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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 1/4/1999
All times are U.S. Mountain Time

Gandalf the White (01/04/99; 22:43:05MDT - Msg ID:1643)
Peter Asher -- Re: message 1641
Peter, somehow I get the feeling that you are still combining gold, dollars and "Euro"s as all being the same things. As Aragorn III discussed, gold and US$ have a relationship that has been defined as the POG for a great number of years. Gold and "Euro"s may not have the same relationship with that of the US$. The 100 "Euro" coin having say, eight grams gold will always be worth 100 "Euro"s, BUT may be worth far more US$ than say the 86 or so of today. It is very difficult for Americans to not think in US$. Everyone else in the world does though. We should start thinking in "Euro"s and have two more years to practice before the real monies comes out, BUT we shall see financial instruments NOW and will see a change in the way the world sees the US$ and "Euro" SOON. I beg Aragorn III to expand this confusing concept in his illustrative manner, as he is far better at creating a written picture than I.
<;-)

Peter Asher (01/04/99; 22:12:27MDT - Msg ID:1642)
Michael
Todays DOW could be a triple top where the overhead supply is and has been, or it could be a pause while the belivers in this take their profits!

P.S. do you have any way of deleting that mess that piggybacked in on my post yesterday?

Peter Asher (01/04/99; 22:02:14MDT - Msg ID:1641)
Disscusion
Paper money functions as a form of bookkeeping by being a monetary equivalent of "payto the bearer on demand, one gallon of milk in return for cutting one rafter". In other
words a Dollar or Euro or Yen is a "production chit". This function works as long as the exchange ratio of all activity in that system remains constant. However, even gold cannot
keep the relationship between milk and carpentry in place, as the price of milk and carpentry will fluctuate depending on the scarcity or abundance of cows,pastures, refrigeration and workers.

The power of gold is that it maintains a trading value external to any economic system.You could probably use gold to trade with Extraterrestials!

The more that economic systems conflict with each other, the more vital the role of gold . the more stable the
relationship the less necessary gold becomes.

Excessive debt will cripple any economic system by triggering default and in its wake, the cessation of production. Gold's role as a monetary standard can prevent this, but if it has already occurred, the necessary gold production would weaken the system even further in the attempt to monetarize the situation.

So, while the possibility of backing the Euro with gold could have raised the price, the event of coinage is two years in the future and might not be economically feasible anyhow.

Finally, the merging of eleven nations into one system, and the possibility someday of a one world currency could also be damping the desirability of holding gold.

Regardless of all this, gold's role as storage of value against economic collapse will always exist. This is where the threats of Y2K, extended markets and excessive debt are pertinent; any and all of them are looking for a time and place to happen.

bmacd (01/04/99; 20:56:12MDT - Msg ID:1640)
USAGOLD
Glad you brought up your last post. I was kind of wondering where the old problems went to. Seems that the market assumed all was well.....NOT...in Asia, Brazil, Mexico, and I hear that Saudi Arabia is in trouble (no small wonder). It amazes me that these catastrophies seem to disappear and become forgotten so quickly. They're still out there.

USAGOLD (01/04/99; 20:28:19MDT - Msg ID:1639)
One of the four horsemen gallops back into view.......
Why did the DOW Collapse toward the end of today's session?
With all the hoopla about the euro, don't forget.......

THE ASIAN CONTAGION.................

From Reuters:

"Barry Hyman, senior equity analyst at Ehrenkrantz King Nussbaum, said investors are also worried that Brazil's new government, which met for the first time today, will fall short of the ambitious economic goals it agreed to in order to receive a $41.5 billion credit line from the International Monetary Fund and other lenders.

If the Brazilian government fails to comply meet the goals, 'that immediately brings to mind the specter of the devaluation of the Brazilian real, which is extremely negative for the markets,' Hyman said.

Gandalf the White (01/04/99; 19:52:39MDT - Msg ID:1638)
NIKKEI 255 closes Down 257 or -1.9%
Down to 13,159 ---- nearing last years low while Yen strengthens to 111 to the US$
<;-)

USAGOLD (01/04/99; 19:51:37MDT - Msg ID:1637)
Comments....
I would like to first of all thank Aragorn for posting the quotations over a span of years and disciplines -- academic, business and political. It is helpful, at least for me, to know that I am not alone in this thinking. Sometimes I forget that even my own philosophical progress results from absorbing the thoughts of many of a like mind who have walked this planet before me. The verification is good.

As for Mr. Summers, bmacd, he was widely advanced a couple months back as the follow-up for Mr. Rubin. I do not think he is the right man for the job and these latest comments justify my reticence. Most of studied opinion reject this type of discussion out of hand, but I suppose its good for public consumption (but quite possibly counter-productive especially if the right people consider it a weak argument). Rubin didn't do much better today. There's got to be a better way for the administration to deal with the euro. All this talk about it "not being a problem", "not really competitor", etc. is a bit unnerving.

I heard from one of my sources late this afternoon that the euro trading lines were sizzling today and the big traders had trouble dealing with the euro volumes. I also heard that as busy as it was, the big corporations were not in the market. They are expected to arrive on Wednesday. If that's true, look out. I don't know why Wednesday, but that's what I was told.

I think things are unravelling in the Clinton administration and the rather lame response by both Rubin and Summers might be a sign just how bad it is. This results from the lack of leadership at the top and a symptom of much deeper problems. I hate to say that but I think it's true.

bmacd (01/04/99; 19:17:35MDT - Msg ID:1636)
Lawrence Summers
It seems to me that a couple of other issues were glossed over by Mr. Summers. As Michael said, the budget is not balanced, which is true, but to make that worse, can you imagine how much worse things would have looked had the stock market not had these past couple of stellar years (lots of extra income taxes). The market tanks, and then let's see how the budget looks. Also, interest rates are going to have to go back up. Inflation is a worry, and the USD will need it to attract buyers. So what does that do to the interest on the massive debt? To pay the interest, they'll have to borrow. Then there's the massive trade deficit. I do beleive that the European countries have a trade surplus. This brings us back to debt again. The US has been able to support the massive debt, but only because it was the reserve currency, and because the world was happy to buy US assets in the market (as well as their debt). It's not the US' game alone anymore. I think Mr. Summers may have missed a lot of points, as I am now the third to attack the comments.


Aragorn III (1/4/99; 10:44:27MDT - Msg ID:1635)
I should add...
What makes these quotes remarkable is the honesty and complete lack of hyperbole in their construction.

Aragorn III (1/4/99; 10:39:23MDT - Msg ID:1634)
Some 'shepherds' are more helpful than others...some important quotes from notables--
ALEXANDER HAMILTON
"To emit an unfunded paper as the sign of value ought not to continue a
formal part of the Constitution, nor even hereafter to be employed;
being, in its nature, pregnant with abuses, and liable to be made the
engine of imposition and fraud; holding out temptations equally
pernicious to the integrity of government and to the morals of the
people."

ROTHSCHILDS BROS. OF LONDON
"Those few who can understand the system (check book money and credit)
will either be so interested in its profits, or so dependent on it
favors, that there will be little opposition from that class, while on
the other hand, the great body of people mentally incapable of
comprehending the tremendous advantage that capital derives from the
system, will bear it burdens without complaint, and perhaps without even
suspecting that the system is inimical to their interests."

ROBERT H. HEMPHILL (Credit Manager of Federal Reserve Bank, Atlanta, Georgia)
"If all the bank loans were paid, no one could have a bank deposit, and
there would not be a dollar of coin or currency in circulation.
This is a staggering thought. We are completely dependent, on the
Commercial Banks. Someone has to borrow every dollar, we have in
circulation, cash or credit. If the Banks create ample synthetic money,
we are prosperous; if not, we starve. We are, absolutely, without a
permanent money system. When one gets a complete grasp of the picture,
the tragic absurdity, of our hopeless position, is almost incredible,
but there it is. It is the most, important subject, intelligent persons
can investigate and reflect upon. It is so important that our present
civilization may collapse, unless it becomes widely understood, and the
defects remedied very soon."

DARRYL R. FRANCIS (former President of the Federal Reserve Bank of St. Louis)
"Since the direct method of printing money to finance government
expenditures is prohibited in the United states, the monetization of
government deficits has occurred indirectly . . . government debt is
ultimately being financed by the creation of new money . . . I doubt
that monetization of debt has a conscious act . . . I can find no
benefits accuring to the whole of society from debt monetization, but
the risks are very serious and can be expressed in one word, inflation"
"In the case of debt monetization the emmediate and even the short run
impact is neither an increase in interest rates, and yet real resources
are still being transferred from private to government use."

RUSSELL L.MUNK (former Assistant General Counsel, Department of the Treasury)
"Federal Reserve Notes are not dollars."

PRESIDENT JOHN ADAMS 
"All the perplexities, confusions and distresses in America arise not
from defects in the constitution or confederation, not from want of
honor or virtue, as much as from downright ignorance of the nature of
coin, credit and circulation."

JOHN MAYNARD KEYNES (chief architect of the current fiat-paper money system)
"By a continuing process of inflation, governments can confiscate,
secretly and unobserved, an important part of the wealth of their
citizens"

DENNIS KARNOFSKY (Chief economic adviser St. Louis Federal Reserve Bank)
"....what is a dollar its just something artificial we throw out
there....what youre doing is you're fooling people...."

BOB PRECHTER
"I cannot morally blame all Americans for allowing, for instance, the
birth of the Federal Reserve System (a private cartel with full control
over the issuance of national debt) and the money destruction that has
followed. They are simply ignorant about it and don't know what happened
or what is happening. They think that prices go up rather than that
dollars go down. Unsound money imposes an  environment of immorality,
which in turn makes people behave in different ways for reasons they
know not. Sometimes you can blame immorality for the imposition of bad
structures (bad people do it with full knowledge of what they are
doing), but sometimes it is simply stupidity. People revere democracy,
but democracy ends in plunder by the majority. Are people immoral for
supporting democracy? I think rather that they lack a deep understanding
of its essence. At a very deep level, I would say that the reason such
structures are created is due to both a lack of knowledge and a false
morality, which in turn is due to a lack of knowledge."

ALAN GREENSPAN (Chairman of the Federal Reserve Board)
"The abandonment of the gold standard made it possible for the welfare
statists to use the banking system as a means to an unlimited expansion
of credit.... In the absence of the gold standard, there is no way to
protect savings from confiscation through inflation. There is no safe
store of value.... Deficit spending is simply a scheme for the "hidden"
confiscation of wealth.... [Gold] stands as a protector of property
rights." 
"This is the shabby secret of the welfare statists' tirades against
gold. Deficit spending is simply a scheme for the "hidden" confiscation
of wealth. Gold stands in the way of this insidious process. It stands
as a protector of property rights. If one grasps this, one has no
difficulty in understanding the statists' antagonism toward the gold
standard."

Aragorn III (1/4/99; 09:52:40MDT - Msg ID:1633)
To USAGOLD...
Excellent! You are precisely correct.
It is troubling when you realize that so few people are inclined to give any thought to such a key element in their well-being...the state of their currency and related national policies. Without independent thought or investigation, the mantra of Washington pundits is all too easily taken at face value--yet when the test of time proves differently there is too seldom even a modicum of accountability brought to bear against them for their misdirections. Most tragic is the effect of these statements upon those few who timidly stray from the herd and act in response for their trepidation over the state of affairs--the 'reassuring words' of these shepherds undo the resolve of the most timid of those few enlightened to do what is surely in their individual best interest.

In these early days, the air will be filled with voices of these similar shepherds. The shepherd will certainly act in the best interest of the shepherd, generally in the best interest of the flock; but only through self-determination and independence can any one of the flock ever hope to rise and walk as a man in pursuit of individual needs and ambitions.

jinx44 (1/4/99; 09:26:49MDT - Msg ID:1632)
Font patch for euro symbol
Be the first nerd on the block (actually, the 2nd- I'm the first!)


http://www.microsoft.com/windows95/downloads/contents/wurecommended/S_WUFeatured/w95EuroPatch/w95europatchread.asp

USAGOLD (1/4/99; 09:02:44MDT - Msg ID:1631)
Aragorn III...
"The U.S. economy, Summers said, "is strongly positioned to
be resilient come what may" because the U.S. now has a budget surplus, inflation expectations are low and banks are well-capitalized."

I might add to your analysis one fundamental:

THE BUDGET IS NOT BALANCED! The last time I checked the government added nearly $70 billion to the national debt.
THE BANKS ARE NOT WELL-CAPITALIZED! In fact they are on the brink of derivative induced apoplexy which will drain their capital in a blink. INFLATION EXPECTATIONS ARE NOT LOW! To the contrary, Alan Greenspan is in a constant state of agitation about the threat of inflation.

How can we, under the circumstances, assume as Mr. Summers has the U.S. economy is "resilient"....This is not the read of a whole host of economists outside the government including Lester Thurow.

This is typical of the Beltway -- both the Clinton administration and Congress. When the facts don't fit what you want the people to believe, warp the facts to create a new reality. The Clinton administration knows it can't get away with the deficits anymore because of the euro and they know that we know that they can't keep running the red ink. So what better way to deal with these nettlesome problem than to pretend that it doesn't exist. Europe certainly won't buy it; and it won't be long until the American people won't buy it either. The subtrefuge will soon be exposed to economic realities in the form of inflation and higher interest rates. I don't take this first day of the euro driven gold market as the final outcome. This is simply Day 1!

jinx44 (1/4/99; 08:58:27MDT - Msg ID:1630)
Bolus to A III
Trading in the new currency began simultaneously today in
Australia and New Zealand -- in Sydney at 5 a.m. local time and Wellington, where it was 7 a.m. Television cameras captured the first trades as government VIPs looked on.
Phil McGrath, the chief trader for spot currencies at
Westpac Banking Corp., said he encountered steady Japanese buying of euros -- possibly the Bank of Japan building up its reserves.
"If the trend continues, it would be significant," he said
Japanese institutional investors also bought euros, pushing
it to 133.39 yen, from the initial reference rate of 132.80 yen.

The euro also got a lift as a report showed U.S.
manufacturing unexpectedly dropped last month, suggesting the economy may be slowing. The National Association of Purchasing Managers index fell to 45.1 in December from 46.8 in November.
Economists surveyed by Bloomberg News projected the index to come in at 47.4. A reading below 50 suggests the economy is slowing.
"It's difficult to make an argument to buy the dollar over
the euro," said Jeremy Stretch in London, a currency strategist at NatWest Markets, who said the euro could rise to $1.23 by the end of the first quarter and $1.27 by the end of June.

The single currency is seen gaining as central banks convert
some of their foreign currency reserves into euros.
At the end of 1997, the dollar accounted for 57.1 percent of
global foreign currency reserves, while European currencies in the monetary union totaled 19.4 percent, according to the
International Monetary Fund.
"We'll see some central banks switching reserves into the
euro," said Bill Bertha, manager of foreign exchange at Mellon Bank in Pittsburgh.
The dollar remains the world's most-actively traded
currency. Last year, it represented one side of 87 percent of all transactions in the $1.5 trillion-per-day currency market, while the deutsche mark was No. 2 with about 30 percent of all trades.
***** It seems that there is the usual wait and see attitude among the players in euroland. As more time passes and there is no perceived problems, the buying of euros will accelerate to a brisk pace. Look for more negative rhetoric to come from the USTreasury as the euro outflanks the $US. Is this the beginning of the final chapter for the $US? The first chapter for gold?

Aragorn III (01/04/99; 08:03:55MDT - Msg ID:1629)
Expect a lot of this sort--talk is cheap after all!
Summers Says Euro Won't Replace Dollar as Reserve

Washington, Jan. 4 (Bloomberg) -- The single European
currency doesn't pose a threat to the U.S. dollar as the world's
reserve currency because U.S. economic fundamentals are so
strong, Treasury Deputy Secretary Lawrence Summers said.
"As far as the dollar is concerned the buck stops here,"
Summers said in an interview with CNBC. "As long as we keep our
fundamentals strong, the dollar and U.S. borrowing costs will do
just fine."

In the current decade, Summers said, financial markets are
going to absorb about $2 trillion less of Treasury debt. "That's
a lot of the reason why our economy is so strong and robust." As
long as that's the case, "there'll be demand for dollars."

It is a priority of the Clinton administration to "keep our
currency attractive to foreign holders," Summers said. "I don't
see a reason why the euro should be a threat as long as we can
keep our own emphasis on our fundamentals."

The euro rose to $1.1790, up from the initial reference rate
of $1.16675 set by European Union finance ministers Thursday. At
its opening in Asian trading, the euro was at $1.1735. The euro
was boosted by speculation the U.S. economy will slow, requiring
another interest rate cut by the Federal Reserve, while the
European Central Bank leaves rates on hold.

Flexible Economies

Summers said it's important that European countries "reload
the fiscal cannon" by working to make their economies more
"flexible and dynamic" and to bring down unemployment rates.

Summers said he doesn't expect the European central bank to
use the euro as a trade weapon, undercutting U.S. exports.
European officials know the importance of keeping currencies
stable and that devaluation isn't the way to bolster economic
growth, he said.

The U.S. economy, Summers said, "is strongly positioned to
be resilient come what may" because the U.S. now has a budget
surplus, inflation expectations are low and banks are well-
capitalized.

Meantime, Summers said the U.S. can't be an "oasis of
prosperity" -- echoing the words of Federal Reserve Chairman
Alan Greenspan -- and he urged Japan to implement its banking
reforms and for Brazil to hold to its promise of reform.
--------------------------------------------
"is strongly positioned to be resilient come what may"...the phrase "come what may" was the most revealing insight into the true but largely unspoken mind of the Deputy Secretary.

Further disection...it is all statements like this that most agitate me; consider his words--
"It is a priority of the Clinton administration to "keep our
currency attractive to foreign holders," Summers said. "I don't
see a reason why the euro should be a threat as long as we can
keep our own emphasis on our fundamentals.""

A Nation's "currency management", when necessary, should keep in mind its 'attractiveness' to that Nation's CITIZENS in priority over 'foreign holders'. (Yet with gold-money, these become the same.) Contrast that sentiment with his following remark--"keep our own emphasis on our fundamentals". These 'fundamentals' are not much more than the Americans' will to spend (and prudence in doing so, I might add) as fast as their money is earned because a dollar at rest is a dollar soon lost in purchasing power. When the spending stops in a system of fiat currency, no amount of effort at shortcuts can regain what is lost--truly demonstrating the old observation about 'pushing on a string'. Once broken, the economic evolution must start afresh--it starts with a supply of permanent and reliable money...gold. You will see Russia recover only when they allow themselves to discover this principle. In America, before it is too late, the 'devolution' should be officially effected to the point to which sound money had been abandoned.

SteveH (01/04/99; 05:44:33MDT - Msg ID:1628)
Feb gold now $289.40...
Was listening to BBC during the night, probably should have turned it off but did manage to hear that the Euro faired well with low volume in overnight trading. Comments heard were Euro was up in the 1.18s/1 US/Euro with one pundit expecting it to reach 1.20/1 US/Euro soon. Another said 1.10/1 would be better for exports. They all said that large currency dealer were cautious, taking a wait-and-see attitude.

Gold is back to its old tricks -- holding pattern at $289.

el St.One (01/04/99; 01:12:31MDT - Msg ID:1627)
***Guestimate for Fri. Gold close
$296.10 I am purposely posting late. Did not want to take advantage MK geneeerous offer with my scientific formula.
The reason for 296.10. I asked my dog what she thought, she circled three times, lay down and scratched twice, a car driving by honked twice, then my wife sneezed twice, and I threw in the price of the new Euro. = Equation

Gold price when Nixon stopped sales X 3 X 2 X 2 X 1.1747
__________________________________________
divided by 2 sneezes

Wishing everyone a Healthy and prosperous 1999........

Maybe we can eliminate the 2 sneezes by 1/1/2000.....el

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