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

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ARCHIVED DISCUSSION FROM 12/31/2001
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Mr Gresham (12/31/01; 23:42:48MT - usagold.com msg#: 67524)
Rollover
Rollover...

ax (12/31/01; 23:14:37MT - usagold.com msg#: 67523)
HAPPY NEW YEAR 2002 TO THE ALL MEMBERS OF THE GOLD FORUM

HAPPY NEW YEAR 2002 TO EVERYONE OF THE GOLD COMMUNITY!

WE CAN DEBATE BY HOW MUCH, BUT ONE THING IS CERTAIN, GOLD
WILL GO HIGHER IN 2002.

VERY SOON, WE WILL BEGIN TO SEE BY HOW MUCH.

ALL THE BEST

AX


Solomon Weaver (12/31/01; 21:16:17MT - usagold.com msg#: 67522)
Happy New Year 2 0 0 2
Welcome to the G O L D E N Y E A R

oh and by the way

Silver is the Poor Man's Gold

Poor old Solomon

Mr Gresham (12/31/01; 20:51:38MT - usagold.com msg#: 67521)
Happy New Year, All
...and a golden 2002 to you, too, cb2. It is such a privilege to hear daily from intelligent people from around the world.

What would a 2002 goal be for us -- recruit someone from Latin America -- Salinas Price? -- from Middle East (Pakistan? Dubai? India? South Africa? and familiar with their gold markets) to join us. How would we go about introducing ourselves -- or would there likely be anyone from those places interested in our form of speculative banter?

John Doe (12/31/01; 20:42:58MT - usagold.com msg#: 67520)
Leigh
That first link writes a hidden, minimized window way off screen (I'm still running 640x480, so this may not happen at a higher resolution). When I closed this window on the start bar, the Windows OS retained the hidden, minimized window's attributes and every time I tried to re-launch the Explorer browser it created the new session using an off-screen, minimized window. Very obnoxious.

Can you paste the review text, giving credit to the source?

A Canadian (12/31/01; 20:36:23MT - usagold.com msg#: 67519)
YEAR OF RECKONING

Happy New Year to all!

2002- Year of vindication for all us contrarians!


Leigh (12/31/01; 20:32:48MT - usagold.com msg#: 67518)
John Doe
The first link I posted was wrong. I typed in "The Village Voice" instead of "Village Voice" and didn't check to make sure I was correct. The second one works fine, I promise!

John Doe (12/31/01; 20:11:45MT - usagold.com msg#: 67517)
Previous post refers to Leigh's Village Voice link


John Doe (12/31/01; 20:08:09MT - usagold.com msg#: 67516)
Don't click on the link below
I don't think the site is sending out a virus, just really bad javascript.

CoBra(too) (12/31/01; 20:06:41MT - usagold.com msg#: 67515)
The Yen vs The US $ -
http://www.lemetropolecafe.com/man_ray_table.cfm?cfid=93093&cftoken=38325355&pid=1914
- As Steve Saville insinuates in above essay that a rejunivated Yen Carry Trade - as it even may be - is at the roots of the recent Yen depreciation - I would be more inclined to feel that the Yen was "greenmailed" into some kind of buffer to uphold the perception of a strong US$.

As I may be totally sticking my neck out here, it has occurred to me that whenever other main currencies have gained vis a vis the "greenback" the Yen was whacked.

- Whacked, with the support of the BOJ - Well, what can you say? Some guys will never learn and rather risk their industry, while trying to rescue their bank's integrity for the sake of precarious -and perceived- stability.

Insanity - to prolong the vanity of misallocated capital - a spiral upheld by ... by ever more of the same. Not cure, but more shame in the endgame!

... and now I'm 4 hours into the new year - and the euro was the main topic in festivities here - an official new currency for 12 countries of the EU 15 - and a promise for a european future of political, and not only economical, unity - building from a new common monetary base! ... and according to Helmut Kohl, that was the goal!
- I'm willing to give it a chance ... and wish all of you
a great and golden 2002 - cb2



Leigh (12/31/01; 19:58:33MT - usagold.com msg#: 67514)
Wrong Link
http://www.villagevoice.com/issues/0201/dibbell.php
I posted the wrong link. Sorry, everyone. Please try this one.

Leigh (12/31/01; 18:43:32MT - usagold.com msg#: 67513)
A Review of Cra$hmaker
http://www.thevillagevoice.com/issues/0201/dibbell.php
Here's an unflattering review of the book Cra$hmaker and a huge slam on all sound money advocates. Geek subculture?? What is this reviewer's agenda?

sector (12/31/01; 18:22:34MT - usagold.com msg#: 67512)
@ uponroof Japan's People HATE the Government...
...my sister has just returned from three years in Japan. Her husband is a really BIG cheese in the theme park area so she and he get to hobnob with just about everybody from Hokkaido to Okinawa.

The rank and file, "yen in the linens" Japanese family trusts the government about as far as they can throw them. The corruption is so rampant its become institutionalized...everyone fits into the twisted mess of payoffs, kickbacks and graft. They ALL know the banks are broke...they have known it for ten years. The reduction in insured deposits will automatically fuel a move of thir uninsured assets. Unlike the US, the Japanese people have experienced first hand, their government's mortality.

Expect the average Japanese to be a little smarter than the government guys think...just as they have been in Argentina. See...Argentina is never coming back...the people know they won't get their money from the banks...ever. The people of Argentina are just now mobilizing. It will not be pretty. "Peacekeepers" will be shredded if they are stupid enough to go there.

Japan's people will remove their yen from the banks pretty soon. They will put those yen into appreciating assets...pretty soon. The sole appreciating asset on their investment horizon is gold...and silver...IF they can get any.

PS...Back from endoscopic spine surgery. Should be 100% in three weeks.

uponroof (12/31/01; 16:21:08MT - usagold.com msg#: 67511)
"it cannot be said that we are now in a state of crisis.''
http://www.asahi.com/english/politics/K2001122900152.html
Telling words from Japanese Finance Minister Hakuo Yanagisawa. Read that again...."it cannot be said that we are now in a state of crisis". Huh? Why say anything about it then? Why advertise the denial?

Because it's intentionally designed to inflame...just a little bit. Just enough to scare some yen out of mom and pop's savings account.

Japan is walking a tightrope. It must justify use of public funding (taxes) in the name of private corporate welfare (banks) through these deliberate and calculated words.

At the same time it must be careful not to incite too much concern which could fire up 'a run on the banks'. Yes, while the phrase is used primarily to scare taxes out of citizens, Japan is indeed afraid of a run on their banks. With Argentina fresh on the Japanese peoples minds, it's a very real possibility:
********

snip

"...Koizumi vowed he would do whatever it takes to help the banking sector avert a catastrophe.

``There is talk that a financial crisis will strike in February or March, but I will never let that happen,'' Yamasaki quoted Koizumi as saying after the meeting.

He said the prime minister also indicated he would take steps to discourage any runs on banks.

Many people are concerned about the safety of their savings after the government ends its policy of fully guaranteeing deposits next year. Starting in April, individual deposits will only be guaranteed up to 10 million yen if a bank goes bust..."

snip

uponroof- Bottom line.....the people get screwed. Whether it's a taxpayer bailout deal or not, the Japanese people are going to get screwed. Two choices....much higher taxes and more debt, or more failed banks which will threaten the life of the financial sector. Pick your poison. Koizumi is steering his people into buying as much bank debt as possible.

Normally a hard sell for traditionally honorable Japanese, maybe not so hard this time. Sprinkling in little inuendos about 'bank runs' and limited withdrawals might just break the Japanese ingrained will to honorably save for oneself.

Back to the calculated rhetoric:

snip

"...Yamasaki said the prime minister vowed to take ``decisive steps'' to improve what he called the ``very serious'' state of the economy.

``There should be no panic and no deflationary spiral. We will react flexibly,'' Yamasaki quoted Koizumi as saying.

When asked if the steps promised by Koizumi included using public funds to help banks, Yamasaki replied, ``I think so.''

At Friday's news conference, Fukuda said the use of taxpayers' money to save the nation's financial system was always an option..."

snip

uponroof- Note reference to possibly use taxpayers money to '"save the nations financial system"' no less! (Gee, since you put it that way, how much can I donate to such an honorable and worthy cause!).

Some very dangerous games of perception going on here which could backfire very easily. If the people sniff a set up (perceived or real), from an overdone selling job. Or believe the situation is being over exaggerated, they might reject this bailout policy. Without full public opinion the bailout will be much more difficult and subject to ultimate failure through semi committment.

These guys have zero margin for error and want to have all available options ready to go, concerning both logistics and politics. We are watching the set up ...Meanwhile gold sales go boom.
********

Thanks Miner 49er, Belgian, and all for your thoughts and posts. Always appreciated to be sure.

Happy New Year all...and watch out tonight. It's amatuer night on the highways (don't drink and drive).

slingshot (12/31/01; 15:33:01MT - usagold.com msg#: 67510)
Happy New Year!
Who knows what tommorrow will bring? Traffic,late sixties?
Despite all the bad news which has come to us during this passed year, if your a Goldbug you just have to smile.
That is if you have been putting some away for a rainy day.
Some have come, and some have gone , but may the USAGOLD forum go on and on.

Wishing All a Safe and Happy New Year!

Slingshot

Black Blade (12/31/01; 13:19:12MT - usagold.com msg#: 67509)
2001 IN REVIEW YEAR OF PAIN
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/12/30/BU162595.DTL&type=news

Layoffs, bankruptcies, recession and terrorism all take their toll

Snippit:

Even before the terrible events of Sept. 11, the national and Bay Area economies were headed for a year of distress. The stock market continued to slide after a terrible year in 2000. Layoffs at Bay Area companies surged and the ranks of the unemployed soared. California was battered by the energy crisis, suffering rolling blackouts and skyrocketing prices.

Meanwhile, the dot-com boom turned to bust for many local startups and even proven Silicon Valley powerhouses fell on hard times. The Federal Reserve repeatedly cut interest rates to shore up the economy with scant effect.

Black Blade: Not much hope as the "Grim" results of the last year and the declining markets of the last two years are pummeling the US economy. The Peoples Republik of Kalifornia has not fared well and will likely sink faster than the rest of the US as the High Tech industry flounders. The "Energy Crisis" of last year torpedoed the state's economy as the Grasshoppers still refused to face reality and build new power generating facilities until too late. Then Kommissar "Red" Davis locked in energy contracts at record high rates to spite his state's citizens rather than admit that the energy professionals would have been better suited to contracting energy rates if utilities were truly deregulated. The "Energy Crisis" of last year pushed the state into a severe Recession and any economic recovery without addressing the next "Energy Crisis" before it returns will be capped as energy demand returns. Meanwhile, the Wall Street touts point to a declining rfate of unemployment in the dot.com industry as "good news". No one seems to mention that the dot.com industry is almost gone due numerous bankruptcies as dot.coms went to dot.bombs and eventually to dot.gones. The current outlook is "GRIM".


Black Blade (12/31/01; 12:50:28MT - usagold.com msg#: 67508)
Japan abandons Kyoto treaty
http://theaustralian.news.com.au/printpage/0,5942,3517860,00.html

Snippit:

JAPAN has effectively abandoned the Kyoto climate change treaty after Japanese industry successfully pressured the Koizumi Government into allowing companies to combat greenhouse emissions on a voluntary basis. The Government will not subject industry to any mandatory greenhouse gas reduction regulations for at least the next three years and possibly through to the end of the decade, a report by its Central Environment Council has revealed.

Heavy lobbying by manufacturing industry has generated a sympathetic hearing from government in recent months, in part due to Japan's dire economic circumstances as politicians indicated they didn't want to add a further brake to production. Japan is in its deepest recession for 60 years, one economists predict could last until the middle of 2003.

If Japan shows it is not prepared to do what is necessary to meet its Kyoto target, the protocol's death knell is close. The scientific community believes there is a link between the rising levels of greenhouse gases produced by industrial countries and global warming.


Black Blade: Kyoto is DOA. In the current environment of deepening Global Recession, this change of heart is a no-brainer. Actually the overwhelming scientific consensus is that there is no conclusive evidence of man-induced "Global Warming". The man-induced "Global Warming" issue is a "Chicken Little" minority position and much of that is politically and economically motivated. Regardless, the Kyoto Protocols are dead on arrival.


Mr Gresham (12/31/01; 12:48:42MT - usagold.com msg#: 67507)
miner49er
I find it really worth reading through your thoughts, even if you think you're spelling them out at length -- fortunately I'm getting some "reading bites" that are enough to get your picture.

Interesting how you just portrayed the "big" operators, backstopped by even bigger policy players, operating in the _smaller_ trading window. And the little players (or at least us), forced to operate in the larger window, waiting for the smaller one to close. And guesstimating that the windows are closer to transiting than the big operators think they are. Usually, it's all the reverse of this.

The federal/Fed/bankruptcy options give them a sense of a timeless window. But, then, our new bean-counting brilliante Pizz gives us suggestions like "tossing out a kicker similar to warrants on stock" (I've only read halfway through his) which hint of some of the computer models that might actually be driving the trading floor...

miner49er (12/31/01; 11:57:12MT - usagold.com msg#: 67506)
Mr. Gresham @ 67498 / Cavan Man @ 67497
New Year's greetings to you both...

Mr. Gresham -

Good article re: Euro launch... I like the quote by Italian Minister Tremonti: "I'm slightly reticent to start walking down a path full of... primates waving banners, faith healers, shamans, miracle makers and bankers..." I'm glad to know he's not afraid to let us know how he really feels...

Also when you say: "...that a paper fiat is just a substitute for one's digital electronic bank balance and not a concrete value of savings, in itself." That, I believe, strikes right at every chamber in the heart of the whole matter about the definition of "money."

One of these days I want to chip in my two pennies worth of opinion on this issue, and the issue of money as a store of wealth is going to be my launching point.

Cavan Man -

Isn't that a great question for cocktail party banter...?

I will try to give my humble "cheap seat" opinion, but may not get to it today... The way I would look at this issue however is as follows:

If something delivers less return in real terms, but still appreciates in market value, either the noted return is misleading, and does not count other hidden, less obvious factors that add the extra premium; or there is perception of additional value that, correct or incorrect, is not yet realized, and still remains priced into it.

At the end of the day, prices still move on the basis of an evaluation of perceived marginal benefits vs. perceived marginal costs.

I think we constantly get thrown on issues like today's apparent contradiction of making the dollar stronger by making more of them, not because the paradigm has changed, but because of the vast complexity behind issues that our text books had taught us were relatively straightforward and simple relationships. Hence we are not prone to think in terms of these additional complexities, and as such don't generally consider them.

We were taught simple things like: Country A exports to country B and vice versa. If A runs a deficit in terms of B, A's currency weakens, B's strengthens, and subsequently A's exports become cheaper, so B buys more A, and closes the deficit. These stick figure illustrations are great to start with, but unfortunately, as most of us are not economists, we seldom go beyond this. Therefore we evaluate the world from this context.

Naturally, the world is more complex. This does not abrogate the basic premises of Econ 101, supply / demand, cost / benefit macro analysis. Instead it requires us to flesh these out more fully in light of the additional complexities, in order to see the real life picture.

I, too, found this kind of "anomaly" as absurd a couple years back, and attributed it surely to raw manipulation. I would see these things now less as flagrant manipulations, but policy directives that set up environments where market forces do the job. The market collectively will recognize and consider these vague signals that we might individually overlook. It will also recognize their "peg-ability" because governments and central banks want their policies to work. Thus they will find profitabilty in these obscure, complicated, and apparently anomalous situations that you or I would not find readily obvious. Also, you or I could not secure the large funds required to make these small margin opportunities worth our while anyway. Nor would we make anything after the "friction" costs of taxes, and commissions, that the big players largely avoid or have reduced.

In this way the markets can be led to do the bidding of policy makers. The markets are moved by relatively few players using tremendous leverage, in amounts that overwhelm the more conventional market operations. This makes it easier for governments and central banks to alter the course of things since the movement of myriad little guys are essentially harnessed into the hedging strategies and arbitrage plays of these big players.

Does it break? Sure, but everyone will work hard to keep this goose laying its golden egg's, a fool's gold though it may be, right until the end. Hi-tech math, and computer power provide the tools to perpetuate what formerly would have run its course in a fraction of the time. So from that point, you might say, "it is different this time."

Thanks to the lessons taught here at this forum by its hosts, Mike and Randy; as well as others, and most especially the profound words of FOA, and Another, I've (hopefully) started on the road to mending my ways...

I know this is vague, but I've got to run right now, I will try to reply more specifically tomorrow (at least from the "cheap seat" perspective...)

miner

Black Blade (12/31/01; 11:51:34MT - usagold.com msg#: 67505)
Argentina ends 2001 leaderless and broke
http://biz.yahoo.com/rf/011231/n31132685_5.html

Snippit:

BUENOS AIRES, Argentina, Dec 31 (Reuters) - Argentina ended 2001 leaderless and penniless on Monday with its new interim president resigning a week into the job and the country fearing more bloodshed and the loss of savings frozen in the banks. Plunged into chaos by looting and deadly riots that forced Fernando de la Rua to resign as president a week ago, Argentina fell deeper into anarchy when interim leader Adolfo Rodriguez Saa quit on Sunday after losing the support of his party. Shortly after, the Senate chief supposed to succeed him also resigned. The head of the lower house of Congress, next in line, said on Monday a legislative assembly of senators and deputies would choose a new president on Tuesday.

Already, Latin America's third-largest economy has declared a moratorium on foreign debt payments -- Rodriguez Saa's first act as leader -- and commerce has halted since cash withdrawals were limited to $1,000 a month to stop a panic run on banks. Ordinary Argentines have poured into streets and squares on hot summer nights banging pots and pans to demand -- and get - the resignation of De la Rua, his unpopular economy minister and aides to Rodriguez Saa who were suspected of corruption.

They have also demanded the heads of the entire Supreme Court, which last week upheld the banking curbs, and criticized politicians of all hues. Politicians have been spat upon in the street and hounded from cafes by angry citizens. ``It's shameful. Until all those above us stop stealing, Argentina has no way out,'' said a woman lining up outside a bank in the rain from before dawn to try to get her cash. Argentina's attempts to revive economic activity, appease the 18.3 percent of the workforce that is unemployed, the third of the population living in poverty and hungry shanty-dwellers who looted supermarkets have worried world leaders. However, despite the heavy police and army guard on the president's Pink Palace and in the Plaza de Mayo outside on Monday, there were no rumblings of intervention by the military which has been subordinate to civilian rule since 1983. Its top brass have stressed they want no role in politics.


Black Blade: Now Argentines really know how to show politicians "proper" respect. Even the military sees no hope for Argentina and so they do not want to get involved. It is really getting very "GRIM" as Revolution is becoming more of a possibility. Only those who have accumulated Gold and Silver will have some degree of safety. Think that US citizens would react differently to such a economic collapse? Think again - a major US city can't even win a national championship in a major sport without rioting, looting, raping, and murder. Europe has no monopoly on hooliganism. We do live in "Interesting Times". ¡Feliz A--o Nuevo!


Black Blade (12/31/01; 11:31:07MT - usagold.com msg#: 67504)
NY silver jumps to 12-week high as 2001 wraps up - Japanese Purchase 30 tons of Gold
http://biz.yahoo.com/rf/011231/n31463869_1.html

Snippit:

NEW YORK, Dec 31 (Reuters) - Benchmark COMEX silver burst to a 12-week high above $4.60 an ounce in a shortened session Monday, but there was not much behind the move and most players were sidelined before the New Year's holiday, dealers said.

One dealer said gold was supported by the purchase late last week of up to 30 tonnes out of Japan, speculating the interest was a reaction to government plans to end Japan's current unlimited bank deposit protection in April, replacing it with state-backed insurance on only the first 10 million yen (about $80,000). He said Japanese individual investors seemed to be buying gold and dollars to shield their wealth from a weak yen and the country's dangerously troubled banking sector. Japan is allowing the yen to weaken to stimulate its economy, which is in deep recession, and stave off prolonged deflation.

Black Blade: The low one month lease rates could indicate anything. There may be a small supply coming into the market for lending. Of course if there is no real supply of silver to loan out then the market makers can pull any number out of their a@@ for window dressing. Market manipulation and defaults on paper PM contracts are commonplace as we have seen with Silver and PGMs on the TOCOM and NYMEX. Of course if physical supply does not materialize going forward we could see some "interesting" price volatility regardless of commodity exchange manipulations. It would also appear that some Japanese are realizing the importance of Gold as portfolio insurance. Maybe they are also keeping an eye on Argentina with memories of Asian Contagion still fresh in their minds. Should be an "Interesting" New Year.


CoBra(too) (12/31/01; 11:25:28MT - usagold.com msg#: 67503)
Musings on the US$ - From Bill Bonner
"The Dollar...Again...

Each year for the last two, we have forecast a decline in the
value of the dollar relative to the euro...and to gold.
Predicting a decline in the dollar's value has become an
annual ritual here at the Daily Reckoning.

This year we keep the tradition alive. In 2002, as the year
before and the year before, we expect the dollar to go down.
And even if it fails to go down... well, it doesn't really
matter. For here at the Daily Reckoning, our forecasts tell
only what should happen...not what will happen.

In that sense, we've been right two years in a row. The
dollar should have gone down in 2000 and it should have gone
down again in 20001. Will it now, finally, actually go down?
That is not exactly the subject of today's letter... but we
expect to pay it a visit once or twice on our meander through
the thicket of monetary past, present and future.

Statistically, this year's forecast is more reliable than
those of previous years - if only because we are less likely
to be wrong three years in a row than two. But readers who
took our counsel for more than it was worth have nothing to
complain about. Stocks over the last two years have lost
approximately 25% of their value - measured by the Wilshire
5000. A reader who shifted from stocks to either euro bonds or
gold is at least no worse off than he was in January 2000.

But there are at least a few reasons to believe that this may
be the year in which the dollar begins its long-awaited fall.
Saudi businessmen, for example, are said to be dumping
dollar-based assets out of disgust with the U.S. government's
heavy handed tactics in its war against terrorist financing.
Drug dealers and other cash-economy entrepreneurs are said to
favor the new 500 Euro notes over the smaller $100 bills.
Still other investors are said to be taking a second look at
the euro, since the European economy is growing faster than
the U.S., European equities are only half the price (in P/E
terms) of U.S. equivalents (and thus, in theory, better
investments), productivity levels are higher in Europe, and
debt levels are much lower.

But in addition to the little waves of monetary fashion, there
are also the epochal tides.

"Not since Jimmy Carter was president, I quote myself from
above, has the nation seen anything like it." The 'it' to
which I refer is the increase in the money supply, recently
clocked at 18% per annum... which is infinitely more than the
increase in the supply of goods and services that it is
supposed to purchase. The nation's output of ostensible
purchasing power is phenomenal. But the nation's output of
purchasable things is in decline. You don't have to be a
monetary economist to guess what should happen. More dollars
in circulation chasing fewer goods and services should lower
the value of each dollar doing the chasing. Like millions of
spermatozoa in search of an ovum - the more there are, the
less likely each one is to reach the prize.

The Carter Administration also marked the last time when
America, relative to the rest of the world, was neither a net
borrower nor a lender. Since then, America has become the
world's leading debtor nation - with $2.59 trillion owed the
rest of the world. This amount is not trivial. It equals a
quarter of the nation's GDP...about $40,000 per household.

In the '70s and '80s, the U.S. was concerned - as Japan is
today - that its currency was too high in relation to others.
An expensive currency gives a nation a competitive
disadvantage, makings its products difficult to export. But
by the time of the Clinton Administration, this worry
disappeared. Japan, Taiwan, China and other far eastern
nations had already taken away much of America's manufacturing
base. So, the country turned to software, services and high
tech industries where cheap labor posed less of a threat.

These new industries were so promising that the rest of the
world wanted to own a piece of them. A new and very curious
financial model developed in the U.S. - helped by Robert
Rubin's strong dollar policy. Instead of producing and
exporting things the world wanted to buy, America's consumers
went on a buying spree, and made up the difference by selling
off capital assets and exporting dollars!

The strong dollar made U.S. investments more attractive to
foreigners. And it made it easier for U.S. consumers to
continue to buy more than they could afford. Every day, the
difference between what consumers bought from foreigners and
what they sold to them equaled about a billion dollars -
financed by foreign investors.

No country could have gotten away with this except the U.S.
Because it is America that produces the key variable - the
currency in which all these transactions take place. America
bought foreign-made goods and paid for them with dollars.
Then, it borrowed back the dollars - trillions of them. Aided
and abetted by foreign investors, the dollar was kept high
throughout the '90s and early 2000s.

But there was no guarantee: the nation that borrowed
expensive dollars may pay back cheap ones. We don't know, dear
reader, but the thought crossed our mind as we were watching a
video at the hardware store: there are some temptations so
great they are irresistible.

Almost 4 decades ago, Charles DeGaulle noticed the temptation
offered to a nation whose currency has attained the status of
the dollar - it can make the currency worth whatever they want
it to be worth, noted the old general. Prodded by DeGaulle,
France demanded payment in gold...which later forced America
off the quasi-gold standard.

Once completely free from the restraints of gold, the dollar
became almost as good as gold; it became the currency of
nearly last resort... the currency in which the world's
financial business was conducted.

America is in a unique position in monetary history. Its
consumers (and voters) labor under a greater burden of debt
than any people ever have. Their mortgages are higher than
ever. Credit card debt is higher than ever. Collectively,
Americans owe $2.59 trillion to foreigners. How could the
load be lightened? Simply by lowering the value of the
currency in which it is calibrated. How can this be done? In
theory, it is simple - by producing more of it.

No cobwebs adorn the money-creation wing of the Federal
Reserve bank. The machinery that increases the money supply
must whir and buzz around the clock. While the rest of the
economy experiences flat or negative growth, the money supply
has been growing all year long at double-digit rates.

According to the formula, the quantity of 'money,' ceteris
paribus, is inversely proportionate to its quality. If the
available goods and services remained constant, and the
supply of money doubled, each unit of money should be worth
half as much. It is, of course, never quite that simple.
But neither is it ever completely contrary to the formula.
Money, like water, has to go somewhere. And sooner or later,
somehow or other, it will get there. Maybe this will be the
year the dollar leaks to lower levels.

More to come on this subject...

Your correspondent, wishing you a Happy New Year.

Bill Bonner"

... and a happy, healthy and golden 2002 from cb2 - too!


WAC (Wide Awake Club) (12/31/01; 10:17:41MT - usagold.com msg#: 67502)
(No Subject)
Many Blessings in the New Year to all.
May it be golden.

Gandalf the White (12/31/01; 10:07:17MT - usagold.com msg#: 67501)
Silver JUMPING -- and Gold HOPPING !
BUT, will the 12:00 NY mark signal the DUMPING of PAPER to stop the rise? OF COURSE THEY WILL !!
We watch and see while discussing the facts behind the smoke and mirrors.
<;-)

Mr Gresham (12/31/01; 09:47:52MT - usagold.com msg#: 67500)
Mundell on Euro (1999)
http://www.columbia.edu/~ram15/lux.html
I think I'll keep this open in a window, if I get a chance to do some deep reading. There's also our Gilded Opinion page from him:

http://www.usagold.com/gildedopinion/MundellGresham.html

Yikes! I'm also shocked (and a bit intimidated) how much good stuff has accumulated there (Gilded Opinion) since my last visit.

(Maybe MK can work out some kind of tele-learning link with Columbia, so we can all take a few pop quizzes, and get those advanced degrees we all missed out on while we were pouring concrete and raising prodigies?) (;;;;)



Galearis (12/31/01; 09:46:45MT - usagold.com msg#: 67499)
@Rich
re: Today's Lease Rates
Hello Rich,

I agree with you on your L.R. statements.
My brother just emailed me about this and said that at 6:30 EST the one month rate (Kitco) showed .13% and 0000 change! Note I said POINT 13%. He also mentioned that the one year was showing a negative rate change and now is indicated as UP! When I went on line they were as you quoted with the one month still indicating no change.

The one month rate is surely nonsense (at least) and one only has the possibly more accurate rates for the other months to go on. The on-going "problems" with the one month rate may even indicate that there is NO silver available to lease for this month (Warren Buffett?) or the system is twisting in agony over a defaulted loan somewhere(?) We may never know "what". But the MOST important aspect of this morning's figures is that rates have begun to CLIMB again and that's the unusual thing here.

This rally may have some legs to it and the shortage too!

Off to see the wizard (smile) and I would like to wish Michael, Randy and everyone on the forum a very happy and profitable new year. May it have a silver (and gold) lining for us all!

Bestest regards,

G.


Mr Gresham (12/31/01; 09:38:09MT - usagold.com msg#: 67498)
Reuters on Euro
http://www.reuters.com/news_article.jhtml;jsessionid=5J1KBCDGRJOSOCRBAELCFFAKEEARKIWD?type=topnews&StoryID=484906
"Euro Launch Hits Top Gear as Some Mourn Old Cash"

Some of the wistfulness about the passing of centuries-old currencies (mostly by rightists) is likely to be replaced by the growing sophistication (or at least realization) that a paper fiat is just a substitute for one's digital electronic bank balance and not a concrete value of savings, in itself. This has to be positive for their view toward real assets going forward, regardless of whether the Euro currency is stable or inflated.

Duisenberg stays on. Wasn't Trichet going to take over, and will the French stay in the forefront of this, with their hopes to someday enjoy the "exorbitant privilege", even if only shared with their new bedfellows?

Cavan Man (12/31/01; 09:31:06MT - usagold.com msg#: 67497)
miner49er
You swing for the fences each time you post! Question: How did the dollar appreciate 7% this year while losing a poitive yield? That BTW, is a point that was brought to my attention by CB(too). TIA

Mr Gresham (12/31/01; 09:17:29MT - usagold.com msg#: 67496)
Belgian, miner49er
Sirs: Amazing posts today, keeping us up to current thinking on events and strategies going forward -- thank you!

miner49er (12/31/01; 08:32:49MT - usagold.com msg#: 67495)
Belgian @ 67494
Hi Belgian... thanks for your reply. Just wanted to clarify something in case you were mis-reading me. I agree with you that Japanese (or any general public) gold buying by itself will not drastically affect the gold price. What I want to show is that I find it interesting that as the day approaches when government backstops are removed from their "savings," that a rise in gold buying seems to follow -- as this demonstrates what I believe is Japanese doubt in their currency. Therefore as other perceptions of support or stability erode, they will fly like bats out of hell away from their yen. This is contrary to what many believe is a stablizing force in Japan -- these huge savings deposits.

I think that if the pressure is at the breaking point, the added dimension of a sudden spike in Japanese gold purchases could function as a straw that breaks the camel's back (certainly, there are many scenarios we could build to fit this role), but it is not necessary for this to happen in order for the gold market breakdown to occur, and gold to be set free.

Dollar flight alone can trigger it without any lasting upward trend apparent in gold (being masked by the contract markets). Loss of dollar faith means there is no need to cover in paper gold as "insurance" since big money knows these markets can't (won't) sustain all the claims in a crisis anyway -- only speculators and small players will have any faith in these markets at this point. So prices on gold contracts will drop as they are dumped on the market, and gold shorts will see the imminent downward trend, and sell into it for all it's worth to eek every last penny out of this bet before it closes for good.

In this scenario spot buying by the masses will make little difference other than periodic spurts contrary to the dominant downward trend. (All the while however, physical gold markets will begin straining and ultimately break away from the paper market price, and once the divergence is clear and sustained, the game is over.)

Indeed, that one of these "spurts" is the tap that cracks the glass is possible. Funny how that spike might find itself being nothing more than an intraday jump of 10% -- from $150.00 / oz. to, say, $165.00...;->

Best regards,
miner



Belgian (12/31/01; 06:11:07MT - usagold.com msg#: 67494)
@ Miner49er _ Spartacus _Japan and Gold
A happy New Year to both of you !
Miner : Outside the box of Spartacus's two links, you said it in one single phrase : ...destabilization in the US/Japan axis...dollar flight in motion....
Question and answer in one.

Let us fly high with the eagle for the big(ger) picture.
It is *irresponsible* to warn investors to get out of assets whose value is about to collapse !
Japanese individual savers are a complete different entity than the state of Japan (the government and fiat issuer)
In the actual state of affairs that Japan...the US ...yep, the world, is floating today : it is impossible to bring *GOLD* back into its high profile role. Bush's reference to the IMF for Argentina's disaster is the evidence of the enormous monetary tsunami. The secretive swapperdiswaps (sale and lease back) of Gold reserves is certainly not ment for temporary *stabilization* but for postponing the final collapse and execution of the disformed financial dragon. This must happen at Pluto's undergrounds !

I am but a dwarf using its humble intuition. Staring at facts to signal evidence of your " dollar flight in motion".
Currency hokus pokus extended the deformed economical reality. Now the economy and the currencies as well need drastic plastic surgery to replace the many protheses that kept it going. One day it must be realized that a global economy has its own natural development momentums and that no fiscal or monetary policy can alter these in a drastic manner. It is more or less an euro-message that is not economical in the first place but rather political.

3.000 tonnes of IMF Gold can prolonge the protectional management from collapse by continued swapperdiswap.
Very similar to the period 1960-1971.

Miner, it took me long time to realize that it is not the general public that is going to present Gold as the ultimate refuge to the globe. At best, the general public can only be responsible for being helpfull at building stealth strenght in Gold's valuation (contracting triangle in POG momentum). Gold to the stars is about to start with the dollar flight, be it forwards or backwards (the dollar). It is when the globe has to accept it can't revive (expand) trade, that a major breaking point pops up. Reg Howe (Spartacus link) gives some realistic suggestions as what might happen if Asia (the globe) doesn't succeed of pulling itself out of the swamps. Read it as the old and worren out, re-inflation strategy of increasing in-stability.
The Argentine crisis is (another) mini-example of debacle, where we are all eagerly waiting to see if and how this will be resolved, oh no better say *overcome*, not resolved.

We have been locating here many pockets of 1 trillion dollars. Be it in fiat creation or stockmarkete loses or savings. None of these trillions have embarked on the Golden lifeboat. But they will as soon as the tide will lift the boat and there will be plenty of floods to load the Goldboat with plenty of refugees. Now the financial fraternity is still draining the economical fields from the heavy rains. What a show !

R Powell (12/31/01; 05:52:38MT - usagold.com msg#: 67493)
Today's lease rates
for silver make no sense to me. The one month has changed from 29% to 0% to NA to 2%. I have rounded off to one decimal place.
One month 2.0%
Two month 11.9%
3 month 9.9%
6 month 8.0%
One year 5.9%
If Kitco is giving us the correct numbers, then it would seem, as someone suggested, that silver leased for one year and then lent out at two or three month rates would make 4 or 6%.
All five time periods were up (increased) today. At least I can venture that this is a positive sign. POS was up all night to 4.52 buy got lowered in London to 4.45 this morning.
The lease rates are telling us something and I wonder if the shortage of physical has reached the critical point. I think the paper price can be controled only as long as there is enough physical to meet industrial demand. Are we close? Depends upon how little is really left and how willing those holding it are to giving it up. If there is indeed only about 300 million ounces left (Buffet holding about one third of this) then I'd guess it's in strong hands. We will run out of silver before gold so, if simple supply and demand fundamentals prevail, silver will lead the charge. If there is any investment interest drawn into this rally, gold will also rally. Both are precious. I will be amazed if there isn't a great investment interest in both as soon as the silver shortage lights the fuse.
Any thoughts, numbers or information which seems so hard to find??
Rich


Canuck (12/31/01; 04:57:05MT - usagold.com msg#: 67492)
Euro Countdown
1 day

US$/Euro 0.885 Unch

Gold 276.60 +0.05



Spartacus (12/31/01; 03:11:51MT - usagold.com msg#: 67491)
Japan
http://www.aei.org/eo/eo13626.htm

Japan in Depression By John H. Makin

Spartacus (12/31/01; 01:27:56MT - usagold.com msg#: 67490)
Japan
http://www.gold-eagle.com/editorials_99/howe071599.html

"All the talk today about gold being "demonetized" is as off the mark as the notion that governments "gave gold its value" under the gold standard. Gold gave the currencies that were linked to it their value depending upon the credibility of the link. And today gold is slowly revealing the bankruptcy of Japan.

Much of what GATA alleges, if true, supports this view. My only disagreement with GATA goes not to the likelihood that governments and central banks are taking actions designed to support the shorts in the gold market, but to the underlying reasons for their action.

In my view, they are not engaged in some petty corruption for the benefit of favored bankers or even in an effort to somehow demonetize or tarnish gold. They are being forced to mobilize their gold to support a yen interest rate that is below the gold lease rate.

They are, as I have tried to point out, effectively bribing people to hold yen today by offering discounted gold in the future. And they are doing this, I believe, because they have run out of options to stave off financial collapse in Japan."

Spartacus: Maybe Reg Howe was right from the beginning? Anyway a golden new year for everyone.

miner49er (12/31/01; 00:44:11MT - usagold.com msg#: 67489)
Belgian @ 67413 - Japan and gold...
Good day, to you Sir... I just wanted to reply back on a couple of your thoughts the other day. I'd love to address all these issues, but won't burden the forum with all my long-winded ideas. So, I'll take up just the one that keeps on track with the thread I've been on lately, namely Japan. (As this goes to press, India / Pakistan have not yet come to major blows, as this would naturally change events, but that is another discussion... A discussion, I hope, that becomes no more than an irrelevant academic exercise.)

There was a post of an article Friday by uponroof (#67397) that made an interesting association between the ending of 100% government backing of certain Japanese savings deposits, and a surge in public demand for physical gold. This underscores what I want to look at here, that being the Japanese public's questionable confidence in their currency, and the dire ramifications of just such a possible wavering.

While the amount of gold the public is buying is not going to, of itself, radically affect the gold price, that they are buying, and why they are (as the article suggested), is significant. The more I think on this, the more I am seeing Japan as one of the most prominent flashpoints for setting this mother of perfect storms in motion.

At some point the tension of yen / dollar exchange rates will give way. The current weakening of the yen, while helping exports up front, is chiefly a financial manipulation to keep gargantuan leveraged trades profitable. And by the same token, the strong dollar policy exists for the same purpose. Neither side can change course. So, while an ever cheaper yen does bolster exports, and an ever stronger dollar has numerous immediate advantages of its own, there cannot help but come a point where Japan's cost of imports, upon which they are largely dependent, will become unbearable. Until that point, the population will just tighten, and cut back, and work harder and longer. But when the flashpoint is triggered, the pent up, compounding effect of wavering confidence in the yen, that heretofore has not manifested among the public (probably for lack of any better alternatives), will let loose with a vengeance.

Despite all the deflationary pressures currently existing, there are immense inflationary pressures in terms of consumer prices for necessities, that are worsening daily, and are not alterable or long containable under this weaker yen / stronger dollar paradigm. Japan's reliance on so many foreign goods, especially oil, make it impossible to ignore. When the point of critical mass is reached, non-performing yen savings will run from the savings institutions, and commodity hoarding from gold to grain will result.

Look at it this way. You are already dancing as fast as you can -- have been for 10 years; you see yourself slowly, steadily losing ground and no way out. You have no confidence in your leaders, and less confidence daily in your currency (hence, your vast stores of it). Eventually, something... will... give...way. All this yen subsequently gushing out of savings will bid up the price of everything worth hoarding. Then according to script, bank holidays and such will follow, and frantic efforts will commence to cobble together some plan to stop the bleeding.

At this point, yen will be flying to both dollar and euro markets (mostly dollar at first), and drive the yen further down, and both dollar and euro up. To the degree that the Japanese run to gold, they might kickstart the chain of events that unleashes the gold genie as well.

If the euro faction is playing a waiting game (and I believe it is), then the plan will be for the dollar faction to make the fatal misstep entirely of its own doing. If somehow the dollar forces can patch up what I think would be a most violent yen crisis, and still contain gold, and a semblance of the status quo, then one would certainly have to stand up and applaud them. Assuredly, though the worst would be yet to come.

During all this, the stronger-still dollar would further cripple U.S. manufacturing, catapulting it even more deeply into recession. The real estate and credit bubbles, if not already burst, would be reeling drunkenly from yet more infusions of hot cash flows from Japan and other Asian currencies who were forced to weaken along with Japan to stay competitive. At the same time though, this destabilization in the Japanese / U.S. axis also would be putting dollar flight into motion, and would eventually overtake the Asian inflows, canceling out their effect. The pressure on gold and the euro at this time would be enormous.

All of this is capable of happening with the ECB in neutral. At some point the destabilization, and its consequent unpredictability in terms of policy, or the feasibility of their policy options is doubted, pressure in the gold market for increased delivery will set the short squeeze dynamics in motion. After a sordid death dance, Comex would default. Long positions would stand no hope of being made whole. Those that wanted delivery (except for those who have the force to demand delivery, like oil), would get some amount of cash instead, and those who just wanted cash, but enough to ensure the value of that cash by parity with gold, would only get a fraction of that.

The U.S. wouldn't step in, since the very reason the markets must default is the protection of the entire U.S. dollar system, and enforcing the demands of long claimants would drive gold vertical, and they can't have that. Once confidence is breached in what amounted to an insurance market underwriting U.S. dollar integrity , foreign capital would dump their gold contracts, and seek redemption in the euro, which would be quite happy to work them out. Spot gold soars, gold contracts plummet, the dollar weakens, the euro strengthens.

FOA makes this point in more detail somewhere (?) along the Trail... (and definitely more accurately than I have...)

So, as the U.S. has elected to play hard-ball, and use its muscle to extract every ounce of advantage from the unique position it has had in the world financial markets, then it must endlessly face the reality that others are endlessly seeking to neutralize the source of its power. In such a dynamic, a reversal will come. Either through the energy of the opponent or U.S. exhaustion. But it must happen.

And in my opinion, this Japanese / U.S. axis is one gaping vulnerability with a big "kick me" sign taped to it.

Good corresponding with you, good Sir Belgian, and may you have a most happy New Year...

miner49er




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