knives" beefed an Internet trader after this past week's Net stock bash that buried investors for losses in stocks like amazon.com, already down 50% from its all-time high, yahoo.com, down 36%, and AOL, down a similar percentage. Although it is fairly common knowledge that, sooner or later, all bubbles burst, recent statistics show that investors have nonetheless fallen for the Internet stock bubble hook, line, and sinker, with many loading up on margin just before that bubble began to burst. Looking to cash in on the big returns provided by the stock market's historic bull run, sophisticated investors and inexperienced traders alike have flocked to the market in droves this year, throwing caution to the wind at such a pace as to drive the U.S. savings rate into negative territory for the first time since 1933 when the world was in the grips of a severe deflationary depression. In order to maintain their trading accounts, investors have also decided that it's all right to maintain high credit card balances and to borrow money to buy stock. The U.S. savings rate again was reported to be negative in numbers released by the U.S. government on Friday. Americans withdrew from savings accounts at a rate of -0.7% in April. U.S. consumer credit card debt is at record levels. Both a low savings rate and a high rate of consumer spending suggest that consumers are, in fact, feeling the Wealth Effect typical of raging bull markets. The reasoning is that if your stock account statements look good, then that's enough savings in itself to justify refraining from sending money to conventional bank savings accounts. And that's not all. Investors have been borrowing on margin to buy stock at a rapidly accelerating pace this year, a situation that is also fairly common knowledge during raging bull markets. According to recent New York Stock Exchange reports, April 1999 saw a record one-month increase in total margin debt outstanding. Margin debt increased by $25.5 billion to $181.94 billion from the prior record high of $156.44 billion. This represents an astounding increase of 39.8% in just the past six months, one of the fastest--if not the fastest--rates of growth in history. According to some research firms, margin debt is now an astounding 2% of U.S. Gross Domestic Product, a figure that is all the more worrisome when one realizes that total U.S. stock market capitalization now stands at a record 151% of GDP, and when one accounts for the fact that a record 44% of all U.S. households now own stock or mutual funds. In 1968, the last major speculative venture involving much of the public, total participation from U.S. households never exceeded 35% and stock market capitalization was not even 100% of GDP. In fact, not even in 1929 did these kind of numbers roll across the desks of research firms. America, then, now values its businesses that produce the goods and services that go into the Gross Domestic Product number more than those goods and services themselves. Historically, this has been a red-flag signal that the stock market is overvalued and investors are in for a route as valuations are quickly adjusted downward. To make matters worse, investor psychology typical of the ending phases of a bull market has also taken hold recently. Although investors have, on balance, reportedly made good money during the stock market rally of 1999, this past week thestreet.com featured a poll reflecting investor attitudes about the recent Internet stock bash. When asked what they're doing with their Internet stock investments, 51% of respondents indicated they're "riding it out," 23% said they're "doubling down" on positions, 15% said they're short-selling them, and only 10% had "had enough." This suggests an attitude that most investors are not only riding out the market decline with no strategy to speak of, but that many had bought near recent all-time highs and on margin at record levels to boot. Thus, despite making good money on the rise, investors are displaying typical symptoms of overstaying their welcome. To put the market capitalization problem further in prospective, we can observe James Grant's ( Grant's Interest Rate Observer ) recent comments echoing what many investors are now discovering the hard way. Grant observed that "the capitalization of an AOL is as much as a company like Merck, but Merck has $27 million in revenues and AOL has one tenth of that in revenues. Therefore, investors are paying high prices for a company that is in the business of making itself obsolete." As we observed in our May issue of The Global Market Strategist, which contains a detailed article describing what the Internet really is from an economic perspective ( a new industry that is an efficient and revolutionary price distribution mechanism, but that is nearing the second stage of new industry development ) and why we have expected Internet stocks to plunge. The Internet is a fantastic resource for consumers and a great way for global businesses to deliver their products efficiently to those consumers. But that very efficiency eventually ruins the average, overly bullish investor loaded up in stocks in that new industry because as companies that enter the new industry due to seductive profit margins become subject to intense competition. That competition eventually becomes fierce enough to drive profit margins to zero as the first phase of new industry development nears its end. Then, the dreaded company shake-out occurs, with many businesses that initially emerged onto the marketplace shaken out by profit margins too low to remain in business. Investors must be cautious of which companies in which they invest, what price they're paying, and how solid an infrastructure the company has as the second phase of new industry development takes hold. As example, IBM, has surged in price recently after their Internet sales of computers and computer products soared. But IBM produces a product--brand name computers and software--and the Internet is helping them distribute that product in a way that supplements their already-established sales in an efficient manner. Amazon.com, however, sells books. Yet, many companies sell books, and the Internet to a company like an Amazon or a Barnes and Noble is a price distribution system that is driving the price of books down enough to adversely affect profit margins. Amazon.com's losses are forecast by analysts to exceed revenue growth in the months ahead, a symptom of the kind of competition that takes hold at this stage of industry development. Since the purchase of stock is, in effect, the purchase of a company's earnings, one must be very conscious of the price one is paying for the right to participate in those earnings. The average investor, we contend, did not borrow money to buy the Amazon's and the AOL's this year to participate in earnings or as a result of carefully researching the situation, but for the reasons that typically dominate investor psychology in each raging bull market that history has offered: the desire for action--to trade--and because of greed, not as an evil personality trait, so to speak, but as the opposite end of the fear/greed spectrum from that had that dominated market collapses such as 1929, 1962, 1973, 1987, 1990, and even last year in 1998. A similar collapse occurred in the Asian markets in 1997, in Latin American markets in 1995, in Japanese stocks after the bubble of the late 1980s burst, in gold in 1980, and so on. Each time, despite history, investors have flocked to the marketplace in droves just at the wrong time, and the U.S. stock market in 1999 appears no different from the bubbles of times past. For more on the economics of the Internet, financial market analysis and recommendations, interest rates, currencies, precious metals and commodities, portfolio asset recommendations, etc., see our May 13, 1999 issue of The Global Market Strategist®. FOA (5/31/99; 17:13:48MDT - Msg ID:6928) Gold talk ALL: I am again able to share time with everyone here. What a tremendous outpouring of discussion on this forum! I will go back a day or so in time to offer some discussion on comments made then. Hopefully, catching up into today's recent posts by Town Crier (good effort TC!). Will return and post shortly. Goldfly (5/31/99; 16:35:10MDT - Msg ID:6927) While we celebrate today..... This is said to have appeared in the National Tribune (the fore-runner to Stars and Stripes) prior to the Civil War. I am working on securing documetation. I'll let you know if I get it......Anthony Sherman is quoted as having said: ``You doubtless heard the story of Washington's going to the thicket to pray. Well, it is not only true, but he used often to pray in secret for aid and comfort from God, the interposition of whose Divine Providence brought us safely through the darkest days of tribulation. ``One day, I remember it well, when the chilly winds whistled through the leafless trees, though the sky as cloudless and the sun shown brightly, he remained in his quarters nearly all the afternoon alone. When he came out I noticed that his face was a shade paler than usual. There seemed to be something on his mind of more than ordinary importance. Returning just after dusk, he dispatched an orderly to the quarters of the officer I mention, who was presently in attendance. After a preliminary conversation of about a half hour, Washington, gazing upon his company with that strange look of dignity which he alone commanded, related the event that occurred that day.'' This is his account: George Washington's VisionThis afternoon, as I was sitting at this table engaged in preparing a dispatch, something seemed to disturb me. Looking up, I beheld standing opposite me a singularly beautiful female. So astonished was I, for I had given strict orders not to be disturbed, that it was some moments before I found language to inquire the cause of her presence. A second, a third and even a fourth time did I repeat my question, but received no answer from my mysterious visitor except a slight raising of her eyes.By this time I felt strange sensations spreading through me. I would have risen but the riveted gaze of the being before me rendered volition impossible. I assayed once more to address her, but my tongue had become useless, as though it had become paralyzed. A new influence, mysterious, potent, irresistible, took possession of me. All I could do was to gaze steadily, vacantly at my unknown visitor. Gradually the surrounding atmosphere seemed as if it had become filled with sensations, and luminous. Everything about me seemed to rarefy, the mysterious visitor herself becoming more airy and yet more distinct to my sight than before. I now began to feel as one dying, or rather to experience the sensations which I have sometimes imagined accompany dissolution. I did not think, I did not reason, I did not move; all were alike impossible. I was only conscious of gazing fixedly, vacantly at my companion.Presently I heard a voice saying, `Son of the Republic, look and learn,' while at the same time my visitor extended her arm eastwardly, I now beheld a heavy white vapor at some distance rising fold upon fold. This gradually dissipated, and I looked upon a stranger scene. Before me lay spread out in one vast plain all the countries of the world - Europe, Asia, Africa and America. I saw rolling and tossing between Europe and America the billows of the Atlantic, and between Asia and America lay the Pacific."Son of the Republic," said the same mysterious voice as before, "look and learn." At that moment I beheld a dark, shadowy being, like an angel, standing or rather floating in mid-air, between Europe and America. Dipping water out of the ocean in the hollow of each hand, he sprinkled some upon America with his right hand, while with his left hand he cast some on Europe. Immediately a cloud raised from these countries, and joined in mid-ocean. For a while it remained stationary, and then moved slowly westward, until it enveloped America in its murky folds. Sharp flashes of lightning gleamed through it at intervals, and I heard the smothered groans and cries of the American people.A second time the angel dipped water from the ocean, and sprinkled it out as before. The dark cloud was then drawn back to the ocean, in whose heaving billows in sank from view. A third time I heard the mysterious voice saying, "Son of the Republic, look and learn," I cast my eyes upon America and beheld villages and towns and cities springing up one after another until the whole land from the Atlantic to the Pacific was dotted with them.Again, I heard the mysterious voice say, "Son of the Republic, the end of the century cometh, look and learn." At this the dark shadowy angel turned his face southward, and from Africa I saw an ill omened specter approach our land. It flitted slowly over every town and city of the latter. The inhabitants presently set themselves in battle array against each other. As I continued looking I saw a bright angel, on whose brow rested a crown of light, on which was traced the word "Union," bearing the American flag which he placed between the divided nation, and said, "Remember ye are brethren." Instantly, the inhabitants, casting from them their weapons became friends once more, and united around the National Standard."And again I heard the mysterious voice saying "Son of the Republic, look and learn." At this the dark, shadowy angel placed a trumpet to his mouth, and blew three distinct blasts; and taking water from the ocean, he sprinkled it upon Europe, Asia and Africa. Then my eyes beheld a fearful scene: From each of these countries arose thick, black clouds that were soon joined into one. Throughout this mass there gleamed a dark red light by which I saw hordes of armed men, who, moving with the cloud, marched by land and sailed by sea to America. Our country was enveloped in this volume of cloud, and I saw these vast armies devastate the whole county and burn the villages, towns and cities that I beheld springing up. As my ears listened to the thundering of the cannon, clashing of sword, and the shouts and cries of millions in mortal combat, I heard again the mysterious voice saying, "Son of the Republic, look and learn" Whenthe voice had ceased, the dark shadowy angel placed his trumpet once more to his mouth, and blew a long and fearful blast. "Instantly a light as of a thousand suns shone down from above me, and pierced and broke into fragments the dark cloud which enveloped America. At the same moment the angel upon whose head still shone the word Union, and who bore our national flag in one hand and a sword in the other, descended from the heavens attended by legions of white spirits. These immediately joined the inhabitants of America, who I perceived were will nigh overcome, but who immediately taking courage again, closed up their broken ranks and renewed the battle.Again, amid the fearful noise of the conflict, I heard the mysterious voice saying, "Son of the Republic, look and learn." As the voice ceased, the shadowy angel for the last time dipped water from the ocean and sprinkled it upon America. Instantly the dark cloud rolled back, together with the armies it had brought, leaving the inhabitants of the land victorious!Then once more I beheld the villages, towns and cities springing up where I had seen them before, while the bright angel, planting the azure standard he had brought in the midst of them, cried with a loud voice: "While the stars remain, and the heavens send down dew upon the earth, so long shall the Union last." And taking from his brow the crown on which blazoned the word "Union," he placed it upon the Standard while the people, kneeling down, said, "Amen."The scene instantly began to fade and dissolve, and I at last saw nothing but the rising, curling vapor I at first beheld. This also disappearing, I found myself once more gazing upon the mysterious visitor, who, in the same voice I had heard before, said, "Son of the Republic, what you have seen is thus interpreted: Three great perils will come upon the Republic. The most fearful is the third, but in this greatest conflict the whole world united shall not prevail against her. Let every child of the Republic learn to live for his God, his land and the Union." With these words the vision vanished, and I started from my seat and felt that I had seen a vision wherein had been shown to me the birth, progress, and destiny of the United States. Aristotle (5/31/99; 15:50:50MDT - Msg ID:6926) Finally getting caught up...glad it's a holiday Turbohawg, being on the road these several days, it was nice to find your "Currency Roadmap" in the recent archives. The pointer "You Are Here" was good for a laugh and proper reorientation. Thanks!Gandalf, You'll be glad to know that visiting this forum is the best alternative to being there...all the Gold without the hassle. Gold was discussed in a social setting even more casually than it is here, just as friends might discuss sports or lawnmowers, music, or nifty computer hardware and software. This Round Table allows precisely this type of gathering of friends and conversation to occur. What is avoided is the more dreadful business elements of that particular trip--all the engineering and policy discussions. Ack! Oh well, its a living...made better through Gold!Make you some. ---Aristotle Peter Asher (5/31/99; 14:41:20MDT - Msg ID:6925) Explanatios ?? Could this explain the question of why coin sales are booming, yet the price of bullion declines. < Four years ago, the Gold Eagle owned 18 percent of the world bullion market. Today, it has a market share of 60 percent>. Given that an additional 42% of the global market moved into the American Eagle, the domestic statistic does not tell us whether the total global market is up or down. ****************************A newsletter I have here by Mark Skousen suggesting that, as gold is a key interest rate indicator, The CB's are suppressing the price of bullion because if the price of gold moves up, so too will interest rates. Could something this basic and simple be the 'raison d'etre' behind the gold slump? TownCrier (5/31/99; 14:27:10MDT - Msg ID:6924) WGC Notes & Quotes -- The Long and the Short of Central Banks and Gold Central Bank Gold Threat Overdone Reuters – May 11, 1999The bullion market should set aside fears that other major central banks will follow Britain's surprise decision to sell over half its gold reserves, a senior mining analyst said. "The British are bad sellers of gold and they have got their timing wrong," said Michael Coulson, head of global mining research for Paribas. "The big boys are not influenced by what the United Kingdom does," Coulson told Reuters in an interview. The announcement by Britain prompted a round of statements by other governments, including the United States and Italy, that no sales of their gold reserves were imminent. "The most likely reason the Brits sold is euro requirements. The European Central Bank has a gold element in its reserves," Coulson said during a business visit to India. The U.K. Treasury said it would cut its gold reserves to 300 tons from 715 tons, starting with a series of auctions to sell 125 tons during 1999/2000. The Bank of England will replace the gold in its reserves with the Euro, dollar and yen. Coulson stuck by Paribas's bullish outlook for gold, saying the market should overcome the present spell of bad news and reap substantial gains in the medium term. "We have got our neck very firmly on the block. I think that we could still see some significant upside." "At current levels, there is substantial demand for gold and one of the important factors is the improvement in economic outlook in the Far East. I see Indian consumption rising while the price remains low," Coulson said. India is the world's largest gold consumer and spent more importing the metal than it did on oil imports last year. Its official imports in calendar 1998 were 614 tons worth $5.8 billion, according to World Gold Council data, but unofficial imports would add another 10 percent to the bill.The Bank of England Gold Sale - Part IIVeneroso Associates – May 12, 1999It is striking that all of the large gold holders within the ECB – the Banque de France, Bank of Italy, and Bundesbank – all did come out with statements which, after taking due note of the Bank of England announcement, argued that they had no intention of following suit. This has been followed up by the Bank of Portugal today. We also find it interesting to note that, with the appointment of Ernst Welteke as Hans Tietmeyer's successor at the Bundesbank, the German Finance Ministry yesterday went out of its way to state that there would be no change in the Bundesbank's position on gold despite the impending changes in personnel. This would tend to undermine the arguments of perma-bears, such as Andy Smith, who have argued that the formation of a new SPD government, coupled with Tietmeryer's imminent retirement, would in fact herald a change of policy with respect to future German gold sales. The characteristically cautious World Gold Council has publicly stated that the BOE decision was, above all else, political. According to Chief Executive Officer, Haruko Fukuda: "Gold is at once a commodity and a universal currency. Is the British Chancellor of the Exchequer challenging that long-held assumption by bringing the gold ratio down to a mere 7% of the UK's total official reserves? Or was there another hidden political agenda? We at the World Gold Council have been told by HM Treasury that it was emphatically a political decision." (Bloomberg, May 10, 1999) "Political", in what regard? Initially, much of the British press focused its attention on the European Monetary Union, arguing that the gold sale was a move designed to prepare (by stealth) for UK entry into ECB by reconfiguring its gold reserves in line with those of its continental European counterparts. Although denying that the sale had anything to do with EMU, the Treasury has sought to perpetuate the myth that the country has a disproportionate amount of gold, out of line with comparable nations. Ms. Fukuda, however, attacks this as an accounting subterfuge: "This sleight of hand does not fool the market. One respected gold analyst, Andy Smith of Mitsui, says: 'The Bank does not quite play cricket. For it is only by netting overseas liabilities [22bn] from gross reserves [37bn] that gold reserves [$6.5bn] appear disproportionate – at 43 per cent of net official reserves . . . Against the usual yardstick, gross reserves, the UK has always kept a more understated balance than its large European neighbors." No central bank ever measures their gold reserves on a net basis – these assets having always been accounted on gross basis. The deliberate deception again leads one to the conclusion that a hidden agenda is behind the sale. What is the nature of that agenda? Fukuda hints at this by arguing that "despite persistent efforts by the United States to drive gold out of the international monetary system entirely, gold is today an important part of the world's central banks’ official reserves." This is an unusually blunt remark coming from an organization noted in the past for its conservative public statements on the gold market. In linking the Americans to this BOE decision, Ms. Fukuda fleshes out our assessments, implicitly suggesting an ideological battle between an Anglo-American camp on the one hand, and the continental Europeans on the other. This may be somewhat of an oversimplification (after all, the Bank of Italy in some respects subscribes to New Age central banking, as evidenced by its participation in Long Term Capital). However, it does illustrate two competing visions with respect to central banking, of which the treatment of gold as a reserve asset is one important aspect.U.K. Announcement To Hit Sentiment More Than RealitySalomonSmithBarney, The Weekly Prospect – May 12, 1999We expect that the U.K. announcement will have an adverse impact on gold market sentiment in the near-term – perhaps over the next several months. We believe that investors will be better served to view near-term weakness as a buying opportunity, not a time to join the central banks in capitulation. Our supply/demand estimates for 1999 conservatively project that gold's supply/demand deficit will approximate 800 mt – all of which will have to be filled by central bank sales or lending (the latter providing liquidity for producers to hedge and for speculators to take short positions). The effect of the U.K. sales will be somewhat diminished, in any case, by the fact that its central bank already is a lender of gold into the market, which means that the country effectively has monetized a portion of its gold holdings. Our view has been that it is increased central bank gold lending, rather than outright gold sales, that have kept the gold price mired below $300 per ounce. There is increasing evidence that total central bank gold loans outstanding may exceed 10,000 mt, more than twice the amount recently estimated by Gold Fields Minerals Services Ltd. in its latest gold update. (This equates to almost one-third of all central bank gold holdings.) While not much comfort in the near term to those of us who have maintained a positive outlook toward the metal, such levels of lending raise the likelihood that when the price of gold eventually climbs out of the cellar, the ensuing rally may be much more dramatic than our published price estimates suggest. The high-risk derivatives-based hedging strategies in place by many gold producers only add to the upside potential.Ex Bank of England Foreign Exchange Head Decries UK Gold SalesReuters – May 13, 1999Britain's decision to sell more than half its gold reserves is ill-judged given the country's chequered economic record, Bank of England former head of treasury Terry Smeeton said on Thursday. "It's not a policy I would have advocated when I was at the bank. I am sad this action has been taken," he told Reuters. "Its clearly a treasury decision in which the bank has had to acquiesce," said Smeeton, who retired from the Bank of England last year and is now a non-executive director at Standard Bank London. "While things are undoubtedly pretty benign at the moment it's hardly wise to think it will be plain sailing for ever after," Smeeton said in reference to Britain's economy. "One only needs to consider our rather poor track record in economic management in the last 25 years," he added. Smeeton cited Britain's abrupt exit from Europe's Exchange Rate Mechanism under the Conservative government in 1992 and near-bankruptcy under labor in the mid-1970s as examples. "Governments have to look to the long-term, as well as the short-term interests of the country," he added. He was also critical of Britain's timing given its vocal support for International Monetary Fund gold sales to help finance poor-country debt relief. "I find it at best ironic that our government, which has tried to seize the moral high ground with regard to the IMF debt issue, then gets in first with its own sales."Reprinted at USAGOLD with permission of the World Gold Council TownCrier (5/31/99; 14:12:02MDT - Msg ID:6923) Oil Supply News Mexico City--May 28--1611 ET--Mexican Oil Minister Luis Tellez said todaythat Mexico and OPEC members Saudi Arabia and Kuwait will discuss thepossibility of extending the current oil output cuts past Apr 2000. Tellezis expected to discuss the issue with Saudi Arabia and Kuwait next week.Tellez and Ali Rodriguez, Venezuela's energy minister, also said theyreiterated their commitment to the output cuts, which called for reducingglobal supply by more than 2.1 million bpd beginning Apr 1. By Allison WrightMexico City--May 28--1651 ET--Mexico's Energy Secretary Luis Tellez saidtoday that the latest round of oil cuts Mexico agreed to with OPEC andnon-OPEC nations have been apportioned evenly among consuming regionsaccording to initial export levels. By Allison Wright(c) Copyright 1999 FWN Reprinted at USAGOLD with permission. For details please go to:http://www.futuresource.com/internet.shtmlNo further reproduction without written permission from FWN. TownCrier (5/31/99; 13:59:19MDT - Msg ID:6922) WGC Notes & Quotes --Gold and Money Move to "Transparency"M. Murenbeeld & Associates, Inc. – May 7, 1998The one plus in the UK development is the overt move to "transparency". The gold market has asked for this and the UK has ironically delivered. There is nothing surreptitious about the U.K. sales. The sales are "aboveboard"; auctions are scheduled and the amount of gold to be auctioned is clear. There is no secrecy, so no rumor mongering need grip the gold market. Thanks to "transparency" people like me can now calculate what this sale will "cost" the gold market. For example, given that 75 tons of gold will be auctioned off this year (July, Sept., Nov.) the calculated impact on the gold price is only about 1%. In other words the gold price will average 1% below what it would otherwise have averaged for the year; meaning the "cost" is less than $3. Since the sale is in the second half of 1999 the cost over that period is no more than $6, which is less than what the market has already given up. Large countries and/or blocks of countries such as the U.S. and EU will want to hold gold reserves. The choice of reserves, other than gold, is quite limited – the Dollar and the Euro, by and large. Gold is a good third reserve asset: it is not a financial liability of another country (which gives it political, if not necessarily economic, appeal) and it is a good portfolio diversifier (the gold price moves opposite to that of the Dollar). We'll see. I fear that today's central bankers are caught up in a "rush to yield"; some central banks are reportedly even placing a portion of their reserves in stock markets. Gold is a long-term asset. Central bankers don't seem to have such a perspective today. Once the Dollar declines, as it inevitably must, this perspective may change.Has Gold Changed?James Turk, Freemarket Gold & Money Report, April 12,1999I have heard some argue that gold has changed, that it no longer is a monetary asset. Before you fall into this trap, consider the following. We must ask ourselves why gold is yielding only 1% interest, while the interest on dollars is 4%? First, if gold were no longer a monetary asset, why does it have an interest rate? If gold were only useful for jewelry and ornamentation, it would clearly not have any interest rate. That it does is a sure sign that gold remains a monetary asset. But there is a question that is even more important. Why is there a differential between gold's interest rate and the dollar's interest rate? The answer is risk. There is greater risk to the dollar, and the higher interest rate is required by the market to offset this risk. If there were no difference in risk, you could borrow gold or the dollar at the same interest rate. What is this risk? You name it – Bill Clinton, your local bank, inflation, the politicians in Washington, etc. All of these forces can adversely affect the substance of the dollar, thereby undermining the value of the Dollar. Gold cannot be debased by these forces, so the market does not require the same risk premium on gold that it requires on the dollar, and the other national currencies for that matter, all of which have interest rates even higher than gold's. Therefore, gold has not changed. Only the perceptions about gold have changed, and perceptions are not permanent.Rubin Says U.S. Should Not Sell Its Gold ReservesReuters – May 20, 1999The United States should not sell gold from its reserves, although the idea of International Monetary fund gold sales is "sound and sensible for their purposes," Rubin told the House Banking Committee. "I do not think the United States should sell its gold for a whole host of reasons." Federal Reserve Chairman Alan Greenspan noted that the issue of U.S. gold sales had been debated in 1976 and the authorities had decided not to sell. "The reason is that gold still represents the ultimate form of payment in the world," he said. "gold is always accepted… and is perceived to be an element of stability in the currency and in the ultimate value of a currency."Still a BelieverBarron's, Letters to the Editor, George Shinopoulos – May 10, 1999With the International Monetary Fund about to yield to almost constant British pressure and authorize the sale of some of its gold reserves, several points should be made: First, the constant talk of gold sales by central banks and the IMF hurts the metal's price more than do the sales themselves. Once the minor effects are seen of the IMF's selling 150-300 tons on a onetime basis and the Swiss selling 100 tons per year, gold should finally move up. These potential sales are important psychologically. However, in relation to the total amount of gold produced and fabricated each year, they're quite small. Second, it's obvious that many gold-selling central banks and, of course, short-sellers, want to talk down gold's price. The argument that central banks have no interest in seeing a lower price because they own bullion is irrelevant. Their economic interest in gold bullion is insignificant compared with their desire to keep the power to create credit and money without restraint and out of thin air, which they have held since the abandonment of the gold standard. Third, the central banks that have sold gold are eager to have other central banks capitulate and join them. Their uncertainty as to the correctness of their action causes them to urge other nations to also abandon gold so that there can be no going back to an international currency system even partially based on gold, as the Bretton Woods agreement was. They fear a future in which nations with little or no gold reserves suffer through periods of currency uncertainty and devaluation, while those with substantial gold reserves do not.Reprinted at USAGOLD with permission of the World Gold Council TownCrier (5/31/99; 13:40:13MDT - Msg ID:6921) WGC Notes & Quotes --The Demand for Gold Bullion Sales Top 10 Million OuncesCoin World – May 17, 1999The U.S. Mint announced April 19 that sales of the uncirculated gold American Eagle bullion coins surpassed 10 million ounces in sales since the program was launched on Oct. 20, 1986. "Investors worldwide are attracted to the inherent value of the American Eagle because of the U.S. government guarantee of weight and volume," said Mint Director Philip N. Diehl. "We have worked closely with our distributors and blank suppliers to make the Eagle the world market leader. Four years ago, the Gold Eagle owned 18 percent of the world bullion market. Today, it has a market share of 60 percent while silver and platinum Eagles hold shares approaching 80 percent of their markets." Customers have ordered 819,000 ounces of gold Eagles in calendar year 1999 to date, with sales of 281,000 ounces in January; 144,000 ounces in February; 269,000 ounces in March; and 125,000 ounces as of April 19. Scotia Mocatta's April 19 order for 7,000 ounces of gold American Eagles pushed total sales over the 10 million-ounce mark. Sales of the tenth-ounce gold Eagle have been particularly strong, with 127,500 ounces of that denomination sold to date compared to 15,000 ounces sold through April 1998. After years as one of the top three gold bullion coins in world markets, the Eagle ascended to the number one position in mid-1997. Before 1997, sales of the gold American Eagle averaged between 300,000 to 350,000 ounces per year, but as gold prices approached 18-year lows, demand rose dramatically. Authorized by the Gold Bullion Act of 1985, the American Eagle Program is designed to provide investors with a U.S. – made and – backed alternative to foreign produced gold bullion investment coins. Gold Eagles are not sold directly to the general public, but are sold in bulk quantities to pre-qualified wholesalers called Authorized Purchasers. Gold Eagles are intended for investors seeking to add gold to their portfolios. The coins are sold at the spot price of the precious metal plus a small premium. The gold used in the production of the American Eagle, by law, comes from domestically mined sources in the United States, which is the second largest gold producer in the world.Boom in Gold Coin SalesThe New York Times Jonathan Fuerbringer – May 3, 1999At Blanchard & Co., a gold-coin dealer in New Orleans, the phones begin to ring in earnest when the price of gold drops to around $280 an ounce. Investors, said Christopher W. Holton, the vice president of marketing, "are bargain hunting." If that is the case, it is a switch for American investors, who have too often been attracted to the glitter of gold when the price was rising, only to be disappointed when a rally was followed by another slump, a regular occurrence in recent years. But bargain hunting is not the only reason for the spurt in buying of the American Eagle gold bullion coins this year, Holton said. Fear of a Year 2000 computer meltdown has given sales a big boost, especially of the one-tenth ounce Eagle coin, which has been singled out by many gurus of the Year 2000 survivalists. According to the United States Mint, 127,500 ounces of these coins have been sold so far this year, compared with 15,000 ounces in the corresponding period of 1998. Holton says other investors are buying because they want some "insurance" against a stock market reversal. And he gives credit to the marketing program of the Mint, which announced last week that total sales of American Eagles, first struck in 1986, have now exceeded 10 million ounces. Last year, gold coin sales in the United States jumped 120 percent, to 1.84 million ounces, according to Gold Fields Mineral Services, a London-based commodities research and consulting firm. The Gold Y2K Safety NetMindy Charski, U.S. News & World Report – May 17, 1999Call it a coupling of Y2K and 24K – as in karat. Many Americans who fear financial turmoil from millennial computer glitches are on a gold-buying spree. Along with investors concerned about instability in the global markets, they are bringing sales of gold coins to record levels. U.S. demand for newly minted coins like the American Eagle or Canadian Maple Leaf was up 109 percent at the end of 1998 from a year earlier. The U.S. Mint alone sold 2.3 million gold coins in the first four months of 1999, more than four times as many as it did during the same period last year. In fact, demand was so high for the one-tenth-ounce coin earlier this year that the supplier providing the mint with blanks couldn't produce them fast enough. Some gold buyers are doomsayers, seeking a commodity for bartering in case calamity strikes on January 1. But most consumers simply want to diversify their portfolios to hedge against a market downturn.Reprinted at USAGOLD with permission of the World Gold Council TownCrier (5/31/99; 13:12:08MDT - Msg ID:6920) Hear ye! Hear ye! (At last!) This Week in Gold is now updated for the week May 17 - May 21, 1999 http://www.usagold.com/wgc.html Read the Weekly Gold Market Commentary -- a review of the major events shaping opinion in the gold market during the past week. It is compiled by World Gold Council staff in London and New York based on contacts in the market and a network of WGC offices around the world.And we anxiously await the commentary soon to be released describing the market atmosphere last week...should be interesting! Cassius (5/31/99; 11:30:35MDT - Msg ID:6919) It appears the word is getting around. GOLD REACHES FOR THE BOTTOM By A. Canon BryanAs a metal, gold doesn't look quite so precious these days. Just as the prospects were beginning to look shiny once again at the beginning of the month - with the gold stock indexes posting substantial advances, backed up by encouraging volume - the bottom fell out. The much ballyhooed announcement by the Bank of England regarding its intention to dispose appears to the latest excuse. Of course, every gold analyst in the world will tell you that the ramifications of the de facto quantity of supply in this case is negligible to the physical market. The fact is, gold has been suffering a strange disease for the last three years. The symptoms are that the good news (such as inflation jitters) is grossly discounted or ignored, and the bad news (no matter how insignificant) becomes largely aggrandized with the results being uncannily over reactionary.This week, gold sank below $270 on the COMEX. This is serious from a technical standpoint because the last recognizable support level rested at approximately $272/oz. Below this, there is a rather frightening crevasse in gold's long term chart; offering very little in the way of noticeable support until (gulp!) $205/oz. Technically speaking, this means that there would be nothing to stop gold from plunging precipitously down to those levels before recovering. I feared this price action the last time gold broached the $272 marker. I was quite relieved to see the support hold. But this time it failed and yellow traded as low as $268/oz. It would not be an unlikely scenario, under the circumstances, for the price to spike abruptly downwards; perhaps to the $250 level, to be followed immediately by an equally sensational spike upwards - undoubtedly north of today's levels. This kind of price action has historically marked the beginning of bullish cycle. Were it upside down, it would mark the opposite - an ensuing term of bearish sentiment. Recall January 1996 for gold.It is noteworthy that the mechanical circumstances of gold, including its physical fundamentals, have remain largely unchanged since July 1997. And yet with a drastic change in psychology concerning the commodity, the price trend has scarcely looked worse. I continue to believe that things happen for a reason and I still smell a conspiracy involving the only party who would have the power to move a market so violently. I am, of course, referring to the largest holders of gold in the world, the United States Federal Reserve. Please visit the BarkerLetter archives for details. Mind my price scenario above, but also make note of another prediction, of the uncovering of a systemic price-manipulation scheme by that institution.From the Barksdale Daily Letter USAGOLD (5/31/99; 10:36:10MDT - Msg ID:6918) All.... #6917 is the fully developed idea. The earlier post somehow snuck on. I had a computer problem this morning. I thought it locked but somehow it posted before I was finished.Ignore the earlier. Please take a look at #6917. USAGOLD (5/31/99; 10:29:08MDT - Msg ID:6917) Cavan....A quick word tied to the rest of today's and last night's discussion.... Cavan, I obviously cannot tell you "how much" and "when" with respect to the price of gold, since my crystal ball is on the blink. Perhaps you should ask my wizrdrous friend, Gandalf the White these types of questions. Frankly, from where I sit, it really doesn't matter since the main point I try to make is that in the first instance gold is an insurance not an investment. Therefore it will manifest in dollar price at some point what the paper currency has lost in terms of purchasing power. James Turk, a gold analyst who has won my respect over the years, says that the equilibrim price of gold "should be something north of $500 per ounce." The bottom line? Own it and protect yourself. Don't own it and run the risk of being victimized by the paper money game.-------On another, but related, matter:Though some would have us believe that the currency game is a fait accompli already settled behind closed doors, I tend to see it as the maximum competition, and the intensity is about to be ratcheted up. The euro has suffered dearly under Duisenberg's benign neglect in many ways, but the loss of prestige and "faith" is no doubt the greatest. Central bankers should not have to play politics but they do and it appears the politics in Europe are intense. Europe has seen what "political largesse" (toward Italy) brought them. Perhaps a bold stroke in the opposite direction -- toward sound money -- would bring them a more satisfactory result. It seems if Steve's reports are to be accepted and blended into the equation, that the Europeans are prepared to move in defense of the euro. Quite often simple currency intervention works for a short time, but then the old trends reassert themselves. A bold and decisive policy should be considered to get the euro off the ground. What will Europe do to defend the euro in reality -- something which is not just a handful of chicken feed thrown toward the press and the markets? They must do something. Going back to an old discussion, I assert that the only way they can defend the euro is to purchase gold, build unassailable reserves and then issue currency in sufficient quantity to make it a viable contender to the dollar. The euro must trade internationally in reality, not in theory, in order for it to build a reputation. To do that it must get in circulation. This to me is not a small problem for ECB. There is an old economic dictum called Say's Law that's been around for a long time (I think I have the spelling right.) -- essentially Say's Law states that "supply creates demand." Keep in mind that Europe does not have to do this. It seems to me, though, that this is best way to do it and fastest way to do it. The world will not wait to see if fiscal and monetary policy will work. If we do wait for that, the currency could go below parity. Purchasing gold would kick start that economy and the value of the euro beyond European dreams. It would also encourage trade with Europe because any exporter to Europe would receive value in return. All that this requires is courage, and that is probably why it won't happen, although you have to give the Europeans credit for a strong gold reserve in the first place.What would all this do to the gold price? I will leave that to your imagination and the discussion at this table. An argument could be made effectively that the Europeans have already done what I propose, but in essence they haven't. Their's is a static program. They've created the euro but they haven't a policy as to what to do with it. Europe must build gold reserves, issue currency, import goods, and get the euro in circulation. This is what international reserve currencies do. SteveH (5/31/99; 9:40:27MDT - Msg ID:6916) thought Wouldn't it be a gas if instead of being far right, we were just extremely correct? USAGOLD (5/31/99; 9:31:02MDT - Msg ID:6915) Cavan....A quick word tied to the rest of today's and last night's discussion.... Cavan, I obviously cannot tell you "how much" and "when" with respect to the price of gold. Frankly it really doesn't matter since the main point I try to make is that in the first instance gold is an insurance not an investment. Therefore it will manifest in dollar price at some point what the paper currency has lost in terms of purchasing power. Own it and protect yourself. Don't own it and run the risk of being victimized by the paper money game.Though some would have us believe that the currency game is a fait de compli already settled behind closed doors, I tend to see it as the maximum competition. The euro has suffered dearly under Duisenberg's benign neglect in many ways, but the loss of presitige and "faith" is no doubt the greatest. It seems if Steve's reports are to be accepted and blended into the equation, that the Europeans are prepared to move in defense of the euro. Quite often simple currency intervention works for a short time, but then the old trends reassert themselves. What will Europe do to defend the euro in reality? They must do something. Going back to old discussion, I assert that the only way they can defend the euro is to purchase gold, build its reserves and then issue currency in sufficient quantity to make it a viable contender to the dollar.What will this do to the gold price? I will leave that to your imagination and the discussion at this table.Keep in mind that Europe does not have to do this. It seems to me, though, the best way to do it and fastest way to do it. The world will not wait to see if fiscal and monetary policy will work. If we do wait for that, the currency could go below parity. Purchasing gold would kick start that economy and the value of the euro beyond European dreams. SteveH (5/31/99; 8:47:49MDT - Msg ID:6914) Did you know we are far right? http://www.afr.com.au:80/content/990531/market/markets9.html To label me is to negate, was that Nietche(?) or Dick Van Patten? -- Waynes World.From above link today:Did you know gold is ..."...But no longer. Gold's demise is a reflection of the new economy. It is a reflection of globalisation, the free float of currencies over the past 15 years and a new world of derivatives. Some, particularly those on the far Right in US politics, see it as a government plot to debase gold to ensure the permanent dominance of paper currency. And they distrust currency as much as they distrust government. They argue that as currencies are issued by government, they can be influenced more by government policy than a "real" substance, like gold. So, it is but a small jump from this to the proposition that there is a conspiracy in play to drive down the world gold price. And GATA provides an interesting example of this." Chicken man (5/31/99; 8:41:08MDT - Msg ID:6913) Thoughts-or wasting band-width? Heck of a subject title!......first,thank you to all for the wonderful posts....anyone feeling an information overload of the mind besides me..? it sure is hard trying to absorb all the facts/fiction that is being presented here and thereCould this have happened 5yrs,10yrs or 20 yrs ago?.....perhaps not!....now we sit in front of these machines reading thoughts of others not knowing even who they are or their motives (if they even have one)....I would like to believe in my heart that these posts/bits of information are being revealed to us are not to trick us, but to "give us a hint" of things going on in the world that most of us would never have a chance to find out...a sincere thank you from the bottom of chicken man's gizzard...I mean heart...Read once..."We learn from history that we don't learn from history"...bold statement,but sad to say very true....how long is "history"....yesterday could be called "history" and indeed it is!......but how far back should one look into history?....the "history" of one's life,one's nation or one's civilization.....We have seen in recent history that countries told their citizens to strike off 3 zeros off their money (Mexico) or 2 zeros (Russia)...we think it could not happen today, at least not in "my curriency"......we watch the world renig on their countries debt (Russia and China).....looking back futher in history we see nations that got in serious trouble that tried to print their way out of their monatary messes caused by overspending (Germany - 1923,France - 1790,Italy - 1949,Poland - 1957,France again - 1957,Brazil- 1960's,and China - 8 times over 7 dynasties (9th to 17th centuries)So are we at a "new" crossroads.....I rather doubt...it is said that most gold that has been mined in the history of the world still existes today...if gold could "talk" and "tell" you of the battles against paper it has fought in "history" it would make for a more interesting read than I'm trying to present today!Question is...are we approaching that crossroad in history once again...?....Is it time to "make gold"..? methinks so! Gandalf the White (5/31/99; 8:39:10MDT - Msg ID:6912) The MEETING ! "Ari", I am so envies of you. -- Please take me on your next trip across the pond. -- To have been able to just sat and watched and listened to the MEETING would have fulfilled my lifetime dreams. -- Thanks for sharing !<;-) Pete (5/31/99; 7:21:09MDT - Msg ID:6911) BOE Gold Sales Why would the BOE sell knowing that a sale would depress prices just as they were beginning to rise? Is this strategy sound and in the best interests of their citizens? I believe not! It's almost as if they wanted the price to tank. The next question is why? My assessment is that they have leased a goodly portion to hedge funds and in order to protect their assets from default, they had to protect funds before advancing prices wiped them out. The BOE had to know that a large drop in price would have been precipitated by their sale. Anything else makes no sense. Times must be desperate for CB's to act in such a disparaging manner towards their assets. Who is left to cry wolf before the next advance threatens to destroy their scam? Can it be that the US is in the same bind as the BOE, and can not sell without approval from congress? How many bullets do they have left before the proverbial you know what hits the fan? As Franz Pick would say, "The Triumph of Gold" may be nearer than many think.Thank you,Pete Christine (5/31/99; 6:15:24MDT - Msg ID:6910) "Money, Lies, and Adding-Machine Tape" by Paul Hein http://www.gold-eagle.com/gold_digest_99/hein060199.html On electronic currency, never mind international. Aristotle (5/31/99; 5:59:42MDT - Msg ID:6909) To post, or not to post; that is the question. (Or is it more properly a choice than a question?) I've weighed this decision for a while now, and have been unexpectedly forced off-line for the past few hours by a raging thunderstorm with lightning that made me fear for the safety of my computer. The storm seems to have abated, and I took this "lightning in the night" as a sign to go ahead and share this info--albeit in such a manner so as not to infringe upon this person's freedoms and right to privacy.Beesting, thanks for your concerns for my well-being in light of my lengthy absence. In that same vein, let me assure everyone that yet another, more noble knight is also alive and well. In the course of my travel and business I had the distinct honor to make the acquaintance of none other than the good Sir Aragorn III! I won't get into the details surrounding this encounter so as not to accidentally overstep any priviledged information, but I'll share this. Put out of your mind any notion that he is a feeble Grandfather of the Court. Upon entering the room that image is shattered--he stands at least 6'3" tall, and the years do not weigh so heavily upon his brow as to be burdened by any Call to Arms. He is at once the very picture of intensity and yet also serenity...eyes that pierce through to hidden depths, and all the while ready to accept whatever is to be found there. Conversation varied widely as a seemingly endless stream of individuals stopped by (the setting being one of the hotel's pubs/lounges) to offer congratulations on this or that, share news, wish him well, or to simply join the company and catch up on old times. As chairs became too few I noticed he was the first to offer his to new arrivals. Aragorn seemed quite content to let the others in this gathering dominate the conversation, absorbing the dialog and ever quick to smile, though not so quick to laugh. Instead, as humorous moments brought laughter to the group, he would often flash his smile and nod in agreement with the jocularity, and pronounce, "That's interesting." When he did laugh, you could sense that there was no place else on Earth he would rather be. Here's an interesting notion to consider...if anyone had made a note of those passing through that evening's social circle, and of the topics of the improptu "agenda," a ready case could be made by conspiracy theorists that would rival that of the Bilderbergs. :-) And I was there!Last week revealed a fair amount of stock volatility, and also gave us Gold priced in numbers not seen since 1979. The good Knight offered these thoughts when questioned about the matter. "No possible combination of patience, luck, and skill will now allow you to buy Gold at the bottom price. Those days are past and will not return...the dollar is not as it once was." In clarification, he reminded the questioner that during his life he witnessed $35 Gold, a price that "reflected a pledge upon the DOLLAR, not upon Gold," as the metal itself continued to "demonstrate indifference to the hand that held it or the flag of the land." Terms of trade and prices were set based upon this pledge. Had Bretton Woods arrived at some other Gold pledge for the dollar, the flow of Gold overseas would have nonetheless been as swift--the international trade terms and prices recognized only the Gold value for pricing, and America had become a more active spender than seller on the world markets. He remarked that much water had since passed that bridge from the collapse of the Bretton Woods agreement (a default on the dollar's pledge to pay real money (one Gold ounce per $35) for real goods received by the U.S.); monetary and fiscal policy have been largely reactionary, experimental, theoretical, and sleight-of-hand ever since. So while the Historical bottom price of1oz / $35 reflected the pledge upon the dollar, the Modern Gold price reflects a dollar that has become only a unit of account for bookkeepers, no longer qualifying as money except among those with "suspension of disbelief" regarding the 1971 U.S. declaration of bankruptcy. "I will bide my time without agitation. At any price below the sky, a person of free choice will easily see the wisdom to REMIT payments using numbers [dollars], but to RECEIVE payments in money [Gold] for the duration of this current system...individual conversion of dollars for Gold is a monetary blessing that only hindsight will fully reveal." [Nations are locked out of this straightforward "blessing" due to the scale of the operation.] "Having secured fair payment [Gold], the further choice to save, spend, gamble, or invest falls to individual preference and judgement."This is something I shall always remember. When investments were discussed in a separate conversation, Sir Aragorn didn't offer an answer until pressed, at which point he said candidly with the grace and assurance that seem to be his hallmark, "Buy a book that teaches you something new. Accept the knowledge and experience earned through the eyes of others--life is too short to do everything yourself. Do what you can, and pass the experience along...invest in yourself, and invest yourself in life. Leave IBM to look after itself, it has no mind to look after you."Aragorn, I hope I have fairly represented your thoughts, and hope you don't mind my attempt to help others realize that there are indeed real people behind these interesting and mysterious forum names. I look forward to your insights when you have also had a chance to get settled after your own travels. You are a vision of peace and stability, an inspiration in a world of uncertainties. I still enjoy your comment, "If I were given a dime for every time I cursed the market for providing easier gold, I'd have a dime...and that one was found on my way over here." Agreed. I'll take whatever the Gold market will give.Easy money. Make you some. ---Aristotle SteveH (5/31/99; 1:20:42MDT - Msg ID:6908) President of ECB speaks PRESS CONFERENCE Thursday, 6 May 1999 The President's introductory statement With the transcript of the questions and answers Ladies and gentlemen, the Vice-President and I are here today to report on the outcome of today's meeting of the Governing Council of the ECB. The Governing Council reviewed, as usual, the main monetary, financial and other economic indicators in line with its monetary policy strategy. Following this discussion it decided to keep the ECB's interest rates unchanged. The interest rate on the main refinancing operations will thus remain 2.5%. In addition, the interest rate on the marginal lending facility will continue to be 3.5% and that on the deposit facility will remain 1.5%. Let me give you some details about our latest assessment of the monetary policy stance and thereby provide explanations for the decisions taken today. Overall, monetary developments and our broadly based assessment of future price developments do not signal dangers to price stability over the short and medium term. With regard to monetary developments in the euro area, in March 1999 the 12-month rate of growth of M3 remained constant at 5.1%. While the pace of increase in overnight deposits reduced further, signalling the waning influence of the uncertainties surrounding the launch of the euro, deposits with an agreed maturity of up to two years grew at a stronger pace in March than in February 1999. The latest figure for the three-month moving average of M3 growth, covering the first quarter of 1999, was 5.2%. This was 0.2 percentage point higher than in the previous three-month period, covering the period December 1998 to February 1999. The Governing Council also noted that the annual rate of growth of total credit was broadly stable at 7.5% in March 1999. In line with the assessment it had made on the occasion of its previous meetings, the Governing Council took the view that recent monetary trends should not be seen as a warning signal with regard to the future evolution of inflation. As we have emphasised in the past, the monetary data in early 1999 may be affected by the special circumstances related to the changeover to Stage Three of EMU. In addition, the three-month moving average of M3 growth remains relatively close to the reference value of 4½%. As regards financial indicators, I should like to stress that recent developments in bond yields in the euro area were accompanied by some decoupling of yields from those in the United States, as differentials between euro area long-term interest rates and comparable rates in the United States have widened. As regards the evolution of the world economy, recent developments tend to confirm the picture of a mild overall improvement in the external environment beyond the euro area. As before, however, the main features range from continuously strong growth of the US economy to continuously weak output in Japan. For the euro area, only a few additional data for economic indicators have become available, and the assessment of forthcoming GDP developments is currently complicated by the fact that the next release will be based on revised data in accordance with the new concept of the European System of Accounts (ESA 95). Industrial production declined at the beginning of this year, and data on retail sales volumes suggest that the pace of growth slowed down somewhat around the turn of the year, but recently there are preliminary indications of some improvement. Recent developments in the labour market show a somewhat decelerating employment growth towards the end of last year. The rate of unemployment remained unchanged in March 1999, following two consecutive declines in January and February. Industrial confidence declined further in the first quarter of 1999, but preliminary April figures from the European Commission point to a slight improvement. Given the latest developments up to April, it would appear that consumer confidence reached a peak at the beginning of this year since when it has moderated slightly. As expected, the trend towards decreasing inflation rates appears to have been reversed in March. In March the annual rate of increase of consumer prices as measured by the Harmonised Index of Consumer Prices (HICP) was 1.0%, compared with 0.8% in the previous four months. This was essentially a consequence of the substantial rise in oil prices which began in mid-February feeding through to energy prices in the HICP. In addition, unprocessed food prices have continued to exert some upward pressure on overall price increases in recent months. Excluding the more volatile HICP components of energy and food, the rate of increase in consumer prices in March remained at 1.1% - i.e. unchanged from the rate observed in February and marginally lower than that recorded at the turn of the year. In conclusion, at this point in time the general outlook for price stability remains favourable. Although the lower effective exchange rate of the euro and the rise in oil prices may lead to some upward pressure on headline HICP inflation in the coming months, the current economic situation is likely to contribute to containing this upward pressure. At the same time, current monetary developments and other available indicators do not point to inflationary risks over the medium term. On the basis of this assessment the Governing Council decided to keep the ECB's interest rates at their current levels. In addition to reviewing the main monetary, financial and other economic indicators, the Governing Council considered a report prepared by the ECB's Banking Supervision Committee on "The effects of technology on the EU banking systems". The report assesses the extent to which technological developments have taken place and are expected to occur in the EU banking systems, the main categories of banking risks affected by these developments and the strategic responses that EU banks are devising. The Governing Council agreed to publish the report, which will be made available in due course. We are now at your disposal should you have any questions. Transcript of the questions asked and the answers given by Dr. Willem F. Duisenberg, President of the ECB, and Christian Noyer, Vice-President of the ECB Question: A couple of months ago, you told us here that you were not worried about the weakness of the euro in relation to the dollar, but you also said that, if it continued to fall, it could give cause for concern. Well, it is still falling, not only against the dollar, but also against the pound sterling, and I am wondering if you are concerned now and, if not, why not. Duisenberg: I should like to contradict you with respect to your last statement. Over the past few days the euro has been strengthening. Just last week it was at a level of USD 1.0550. When I entered this conference hall it was at a level of USD 1.08. So, I am still not concerned, but have seen with some appreciation, I might even use this term, the recent appreciation of the euro. Question: One month ago, when you cut the interest rates, you mentioned that that was it. Now we have heard some positive signs from the real economy. Are you more convinced that we are now at the turning point in interest rates, so that the falling trend has finished? Duisenberg: Let me only say that in today's statement, which reflects the decision of the Governing Council, this is still it. Question: In the last week or so, in line with this "speaking-with-one-voice" idea, we have seen ECB officials taking a stronger line on saying that the euro can only fall so far. Did you all make a decision to start speaking somewhat differently? Duisenberg: No, we did not speak differently. But we were somewhat concerned that it had been alluded in the European Parliament that we were following a policy of neglect vis-à-vis the euro, so that we deliberately wanted to contradict that. We are not, by any means, neglecting the exchange rate of the euro. We regard the exchange rate as one of the main indicators we follow in assessing the outlook for price movements and price stability over the medium term. So, that is what we discussed and what we decided to emphasise, which is not a change of policy, only a confirmation of policy which apparently did not come across sufficiently well. Question: I understand that just over an hour ago, before the press conference, Mr. Rojo, one of the Council members, effectively leaked today's interest rate decision to the press. He was reported as saying that you left interest rates unchanged. Are you aware of that and do you think that this is an appropriate way for information to be released? Duisenberg: I am aware of what has been reported. I think that, if he said that, we should ask for some foregiveness in this particular case because it happens that the spokesman you quote is celebrating his 65th birthday today. Question: Have you intervened in the markets in any way to boost the euro? Has the ECB intervened in the markets in any way to boost the euro's value? Duisenberg: It has not. Question: Some ECB watchers consider that within the Council of the European Central Bank there are differences in the emphasis on the value attached to the exchange rate of the euro. There are perhaps differences in views, slight differences of view between Duisenberg and Tietmeyer. One says "a euro is a euro" and the other says "as long as the stability goal is not endangered, the exchange rate does not mean very much". Are there these differences of view and do they mean anything? Or are there really differences in view in the European Central Bank Council about the exchange rate of the euro? Duisenberg: If there were different opinions in the Council, I would not tell you about it. But I can tell you that, of course, all these matters are subject of discussion. And in all cases in our history, which is admittedly not a long history, we have easily been able to reach a consensus about our views and, of course, sometimes someone enters the discussion with a view which may differ from the view that is being held at the end of the discussion. There is no way to define or discover, at least I could not do that, a split in thinking or differences of views which are of any significance. Question: This afternoon, when the ECB made its normal statement about interest rates to news agencies, it did not mention the number of weeks that the securities re-financing rate would be conducted at 2.5 percent. Will it be done for the next two weeks, as it has been in the past, or was this an intentional omission? Noyer: No, it was not an omission. Normally, we simply mentioned the number of weeks between two Council meetings. There is no particular intention behind that. That will be for the next two weeks, yes. Question: We heard from the German government that savings are going to be applied only from 2000. Generally speaking, we see that all of the Governments are starting to look more at the war in Kosovo than at controlling their expenditure. Do you think confidence is declining? Do you think that this is also a major danger for the euro, the fact that these reforms are just being put off, and put off, and nobody seems to apply them? Duisenberg: It is too early to assess the impact of a conflict, that has not yet ended, on future budgetary developments. We are actively studying that. But it is too early still to come to conclusions. For the time being, we do not think that it should, nor that it will have a significant impact on budgetary developments. In the future, it might lead to a re-arrangement of priorities within budgets. I do not exclude that. But as for the impact on the euro, as you have mentioned it, it is true to say that the news that comes by the hour on the conflict in Yugoslavia has an impact on the volatility of the euro. Just when I was entering this room, there was a statement by the Vice-President of the United States, which immediately caused the euro to lose a couple of hundredths of a percent, but then, maybe, there already is another statement which goes in the other direction. So, the volatility has increased. We believe it is too early to assess what the basic reasons are that the euro has been, let me call it, recovering so strongly in the last few days. Question: At the start of the year you were expressing some concern about the level of fiscal discipline used by Governments in the euro zone. Have you seen any signs of improvements in that area? Do you think that there is a greater understanding now of the need for budgetary discipline and also for structural reforms and labour and product markets? Duisenberg: Excluding, as I just did, the war from those considerations, we have not yet seen signs of a significant improvement of, let me call them, the fiscal authorities. Now that we know all the stabilisation programmes which have been introduced or published, we see an only moderate further decline in public deficits across "Euroland" - very moderate, on average - which still leaves the combined deficit for "Euroland" in the year 2001 or 2002 at a level above that which is called for by the Stability and Growth Pact. So, in that sense, our concerns have not diminished. Question (translation): What was your impression of the meeting of the G7 countries where you represented the euro and monetary policy, while the Euro 11 Ministers of Finance have not yet agreed on how they should present themselves there. Do you regard this as a problem or not? And another question: the German-French Financial and Economic Council will be meeting next Sunday in France. The President of the Deutsche Bundesbank and the President of the Banque de France will be meeting there. Is this institution, this arrangement, really still appropriate now that we have a Monetary Union? What are your views on this? Will you be attending the meeting? Duisenberg: The results of the G7 meeting have been communicated to you in an extensive communiqué. It was not the first time I participated. It was the third time that I participated in the G-7 meeting on behalf of the European System of Central Banks. I was in a position there to explain and discuss monetary policy aspects of euro area politics. For fiscal policies, of course, I am not competent to speak. But for monetary policies and a discussion of the general economic outlook for the euro area, I was fully competent and that was recognised. And I was able actively to participate in the discussion. On the French-German combination, the national central bank governors will be present. I assume they will be there in their traditional role, which is still their role and will remain their role, as the main economic advisor of their government and, to that extent, I have no objections whatsoever, and I have no inclination to be present either. Question: Mr. Duisenberg, I have a question regarding the allocation ratio at the weekly tender. You said two months ago that you were worried about the low allocation ratios. We are now again seeing low allocation ratios. Are you still worried, are you worried again, and what are you intending to do about it? Noyer: We think that, for the moment, it is extremely difficult to assess, because every time we have a different configuration. The number of counterparties taking part in the operations changes. There has been an evolution, an evolution more in the main refinancing operations than in the long-term refinancing operations. We have had, of course, a very sharp increase in the allocation ratio at the end of the maintenance period. Now it is declining again. We do not have - and we all share this view - we do not have the experience to make a final judgement on that and on whether we should stay on that sort of level. That would be the real problem to be addressed. So we have decided to wait and gain a little more experience before making a final assessment on that. For the time being, we think that it could very well be that the allotment ratio will come up again, to a certain point of equilibrium, but it is not possible to make a final judgement. Question: I wonder, and despite the fact that the ECB does not feel competent to speak on fiscal policy, I wonder if you see any role at all for the Central Bank in helping Mr. Prodi organise matters at the Brussels level in terms of the fiscal side, specifically the European Commission. You know yourself about the Paris proposals for boosting the role of the European Commission in the fiscal debate and, of course, it goes together with the policy mix in which the ECB is, of course, one of the actors. Is there any role, therefore, for the ECB in helping Mr. Prodi organise or advising him in any way on how to organise the Brussels Commission? Duisenberg: The specific question being the last one, how to organise the European Commission. There is no role for the ECB in that respect. Question: Mr. President, I would appreciate it if you could comment on the wage developments in Europe, some of the wage increases, especially in Germany. Have you any opinion on these developments? Duisenberg: There is, of course, only incidental information across "Euroland" about the areas in which wage contracts have been concluded. At an earlier stage we already indicated that there were instances where wage settlements seem to have been concluded well in excess of the likely rise in productivity and that itself is one of the risks we see for the future. But it is not enough of a risk to make us concerned about the future inflationary developments. Otherwise, we would not have lowered the interest rates a few weeks ago. Question: Mr. President, I just wanted to follow up on your "this is it" comment. Does that mean you actually have a tightening bias at this point and also in light of your saying that there is a moderate bettering of the current condition? Duisenberg: No, I know that every word I say is being interpreted differently by different people. So I can only emphasise that in my words and in my thinking there is no bias. Yes, there is no bias, and that means none in either direction. *** SteveH (5/31/99; 1:12:21MDT - Msg ID:6907) Euro (again) http://www.ecb.int/ Yet another recent speach:Stable and efficient financial systems for the XXIst century - The euro area - Speech by Dr. Willem F. Duisenberg, President of the European Central Bank, at the XXIVth IOSCO Annual Conference Lisbon, 25 May 1999 "1. Introduction The euro area constitutes a large economy, of a size comparable to that of the United States. That fact alone places the euro and the euro area financial system firmly "centre stage" in the global economy. Consequently, it is essential for the euro area financial system to be stable and efficient, not only for the benefit of the euro area economy itself, but also for the world economy. The introduction of the euro on 1 January 1999 had a profound impact on financial systems both within and outside the euro area. Part of this impact was immediately evident in the rapid integration of money markets and the replacement of national currencies by the euro in foreign exchange markets. The fact that the changeover to the euro progressed smoothly is a reassuring indication that the euro area financial system is able to remain stable during times of structural change. However, a further part of the impact on financial systems - most likely the greater part - will be experienced over a longer period of time. The euro is likely to become one of the major factors reshaping both the domestic financial system of the euro area and the global financial system. This process should lead to a more efficient allocation of finance within the global economy, but it will also call for the ability to adjust to structural changes in order for stable financial systems to be maintained...." SteveH (5/31/99; 1:08:09MDT - Msg ID:6906) Euro (more) http://www.ecb.int/ This is how that previous quote should have looked:"...Maintaining price stability in the euro area also promotes credibility and thereby enhances the international role of the euro. The Eurosystem neitherpromotes nor hinders the development of the euro as an international currency. We consider that the international role of the euro should developthrough the interaction of market forces. As yet it is too early to predict how long it will take for the euro to be considered as a truly internationalcurrency similar to the US dollar.Clearly, the disappearance of 11 national currencies and the introduction of the euro as a major international currency had an immediate impact onthe turnover and focus of attention in the global foreign exchange markets. This has been reflected, for example, in rather active and liquideuro/dollar trading in the foreign exchange market since the launch of the new currency. However, there are also indications that the euro has furtherpotential to grow in other markets as the surprisingly slow development of euro/yen trading suggests.The euro can also be expected to become an attractive currency for the investment of official reserves...." SteveH (5/31/99; 1:05:59MDT - Msg ID:6905) Euro (more) http://www.ecb.int/ Here is another speach by a European Bank person. This paragraph was plucked from the middle. It would seem that the ECB does view the Euro as an eventual competitor to the dollar:"...Maintaining price stability in the euro area also promotes credibility and thereby enhances the international role of the euro. The Eurosystem neither promotes nor hinders the development of the euro as an international currency. We consider that the international role of the euro should develop through the interaction of market forces. As yet it is too early to predict how long it will take for the euro to be considered as a truly international currency similar to the US dollar...." Clearly, the disappearance of 11 national currencies and the introduction of the euro as a major international currency had an immediate impact on the turnover and focus of attention in the global foreign exchange markets. This has been reflected, for example, in rather active and liquid euro/dollar trading in the foreign exchange market since the launch of the new currency. However, there are also indications that the euro has further potential to grow in other markets as the surprisingly slow development of euro/yen trading suggests. The euro can also be expected to become an attractive currency for the investment of official reserves. SteveH (5/31/99; 0:55:14MDT - Msg ID:6904) Euro (in depth understanding) http://www.ecb.int/key/sp990527.pdf This is a speach entitled: Hayek -- Currency Competition and European Monitary Union.A long read but when done, understanding the Euro will have gone a long way.It is well written and shows the thinking process of a board member of the Eurpean Central Bank.BTW, I saw no references to gold. SteveH (5/31/99; 0:08:27MDT - Msg ID:6903) Euro http://cnnfn.com/worldbiz/europe/9905/28/euro/ Euro gets German defense As single currency struggles, Bundesbank's backing is louder than ECB's May 28, 1999: 8:23 a.m. ET LONDON (CNNfn) - As Europe's new common currency, the euro, fights to fend off a dreaded slide towards "parity" -- or equivalence with the U.S. dollar -- it is finding its staunchest defender in Germany's Bundesbank. Before the European Central Bank supplanted the Bundesbank in January as the paramount maker and breaker of European monetary policy, Bundesbank officials routinely attempted to shore up the German mark with supportive comments. With the shift to the euro, that role was, in theory, relegated to the ECB -- whose powers include setting European interest rates and, in certain cases, intervening to prop up the euro. But as the euro touched a lifetime low near the $1.04 level Thursday, the ECB made only mildly supportive comments, dampening market speculation about an intervention. Instead, it was a Bundesbank official -- president-designate Ernst Welteke -- who leapt to the euro's defense Friday, even as the euro staged a modest recovery, edging up to just below $1.05. In remarks to CNN's World Business This Morning, Welteke said he was concerned about the euro, stressing his displeasure with the parity threat posed to the single currency less than five months into its life. "I am not happy about this," Welteke said. "I am concerned about this development and this development has to stop. We can see that this helps the export situation, but the confidence in the (financial community) and the public is concerned with this." The remarks were by far the strongest alarm signal yet issued by any member of a central bank in the 11-nation euro zone. Those remarks, along with comments by the Bundesbank's chief Hans Tietmeyer that he would not be pleased if the euro were to decline further, were seen as underpinning a mild rebound in the euro Friday to $1.0495 in late morning. On Thursday the euro hit a record low of $1.0455 in Europe before bouncing back. A day earlier, the currency had begun to drift down after European finance ministers permitted Italy to record a larger deficit than allowed under a European stability pact. Though the ECB expressed its displeasure with what bank officials viewed as political largesse towards Italy, the bank did not signal any intention to take remedial action. Welteke, in a measure of his frustration, said he disapproved of the leeway given to Italy, but acknowledged to CNN "There's no way for central bankers to mix in decisions on the political side." Monetary policy at its limit Welteke also expressed his belief that monetary policy had reached the limit of its ability to foster growth and employment in the European economy. "When interest rates came down…to 2.5 percent it was all monetary policy could do." Robert Pryor, a European economist with HSBC in London, said he thought it was natural that a German central bank official should jump to the euro's defense. Throughout its history, he noted, the Bundesbank's role was to galvanize the mark, once the linchpin of European currencies, to which many other banks calibrated their monetary policy. "The whole purpose of it being there was to boost the internal purchasing power of the Deutsche mark," Pryor said. Now, he added, "the power base has switched a bit, to countries that are not so concerned about the euro." The Bundesbank also carries heavy influence within the ECB, where it holds two seats on the 17-member board, or 12 percent of the votes. Many economists say the ECB has been willing to tolerate a weaker euro as a way of promoting Europe's exporters, for whom a softer currency makes their products less expensive abroad. But Pryor also suggests that some of the euro's misfortunes of late -- it is down more than 10 percent from its launch level of $1.17 on Jan. 1 -- may be undeserved. "All the gloom possible is hitting the euro, it's almost all one-way," he said. "It's been hit by a lot of bad news, and markets seem to have got incredibly gloomy about Europe." That view was echoed Friday by Deutsche Bank chief executive Rolf Breuer, during a seminar at the bank's Frankfurt headquarters. "I have no reason to believe that this credibility is coming into doubt in Europe," Breuer said. --from staff and wire reports SteveH (5/31/99; 0:05:32MDT - Msg ID:6902) Euro http://cnnfn.com/worldbiz/europe/wires/9905/30/euro_wg/ Euro looks less likely for U.K. Research group chief says currency's woes makes U.K. membership difficult May 30, 1999: 7:42 p.m. ET LONDON (Reuters) - As the euro's value sinks and the British public grows less willing to abandon the pound, London's Center for Economics and Business Research said Monday it now sees less than a 50-50 chance of Britain adopting Europe's single currency. Douglas McWilliams, the center's chief executive said for some years he had been working on the assumption that Britain would join the fledgling single currency in 2002, shortly after the next general election. He said the recent fall in the euro's value, while not a measure of the currency's success in itself, had highlighted strains in the system and cast doubt on the performance of the euro-zone economy and on the fiscal rectitude of countries taking part. "The increasing divergence of economic performance within the zone casts some doubt on a 'one-size-fits-all' monetary policy," he said. There was also the tricky issue of the rate at which the pound would enter the new currency. With the pound staying stubbornly strong and likely to continue doing so, it may be difficult for Britain to join at much less than 1.50 euro per pound, or 2.94 marks in old money, he said. "Mr. Blair is too shrewd a politician to fight a referendum on as crucial a topic as the euro unless he is a strong odds-on favorite to win," McWilliams said. "With public opinion hardening against the euro joining, we now think the probability of the U.K. joining in 2002 is down to 30-40 percent," he said. The Labor government has promised to make a decision on joining the euro early in the next parliament subject to five economic tests and a referendum. An election is due by May 2002. Click Here to view yesterday's discussion.
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