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ARCHIVED DISCUSSION FROM 4/6/2002
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Sierra Madre (04/06/02; 21:01:24MT - usagold.com msg#: 72898)
Uh-Oh!!
For what it is worth, here is a message received today, from a prominent New Yorker:

King of Jordan has warned Bush he fears for his
life and could be assassinated at any time. President
Mubarek of Egypt believes he could be overthrown imminently and has so warned Bush. The Arabian street is in turmoil.
The situation is extremely fluid.

The CIA thought they had the Middle East under control
and I was assured that there was nothing to worry
about as little as two weeks ago. Now, they are
clearly alarmed.

DEBKA weekly says that 15 dinghies have been
discovered along Israel's shore carrying an
estimated 150 highly trained commandos possibly carrying
weapons of mass destruction and assessed to be working in
teams of three, or fifty teams. The security
breach is almost incomprehensible as this is the most
secure shoreline in the world with the Israelis and American fleets offshore and DEBKA believes that security
codes and technology has been compromised as in the 9-11
attack. In other words, there appears to be inside
help. Someone clearly wants the world turned
upside down.

This whole area could explode into a catastrophe.

Such a catastrophe would clearly wipe out any thought of Central Bank control of anything, and it is
questionable that this amateur hour over at the
Federal Reserve is capable of handling anything of
this magnitude.

DEBKA says that targets such as London and various
ones in the United States are on the highest alerts
and may be struck. This is the DEBKA weekly.

The situation is clearly different from that of
1973 and ten times more dangerous. It is even worse
than the Lebanon-Beirut invasion.

It is important to note again and again that the
international financial situation has never been at greater risk with over 60 trillion of counterparty risk in derivatives, and the international current account
imbalances almost unprecedented in magnitude and
proportion. The current account deficit of the United States alone is approaching 500 billion a
year, or 5% of the Gross Domestic Product, and the
net deficit position is approaching 3 trillion dollar or 30% of the GDP. There was nothing like
this in 1973 when the United States reigned supreme
as the world's greatest creditor and was able to successfully absorb the oil shock at extreme cost.
We had better men to handle it then.

It is questionable whether the international
financial system is resilient enough to handle an oil cutoff of the magnitude of 15 million barrels a day
of 76 million barrels produced to underpin the
world economy, and a collapse of that system would lead to the overthrow of the liberal regimes in the United States, England, Western Europe, Japan, etc. as in Germany in 1929 to 1933 that collapsed over similar current account imbalances. The political ramifications and consequences would be similar.

The Bush crowd, like that Gadarene herd of old, is
rushing like the possessed to a ruin that is almost without precedent since the old Christian monarchies were overthrown by the atheistical forces of international finance that have almost completely corrupted the western world in order to effectuate its submission. Benjamin Disraeli's novel, "Coningsby," tells the true story of the history of our time, and who was behind this.

.......

A worrisome message, indeed.

Sierra

Sierra Madre (04/06/02; 20:42:34MT - usagold.com msg#: 72897)
Like taking candy from children...

Just a couple of weeks before the famous "Washington Agreement" I had a converation with the Managing Director of a venerable PRIVATE Swiss Bank.

I was dumbfounded by the ignorance of this individual in such an important position. Let me tell you, he did not have a clue!

Gold has been expunged from the mind of this man, and I suppose if he is so ignorant, the rest of his colleagues must be in a similar situation. For him gold is through, finished, Kaput, a thing of the past. He said, "The Central Banks don't really WANT any gold any more." Just those words.

The Swiss have many virtues, and I hope they keep them. But what is one to think when coming up with such a character?
I remember Orson Welles' line in "The Third Man": "What have the Swiss contributed to civilization? - The cuckoo clock."

Load up with gold, it's like taking candy from children at this point. It won't be so much longer. See my next post.

Sierra

mikal (04/06/02; 18:46:08MT - usagold.com msg#: 72896)
Correct link- Afghan story
http://www.hindustantimes.com/nonfram/070402/dLFOR09.asp
Please accept my apologies for oversight. Article suggests resistance reminiscent of VietCong. If the US public overwhelmingly approves of this conflict as we are told, why aren't our dead and wounded casualties being honored publicly?

Black Blade (04/06/02; 18:36:14MT - usagold.com msg#: 72895)
Labor Dispute Affecting Oil Exports
http://story.news.yahoo.com/news?tmpl=story&u=/ap/20020406/ap_on_re_la_am_ca/venezuela_oil_protest_42

Snippit:

An escalating confrontation between the government and workers at one of the world's largest oil companies has started to affect exports from Venezuela � the largest foreign supplier of oil to the United States.

Protesting workers closed two of Venezuela's five major loading terminals Friday, stranding a dozen ships waiting to load cargo, Venezuelan oil officials told Dow Jones Newswires.

Black Blade: Oil workers have called a strike for Tuesday. Another possible restriction of oil supply is in the works.

Black Blade (04/06/02; 18:25:32MT - usagold.com msg#: 72894)
Arab Oil Embargo Gains Support
http://story.news.yahoo.com/news?tmpl=story&u=/ap/20020406/ap_on_re_mi_ea/mideast_palestinians_120
Arab Foreign Ministers Meet

Snippit:

CAIRO, Egypt - Arab foreign ministers gathered here Saturday to discuss ways of increasing their response to Israel's military offensive on the West Bank amid calls from Iraq and Iran to use oil as a weapon. The Arab League ministerial meeting comes after a week of daily protests against Israel and the United States, the like of which the Arab world has rarely seen. Jordanian demonstrators beat up riot police and sent them packing in Amman on Saturday while Bahraini protesters set fire to structures in the U.S. Embassy in Manama.

Iranian supreme leader Ayatollah Ali Khamenei came out Friday in support of the Iraqi oil proposal. "I suggest, only for one month, as a symbolic gesture, that Arab and Islamic countries switch off oil to all countries who have close relations with Israel," Khamenei said in a Friday prayers sermon in Tehran. However, support for a cutback came from a newspaper in a fifth oil producer, the United Arab Emirates, on Saturday.

"The time has come to stop talking and start action ... Time now to reflect upon the success of the oil embargo of 1973 ... So it is time to use it again. Then, perhaps, the international community will once again listen to the voices of the Arab peoples," said an editorial in the English-language Gulf News.

Black Blade: Support for a new Arab Oil Embargo is picking up steam. Libya could also be expected to give support. There also exists the very real possibility of terrorist acts against the oil industry infrastructure of those producers who do not support an embargo. This Middle East affair is intensifying and spreading throughout the region.

Old Yeller (04/06/02; 16:58:10MT - usagold.com msg#: 72893)
Looking for villains,in all the wrong places
http://www.smithers.co.uk/esnews.shtml?209

It's stock options and cooking the books by unscruplous CEOs,thatwould be today's bad guys,according to the esteemed Mr.Greenspan.

Who is responsible for allowing these charades to be created and continue in an unabated fashion,while the ROW withered away'sir?

Why were they heroes two years ago and villians today?

Where are the profits generated in your productivity boom?

Note the comments of the FASB spokesman,possibly hundreds of billions of off-balance sheet debt that must,at some time,be reconciled on companies' books.

Just another unexpected surprise,that's all.

CoBra(too) (04/06/02; 16:28:13MT - usagold.com msg#: 72892)
Usagold, Belgian, Miner et al ...
Just dropped in and skimmed the interesting posts re DB/BT and the potential blunder of landing BT's derivative - possible gold shorts at DB and eventually BuBa's door step.
Makes sense.

And probably makes even more sense by pondering DB's failed trial balloon to take over JPM, which would have re-delivered the gold problem back to the original sender.

Anyway, DB has bought the proverbial cat in the sack with BT and was squarely taking it on the chin, while part of a US/UK problem was neatly exported into the (pro gold?) euro lands.

Again, pure speculation on my part only, though the absolute
silence on euro CB's on any gold issue (remember my repeated queries to Klaus Liebscher the Austrian CB Gov. and a l.t. friend, to no effect) - except Wetelke's pathetic ramblings - would prove that something is very amiss in regard to gold.

... A final thought on the lender of last resort, which after the demise of Bretton Woods should have been the IMF
SDR's. We know seem to grasp that SDR's had a foster child called SDR Certificates, regulating gold equivalents as final barter payments for products necessary to keep up the grand illusion of inherent value in the free floating confetti currencies.

This system is doomed and the potential outcome can be read at the latest Atzteca di Oro at the Cafe - hopefully not the Dark Ages again.

- late night ramblings - cb2

mikal (04/06/02; 15:47:29MT - usagold.com msg#: 72891)
US troops suffer heavy losses?
http://www.hindustantimes.com/nonfram/070402/dFOR09.asp
Noninterventionism- Embracing this tenet, our founding fathers weren't only concerned with preserving lives, but the quality of life, and for each succeeding generation. The linked story originates from Moscow.

Old Yeller (04/06/02; 15:34:29MT - usagold.com msg#: 72890)
FWIW,Reg Howe's commentary on questionable Bundesbank/DB gold
http://www.goldensextant.com/commentary12.html#anchor29020

Derivative activities from May 2000.Wenteke is squirming in a open and brazen fashion,however,at the moment,central bankers are still above suspicion in the financial skullduggery that envelopes our planet.

It's up to the people in the steet to expose these criminals(I do not use this word lightly),as it is obvious we are only recieving cursory coverage in the mainstream media despite GATA's assertions to the contrary.

Look at how quickly Enron disappeared into the ether when it became clear how these people in postions of power and trust so insidiously work together.

Rockgrabber (04/06/02; 15:30:05MT - usagold.com msg#: 72889)
USA Gold, Thank you so much for this gold trail.
"""In the same way as prices rise against a currency durring inflation, physical gold prices begin to rise against paper gold. Less gold will delivered against contracts untill we end up with totall cash settlement. All the while the physical "Free Gold" market trades at higher and higher currency price. This is what dollar hyper inflation may look like in our modern paper gold markets. AS LONG AS INVESTORS BELIEVE IN PAPER GOLD, THEIR WEALTH WILL BE SLOWLY ABSORBED BY PHYSICAL GOLD BUYERS UNTILL TRADING BREAKS DOWN.""" By our Trail Guide.

I can feel the stomach of paper gold traders feel like they have just swallowed a bucket of ice water when they read that. That was written some time ago as well. Talk about a valuable lesson to learn before it is too late. I would be happy to buy physical gold at double the paper cost, even more. FOAs message has not fallen on deaf ears around these parts!!

Cavan Man (04/06/02; 14:57:48MT - usagold.com msg#: 72888)
@Sierra Madre
Pondering your thoughts as always; and, merely stating a truism though perhaps indirectly connecting your dots.

Best2U....CM

Old Yeller (04/06/02; 13:49:04MT - usagold.com msg#: 72887)
More good analysis of the US C/A deficit
http://www.2000wave.com/home1/home1.html

The elephant at the cocktail party is finally getting some serious notice.European M&A activity has slowed to a crawl(little wonder in light of massive "good-will" writedowns as a conesquence of buying into bubble valuations)and the Asian tigers are carrying the ball now.

Perhaps bomb ia better word.

Short sighted monetary officials and brain dead politicians;supposedly acting in their peoples' best interest.Best argument yet for buying physical gold and saying NO to destruction of years of hard work and diligent saving in an inevitably valueless currency.

Can't happen in America,those who should know better endlessly bleat.

Another fine mess,the search is ongoing for villians to blame.Hopefully,the diversionary tactics will not work this time.

TownCrier (4/6/02; 13:05:07MT - usagold.com msg#: 72886)
Good summary, MK...
Very nice to see it in print. A real treat for our Saturday visitors, to be sure.

R.

USAGOLD (4/6/02; 13:03:06MT - usagold.com msg#: 72885)
Randy, Belgian, 49er. . . .
The deeper you go into this analysis, the more you realize that physical gold remains the Holy Grail of the gold business -- the objective of all operations and precisely the opposite of what the opposition would have the public believe. Those who buy time, buy time to acquire the metal. That's why all paper representations are threatened on a continuum of risk for the holder the further you move away from the metal itself.

FOA and Another were right.

Sierra Madre (4/6/02; 12:54:30MT - usagold.com msg#: 72884)
Cavan Man: your statement about History:

"History can only be made in the context of preceeding events." - This you said in relation to my "Thoughts for the weekend."

I am puzzled by the connection between your clear, declarative statement, and the things I had to say; which I offered as thoughts, as suggestions to mull over.

"History can only be made in the context of preceeding events": yes, I suppose I can agree. But - there are lots of "buts" - WHAT are we to consider as the pertinent "preceeding events"? How do we select them? What rule do we apply to select the preceeding events? This is the problem of writing history: how to select the meaningful events. No two historians, however well-qualified, will ever write the same "History". Enough books to fill a library have been written on this subject. Herodotus, the Father of History, was hated by others as biased and malignant - Plutarch and Thucydides for example.
So if we want to stick to the "facts" - just what are the "facts"? Some historians even today are punished.

Black Blade writes about the End of Hydrocarbon Man; but, we have a preceeding event that is hardly known at the moment, which may change the outlook drastically: the Longitudinal Waves of the Vacuum which it appears MAY allow the construction of generators of energy in limitless quantities, such generators possibly to be on the market initially, by next year. See cheniere.org.

Incidentally, I can't think of an event more dangerous and destabilizing for humanity, that to provide it with unlimited and virtually cost-free energy! Disregard for limits, in any field, always brings with it Nemesis, the punishment of Nature, or of God. This invention may be the death of humanity.

Hoople: thanks for your six guidelines. I agree with you heartily. We don't have to know too much. Just the most significant data suffice (Again, what is "significant"?) Well, we can pick and choose as we like. I like your selection. 99.44% of the content of the WStJ is insignificant, as far the big picture is concerned. "So pure it floats!" Pure fluff.

M3: M3 is a good indicator. Very strictly speaking, prices in general are not - in Austrian economics - mechanically determined by money supply. But as a practical rule, I feel that prices DO follow the path of M3 over the long run. (Here we have Historical insight working together with Economic insight which is of another nature entirely.) I like your parallel between an M3 of 1 trillion, gold at $300, and M3 at 8 trillion, gold at $300. An objective of $2,400/oz is entirely reasonable, in my view.

Thanks for reading!

Sierra

TownCrier (4/6/02; 12:54:06MT - usagold.com msg#: 72883)
Thanks, Belgian
It seems that while I was typing my previous question, you were busy giving the lion's share of the answer I was ultimately expecting. Well done! That is, unless you have more you'd like to offer on the matter...

R.

TownCrier (4/6/02; 12:43:18MT - usagold.com msg#: 72882)
Question for Belgian
Since you've proven yourself to be quite adept at, shall I say, cutting through the underbrush, I was hoping you might be able to provide your particular brand of insights on this following matter.

You recently commented nicely on the motivations behind BuBa President Welteke's recent comments, and as you know, ECB President Duisenberg offered his own response regarding expectations of (fiscally- socially- economically-(?)) responsible activity from the BuBank with respect to gold. I can grasp that well enough.

My question for you is whether you have any inkling (translation = hunch, notion) of what Mr. Duisenberg may have been driving at when, beyond the jurisdictional element, he answered the equities question with a wink?

As a refresher, here again is his delivery Thursday regarding both the official practicality and official "endorsement" let's call it of Mr. Welteke's suggestion that the BuBank might purchase equities:

-----"Well, the management of both the foreign reserves and the domestic assets of any national central bank falls, beyond certain thresholds, under the guidelines and guidance of the ECB. That is one thing. And to buy equities is, let me put it this way, for many central banks not unusual."----

Your thoughts on the list he likely had in mind?

Thanks for your time.

R.

USAGOLD (4/6/02; 12:43:01MT - usagold.com msg#: 72881)
Belgian, 49er, All. . . .
Bundesbank, Old Bankers' Trust and Deutschbank
I would like to throw a thought into the mix.

In the early 1990s Bankers' Trust made a decision to go from being primarily a commercial bank involved in the kind of business your neighborhood commercial banks does to a global money-center bank replete with wholesale currency dealings, loan repackaging, investment banking, i.e., the works. In the late 1990s stories began to surface that Bankers Trust was having all sorts of internal problems -- much having to do with complex derivatives arrangements. If I recall correctly, Proctor & Gamble at one point filed a suit against Bankers' Trust for fraudulent representation with respect to derivatives' packaging sold P&G. For awhile the details of the suit were suppressed by the courts and I don't know if they ever became public. I lost track of the story after Bankers Trust mergerd with Deutschbank (in 1999 I believe). The fact of the matter is that Bankers' Trust had the reputation on Wall Street of being one of the big risk players in derivatives. This modus operandi usually includes gold loans. I am not certain that Bankers' Trust was inolved in the gold carry trade business but I would not be surprised if we learned that they were deeply involved.

What is interesting about the Bankers' Trust/Deutschbank merger (beyond the on-going strategy of merging an entity that has gotten itself in a trading hole with a stronger, more conservative entity -the Barrick/Homestake merger also fills this mold) is how risk can be transferred across national borders. What was once the lender of last resort problem in the United States is now the lender of last resort problem of Bundesbank. (It would be interesting if someone could find out how this would affect ECB as well should Bundesbank decide to bump the problem downline). And I don't think any of us should lose sight of the fact that the lender of last resort function remains a central bank's most fundamental responsibility. As James Turk most notably documented several years ago, a central bank can print paper money to bail out a failing commercial "debtor" but it cannot print gold to bail out a commercial [gold] "debtor."

Can it be that the responsibility for the Banker's Trust gold loans transferred to Bundesbank via Deutschbank and the merger? My guess is they have and as a result altered the long term German financial establishment's alliance with gold. Deutschbank inherited a problem it didn't really want (or understood it was taking on) and in the process affected German monetary policy. The Welteke gold gaffes follow on that. It seems to me that some gold depositor[s] need[s] reassurances and that's what these statements are all about. Who that depositor might is anyone's guess. If Bundesbank can get in line for WA2, that reassurance carries weight beyond anything simply verbal. Gold lenders understand the supply problems with gold -- if they don't, they should.

There simply is not a lot of gold around in size. Bundesbank cannot make a few discreet phone calls and find 500 tonnes. It's not going to happen. Everyone in the upper echelons of the gold business knows this and I will stick with my original analysis that the British, the Swiss and the German sales (if there are any) are essentially lender of last resort activities resulting from the on-going and structural shortage of hard metal. Germany cannot afford to let Deutschbank go down (as Doody references in the generalized sense). So it may sell unless the German people through one of its political parties stops it. The depositor will be forced to remain patient and hopeful. Welteke's there to provide comfort.

In the future, I think the eurozone will look long and hard at mergers with external banks, particularly British and American banks, to make sure that the lender of last resort responsibilities on gold loans is not dumped on their doorstep.

Hard to believe that Deutschbank made such a costly mistake, but they did. And, once again, its interesting that a simple merger would have such a ponderous effect on German gold policy. One wonders if there hasn't been some behind the scenes quid pro quo involving gold between the U.S. and Germany -- but in my mind the flow would be opposite of what has been contended: From the United States to Germany instead of the opposite.

This is all theory, my friends --an educated guess as to what might be happening behind the scenes. I'll leave you and future events to determine whether or not this scenario holds water.

YGM (4/6/02; 12:36:32MT - usagold.com msg#: 72880)
Economic Control & Steps Toward a World Bank...
http://educate-yourself.org/brotherhoodpart3.html
Interesting reading.........(NWO stuff)

Belgian (4/6/02; 12:20:50MT - usagold.com msg#: 72879)
David W. Tice and Associates
** When central bankers become asset managers **

Gold and the previous (non US) US$ as good as Gold have always been the assets to be managed by CBs under direct order of the oligarchic governments, no ? What difference does it make if "stocks" are directly (Welteke+FED) or indirectly (Interest Rates) managed as asset or asset derivative ? Goldreserves and consequently the respective floating currency's valuations have been managed by CBs for already more than 70 years. We just are allowed to see some more transparancy on how this gigantic interventionism is to evolve. It is nothing more than explaining what is ment by the financial tail, wagging the economic dog ! What is the essential difference in se between the PPT and central bank ?

The European Central Bank (ECB) is making the difference or at least WANTS to make the difference with the management of one particular and very special asset : GOLD !!!
Who cares if between the assets (Gold/currencies) there will be some stocks or apples ? Wich of the present or future assets will remain as for all seasons to come ? All together now : GOOOOOOOLD ! Repeat : Phyyyyysical GOLD !
Stocks are paper contracts, stating virtual ownership of the underlying enterprise. So are Bonds, notes and any other paper contract, derivative or not.
I could appreciate if tomorrow CBs start stockpiling Crude Oil ! Than we talk about an asset worthy to manage.
But it is exactly these two VERY REAL assets (Gold + Oil) that are subject of denigration ! Both can NOT and will NEVER reach zero value ! Japanese IRs rerached 0,01 % level and track the purchasing power of so many currencies as notes or bonds. Real estate and land values are constantly taxed away. Why do the Rotshields have such a treasure on high value antics (and Gold of course) ? No taxes and transferable to the next generations ! Let them (CBs) play and manage as much different paper as they wish. I'll keep my yellow coins under the matrass.

These high profile but minuscule Goldsales by CBs is a lot of sand in people's eyes. I even start to enjoy official announcements (threaths) of some more Goldsales/exchanges/reschufflings (no sarcasm intended)!

slingshot (4/6/02; 11:51:00MT - usagold.com msg#: 72878)
RobotGuy
The POG
What was the official POG? $299.80 or $301.00. There are two people who have something riding on the price. First my reputation and second the guy who is going to dye his hair blonde if gold stayed above $300.00 for Five consecative days. Betcha he was in my corner.
As for this experiment in calling the POG there are two ways to look at it.
Perception. That is what Joe Sixpack uses to evaluate the market. For him all is fairly well so his investment sharpness has been dulled. Why else would he continue to put large amount of money into the stock market and not invest in PM's.
Now sizing up the market that is a different animal altogether. The amount of information is far greater and researched for truth.

Perception and Sizing Up are almost the same except and I use this example.

When you meet somebody new and he is big. You think this guy is a nice guy. Thats perception.

Then this guy gets angry with you. And you think, can I take this guy or should I leave. That's Sizing Up. You might precieve that if you hang around you might get a whoopin.

So, Do you want to know when Gold goes to $1000.00 an oz.?

Slingshot-----------------------<>

Belgian (4/6/02; 11:25:22MT - usagold.com msg#: 72877)
Hoi Miner49er
I doubt that any Gold was/is/will be used for eventual Ost/West settlements !? Think you are running a bit too far with the Welteke Gold incitement. But indeed, Gold stands at the end of unemployment > contraction > stagfla > currency depreciation + welfare (re-distribution) etc. Basically confetti expansion in economic contraction, should be accompagnied with Gold (POG) value adjustments.
But that's what the ECB is doing (shy though) with its quarterly marking to market of Gold !!! Germany's reunification + expansion to Balkan and Russia is expansion. But is it a passive (redistribution) or a healthy productive expansion !? And here comes that desire of a specific monetary policy of the unified Germany, within the rest of Euroland. Yes Germany wants and has the capability of growing faster and deeper than the rest of us. And all this when they lost their total autonomy on monetary policy.
So far the euro and EMU has protected Euroland from heavier inflationarry burdens. But how difficult is speed of growth (different speeds of growth) and stability compatible in an Euroland with different economic velocities. This creates tensions and is reason for political fights (Welteke) on different programs. Euroland the Big "Compromis" ! Uhhgg.

Internal EMU tensions work on this quarterly valuation of the ECB gold reserves and on top of that the remaining goldreserves of the respective 12 member National Central Banks. Imagine you having to manage a household with 12 spouses (smile with understanding) ? And these 12 spouses have different spending patterns, but tied up to the Miner Agreement (WA) for periods of 5 years ...do you follow me ?
Add to the problem that it is not only your 12 spouses (EMU) but also other big spenders (U/UK/Japan/etc)having signed the WA and not belonging to your household. Woehaaa !

The final intention of FREE GOLD is having a constant Valuation of the Physical trade as a reflection of monetary management ! Bad management with strong currency depreciation = Higher POG or inversely.
This is surely not yet reflected in the present quarterly price marking of POG by the ECB !!! POG in euro is escorting the dollar/euro or euro/dollar trap ! Note that the US Gold is only reclassified and not marked to market since 30 years. And w've not yet come to any explanation for that reclassification and the possible role of Germany
into this. I'm at a complete loss here ! But don't give up searching.
Kind Regards to you Miner49er.

nickel62 (4/6/02; 11:06:30MT - usagold.com msg#: 72876)
The Hoople Thanks for the Handy Dandy Quick References
I found them very intriguing and most likly correct.

mikal (4/6/02; 10:23:18MT - usagold.com msg#: 72875)
Correct title to link below: "The right way to use silver in coinage. Part 2"
Site links other articles in English or Spanish

mikal (4/6/02; 10:16:39MT - usagold.com msg#: 72874)
@Canuck, All
http://www.plata.com.mx/plata/plata/comHSP27a.htm
By Hugo Salinas Price- "The right way to use silver in coinage." Written last fall and more relevant today than ever. This excerpt from the link concerns full legal tender status for silver!!!: "...Russians have plans similar to one we have..." Also he wrote in February 2002, this gem: "Mexicans buy more gold"-http://www.plata.com.mx/plata/plata/comNOT24a.htm

miner49er (4/6/02; 10:08:10MT - usagold.com msg#: 72873)
Belgian @ Welteke
Very interesting info... great analysis!

On the topic of Germany, do you have any thoughts regarding their unification? It had always seemed to me, that the 1:1 West/Ost Mark exchange would manifest itself in much worse price inflation. Yet, despite all the economists warnings, it seemed politically pre-determined, and indeed, that is what happened. And, in the same way (on a smaller scale) that the U.S. seemingly mystified its critics when it broke from gold in 71, so this superinflated new German state has had only mild inflationary indigestion, hardly the rupturing ulcer their physicians warned against.

Regarding the U.S. dollar actions of the 70s, a more complex understanding of factors like oil, gold, and the politics regarding a replacement currency, help fill in the gaps. Do you think there are any such considerations to be had in the German situation as well?

While Russian troops left the East ostensibly as a bankrupt, vanquished foe, with little alternative, do you think there was any other price paid for such an easy withdrawal? Seems to me, that despite the blown up state of the Soviet "empire," at that time, this was truly one of their prizes. It seems odd they let it go with so little fuss...

All this to suggest the question, if there were prices paid for an "easy" absorption of East back into West, was payment deferred to sometime in the future? Is payment coming due in this day?

While an official intervention on the part of a German utility (presumably because it needs help), is a typical short-term political goodie, it seems there would be more to it. Is this utility some metamorphosis of an old East German utility? If so, I would gather there are not too few shareowners still, that were former Soviet officials. This being some way of washing a payout promised a decade ago through transparent political channels. Maybe not, but I'm sure this kind of thinking goes on.

If gold is about to undergo an "official" revaluation, there are settlements that need to be made before the fact in cheap gold, just as much as settlements will be made after the fact, in revalued gold. Depending on who had strength in the bargaining position at the time...

Gotta run right now... will check in later. Would love to hear your take, though...

cheers,
miner

The Hoople (4/6/02; 08:28:15MT - usagold.com msg#: 72872)
Handy dandy references
I have come to use about 6 reference points to gauge the health (or lack of) of the U.S. economy. While these aren't anything new it quickly gets me to real information that can't be seasonally adjusted, hedonically deflated, or any other form of skewed reporting. So unless you just like watching Bartiromo blather about why the arrows are all red you can get your cost down to a weekly Barron's , a quick visit to your state web site, and visiting this site to convert those worthless fiats into money.

* IBM / GE stock prices - this is the faith in the market, period. If either did an Enron its all over.

* JPM/ Chase - barometer of derivatives bubble. When trillions go by- by this flag will be bright red.

* Fannie/ Freddie and HD - barometer of housing bubble. This is mostly the only prop under the economy right now. Trillions of government-backed cheap mortgages are doing the trick. For how long?

* Insider selling - Wall Street faith (or lack of) in Wall Street. As they say they are talking the talk, but aren't walking the walk right now.

* State sales tax collections - measures the real economic vitality and not just vague references to recovery. Our state just had a 9% drop in collections for the month of March. It isn't recovering if the sales tax revenue is dropping.

* M-3 non-adjusted - the real inflation rate. When M-3 was about a trillion gold was still about $300. Now M-3 has surpassed 7 trillion and still the same $300 gold. I figure the delayed rate therefore at $300 per trillion, or $2,100 for the real price of today's gold. Whenever I see 50 billion added almost weekly to M-3 I figure gold is up about $16.50 that week. Anything less is suppression. Remember when 1 share of Amazon would buy 2 oz of gold? Now it would barely cover the premium to spot. Think dollar instead of Amazon stock and you get a better idea of the risk. I know there are many excellent guides other than these 6 but I really think it clearly and quickly gives a picture.

YGM (4/6/02; 08:25:15MT - usagold.com msg#: 72871)
More failures......Who's "Next"??
Just the "Tip of the Iceberg" .......And the Public Investor Rides the Titanic....
DEFAULT BY NTL CABLE-TV WOULD MARK
THE BIGGEST CORPORATE BOND DEFAULT IN HISTORY,
even surpassing that of Enron.

A Bloomberg wire on Thursday pointed to the fact
that, according to Moody's Investors Service,
the corporate bond default by Enron last year
amounted to $9.9 billion ***(excluding bank credits and derivatives, of course),***
while the British cable-TV company NTL, based in New York,
is now about to default on $11.5 billion of corporate bonds.

On Monday this week, NTL was not able to meet interest payments
on its bonds. As Bloomberg writes: "It now has time until May 1
to make good on the payment or trigger
the world's biggest corporate debt default,
which would send it into Chapter 11 bankruptcy protection from
creditors."

NTL is the leading cable-TV group in Britain.
Its stock price plunged 43% on Monday alone,
while its market capitalization since the beginning of 2001 melted down from $11 billion to $23 million.

London's Financial Times notes that with total debt
more than 500 times larger than market value,
NTL surely qualifies for the "Guinness Book" of records.

NIPPON TELEPHONE & TELEGRAPH (NTT), JAPAN'S MAJOR PHONE COMPANY,
said today that it expects to post the biggest annual loss
by a Japanese nonfinancial company. NTT said it will record
a loss of 865 billion yen ($6.5 billion) for the fiscal year
ended March 31 of this year. This will result from NTT writing
down
2 trillion yen ($15 billion) in its investments in overseas
companies AT&T Wireless of America, Royal KPN of Netherland's
mobile phone unit, and Verio, Inc. of America,
and including a reorganization charge of NTT's own domestic unit.

Meanwhile, financially troubled Worldcom announced it would
layoff another 3,700 workers, or 4% of its total workforce.
Worldcom is America's second largest long-distance phone company,
and the world's biggest carrier of Internet traffic.

YGM (4/6/02; 08:05:00MT - usagold.com msg#: 72870)
Wildcard in China's future......
Internal strife can & will deflect external plans of Hard Line Communist Leaders, IMHO.
China's labor
unrest a portent
by Manik Mehta*
Taipei: Taiwan
TNA News with Commentary
No. 330, Weekend 6-7 April 2002

The pressure cooker has been whistling for quite some time, but few international analysts have taken notice of what has been happening in mainland China. The euphoria over what many anticipate will be a larger market has drowned out the cries of laborers, who are afraid of joining the ever-increasing hordes of the jobless.

With Chinese Premier Zhu Rongji's new emphasis on productivity, it is natural to expect millions of workers to be laid off from unproductive, bloated government organizations. Indeed, the mainland's labor problems will intensify further, with inefficient, unproductive units facing closure and workers being phased out of hitherto cozy sinecures. Layoffs will create social unrest. Workers depend on such jobs for basic survival. The socialist thinking of many workers, who still cling to past ideals regarding "overall good," has still not been completely eliminated. Organized labor in state factories is very much a problem � a situation that has come to the fore in recent days.

The mainland's "Rust Belt" was rocked March 21 by escalating unrest in two cities. Workers, angry about unpaid wages and job losses, took to the streets in face-to-face confrontations with military police. The communist leadership is fearful of social unrest in that the majority still lives in poverty while a small minority along the southeastern coast enjoys prosperity.

Eye-witnesses in the northern province of Liaoning told journalists that the military police had to be called in to safeguard the local administration office in the industrial center of Liaoyang, and break up demonstrations. While eye-witnesses said there were 10,000 demonstrators, local officials, in typical fashion, denied that there had been any protests at all.

Another scene occurred in Daqing � an oil town in Heilongjiang Province in the North � where employed and laid-off workers picketed the local office of China National Petroleum Corp. Angry protestors overturned a car, although it was not clear if there were any occupants inside the vehicle or whether anyone was injured. Despite all these incidents, the communist regime in Beijing declared that "nothing had happened" and that everything was "normal." But the "normal" situation continued to deteriorate further. Thousands of angry demonstrators marched to government offices calling for the release of four labor leaders, who had been arrested. Three leaders were arrested while holding talks with government officials in Liaoyang. The fourth was arrested near his house.

Strikes and demonstrations were unusual when workers were guaranteed jobs regardless of whether they were engaged in productive work or not. But as modernization continued and competition became fiercer, particularly after accession to the World Trade Organization, inefficient state-owned firms are being closed and the ranks of the unemployed continue to swell.

While demonstrations have, by and large, remained nonviolent, burgeoning unemployment will produce a great deal of worker frustration. Such frustration can lead to social unrest that may eventually culminate in violent upheavals. Already, the size of the demonstrations and intensity of the protests have taken both local and foreign experts by surprise. Workers believe that they have been cheated by factory managers and by extension the state, which after using them for decades is now throwing them out onto the streets.

The communist regime deployed armed police to quell what have been some of the largest protests in the country, highlighting the pressure the Chinese Communist Party is under from millions of workers who have lost their jobs since reform began. The workers at the Daqing oil company were particularly angered by a plan aimed at abolishing welfare benefits in exchange for a one-off payment unless workers continued to contribute to the pension fund, despite no longer being employed.

Many are already wondering if these protests will one day turn as volatile as those held at Tiananmen Square in 1989. Such an eventuality cannot be ruled out. After having jumped on the WTO bandwagon, the mainland's main priority is to remain competitive in global markets.

According to independent sources, another 20 million job losses are expected nationwide because of WTO membership. Indeed, as the mainland opens its market to imports, it will not only face the onslaught of sophisticated foreign technology but also products of superior quality. As purchasing power grows, a quality-conscious class of people will be more inclined to purchase imports.

The International Confederation of Free Trade Unions stated that workers in Daqing have established an unofficial union and that demonstrations have spread to other oilfields as an expression of solidarity. Activists are reportedly hiding to avoid arrest.

The Daqing unrest is reminiscent of trade union activity in communist Poland in the early 1980s when an unknown shipyard worker named Lech Walesa emerged as a trade union leader. He banded workers together, eventually leading them to liberate the country from the communist yoke. Is the mainland next?

*Manik Mehta is a free-lance writer based in New York.

Canuck (4/6/02; 08:04:57MT - usagold.com msg#: 72869)
Pondering
I saw Hamilton's recent essay on oil/gold ratio's (tks Waverider). He rediscusses the ancient 15/1 gold/oil ratio and outlines today's 11 to 1 ratio discussing if oil is too expensive and/or gold too cheap.

Other ratios are interesting, the Dow/Gold, Dow/Silver, Gold/Silver, Gold/XAU etc.

Ratios are statistical, what do they mean? In the case of the gold/oil ratio Hamilton makes the point that from 1950 to 1971 the ratio averaged some 14.8 and in the last 30 years it has increased to over 16.

So where is it going? Well, reading the numerous 'cheap oil' essays, posts and messages it seems to me that the ratio may swing strongly in oil's favour in the next few decades. As cheap oil becomes scarce will it's price not accelerate faster than gold? Let's guess a little. When the last barrel of oil is sucked out of the ground (in 2099??) suppose the ratio is 1 (gold $10,000/oil $10,000). Alarming, absurb, impossible? In 2006/2008, as we approach Hubbert's Peak, oil may fetch $80/bbl while gold languishes at $400/oz. The ratio, a mathematical convenient 5.

The long term view of 15/16 as the historical gold/oil ratio in my opinion will drop.

Silver is in my books as a love/hate metal; I can't decide to be bullish or bearish. Yes, silver is consumed (little above ground) and more industrial use than gold but silver has indeed lost it's largest use. That use, as we know, is the making of coin/currency. The US had a hoard of 2 billion ounces many, many moons ago and now it has a mere handful. This is alarming at face value but the other side of the coin is why do they need it? Why does the US Treasury and/or the US Mint need a massive stockpile of silver? Do they stockpile zinc, lead, ....apples?

The ageless/endless commodity/monetary argument for silver appears to have reached its conclusion. Silver has slowly shifted over the last 30 years to commodity status. Even the goods folks here and at other forums boast of more and more commodity uses and there is (as one must admit) less and less monetary use of silver.

Some time ago I chanced on a Dow/Silver ratio chart. I forget the exact numbers but I recall numbers of 100 and 200 to 1 generations ago while the ratio hit a mind-numbing 2200 when the Dow peaked at 11,000 and change. Where will this end up?

Back to the gold/oil ratio. Let's assume for the moment that alternatives to oil, NG, coal etc. will not be discovered/invented in the next 20 years. These conventional sources of energy will rise; given the assumption above, this is not a debatable fact. So, if the gold/oil ratio is to increase to its historical 16/1 gold must rise. Why will it rise?

If silver is being de-monetized and the debate rages that the PTB is doing the same where all this lead?

Forget about the ratios, I can concoct a corn/apples ratio that will be as meaningless as any other. The bottom line, IMVHO, is the attack on the monetary value of gold.

As Hamilton pointed out in 1995, the traditional 16/1 gold/ratio was severed. So began the de-monetization of the yellow metal. This is where my focus will be, trying to understand where gold is headed. Will it follow oil? Will the PTB lose control? Will gold be a commodity metal for high-performance printed circuit cards and jewellery?

The WA gave us a crumb but I do not know for sure if it's for real. Yeah, yeah "gold will remain an inportant reserve", blah, blah, blah. The $260/330/260 ramp up/ ramp down didn't convince me of the EU's intentions, seemingly not the market's either.

We know as much today as we did 5 or 6 years ago, nothing.

(Must run, sorry for the non-proofread; I await the flaming!!!)

Cavan Man (4/6/02; 08:01:06MT - usagold.com msg#: 72868)
@Sierra Madre
History can only be made in the context of preceeding events.

Hipplebeck (4/6/02; 07:33:35MT - usagold.com msg#: 72867)
The public debt (reposted)

Just to bring it into focus on a real life level,
Every child born in this country is starting off with a debt of over $20,000.
That's right.
Every one of us owes more than $20,000 on top of any personal debt we have run up.
If the government balances the budget from here on in, we will all have to pay $133 per month for the next 30 years to pay off
what has already been spent. (at 7% interest).
Yes that's right.
For a family of four that's $532 a month.

YGM (4/6/02; 06:53:09MT - usagold.com msg#: 72866)
GATA
Finally!... some serious Media coverage....
If Chris already posted this then please forgive me...YGM
*********************************************************

Le Metropole Members,

[GATA] GATA cracks U.S. news media blackout
Date: 4/4/2002 8:25:39 PM Central Standard Time
From: GATAComm@aol.com
To: gata@yahoogroups.com

9:08p ET Thursday, April 4, 2002

Dear Friend of GATA and Gold:

A remarkable financial market commentary that
centered on GATA's work was distributed
yesterday by the Knight-Ridder/Tribune news
service and published at the CNN and London
Evening Standard Internet sites.

While we don't know at this hour how extensively
the commentary has been published in the United
States, the Knight-Ridder/Tribune news service is
delivered to many major newspapers owned by that
company, including the Chicago Tribune, Philadelphia
Inquirer, and Miami Herald. So with this commentary,
we have finally cracked the U.S. media blackout
on the scheme to suppress the gold price.

This is all the more delightful because GATA
has not had any direct contact with the commentary's
author, Richard Morrissey, publisher of
www.CreditCurve.com. That is, GATA's work has been
reaching many people in the financial markets despite
the U.S. media blackout.

So don't despair at the dismissal of Reg Howe's
lawsuit in U.S. District Court in Boston. The
suit is not only is still alive with the motion
Howe has just filed for a revision of the
dismissal judgment, but the suit already had
brought the gold-suppression scheme to an
international audience. Exposure of that scheme
remains our biggest weapon, and we continue to
attack with it.

The Morrissey commentary appears below, along
with the Internet link to it at the CNN site. If
you use the link, please close any spacing that
may appear in it in this dispatch.

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

* * *

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?
story_id=29040017&ID=cnniw&scategory=Metals+%26+Minerals%3APrecious&

Gold Aims to Recapture Its Lustre
As a Safe Hedge in Troubled Times

By Richard Morrissey
Knight Ridder/Tribune Business News
April 3, 2002

After years of playing the part of Cinderella
to other more-favored financial assets, gold
is finally shaking off its dowdy image and
taking a shot at gaining the prize for best-
performing asset market of 2002.

Since 1997, $300 an ounce has been a ceiling
for gold as a combination of central bank
auctions and lending to hedge funds, forward
sales by gold producers, and the much-touted
death of inflation conspired to keep the
price well below its historic high of $870
hit in 1980.

To those gold bugs who have never given up
hope that this once-lauded store of value
would again take its rightful place in the
pantheon of credible financial instruments,
the poor performance of the commodity has
been nothing short of a conspiracy.

Indeed, according to many gold aficionados,
particularly those at the Gold Anti-Trust
Action Committee, the U.S. Federal Reserve,
the U.S. Treasury, and European central
banks, in league with major U.S. investment
banks, have conspired to keep the price of
gold low.

Gold broke through the $300 level to reach a
two-year high of $307.80 on 8 February. But
the move did not last long, and as the price
drifted off German Bundesbank President Ernst
Welteke conveniently speculated that Germany
might at some stage start selling gold. The
timing of his statement was seen by many as
an attempt by the central banks to ensure the
price of the commodity remained capped below
$300. However, the price has since rebounded,
trading back above the key $300 level last
week.

The latest rebound has been driven by new-
found interest from the hedge funds, many of
which are betting that persistent selling by
large investment banks to keep the price
down, and central bank comments to achieve
the same end, will ultimately fail to cap the
upward trend.

Indeed, the talk now is that this so-called
cartel is about to get its comeuppance, with
some gold optimists suggesting gold may hit
$600 or even $1,000 an ounce.

The Enron scandal has brought to the fore the
issue of cartels and especially the role of
so-called bullion banks that reportedly have
very large short positions in gold via the
derivatives market. These are now being
squeezed as the price of the commodity rises.
Indeed, there is wildfire speculation among
some U.S. gold watchers that if the price of
gold moves even $20-$30 higher we are going
to see these shorts getting hammered.

There are plenty of other reasons why gold
and gold-related stocks are worth serious
consideration. As well as Enron, the markets
also have to contend with Argentina's debt
default and the huge bankruptcy cases of U.S.
companies.

Another factor favoring gold is the
quadrupling of purchases of bullion by
Japanese consumers worried about the safety
of their bank deposits. Also, investors in
the Middle East have started to actively
purchase the metal as tensions over Iraq,
Israel, and Palestine mount.

Finally the all-powerful U.S. dollar, which
has held up remarkably well in the face of a
weaker U.S. economy, evaporating corporate
profits, and heightened worries over the
threat from terrorism, may be set for a
downturn, which usually means higher gold
prices.

Against this backdrop there is a genuine case
for thinking that gold provides an attractive
hedge against financial and political stress.

However, gold has to become more than just an
icon of gold bugs, conspiracy theorists, and
short-term speculators. Instead it needs to
broaden its appeal as an asset among
mainstream investors anxious to protect
themselves in an increasingly uncertain
financial and political environment.

---------------------

Richard Morrissey is publisher of
www.CreditCurve.com.

------------------------------------------

COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED BY OUR MEMBERS

Centennial Precious Metals
3033 East 1st Ave.
Suite 403
Denver, Colorado 80206
www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com

***Many other Coin dealers omitted here by me as per advertising rules. But USA GOLD is at the "TOP" of the list.......YGM.

Belgian (4/6/02; 06:38:01MT - usagold.com msg#: 72865)
Welteke...
Germany : "Welt am Sonntag" (World on sunday-Finance) by Ulrich Reitz : Translation
Bundesbank president E.Welteke made a beautifull eastern present to his friend (!) Financeminister H. Eichel (SPD-Socialist Party Deutschland) with the past intervieuw on Germany's Gold reserves (parts of) for interest bearing (German) stocks (utilities-RWE-?). Welteke will elaborate on what exactly he was suggesting previously on april the 11.
H. Eichel is happely waiting to see if sleeping Gold will be exchanged and handed over for interest producing paper.
Welteke's plan will bring nothing to compensate for the Brussel's deficit criteria. That was stated by the CBs. No more sales before 2004 (W.Duisenberg.)

April 11 will bring exclusion on this ridiculous little "political" (small) play that Welteke has been bringing. First statement was to test the water. Duisenberg responded and now the finale on april 11. Very little storm in a very little glas of water.

When you Google on Welteke's past intervieuws, you get a nice picture on his personality ! Judge it for yourself.

nickel62 (4/6/02; 06:12:02MT - usagold.com msg#: 72864)
Elephant size gold mines really as scarce as the giant oil field discoveries that YGM and BB mentioned!
As far as I can remember, the number of truely large gold discoveries is really quite limited. The Goldstrike mine in Nevada for all intents and purposes has built both Newmont and Barrick into what they are today. You have the Yanacocha mine in Peru, The Red Lake Mine of GOld Corp which is really the same ore body as the Placer Dome Mine Campbell Mine,a thousand yards away, and numerous other large districts in the world that have two or more mines sharing them and produce a million ounces or more. Not many of those type babies out there. And really you need that kind of economies of scale and high grades to be producing at the kinds of low total production costs that you need to stay in business at $300/ounce gold. We keep hearing about the ability of the mines to flood the world with production but realistically unless the technology has changed significantly in the last six years, even at $400/ounce the number of new production mines that could produce above 500,000 ounces per year is rather limited. I would be interested in a discussion where we shared our collective knowledge about what is out there in terms of potential new finds or more likely old fines that became uneconomic at sub $300/ounce gold and now might have a chance of comming back. Anyone interested? I don't mean touting various juniors by the way but talking about where the gold districts that could be brought back are and who has the best mothballed type of properties. As we all know the number of actual exploration plays that are out there is very limited. What do you think? I hope you understand that there can be a difference between sharing areas of potential and touting spec stocks. I have no interest in the latter, thanks. But there are some commodity discoveries of the past that might be finally starting to pay off. LEt me know if the members of the table think this is not doable.

Black Blade (4/6/02; 05:13:18MT - usagold.com msg#: 72863)
AGA Natural Gas Storage
http://highlandenergy.com/

The American Gas Association (AGA) has stated that natural gas in storage is at very high levels compared to last year. That may or may not be true due to disputes about sample population collection, data acquisition, and the methodology used. However, it should be noted that withdrawal rates have been exceptionally high � at times several times the withdrawal rate of last year. Natural Gas is the real sleeper that is slipping below the radar.

Note from the graph (at the link � click on AGA Storage, then graph or table menu) that storage levels are not all that much out of line compared to previous years.

The reason for such low natural gas storage levels last year are due to the booming "New Economy". In fact ever-more energy is consumed as more computers, Internet backbone, server farms, telecom infrastructure, etc. are built and used. This dramatic growth in the "New Economy" helped to create last years "energy crisis" as demand outstripped energy supply.

Natural Gas demand has been increasing at a very rapid pace as new power plants have been built in response to last years "energy crisis". Virtually every new power plant being built or planned is natural gas-fired due to environmental and political regulations that make coal, oil, and hydroelectric less desirable. Fuel cell technology will eventually be built, however, the fuel here is also natural gas (easier and energy efficient to break four hydrogens from one carbon than it is to break two hydrogens from one oxygen). That will of course add more pressure to natural gas supply. The new energy commission in California is studying this possibility with stacked fuel cells (daisy-chain) for critical centers such as hospitals, government services, etc.

Natural Gas demand will rise as aging nuclear power plants are retired or shutdown for maintenance. Recently boric acid corrosion has become a concern as the Besse-Davis nuclear power plant near Toledo has been found to be damaged. There are 69 such nuclear power plants (Three Mile Island design) that may be shutdown for inspections and possible repairs. The whole process may take anywhere from 90 days to 2 years.

Hydroelectric power is becoming questionable due to drought in many parts of the US. On the East Coast from New England to Georgia, drought has been enough of a concern that some regions have implemented water restrictions. There will be a greater reliance on other sources of power as water levels will likely be kept high as possible in some rivers for environmental reasons.

Coal-fired and Oil-fired power generation will probably be restricted due to lack of "carbon credits" that are routinely traded among power producers. Older plants are being retired after many years of use and the switch has been to natural gas while "carbon credits" are used to keep other older power plants operating.

Drilling activity for natural gas exploration and production has fallen to very low levels (Rig counts are far below last year's levels). This may result in a shortfall in supply this coming fall and winter � at the worst possible time. Production has already fallen by nearly 3% while decline rates in several fields have increased by as much as 29%. As reserves are not being replenished the outcome is almost a forgone conclusion. Last year with record drilling activity, production increased only 2%. The AGA storage data could very well be misleading and giving a false sense of security. If the economy is in recovery as some economist claim (doubtful), then we may find a different kind of "October Surprise".

- Black Blade

Black Blade (4/6/02; 04:21:24MT - usagold.com msg#: 72862)
Alcoa 1st-Qtr Profit Falls 46 Percent as Sales Drop
http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial%20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=ad_right1_topfin&bt=ad_position1_topfin&middle=ad_frame2_topfin&s=APK3RFRRlQWxjb2Eg

Snippit:

Pittsburgh, April 5 (Bloomberg) -- Alcoa Inc., the world's largest aluminum company, said first-quarter profit fell 46 percent and sales dropped because slumping demand from aircraft and automotive makers eroded prices. Earnings fell to $218 million, or 26 cents a share, from $404 million, or 46 cents, in the year-earlier period, Alcoa said in a statement. Sales declined for a third quarter in a row, dropping 19 percent to $4.98 billion.

Black Blade: Amazingly, yet not surprisingly, the spin from the media Trolls was that earnings fell 46% but "beat analysts estimates". Hmmm� This ridiculous spin has to be getting old. That is reflected in extremely low trading volumes on Wall Street.

Black Blade (4/6/02; 04:13:32MT - usagold.com msg#: 72861)
Venezuela oil dispute escalates
http://news.bbc.co.uk/hi/english/business/newsid_1912000/1912201.stm

Snippit:

The dispute between Venezuelan oil workers and the government has intensified, increasing the risk of a supply squeeze. Protests already caused some disruption to oil supplies on Thursday, and the workers at state-owned oil firm PDVSA vowed to step up the strike on Friday. "Workers of all sectors of PDVSA are starting today a progressive, collective suspension of work in operational and administrative areas," a spokesman for the group said.

The news comes amid growing concern over global oil supplies due to political troubles in the Middle East. Venezuela is the world's fourth largest exporter of crude oil and is a key supplier to the US market.

Black Blade: Venezuela is the largest oil importer to the US.

Black Blade (4/6/02; 04:02:28MT - usagold.com msg#: 72860)
Energy crisis costs ongoing
http://www.oregonlive.com/business/oregonian/index.ssf?/xml/story.ssf/html_standard.xsl?/base/business/10180113662067117.xml

Snippit:

Portland General Electric ratepayers will spend the next 31/2 years paying for an energy crisis that lasted little more than 12 months. This week, PGE's 738,000 customers began reimbursing PGE for $90.9 million in unanticipated electricity costs incurred last year when wholesale power prices skyrocketed. The payments will continue through August 2005.

Black Blade: The lack of preparation is costly. Yet the "Grasshopper" mentality has set in again � outta sight, outta mind. At least until the next "Energy Crisis".

Black Blade (4/6/02; 03:44:10MT - usagold.com msg#: 72859)
Middle East crisis sets off rush into gold
http://www.usatoday.com/money/markets/2002-04-05-gold.htm

Snippit:

LONDON (Reuters) � The Middle East's plunge into turmoil has driven gold prices toward their highest in more than two years as investors scramble for a safe home for their money. Gold prices have gained nearly 4% this week as Israeli tanks and troops poured into the West Bank in reprisal for a wave of Palestinian suicide bombings unleashed in Israel. With the West Bank in turmoil, speculation rife over a U.S.-led attack on Iraq and ongoing military deployment in Afghanistan, gold's reputation as a retreat in times of trouble has shone through.

Bullish gold fundamentals, including falling supplies from mines worldwide and a reluctance by producers to sell unmined nuggets in forward markets, have also underpinned the rally. "There's more interest being seen in gold now than in the last 15 years. There's been a mindset change," said Peter Hillyard, senior manager at ANZ Investment Bank. "Israel, Iraq, additional troops in Afghanistan, higher oil prices � the list is endless. In that environment gold goes up. ... There's enough going on to add gold as a portfolio diversifier," Hillyard said.

In local currency terms, gold prices in India, the world's top consumer, were at five-year highs and at nine-year highs in Australian dollar terms, Norman said. Japanese savers, worried over the safety of their bank deposits and the yen, have also scurried into gold to bank a dollar-denominated asset away from a lumbering stock market. Gold was trading in London at $301.00/301.50 on Friday, off its highs after President Bush called for a halt to Israel's weeklong drive into the West Bank and a withdrawal of Israeli forces from the area.

Black Blade: The list is endless indeed. Meanwhile the Bankers, Investment Houses, and Central Banks are walking a tightrope�..one misstep anywhere and the POG is off to the races once again.

Black Blade (4/6/02; 03:26:32MT - usagold.com msg#: 72858)
Market Wrap Up � Puplava
http://www.financialsense.com/Market/wrapup.htm

Uncertainty of War

Snippit:

There were three factors that influenced the markets this week: 1) tensions in the Middle East, 2) economic numbers, and 3) earnings warnings. The ongoing tensions in the Middle East had the greatest impact on the markets with worries of the conflict erupting into a regional conflagration. Suicide bombings continued all week as Israeli troops took over and occupied many key Palestinian towns. The uncertainty of war breaking out in the region and the impact it would have on the oil markets helped to keep energy prices high this week. The Bush/Powell peace initiative helped to cool down tensions, which resulted with oil and natural gas prices pulling back by the end of the week. But there was still a sense of unease with investors with so many unknowns having no closure.

The Economy

This week the data was mixed with most economic reports indicating a weakening economy. The week began with a drop in U.S. factory orders, which fell in February. This report contrasted earlier reports on the manufacturing sector that indicated the 18-month slump was beginning to recover. Factory orders fell by 0.1% in February, the first drop since November of last year.

Other reports out this week showed the unemployment rate rose last month from 5.5% in February to 5.7% in March. It looks like those numbers may go even higher with a sharp jump in jobless claims this week. The number of Americans filing unemployment claims jumped from 396,000 to 460,000. Companies continue to downsize in an effort to squeeze costs down. In this competitive environment companies lack pricing power due to still competition, so what is left is companies are reigning in costs, which means further reductions in payroll.

Black Blade: I had thought to comment on the rise of 58,000 new jobs vs. the rise in the unemployment rate. How can this be? Simply put we are looking at more BLS trickery. These are "seasonally adjusted" numbers (read statistically manipulated) that ignore many thousands more who are out of work from various sectors that are conveniently ignored (otherwise there would be too many embarrassing questions to address). Remember that Februarys 66,000 new jobs disappear to be readjusted to a 2,000 lost jobs ("seasonally adjusted" ones of course or the losses would be much greater). Notice how the Trolls on CNBC and other media focus on the new jobs while neglecting to refer to the unemployment rate rising from 5.5% to 5.7%. More and more US economic data makes little sense � all that is required as far as the BLS is concerned is that enough people are fooled. Fooling the US public is becoming a more difficult proposition each day as trading volume on US markets have fallen off a cliff, unemployment rolls keep growing, corporate and consumer debt grows rapidly, corporations warn on earnings at a growing pace, corporate accounting scandals appear daily, public confidence reaches for all time lows, etc. The House of Cards is wavering and ready to fall. We do live in "Interesting Times".

Belgian (4/6/02; 03:22:59MT - usagold.com msg#: 72857)
The euro's Ambitions
Still NOT yet recognized by the vast majorities of Dollar-blind, that the euro's alternative for STABILITY is Crucial ! Morgan Stanley for instance, classifies the euro in the Gold / SwissFr line !? As if the euro is a temporary refuge for temporary dollar-problems and holds nothing more than that. (mistake of course)
The euro is hesitant to show its real ambitions. Ambitions to overthrow Emperor Dollar ! Not an easy task, as we all do know. The plan/concept is there but some fear/hesitation to execute/materialize it,... reigns. The euro/gold-concept, needs the help and alliniation of Arabian oil. And it must be here that doubts might exist. Doubts about present or future division between Arabian oil producers themselves. Euroland and allies Doubts about the not foreseeable consequences of a substantial dollar fallout.
Doubts about the scale and intensity of US retaliatons.
These doubts must be living in Germany ! The French have much more selfconfidence (flexibility) on these matters.

A New Free Market for Physical Gold Trade, combined with another currency (the euro) must have some flaws and weaknesess. Can there be another kind of manipulation or unbalancing of power shifts ? Hot soup, isn't it ?

An alliance of Euroland + China + Russia + ME is quite a BIG piece of cake to put it undamaged on the currency table.
That's why the introduction of the "concept" must proceed with extreme care and precission. The architects and builders are a small minority of CEOs.

Whatever Welteke and his German faction might have in mind, is subordinate to the reality force and intentions of oil-euro allies. The POO and its consequences will inevitably bring the euro on the foreplan as the better "STABILITY" factor and tool ! Simply because of the *POSITIVE* Gold-Connection in blatant contrast with what the dollar has always stood for,... a Gold rival!

It is or the euro as a special (better) currency or the POO that will set Gold Free ! Both euro + Gold will enhance and perpetuate the initiated Gold move.

ST technical interpretation on POG : If 297,6$ holds a mini inverse SHS (bar-chart) is in place and a fib. target of 329$ is the next attraction point. Will see if POG rise has dramatic consequences for the shorters (Deutsche Bank included), already unloading their threathening derivatives or not ?

Black Blade (4/6/02; 03:01:05MT - usagold.com msg#: 72856)
The Next Big Thing by Jim Puplava
http://www.financialsense.com/stormwatch/update.htm

Snippit:

During the 70's the U.S. experienced a loss of confidence in government and in financial paper. The period was characterized by a series of policy failures that directly contributed to a rise in inflation. Investors preferred to put their money in tangibles rather than intangibles. These graphs of gold, silver, and oil show the tremendous price rise of key commodities during this time. Other commodities such as grains, cotton, and base metals also rose in value. Everything tangible from gold, oil, real estate, and rare art to collectables rose in value. The stock markets languished during this same period as reflected in the previous graphs of the Dow Industrials. If you made money in stocks, it was mainly in small cap companies or the commodity producers.

Basic Needs and Population

My observations lead me to believe the next big move will be in commodities. I believe it will be driven by supply and demand factors aided and abetted by a growing world population. Food, water, and energy are necessities. These items aren't optional, but are considered basic necessities of life. Without them, civilization would perish. At the end of the last century, world population was estimated to be 6 billion. By the year, 2020 global organizations from the World Bank to the UN estimate the human population on this earth will grow to 9 billion people, a fifty percent increase from where we are today. This population growth will become the primary driver of the demand for commodities of all kinds, will special emphasis on clean water, energy, and food. This demand for basics will take place regardless of the condition of the economy be it inflationary of deflationary.

Central Bankers' Two-Front War

For these reasons it has been necessary to maintain confidence in all things financial be it stocks, bonds or currencies. Central bankers are fighting a two-front war. One front is in the financial system that requires constant injections of liquidity to hold back the debt defaults and prevent the system from collapsing. The other battle is to prevent users inside the system from shifting their funds to an alternative medium such as gold, silver, oil or any other tangible good that would compete with paper and credit. It is a lot like a fork in the road. On one side is the credit and paper money system that makes up the world's financial system. On the other road are tangible goods such as base metals, oil, silver and gold. The war is a constant battle where the public must be corralled on the one side of the road. Therefore, in a crisis, the only alternative is to shift from one paper asset to another rather than exit the system for the other side of the road.

Black Blade: A new Puplava report. Are we due For a Repeat? I say that it's very possible. Much is discussed in Puplava's article (a good read).

As always, get out of debt, get Gold and Silver portfolio insurance, get enough cash on hand for several months expenses, and start a nonperishable food and basic goods storage program.

Jin-Yin (4/6/02; 02:48:19MT - usagold.com msg#: 72855)
Israel
@darkhorse � totally agree with you about many of us not having understanding of all information through personal experience. Atrocities on both sides make this developing situation all the more difficult to grasp.

@DOWNUNDER � G'day. Trying to understand what the facts are help to better comprehend the world at large. I have no opinion on the subject and certainly don't want to pass judgement on who is right or wrong. Like many people I don't have a clear understanding of most of the facts anyway, that is why some of the facts, if true, I found interesting.

Yes the e-mail was one sided and that is why I asked a few questions in my commentary; rhetorical questions that highlighted such concerns. I would have also liked to receive an e-mail with a Palestinian view but didn't. Thanks for the heads up as next time I will be clearer so as to be better understood when posting, especially with such a touchy subject.

Black Blade (4/6/02; 02:10:39MT - usagold.com msg#: 72854)
The Rise and Fall of Hydro-Carbon Man" - Part II

The Rise and Fall of Hydro-Carbon Man" - Part II

GOLD - OIL LINK:

The coming oil price shock/oil crisis will make the last temporary oil price shocks look very mild in comparison. On January 21, 1980, the price of gold on the London fixing set a record at $850 an ounce. This ended an inflationary decade of oil price shocks, freezing of Iran's assets and Soviet invasion of Afghanistan, which sent investors rushing for gold and silver. The average London price of gold for the year was $614.63 per ounce. Could it happen again? You bet it will. Gold has it's own intrinsic value and several thousand years of history is not about to vaporize and disappear. As philosopher George Santayana stated, that those who forget history are condemned to repeat it.

Every postwar recession has been preceded by a rapidly rising price of oil. Gold prices lagged the price of rising oil, yet the price of gold eventually rose as well. The question one must ask: If oil is rising in price, then why is gold not rising as well?

When the price of oil had risen in the past due to OPEC oil supply disruptions, the price of gold responded with a price rise as well. In 1974 gold rose 20% in response to the Arab oil embargo, and in 1979 gold also rose over 125% in response to the overthrow of the Shah of Iran and subsequent Iranian revolution and hostage crisis. Oil and Gold have had roughly a 15 barrels of oil to 1 ounce of gold ratio. If this ratio were to be stable, then at today's $35.00/bbl, gold should be valued at $525.00/oz. If oil were to be priced at $50.00/bbl as some sources expect will likely happen, then gold should rise to $750.00/oz. Oil at an inflation adjusted value of $140.00/bbl that roughly matches its past record high, then gold should reach $2100/oz. (similar to recent projections in Forbes magazine).

Another way to look at the oil-gold relationship is to compare pricing during the 1973 Arab oil embargo and into 1974. Oil rose in price from $2.00/bbl in 1971 to $10.00/bbl in 1974, or a 500% increase in price. Following the relationship of the oil-gold ratio, an increase of 300% in the price of oil (similar to recent prices) should yield a price of $962.50/oz. for gold. A similar increase in the price of oil as the 1973 500% increase in the price of oil should yield a price of $1375.00/oz gold (based on a recent $275.00/oz gold and a projected $50.00/bbl oil). These back of the envelope calculations are based on the recent price of gold at $275.00/oz, which in my opinion is grossly undervalued, so it would appear upon closer examination that gold could and should increase much more in value. However one were to look at it, the oil:gold ratio appears to be out of balance and is due to readjust to the norm.

GOLD MANIPULATION:

Why is gold priced so low? If some are correct in their assumptions that the Saudi's and others in the Middle-eastern countries prefer payment in gold for oil (as per the 1920's oil deals), then they also have an interest in having a low gold price vs. a high oil price. This yields more gold per barrel of oil. This is unsustainable of course and eventually the lid will blow off unless some powerful forces cap the price of gold. The current gold prices are unsustainable in face of a growing energy crisis. As the price of oil continues to rise, the producers will not be very excited about receiving devalued dollars for their diminishing natural resource. The Central Bankers know that there is pressure on gold so there is a concerted effort to malign the perception of gold as portfolio insurance and as an investment. That is the primary reason for the Bank of England auctions, and the various other auctions that have come from European central banks and from the little CB's that can be leaned on to submit to their stronger cousins. This is only a temporary measure as it cannot continue indefinitely. There is not enough gold to continue with this charade forever. The longer it continues, the more explosive the rise in the price of gold. This is apparently the reason for the frantic efforts by so-called "Gold Analysts" at the major Bullion Banks who engage in hysterical effort to talk down gold prices and damage gold's reputation as a hedge against inflation.

The situation is more dire as one recognizes that the LMBA and Bullion Bankers have loaned out millions of ounces at ridiculous interest rates to those who sell short gold and then invest the proceeds in the equities markets or in higher yielding government paper and scalp the spread (Gold Carry Trade). Simply put - that gold is gone. The forward selling gold producers borrow gold, sell it, and usually use the proceeds to advance their mining operations. Some miners, however, act as hedge funds and invest in higher yielding government paper and they too scalp the spread. When these miners get in trouble and go bankrupt, the counter-party bank is on the hook. It is in the best interest of the LBMA and Bullion Bankers to maintain the illusion that gold is abundant and move the price lower in an effort to discourage gold investment. A sharp rise in gold prices would likely result in "margin-call" requirements that could level many financial institutions and hedged miners.

Eventually, something has to give. As the price of oil continues to rise and the ripple effects work through the economy in the form of higher prices, that is inflation in spite of government manipulated gauges of inflation such as the Bureau of Labor Statistics US Consumer Price Indices (CPI) and Producer Price Indices (PPI), the price of gold will explosively rise in value like a tidal wave as it is recognized as a hedge against inflation. The Federal Reserve Bank is trying to slow the economy with mild on-again and off-again interest rate hikes in an effort to engineer a "soft- landing" This is likely to fail as it has in the last 8 out of 10 times it was attempted. The odds are against it. It is a delicate balancing act between adjusting interest rates and money supply. Once inflation is truly felt, then people will run to hard assets. If oil rises to $50.00/bbl, then the government will have an extremely difficult time hiding and manipulating the inflation figures.

PRECIOUS METALS AND PREPARATION:

Physical precious metals are not an investment as much as insurance for the possibilities of economic disaster, natural disaster, or even temporary disruptions such as family tragedy, illness or unemployment. Many people prepared for possible disruptions to everyday life in advance to Y2K. Fortunately there were few problems encountered during the transition from 1999 to 2000. Those who prepared for Y2K and remain so now are better positioned for the problems that may be encountered during the coming energy crisis. A prolonged recession should be expected. In a worse case scenario, hard assets such as gold, silver, and platinum bullion and coin will transfer wealth across any pending disaster. We have health insurance if we become ill or am injured, we have life insurance for our heirs should we pass away, we have insurance if we have an automobile accident, and we have home insurance in case our homes are damaged or destroyed. Does it not make sense to insure our investment portfolios as well?

Hard assets are king when all hell breaks loose. Is it any wonder then that George Soros buys vast tracts of land and in the Silver miner Apex Silver (SIL), that Bill Gates purchases 10.3% of Pan American Silver (PAAS), and that Warren Buffett purchases 137 million ounces of silver and keeps it offshore out of the grasp of a potentially hostile US Government? Does it not seem reasonable that one should follow the lead of those who are supposedly in the know? Why stop at hard assets? Have a storage program of food, water and necessities in storage in case of unemployment, natural disaster, or worse. Get out of debt as soon as possible. Get a well-stocked first-aid locker. Get firearms and ammunition for hunting wild game. Maybe even a wood burning stove and plenty of fire wood. Disaster may not come, but many people tend to sleep better at night knowing that they have "battened down the hatches" so to speak. Think of the panic during the Cuban missile crisis as people rushed to the super markets and stripped the shelves bare. Why even when Johnny Carson on the "Tonight Show" a few years ago on US television joked about a toilet paper shortage, he unwittingly created a shortage as people rushed to get plenty of toilet paper. You see, anything can happen, but then I (and a few others) sleep very well at night.

CONCLUSION:

We have already learned the consequences of an oil crisis. In 1973 during the Arab oil embargo, the resulting higher costs were passed along to the consumer and the world's economies were thrown into recession. Those of course were only temporary blips. The world's economies are addicted to cheap oil. The new oil shock is coming and it is permanent. Hydro-Carbon man is going to suffer the effects of forced Hydro-Carbon withdrawal. Oil supplies from mature oil fields are diminishing and no new significant discoveries are being made to replace them. Current reserves have been inflated for political and economic reasons. Alternative and non-conventional energy sources are more costly and most are not likely to be recoverable. The discovery of new fields is not keeping up with current depletion rates. The crucial point however, is not when the world "runs out of oil," but rather the half-way point when production is no longer is increasing and when it begins to decline (Hubbert Peak), and ever increasing demand for oil forces prices to rise dramatically. There is a finite amount of oil. As oil reserves are depleted there will be rampant inflation and irreparable damage to economic growth. It is possible that much of the "non-conventional" oil may be eventually recoverable with new technology, new refining methods could conceivably be developed, and reclassified as "conventional" oil. However, at current prices these "non-conventional" sources are not profitable. The current infrastructure and refinery capacity limits our ability to keep up with demand. The world is an unstable place and the inability to expand energy only makes the world more unstable. The ratio of the historical oil to gold relationship is severely out of balance and offers a unique opportunity in gold (and silver) investments. Gold is about to reassert itself as a hedge against the coming inflationary pressures and world turmoil. "Hydro-Carbon Man" must adjust to his new environment of declining energy resources, higher energy costs, or go extinct.

RECOMMENDED READING:

Campbell, C.J., The Next Oil Price Shock: The World's Remaining Oil and Its Depletion," Energy Exploration and Exploitation, v. 13, no. 1, 1995, p. 36.

Campbell, C.J., The Coming Oil Crisis, Multi-Science Publishing Company & Petroconsultants, 1997.

Campbell, C.J., and Laherrere, J.H., The End of Cheap Oil, Scientific American, Mar. 1998.

Black Blade (4/6/02; 02:09:16MT - usagold.com msg#: 72853)
The Rise and Fall of "Hydro-Carbon Man" (Reprise)
The following is a repost that I put forth on this forum quite some time ago. In light of recent events I repost it here. There have been some changes in Oil and Gold prices, however, the premise remains the same.

The Rise and Fall of "Hydro-Carbon Man" (Reprise)

HYDRO-CARBON MAN:

The modern industrial economy is dependent on cheap oil. Cheap oil has fueled the industrial age and has advanced modern man to what can best be described as the age of "Hydro-Carbon Man." Yes, there is evolution, as man evolved from the hunter-gather and agrarian society to the heavy industry of modern society. It was crude oil that gave rise to heavy industry, efficient mechanized transportation, increased out-put of goods and services, and has become vital for modern agriculture. But how long can Hydro-Carbon Man continue without cheap oil?

The question is not whether, but rather when cheap world crude oil productivity will begin to decline bringing about the long awaited "permanent oil shock." Demand for cheap oil continues to increase, all the while, the world's population continues to grow. The real problem of course, is when the production of oil peaks while demand continues to increase and the world's population continues to grow unabated. Emerging economies that are entering into the industrial age will also demand their share of oil. Oil was the principal fuel powering the "Asian Tigers" economic growth. A booming US economy continues to consume ever-increasing amounts of oil.

It was the abundance of cheap oil gave rise to "Hydro-Carbon Man ". Oil and its refined products allowed "Hydro-Carbon Man" to expand his productivity several fold. Now Hydro-Carbon Man's existence is threatened by the limitations of "cheap oil". Like a drug addict who suddenly has to face a very high price for his fix, Hydro-Carbon Man is about to learn the realities of life without an abundance of "cheap oil". Oil is the primary energy source for the world's economies and now we are faced with the limited ability to increase production of "cheap oil" and continue fueling future economic growth.

When the price of petroleum rose in the past it has had profound effects on the economy. Since oil is a vital commodity for everything from energy, to petrochemicals, to plastics, and to agriculture, it is perfectly understandable that high oil prices have resulted in economic recession. Gold and Silver prices generally increased in dollar terms as the effects of higher petroleum prices filter through the economy. Every postwar economic recession has been preceded by sudden oil price increases. In 1973 prices tripled in response to an Arab oil embargo as punishment for the western nations support of Israel during the 1973 Arab-Israeli conflict. In 1979, prices nearly doubled when the Shah was dethroned in Iran and the Soviets invaded Afghanistan. Oil prices rocketed to over $40.00/bbl during the 1990 Gulf War. The major economies went into a tail-spin and suffered through major recessions. These were only temporary disruptions to the economy. The coming oil crunch is not going to be so temporary. Gold and silver prices increased in the past as recession and inflation (stagflation) followed those oil shocks. Precious metals will rise in value in the coming oil shock as well. If we learn anything from our past, it should be that history does repeat time and again (my apologies to philosopher George Santayana).

WORLD OIL SUPPLY:

The first thing that one must remember is that the problem is not how much oil is left, but rather how much oil is recoverable, and more importantly, how much is economically recoverable. Secondly, what is perhaps more important is what happens when production no longer increases or worse, tapers off, while demand increases. Thirdly, the question arises whether or not non-conventional oil, alternative energy sources, new technology, and energy conservation measures can make up for the dwindling conventional oil reserves.

How did we get to the point where we risk not being able to produce sufficient oil? The member nations of OPEC have attempted to act in concert to manipulate oil prices by setting production quotas that often resulted in both cheating by various members. Many countries and companies have grossly exaggerated the estimates of their petroleum reserves in order to get increased OPEC production quotas, to increase their stock prices, or to obtain more collateral for their loans. Another problem lies in the definition of "reserves." Reserves are generally referred to as proven oil reserves that can be economically recovered using existing technology. However, many countries have played "fast and loose" with this definition. True that much of that oil does exist, but whether it is economically recoverable is debatable. Many simply do not understand the difference between "resources" (petroleum known to exist) and "reserves" (economically recoverable petroleum). They are unaware of the limitations of cheaply produced petroleum and point to the vast deposits of "non-conventional" petroleum sources such as tar sands and oil shales without awareness that these are "resources" and not "reserves." Without new improved technology or willingness to pay perhaps $60.00 or more per barrel of crude oil, these deposits are not likely to be extensively exploited.

Most of the world's oil has been found. The so-called "Super Giants" (extremely large oil fields) have been found prior to 1973. None have been found since, and this includes the time period encompassing the early 1980's when crude hit all-time highs and new technology was developed. In fact, the discovery rate for "Large Fields" has declined. Perhaps as much as 90% of the world's crude oil has been found. The amount of new discoveries in the world has dropped from a peak of 41 billion barrels in 1962 to an annual rate of 5 billion to 6 billion barrels a year now.

Predicting when oil production increases will peak and when the inevitable decline begins can be fairly accurately calculated. This mathematical model was first published in 1956 by M. King Hubbert, a Shell Oil geologist. He realized early on that the unrestricted extraction of oil from a region eventually reaches a maximum production level. He fitted a bell curve to production statistics and projected the point when production peaks would occur. He did this for US oil production in the lower 48 states and concluded that oil production would peak in 1969, give or take a year. US production actually peaked in 1970. Oil productions from other regions around the world have successfully followed the Hubbert Curve model. The analysis reveals that Norway and the U.K. have likely reached their production peaks. Mexico's largest oil field, offshore Cantarell, has a $10 billion nitrogen injection project about to be commissioned to re-pressurize the field to offset declining production. Venezuela is facing a similar situation as Mexico. The Persian Gulf states are expected to reach peak production between 2006 and 2009. Global peak production could be reached as early as 2002, then decline over the next 70 years. As oil stocks peak and eventually decline, prices will rise steeply. Provided that there isn't a global recession (a more likely probability), then worldwide oil production should peak during the first decade of the 21st century.

What about undiscovered oil fields? There are very few geologically probable places that have not been actively explored. This includes extremely deep water and the polar regions. Since these areas are in remote and generally inaccessible regions, the costs alone would make any such oil fields uneconomic, if in fact they did exist. The problem is not so much that there is a shortage of reserves, but rather a shortage of production. For years energy companies have not invested in increasing their oil production capacity and refining capacity. In fact, in the US, no new refineries have been built since the 1970's due to EPA regulations and perceived liabilities.

WORLD DEMAND:

World demand for cheap oil is growing exponentially due to population and economic growth. The emerging economies of China, India, Southeast Asia, Latin America, and Africa are rapidly industrializing and becoming more important to the world economy. To fuel this industrialization, ever increasing amounts of oil must be found, produced, and refined. Increased oil production has come from existing wells that have been exploited for many decades. Many advances in technology have allowed man to squeeze ever more oil from these oil fields. Yet no significant new fields have been discovered for many years. The refining capacity for any new oil would be severely restricted as oil companies have not invested in any new refineries or infrastructure. Regulatory limitations and recent low prices have created an environment where oil companies do not want the added liabilities. Any additional demand will severely stress the already deteriorated and fragile oil production infrastructure. Production from untapped reserves are limited by the simple fact that it takes years to meet regulatory criteria, drill wells, to setup production and lack of new refining facilities. In the US much of the known reserves are off-limits in such areas as the Alaskan north slope, Southern California coast, and Rocky Mountain Front.

Additional pressure on the world's oil supply is coming from the emerging economies of Latin America, Africa, and Asia. The added economic and political tension will only increase as competition for world oil supply intensifies. The third world emerging economies such as China and India with over one third of the world's population will require ever increasing energy as they become major suppliers of goods. The energy needs of China and India are projected to increase by at least 400% in the next decade.

All the while, the Middle Eastern nations of OPEC continue to gain greater share of the remaining global oil business in a politically unstable region of the world. Increasing prices could reduce demand, however, the world as we know it runs on oil. In truth "Hydro-Carbon Man" and his addiction to "cheap oil" is about to come crashing to an end.

PRODUCTION CAPACITY:

The debate over whether or not there is plenty of cheap oil is a moot point when one considers that there is not enough refining capacity to produce from any significant increase in oil production. The only country believed to have any excess production capacity is Saudi Arabia. Kuwait recently admitted that they are unable to meet their OPEC quota. This is a recipe for disaster.

CLASSIFICATIONS OF OIL:

There are generally two classifications of oil. These are "Conventional Oil" and "Non- conventional Oil." "Conventional Oil" refers to oil that is easily economically recovered. "Conventional oil" is that which is found and produced today from large oil fields. "Non- conventional Oil" is that which is or can be produced from a variety of sources at higher oil prices.

CONVENTIONAL OIL:

Conventional oil sources are those that can and have been exploited easily and profitably. The largest oil fields were the easiest to find and exploit. The largest oil fields, so-called "Super Giants" were found early on as there were usually many clues as to the existence of a large pool of oil. Much of the time oil would even be found at the surface in what are called oil seeps. As the geology of these large oil fields was more fully understood over time, other surface expressions were useful in finding oil. The sheer size of these "Super Giants" (basins or oil province) were the easiest to find with any given technology. The exploration for oil improved with technological advances with the use of refraction seismic, analog reflection seismic, digital reflection seismic, 3-D digital reflection seismic, and electric well logs. Eventually as these oil fields were exploited and new ones were found, advances were made in drilling technologies as well such as horizontal (directional) drilling. The search for oil has advanced offshore and there too drilling technology has improved with the use of offshore drilling barges to deepwater drill ships, jack-up drill-rigs, and semi-submersible rigs.

In all probability, all the major oil basins or provinces have been found and the world is in effect, truly running out of oil. At least out of easily exploited conventional oil. In fact, the peak year for oil discoveries in the US was in 1930, and the peak for worldwide oil discoveries was in 1962. Discovery rates have steadily fallen since. In fact, most increases in oil production since then have come from technological advances that were applied to already discovered oil fields. 3-D Seismic and horizontal drilling techniques improved oil recovery in known fields, but have not resulted in any significant discoveries of major fields.

NON-CONVENTIONAL OIL:

Much has been discussed about non-conventional oil sources and alternative energy sources. It is true that there is a substantial amount of non-conventional oil. The problem of course is that it is much more costly and much of this oil is not economically recoverable at current prices. The Oil Sands of Canada's Athabasca region may have as much as 900 billion to 1.3 trillion barrels equivalent oil (maybe 300 to 600 billion recoverable). The wholesale processing of tar sands (effectively asphalt) is difficult and the impurities creates a whole set of environmental problems as it is mined and therefore is likely to face a lot of political pressure. There are at least 2 major producers in the region: Syncrude (a consortium of oil producers), and Suncor (SU). The same problems arise from even more difficult oil shales. The problems of course are the included heavy metals and sulfur content.

Some non-conventional oils are those that are not easily recoverable and also are difficult to process. An example is the massive deposit of heavy oil sludge such as that found in the Orinoco Belt. The Orinoco Oil Belt in Venezuela is thought to contain 1.2 trillion barrels of heavy oil sludge. The Orinoco Belt, or "Faja" of eastern Venezuela may become a major source of oil, yet this is a costly enterprise as this heavy sludge may not be easily recovered. This sludge has been described as having the consistency of peanut butter. The belt is a thick lattice of ancient river beds about 280 miles (450 kilometers) long and 60 miles (100 kilometers) wide. The heavy oil must be warm enough to be pumped and specialized horizontal drilling rigs are used. To keep this oil moving, solvents are used to dilute the oil before it cools and hardens. Obviously this will be not only costly to produce, but since it is still a heavy oil even after it is upgraded for shipment, the additional processing at the refinery will also be costly.

Other possibilities do exist. Liquid natural gases and condensates could be a source of fuel. Unfortunately, the need for clean burning fuel for the current generation of power plants for the world's power grids mean that the competition for natural gas will become intense. The difficulties of liquefied natural gas (LNG) can be easily illustrated by a short case study of such a project in the small Arab country of Qatar on the western coast of the Arabian Gulf. Qatar has the third largest natural gas reserves in the world, and the country's North Field is the world's biggest source of non-associated natural gas (that is natural gas not associated with oil). The field has reserves of more than 500 trillion cubic feet - 3 times greater than in the entire US. Qatar is developing the capacity to deliver almost 11 million metric tons of LNG annually for sale to power companies and other customers in a number of Asian and European countries, as well as the United States. Natural gas is piped from the field to a processing facility. It is at this processing facility where the natural gas is liquefied by chilling it to -260 degrees Fahrenheit and transporting it in newly designed tankers with nickel and steel membranes. Once these tankers reach their destination, the LNG is regasified and consumed as pipeline natural gas. Obviously this will help offset some of the coming oil crunch, but a lot more specialized tankers and a lot of infrastructure needs to be built.

The possibilities do exist for clean energy from nuclear power. However, nuclear power is politically incorrect and faces regulatory and political pressures that make it an economic uncertainty. The Three-Mile Island and Chernobyl nuclear power plant accidents are still fresh in most peoples memories. Nuclear power in some countries is still acceptable (such as france and Japan) and may help relieve some of the pressure on limited oil reserves. Solar and wind power also face opposition as the infrastructure requires vast tracts of land and may impact on some wildlife. Solar and wind power are not likely to become widespread sources of power as they are climate dependent and it is not easy to store electrical power for use when needed. Another relatively expensive possibility is the development of Biomass fuels such as ethanol. The problem of ethanol is that it requires much more energy to create than is ultimately obtained. Ethanol that is used in reformulated gasoline is only available because of government subsidies. Non-conventional natural gas will become increasingly important. Coalbed methane (absorbed into coal molecular structure) is produced from wells drilled into coal seams. NG from gas shales require fracturing and pending recent requests for environmental legislation in the US to restrict Hydro-fracturing, this resource may ultimately become unrecoverable. NG in Artic regions and deepwater are problematic at best. Hydrates (methane ice-like solids) in Artic and oceanic regions are presently unrecoverable and do not migrate into commercial traps.

There is another classification that fits under the heading of non-conventional oil and that is oil in the conventional oil regimes that require uneconomic measures for exploitation. This includes oil that is in small oil traps that is currently uneconomic at current prices. Such oil is found in mature oil fields, and requires that wells are drilled near existing primary wells to access these small pockets of oil. Also oil that requires extraordinary measures such as steam, water or gas injection to force oil to migrate to where it is economically recovered could be considered non-conventional oil.

NEW ECONOMY AND OLD ECONOMY:

The financial analysts, government parrots, and media drones continue to rant about the new economy and occasionally attempt to describe how oil is not very important in the world's economies and therefore rising petroleum prices are no threat. They even continue to ignore the importance of petroleum when calculating core inflation statistics for the Producer Price Index (PPI) and Consumer price Index (CPI). They even use dishonest measures in these calculations by incorporating dubious valuations derived from "Hedonic Deflators" and "Seasonality" statistics. These fools overlook the big picture and the importance of petroleum in the economy (New or Old). The claims are that Hydro-Carbon Man no longer needs oil because now he has communication through the Internet and the invention of the computer. He can buy his toys through a computer and a phone line. If it were only that easy.

The Old and New economy debate can be misleading. The future economy is likely to blend traditional business (Old Economy) with new developments and inventions (New Economy). The question is where does petroleum fit into this future economy? It is only obvious to even the most causal observer that energy and petrochemical use will grow several fold because they are so embedded in our economic life and power the engine of economic growth. The use of plastics (derived from oil) has increased and will continue to do so. The invention of the personal computer and development of the internet assures that electrical use will dramatically increase and thereby consume much more energy. Products purchased over the Internet will be delivered by conventional means such as by courier (i.e. United Parcel Service, Fed-Ex., Postal Service, etc.), consuming ever more energy rather than delivered to a central location where the consumer can retrieve several items at a time. As more people and countries join the new economy, ever more energy will be consumed.

The world's population continues to grow and recently surpassed the 6 billion mark. Agriculture is stretching its limits. Food is cheaply produced. Much of that cheap production is directly related to mechanized farming and the cheap production of petrochemicals such as fertilizers and pesticides. Without these petrochemicals, agricultural productivity would drastically decline. Approximately 90% of the energy in crop production is oil and natural gas. About a third of the energy is to reduce the labor input from 500 hours per acre to 4 hours per acre in grain production. About two-thirds of the energy is for production, of which about one-third is for fertilizers alone. Agricultural products are delivered to cities and remote areas by vehicles that run on oil.

POLITICAL STABILITY:

A major problem in many of the oil producing regions around the world is political stability. Saudi Arabia and Kuwait have many social problems. Social programs are dependent on oil. The only business in most of these countries is the business of oil. The threats of war and internal strife are always a concern. Iran and Iraq have been to war and both have ethnic derision from minorities such as the Kurds who desire their own homeland. Saudi and Kuwait have had their own difficulties with Iran during the so-called "Desert Storm" event, and both must keep a wary eye on Iran. Even now Iraq accuses Kuwait of sniping it's oil along the border and has threatened renewed military action. The possibility always exists that another Arab-Israeli conflict could arise. There are numerous possible events that could disrupt oil supplies from the middle-east. As oil supply becomes tighter, we could expect the next president of the US go begging the Iraqis and Iranians for oil and better diplomatic relations. Israel could even eventually find itself without a benefactor.

The oil producing regions of Africa and South America are also vulnerable. Angola and Nigeria have been through several civil wars, and the current governments are young and constantly under threat from renewed internal conflict. Venezuela has elected a socialist that has openly praised Fidel Castro of Cuba as a hero of the people, and has also instituted economic and political changes that could erupt into civil strife as well. Colombia has oil reserves, pipelines, and refineries that are under constant attack by revolutionaries (bandits?). The tight supplies of oil could be disrupted at anytime and therefore the threat to the world's economies from political instability is very real.

Mr Gresham (4/6/02; 02:04:21MT - usagold.com msg#: 72852)
"Dead Presidents"
I wonder how many Americans think Franklin ($100) was a President?

Mr Gresham (4/6/02; 01:19:58MT - usagold.com msg#: 72851)
Fed tightening ahead?
http://www.pimco.com/bonds_commentary_fedfocus_recent_index.htm
Don't miss this great Pimco read on the Fed's operating system overall, including the Continental bank run.

Black Blade (4/6/02; 01:08:51MT - usagold.com msg#: 72850)
Bush's push for Middle East peace dampens energy prices
http://ogj.pennnet.com/articles/web_article_display.cfm?ARTICLE_CATEGORY=TOPST&ARTICLE_ID=140328
Market watch: Bush's push for Middle East peace dampens energy prices

Snippit:

HOUSTON, Apr. 5 -- Energy futures prices fell sharply Thursday as strong talk from President George W. Bush fanned hopes of at least a ceasefire in the Middle East. Traders were encouraged by Bush's demand that Israel withdraw its forces from Palestinian territories and by his decision to send US Sec. of State Colin Powell to the region.

The first bearish reports of US petroleum inventories from both the American Petroleum Institute and the US Department of Energy in several weeks also accelerated downward momentum from Wednesday's trading session, analysts said. Price declines during the 2 days wiped out most of the increases earlier this week, bringing energy futures back near their pre-Easter levels.

Black Blade: This is a temporary measure as inventories have been in a general downward trend, even with Russian quota cheating. We now enter into the so-called "driving season" when traditionally gasoline use begins to rise and fuel prices start to rise. "Thankfully" this is not inflationary as it is not calculated in the "core rate" (dripping sarcasm). .

Black Blade (4/6/02; 00:54:55MT - usagold.com msg#: 72849)
US drilling activity resumes its downward spiral
http://ogj.pennnet.com/articles/web_article_display.cfm?ARTICLE_CATEGORY=TOPST&ARTICLE_ID=140386

Snippit:

HOUSTON, Apr. 5 -- US drilling activity declined this week, wiping out last week's gain that was the first after 9 weeks of straight losses, officials of Baker Hughes Inc., Houston, reported Friday. There were 738 rotary rigs drilling in the US and its waters this week, 23 fewer than last week when there was a gain of 11 units. A year ago at this time, the US rig count was at 1,200 and still climbing.

This week's losses were in the usual areas�land and natural gas drilling. There were 613 land rigs working in the US this week, 21 less than last week. The number of units drilling inland waters was up 2 to 15. But the number of rigs drilling in the US offshore sector was down 4 to 110. That included 107 working rigs in the Gulf of Mexico, down 2 from last week. The total number of US rotary rigs drilling for natural gas was down by 18 to 591 this week. There were 145 rigs drilling for oil, a decrease of 5. Another 2 active rigs were unclassified.

Black Blade: Without replenishing reserves the domestic market is in peril and energy independence in extremely unlikely. The US is likely to be held hostage to Middle east oil from here on out. It is "Cheap Energy" that fuels the economy. It won't take much if one major ME oil producer decides to "punish" the western economies.

Belgian (4/6/02; 00:38:52MT - usagold.com msg#: 72848)
@ USAGOLD /All : Welteke's Gold (threath)
Wim Duisenberg - ECB Press Conference :

He (WD) iterated the "very sensible matter" in wich CBs sell(sell=?) Gold under the CB Gold Agreemenet (WA) and commented that any future sales (leasings-reschuffles) by current (! more/less later)signatories would certainly not (NOT) be until the expiry of the current Agreement in 2004 !!!! (WGC)

A German faction is in support of the US$ for God knows what reason. Balkan / Russia common agenda (military) ? German dollar-investments in US � la Daimler Chrysler and impact on Deutsche Bank ? Disagreement with the Euroland euro/gold/oil concept (Russian oil/gas) ? Still on the look out for clues indicating the direction to look for.

1/ A desire to drive down (consolidate) the POG is a pro US$ stance and not a Goldsale pro !
2/ Next WA allotment (2004) is too late for relief to the present problems of unemployment (Elections-sept.'02).
3/ Bailing out (support) Deutsche Bank ? Possible, but impossible to know ! cfr. Nobody (except few insiders) knew about the Holzmann debacle for years !!! Any kind of suspicion is perfectly camouflaged and covered (see Enron-new culture of selfdelusion).

That there is a German Gold-Problem is clear ! Duisenberg W.
called for : Order ! Reassuring !?
Not ALL Eurolanders are Gold minded and desire to use the ancient Gold reserves for immediate relief and political support rather than backing the euro/gold-concept. Remember the discussion on 15% or 30% Gold-reserves. Gold's immense power is anti-social ! And talking about Gold in Euroland, automatically splits the pro and contra's in two camps.
Plunderers for immediate profit and Savers Long Term Stability. And it is exactly this same diversion that pops up each time the Gold word (reserves) is mentioned. Ahhghh Democraty...(Swiss referendum)!?

If next ECB presidency can't be given to the French Gold-Lovers (German opposition), the lilliputan Belgian alternative (compromis) presidency is also a quasi guarantee for (liberal) Gold sympathy !?

Sorry for not being able to offer more facts (certainties) on the matter.

Mr Gresham (4/6/02; 00:21:48MT - usagold.com msg#: 72847)
Israel
Wow! As usual, Sierra has gotten some great points in, and gotten me going again. I was gonna take the night off...oh well.

From the lay, non-Jewish American's point of view, Israel was born out of the photographs of the death camp survivors, and the heaps of bones, ashes, and remnants of the dead. It has taken us decades to integrate the shock of this history into our lives in this world. But it did not take us long to conclude that this people's survivors deserved a home as safe as any of us had at present.

Israel's military was born out of the memory of the helpless ghetto inhabitants quarantined, then rounded up with no weapons, no defenders to stop the Gestapo's goon squads, and sent to die. "This will never happen again." was a response we could all identify with. Young Jews who acted out that response seemed heroic. Any of us would hope to have done the same. (The cause they were then enlisted in might be more questionable, but perhaps inevitable.)

Israel's politics was born out of a staunch resolve never to trust the world's nations again, even the above-stated sympathies to never let Jews be in peril again. Israel will imprison Vanunu, who reveals its nuclear arsenal. Israel will influence US politics and elections, spy on US policymaking, attack the USS Liberty -- in a fanatic devotion to its own survival. Understandable in its ruthlessness -- but therefore tolerable?

Meanwhile, politicians arise, as in any society. "I can advance myself by seizing upon these issues, these fears, these sympathies." Chameleonlike, will adapt to whatever history has propelled them into nationhood. Ideals aside, it is power that rules them. The evidence is in their deeds.

Getting Israel to act in its own long-term best interests -- this is the observer's dilemma. Calculations are made from different platforms; mine is not theirs. I can see theirs; but I must still speak from mine.

The Palestinians were not the evil enemy that threatened Israel's survival, certainly not since 1967. But Israel -- understandably -- came into existence PRIMED for such a second enemy. Palestinians had been the most likely COOPERATING neighbor for Israel among Arabs, most likely to help economic development, AND acceptance into the Arab neighborhood, after the initial war faded away.

Not an enemy, but they were a "competitor" for the same lands. Which some saw as lands for the taking. And what example did Israel have before them. "Where are the Jews of Europe now?" Germany is largely "Judenfrei", only 45,000 left out of millions gone, 50 years later. Never to come back. They see that people CAN be cleared out of spaces, and time will pass. And grass will grow over the graves. (Having been done to them, some may even think the world "owes them one.") That can set a policy course, unable to be spoken, but just as determined upon.

That is what we are seeing today.

Jews have taught the world more about Conscience, perhaps, than any other people, paying the highest price as its teachers. Conscience may seem like a weak second to tanks and bomber squadrons. But if we all speak -- and they act -- from what we have learned, perhaps we can help this resolve, as other "eternal" conflicts have recently resolved, in some way other than a Final Solution, that will tarnish the name "Israel" with a sadness that will be centuries in the dispelling.

Black Blade (4/6/02; 00:21:44MT - usagold.com msg#: 72846)
YGM � Oil Reserves and Declining Projection

I have addressed this issue over the years and here over the last couple of years or so. But your post from the "Daily Reckoning" is essentially correct. Each new Giant (reserves of 1 billion bbl/day not "Super Giant" of 5 to 10 billion bbl/day) oil field found over the last 50 years has been progressively smaller. Roughly 120 of the largest oil fields produce about half of the worlds oil. The average age of the largest (Super Giants) is 43.5 years (Matthew Simmons, 2002).

Consider that there have been no new oil fields that produce more than 250,000 bbl/day (most of those are deep and ultra-deep water), yet the world's largest 19 Super Giants produce more than 500,00 bbl/day though they have an average age of about 70 years. And most of these fields are in various stages of decline � in other words they have already reached their "Hubbert Peak" (named after M. King Hubbert). The last two Super Giants with production over 1 million bbl/day that were discovered were Alaska's Prudhoe Bay in 1968 and Mexico's Cantarell Field in 1976. That's it! Since the 1970's all the new discoveries supply only a miniscule 13% of the world's daily production and new discoveries have been declining since the 1960's.

Of course this discussion does not consider recoverable oil or "Cheap Oil" which is necessary for fueling a robust economy. If the concept of "Cheap Oil" is ignored then we could conclude that there is enough oil for many decades. This is especially true is we consider the combination of Tar Sands, Heavy Crude Sludge, Oil Shale, Biofuels, natural gas liquids (NGL), etc.).

The point is that all the "Super Giants" and possibly "Giants" have been discovered. That is because they are obviously the easiest to find. Each successive discovery has been smaller than the previous discovery. All US Super Giant oil fields are in decline (including Alaska's Prudhoe Bay). Recently the North Sea Oil Field has been projected to have reached it's Hubbert Peak production and is now in decline. It is suspected that the Saudi Ghawar Field is close to reaching its Hubbert Peak projection (production data is a closely held secret). Interesting is that once a field reaches its Hubbert peak it then production declines rapidly. Of course with declining drilling activity and without a drilling boom in the works, it is very unlikely that we will have enough smaller fields to replace declining supply from Giant and Super Giant oilfields in future years. Immediate and long term prospects for "Cheap Energy" look rather grim.

- Black Blade

Resource:

Simmons, M. R., The World's Giant Oilfields, Hubbert Center Newsletter #2002/1. January 2002

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