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ARCHIVED DISCUSSION FROM 3/5/2007
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Pal (3/5/07; 21:13:11MT - usagold.com msg#: 153110)
Silver Certificate
http://www.treasury.gov/education/faq/currency/sales.shtml
My grandfather gave me a one dollar silver certificate on my 18th birthday. It was circulated and was part of the 1957 series so it has no numismatic value. The link above states...
"On March 25, 1964, C. Douglas Dillon, the 57th Secretary of the Treasury announced that silver certificates would no longer be redeemable in silver dollars. This decision was pursuant to the Act of June 4, 1963 (31 U.S.C. 405a-1). The Act allowed the exchange of silver certificates for silver bullion until June 24, 1968. This was the deadline set by the Congress. Since that date, there has been no obligation to issue silver in any form in exchange for these certificates. You may be interested to know that the Congress took this action because there were approximately three million silver dollars remaining in the Treasury Department's vaults. These coins had high numismatic values, and there was no way to make an equitable distribution of them among the many people holding silver certificates.

Silver certificates are still legal tender and do still circulate at their face value. Depending upon the age and condition of the certificates, however, they may have a numismatic value to collectors and dealers."

...that last part gets me where it points out its worth at 'face value'. If I had been given a physical silver coin then it would be worth 13x face value. Just Another example of how paper money should only be used as a transactional unit and not a store of wealth.

-Pal

Goldilox (3/5/07; 20:54:23MT - usagold.com msg#: 153109)
Separation
I think I'm beginning to see why physical may well sever its connection to paper gold at some point.

As long as the paper gold commitment is to deliver "like value", the short sellers can manipulate the price down whenever either delivery or liquidity put them behind the proverbial 8-ball.

However, at the point that real sellers completely dry up, they then dictate a fictitious "settlement" price and make the buyer go away with only FRNs.

Their line in the Kangaroo Courts will be, "If it were selling, this is how we would determine the "price".

They better hope they don't meet up with a Judge who is fond of the metallic critters, or if they do, better hope he is also fond of Executive Hunting Junkets.

Goldilox (3/5/07; 20:38:33MT - usagold.com msg#: 153108)
Five words from the web bots
Since they are already public domain, I think it's acceptable to reproduce them here. See Geo Ure's urbansurvival.com for authorized elaboration.

"Beware the Ides of March!"

Smeagol (3/5/07; 20:28:12MT - usagold.com msg#: 153107)
Sss... Neither are the Silver ETFs...
http://news.silverseek.com/SilverSeek/1171925694.php
"A seminal moment during our brief soirée into Orlando came when a curmudgeonly sort sauntered up to our booth and demanded why, when he sought to retrieve the silver bars he had laid into receipted warehouse storage at this nation's most premiere repository in New Orleans, they could not produce them but, per contract, would happily replace with new bars. They were not deadbeats, this New Orleans outfit. They would honour the contract. He would get bars of equal value. "Why cannot I get my own silver back from your storage?" he asked.

"We leased your silver," they told him. His bars were gone. That was his story to us. And then along comes, just Sunday, a missive from Bill Murphy of GATA and LeMetropole Cafe, alerting us to an article by Tom Lauricella, dipping out of the Wall Street Journal (not to be confused with the Wallace Street Journal) to the effect that Barclays ETFs, which make owning silver so painless and easy, may have a more nefarious agenda: turns out the reason that their ETF schemes are so inexpensive and transparent is that there's a back-door to the money. Says Lauricella, "Another aspect of its business that is less well-known to ETF investors: Barclays actively engages in securities lending -- loaning out the stocks and bonds in its iShares ETF portfolios. The loans are highly lucrative, bringing in millions of dollars a year for Barclays in addition to the fees it gets for managing the funds."

In other words, there's just a niggling chance that the silver Barclays claims to be holding on your behalf may already be leased to somebody else. May already have ceased to exist. But because you are so confident in your investment in iShares, you'll not demand delivery of the physical because you are so far just enjoying the ride. After all, why would a bank lie to you? And this is the nut of a Ponzi scheme: as long as only a few make physical demand, the game continueth. Ponzi schemes unravel not because of their size, but because they run out of trusting players."

Sun- or Moon-metal, if you don't hold the Precious, precious, It might not be there when you need It most. WHEN will people learn?? ~8-(

Chris Powell (3/5/07; 19:56:10MT - usagold.com msg#: 153106)
James Turk: Buying gold ETF isn't quite buying gold
http://www.financialsense.com/editorials/turk/2007/0305.html
5:30p ET Monday, March 5, 2007

Dear Friend of GATA and Gold:

Buying shares of the gold exchange-traded fund sponsored by the World Gold Council isn't quite buying gold itself, GoldMoney founder James Turk writes in an essay adapted from the latest issue of his Freemarket Gold & Money Report (www.fgmr.com). Turk's essay is titled "The Paper Game" and you can find it at Jim and Mary Puplava's Financial Sense site here:

http://www.financialsense.com/editorials/turk/2007/0305.html

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



Chris Powell (3/5/07; 19:54:34MT - usagold.com msg#: 153105)
Peter Brimelow: Mysterious movement in gold market
http://www.marketwatch.com/news/story/mysterious-movement-gold-market/story.aspx?guid=%7B0233E1E3%2D809B%2D4E9A%2D819C%2DC976C1C09077%7D
By Peter Brimelow
CBSMarketWatch.com
Monday, March 5, 2007

NEW YORK -- Gold had a tough time in the past week too.

No stock market enthusiasts will have any sympathy, but gold's friends are aggrieved. A week ago gold bullion closed at a 2007 high, and early this past week made highs in several major currencies, a favored sign of bulls. But furious selling, starting rather strangely in the thin aftermarket after Tuesday's close in New York, ultimately sent the metal reeling to a $39 per-ounce loss on the week.

Not all gold observers were caught. Pring.com's Martin Pring, who places great faith in the predicative power of gold equities, was worrying in his Weekly InfoMovie Report about their nonconfirmation of the metal. And several old hands were suspicious about the ballooning "open interest" in gold on the New York Commodity Exchange. In essence, this is a measure of the size of the bet laid down by speculators in gold futures. Seeing it pass 2005's record high without a new high in gold set off alarm bells.

How big was the seller?

The Gartman Letter, which for a loudly self-proclaimed non-membership in the gold fraternity spends a lot of time thinking about the metal and is actually quite a successful trader of it got the message on Thursday morning: "We find it disconcerting that spot gold has seemingly badly failed in the past two or three days to push upward through $685-690. Whoever, or whatever, the seller is at that level, it has been formidable indeed."

The Gartman Letter acted, halving its quite substantial holding and converting the rest into a long-gold, short-Nasdaq spread, consequently avoiding two-thirds of the week's loss.

The size of the blocking operation which stopped gold imitating oil this past week in making and holding new 2007 highs, perhaps paradoxically, encourages the considerable school of gold followers who believe gold is subject to heavy but surreptitious manipulation by the authorities. This is because of their theory of the mechanism involved.

As one of their leaders, GoldMoney.com's James Turk, says in the new edition of his Free Market Gold & Money newsletter: "As gold climbed in price, we witnessed in recent weeks the huge buildup of open interest on the Comex. The gold cartel ... was selling whatever ... it felt... needed to try slowing and then capping gold's advance ... the gold cartel finally succeeded in capping gold. ... Fortunately, there was no serious long-term technical damage to gold's chart -- nor do I expect any in the days and weeks ahead. Any reversal of gold's major uptrend is unlikely because the gold cartel is already covering short positions at these prices, which will provide underlying support for gold."

This concept that the "enemy" trades around the gold price, and are not just constant sellers, is a sophisticated point that open interest behavior in the past can be interpreted to support.

Others, of course, presume that gold was just caught in the general stampede for cash. This must be true to some degree, but the latest open interest data (Thursday evening's, with half the week's losses booked) do not really show it.

Gold, of course, is not just part of the spectrum of financial assets seen from the West. It is also of great interest to the Indian population, easily the world's biggest buyer of physical gold. Over at LeMetropoleCafe.com, Bill Murphy is expecting the Indians will step in and stop the slide. His proprietary Indian premium numbers (full disclosure: Once provided by my brother John) have not so far shown this is happening. But after Friday's losses perhaps they will.

Paper Avalanche (3/5/07; 19:53:28MT - usagold.com msg#: 153104)
EO 11110
http://www.rense.com/general44/exec.htm

Here is a more detailed look into EO 11110.

PA

Chris Powell (3/5/07; 19:52:50MT - usagold.com msg#: 153103)
How can the U.S. dollar survive profligacy like this?
http://www.house.gov/paul/tst/tst2007/tst030507.htm
The Coming Entitlement Meltdown

By U.S. Rep. Ron Paul
Monday, March 5, 2007

David Walker, comptroller general at the U.S. Government Accountability Office, appeared on the television show "60 Minutes" last evening to discuss the federal budget outlook. If you saw the show, you know that he painted a very sobering picture regarding the federal government's ability to meet its future obligations.

If you didn't see the show, Mr. Walker's theme was simple: Government entitlement spending is like a runaway freight train headed straight at American taxpayers. He singled out the Medicare prescription drug bill, passed by Congress at the end of 2003, as "probably the most fiscally irresponsible piece of legislation since the 1960s."

When it comes to Social Security and Medicare, the federal government simply won't be able to keep its promises in the future. That is the reality every American should get used to, despite the grand promises of Washington reformers.

Our entitlement system can't be reformed -- it's too late. And the Medicare prescription drug bill is the final nail in the coffin.

The financial impact of the drug bill cannot be overstated. Government projections that the program would cost $400 billion over the next decade were a joke, as everyone in Congress knew even as they voted for the bill. The real cost will be at least $1 trillion in the first decade alone, and much more in following decades as the American population grows older.

The Medicare "trust fund" is already badly in the red, and the only solution will be a dramatic increase in payroll taxes for younger workers. The National Taxpayers Union reports that Medicare will consume nearly 40 percent of the nation's GDP after several decades because of the new drug benefit. That's not 40 percent of federal revenues or 40 percent of federal spending, but rather 40 percent of the nation's entire private sector output!

The politicians who get reelected by passing such incredibly shortsighted legislation will never have to answer to future generations saddled with huge federal deficits. Those generations are the real victims, as they cannot object to the debts being incurred today in their names.

The official national debt figure, now approaching $9 trillion, reflects only what the federal government owes in current debts on money already borrowed. It does not reflect what the federal government has promised to pay millions of Americans in entitlement benefits down the road. Those future obligations put our real debt figure at roughly $50 trillion -- a staggering sum that is about as large as the total household net worth of the entire United States. Your share of this $50 trillion amounts to about $175,000.

Don't believe for a second that we can grow our way out of the problem through a prosperous economy that yields higher future tax revenues. If present trends continue, by 2040 the entire federal budget will be consumed by Social Security and Medicare alone.

The only options for balancing the budget would be cutting total federal spending by about 60 percent or doubling federal taxes. To close the long-term entitlement gap, the U.S. economy would have to grow by double digits every year for the next 75 years.

The answer to these critical financial realities is simple, but not easy: We must rethink the very role of government in our society. Anything less, any tinkering or "reform," won't cut it. A good start would be for Congress to repeal the Medicare prescription drug bill.

Paper Avalanche (3/5/07; 19:51:34MT - usagold.com msg#: 153102)
@ Rook - Re: EO 11110
http://www.kamron.com/economics/kennedy.htm

I may be mistaken, but it is my understanding that the EO was actually carried out a few days before he was shot in Dallas. Immediately thereafter all US silver notes were removed from circulation. I am not sure if many ever saw the light of day, but I want to say that about $4 million worth got into the banking system only to be recalled a week or so later. Please see link below for a better review of the topic.

I may be wrong. I often am.

PA

pilgrims_gold (3/5/07; 19:45:30MT - usagold.com msg#: 153101)
Heist and Italian Job have been added to my list!
Thanks guys, I knew the Italian Job should have been on my list but could not remember the name of the movie for the life of me, thanks! I never seen the movie Heist and will look for it in the DvD movie rentals for a night entertainment.
Every one of these movies someone was trying to steal the gold, bankers must of financed the movies!

Rook (3/5/07; 19:41:16MT - usagold.com msg#: 153100)
.,.
Hi All, well, if there ever was a reason for Kennedy to meet his maker, according to Fed backers, the following would be reason enough. Surprised to find this, but here it is.

"As the Federal Reserve overprints more money, the money supply inflates, and too much money starts chasing too few goods and services, which means prices go up. But contrary to the charade put on by the Federal Reserve, inflation doesn't just come and go due to some arcane sorcery. The Federal Reserve can halt inflation any time it wants to by simply shutting down those printing presses. It therefore follows that both inflation and recession are fully under the control of the Federal Reserve.

Over time, that excess of printing has destroyed the value of that dollar you think you have. If you want to know by just how much, go out and try to purchase 371.25 in silver right now. Usually, the deterioration is gradual. Sometimes, it has to be obvious, such as the 1985 devaluation (done to halt the trade imbalance) which triggered the Japanese real-estate grab in this country.

Many politicians have attempted to reverse this process. John F. Kennedy issued an Executive Order 11110, requiring the Treasury Department to start printing and issuing silver certificates for the silver then remaining in the US Treasury.

Kennedy decided that by returning to the constitution, which states that only Congress shall coin and regulate money, the soaring national debt could be reduced by not paying interest to the bankers of the Federal Reserve System, who print paper money then loan it to the government at interest. This was the reason he signed Executive Order 11110 which called for the issuance of $4,292,893,815 in United States Notes through the U.S. Treasury rather than the traditional Federal Reserve System.



John F. Kennedy's United States Note.

That same day, Kennedy signed a bill changing the backing of one and two dollar bills from silver to gold, adding strength to the weakened U.S. currency.

Kennedy's comptroller of the currency, James J. Saxon, had been at odds with the powerful Federal Reserve Board for some time, encouraging broader investment and lending powers for banks that were not part of the Federal Reserve system. Saxon also had decided that non-Reserve banks could underwrite state and local general obligation bonds, again weakening the dominant Federal Reserve banks".

Kennedy's executive order was never implemented following his assassination, and shortly afterwards, United States silver coins were taken out of circulation and replaced with the copper clad slugs in use today. These two events, the failure to print new silver certificates, and the substitution of worthless slugs for our silver coins, may explain why the Warren Commission included on its panel John J. McCloy, a man with no experience in crime, law enforcement, or national security, but who had been the President of the Chase Manhattan Bank.


MK (3/5/07; 19:22:03MT - usagold.com msg#: 153099)
Articfox - Gold in surplus
This is a nebulous concept as anyone who studies the tables can attest. Gold is never in surplus; never in dearth. On the contrary, it is always in balance with price the final arbiter. One can make a case though whether the suppliers or the demanders were more aggressive. In the current time period, the demanders are more aggressive and the shorts will do all they can to tilt the balance in their favor, including manipulate the press. In that respect, nothing has changed for more than a decade.

Paper Avalanche (3/5/07; 19:16:14MT - usagold.com msg#: 153098)
@ Gold Fingerrrr

I love you man.

PA

GOLD FINGER (3/5/07; 19:15:03MT - usagold.com msg#: 153097)
GET REAL!
REF:
Paper Avalanche (3/5/07; 19:03:05MT - usagold.com msg#: 153094)

Sarcasm is not very becoming nor is it very courteous.

I thinks CHINA will never devoid it's self of gold and neither will it's people. As far as choosing a stock that pays meager dividends...they can have it. Why would anyone choose to invest in a company that is going down to begin with?


USAGOLD Daily Market Report (3/5/07; 19:11:34MT - usagold.com msg#: 153096)
Page Update!
http://www.usagold.com/DailyQuotes.html
The 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.

MONDAY Market Excerpts

Gold piggybanks tapped on global market weakness

March 5 (MarketWatch) -- Gold for April delivery closed down $4.90 at $639.20 an ounce on the New York Mercantile Exchange. Prices climbed briefly Monday to touch a high of $645.30.

U.S. stocks saw another tumultuous session on Monday, as the yen rallied against major currencies, while stocks across Asia ended sharply lower, with indexes in Japan, Malaysia, Hong Kong, and Singapore retreating more than 3%.

"Gold traders see the stock market recovery off the days lows and are growing more bullish that a financial meltdown is not in the works," said John Person, president of NationalFutures.com.

"If this stock market continued lower, then I would have expected gold to fall as well -- mainly because hedge funds and others who are cashed strapped would be liquidating holdings to meet potential margin calls [and] one holding might have included gold," he said.

"For some who believe the global economy is still vibrant, buying gold is a bargain near the $640 level," said Person, pointing out that gold prices were at $690 just a few days ago.

The contract has lost $50.60, or 7.3%, from the closing level of $689.80 on Feb. 26.

"It certainly presents a lower risk to buy today than it did last Friday."

So contrary to the expectations of some market observers who believe that gold absolutely must rise during periods of duress, gold has been under pressure, Dennis Gartman, publisher of the Gartman Letter said.

"Gold remains a source of liquidity that can be tapped when it must be tapped," Gartman said.

---(see url for full news, 24-hr newswire)---

TownCrier (3/5/07; 19:07:20MT - usagold.com msg#: 153095)
Lackluster, the movie is called "Heist"
I highly recommend it.

R.

Paper Avalanche (3/5/07; 19:03:05MT - usagold.com msg#: 153094)
@ Gold Finger

It's true. He somehow got my home phone number and called me to discuss the items in my post below.

I appreciate your concern. I hope that other central bank presidents don't take this as an open invitation to call me whenever they want.

I love you man. You are the reason I get up in the morning.

Take care,
PA

GOLD FINGER (3/5/07; 18:57:57MT - usagold.com msg#: 153093)
WHAT THE......

REF:Paper Avalanche (3/5/07; 18:25:18MT - usagold.com msg#: 153091)
Zhou Xiaochuan just called me.... this is big news


Your not serious...a joke??

....now I wonder who uses the anti gold cloaking devise.

Gold's low price is an opportunity to buy and get into the market. The demand for oil will continue. Gold will soon rise again!

GF

David Linkley (3/5/07; 18:45:32MT - usagold.com msg#: 153092)
What I have feared is now occuring
Physical gold at these prices may never be seen again in our lifetimes. Only huge liquidity increases from the already high levels we are experiencing at this point in time can prolong the the current economic cycle. The desperation of the New World Order was indicated with repeated IMF begging to sell gold. The Euro offers no haven and all other paper currencies will decline vs. gold. Good luck all as additional liquidity may buy a little more time (keeping averages up) but the tranquil investing periods we have known are over. The subprime lending defaults are just one of many battles to be lost by consumers from this point on. The battle between the bankers and gold has now reached the point of no return. The winner will take all. Slavery vs. freedom is now on deck. What will you chose?

Paper Avalanche (3/5/07; 18:25:18MT - usagold.com msg#: 153091)
Zhou Xiaochuan just called me.... this is big news

He said that he has been watching CNBC all day. After Liz Clayman's story this morning, along with the other compelling reports on gold, he is rethinking diversifying the PBOC's reserves into gold. He said that he may go with an ETF (if anything) if he wants to get back into the gold market in the future.

He also said that he will be calling Shanghai later this morning (it is early morning in Beijing) to recommend that they mothball the Shanghai Gold Exchange since gold is no longer a safe haven and the need for a formal gold exchange in China would appear to be useless going forward. He is looking for a more productive use of the country's FOREX reserves such as Fannie Mae or Freddie Mac common stock / bonds.

I know that many here think that gold will go up in the future, but after speaking with Mr. Xiaochuan and learning that China has no further interest in gold as a reserve asset, I am leaning toward cashing out my gold bullion position and possibly moving that capital into something that yields a dividend such as Ford or General Motors stock.

I wish everyone the best, but I think that gold's run is over and now is the time to get back into the market while stocks are cheap since that is what the Chinese appear to be doing.

PA

mikal (3/5/07; 18:21:50MT - usagold.com msg#: 153090)
Paper mache' party pooper?
http://www.forbes.com/business/businesstech/2007/03/02/nyse-sec-nasdaq-biz-cx_lm_0305nyse.html
Financial Services
A New Worry For Wall Street
Liz Moyer, 03.05.07, 6:00 AM ET - Forbes.com - Excerpts:

"Last week's market turbulence and technical glitches have overshadowed an important regulatory change that kicks in this week. Beginning today, all trade orders are supposed to be routed to whatever exchange offers the best price, meaning markets like the NYSE Group's (nyse: NYX - news - people ) Big Board could lose share to smaller regional exchanges and electronic networks.

The impact won't be completely felt for another month, courtesy of a delaying action from the NYSE. Last week, the exchange received an extension from the Securities and Exchange Commission that gives it until April 5 before it has to comply with all of the new rules, which are called Regulation NMS...

The chief executive of one relatively new network, BATS Trading in Kansas City, said in an e-mail to a regular group of some 1400 readers that he was "concerned about the stability of the public markets in the transition to Reg. NMS."
David Cummings, the BATS chief executive, added, "I would urge all participants across the industry, especially those with high-speed automated trading models, to be mindful of any unnecessary loads their orders could place on the markets."

The messaging snafus were enough to pique the interest of the SEC, which has been talking to NYSE about what happened. Thain has denied news reports that a bigger investigation into this week's events is underway."
Mikal-- This doesn't seem to be so much 'much ado about nothing' as incompetence. The coming weeks(or days) should reveal just how negligent or consequential 'glitches'
figure to be in 'the program'.

Lackluster (3/5/07; 18:18:24MT - usagold.com msg#: 153089)
Gene Hackman gold movie?


There was a Hackman movie not too long ago, where he steals some gold off an airplane. Can't remember the title, it had a surprise ending, I won't give it away here.

Seems like a common theme to a lot of these gold movies is theft. Why would that be?

Paper Avalanche (3/5/07; 18:12:42MT - usagold.com msg#: 153088)
@ pilgrim

I would add the relatively recent "Italian Job" to that esteemed list. Good plot, action and plenty of gold to look at.

PA

pilgrims_gold (3/5/07; 18:04:17MT - usagold.com msg#: 153087)
Golden Movies
I like to create a list of movies with a gold bullion/gold plot line of some sort.
Have quite a few good choices and am wanting all posters to help add to this list.
My list so far in no particular order:
The Good, the Bad, and the Ugly (A search for gold by the 3 adversaries)
McKenna's Gold (That vein of gold on the moutainside would give you a heart attack)
Goldfinger (A how to on robbing Fort Knox, 1st-disable an army, 2nd-radiate the gold)
Treasure of the Sierra Madre (The Prospectors Bible Movie)
Kelly's Heroes (A lot of nice gold bars!)
A Fistful of Dollars (Clint seems to do a lot of gold movies)
Paint your Wagon! (Pardner!!!! Is that Clint aggin?)
The Maltese Falcon
All the Kings Men
Die Hard III (Need a lot of Trucks to hual all that gold under New York)

Im hoping to have all of these on dvd eventually

Arcticfox (3/5/07; 17:43:20MT - usagold.com msg#: 153086)
Banner now going across CNBC stating that gold has
been in surplus since 2002..huh?

melda laure (3/5/07; 17:00:37MT - usagold.com msg#: 153085)
The difference between catching a falling gold bar and a china cup.
http://www.financialsense.com/editorials/au/2007/0305.html
yes it is most definitely a garden variety correction... so far...

SNIP: Are subprime mortgage lenders like New Century Financial and Novastar taking it on the chin?...

No, more like a bullet wound in the aorta. Do not mistake the twitching for signs of life.

mikal (3/5/07; 16:30:34MT - usagold.com msg#: 153084)
Bernanke plucky parrot
http://www.lemetropolecafe.com
Midas Report by Bill Murphy - March 5, 2007
Snippit: "For the skeptics out there who remain clueless on all this market management stuff, one only need go to the public record. For example:

Bill,
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFkGFnSxyPjo&refer=home

In Bernanke's speech at Stanford on Friday he admitted that the FED manipulates markets:

QUOTE

``Given their scale, capital inflows and outflows certainly influence long-term U.S. interest rates and other key asset prices,'' Bernanke said. Still, ``the Federal Reserve retains considerable leverage over longer-term rates and key asset prices.''

END

How many times do key officials have to confess to manipulating markets before the main stream press will acknowledge it happens?
Cheers
Adrian"
Mikal-- Way to go Bill! Way to go Adrian!

flow5 (3/5/07; 15:45:02MT - usagold.com msg#: 153083)
Consolidation Period
"On Wednesday, Bernanke told the House Budget Committee he could see no single factor that caused the market's pullback a day earlier."

This is, of course, economic nonsense. We saw in the first two months of this year, Jan. & Feb. 2007, the sharpest, and largest, draining of legal reserves in the history of the Federal Reserve. (for an explaination of legal reserves see Modern Money Mechanics: http://landru.i-link-2.net/monques/mmm2.html)

What happened? The Manager of the Open Market Account uses the federal funds "bracket racket" as a "trigger" to guide open market operations. The FOMC maintained their interest rate target, but disregarded the level of legal reserves. This is another, of an endless examples, of an extremely flawed monetary policy. Our money supply can never be managed by any attempt to control the cost of credit, that was what the Treasury Federal Reserve Accord of 1951 was all about.

If monopolistic powers "administer" an upward shift in a price, the long-term effect will not be inflationary, but will be deflationary unless monetary flows (MVt) "validate" these specific price changes.

The monetary authorities use two tools to control the money supply--free legal reserves and reserve ratios. If these tools are to be effective, all legal reserves of all money creating institutions have to be in a form which the monetary authorities can quickly ascertain and absolute control. The only type of bank asset that fulfills this requirement is interbank demand deposists in the Federal Reserve Banks owned by the member banks. Similarly, the monetary authorities have to have complete discretion over changes in reserve ratios. This is essential since under fractional reserve banking (the essence of commerical banking) these ratios determine the minimum volume of legal reserves a bank must hold against a specific volume and type of deposit liability.

Congress should "bite the bullet" and require all commercial banks to have the same reserve ratio and reserve asset requirments (pre-1959 requirements pertaining to assets). And as a long-term proposition, get the commercial banks out of the savings business. Never are the commercial banks intermediaries in their lending process.

See: Reserve Requirements: History,Current Practice, and Potential Reform. http://www.federalreserve.gov/monetarypolicy/0693lead.pdf

There has always been a seasonal consolidation period. This historically ends mid March.

Cometose (3/5/07; 14:58:24MT - usagold.com msg#: 153082)
Sinclair / Monty
Evident is the GLOBAL LIQUIDITY surge...

Globalization = the goal until the NEW WORLD ORDER

to get all the players on board including CHINA and the Middle East ......

Banking eventually HOOKS every one in

LIQUIDITY is VASELINE to enable this process ....to continue without mishap .... keep everybody in line and on que


Since Globalization is PRIMARY OBJECTIVE to the New WOrld Order , and LIQUIDITY IS THE GREASE .....and this is a long term goal .......

SEE GOLD RUN
SEE SILVER RUN



Clink! (3/5/07; 14:52:32MT - usagold.com msg#: 153081)
What to do in a panic
http://www.the-privateer.com/chart/gold-pf.html
I find that the best thing to get a perspective on things is to look at a long term chart. The URL attached is a beaut covering 25 years. TA tends to be more reliable the longer a trend continues. If you look at the green lines drawn from 2000, you can see that this is, so far, part of a normal pullback. The support line appears to be around $625-630, which is where we are coasting to. If the PoG breaks this, then, yes, it may be different this time.

I mentioned when I posted for the competition that the uptrend appears to be getting steeper, and this is clearly shown by the second green line. I saw this on the log(PoG) vs. time chart, but I'm not sure how this correlates to a linear P&F one. One thing that the P&F definitely DOESN'T show is that the speed of the falls is 10 times the speed of the rises !

C!

mikal (3/5/07; 14:11:19MT - usagold.com msg#: 153080)
Dollar dazed by dizzying dimensions of debt, derivatives and defaults
http://disc.server.com/discussion.cgi?disc=149495;article=109686;title=APFN
The dollar index may be popping nicely the past week or so, but it's technically no where near staging a bull run to the upside. Topaz could be right and the index clear some technical barriers. We all remember the lengthy period last year where POG and $ index rallied together- maybe for a few days this year- and now some calling for some more. Maybe they'll chop around but then they'd better hurry because this things heading for a climax soon IMHO.(You know my timetable). Thank you.
Sun Mar 4, 2007 19:06
72.201.70.108
The Condition of the Dollar
By Lindsey Williams
http://www.lwoil.com/newsletters/march_2007.htm
Excerpt: "There is so much to touch on regarding the dollar this month, I hardly know where to start. Regardless of where I begin, the news is not good and affects all of us.
First on our list is China. They have now announced that they are refusing to accept American Corporations purchasing into their stock market any longer as they did in the past. China also said that they are no longer going to be purchasing our securities as they have in the past, including bonds and T-bills. China's decisions and subsequent announcements at the beginning of the week has sent a panic across the World's markets.
Additionally, OPEC met recently and they have also stated they will be diversifying into other currencies instead of just the American dollar. They will now begin accepting other currencies and limit the trade of oil via the American dollar.

March 21st 2007 will be one of the most significant dates this month. Iran has outlawed the American dollar and will put anyone in jail that uses it in their country after that date."

Goldilox (3/5/07; 13:48:28MT - usagold.com msg#: 153079)
MelissaData
Melissa Data offers an opportunity to download the list of sales used in the calculation month by month. Most zip codes contain more than one style of home, so the list should show if the data is skewed by over-weighted proportions of lower or higher priced units.

My zip code showed a peak in late 2005, early 2006. Probably about right, but my zip code is heavily populated, so anomalies tend to get lost in the sheer volume.

Quantity of units sold is another dropping trend in my zip.

mikal (3/5/07; 13:40:36MT - usagold.com msg#: 153078)
Gold
http://www.jsmineset.com
Here is a small sampling of the many good comments Jim Sinclair and Monty Guild made on this and related subjects, since last week:
"What has turned gold into a fearful thing for the unthinking is threefold:

1)The unwinding of the Yen Carry Trade. This is a hot one. It assumes that major clients, hedge funds, have borrowed yen in order to buy gold thereby improving their leverage and profit on the long side. The leverage for floor traders, which is what most hedge funds get, is 95% credit. To improve 95% credit is a trick that borrowed yen will not even do for you. The long side is played to a degree by every black box, but that is about all needed to get a 25 to 35 year old schooled to hate gold, turning them into an enemy thereof. The last point is nobody has knowledge of the size of the so-called gold/yen/carry. Therefore it becomes the best of fear makers because like the expert in the field where there is no expert, they cannot be wrong.
2)The collapse of the Chinese gold demand interpolated from a regulator-engineered liquidation of speculation."

"Do you not realize the minute the false yen bull move ends, motivated by panicked carry trade shorts to the loan covering, that gold will parade right back up to and through $690?

Do you really believe a 7% growth in China is a debacle?"

"The answer is simple. As the momentum of the Yen upwards move slows, and internal indicators indicate so, then putting the yen for qualified speculators is rational.

The minute the up trend on the yen breaks down then the down trend on gold break out and up.

Review the inner working of the economic Gordian Knot tied and unmovable by economic management for political advantage by as many administrations as one can recall."


"Monty Guild's Commentary

As predicted by many, Venezuela's oil output is faltering under the wise and able leadership of Hugo Chavez. Today it was announced they are cutting production by 40,000 barrels a day at the famous Boscan field.

On another note, according to my wise friend Larry Jeddeloh, the money supply growth in the last 12 months for the UK M4 is up 13%, Eurozone M3 is up 10.6%, China M2 is up 15.9% ,South Korea M3 is up 10.6% , Australia's M3 is up 13% and Russia's M2 is up 48%.

With numbers like this it is obvious that global central banks are continuing to provide a lot of liquidity to the markets.

For this reason and others, we expect this correction to be relatively short, after which gold and foreign stocks should rally strongly.

Yours,
Monty"

"The Carry Trade is huge in gold, except no one can know.
The standard argument is that a slowing economy is bad for gold because inflation will decline. It will not! The Formula speaks for itself.
I have already suggested to you the carry trade and bullion buyers are a contradiction of terms. It is like saying the meeting of NASCAR fans will be held at the Westchester Country Club. They simply are not the same people. The carry trade is in equities and thereupon derivatives first and further, currencies, but primarily government paper. The scam commercials pull under cover is completed by hammering the silver price to tip off the Black Boxes both in silver and gold. The Black Boxes then do the work for the commercials..."

Survivor (3/5/07; 13:21:26MT - usagold.com msg#: 153077)
Re: Credit bubble popping

The MelissaData site referenced by below is an example of why we should always be careful to take data on the Internet with a grain of salt.

For my zip code, MelissaData shows that real estate prices have gone up by 465% since December 2006, and the average price is $446,000. Neither of these data points is even close.

Our real estate transactions and statistics are regularly posted in the local paper. For reasons driven by the local economy, prices are relatively stable and average prices are around $300,000.

There is no doubt the real estate and credit bubble is loosing gas rapidly in many areas, but MelissaData may not be the best place to learn the details about your area.

- Survivor


Topaz (3/5/07; 12:49:07MT - usagold.com msg#: 153074)
last one, I promise ...Alt Gold.
http://www.futuresource.com/charts/charts.jsp?s=GC&o=100/DX&a=D&z=610x300&d=LOW&b=LINE&st=
Without too much difficulty we can identify on the accompanying Chart, 5 times during '07 (so far) where $PoG and altDX have headed in different directions.
This is the signature of a Stage 2 GoldBull ...and we're due for another cracker separation real soon imo.
DX 90-92, $PoG 1000 here we come!
...and Aggie? ...you don't wanna know!

Goldilox (3/5/07; 12:45:37MT - usagold.com msg#: 153073)
Paint Your Wagon
@ Topaz,

TCM has been running PYW this month. Check the listings. I watched it a couple days ago, Partner.

Topaz (3/5/07; 12:09:21MT - usagold.com msg#: 153072)
...meanwhile, back at the Ratio Ranch.
http://stockcharts.com/h-sc/ui?s=$gold:$silver&p=D&b=5&g=0&id=0
We're getting creamed here with the only positive being an almost complete retracement from 30-70 on the RSI without too much damage along the way.
It's still early days in March so I'd be not too keen to bail out on Aggie just yet.

Topaz (3/5/07; 11:50:46MT - usagold.com msg#: 153071)
A method in the madness.
http://www.futuresource.com/charts/charts.jsp?s=TYXY&o=&a=V%3A15&z=610x300&d=LOW&b=CANDLE&st=
Provided we accept that PoG represents only a paper claim on Gold in the future, a clear pattern can be identified vis PoG and the Buck/Yield composite.
What we poor sad Goldphiles need to happen is for Bonds to sell-off without ratcheting Buck up "too much".

"Gold" nowadays simply can't exist in speech without a qualifier ...or better put, the term gold has become merely a qualifier (adjective) in itself.

Pathetic little buggers we are!

If they remade "Paint your Wagon", the opening scene with Lee Marvin uttering the word "Gold" would be totally different ...he'd now be saying: Gold-metal, No no, not stocks ...or April Contracts, not unallocated ...or for that matter allocated, not certificates ...real honest to goodness Gold in hand.
Welcome to the 21st century!

I think I'll rent it this weekend ...for old times sake!

Federal_Reserves (3/5/07; 11:47:21MT - usagold.com msg#: 153070)
Credit bubble popping.
http://www.melissadata.com/lists/ezlists/ezhomeowners.aspx
Folks are starting to SELL THINGS to make their payments. This is the reverse from just last year when they could hold on to things as they went up and just rollover the debt and take cash out. In my neighboor last summer average selling price of a home 550k, this last month 435k. Things are collapsing fast, and much faster than most people realize. Rich folk don't feel it yet. You can check your zip code and monitor your neighboorhood on the attached website.






CoBra(too) (3/5/07; 11:35:58MT - usagold.com msg#: 153069)
@Mk
I totally agree with you:

...MK "In terms of the DJIA I agree with you. When you think about, we haven't seen a real correction in the Dow in many years. In fact, there is a case that can be made that this last upswing was really a bear market correction for stocks. I think the correction in gold, although it was sudden and strong, is in line with previous corrections along the road in this bull market - a correction in a bull market". ...

... Well, dear MK I sure do. In the short term we may have a problem as I've characterized as mad scramble for liquidity and that's not the end. What we're seeing is a mad scramble to the perceived security of bonds and even to the Dollar. If it wouldn't be so "terrifficly" outlandish - to "coin" a new phrase, as the new paradigms have become in tight supply - the severance from both the former safe harbours will surely do the trick.

... And yes, I'm with you on former corrections on PM gold markets - just go back to 1974 - that's where I think we are and it doesn't mean not to go on accumulating - it just means accelerate your acquisition on every downtick.

... And what would a few bucks more or less mean in A/FOA's scenario of 30.000 $/oz of Au. OK, since we're not there yet, I guess there's a big chance out there to even beat the oldtimers to their game and acquire reality at even better averages ...

Thanks and see you in a golden future (with some silver lining) ... cb2


MK (3/5/07; 11:14:09MT - usagold.com msg#: 153068)
CB
In terms of the DJIA I agree with you. When you think about, we haven't seen a real correction in the Dow in many years. In fact, there is a case that can be made that this last upswing was really a bear market correction for stocks. I think the correction in gold, although it was sudden and strong, is in line with previous corrections along the road in this bull market - a correction in a bull market.

MK (3/5/07; 11:09:34MT - usagold.com msg#: 153067)
Goldi - Savings not investment
That's been the case ever since I can remember. People with a little wealth see gold as a form of savings that's not the dollar (or euro, or yen, etc). When I decided to make the theme of the first ABCs of Gold Investing "asset preservation," it was not a creative assumption on my part, or an attempt to convert people to that way of thinking. It's what our clients had been telling us for many years. So in a sense our clientele created the theme of the book.

CoBra(too) (3/5/07; 11:07:08MT - usagold.com msg#: 153066)
@MK
Sorry, haven't seen your input.

So just a thought; This correction may be more severe than any we've witnessed in decades, what with the hedge funds scrambling to survive in this beginning nosedive, which IMHO is long from over.

Gold will ultimately be seen as real security instead of US and other bonds - as it seems a lot of scared investors are still running to a totally doomed safe haven. That'll change as the scramble for liquidity pauses to re-evaluate the situation and then they come to the only conclusion left ... Got'ta Have GOLD!

Best to youse and I'll back off again ... Just thought to give a li'l warning as BB has done as well - cb2

CoBra(too) (3/5/07; 10:56:57MT - usagold.com msg#: 153065)
Tell a full room ...
... of people some bad news and immediately 80% of the gathering will dismiss you and not like what you say.
If you happen to be right, the other 20% will loathe you...

What a great truism - and then you just have to wait for the things to fall in place, the dust settles and pick up what's real in the mad scramble for liquidity to rescue whatever's left or underwater in your financial assets.

This time it's different is starting to get a little long in the tooth; Though it really is, at least in comparison to 1929, where people could still survive - barely - and the US was still a creditor nation. Well, yes today it's really different in every aspect.

In this context I've posted a note from a friend the other day and with the lack of response, I assume my contention is totally, if not politically correct.

That's it for now - cb2

PS: Cheers, Lady Waverider - J.Turk is a personal friend and his chart is as beautiful as MK's and I stronly believe the outcome will be even stratopheric. Just be careful in the next few month's but get all your reserve resources ready to employ once we hit way lower lows for the move - and then get ready for the ride of a lifetime. My opinion only!

Goldilox (3/5/07; 10:53:34MT - usagold.com msg#: 153064)
More "street" interest
@ MK, all -

In addition to my Sculptor friend last week, I had a house painter and a retired mover asking me specifically about gold on Saturday. I think the shift in public thinking is beginning, although you are probably in the cat seat for analyzing that based on your "new accounts".

Interesting to me is that these are "savings" types, not the investment crowd.

MK (3/5/07; 10:47:33MT - usagold.com msg#: 153063)
Goldilox and all. . . .
It seems to me that people are reading a lot more into what is really just run of the mill corrections in both stocks and bonds than they need to. The dynamics here haven't really changed except for one aspect -- the volatility in most of the markets. And by volatility I mean the yo-yo effect that you see on the charts. I see it only increasing going forward due to the concentration of too much capital into too few hands - a circumstance we discussed on these pages long before it became CNBC fashionable. Combine the volatility, financial engineering (huge structured derivatives' plays of all sorts including now property derivatives on the way) and with dollar woes, the markets are now inherently unstable by their very definition. (Note Sec Paulsen's description of markets over the weekend as being "volatile" by nature.)

Physical gold, through all of this, comes out a winner because sooner or later the investing public will turn to it out of frustration with standard markets.

First, its primary function in the portfolio remains a representation of stability, liquidity and enduring value in an increasingly uncertain and hostile market environment. No one, not even CNBC, can that away from gold though its opponents will take even the scantest opportunity to club it. That hasn't changed.

Second, even the correction we just went through adds up to an insignificant blip on the long term charts (this was the heart of Jonathan's analysis a couple of months ago) and there are those (like myself) who would view this it as a healthy sign for the future. Therefore, the growing ranks of gold owners is not likely to shrink noticeably anytime soon, no matter how much anti gold propaganda CNBC telecasts on a daily basis. (No one believes them anymore.)

The people who will get hurt in this are the speculators and leverage players who are going to find themselves subjected to much whipsawing in the future as the overall market volatility gains velocity -- to what end I don't think any of us really know at this time. If you don't have the capital to play a position, then stay away from it. Going forward, leverage will not be the way to riches, but to decreased wealth. One is reminded of the example of the Nightmare German inflation and what happened to speculators then. Don't forget after all was said and all their winnings counted (assuming there were any), even the adept 1920s German investor still ended up with an eroding, valueless currency.

For peace of mind and restful nights, stick with the physical, my fellow goldmeisters.

Survivor (3/5/07; 10:32:25MT - usagold.com msg#: 153061)
Oops . . .

I mixed up Mark Haines with Haynes auto repair manuals. Oh well, I guess one bunch of nuts and broken parts is about the same as the next. :)

- Survivor



Paper Avalanche (3/5/07; 10:24:28MT - usagold.com msg#: 153060)
@ Survivor

Schiff crushed Mark Haines as he normally does. I find it remarkable that CNBC still has him on as a regular guest. You would think that they would rather have someone who is less convincing, articulate, fact based and certain of the inevitable so as not to upset the end goal of the infomercial.

I believe that you are correct that Schiff's piece more than offset the tripe about gold that followed.

PA

Survivor (3/5/07; 10:17:55MT - usagold.com msg#: 153059)
CNBC

But did you see Peter Schiff on with Mark Haynes again this morning? Did you see Haynes' face when Peter explained to the audience that the DOW has not been anywhere close to the 2000 peak when inflation is taken into account?

Schiff was on a roll today. His comments more than offset anything Clayman could bring to the table.

Meanwhile, what's up with spot gold and equity indexes tracking each other this morning? Too strange! There may well be a price conspiracy with respect to gold, but that doesn't explain everything we have seen in the last week or so.

- Survivor


Goldilox (3/5/07; 09:59:54MT - usagold.com msg#: 153058)
Liz Clayman
@ PA,

Watching Liz Clayman discuss a CNBC Alert entitled "Gold Losing 'Safe' Status."

So Lizzie has graduated from being the on-screen cupcake to actually "analyzing" stories? I guess it helps to be married to the producer.

Contrary indicator?

Sierra Madre (3/5/07; 09:52:06MT - usagold.com msg#: 153057)
Thank you GE and SUNDECK!

Thank you to both, for the chart - SnP vs. HOUSING lagged one year.

SnP still fat and happy, no problema!

SIERRA



Lackluster (3/5/07; 09:50:53MT - usagold.com msg#: 153056)
Paulson fleeing...

Did he get arrested again?

mikal (3/5/07; 09:38:32MT - usagold.com msg#: 153055)
@Minero
Re: "One can breathe easier the rest of the day"
Tell that to the guy breathing down Hank Paulson's neck- the poor man has fled to Asia.
Re: "PPT and the PTB". I won't breathe a word of it to anyone, I promise. ;)

Minero (3/5/07; 09:31:15MT - usagold.com msg#: 153054)
Never Underestimate the PPT and PTB
Our friends were up all night preparing their strategies and getting ready for market manipulation. They have gone to work placing long orders and avoiding a market crash. How many more times can they extract the rabbit from the hat? They really are good at what they do! One can breathe easier for the rest of the day.

mikal (3/5/07; 09:23:59MT - usagold.com msg#: 153053)
@Cometose
Yes, now we can cover our shorts whilst everyone thinks we're permabears. I'll meet you at the Hilton for dinner and cocktails at 2PM.

mikal (3/5/07; 09:20:05MT - usagold.com msg#: 153052)
@PA
They're so desperate for tv ad revenue, they're using sensationalism on top of infomercials.
But this isn't the first time they(or their guests) flipflopped either, and it won't be there last.
Good catch Paper Avalanche. We likes to see contrarian newses, we do! ;)

flow5 (3/5/07; 09:05:06MT - usagold.com msg#: 153051)
Gold Will Shine!
Imported oil, + U.S. foreign & domestic military policies will rapidly transform this country into one with the highest poverty rate in the world. The exchange value of the dollar will perpetually, inexorably, relentlessly, depreciate, to where the U.S. will have no foreign policy choices.

Besides, the world consumes 4,000 tons of gold per year, but mine production is 2,500.


Cometose (3/5/07; 09:02:28MT - usagold.com msg#: 153050)
bleeding
looks like it is going into abatement

Paper Avalanche (3/5/07; 09:00:21MT - usagold.com msg#: 153049)
CNBC Going All Out to Slam Gold

Watching Liz Clayman discuss a CNBC Alert entitled "Gold Losing 'Safe' Status."

This is over the top propaganda even for CNBC (and that's saying a lot).

They said that $700 gold is now out of the question. I guess that there is no need to worry with gold anymore. Time to take my ball and go home.

PA

flow5 (3/5/07; 08:23:26MT - usagold.com msg#: 153048)
Nathan Brazil - Gold Stocks in the End Game
Good points. That would also ascertain its value during, say, revolution, war, etc.

flow5 (3/5/07; 08:14:23MT - usagold.com msg#: 153047)
China - continued
Existing home sales fell 8.4% in 2006, the sharpest decline in home sales in 24 years. 30-year mortgage rates are still only at 6.14%, and so homes should be very affordable, but because of rising real estate values home buyers are battling to meet mortgage payments. Falling real estate prices have reduced some home values below their outstanding mortgages, making the homeowners prone to default on their mortgage payments. Nearly 6% of all sub-prime home loans were more than two months in arrears by the end of last year and first-year delinquency rates are up about 200% in little over two years.
Approximately 16% of all mortgages issued last year were to sub-prime borrowers and with falling real estate prices the money available to these borrowers is drying up. That will reduce demand for homes.
There is an index (part of the ABX family of indices) that tracks how much it costs to insure BBB-minus rated bonds backed by mortgages to sub-prime borrowers. When the index falls it means such mortgages cost more to insure, which in turn is a proxy for the risk and value of these mortgages (as risk increases, insurance increases and value decreases). The index is down almost 30% since the beginning of the year. More than 20 sub-prime lenders have closed shop after having to repurchase bad loans they originated.
Mortgage defaults are now the highest in five years and rising with many of the problems tracing back to adjustable rate mortgages - what a surprise! Mortgage lenders such as Bank of America and Citigroup are now trying to get borrowers with adjustable rate mortgage to switch to fixed rate mortgages. That's a smart move for both parties: the US budget deficit will eventually cause interest rates to rise to much higher levels. Some banks are now also allowing borrowers to sell their homes for less than the outstanding mortgage and then forgive the shortfall since it is often less costly and time consuming than foreclosing on the homes. The catch is that borrowers may find they have to pay income tax on the forgiven debt. Sales of homes for less than their outstanding mortgage debt increased by 25% during 2006 according to Bank of America.
Keep in mind that the increase in bad loans is broad based and is occurring during exceptionally strong economic conditions, at least if you believe the authorities and talking heads. US consumer confidence is still at a five year high indicating that the collapse of the US real estate market has not had a major effect on consumer spending yet. What is going to happen when consumer confidence finally does fade and economic growth does stall?
As more and more home owners get into financial trouble and more and more homes go on sale it puts downward pressure on house prices. Home prices fell in about half of all metropolitan areas during the fourth quarter of 2006. For the first time since the National Association of Realtors started recording home prices in 1979 home prices fell in the majority of the cities surveyed.
Home construction has fallen to its lowest level in ten years. Housing starts in January fell 14.3% and building permits fell 2.8%. Luxury home builder, Toll Brothers, reported a 67% decline in its last quarter's profit as it wrote down inventory. The company also lowered its earnings outlook for 2007 based on fewer orders and rising cancellations. The company's net orders are down 33% from a year earlier as it struggles with a 30% cancellation rate.
It's not just real estate loans that are going sour. Wells Fargo, the 4th largest bank in the US by market value, reported $726 million in net credit losses for the fourth quarter and most of these were concentrated in its auto-lending portfolio. Consumers are increasingly unable to pay for all those new cars they bought when the car companies were running specials to get rid of inventory. US Bancorp, the 6th largest bank, saw a 25% increase in charge-offs and predicted that writing off retail loans will continue to increase during 2007. These are by no means the only banks seeing an increase in loan defaults, merely an example of what is happening.
The problems don't end with autos and homes either - the economy is integrated. Home Depot expects earnings during 2007 to fall between 4% and 9% as it doesn't expect the residential and housing markets to improve during the year. Manufacturing output fell 0.7% in January with manufacturing capacity utilization at only 79.6%. Manufacturing of automobiles fell 6% in January and excluding autos, industrial production was still down 0.2% for the month.
Is this all not more worrisome than the pullback of an over-bought Chinese stock market?
The dollar lost about 2.5% against the yen during the week. I wrote about the yen carry trade and how, when it unwinds, it will cause the dollar to fall. Last month Japan raised its overnight interest rate from 0.25% to 0.5% and this is potentially far more significant than what happened in China this week. Higher Japanese interest rates will cause the yen to appreciate on foreign exchange markets and will put pressure on the yen carry trade. On Tuesday of this week the dollar recorded its largest decline versus the yen in over a year as investors sold dollars to buy yen.
It is somewhat incorrect to say that the dollar is falling since it is actually the yen that is rising. The dollar has been reasonably steady against most major currencies this week but the yen rose against almost all of them. I suspect that over time the yen will rise against most currencies and the dollar will fall against most currencies because much of the yen carry trade involves being long dollars and the US still has an enormous trade deficit that has to be addressed.
From my perspective as an investor primarily interested in gold, the events of the week were very interesting because the gold price in US dollars fell even though the dollar was down sharply against the yen.
Unlike the investors who panicked and sold this week, I was happy to see falling gold stocks. Share certificates are certificates of fractional ownership in a business and I only buy stocks of companies that I really want to own, so I don't mind if the share prices fall because it means that I can increase my ownership at a lower cost than before the decline. When I look at my portfolio and see a stock that I would not like to see fall in price I sell it immediately, before it has a chance to decline.
With gold and gold shares falling I am quite content to wait and see what happens. Nobody can predict the future so to sit and debate whether this is going to be a big decline, a long decline, a short decline, a non-event, is pointless. The markets are so emotionally driven and far removed from any sense of value that there is no telling what will happen or how long it will take. Fortunately, if the carnage is short lived then stock prices will soon recover and everyone will be happy. If the declines continue then we will find much better buying opportunities going forward and I'll be very happy.
At some point I think the US dollar is going to come under serious pressure and when that happens the dollar and the gold price will decouple, with the gold price rising and the dollar falling. I am actually hoping that the gold price continues to fall in the interim as it only means there will be more money to be made in the longer term.





Nathan Brazil (3/5/07; 08:12:59MT - usagold.com msg#: 153046)
Gold stocks in the end game
<snip>
The ultimate hyperinflations result when the existing government is destroyed, making its currency worthless - a 100 percent depreciation.
<snip>

In the extreme, gold metal in hand has value for barter.

Does history speak to the fate of stocks that represent gold mines or metal during hyperinflation? Will companies survive the singularity and come out the other side re-valued in other currencies? I can find no precedent.

--------
$636.70
On another note, it is amazing how quiet this forum gets when we are taking a bath. If you came here for sage advice on timing this market you have my sympathy. If you are doing it with leverage, you have my condolences, I know that margin call really hurt.

For those of us with physical for cash this is an annoyance at worst or a huge opportunity if still liquid. Careful you aren't dashed on the rocks by the breakers while waiting for the tide.

flow5 (3/5/07; 08:12:29MT - usagold.com msg#: 153045)
Paul van Eeden -- China
On Tuesday for the first time in modern history China became a world financial trendsetter. The Chinese stock markets declined (the Shanghai Composite Index fell 8.84% and the Shenzhen Composite Index fell 8.54%) and stock markets around the world fell like dominos.



That China is important to the world's economies and financial well-being should not have caught anyone by surprise. China has been credited, or accused, depending on your point of view, with the increase in commodity prices for several years now and the ascent of its vast population to middle class is supposedly going to convert hundreds of millions of investors all over the world into millionaires. So when China's stock markets fell, the world took notice.



The reason for the markets' fall was China's government's announcement the previous day of a top-level task force to clamp down on illegal activities in the securities markets. Chinese investors have been flocking to stocks hoping to get rich, just as North American and European investors have been snapping up anything to do with China hoping not to get left behind. Chinese capitalism is today's Wild Wild West where just about anything can and will happen, where for every greedy investor there is an appropriately constructed plan to part him from his money and now the government wants to put an end to it.



The Chinese banking system is rife with bad loans made to well-connected people who set up unprofitable businesses. Corporations borrowed money to build factories, offices and apartments, many of which are empty or operating at a loss. The boom in China's stock markets was, to some extent, also driven by debt, although I suspect it would be near impossible to figure out just how much of the speculation had been undertaken with borrowed money. When markets are debt-driven they are massively volatile both during the upswing, as an inordinate amount of money chases limited stocks, and during the down-cycle, as investors panic and fret about losing all they have and more, so it is not really surprising that China's stock markets took a plunge.



The only explanation for the contagion caused by China this week is that investors across the globe have entrusted their money to mutual fund and hedge fund managers that are gambling on the greater fool theory with their clients' capital. When the markets around the world fell in sympathy with China it illustrated loud and clear that many investors have no interest or faith in the companies they own; they are merely holding them in the hope of trading the stocks to another fool in the future.



According to the World Bank approximately one third of all of China's production is exported, and if you consider the flow through effect then perhaps more than half of China's economy is export dependent. As a bellwether, the USA being the world's largest economy and largest consumer is therefore far more indicative.



Unfortunately the United States is not in good shape. The latest from the Commerce Department is that durable goods orders fell 7.8% in January; the National Association of Realtors reported that January new home sales were down 4.3% from last year and the median sales price was down 3.1%; the Commerce Department revised gross domestic production for the last quarter of 2006 down to 2.2% from an earlier estimate of 3.5%; business spending fell 2.4% in the last quarter although consumers did their part by increasing their spending by 4.2% yet residential fixed investment fell 19.1%.



Consumer spending accounts for more than 75% of US economic activity and the US accounts for more than a third of all the economic activity in the world. The US consumer accounts for about 25% to 30% of global economic activity, meaning that if US consumer spending fell by only 5% there would be a 1.25% to 1.5% reduction in world-wide economic activity. There is no other single more important economic factor than the US consumer. Because the US consumer has been financing his spending with borrowed money generated mostly due to rising real estate values, we should look at the US real estate market for future guidance - not to the Chinese stock market.



USAGOLD / Centennial Precious Metals, Inc. (3/5/07; 03:40:34MT - usagold.com msg#: 153044)
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Sundeck (3/5/07; 03:26:27MT - usagold.com msg#: 153043)
@Sierra Madre #153030 Correlation SP500 and NAHB Housing Index
http://www.themoneyblogs.com/millionairenow/my.blog/nahb-housing-market-index-and-the-sp-500-79-correlation.html
Sierra,

I think this may be the chart to which you refer (see link).

The S&P500 index currently sits at about the same level as it did back in November last year when this correlation was reported (by Sir Thoreauly, I think). But the S&P index is certainly headed in a direction that suggests that the correlation may be sustained a bit longer.

http://finance.yahoo.com/q/bc?s=%5EGSPC&t=1y

One must be cautious not to read too much into these charts...correlations do not necessarily imply hard and fast causal linkages.

Cheers

:-)

Paddington (3/5/07; 02:28:30MT - usagold.com msg#: 153042)
Yen Carry Trade, Total Recoil ?
http://www.netdania.com/ChartApplet.asp?symbol=USDJPY
Looking at the yen strengthen vs the us dollar there are the occasional sudden +/- 0.50 yen surges but nothing really to indicate capitulation at this stage.

I don't know how long this carry trade has been going on (years ?) or how big it is, but the FX graph seems to indicate the current unwinding as moderately orderly.

One presumes that so much money has been made with this speculation over the years that even the move from 121.50 to 115.50 in 6 trading days is not worrying too many.

As more funds liquidate however the yen is forced upwards further squeezing the margins of those still onboard creating a potential capitulation scenario further down the track.

Perhaps the occasional sudden +/- 1.00 yen surge going forward will be evidence of the snow ball effect moving closer to capitulation.

http://www.netdania.com/ChartApplet.asp?symbol=USDJPY



ge (3/5/07; 02:10:20MT - usagold.com msg#: 153041)
@ Sierra Madre
http://www.businessweek.com/the_thread/hotproperty/archives/2006/09/merrill_lynchs.html
That chart last Autumn...

Goldilox (3/5/07; 00:50:44MT - usagold.com msg#: 153040)
Lloyds hangs up on Indian calls
http://news.bbc.co.uk/2/hi/business/6412391.stm
snip:

Lloyds TSB, the UK's fifth biggest bank, has said it is closing its call centre in Mumbai - but that back office work will still be outsourced to India.
Customer phone calls will now be answered in its 10 UK call centres and the numbers of branches made available.

Lloyds TSB said that calls had previously only been directed to Mumbai when its UK operators were busy.

It added an automated call-handling system had cut the number of callers who needed to speak to an operator.

This meant there was no need to continue to answer calls in its Indian call centre, which at its peak employed 600 people but now employs about 180 people.

The bank employs around 2,800 people in India, and staff at the call centre will be given new roles.

Lloyds TSB Group Union, which represents many staff at the bank, welcomed the move saying that outsourcing calls to India had proved "a costly failure".

-Goldilox

Unhappiness with international "assistance calls" is not limited to the high-tech world. Globalism is losing some of its "charm".

Goldilox (3/5/07; 00:42:51MT - usagold.com msg#: 153039)
Are we being robbed by the banks?
http://news.bbc.co.uk/2/hi/business/6396487.stm
snip:

In recent weeks, UK High Street banks have been announcing record profits. Are these figures to be criticised or welcomed?
Two commentators from opposite sides of the argument go head-to-head over the issue.

-Goldilox

Nothing new in this debate, but the fact that it headlines the BBC Business section speaks volumes.

Goldilox (3/5/07; 00:32:51MT - usagold.com msg#: 153038)
More to come?
CBS MarketWatch:

Hong Kong's Hang Seng Index was down 2.9% at 18,882.74. The Hang Seng China Enterprises Index, a gauge of Hong Kong-listed shares of mainland companies, tumbled 5.7% at 8,475.36.

China's Shanghai Composite Index reversed early gains to trade 3% lower at 2,744.71.

"I'm not upbeat about the market direction," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong. "The global markets have been moving higher over the past year without any pause, so we are now paying for it."

Tang said the Hang Seng Index could decline another 500 to 1,000 points in the short term, but is likely to trend lower until reaching the 17,000 level around mid-year.

"We advise clients to offload shares on any rebound, the market is moving lower," Tang said.




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