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ARCHIVED DISCUSSION FROM 1/5/2006 All times are U.S. Mountain Time (Yesterday's Discussion.) Knallgold (1/5/06; 23:51:47MT - usagold.com msg#: 140149) @TC The arrgh was not your fault as you found out-when I copied this line,I changed a little bit intentionally (and noted that in my comment afterwards),in the hope of being able to make a point subcutaneously.Hmm,not sure if I failed. TownCrier (1/5/06; 23:27:14MT - usagold.com msg#: 140148) Sundeck, thanks for the continuing contributions Among the very finest.(Usually it takes a contest to wrest such a gem from your desktop.)If I ever owed you a compliment, it is now paid. Until the next time...R. Sundeck (1/5/06; 22:48:31MT - usagold.com msg#: 140147) Personal IOUs, FRNs and Gold. Nothing new...just a reminder. Supposing I met one of the knights or ladies from this round table and, after a bit of friendly banter, it was agreed that I should buy from them some item which we both valued. It might be anything across the spectrum of human values, but we both agree that, whatever it be, it has value to each of us. Therefore the exchange involves an agreement within which I undertake to deliver to you (the knight or lady) something of comparable value as agreed between us.I offer you four modes of settlement: (1) an IOU written on a scrap of paper and signed by me,(2) federal reserve notes totalling an agreed sum,(3) a digital transfer to your bank account of agreed sum,(4) pure gold of an agreed weight.Which of these modes of settlement would you be most CONFIDENT in accepting?(1) Personal IOU. Now, you don't know me from Adam.... and apart from my sparkling personality (capped by wit and an honest countenance) you have no way of knowing whether I would honour an IOU to be settled in the future. You, and most people, would consider this to be a very risky mode of settlement, but nonetheless one that may be chosen under certain circumstances. Still, nearly everyone would agree that this would be the riskiest of the four modes of settlement. One might say that your CONFIDENCE in the transaction would be low.(2) Consider settlement with FRNs. If our chance encounter and our deal was conducted in the USA in present times, then most people would be comfortable accepting FRNs as settlement. Concerns that may arise include whether the notes were counterfeit; or that they may be the profits from the sale of stolen goods or illicit drug deals. There may be other concerns as well, but few people would worry (at least in present times) about the extra THIRD-PARTY RISK implicit in such a mode of settlement: that is, the risk of default by the backer of the notes - the Federal Treasury of the USA. So trusted is this "legacy" arrangement, that I could offer you (a non-US National, say) US FRNs in many other countries (Costa Rica, Canada, Thailand, Mexico, Russia, to name several) and you may still be comfortable with the arrangement. Then, your additional concerns may include increased uncertainty about the authenticity of the notes, the inconvenience of being able to pass-on the notes in other personal transactions, or your ability to readily exchange them for local currency. Nonetheless, most people would consider this mode of settlement less risky than a simple paper IOU from me. Your CONFIDENCE would be higher than for a personal IOU, but in effect, whether you realised it or not, you would be accepting an IOU, not from unknown little-ol' me, but from the mighty Treasury of the USA. Not a difficult decision, you might think...(3) Digital transfer. In this case, if you could witness the transfer and see that the balance of your account had altered accordingly, then you may be reasonably comfortable. You may have concerns about the authenticity of the details that you are viewing on the computer screen (from cyber-shysting of various kinds), but if you could overcome this, then your CONFIDENCE would be that which you have in your bank combined with that which you have in the US monetary system. In this case you are effectively refusing my paper IOU in prefernence for the IOU of the Federal Treasury as well as whatever guarantees are provided by your bank regarding digital transactions and accounts generally. Again, not a difficult decision, you might think...(4) Gold in the hand. You would be rightly concerned that the "gold" I am giving you is pure and that the weight is correct. However, these are simple things to verify in this day and age...unlike hundreds of years ago. Upon my giving you the agreed weight, your CONFIDENCE would be that which you have in gold alone as a store of value. Perhaps there would still be concerns about theft or inadvertant loss (problems in common with FRNs or personal IOU), but there would be absolutely no second- or third-party risk associated with settlement. I could be eaten by a lion, your bank could fail, or the US Treasury could disappear into the sea and it would not affect the value of your transaction one iota............................................ Notice how I have emphasised CONFIDENCE in the above text...because it is confidence above everything else that underpins settlement; be it in the form of personal IOUs, government IOUs (FRNs), digital transfers of "nominal" FRNs, or gold itself. It is largely because of this CONFIDENCE problem (that had to be overcome) that gold became the preferred means of settlement between traders... especially for trade with foreign lands. No problem with that...easy to understand.What about the IOUs (the "currencies") of one country or another? These are inherently risky. Not only may their value be pushed and pulled by the enormous FX flows that course around the globe, but their value may also be altered arbitrarily by the custodians of the currencies involved - the national treasuries of the governments concerned. Governments always act with their own interests in mind, so when you accept an IOU from another country you knowingly or unknowingly accept all of their idiosyncrasies. If they are loose or wiley in issueing you their debt, then you bear the risks...just as you would if you were dealing with me and one of my IOUs. And if they happen to carry a very large stick and have demonstrated a willingness to use it then you can whistle for settlement...just as you would have to do with Sundeck if he packed a pair of pearl-handle six-shooters and was a crack shot.Sooo...in fact, the IOUs of a nation may well be MORE RISKY than the simple IOUs of an unknown soul that you meet in a bar somewhere...and there may come a time (if it is not already here) where lowly Sundeck's IOU is held with greater confidence than the IOUs of the Federal Treasury of the USA. Let me say that again..."There may come a time (if it is not already here) where lowly Sundeck's IOU is held with greater confidence than the IOUs of the Federal Treasury of the USA." Nearly everyone would scoff at this, but it is true. Sundeck is unencumbered by debt, his honesty can be verified from numerous referees and he does not have a punitive arsenal with which to fend off, intimidate or destroy those coming to claim upon his IOUs. Sundeck's IOUs never overstate his worth and his credit is good. Unfortunately the same may no longer be said of the USA. In truth, CONFIDENCE in the USA and its monetary system is eroding rapidly. It is being talked about more and more...not only behind the scenes, but in the mainstream media. Since most other monetary systems have been strongly coupled to the US dollar for fifty years or more, loss of confidence in the US dollar will likely infect these other "derivative" currencies. Indeed, the custodians of these other currencies may be unable to stand against the flow away from the US dollar - even if they wanted to...they may just have to go along with it. Under these circumstances it is tangible "things" (goods, sound businesses, commodities) - amongst which gold is pre-eminent - that will be sought by small and large players alike in exchange for the IOUs of all countries alike, but especially the IOUs of the USA.Nothing new under the Sun here...:-)Sundeck Goldilox (1/5/06; 22:48:17MT - usagold.com msg#: 140146) News sequence @ TC,Ain't it the truth? The Newshounds are nearly the last to know. Goldendome (1/5/06; 22:41:42MT - usagold.com msg#: 140145) More Middle Eastern intrigue Yesterday, saw the Israeli PM afflicted with a severe stroke, leaving him gravely ill. Last night and today saw about an $8 drop in the gold price and a leveling off of the dollar after a big fall. Coincidence? Probably. But with the U.S.'s hands full in Iraq, it's been rumored that Israel might be the designated Iran attacker. An attack, we are told, that would be prompted by nuclear activity -- in the headlines, and by the Euro-oil bourse, on the back page. Now with Prime Minister Sharon down and Israeli politics in a state of uncertainty, could the gold market be dropping the odds on an attack taking place? I don't know -- but it's only about 9 weeks away to the opening of that market (early March, I believe.)Some have opined that some of the gold run-up of late, may be attributed to nervousness over the Iranian issues now and in March. If an attack is less likely, I would expect continued weakness for the dollar going forward, and growing strength for the Euro as more demand is anticipated for that currency; and hopefully, steady to rising gold prices. Flatliner (1/5/06; 20:44:30MT - usagold.com msg#: 140144) @TownCrier and However… "International trade with that country will falter" – ah, yeah… That's what I wrote. Did I really mean that? Now that you've pointed it out, I'm not sure. At the time I wrote that, I was thinking about long term business decisions. In an environment where the currency is unstable, business can't plan for the future with as much confidence as they can in a stable environment. In a stable environment, you can borrow currency at a known fixed rate and spend it over time knowing that it will depreciate at some small constant rate over the life of the loan. Likewise, and probably more important, the creditor can lend currency at a rate above inflation knowing that they will make a little profit. In an unstable environment, any money that you borrow, may not have the purchasing power in a few months that you'd planned your business around thus, driving you out of business. Or, credit just dries up because no one is willing lend - long. Businesses usually need investment capital to grow, stay current and get more efficient. In a society where stability can not be found with the currency means that businesses will suffer. If business suffers, it's going to be really hard to actually manufacture something to export. Also, everyone on the outside looking in is going to think twice before investing in a business in that type of environment. The risks are just too great. Sure, they will look for things to buy, but they will not invest.So, in a Fiat system where the value of the currency is determined by the economy of that county, those in charge of printing the currency will want to think twice about how they manage it. If they print little, their currency will be strong for business attracting investment capital for long term decision making and fundamental business support. If they print a lot, they will undermine the ability for business to function in any long term fashion. It seems that when it comes to exports and imports, it might be a matter of – does anyone want what they produce? If building the hottest car on the market will improve exports, then the country will have to have a monetary policy that will attract big business investment. Then, in time, exports will happen. (maybe…)I'm glad you called me on that tidbit and I'm sure you'll call me on something that I've written here. Keep in mind that I am a student, at heart, and look forward to broadening my understanding though this change in this great forum. Oh, two more things. I'm looking forward to the day when traveling with a gold coin is the norm and the compliments that I've seen lately in this forum. It has lightened the mood a little. TownCrier (1/5/06; 20:38:47MT - usagold.com msg#: 140143) Goldi First there is the conception of a goal.Then there are stirrings in the shadows.Then there is writing on the wall.Then there are headlines.Then there are newscasts.Then you one day awake and marvel at how so much could have happened 'overnight'.R.PS. Flatliner, I liked your comments about TIME and the brew analogies that followed. Goldilox (1/5/06; 19:39:14MT - usagold.com msg#: 140142) China investment atmosphere @TC,Given how much China has invested in infrastructure, production, and resources in the last years, it's tough to tell if this release is a "continuation of a trend" or just an official announcement of something they've been doing for a while.Huge purchases in Canadian and South American resource projects, large purchases of Boeing and John Deere equipment, and the offer for UnoCal are all indicative of them wanting to put some of those excess dollars to work. They may not be ready to stop propping up the US Treasury, but they sure aren't going to put all their eggs in that one basket. TownCrier (1/5/06; 19:15:59MT - usagold.com msg#: 140141) China relaxing grip on dollar http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh62561_2006-01-05_11-23-01_pek63223_newsml BEIJING, Jan 5 (Reuters) - China's foreign exchange regulator said on Thursday it would abolish foreign exchange quota limits for outbound investment as one of its key tasks in 2006.It also said it planned to explore new ways of using China's foreign exchange reserves and broadening their investment scope. Most of the country's foreign exchange reserves, which hit $769 billion by end-September, are invested in U.S. Treasuries."We will abolish foreign exchange quota limits for outbound investment to give more support to companies investing overseas," the State Administration of Foreign Exchange said.The move will offer a boon to domestic firms as they seek to strike out onto the world stage and help the country to offset a rapid accumulation of foreign exchange reserves....also reiterated the government's goal of reducing China's balance of payments surplus, saying it aimed to promote a balanced international payments position.^---(from url)---^Take a moment and try to understand what this signifies that China is going to let its companies SPEND their earned dollars in the first place -- rather than having the People's Bank continue to ABSORB the dollars in exchange for renminbi.Secondly, try to reconcile to your own satisfaction how the other two goals can work in harmony; one being that China wants to "broaden the investment scope" of its vast dollar-dominated foreign exchange reserves, and the other being that China wants to promote a "balanced international payments position".Choosing gold (technically an import) is a NATURAL way to achieve a balancing of the books while at the same time sacrificing nothing with respect to the size and strength of their reserve position. In fact, with an eye to future performance of dollars vs. gold, with MTM gold they emerge all the stronger.The transition to freegold... slowly happening right before your eyes, folks.R. USAGOLD Daily Market Report (1/5/06; 18:04:42MT - usagold.com msg#: 140140) Page Update! http://www.usagold.com/DailyQuotes.htmlThe Daily Gold Market Report has been updated.If you are considering investments in gold we invite you to request our free introductory information packet detailing the products and services offered by USAGOLD ~ Centennial Precious Metals. We welcome your inquiry and look forward to working with you.THURSDAY Market ExcerptsJanuary 5 (from MarketWatch) -- Gold futures closed with a loss of over 1% Thursday after gaining more than $40 an ounce in the past eight sessions."Gold was overbought and the first quarter is a seasonally weak period for gold, so no surprise there's profit-taking," said Peter Grandich, editor of the Grandich Letter."But this powerful secular bull market in gold has a history of sharp but short corrections so any sustained weakness is not expected," he said.The COMEX February contract has climbed $40.30 since its close at $495.30 on Dec. 21. On Wednesday, it traded at a three-week high on an intraday basis but closed at the highest level in almost 25 years.The contract finished Thursday at $527.80, down $7.80 following a low of $524.Indeed, "gold has [been] hit with a round of profit-taking as the dollar found some legs and crude is trading soft," said Charles Nedoss, an analyst at Peak Trading Group."Keep your seat belts buckled. It's going to a wild ride as volatility remains high," Nedoss warned.---(see url for full news, 24-hr newswire, market quotes)--- silverton3 (1/5/06; 17:41:06MT - usagold.com msg#: 140139) Increase Margins Chicago Board of trade raised margins on Gold and Silver Futures.-------------The following margin changes are effective with the closing of business January 5, 2006.I. Changes to Margins on CBOT Futures From Initial/Maintenance/Hedge To Initial/Maintenance/Hedge 100 Oz. Gold $1,418/$1,050/$1,050 $1,823/$1,350/$1,350 Mini-Sized Gold $473/$350/$350 $608/$450/$450 5000 Oz Silver $1,620/$1,200/$1,200 $1,823/$1,350/$1,350 Mini-Sized Silver $324/$240/$240 $365/$270/$270 In setting margins levels, the Chicago Board of Trade Margin Review Group along with the CME Clearing House monitors current and historical price movements covering short-term, intermediate and longer-term data using statistical and parametric and non-parametric analysis. Futures maintenance margin levels are typically set to cover at least the maximum one-day price move on 95% to 99% of the days during these time periods. TownCrier (1/5/06; 17:02:09MT - usagold.com msg#: 140138) Knallgold, that's odd... Just now I was scrolling through the forum and ran across my original post... where I now see I hadn't actually misspoke. Turns out that your translated quote was out of kilter, and it was that translation that I subsequently responded to.[The 'Copy&Paste' feature of the mouse is a very quick and handy tool to avoid that sort of thing.]Regards,R. TownCrier (1/5/06; 16:42:43MT - usagold.com msg#: 140137) Fed still buying more Treasuries outright http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh69935_2006-01-05_15-46-42_n05196240_newsml Following yesterday's outright purchase (monetization) of $844 million of government debt, the Federal Reserve was at it again today. [see yesterday msg#: 140076]Today, depsite a tame fed funds market, the trading desk of the Federal Reserve bought another $448 million, upping the 'permanent' money supply in the process. This time the focus was upon TIPS across the spectrum, taking maturities from January 2007 to April 2032.In additional open market operations today the Fed added temporary money through $11 billion in two-week repurchase agreements, and a further $5.75 billion via overnight repos.When you see how easily money is made, you question the wisdom of various parties (especially foreigners and CBs) who have for so long been willing to hold onto it as though it were a reserve asset of particular merit.To be sure, there was a time for it, but that time is now passing. The international move is onward to gold.R. Goldilox (1/5/06; 15:43:00MT - usagold.com msg#: 140136) Dad's Booze "conundrum" Or maybe, being smarter than the average Dad, he moves the good stuff to the garage filed under "automotive lubricants", and lets the kids keep acquiring more and more diluted booty from their illicit enterprise. He might even add some color to the liquid in the bottle (a little flat cola will do) to make them think they are still getting real hootch!Now there's a Dad that understands "market spin". Whitewaterwoman (1/5/06; 13:48:55MT - usagold.com msg#: 140135) Gold, please, Mr. Knife ...because unlike the Google company, I know gold's fundamentals and I like them very much. I'm not saying Google doesn't have good fundies, but I don't know them or their management. What I love about physical gold is that I know the manager intimately: it's ME! And I have great trust in myself.On a wonkish note, Google's value depends on people being online. If energy costs soar, or anything else causes rolling blackouts...no computers, except for laptops rechargable by solar or hand-crank.Happy New Year, all! TownCrier (1/5/06; 13:45:54MT - usagold.com msg#: 140134) Knallgold, msg#: 140118 Arrrgh! (And by that I also mean, "Ooops!!")"There's really not much we can do, personally, to control our monetary system or its controllers. But we CAN take control of our money, by making sure it is as secure as solid gold"--TCI beg your many pardons for my confounding grammatical slip. I'm sure you'll have an easier time following my train of thought when I offer the corrected version below, which is what I MEANT to type."...But we CAN take control of our SAVINGS, by making sure it is as secure as solid gold"R. Liberty Head (1/5/06; 13:19:51MT - usagold.com msg#: 140133) Dad's Moonshine Dad's kids are more clever than Dad. They dilute the moonshine and finger the maid. They beat her up. Dad says with pride "That's my boys". Dad brings in more moonshine, finds another maid and the cycle repeats until the kids all drop dead with cirrhosis. Anyone who tries to tell Dad the truth is accused of treason, anarchy and terrorism. If there is a trial at all, it will come after the sentence has been imposed.Welcome to the USA.Best Wishes USAGOLD / Centennial Precious Metals, Inc. (1/5/06; 13:01:41MT - usagold.com msg#: 140132) The art of converting your seasonal fruits into everlasting value! http://www.usagold.com/gold-coins.html
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