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Welcome to the USAGOLD Gold Discussion Archives. The archives of this gold discussion forum are a treasure trove of information to educate investors about protecting their wealth through portfolio diversification with private gold ownership. The discussion forum also covers the wider issues of the past, present, and future role of gold in international monetary policy and the dynamics of the modern gold markets...   (Discussion Forum Hall of Fame) (The Gold Trail) ("Thoughts!" by ANOTHER)   The opinions posted by all guests are expressly their own and do not necessarily represent the views of the management or staff of USAGOLD - Centennial Precious Metals. The hosting of the public discussion shall therefore not be construed as an endorsement by USAGOLD - Centennial Precious Metals of any of the opinions posted here.

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ARCHIVED DISCUSSION FROM 9/6/2002
All times are U.S. Mountain Time

(Yesterday's Discussion.)

Black Blade (9/6/02; 23:18:58MT - usagold.com msg#: 84545)
Market Wrap Up – Puplava
http://www.financialsense.com/Market/wrapup.htm


Snippit:

What has surfaced this week sending stock prices lower is emerging evidence that the economy is heading back into recession. Sales at retailers such as Wal-Mart, Sears, and Kohl's are starting to fall. They are still growing, but at much lower rates of growth. Most of these stores are starting to see a moving downtrend. This month has been important in that back-to-school sales usually give retailers a lift. If sales don't pick up the rest of the month, we could be in big trouble. After all, there is a limit to how much consumers can continue to borrow given that they are up to their eyeballs in every imaginable kind of debt from credit cards, installment debt, mortgages, school loans, to margin debt.

Meanwhile, oil prices continue to rise as stockpiles continue to fall in the US. The American Petroleum Institute reported this week that oil stockpiles fell to an 18 month low. This is creating worries that the US is vulnerable to a disruption of supply ahead of a major war. During the last war, US stockpiles of oil were close to 400 million barrels. Currently they have fallen to 298.9 million barrels. Oil inventories have dropped 7.2% since June. Oil prices have been hovering close to or over $30 a barrel for more than a month. The tightening of supplies, the threat of an unexpected terrorist event, and the advent of a coming war with Iraq, when added together don't bode well for the economy.


Black Blade: "Interesting Times"



BlackBart (9/6/02; 23:09:00MT - usagold.com msg#: 84544)
$$$$332.2$$$$
New as I am to the forum it gives me great pleasure to find a "Community" of cyber brothers and sisters who are in touch with the realities of the geopolitics of our age...and it is this mysterious, elusive precious metal that brings us together...and it is the same metal that links us to geopoliticians, Knights, Ladies, Kings, Princes, Queens and all others of so many ages across human history. I was involved in the mid-seventies by virtue of an acquaintance with one of Bunker Hunt's advisors..and I rode their coattails in silver. I panned some around Charlotte, NC...the main street of Charlotte is built on top of the extensive gold mine which is the reason that Charlotte is there at all...shut down when the shafts filled up with water from numerous creeks flowing through...POG then was about $20/oz so it was not cost efficient to pump the water out to mine...in the rise of the late 70's there was some thought to pump and mine...some felt that the mother vein had never been found...but, for me, there was something magical that I could get into those creeks downstream from the mine and come away with yellow...Maybe that's some of the mystique...there's some problem with printing one's own currency, I'm told...but the metal will be here when the printing presses are a pile of rust...thanx all

mudr (9/6/02; 22:47:45MT - usagold.com msg#: 84543)
$$$$$ 327.6 $$$$$
MUDR
My guess is $327.6 is based on a guess about world tensions and the general trend. The POG will likely be fought all the way up to our highest expectations,

HopeingII (9/6/02; 21:14:33MT - usagold.com msg#: 84542)
$$$$$ 309.70 $$$$$
I believe in owning physical Gold for purely selfish
monetary reasons. I truly believe the POG is being
"managed", "controled", "manipulated", "supressed",
or any other number of adjectives (?) you want to use
to explain it's current price. Some day in the future
this losing proposition will fail and the POG will
explode to the upside even further than many who
frequent this form think possible. Furthermore, I
guess the low price I've entered because after 09/11/02 passes with no catastrophy happening TPTB will hammer the POG once again, only to postpone the inevitable.

Good Luck to all,

HopeingII



MK (9/6/02; 19:47:59MT - usagold.com msg#: 84541)
Hoople
Your question:

"Isn't inflation/deflation combined what we currently have?"

My response:

Yes. That's an important observation, Hoople. What you describe is the "economics" we live in a fiat-based economy. Books have been written about it, but it really comes down nothing more complicated than that. Just as a virus can exist at low grade within a host until such time as the defenses are weakened to the point that the virus comes to full fruition, so are we running a low grade economic fever at the moment in the United States -- a low grade fever on the verge of becoming full blown disease. What will it take to come to full bloom? Attempting to discover those trigger mechanisms is what an information exchange prototype like this forum is all about. Keep in mind that Argentina at one time operated under what might have been described as a low grade fever. Now look what has happened. . . . . And it didn't take long once the wheels fell off.

When the Contagion came to full fruition in Asia and South America, it manifested all the preconditions of the lesser disease only on a greater scale. The stock markets didn't just adjust downward, they collapsed. The inflation rate didn't just rise, it skyrocketed. The unemployment rate and bankruptcies didn't just worsen, they went off the charts. And so on. . . . Do you remember the old Misery Index of the 1970s -- inflation and the unemployment rate added together -- made famous by Ronald Reagan? I would be willing to bet that it will not be long until it becomes a part of our daily discussion once again.

Thanks, Hoople. I wish you would play a greater role here. We would all benefit from your knowledge and understandings.


R Powell (9/6/02; 19:47:30MT - usagold.com msg#: 84540)
Sierra Madre
Something tells me
Something reacted in me saying I certainly hope you are right about nothing happening on 9/11. Then all that will be needed is a little political spin (resumption of unhindered inspections?) so that George W can drop the issue while looking good. Or, the government can declare that all weapons, held by anyone, are potential threats (whether used or not) and declare war on the world and all U.S. gun owners registered or not. **
Gold and silver will do just fine even without wholesale man-made death. **
I received an e-mail from the CPM research folks today, my copy of the 2002 Silver Survey has been entrusted to the U.S. Postal Service. It's no longer brandy new so they dropped the price from $175 to 150. So, there we have have the answer- deflation from outrageously overpriced to merely grossly overpriced. They have some other publications, one for gold and one for silver- $3500 each!! I guess these must have the exact dates of the coming limit moves for our metals, or at least the winning lottery numbers for next month.

If there is anything in the Survey that hasn't already become known, I'll pass it along. I just want to take my study back to primary sources so I ponied up the 150.
Happy weekend
Rich

Arcticfox (9/6/02; 18:55:17MT - usagold.com msg#: 84539)
Wasn't Bill Gross supposed to be on CNBC with Lou tonight...
I wonder if he was canned to be replaced with chearleaders due to his 5000 DOW article today. If so, all I can say is amazing. Actually, as I watched the show I realized that I was watching what appeared to be a half hour of old tape put together. They must have been scrambling to find anything to replace Gross's time.

Also, on Kudlow's Bulls vs Bears, there were no bearish quests asked to show up...and Kudlow actually slammed Gross at the end of the show stating that Gross doesn't understand what growth is anyway.

Chris Powell (9/6/02; 18:48:51MT - usagold.com msg#: 84538)
Europe is hearing that the gold price is being manipulated
http://groups.yahoo.com/group/gata/message/1222
Belgium's Financial Times and CNBC Europe
let people know that the gold price is being
manipulated:

http://groups.yahoo.com/group/gata/message/1222

To subscribe to GATA's dispatches
by email and get them immediately so
you don't have to go look for them,
send an email to:

gata-subscribe@yahoogroups.com

Sierra Madre (9/6/02; 18:34:48MT - usagold.com msg#: 84537)
Something tells me...
nothing at all is going to happen on 9/11/02. Nothing!

The next trading day, gold and oil will fall quite sharply, as the world breathes a collective sigh of relief. Gold will then resume its slow uphill battle.

A Jewish friend in N.Y., who is well connected, informed me that he had had a talk with an important personage, in his words, "higher than the President" (!) who assured him there would be "no war against Iraq". That this "war on Iraq" is all for public consumption in the U.S., not for real.

Is this believable? We shall have to wait and see. I sense that Pres. Bush has lost the moment for waging war; the public has become fed up with all the talk.

For what it's worth.

Sierra

Gandalf the White (9/6/02; 18:21:01MT - usagold.com msg#: 84536)
"The Happy Birthday GOLD PRICE SETTLEMENT CONTEST"
UPDATE #7 (as of FRIDAY 17:17 Denver time 9/6/02)
===
FYI ------HIGH, Low and Settlement Price of GC2Z on:
9/3/02 $315.9 $314.1 $315.0s
9/4/02 $317.1 $313.8 $316.5s Change + $1.5
9/5/02 $320.8 $318.1 $319.8s Change + $3.3
9/6/02 $322.9 $319.8 $321.4s Change + $1.6

===

$$$$ 398.6 $$$$ Believer (09/04/02; 18:22:46MT - msg#: 84358)

$$$$ 375.0 $$$$ Henri (09/04/02; 10:58:18MT - msg#: 84326)

$$$$ 362.3 $$$$ NEMO me impune lacessit (09/04/02; 05:21:24MT - msg#: 84304)

$$$$ 354.4 $$$$ perform (09/04/02; 07:34:49MT - msg#: 84313)

$$$$ 353.4 $$$$ darkhorse (09/03/02; 20:56:04MT - msg#: 84280)

$$$$ 349.2 $$$$ mdgc (09/05/02; 15:45:42MT - msg#: 84427)

$$$$ 345.0 $$$$ Socrates964 (09/04/02; 16:11:50MT - msg#: 84344)

$$$$ 343.0 $$$$ ji (09/04/02; 21:38:27MT - msg#: 84381)

$$$$ 342.5 $$$$ gvc (09/03/02; 17:08:12MT - msg#: 84255)

$$$$ 341.7 $$$$ old gold (09/04/02; 11:40:02MT - msg#: 84330)

$$$$ 339.0 $$$$ rsjacksr (09/03/02; 22:36:21MT - msg#: 84289)

$$$$ 335.4 $$$$ Roger The Shrubber (09/05/02; 08:18:47MT - msg#: 84404)

$$$$ 334.7 $$$$ GoldCoaster (09/05/02; 21:29:56MT - msg#: 84455)

$$$$ 333.7 $$$$ Speedy (09/04/02; 19:15:01MT - msg#: 84366)

$$$$ 333.4 $$$$ Slowman (09/04/02; 20:10:11MT - msg#: 84370)

$$$$ 330.0 $$$$ HOOSIER GOLDBUG (09/04/02; 19:11:32MT - msg#: 84365)

$$$$ 331.3 $$$$ misetich (09/04/02; 05:28:30MT - msg#: 84307)
$$$$ 331.2 $$$$ Pippin (09/04/02; 12:50:09MT - msg#: 84335)

$$$$ 329.8 $$$$ goldenpeace (09/04/02; 11:36:15MT - msg#: 84329)

$$$$ 329.3 $$$$ mikal (09/04/02; 17:08:29MT - msg#: 84349)
$$$$ 329.2 $$$$ The Hoople (09/04/02; 12:04:30MT - msg#: 84332)

$$$$ 328.5 $$$$ steady (09/03/02; 20:14:41MT - msg#: 84272)

$$$$ 328.1 $$$$ ha_tey_o (09/04/02; 11:15:13MT - msg#: 84327)

$$$$ 327.9 $$$$ Trapper (09/03/02; 20:12:26MT - msg#: 84271)

$$$$ 327.3 $$$$ luckypierre (09/03/02; 15:20:51MT - msg#: 84244)

$$$$ 326.5 $$$$ turkey hunter (09/03/02; 18:33:51MT - msg#: 84261)

$$$$ 326.0 $$$$ White Rose (09/06/02; 08:23:51MT - msg#: 84503)

$$$$ 325.5 $$$$ Galerider (09/03/02; 20:53:27MT - msg#: 84279)

$$$$ 325.2 $$$$ The CoinGuy (09/04/02; 13:00:07MT - msg#: 84338)

$$$$ 324.5 $$$$ Rock (09/04/02; 12:19:18MT - msg#: 84334)

$$$$ 324.1 $$$$ Gold Standard (09/04/02; 05:02:31MT - msg#: 84302)

$$$$ 323.7 $$$$ Boxman (9/4/02; 04:27:17MT - msg#: 84301)

$$$$ 323.2 $$$$ a nation of one (09/03/02; 13:55:53MT - msg#: 84229)

$$$$ 322.2 $$$$ Tommy P (09/03/02; 14:33:23MT - msg#: 84233)

$$$$ 321.9 $$$$ MoonHowler (09/04/02; 21:59:49MT - msg#: 84382)

$$$$ 321.4 $$$$ balzac (09/04/02; 17:22:15MT - msg#: 84353)

$$$$ 321.1 $$$$ The Knife (09/04/02; 16:30:43MT - msg#: 84345)
$$$$ 321.0 $$$$ Gandalf the White (09/03/02; 12:29:20MT - msg#: 84221)

$$$$ 320.2 $$$$ 18K (09/03/02; 13:18:00MT - msg#: 84226)

$$$$ 320.0 $$$$ Zhisheng (09/03/02; 15:06:26MT - msg#: 84240)

$$$$ 319.8 $$$$ Bound Spirit (09/03/02; 17:20:54MT - msg#: 84257)
$$$$ 319.7 $$$$ slingshot (09/03/02; 16:57:17MT - msg#: 84254)
$$$$ 319.6 $$$$ NTgeo (9/6/02; 01:56:11MT - usagold.com msg#: 84477)
$$$$ 319.5 $$$$ davefinger (09/03/02; 14:52:14MT - msg#: 84235)
$$$$ 319.4 $$$$ koala bear (9/4/02; 04:08:54MT - msg#: 84299)

$$$$ 319.2 $$$$ Bulldog (09/03/02; 21:53:40MT - msg#: 84288)

$$$$ 318.6 $$$$ Kodie (09/03/02; 12:41:26MT - msg#: 84222)

$$$$ 317.9 $$$$ VanRip (09/05/02; 12:20:50MT - msg#: 84415)

$$$$ 317.2 $$$$ Artie Farkle (09/04/02; 20:02:53MT - msg#: 84369)

$$$$ 316.0 $$$$ Tevye (09/04/02; 08:02:40MT - msg#: 84316)

$$$$ 315.5 $$$$ Christian (9/6/02; 00:11:42MT - msg#: 84471)

$$$$ 314.9 $$$$ MO VER MEG (09/04/02; 07:34:44MT - msg#: 84312)

$$$$ 314.5 $$$$ Frosty (09/03/02; 18:59:09MT - msg#: 84265)

$$$$ 313.3 $$$$ Woodie (09/03/02; 23:41:11MT - msg#: 84291)

$$$$ 312.5 $$$$ SilverHoard (09/04/02; 17:01:10MT - msg#: 84347)

$$$$ 311.4 $$$$ De Ronin (09/04/02; 12:16:42MT - msg#: 84333)

$$$$ 308.6 $$$$ Noble1 (09/04/02; 20:25:58MT - msg#: 84371)

$$$$ 308,0 $$$$ Trurl (09/05/02; 09:33:57MT - msg#: 84408)

$$$$ 295.5 $$$$ Topaz (9/5/02; 01:41:33MT - msg#: 84389)

===
THE RULES --
1) THIS Contest consists of TWO Portions --- A Price Prognostication and a Discussion Statement !
2) The Winner is the Price Guess closest to the Settlement price of the COMEX (most active) December 2002 Contract (GC2Z) on the date of Friday the 13th of September. (NOTE the LUCKY date !)
3) Price "Guesses" shall be stated in Dollars and tenths !
(Such as $543.2)
4) "Guesses" shall be SHOWN in the SUBJECT location AND enclosed in markers of "Dollar Signs"
so as to be OFFICIAL ! Such as $$$$ 543.2 $$$$
5) ONLY one "Guess" per Knight or Lady is allowed, and once that "Guess" has been "taken" -- no one can duplicate it !! FIRST COME has rights to that "Guess".
6) HOWEVER, All "Guesses" MUST be posted before the clock in Denver strikes HIGH NOON on Thursday, September 12th.
7) AND MOST IMPORTANTLY -- A short discussion paragraph of "Why gold is important to THAT PERSON as an investor/owner." This part of their entry MUST accompany their Price prognostication, OR the entry WILL NOT BE CONSIDERED!
----
THE PRIZES !!
To the person with the exact or closest "Guess" to the December ‘02 (GC2Z) SETTLEMENT price on Friday September 13th ----- an one-half ounce PURE GOLD Canadian Maple Leaf as the winning prize, with an one-tenth ounce PURE GOLD Austrian Philharmonic to BOTH the next closest guesses (runners up).
===
"WHAT IS THAT" Sir Balzac is saying ?
He thought that the Contest was to end on THIS Friday's SETTLEMENT ?
NAW !
<;-)


Trapper (9/6/02; 17:17:29MT - usagold.com msg#: 84535)
Sir Pippin
Re; Deflation
I belive your ideas are correct. Here is my answer to the question (when I an asked). How much do you think an automobile, a house, or new funiture for the home would cost if you must pay cash for it. My guess is 20% to 50% less than credit prices. Just my thoughts, live small.
RJ

R Powell (9/6/02; 17:08:23MT - usagold.com msg#: 84534)
Inflation and deflation
Why is the question "Which one"? Why not both? Or a mixture like surf and turf.

Haven't we recently seen stock prices deflating on the Cow, Nasdog and S+P while tangible goods (necessities of modern life) are increasing in price. Corn, soybeans, cocoa, OJ, sugar, gold, oil, especially wheat and now even coffee are trading for higher prices. Wheat is now over $4/bushel and climbing. The CRB is projecting higher prices which will probably lift all commodities. If this continues there will be no doubt about inflation in commodity terms. How then will inflation numbers be doctored to show none? Will the average loss on the typical 401K be factored in to lower the index? There was some discussion a while ago about an intended effort (I hate the word conspiracy) to keep ALL commodity prices low. Hey guys, if there's not enough wheat then there's nothing short of price controls that's going to lower prices.

Can't we see equity prices deflate while the price of anything grown, manufactured or mined goes up. Perhaps during this time real estate prices will do both, up and then down.
They'll be no holding POG or POS down if the CRB blows wide open the lie of "no inflation". Thoughts?
Hey, hey and hey! It's Friday.
Happy weekend!!
Rich


Andúril (9/6/02; 17:00:53MT - usagold.com msg#: 84533)
Know that nature takes no holidays.
Fulke Greville, Baron Brooke [1554-1628]

-c. 1609-

Oh, wearisome condition of humanity,
Born under one law, to another bound;
Vainly begot, and yet forbidden vanity,
Created sick, commanded to be sound.

What meaneth nature by these diverse laws?
Passion and reason self-division cause.

It is the mark or majesty of power
To make offences that it may forgive;
Nature herself doth her own self deflower,
To hate those errors she herself doth give.

For how should man think that he may not do,
If nature did not fail and punish too?

Tyrant to others, to herself unjust,
Only commands things difficult and hard,
Forbids us all things which it knows is lust,
Makes easy pains, unpossible reward.

If nature did not take delight in blood,
She would have made more easy ways to good.

We that are bound by vows and by promotion,
With pomp of holy sacrifice and rites,
To teach belief in good and still devotion,
To preach of heaven's wonders and delights:

Yet when each of us in his own heart looks
He finds the God there far unlike his books.

Andúril (9/6/02; 16:27:49MT - usagold.com msg#: 84532)
Pippin's deflation
Yes, price deflation would be the good theory IF there were a collapse of the mountain of debt. Velocity is impotent in the equation. It is derived by economists with time to spare after they have measured the prices and amounts that matter. The notion of velocity is no cause to any effect. Have you spend a dollar faster because it came to you as a hot potato? Did you read that person's mind? One does never know how long another held his money..."did this cash come from the top of the barrel or pulled from the old bottom of the stack?"

The price deflation theory is for thought only. You will not see it in practice. There is nothing in the relevant nature of these times that will allow this mountain to grow anywhere but up. If the mountain collapses, many banks will fall with it. Where is the political will to let this happen, when the prop of liquidity is so easily crafted?

Purchasing power will take a haircut. The banks will remain standing. Inflation is the order of business until nature takes a holiday.

kasperjack (9/6/02; 15:35:23MT - usagold.com msg#: 84531)
The Siberian Express
@ ******* Desk

SEPTEMBER 4
In course of the current year Russia's
Saving Bank
(Sberbank) increased its reserves 10,5
of gold and 11
tons of silver


***
The Russian Central Bank is not the
only institution accumulating physical
stocks of gold and silver in Russia? Is
the practice more widespread and did
the directive come from Putin himself a
la the creation of a Russian gold coin
last summer, the what was it $13,000
gold coin the Russians are marketing
now.

Pippin (9/6/02; 15:34:24MT - usagold.com msg#: 84530)
MK + Andùril on Prechter / deflation vs. inflation etc.
I'd like to add another question on this subject: till now at least, I was a believer in the little equation <prices multiplied by quantity equal monetary mass multiplied by velocity>. Sorry for the probably improper wording, but I'm translating from french :^D
Since the "amount of money" in circulation includes cash and credit, am I wrong in believing that a collapse of the "mountain of debt" would shrink the monetary aggregates - and therefore trigger deflation ? Not to speak about the probable impact on velocity ?

TownCrier (9/6/02; 15:12:01MT - usagold.com msg#: 84529)
From the USAGOLD NewsWire -- Oil, gold prices surge
http://money.cnn.com/2002/09/06/markets/oil/index.htm
NEW YORK (CNN/Money) - Oil prices surged to their highest levels in a year and gold moved to fresh six-week highs in European trading Friday amid fears that a full scale attack was imminent against Iraq and as the first anniversary of the Sept. 11 terrorist attacks approached.

"The war drums are pushing the price (of oil) higher, but the global market has been tightening since the second quarter and this will continue into the winter,'' said Leo Drollas of the Center for Global Energy Studies in London.

He predicted the Brent price would rise to near $30 a barrel by the end of the year even without an attack. Tough output curbs by the Organization of the Petroleum Exporting Countries have coincided with a sharp recovery in global oil demand, which analysts expect to accelerate by the end of the year.

"Gold looks set to be supported and set to move higher as we approach the anniversary of the 9/11 attack on the U.S. and the expectations of an attack on Iraq intensify," said John Reade, metals analyst at UBS Warburg.

Gold's latest gains put the metal 17 percent higher than at this time last year, making it one of the strongest performing financial assets.  

-------(see url for more)--------

Lock in prices and get your gold order in the pipeline today -- because you never know what tomorrow will bring.

R.

TownCrier (9/6/02; 15:05:29MT - usagold.com msg#: 84528)
Zimbabwe looking to expand its two-tier (price) gold market
http://allafrica.com/stories/200209060288.html
Here's the latest news in this ongoing scheme -- a neat twist on the old post-London Gold Pool notion -- twisted insofar as the goverment is paying a tier price that is consistently HIGHER than the "market" tier. Something I often say on the street can be applied to the Reserve Bank in this case -- they "know what time it is".

Excerpts:

The Herald (Harare) September 6, 2002 --

GOLD panners who are being integrated into the formal sector may benefit from the gold floor price support scheme if recommendations made by the Ministry of Mines and Mining Development sail through.

The gold floor price introduced by the Reserve Bank of Zimbabwe last year allows producers to earn a price higher than the ruling international price of the precious metal."It is proposed that, as a minimum, the price paid to small-scale miners be the same as that paid to producers who benefit from the gold floor price scheme.

"The business risk for gold trading should be transferred to the RBZ or any of its nominated agencies."

-----------

That "risk"...is in the eye of the beholder.

R.

kasperjack (09/06/02; 14:55:39MT - usagold.com msg#: 84527)
Bill Gross Complete Statement on Dow 5000
http://www.pimco.com/
Just click on Gross's latest. Sector, Bill Gross has a lot of money on the line. There are real world consequences for how he manages his money. His best effort perspective says much about how the bond fund managers expect to traverse the economic labyrinthe. A real captain running a real ship cannot throw his arms akimbo and abandon the ship, no matter how stormy the seas that lie ahead. Well.... many might retire before tshtf.................

Belgian (09/06/02; 14:55:12MT - usagold.com msg#: 84526)
The US$ and wars
Any perception of world in-stability, always resulted into a dollar-rush for safety. It was for the first time, on 9/11, that fear resulted in a dollar-flight. The same is happening and further expected with mounting tensions on Iraq and ME. What has changed, is the existance of the euro, more suitable as an alternative to the previous Swiss franc. But this windfall interest for the euro is not going to solve the globe's economic contraction and therefore looked at with mixed feelings. A dollar flight into the euro, not accompagnied with a proportionate growing/expanding Euroland economy. Job for both US/EMU central banks to manage the exchange rate with brakes.

But can they win against panicking financiers, commanding the gambling fiat flows in their relentless search for profit ?

During the initial stages of the coming war, w'll see moves in the ***paper** price for Gold with relatively slow uptake of physical. If the US is succesfull in a blitzkrieg...the paper-move will quickly settle down (unwind) and POG might be tamed once more. If full scale resistant terror is able to turn a blitzkrieg into a dragging conflict of long duration...more physical uptake might accumulate critical mass with a prolonged flight out of the dollar. I think that this scenario is the most plausable. Russia is well aware that the US has colonizing ambitions on big parts of its resourcefull territories and will therefore complicate things in favor of the ME. China's attitude is unknown to me. Maybe someone else has more insights on their (China) stance towards this ME situation.

Anyhow, a US occupation of Iraqi oil-reserves will be met by much higher POO (35$ plus) for a prolonged period and entitled as another act/expression of terror against the westerenized part of the world. Short : A high degree of escalation !

We could even witness a relative strong dollar (around euro parity) with rising POG. And the dollar linked to the succes or failure of the US' war-actions. Up until the financial communities start to agree that no economic recovery is possible within a reasonable timeframe.

The US has been considered the globe's economic engine for the past decade. What if this same globe discovers that it is all over and blames it on the recklesness of the US instead of on ME terror ? Very difficult and risky times ahead imvho.

sector (09/06/02; 14:38:36MT - usagold.com msg#: 84525)
Hyperinflation: Japan's next problem?
Jesper Koll Special to The Daily Yomiuri
Stock markets around the world are crashing and a lot of hard-earned financial wealth is being destroyed. Clearly, this is serious business that affects all of our lives. According to one survey, at the end of last year, more than two-thirds of U.S. baby-boomers still thought they could retire within the next two years due to the assumed strong performance of their financial investments. By this summer, another survey finds that more than half of the baby-boomers now expect they will have to work for at least another 10 years before they can afford retirement.

Of course, the exact degree of accuracy of these sorts of surveys can always be disputed, but the basic fact remains: The global stock market drop is destroying wealth and, if sustained, signals a coming reduction in the standard of living.

Japan has been a front-runner in the global wealth destruction game. By my back-of-the-envelope calculation, the current money amount of wealth destroyed by real estate prices falling back to 1982 levels and the stock market plunging to 20-year lows is more than the total wealth destroyed by the Great Kanto Earthquake of 1923 and the Pacific War combined.

Yet despite this, the country appears to be doing fine. Nowhere is there any meaningful sense of crisis. Yes, unemployment is rising and bankruptcies are creeping higher, but at the same time luxury sales continue to rise, a record number of new condominiums and office buildings are being built and Japan remains unchallenged as the world's largest creditor nation. Wealth destruction--yes. Economic stagnation--yes. Crisis--no!

For an economist there is a very straightforward explanation for this apparent mismatch. Again and again, Japan has borrowed from the future to postpone the inevitable decline in living standards that is forced by the collapse of yen-based asset markets. From my perspective, the worry from this point on is not that some one-off trigger event will spark a real crisis. The worry is that the inevitable paying back of all the money borrowed will increase the drag on growth. After all, rising debt repayments will reduce the economy's ability to invest in the future. Japan's future outlook is clouded by a high probability of stagnation and "muddle through." If the past 10 years are any guide for the future, no one should ever underestimate the capacity of the Japanese people to tolerate and endure stagnation.

What could spark a real crisis in Japan? I think there are three main risk scenarios: capital flight, a current account deficit, and hyperinflation.

Capital flight is the most serious of all the risk scenarios. Japan has a massive savings surplus and, at the same time, has no non-yen currency liabilities. Japan owes nothing to the world and, de facto, all its debt is funded by its own savers. This works fine as long as Japanese savers have full trust in their currency and the institutions that intermediate the flow of savings into investments.

If this trust breaks, savers would rush to convert out of yen-savings instruments and into dollar or euro assets. It would be like pulling out the carpet from underneath the financial system, similar to what happened in Argentina recently or Indonesia a couple of years ago.

To be sure, the probability of accelerated capital flight is extremely low. For example, even with 10 years of a banking crisis in place, private bank deposits are still growing at a steady 2 percent to 3 percent pace. While there is some concern over smaller regional banks, the overall banking system is flush with liquidity and sees steady increases in deposit funding.

As long as this persists, the banks will use these funds to buy government bonds, with the increased powers of regulatory authorities openly encouraging stepped-up purchases of Japanese government bonds (JGBs) and other yen assets. A domestic "buyers strike" for JGBs is thus kept in check. More importantly, Japanese savers have a very high home currency preference. They live their lives here, have yen mortgages to pay back and have an absolutely overwhelming desire to retire here in Japan.

The second risk scenario is Japan loosing its status as a creditor nation. If Japan started running a current account deficit, then foreigners would become the marginal buyer of yen assets in general, yen government debt in particular. Foreigners buy yen assets against non-yen liabilities. So they will inevitably demand a currency risk premium before buying more JGBs. In addition, foreign investors will demand a credit risk premium because for them the credit rating by the global rating agencies actually matters.

So a current account deficit would result in a temporary "buyers strike," pushing up bond yields. Domestic portfolios would suffer capital loss and, more importantly, Japanese corporations would see an increase in their own cost of debt, which would inevitably push many of them into bankruptcy.

Hyperinflation seems like the most far-fetched of all the risks. After all, deflation has been with Japan for almost three years and is still accelerating. However, from a medium- to long-term perspective, hyperinflation risks are actually rising in Japan. The reason is the more and more aggressive monetization of public debt by the Bank of Japan. This year, about 40 percent of the government's new borrowing will be purchased by the central bank--up from barely 15 percent last year.

Why does this raise inflation risks? For an economist, inflation stems from too much money chasing too few goods. With the Bank of Japan raising aggressively the amount of money in circulation--they buy the JGBs with money printed--sooner or later there will be more money chasing too few goods.

Right now, the combination of massive excess capacity and idle showrooms, together with consumers' reluctance to spend, makes it seem far-fetched to talk about too much money chasing too few goods. Indeed, the only exceptions where this is true seems to be maybe too much money chasing too few safety deposit boxes and futons. However, this can change very fast and very unpredictably.

Of course, there are other country risk scenarios that one could consider, like a trade war with Asia, oil prices at 60 dollars per barrel, or a terrorist attack on Japan.

But from an economist's perspective, these three are the main ones. Indeed, the most likely one may very well be hyperinflation, at least according to economic textbook. The usual problem is, unfortunately, that economists can tell you how it will happen, but not when. But one thing is for sure--Japan's standard of living has a high probability of declining. Hyperinflation would just be the most extreme form of this as it cuts the purchasing power of the peoples wealth very sharply, very quickly.
==
Koll is chief economist of Merrill Lynch Japan.
++++++++++++++++++++++++++++++++++++

Aside from a colossal conflict of interest, this Merrill guy displays high skill in the art of denial. He's like the lung cancer patient seeing his abnormal chest film filled with white, softball sized tumors and suggesting that the x-ray tech mislabeled the id card. "There's no crisis" "Wealth destruction-yes but crisis?-no".

The Japanese know they are being taken to the cleaners. The Nomura door-to-door sales people are doused with dirty dishwater thrown by irate house wives.

For this mope to suggest that the mass hypnosis of continued equity ownership and the Japanese bubble mind-set will continue is more evidence of the huge brokerage house disconnect from reality.


TownCrier (09/06/02; 14:16:17MT - usagold.com msg#: 84524)
Related to my previous article
If, in fact, the government DID decide that it would be in some manner expedient to ban bullion, and even if they did decide to leave the mines untouched (i.e., no taxation), how on earth would anyone in the market expect the equity value of mining companies to benefit? I mean, who would be buying the mine's newly produces bullion? And at what price? After all, the government would have closed the door on many of their free-market customers. Think about it.

Surely the price of shares in breweries and distilleries didn't skyrocket during the implementation of prohibition?!

If, in fact, bullion were banned, I think it would be far more likely to see the price of pre-1933 coinage soar far and away above the price of the mines -- be they taxed or not.

Just food for thought. You always want to be sure you've considered all sides, and then have portions of your portfolio dedicated to those various contingencies. Sometimes you can kill two birds with one stone.

R.

TownCrier (09/06/02; 14:01:03MT - usagold.com msg#: 84523)
Reuters reports in black and white 'Gold price could hit $1000/oz'
http://www.news24.com/News24/Finance/Features/0,4186,2-8-133_1253791,00.html
London - The gold price could more than treble to US$1 000 per ounce if Western stock markets suffer from a 20-year bear market, according to Hugh Hendry, manager of the Odey Continental European fund.

"I think there are some circumstances where the gold price could go to $1 000. Logically you could construct an argument where the gold price goes up by several times its current value," Hendry said.

...Hendry, a partner at Odey Asset Management, said it was ridiculous that some market commentators think shares will bounce back in the next year or so.

"We've seen the biggest bull market in history, and history demonstrates that the intensity of any bull market is more than matched by the intensity of a bear market. The S&P is on 37 times earnings. Bear markets end when stocks are on six to seven times," he said.

...His bullish outlook on gold is partly due to the fact that many gold mining companies have stopped hedging against a fall in gold prices and are taking a positive view on prices for the first time in many years.

---------(click url for full text)---------

Randy's note: The thing that I found most striking about this article was the candid discussion about the *potential* fate of physical gold in bullion form. Here is is, excerpted in full:
----
However, he is less keen on holding gold bullion, saying that gold bars have been confiscated by governments in the past and this could happen again if a government felt its currency were under threat.

The United States banned private ownership of gold bars from the early 1930s to 1971, when the country got rid of the gold standard so that dollars were no longer backed by gold. France took a similar policy in the early 18th century.

A spokesperson for the World Gold Council said such a move would be unlikely these days as markets move towards further de-regulation.

"You can never anticipate what any government is going to do, but I would think it would be extremely unlikely," she said.
----

As long as congress is in session, you can just never be too certain about anything. That goes for "nationalizing" a mine through special taxation, too. That's why MK and the fine folks at Centennial also caution investors about a prudent diversification WITHIN your gold diversification -- to include the holding of the pre-1933 class of coinage for as long as it can be obtained at near-bullion prices.

Give them a call this afternoon. I know they can help you work these things out to your best benefit and arrive at a diversification plan that fits your needs and your sense of personal style.

R.

darkhorse (09/06/02; 13:27:28MT - usagold.com msg#: 84522)
(No Subject)
Operative, re: the article you linked that ended with "...the safety and security of our citizens." Animals caged up in our zoos are relatively safe and secure, but I'd be willing to bet (Dr. Doolittle would be helpful here) that 3 out of 4 of 'em ain't too happy about it...the fourth one would most likely be a socialist anyway.




sector (09/06/02; 13:27:02MT - usagold.com msg#: 84521)
Worries about Japan insurers grow as stocks plunge
http://biz.yahoo.com/rf/020906/financial_japan_insurer_1.html
Reuters Market News
ANALYSIS-
Friday September 6, 5:05 am ET

By Mariko Hayashibara

TOKYO, Sept 6 (Reuters) - Fears are growing about the health of Japanese life insurers as the latest plunge in Tokyo share prices threatens to eat into their capacity to make payouts.

Tokyo's Nikkei stock average (^N225 - News) touched a 19-year low this week. It has lost about 19 percent since March, damaging most insurers' solvency margin ratios, the key gauge of their ability to pay out on policy obligations.

ADVERTISEMENT
The ratio shows the amount of assets held against the risk of large-scale payouts in the event of disasters or a sharp decline in prices of financial products. The authorities can order corrective action if the level falls below 200 percent.

Japan's financial watchdog, the Financial Services Agency (FSA), is not planning to relax requirements.

"At this point, we are not thinking about any measures," an FSA official.

"It's no question that weak stock prices are negative for their business, but I don't think any insurers' solvency margin falls below 200 percent at the current stock price level," the official told Reuters.

Taking the current levels of the Nikkei and broader TOPIX index into account, Brett Hemsley, insurer analyst at Fitch Ratings in Tokyo, said some insurers' solvency margin ratios were likely to have inched close to, or even below, 300 percent.

Analysts consider that a worryingly low level because some insurers have gone insolvent in recent years even though their ratios were above the officially required 200 percent level.
+++++++++++++++++++++++++

More trouble in the land of the rising sun.

One big insurance company failure can lead to major banking problems as they are intertwined.

As for the good Bill Gross, his belief that bonds will be the place to land for many years...oh?

How long can the companies that issue the bonds last in a combined inflation and deflationary atmosphere? Recall that there are only THREE AAA rated bonds of all listed currently for sale.

Ten years ago the US boasted 58 AAA rated companies, today there are 8.

Since there is a huge intertwining effect [Derivatives] here as well as in Japan [Real estate] it seems to me that bonds should be the LAST place on put their hard-earned money.


Operative (09/06/02; 13:11:28MT - usagold.com msg#: 84520)
How Soon Before They Paint Gold As A Terrorist Tool?
http://ap.tbo.com/ap/breaking/MGADOM0GS5D.html
The article ends with a qoute that says the ultimate goal will be achieved when Americans are safe & secure. That makes a nice sound bite for the evening news, but at what cost to our freedom(s) will this be accomplished?

kasperjack (09/06/02; 13:02:01MT - usagold.com msg#: 84519)
Gross Speaks Out On Dow

Reuters Market News
Bond investor Bill Gross says Dow 5000 looks
fair
Friday September 6, 1:28 pm ET

By Jonathan Stempel

NEW YORK, Sept 6 (Reuters) - Bill Gross, widely considered the world's most
powerful bond investor, said 5000 is a fair level for the Dow Jones industrial
average, and that bonds will "for years to come" be the best performing asset
class.
***
The head of a major bond fund is totally fed up with the Potemkin facade.

The Hoople (09/06/02; 11:59:36MT - usagold.com msg#: 84518)
MK
Isn't inflation/deflation combined what we currently have? I see raging inflation in domestic-based product and service. Insurance (health, liability,auto and property) , taxes, fuel costs, food are going up double digits yet fire sales exist on glutted corporate planes, durables, electronics and anything imported made from slave wages. The UPC scanners so prevalent today at most stores mask the steady march of day to day inflation. Only pricing at the gas pumps remain as vestiges of when you could see inflation on a daily basis. There will always be products that collapse in price if non- essential or over produced. I don't think that should be confused with inflation which is debasement of money supply induced. The only way gold would collapse if it were truly undesired. That seems implausable and in light of M-3 explosion impossible. Prechter wave counts showing gold collapse seem out of touch. Gold is not another widget, it is a proxy for the fiat masquerading as money. When my health insurance premium declines 70% is when I'll believe gold could fall to $160. Neither will happen IMO.

Socrates964 (09/06/02; 11:22:45MT - usagold.com msg#: 84517)
DEFLATION
I agree with Doug Casey, who points out that the deflationary scenario depends on the rest of the world maintaining faith in the U.S. dollar as a medium of exchange/reserve currency.

All the political signs point the other way (from Middle Eastern oil producers talking about pricing oil in EUR, to talk about Islamic dinar, to shifts in CB reserves, and informal evidence that the Euro is gaining share in the black market).

Once the US bond market has completed what appears to be a blow-off top(say 10-year yielding 3% or so), you have to assume ferocious rallies in equity markets or there will be no fundamental case for any foreign investor keeping any funds in US$.

All this deflation talk seems to me to be nothing more than illusion on the part of US economists (whether conscious or not) that the dollar is an absolute measure of value.

This is redolent of 1971 - when Nixon moved off the gold standard, convinced that Japanese/German complaints about exchange rates were nothing more than self-serving whingeing and that there was really nothing fundamentally wrong with US policy. Everyone knows what happened next.

I don't mean to launch into an anti-American rant, but successive American governments seem incapable of understanding why they need to respect the rules of the international economy and how they could possibly be doing anything wrong. My reading of history is that they have learnt nothing in the last 30 years.

MK (09/06/02; 11:18:18MT - usagold.com msg#: 84516)
Additional thought. . .
There's a third scenario beyond inflation and deflation and one we might well consider:

A combination of the two -- as in the Contagion scenarios that have run consecutively through the Asian and now South American economies. A melange of unemployment, bankruptcies, failed financial institutions, inflation, deflation -- in other words complete economic breakdown a la Argentina.

In this analysis, the very first victim of the Contagion was the United States in the 1970s, early 19080s (which exhibited the same symptoms -- this odd combination of inflation and deflation) with the Asian and South American breakdowns following essentially the same model during the 1990s.

Now it may be coming full circle. . . .

Henri (09/06/02; 11:13:01MT - usagold.com msg#: 84515)
General Hugh Casey doesn't mince words
http://www.usace.army.mil/inet/usace-docs/eng-pamphlets/ep870-1-18/entire.pdf
Found this while working on another project...This man's work in the phillipines pre-dates the period of time when the Japanese hoarded their "black" gold there...Mc Arthur was also there and apparently knew much about the the "lay of the land" before the Japanese occupation.
The dialogue beginning on page 141 or so is very interesting.

Somewhere in the discussion he speaks of how recovering countries should structure their new currencies but I can't find it now. Very wise perspective as I recall.

Andúril (09/06/02; 11:06:08MT - usagold.com msg#: 84514)
Golden Bear, Mr. Prechter has a lot to learn.
Until that comes he is entitled to his thin opinion you stated in your post:

"Mr Robert Prechter. He is calling for a deflationary bust where gold will fall and the value of cash will skyrocket."

Do not let yourself be troubled by the speed of the printing press maybe falling short against the velocity of 'debtberg' destruction. These two are horses in different pastures with no need to race.

How fast can the debtberg destruction run, you wonder? Not fast enough. FedWire is faster. So fast indeed it is ALREADY THERE!

Mr Gresham (09/06/02; 10:58:38MT - usagold.com msg#: 84513)
Cavan Man
If that was your Goodbye message, then farewell, brother. I hope it was not, but I seem to be able lately to only tune in for a morning skim of the Forum, and a weekend catchup if lucky. If you've been involved in any controversies while I was away, I'm sure you got the best of 'em! ;)

One health recommendation I've returned to over the years is a News Fast. I've been a news junkie off and on through my life, and occasionally sanity compels me to veer off away from the printed stuff and watch green leaves blow in the breeze and butterflies float and stuff like that ('specially these last days of Summer!).

The WAR stuff is like that. Stay away from it if you know what's healthy for ya! It'll drive ya crazy faster than just about any "news" I know of. You're being played to, or played, and this Forum already has a leg up on seeing through all of that...

Actually, my image of this place has always been something like sitting around the cracker barrel at MK's General Store, jawin' away over th' State of Things and "money" in particular. (Don't underestimate how much of USA history has been spent in JUST that IDENTICAL topic!)

(Hopefully, we attract some bizness in for the store now and then, or at least not scare any away!)

The arguments may come and go, but the cast of characters talking it out here remains largely the same.

That's why I'm sad to see one of us go, and always hope it's not a permanent withdrawal. There ought to be an icon or registry or something that says of each character "Still here, reading and listening occasionally, even if I'm off busy with other things now..."

MK (09/06/02; 10:49:01MT - usagold.com msg#: 84512)
Golden Bear. . .
Your question:

"Hyperinflationary bust, or Deflationary bust, which will it be?"

My Response:

That's exactly what I was thinking when I said:

"Gold ownership in the low $300s will prove to be the investment of a lifetime -- not so much for the profits it MIGHT generate but for the hard-earned capital it WILL preserve."

I would add that it doesn't matter to the gold owner if the current unfolding debacle resolves itself in inflation or deflation. Gold will protect against either and no matter in which order they occur. To the well-hedged portfolio, the inflation-deflation argument is a sideshow. What's important to understand is that the current economic milieu isn't resolve itself through some sort of a miracle (although the propaganda artists might have us believe otherwise). Ultimately, any economic catastrophe ends in asset destruction.

Though I have great respect for Robert Prechter, particularly his work on the Elliott Wave as a reflection of human nature -- a behaviorist (and an interesting one)*, if you will -- my view is that fiat-based economies are prone to inflation followed by deflation (as an antidote) and gold-based economies are prone to deflation followed by inflation as the antidote. This is a fiat economy and though the current situation may resolve itself outside that parameter (anything is possible), to the portfolio holder the question is essentially academic -- AS IT SHOULD BE if the portfolio is properly constructed. Though I must say I enjoy the conversation on the subject as enjoyable as anyone at this forum.

After that one might weigh his or her portfolio toward either inflation or deflation, but that weighing is strictly speculative. Mr. Prechter has long advocated the deflationary scenario. It is a speculative positioning. Equally strong arguments have been advanced for inflation even hyperinflation.

Your guess is as good as mine.

History has shown that

-- in an inflationary scenario gold rises at a higher rate than other commodities as investment money pushes on an already delicate supply

-- in a deflationary scenario gold tends to hold its own, or fall at a lesser rate than other investments, thus preserving capital.

As you can see gold is the winner in either case -- and that's why it remains the ideal portfolio insurance.

The essential fact of life in the gold market is that the price of gold has been restrained for what appears to be political reasons. This hearkens back to both of our earlier posts. As gold owners, we will take advantage of the unfolding scenario no matter which way the ball bounces.

* A few years ago George Cooper and myself were talking about the Prechter analysis (We have both studied his works) and the question came up where his mentor AJ Frost had the EW count. So we called Mr. Prechter who graciously forwarded Frost's last known chart count and put us in contact with Mr. Frost. You might be surprised to know that Frost had the graph numbered differently and proposed an economic situation the opposite of RP. His charting predicted an inflationary resolution and gold in either the beginning stages of a wave 5 super spike or the tail end of the "c" corrective wave. Unfortunately, Mr. Frost was ill at the time and unable to elaborate. All we have is his original count which was published in News & Views a few years ago.



USAGOLD / Centennial Precious Metals, Inc. (09/06/02; 10:31:43MT - usagold.com msg#: 84511)
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