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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 5/5/1999
All times are U.S. Mountain Time

View Yesterday's Discussion.

Goldfly (5/5/99; 23:44:49MDT - Msg ID:5636)
Aristotle-13:04
http://www.usagold.com/cpmforum/archives/22199810/day2.html
You liked that link? Try this one.... Now you'll earn your keep!

But before that... Where have I been? Busy. A wife and four kids will keep a man occupied……. And a house….. and a job…….etc, etc.

But I've been lurking. I noticed a couple of weeks ago, you had a line in one of your posts-something like "Adopting the gold standard was one of the great unsung achievements of mankind." Now I'll point you to the link above. [I'LL WAIT NOW WHILE YOU GO READ POST 727] I had pretty much settled the issue by simply accepting the situation as it is. Aragorn and FOA both had good responses and FOA had some nuggets to chew on in some subsequent posts (even though he didn't then address it directly.) But I never was fully satisfied and that line in your post got me thinking again.

So now, with some new knights at the table, I'll posit the question again: What event(s) in human history brought gold forth as the measure of worth?

I'm not asking to be convinced of gold as the standard for money. I want to know- Whose idea was it? Or how about--- What is the earliest record of gold settling a business transaction?

ANOTHER, are you listening in? As someone accustomed to taking the long view and perhaps not subjected to the cacophony of life in the west, with it's deleterious effects on knowledge and wisdom, could you shed some light on the origins of gold as the denominator of value? Or is this lost in the dawn of time?

Like I said in post 727, perhaps this question cannot be answered. Maybe I'm chasing a shadow. But it nags at me.

Got answers?

GF


Aristotle (5/5/99; 22:49:43MDT - Msg ID:5635)
"Flight to junk?" "JUNK??!" I love it!! Some trader having a bad betting day...Whaaaaah!
Goldfly, thanks for the great music link. I'll definately have it playing while I open my precious package upon its arrival. The anticipation of the arrival of the Castle's delivery men is always the sweetest form of agony.

Tomcat, the fruits of my latest dabblings into the noble art of alchemy are a tidy assortment of Belgian gold francs and British Sovereigns. I'm jazzed up over this particular round of payday conversions (er, I mean alchemy) because I'm adding a new variety to the Aristotle Treasury (the Belgians.) MK told me they looked pretty sharp in his opinion, so I said "Ship 'em!" to a small pile, sight unseen. (Psssst...I'll let you know when they arrive whether MK is a good judge of aesthetics.) Judging from their Gold content, I imagine they will stack perfectly with my Swissies, and my French Napoleons, Angels, and Roosters. I find that I enjoy this form of idle banter over the trivial matters of Gold coins every so often. In addition to being the foundation of serious economic elements, I enjoy Gold for the lighter side as well. And while Gold priced at $285 per ounce is more 'fun' than any genuine goldheart could have ever imagined, the coming days will definitely reveal Gold at the center of the serious economic business that it ever has been. When I try my hand at Fortune Telling, a dispassionate, clinical assessment of the future reveals more reason for concern than optimism regarding the Dollar. I believe I'll stick to Alchemy.

If you don't mind me asking, what forms did you stir up with your alchemy project? Do you have a favorite?

Gold. We're ALL getting us some. ---Aristotle

ET (5/5/99; 22:24:09MDT - Msg ID:5634)
Quack - USAGOLD

'A promise to pay was met with another promise to pay. A stock is not even a promise to pay. A stock
carries the full faith and credit of.......no one! Yet wave after wave of currency has been printed and
pumped into the stock market by investors who have come to believe it is a promise to pay. A market
which was invented essentially to distribute risk has become a proxy for money.'

Hey Quack - now this is excellent insight. This last sentence sums the situation up quite nicely. Mozel's post is right on the money. Where is the new collateral? I was in Minneapolis this morning listening to CNBC and they were actually talking about the extremely disappointing earnings forecast from Disney. Pretty much cut in half from 3 months ago. The monetary ship seems to be taking on water. Markets today seemed to confirm a loss of confidence.

ET


Goldfly (5/5/99; 21:16:02MDT - Msg ID:5633)
SteveH- *I* knew you were kidding......
http://www.sanford-and-son.com/sounds/sanfordtheme1.wav

Crier!! ClintH!! Click the link!

Half a meg download. Save it to your disk and run it in a loop!

GF


SteveH (5/5/99; 21:05:34MDT - Msg ID:5632)
Mozel
A person to respect. But boy did I in fun start a rumor:

Date: Wed May 05 1999 22:10
crazytimes (@ Earl) ID#344326:
Copyright © 1999 crazytimes/Kitco Inc. All rights reserved
Thanks for pointing out Mozel's post. His ideas ( in my mind ) resonate with those of ANOTHER. It is interesting that someone on the USA Gold Forum was wondering if Mozel was ANOTHER. I don't believe that is the case at all but there are similarities. Mozel ( IMHO ) is the most sparkling and precious gem found on Kitco. His posts are brilliant and get to a profound level. There are many times I don't understand all of what he is saying but he is leading me to a place. He is also one of Kitco's most "human" of posters. I know that man ( or woman ) cries for the loss of freedom and liberty that is occuring in the USA. If there ever was a Kitco poster I wanted to meet in person and shake hands with, it is Mozel.


TownCrier (5/5/99; 20:36:28MDT - Msg ID:5631)
Hear ye! Hear ye! All good Knights and Ladies: I direct your attention to The Gilded Opinion
http://www.usagold.com/THEGILDEDOPINION.html
"Bankers, (real ones) are always aware of the potential for a meltdown and the economic game doesn't go on without their involvement. Commerce requires that all transactions have to be paid for, which means financed. A good look at a list of bullion banks is also revealing since many of the "old" names in banking are also the "old" names in bullion dealing. However, you don't see too many "old" names on the share registers of high flying internet stocks. The "old" bankers have seen it all before and their guidelines go back several hundred years."

"Patriarchs may come and go but established banking guidelines do not change. That's the advantage of experience and an understanding of the cyclical nature of commerce and economics. "To hell with the new age theory, give me the gold any day", may well be their motto."

"The fallback position of European Central Banking and of the old established European family banking groups has always been gold bullion."

Read this entire commentary, "The Winds of Change: An Investment Strategy Beyond the Year 2000", reproduced at USAGOLD's Gilded Opinon by permission of AurumBank Incorporated. Clink the link, select "The Winds of Change" from the index, and return to the Round Table with your opinions that we all value.

SteveH (5/5/99; 20:07:19MDT - Msg ID:5630)
Peter, are you watching? Gandalf?
Gold just (june that is) hit 289.00 in overnight trading.

All systems check.

rockets, check.
instruments, check.
helmets,check.

All systems go.

10, 9, 8, 7, ....

USAGOLD (5/5/99; 19:22:30MDT - Msg ID:5629)
Quack!
Question: When stocks continue to rise and earnings continue to plummet or prove to be non-existent, does that stock begin to take on less the characteristics of an equity and more the characteristics of a currency? To think of this in another way, if stocks have become a proxy for currency in the minds of the masses, what happens when stocks decide to quack like a duck?

Years ago I acquired a number of Revolutionary War debt instruments which had been redeemed by the federal government not in specie, but by issuing another note. A hole was punched in the old note and it was retired. Very convenient for the government but no doubt disturbing to the note holder who was left without a choice in the matter and was conscripted as a creditor of the government.

A promise to pay was met with another promise to pay. A stock is not even a promise to pay. A stock carries the full faith and credit of.......no one! Yet wave after wave of currency has been printed and pumped into the stock market by investors who have come to believe it is a promise to pay. A market which was invented essentially to distribute risk has become a proxy for money. When the tulips drop from $10,000 to 50¢, the public will discover that there is no deposit insurance, no redemption recourse, no gold backing, only a $10,000 tulip worth 50¢. Stocks have become a paper promise without a safety net of any description in this best of all possible worlds.

Quack.

Christine (5/5/99; 16:54:03MDT - Msg ID:5628)
Junk is beautiful
Go junk!

CoBra(too) (5/5/99; 16:53:28MDT - Msg ID:5627)
XAU, Gold, G-Mines, - A move in the right direction....?
Probably, yes for chartists, Elliot wave and Fibonacci et al apostles, a decisive move of POG was the missing link to catch up with XAU (sorry no confirmation yet, but right direction) on respective trends. I would long (hence & be long)to be a believer, but still feel the forces of the paper mongers having the upper hand (though, "white hand" seemingly is slowly starting to surrender to reality?), but we're not there yet.
BTW, Butler expressed my thoughts (last post} more implicitly - gold forwards or leases are effectively shorts!
Goldilocks markets driving Goldilocks economies? What's left? Go Gold Stocks vs. Gold -MAN" S(-ucks)achs - .....




TownCrier (5/5/99; 16:27:43MDT - Msg ID:5626)
End-of-day tea leaves: Most IMM currencies end higher, euro up sharply
http://biz.yahoo.com/rf/990505/ba1.html
Currency strategist says today they have switched from bullish on the dollar.

(Clint H: I can almost sense the theme to Sanford & Son spilling out of my ears)

Clint H (5/5/99; 16:11:21MDT - Msg ID:5625)
TownCrier Msg 5622

TC, interesting. Goldmeisters have become junk dealers. Are we looking for a last laugh here?

Tomcat (5/5/99; 15:39:07MDT - Msg ID:5624)
Aristotle

Sir Aristotle, I have heeded your wisdom and just turned paper into gold. Twas not difficult at all. The Chair of Royal Alchemist is surely honored with your dignity and integrity.

TownCrier (5/5/99; 15:12:22MDT - Msg ID:5623)
Dollar Drops Against Euro as Investors Seen Taking Money Outside of U.S.
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_fgcgi_content99.ht&s2=blk&bt=blk&s=f8efbe2ae6f64b561ffcc1dec4825838
Explains a mechanism whereby the dollar will fall as stocks fall.

TownCrier (5/5/99; 14:58:58MDT - Msg ID:5622)
Bridge NY Precious Metals Review [Don't let the ending make you mad.]
By Melanie Lovatt, Bridge News
New York--May 5--June gold settled up $1.60 at $288.50 per ounce after
reaching $289.20 per ounce today, its highest level in almost two
months. "A little bit of inflation is creeping into gold and silver. A bit of
the psychology that's weighing on the bond market is benefiting gold and
silver," said Bill O'Neill, analyst at Merrill Lynch. He noted that gold and
silver were being helped by continuing strength in crude oil prices. With a
large number of speculative shorts still out there "people are watching gold,"
he said.
Traders noted that some players are fearing a short covering rally and some
suggested that some of today's climb was options-related. The climb today in
the Philex XAU and Amex gold bugs index (HUI) also helped boost prices of the
underlying commodity said traders.

While some called this a "flight to quality" in reaction to the huge jumps in
"paper" which pushed the Dow Jones industrial average to record highs Wednesday, others
were dismissive.
One trader called the incursion of money into gold, which was accompanied by
some yen buying, a "flight to junk."
Traders noted that gold continues to have trouble rallying above the $290
resistance level.

--Jun gold (GCM9) at $288.5, up $1.6; RANGE: $289.2-286.5

Reprinted at USAGOLD with permission. For details please go to:
http://www.crbindex.com/reviews/index.htm
No further reproduction without written permission

TownCrier (5/5/99; 14:25:45MDT - Msg ID:5621)
The commodity trap
http://news.bbc.co.uk/hi/english/business/the_economy/newsid_334000/334432.stm
Someone at the BBC wrote this one specifically for our Round Table...glimpses at the 5th Horseman.


TownCrier (5/5/99; 14:21:12MDT - Msg ID:5620)
Russia hopeful on debt rescheduling
http://news.bbc.co.uk/hi/english/business/the_economy/newsid_336000/336239.stm
Things sure look bleak when your money goes bad--the wheels of your economy have no grease and no longer may turn.


TownCrier (5/5/99; 14:05:49MDT - Msg ID:5619)
Dollar at risk from puncture in U.S. asset bubble
http://biz.yahoo.com/rf/990505/5c.html
Another must read. This article is more candid than most about the position of the dollar.


TownCrier (5/5/99; 14:00:18MDT - Msg ID:5618)
U.S. Growth cannot stay above trend--Chicago Fed
http://biz.yahoo.com/rf/990505/1k.html
Blistering pace of recent quarter is unsustainable.

fox (5/5/99; 13:53:14MDT - Msg ID:5617)
(No Subject)
Fox
forgot the link http://news.24.com/English/Business/Companies/ENG_46143_352283_SEO.asp

fox (5/5/99; 13:51:07MDT - Msg ID:5616)
NEWS from South Africa
FOX
The struggle for the richest goldmine in SA is over.
The richest goldmine, which is Driefontein (DRFNY), is now a part of Gold Fields (GLFD), not Gold fields of south Africa (GFSA). Gold Fields will be noted on the Nasdacq in stead of Driefontein . The exchanging rate will be 155 Driefontein for 100 Gold Fields;
Look at today's quote for DRIEFONTEIN !!

TownCrier (5/5/99; 13:44:41MDT - Msg ID:5615)
Y2K Glitch Will Burst Internet Bubble
http://www.techweb.com/wire/story/TWB19990504S0007
This one is a must read...ripe with notable quotes!!




TownCrier (5/5/99; 13:21:23MDT - Msg ID:5614)
FWN Closing N.Y. Metals: Firmer; Gold Edges Above Recent High
New York-May 5-FWN--The precious metals complex ended
the day on a firmer note, with the "path of least
resistance" in gold and silver appearing on the upside,
sources here said.
June gold added $1.60 to $288.50, while July silver
firmed 7.2 cents to $5.3970. In both metals, trade remained
slow due to the Golden Week holidays in Japan, which has
left markets there closed the first three days of the
week.
"But today, anyway, it appeared the path of least
resistance was to the upside," said Dave Rinehimer, head of
futures research at Salomon Smith Barney.
He pointed out that June gold managed to take out last
week's $289 high, although not by much, topping out today at
$289.20.
"We're probing that resistance level," said Rinehimer.
"I think the idea was that if we moved above the highs, we
might be able to hit some stops on the upside. But there
didn't appear to be that much momentum after we took out
that (recent $289) high."
He noted that there did not appear to be any fresh
fundamental factors, although the market likely still has a
large net short speculative position--leaving room for
potential short covering. The market will get more
clarification on this Friday, when the next Commitment of
Traders report is due out.
Resistance in June gold was put at $290, while support
was pegged at $284.

"I think silver is basically following gold," said
Rinehimer about today's activity. "The volume is a little
bit lighter in the silver than in the gold.
"We saw a correction earlier in the week, and with the
gold turning up, there is a little more buying interest
coming into silver. But the volume is still pretty
light."
Rinehimer noted that gold and silver might have drawn
some support from worries about inflation, which has hurt
bonds lately.
"Gold and silver are pretty much technically driven at
this juncture. But with the recent breakdown in bonds and
stronger-than-expected economic news, the metals might be
reflecting some modest uptick in inflationary concerns,
although I don't think it's that meaningful."

(c) Copyright 1999 FWN Reprinted at USAGOLD with permission. For details please go to:
http://www.futuresource.com/internet.shtml
No further reproduction without written permission from FWN.



TownCrier (5/5/99; 13:14:36MDT - Msg ID:5613)
Oil Production Cuts Boost Prices
http://biz.yahoo.com/apf/990505/oil_price__1.html
Supply and demand, and remarkable cooperation for a common cause--within and outside of OPEC.



Aristotle (5/5/99; 13:04:30MDT - Msg ID:5612)
Goldfly and the Hall of Fame
Thanks for the Blast for the Past. It shows how fun it can be to wander around the Archives once in awhile, and dangerous, too! I always get drawn further in by viewing the previous day or next day, etc. It is my opinion that the Archives in their entirety could serve double duty as a Hall of Fame also.

Although having said that, I can see the benefit to people new to our castle in providing a well-lit reading room of Golden classics.

Where have you been lately, Goldfly? Busy buying Gold with both hands, I trust? ---Aristotle



Aristotle (5/5/99; 12:42:19MDT - Msg ID:5611)
An aggressive looking chart!
http://www.kitco.com/gold.graph.html
Take a look at that pointy, angry-looking black line that represents today's spot price. Gold has definately taken on the look of a lean, mean, fighting machine.

That reminds me of a discussion I had the other day with a friend. He was remarking that Gold certainly looked poised to go higher, but being a solid and inert asset such as it is, it would be a long hard road for it to rise in price. But he conceded that Gold was the only place to be given the overvaluation of the stock market--it could fall a lot easier than it could rise from these levels.

I agreed with his thoughts about the stock market, but asked him to reconsider his conclusion about the price of Gold. I reminded him that the price of Gold was not only based on the overall demand for this asset of solid value, but that it also included the 'dollar component' in the price. While Gold has itself as a guarantee of value, the dollar is only what people choose to believe it to be. It is on shakier ground than even the stock market. So I asked him to do the hypothetical math for the price of Gold, using solid value of Gold (in the numerator) and dividing by the 'value' of the dollar (in the denominator). Assuming today's dollar has a value of 'One', any decline results in a higher price for Gold. And if it fell toward zero, well...any value divided by zero is infinity.

Where my friend easily saw that Gold would moderately rise on demand alone, he now recognized that a vicious circle of price reinforcemant was now in place. A falling dollar would cause more demand for Gold, and each element would further boost Gold's 'price' while further diminishing the artificial confidence (and value) people place in the dollar.

I'm happy to say that as a result, he exercised his own skills as an alchemist and converted a great deal of paper into Gold. Methinks the castle's treasury-room below this Round Table must be getting quite bare. Hey MK, can you see the floor in places?

Gold. Get you some. ---Aristotle



Gandalf the White (5/5/99; 11:08:43MDT - Msg ID:5610)
Aristotle's observations
Yes, Ari --- Steve may well be Mozel --- up and posting deep thoughts and quotes at ALL times of the day !

I agree with your Royal Alchemists thought too. Tis NOW very easy to make the green paper (w/portraits of Dead Presidents) into Gold ! Today there is evidence of this neat trick, is going to become more difficult, as the ONLY thing going in the correct direction (up) is GOLD. The picture that Goldhearts have been hoping for, is truly starting to fully appear, in accordance with the prognostication of our friends and mentors FOA and ANOTHER. My challange is to equal the Scroouge McDuck stash before the first limit up day on the COMEX.
<;-)


Gandalf the White (5/5/99; 10:50:08MDT - Msg ID:5609)
The "Best" of (humble) Goldfly
Well Brudder Goldfly, I can not whole heartedly agree that everything that you have posted should reach the "Hall of Record", (take of instances the skit on the Euro getting stronger in Oil than the US$ --- The reviews of that one were -- well I really do not know, BECAUSE no one said a single word ! BUT, sometimes silence is a bad review !
Ok, I will second the nomination of one of your best --posting #1436 on 12/19/98 !!! Twas FUNtastic!!
<;-)

Aristotle (5/5/99; 10:48:44MDT - Msg ID:5608)
Tomcat and Alchemy
Well, my friend, your kindest of words last evening have thoroughly embarrassed me, but I will gladly accept the official role you suggested as Royal Alchemist. For it was only yesterday that I again demonstrated the remarkable ability to turn paper into Gold! It is so easy, we should ALL be Royal Alchemists.

Hey Gandalf, I think the proper question should be, "Is it possible that SteveH is really mozel?"

Paper. Get you some, then turn it into Gold. ---Aristotle


TownCrier (5/5/99; 10:34:45MDT - Msg ID:5607)
IMM currencies mixed early, euro edges higher
http://biz.yahoo.com/rf/990505/u7.html
The amazing world or currency traders...swapping dollars to make a buck.


Goldfly (5/5/99; 10:29:31MDT - Msg ID:5606)
Here's To The "Hall of Record"
http://www.usagold.com/cpmforum/archives/19199812/day2.html

I stand in favor of such an archive.

I also nominate everything I ever posted that has at least two paragraphs in it! (Something is bound to stick!)

Perhaps my post at the above link is my best.

GF



Gandalf the White (5/5/99; 10:28:02MDT - Msg ID:5605)
Steve's Question
NO, Steve, Mozel is NOT ANOTHER ! The two are great in depth of thought and bring ideas to the surface for discussion, but totally separate in pattern of thinking and method of explaination. Would love to see the two of them debate though.
<;-)


TownCrier (5/5/99; 9:43:27MDT - Msg ID:5604)
There is no need to lose sleep over the slide in Europe's new single currency
http://www.economist.com/editorial/freeforall/current/index_ld5397.html
Perspective from The Economist.

TownCrier (5/5/99; 9:33:33MDT - Msg ID:5603)
A snapshot of various markets--Gold is the only winner at the moment
http://www.usatoday.com/money/charts.htm
Was there ever any doubt?

USAGOLD (5/5/99; 8:43:50MDT - Msg ID:5602)
Today's Gold Market Report: Gold in Stubborn Mind Set
MARKET UPDATE (5/5/99): Gold showed no change from yesterday in early New
York trading after an equally stubborn performance in London. Gold these days remains
disinterested in pleasing either the longs or the shorts. It clings to a narrow range with
strong physical demand cropping up whenever it drops and bullion bank/hedge fund selling
whenever it rises. The most interesting gold news to surface over the past 24 hours comes
out of Toronto where Barrick Gold Corp. chairman Peter Munk blasted central banks and
hedge funds for undermining the value of gold. According to a Reuters report yesterday,
Munk charged that "hedge funds 'out to make a buck' had exaggerated rumors and a
general lack of information in the gold industry to profit from the downward spiral in
bullion prices." Munk joins Gold Fields chairman Chris Thompson in publicly charging a
concerted effort in holding down the gold price. Thompson earlier this month blamed Wall
Street bullion traders for spreading false rumors about Gold Field's hedge book. Interest
rate fears continue to plague the bond market today -- a worry that could spill over to
stocks. Crude oil is down slightly at $18.60 (June NYM). Gold is rallying a bit as we go to
fetch this over.

Have a good day, my fellow goldmeisters.

PH in LA (5/5/99; 8:34:07MDT - Msg ID:5601)
More Smoke and Mirrors!

Just saw a noteworthy item on the morning news. "First Lady Hillary R. Clinton unveiled the design for the new US Dollar coin, blah , blah...the new coin will be GOLD COLORED and will bear the face of ... replacing the Susan B. Anthony... etc."

Is there a reason why they want it to look like gold?

SteveH (5/5/99; 5:31:29MDT - Msg ID:5600)
Mozel again...
Are we sure he isn't another?

Date: Wed May 05 1999 03:08
mozel (@Fiat @Let It Be Done @The Emperor Commands @IMF @Gold Loans) ID#153110:
Copyright © 1999 mozel/Kitco Inc. All rights reserved
One day the Emperor Nixon refused to pay in gold and commanded that there be a fiat international monetary system. The World Bank and IMF were created. Now, in Europe gold is monetary again. Now, in Europe the limits of the Emperor's legions are being revealed. Soon, the Emperor's fiat international monetary system will be no more though it may survive in name. The day of interntational monetary fiat is drawing to a close. What happens next ?

In the past every $US of trade surplus which was converted to gold reduced the liquidity of the international monetary system. Yet, despite all the allure of $US bonds and interest and stock price increases and the penalites to holding gold built into the Articles of the IMF, nations have persisted in converting $US to gold. They have even bought gold forward. Gold Loans were a device to reverse this, a device to make sterile gold earn revenue. A gold loan increased $US liquidity just as a gold purchase reduced it. Gold loans to miners were a subsidy accomplishing two goals, at least. I think also gold loans were a device to move gold out of the physical control of the United States. To get European and English gold out of USG control in New Yawk and Denver. But, what happens now if the lenders stop lending ? Liquidity crunch. The lenders call the tune. Who are the lenders ? Well, who has gold to lend ? The Europeans and English, the BIS for the Saudi and Kuwaiti, and perhaps USG. By terminating the lending on a schedule, some of these lenders can effectively lay claim to every ounce of current production. And the price must rise. I have heard a rumor that when gold goes over $380, it will be time to head for the proverbial hills. I can't vouch for the particular number, but there is a number for POG above which there are not enough liquid $US to meet obligations. Particularly, leveraged obligations, the sort of obligations tied to a lot of gold loans. Bankruptcies and defaults create black holes in the universe of liquidity. Credit caught in them never comes out. The three "marketeers" got the international monetary system past the liquidity crisis caused by Asian black holes. And here approacheth another. It was interesting reading Gramlich's comments. If people only knew the trash quality of some of the paper which today collateralizes the fiat monetary system, they would head for the hills now. I have already posted about the scam of not returning the original loan papers which under the Uniform Commercial Code of thieves allows the banker to continue to collateralize on a paid off loan. How much of the international monetary system is collateralized by the US stock market ? Depository Trust Corporation. The day draweth nigh when there is nothing more to collateralize. And also the day when the collateral on the books has not its book value in the market. The Japanese problem and the American problem are perhaps not so different. Bubble A and Bubble B. I think I could show that, assuming usury on the loans, a gradual, irreversible deterioration of collateral quality is an inevitable consequence of a debt paper international monetary system. The embedded rate of usury determines the rate of deterioration.

LTCM showed the vulnerability. Now, the Emperor commandeth hedging. But, the problem of diminishing liquity with nothing left to collateralize to create new liquidity is the deeper problem for which there is no hedge. The number of $US taken out of the international monetary system to buy gold does not seem like so many. But, they are leveraged $US and that is the true measure of the drain on liquidity.

People mistakenly think based on wrong or insufficient understanding that the United States Government just prints money. But, it doesn't. Money is borrowed into existence. Land, improvements, and cars and other tangibles in the country and many intangibles are collateral for the currency. Foreclosure and seizure are the tools for recovery of collateral that are the foundation for full faith and credit in the currency and other obligations of the United States. Foreclosure by the banks for loans and by bondholders for bonds, and seizure by the IRS for tax debt. Accummulation by the usurious banks and insurance companies has been quietly proceeding for years as gagnrad pointed out. Vultures picking over and revealing the rot in the collateral of the credit dead. The S&L crisis was a mere foretaste, confined largely to a few states. A general slowdown will bring systemic collapse. USG cannot afford to defend the $US with interest rates.

Will the Federal Reserve have to put up gold as collateral to borrow Euros to buy $US to defend the currency ? Will an indexed bond be devised to entice others to lend to USG ? Will others accept the offer ? Whose index ? Measured by whom with whose data ?

What happens to $US now depends, it seems to me, on the motives of parties overseas. Trade barriers would prevent a devalued $US from exporting to Europe on price advantage. Europe seems to be raising those barriers, perhaps in anticipation. Reducing US exports also undermines $US position in the IMF basket. In hindsight, Kosovo may be revealed as an occassion to alienate European public opinion against both UK and US. The game afoot is one to force concessions without destroying relations, I think. The gameball is control of the $US price of the political metal. It is not inconceivable that POG will prove an unworkable concept altogether. And a new game with new rules will be required for trade among nations. Paper which does not have gold or silver for collateral would then become worthless between nations. The world got in its monetary mess when Germany collateralized the reichmark with German land and the US followed suit by collateralzing US land and improvements under FDR, domestically, and then under Nixon, internationally. But getting your collateral is a problem when it is under the physical control of the borrower. Repo work can be dangerous. Especially across borders. The world will get out of its monetary mess only when land and improvements are not used as the collateral for international trade. To bring the international monetary system to such a state that collateralizing gold for international trade and settlement is the necessary, inevitable choice of governments is the object of the game. Then, the gameball will not be POG, but gold itself.

SteveH (5/5/99; 4:48:59MDT - Msg ID:5599)
June gold now...
$286.70.



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