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The Gold Trail:

The Message
of an Evolving Market

 

"Understanding the events that got us here
and how they will unfold before us
is what this GoldTrail is all about."
--FOA (5/6/01)

Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;

[...]

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I--
I took the one less traveled by,
And that has made all the difference.

--Robert Frost (1874-1963)

Yellow Woods

"Think now, if you are a person of "great worth" is it not better to acquire gold over years, at better prices? If you are one of "small worth", can you not follow in the footsteps of giants? I tell you, it is an easy path to follow!" --ANOTHER (THOUGHTS!) 1/10/98

[View early writings of ANOTHER and FOA at USAGOLD (5/1/98 - 9/3/98)]

WELCOME to The Gold Trail: The Message of an Evolving Market...

USAGOLD is pleased to offer these special pages of unfolding commentary (and archives) that are sure to challenge conventional perceptions of the gold market and international monetary affairs. As we turn over posting access to this web page to our anonymous author, FOA, we no more know in advance the schedule or direction of the forthcoming commentary than do our fellow readers. However, based on our past association with this gentleman, we are confident that the messages will continue to be as fascinating and as worthy of careful study as anything you will find on the web today.

Through these special pages we can now follow "The Gold Trail" of current events; anticipating the road ahead while leaving this easy-to-follow trail of commentary behind.

For your further convenience, an alert message is automatically posted to the USAGOLD Forum whenever there has been an update to this Gold Trail page. We encourage you to follow along and to join your friends at the USAGOLD Forum to share in the discussion.

It should be noted that we do not edit or seek to alter these presentations; they appear here as submitted by the author. With that, we have finished lacing on our own hiking boots, and stand ready to enter the yellow wood, taking the path less traveled by...

Click here for convenient access to the USAGOLD Discussion Forum Archives for referenced posts

(Archive I) The Trail Head -- Start here for earliest archived Gold Trail posts from February 2000 - June 2000
(Archive II) The Long and Winding Road -- Gold Trail posts from June 2000 - January 2001
(Archive III) The Scenic Overview -- Gold Trail posts from January 2001 - April 2001
(Archive IV) Nearing the Great Divide -- Gold Trail posts from May 2001 - June 2001
(Archive V) The Trail Widens -- Gold Trail posts from July 2001 - September 2001

This periodically updating Gold Trail commentary page is presented in a bottom-up order, with the most recent text posted atop the prior commentary. (Scroll To Bottom of Text) to read the earlier posts.



FOA (12/16/01; 15:27:34MT - usagold.com msg#133)
(No Subject)

Seasons Greetings and a Happy New Year to the entire USAGOLD GROUP. Certainly, this includes every reader / lurker at the forum, hikers on the Gold Trail and the staff at CPM!

Of course, the largest thanks must go to Mr. Michael Kosares; as this media would not exist without his enormous efforts. Thank you Michael (smile)!

We rest from discussion during this holiday season; a season that also happens to be ushering in one of the most dramatic financial changes the world has seen in our time. As the rains arrive and our crops begin to grow :

---- "We watch this new gold market together, yes?" -----

A happy (smile) to all!
TrailGuide

FOA (11/12/01; 16:31:28MT - usagold.com msg#132)
There comes a time

There comes a time in all things when one must do nothing and simply wait. This is an ages old truth that crosses all the boundaries of life's endeavors; for everything is not always in the doing, but also in the watching. Any good farmer knows that he does not grow a crop; he only prepares his field so the growing, he knows is coming, can take nature's course.

My friends, we have crossed time and space, while plowing these fields of understanding, and the unfolding drama before us must now sprout it's own life. For now, it is my time to watch the trail and let the crop develop. Indeed, it will and it will do so for all to see.

Enough has been said to prove our reasoning is true, especially when the fields become full and in a shade of physical green only our seeds will produce. And planted them, we did, by hand, one at a time, over many years.

Enough has also been said about myself as this story was never about me; perhaps too much untruth was also said by others?

I am going to travel for a while and watch the trail from a distance. It won't be long before the rains come and the ground begins to open; in that time I will return. Until then; this farmer will rest from this work.

Thank you USAGOLD and all the fine people that make this media the best gold site in the world! Another time, we WILL hike again.

Sir Douglas
Your Trail Guide




FOA (11/8/01; 15:10:35MT - usagold.com msg#131)
Words of a fool!

These are parts of several posts presented today on the main forum. This person does not know me or my associates. Indeed, most of us let blood for this country in a war long gone. I will say this for the record: Another is English and not Islamic!

But you have no trouble at all casting me in with the same evil that crashed into our nation on the 11th., do you? . Sir, you have spit upon the "flag" that waves outside my window. I do so now spit upon your name. You are not part of the same country I served!

I have spent years teaching and debating with men great and small. And have learned that only the mean ego of a useless fool uses such tactics. I am ashamed to have read your words at all and will do so no more. You are but a reflection of the very political hatred you condemn. It is a sad, sad day when someone wants your story silenced, so badly, that they resort to such comments. My spirit is low, I will walk this trail in silence.

-------------
-------However, I do not say "all paper will burn", and I definitely don't send demented religious fanatics to crash into the paper trading house and burn it down. -----

------ Finally, when FOA started putting forward his economic theories, I realized that he had spent too much time listening to an Islamic cleric who had not a clue as to economics.----------

------ So, from my vantage point of budding economist, FOA's explanations come down to being non-arguments and economic gibberish that would even shame Marx and Keynes. ----------

------ The motives of these people complaining of US defaults and monetary imperialism are simple: the greed for the unearned, envy grown of a zero sum view of social life that is characteristic of feudal societies such as Arabs still live in and Europe has barely made one step out of, and fear of their economic and financial future as a result of their stealing and wasting of their people's wealth. -------------



FOA (11/5/01; 18:31:01MT - usagold.com msg#130)
A quick note from the "TrailHouse"! (smile)
http://www.forbes.com/work/managementtrends/newswire/2001/11/05/rtr415069.html



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

You just have to give the devil his due,,,,,, Wim Duisenberg gave a clear signal today and his timing
allowed him to hit two birds with one rock.

First target: He has all of Political officialdom now holding their tongues because they learned that
the ECB is not the same animal as our Fed. From the link:

---- "Politicians have been scared of publicly pressing the independent ECB to act for fear it may
dig in its heels and remained cautious Monday" ----

Ha. Ha. They now know that these guys (ECB) are looking out for not only the money of a large
diverse group of nations, but perhaps a new bench mark currency a good portion of the rest of the
world may use. Their stance, recently, states that a currency should be valuable too and even offer
a real return for those that hold it for a while.

Don't expect Western dollar investors to fully taste this flavor just yet. But, they will as their local
economic structure begins to hold complete sway over the Feds actions. And all those deflation
boys thought our Fed would not inflate? Shoot, even our treasury in manning the guns now!

Second Target: Wait long enough for the US to have to drop dollar rates even lower before you move. "Watch him Alan,,,,,, Old Wim keeps his Euro biding a little higher than your dollar! I got a bad feeling about
this trend!"

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

Leigh,,, thanks for reading and thinking. I also want to thank everyone for using the fine services of
USAGOLD. Because then they further offer this entire forum library to further expand your understandings of gold. It takes a lot of effort by
everyone, who thinks and writes here, to offer such a broad spectrum of Gold thought.

---------

Gold has always been the most political metal our world has ever known; political because it offers
so much power to those that hold it in their hand. Many of the downtrodden look at government
policies and say:

-----"they dictate our wealth and put us in debt so as to control us"! -------

Conversely; A simple person can control his controllers by staying out of debt and owning a wealth
no government can dictate the value of: Gold Bullion!

GOLD:

-- value it with official contracts and currencies and your wealth is their power ,,,,,,,,,, keep it as your savings of ages,,, and your wealth becomes their master!

TrailGuide



FOA (11/3/01; 14:39:16MT - usagold.com msg#129)
An "inflationary depression" is in the cards -- a "price deflation" doesn't have a chance!

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

Back in the mid to late 70s Sir John Templeton always drove his point home for investors watching Luis Rukiser's show. (how does one spell his name,,,,, we always called him Lou Baby (smile))

Sir John, living here on Layford Cay, kept saying that the Dow of the 70s was very under priced and would soar. He was the most absolutely correct person stating that then! But more into the mechanics of his perception: he knew that anyone buying the Dow and waiting a decade or more, would gain way beyond mere price inflation. Monetary inflation would eventually drive the perceived virtual wealth of US stocks ever higher. So high, in fact, that their percentage gains over price inflationary gains would be incredible. They were!

Truly, what John was referring to was the effects that simple "passive inflation" has on paper assets; especially in a "reserve currency's" domestic market. In this; real price inflation is mostly exported by importing "real goods" competition. This happens as we export excess credit dollars to buy things. It also has another effect; some of that same exported printed money flows in a circle and joins native investor's buying of local paper assets. When this process first starts, "passive inflation", in the form of massive money creation that's far beyond real price inflation, allows one to gain "virtual paper wealth" even before the markets price out the gains. That is; the Dow stays cheap at first then eventually rises to absorb the money inflation! As long as prices don't rise too much.

People that followed his advise, accumulated the Dow over a decade or more; buying "virtual wealth" before the fact! Stock investors made a killing by positioning their assets where this created "passive monetary inflation" would eventually end up. Even though hard money players laughed at them all thru out the 70s, 80s and early 90s! Look who is laughing now? Stocks tromped hard money plays hands down for over 20+ years! Even considering the latest fall on wall street.

My friends:

Today, this same "virtual wealth" effect has been created again and is located in physical gold bullion. I believe Sir John has already made part of my point but I will repeat.

When a currency system comes to the end of it's reserve use, I'm speaking politically, it's domestic market will come to a point where it can no longer export "real price inflation" in the format of; "shipping it's excess currency outside it's borders". This happens because internal money inflation, that is super currency printing, is increased so much that it overwhelms even it's export flow. Worse, even that export flow later tumbles as the fiat falls on exchange markets.

The effect is that local "passive inflation" , built up over decades and fully reflected in "Sir John's" paper assets, spreads out as "aggressive inflation" and hyper price rises begin. In this action, the very same wealth effect that was eventually priced into "John's" Dow stocks and other assets, begins a long march of being priced into real gold.

Anyone that has accumulated physical gold over this past long period was doing the exact same thing Dow buyers of the late 60s and early 70s were doing: ------ saving "wealth" as unpriced "virtual wealth" stored up over that "passive inflation" period. ---

----------------------
As "political will" begins to impact the economies of the US,

our old "virtual wealth" that is no longer in the form of "passive inflation" nor limited to the currency, and is openly displayed in our vast sea of paper assets values including stocks, bonds--------

must now be defended in the open with official printed money flow.
---------------

The "virtual wealth" in gold, saved over years by patient investors, will also be priced to market in this process.

Never mind that during the Dow years paper gold markets could not work in parallel with all the other asset gains; it couldn't. Hard money players, trying to somehow play the Dow's game, never caught on to what was happening. Instead of buying "virtual wealth" by saving real gold; they brought
leveraged bets that gold would be priced correctly during the "paper asset" years.

Obviously, this "trade" failed hard money players as the waves of value from other paper gains and derivatives leverage were employed to match against their every long bet on gold. Not only that; the "virtual wealth" in gold was never opened for them with the super price inflation they all thought was coming during that era!

Now that the paper game is about to stop for the dow, it will also cut off the leverage of gold bets. Just as the real game begins.

The reason for this is that our massive, decades long gains in our stock markets did not bankrupt the leverage in the money system. Where as any massive rise in physical gold values cannot be priced into "derivative gold" without crashing the system.

Remember; in political inflation's, money is printed
to save the assets as they are currently priced; not create new loses by saving the liquifying the leverage that's countering your play!

This paper gold market will be cashed out at prices far below real bullion trading so as to inflate further the books of the Bullion Banks,,,,,, not destroy them. At least this is how the US side will proceed.

------
Michael Kosares-- A thru Z


In this perception USAGOLD has been guiding it's clients, and now the world, in much the same way Sir John did decades ago.

"Buy what has value at the greatest discount and wait for the politics of money to price your new savings correctly"!

The politics of wealth today is centered around gold bullion and only gold bullion: that is where the wealth and power will be manifest: this is where the gains will be! To bet on the rest of the hard market ; is to bet against the coming inflation making your asset whole!

Place as much of your wealth in physical gold as your understanding allows and save this "virtual wealth" of the ages today: waiting for it to become real wealth, priced correctly in the market place, tomorrow.

Make no mistake, the wealth is there "but only there in bullion"! Because a free bullion market cannot be denied or controlled

----- when it stands between the opposite goals of political powers! ---

In this: it will separate from the politically crushing reality the current dollar based paper gold markets represents. The premium on bullion will soar!

The "Political will" of old world Europe is about to help make our investment real. For myself, a large percentage of my wealth is being saved by going with the evolution of paper moneys: not against!

This trend is visible now and based on the forward flow of human affairs, not the backward rules of money theory!

Our future is today; if not just around the trail!

Sir Douglas; aka FOA

your: Gold - Trail - Guide

FOA (11/2/01; 12:35:27MT - usagold.com msg#128)
Gold,,,,,, Gold,,,,, Who has the Gold?


Let's take a walk and think about the big picture for a minute. Then we can get back to that question.

-----------

If you followed most of Another's Thoughts over the years the line of reasoning below will fall easily into place.

Somewhere during the late 90s, when events made it more certain that the Euro would be formed, the threat to use real gold as a partial pricing unit for oil was moved to the back burner.

By including an extremely small amount of delivered gold in trade for oil, along with digital dollar settlement, gold would once again be returning to it's ancient roots as a world class wealth used in barter. Instead of allowing it to be controlled by bankers and governments, gold's socialist tie in with official money use would be all the further distanced.

So, if swapping oil with third world nations, for grains, finished goods and other commodities, offered lesser countries another way to circumvent their lack of hard currencies while using the dollar system; then using gold to partially settle world wide oil trades would bring more balance into this one-sided dollar economic world. Trade alignments, such as gold for grain, grain for copper, copper for oil, then oil for gold would easily be adapted into our current solo dollar realm; forcing the dollar to share it's fiat use demand with real barter trade for real goods. In this, allowing international trade to abrogate the dollar's iron clad pricing of goods and services to the singular benefit of American lifestyles.

Where official dollar supporters have structured our paper gold market in a way that values gold only upon it's money backing merits; a returning of gold into it's barter trade realm would force a realignment of values between physical and paper. Once again allowing gold's value to soar and creating a large enough liquidity mass to serve not only as an oil trading medium, but wealth savings for all.

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

On the back burner, perhaps, but not out of the picture.

In this premier position of barter trade for oil, gold itself would have been backed with a demand component, the demand for oil, that would last as long as the world remained advanced. As dollars and Pounds were once backed with delivery of gold, in a turn of events, modern physical gold would be backed with delivery of oil.

Even matching a barrel of oil to just 1/100 of a gram, the long term demand for oil would have brought physical gold trading back into the forefront and shown the true worth of gold in it's non money barter roll. Such a price valuation that has not been seen in, perhaps, a thousands years.

With physical pricing again setting the level for derivatives pricing, the dollar reserve system's evolution from gold standard to derivative standard would permanently dissolve. Not only would our current form of paper gold would lose it's effective control in price discovery; in a repeat of 1971, our paper gold game failure would once again costing paper leveraged investors many fortunes.

-----------

For now the Euro: the vision held together

Once again the choice would be clear for both common man and international trader; use fiat if it's economy of use is efficient and controlled or use taxable barter to help control your controllers. Within the confines of the US, this may not become a reality (I think it will), but internationally, with European support, it cannot be avoided. All nations will use gold as nature intended and do so for the betterment of mankind.

At this point in time, there is no longer a concern that the Dollar's timeline might have no end in sight. With the world's more favorite form of trade settlement, digital currency, about to be represented by the moneys of a group of nations; the dollar's singular drive to enhance the lives of only one people is about to end with the currency's credibility.

First and foremost in the ECBs political will to establish a credible fiat, gold was and is set free to be valued at whatever level free physical trading would allow. We know now that the dollar marketplace for gold paper is coming to an end with this process. Not only will they be allowing limited, taxable gold barter to accelerate, but to also encourage it's bilateral barter use within international trade settlement. Something the IMF has fought so hard to contain.

Therefore, by the end of the 90s, the need to employ gold for partial payment in oil settlement, as a means to block our dollar faction, was removed from the table. With that the threat that buyers, traders and hard money players would join oil sellers in flocking into the physical gold markets, also disappeared. The thought that driving this suddenly new oil pricing tool thru the roof, was simply restructured. For the time being, the complete burning of our paper gold markets was put on hold; along with the 280 floor big trader and other official gold holders said "must stand" at that
time.

Indeed, from hindsight, the often repeated remark that "all paper would burn" was not invalidated; rather expanded in scope beyond just our dollar paper gold markets. It now seemed that this paper burning would also include the entirety of dollar assets, both debt and equity. With the
acceptance of a Euro based trade protocol, our dollar system would now be forced into a super inflationary fire. Truly, this day has arrived with current events literally shouting "monetary inflation" as we have never seen it before!

Not only Euros, but some form of freely priced barter gold is now firmly on the road to becoming a real competition for use in world wide trade. Within this evolution, the currency trade settlement game is being slowly switched from virtual to real time as the act of slowly accumulating gold over
a long transition period is drawing to a close. Over several past years and for the remaining time ahead, selling the illusion of paper gold short while buying free gold will come more into open view and no longer be the sport of kings. The coming premium price, paid for physical delivery, will develop for all to see. Something I will personally welcome as an open confirmation of our views.

The events begin to unfold:

To the bane of Western thinking hard money gold bugs, who craved the leverage illusion our gold markets seemed to create, the death watch for their favorite game is about to begin. As if out of a fog, an end to our gold pricing illusion will march, hand in hand, with an end of our economic prosperity. The coming inflationary fire will now sever the wealth our reserve dollar system created for all of us Americans. In the same scope of time a, Euro based, free gold price will evolve out of these inflation fires. I for one do not relish this outcome, but welcome the good such a staunch reality will infuse into our national values.

We pointed out earlier this year that our Fed would begin it's inflationary march "now" and never turn back again. They did "then" and we are well into it now! Our point was made in spite of all the past decades of similar "dollar inflation" calls other hard money people declared were coming. Our dollar's decline never arrived for these people because they based their calls on economic theory; instead of "political will". "Political will" won then and will so now as we point correctly in the next direction.

Many said that the "bond vigilantes" would hamstring any effort to price inflate a credit driven money like the dollar reserve. Perhaps causing our Fed to eventually lose the war as it "pushes on a string"? Many of you have read countless opinions as to why our credit markets would implode into deflation as a "mise" style economic theory surfaced to control the controllers. Truly, these people confuse theory with human action as much as they do not understand real physics! Indeed, strings that cannot be pushed are either thrown or cast aside in the real world.

Reference today; we see where the "political will", trumps economic theory hands down, as the dollar people remove 30 year bonds from the system. In the process, forcing rates all the lower. The next time someone reads to you reams of hard money theory; ask they why they said the same thing 30 years ago about the dollar and the US economy? But it kept right on running; proving them repeatedly wrong? Now, for the hundredth time they say: "mise is correct, the markets cannot be faked, so a little deflation will follow this inflation!"

Baloney! The evolution of Political will is now driving the dollar into an end time hyper inflation from where we will not return. That is our call. Bet your wealth on the other theorist's call if you want more of Their last 30 years of hard money success.

More is to come!

Are you worried about South America? Don't! We will print all the money it takes to save any and all US financial interest in that sector.

Are you worried that we will enter an Japan like economic environment with rates at zero, economic stagnation and falling real asset values? Don't! They do not use an out going world reserve currency and we do! We will print what ever amounts needed to keep real Estate up, the Dow up and our economy purring: no matter what the value of the dollar on foreign exchange becomes. Or our eventual price inflation.

Our local economy will soar in dollar terms; no matter what our dollar is worth.

Are you worried that our 10 year bond, the new bench mark, will soar and squeeze off any recovery? Don't! We will just remove it from use and move to the 5 year,,,,,,,, to be replaced later by the 2 year,,,,,,,, to be replaced later by the 6 month,,,,,, 1 month,,,,,, 1 week,,,,, 1 day,,,,,, then
CASH!

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

Who has the gold?

I do and so should anyone that wishes to participate in the next currency system. Only, don't expect your gold to become money, it won't! It will become the most valuable wealth asset in your portfolio,,,,, by a long shot. For the simple thinker; gold is good. That's all we need to know. For the man with a question: Gold must vise in value many many times just to regain it's wealth barter asset value. Perhaps $10,000 to start. Then, it will run with any and all dollar inflation,,,,, even Euro inflation that ECB people openly admit must be a part of a dollar to Euro transition.

The EuroLand Central Banks have every bit of gold in their vaults their accounts say they do. For that matter, so does the USA (for now!). So what if they or we swapped it out on paper? It means nothing because the gold never moved. Remember, EuroLand is playing a dollar gold market game
for now. If we walk, and they know we must will walk first, they will simply opt out of the dollar bullion paper system. Period! Why do you think England it trying so hard to enter the Euro fold? Think: saving their bullion liabilities by opting onto the other side!

Hell, pre 1971 the US swapped it's entire vault of gold to foreign interest by issuing dollars overseas. In a news flash, some seemed to have missed, we killed that arrangement by simply keeping the gold! Today, because the ECB would love to see the entire dollar gold market fail, I cannot imagine them shipping gold to support it if we default on shipments. Well, perhaps gold bugs would think this appropriate because it saves their leveraged futures, options and mine investments?

No,,,, most of these theories about missing gold are extrapolations that attempt to explain how the industrial / physical gold market is meeting demand. Hard money thinkers simply cannot believe that private Western gold holders have been unloading real gold for the paper variety and filling the physical demand void in the process.

If this paper buying is true, it goes a long way in explaining how fractional gold paper has filled the real demand for gold. It also ruins the dreams of investors in "illusion gold" because it points to a colossal default and asset seizure (via windfall taxes) is coming to a mine near you. Events march on and will soon begin to prove "who knows what" about our political world. Watch carefully, the
show is beginning.

In a final note: I see that in spite of world shaking events, the downfall of our paper gold markets is keeping the "virtual" price of paper gold very low. Just remember; inflation in the paper gold markets works the very same as inflation in currency markets: it cheapens the value of the paper holding and works against allowing leverage to return real gains. Conversely, physical gold will gain as leveraged gold assets fail.

Once again, I see where Big Trader is selling silver to buy real gold. Some people just know where "political Will" is going. (smile) Others don't.

Thanks
TrailGuide



FOA (10/26/01; 21:21:33MT - usagold.com msg#127)
A few comments on comments!


----- The Euro is a mere convenience for trade among the group of user nations if it cannot buy a bbl of oil in international markets. That's a fact.----

I hear that some French buys are already being invoiced and settled in Euros. But, then again, they don't like to admit that they even use the awful stuff. (grin) Actually, with so much of their electric needs provided by Nuclear,,,,,, what doooo they need oil for?

------ Could it be that some dollar holders are buying up US stocks at what will later seem to be bargain prices? What better place is there to dump dollars without upsetting prices?-------

Well,,,,,,,, some small players may be doing this. But, big holders of overseas dollars have to ask: "what would foreign exchange controls do to my big stock gains"? Besides, if they can only get 5 or 10% of their dollar wealth into physical holdings,,,,, the rest of the cash could evaporate later and they would still be light years ahead. Considering the coming gold / dollar free market revaluation. Only, the problem has been for a number of years; how do all of these old Euro Dollar accounts get into even 1% physical when the whole market has such a waiting list. But, ask about paper gold? Sure,,,, all you want. Has anyone ever figured how much gold 1% of the whole Euro Dollar float would buy? Even at $1,000 US per ounce?

----------Europe has not matched US efforts to stimulate growth since the September 11 attacks, Breuer said, because "we have no common, defined, decided economic and financial policy in Europe".-------

(comment by USAGOLD site steward) More importantly, it does have a single independent authority steering monetary policy down the middle of the road so as to be neutrally suitable for a wide coalition of interests. ------

You have that right Randy! Rolf Breuer sounds like all the late model financial planers in Europe that still don't know where EuroLand is headed. These guys got their economic stars while studying at the socialist feet of our political Federal Reserve. Only trouble is that they never understood that fiat inflation using a world reserve currency, like our dollar, is different from other systems. We buy cheap social policy and economic expansion with the blood and sweat of foreign productivity. I bet Old Breuer thinks its ok for a business to buy $1.00 running shoes from asia and sell them in Dollar land for $120.00. Then he would point out that shoe inflation is only running at a few percent
because those shoes went up $3.00 last year. Oh well.

The Euroland Germans, and the ECB studied our ways for a long time and now fully understand how to attract other nations into a fair game. The Euro will become a "world standard" more so than a reserve because they want it to be a fair currency that's accepted for it's value. For the Euro to gain American financial acceptability later, it will do so because it will be the "last man standing" when this inflation storm resides.

------ Government gets "tennis elbow" from throwing the ball of string --------

I know where that one came from (smile). All of us concentrated much too long on when the Fed would eventually fail to push our monetary string. Did we ask this question as if the US was about to become "suddenly dollar responsible"? Or was it because the markets would over rule the fed's hand? I bet we asked because "fiat credit theory" said the fed would eventually meet such a fate.

Double baloney! Our fiat world would and did evolve around this problem. Once the dollar inflated itself to the end of its "gang plank", it was into the inflationary drink sailor! The Euro will take over and we will become like any other national currency; subject to pay as you go politics and social policy. Can't push that string? Pick it up and heave it in a third world like inflationary pitch. That ball will fly, brother,,,,,, oh will it fly!

--------Putting these two together, I observe the following -- So, really, the Euro Banks don't mind selling gold short, because when the big blowup comes, they suddenly have a use for the the dollar reserves they have piled up. Is this a fair conclusion? ---------

Well sir,,,,,,,, we should all think about this for a bit? It's awful clear, to anyone that has just a little of the facts, that the paper gold markets cannot ever be converted into physical gold. The numbers would be????,,,,,, That's just a rhetorical, don't even try to put a real number on it.

You see, all the armchair gold bugs hold onto their paper leverage and cheer for some big paper short covering blow up. A paper squeeze that forces the "virtual" price of gold way up. But, who exactly is it that is going to be a threat to the paper Bullion bank market? You,,,,, me,,,,,, that man
behind the tree?

What if me and a thousand others came up with a 1 trillion in cash and used it to lock down paper contracts to deliver us 1 billion ounces of gold. The paper gold market has the means to match our commitments dollar for dollar. I mean, they could put the money up, not gold ina a vault, and get
on the other side of us,,,,, margin to margin.

OK, now we stand face to face. Even if we had enough free cash to pay for delivery,,,,,, what jurisdiction would let us settle; England, US, South Africa, Canada,,,, who? No, we would be told to cash out and buy our gold on the tiny physical markets. In a Hunt like joke,,,,,close out would come and we would eat it, big time. Even if we broke even, how exactly would we exchange our cash for metal in the tiny bullion markets without driving the price to the moon?

The reason I play this out, in text, is for others to understand that there ain't gona be a run up in paper gold. That market is a derivative style currency support and it was never set up to be a big time deliver machine. Its control will end when the currency system, it's built on, fails and takes the "virtual" gold market price with it,,,, to the floor! But, long before that plays out, the real bullion markets will get extremely thin and build up a huge premium to contract settlement. It will do this because some financial disorder will invalidate, and most likely, force an official deferral in physical delivery; indefinitely. From there the show will proceed.

The big dollar gold shorts in Euroland have real market exposure but no political exposure. Their political house would just as soon settle this at whatever level the paper prices sink to; this is their real market exposure and it will most likely be profitable. There will be no political exposure, forcing them to settle in physical delivery; because the US system will opt out first because of inflationary preasures! Very simple political logic, right? Try asking someone that is hip deep in gold stocks or futures if they grasp it? Hard thing, that political perception is,,,,, especially when your pocket book controls your brains. (smile)

Again; this all mostly covers the bulk of the markets. Paper gold owners that have oil to trade will get their ticket clicked,,,,,, believe it. However, I bet that by then most of them will be asking to settle their gold in Euros.

----- So, Japan has excess fiat they don't know what to do with.------

Japan is a different problem. They have been locked into the US dollar economy for so long that they cannot escape. There is simply no way that China will let them into the Euro house. The HK / China central bank system, also known as Big Trader, simply wields too much economic sway between Asia and Europe. In historical precedent, the orient express always headed to Europe and never saw "The Japans".

Actually, Japan doesn't want to go there and has risked a decade of time waiting for some economic change in the US. I have said from way back, that Japan will go down with our (US) inflationary tide. They will waste away their dollar assets following our lead. Those that think that these peoples want to be part of a third world currency block do not know them. I do,,,, but that is another story.

--------- A Trail house? A Trail office?! Life on the Trail is growing much more comfortable than before, when we all "pitched camp" and ate pork 'n' beans around the fire! ----------

Believe it or not,,,,, I was in a real tent on my last vacation. Tell this forum the truth,,,, my-Lady,,, when was the last time you went for a wilderness experience,,,,,, slept in a tent and watched the stars while around a fire? On the GoldTrail such an expierence is valuable beyond all things, no?

Pork-n-beans??????? I should not have saw that,,,,,, I'm off to eat! (smile)

thanks
TrailGuide



FOA (10/26/01; 09:01:38MT - usagold.com msg#126)
Still at the Trail House
Ok!

Check out those new home numbers? How can this be; people are financing and buying homes in the middle of massive layoffs and cutbacks. It just goes to prove that if you expand a fiat enough, the physical market for anything real will be brought. The secret is in "expanding enough" and using the right kind of fiat to expand with.

----- New Homes Sales for September were just released and came down 1.4% at an 864K pace. This was slightly stronger than the consensus estimate for 860K though softer than August's reading of 898K. ----------------

Well, our fed isn't shy at all. They don't hide behind some hard dollar theory when it comes to giving out free money; especially when the currently they are giving away is the world's reserve. No sir, our American home buyer has the right to buy himself a roof no matter what his economic fate.

This is the game plan that works,,,,,, has worked,,,, for decades. As long as your local economic structure is based on a "fractional credit reserve banking" that is not affected by price inflation: then the people using your internal dollar market will buy goods using whetever "almost free credit" that's avaliable.

Americans exploit the system because they use credit created buying power to buy real "non inflationary priced goods". No matter the debt load as long as the fed will cover their cost by refinancing said debt at ever lower rates. And the Fed can do this as long as the world has to support the "only currency game in town" by delivering their real goods for our dollars.

Again; this all works as long as the world "buys into" using our dollars. As I said; an expanding fiat works to grow the economy thru expanding credit buying power because the fed can support the system with credit creation that has no "inflation premium". That lack of premium only exists as long as Americans can exchange free credit for real physical goods. Once this perception changes its over. Once the world understands that it's not local US goods that stands behind dollar growth, but less expensive foreign goods,,,,,,,,,, the stage is set for our "supporters" to sell to themselves!
Making themselves "lifestyle rich". All they need is Another currency unit.

Today, the ECB said that their M3 was rising at a 7.6 rate and doing so because people were moving more wealth into savings. Can anyone figure that one out? Hello,,,,, they keep their short rates well above inflation (or at least above the US dollar rates) and international people are saving the currency. In the face of this our fed is expected to lower rates again to around 2%?

Somewhere in the middle of all this; real savers will supply Euroland with a solid base of credit wealth that can be borrowed without driving their local price inflation thru the roof. Then: other national economies will have a market that shares realistic price levels for all goods. Then; all economic systems will begin a non inflationary expansion that centers around Euro use! All of this period will mirror our (US) internal coming inflationary expansion that limits our ability to import or export. Think about it.

-------

There is a lot going on now,,,, so: Later today I'm going to address some posted items made on the Main forum in an effort to expand on the political game in process. Will be back later.

TrailGuide



FOA (10/25/01; 17:19:54MT - usagold.com msg#125)
More Thoughts and Comments from the Trail House
http://money.iwon.com/jsp/nw/nwdt_ge.jsp?section=news&news_id=reu-l2510670&feed=reu&date=20011025&cat=USMARKET

Somewhere in the 1970s era I was exposed to the thinking of several different deflationist. It seemed that all of their conclusions came to the same end: that dollar deflation would rule the day, no matter what. Mind you now,,,,,, most of them were split on the finer points of the issue, but for all of them; inflation would have its day even if prices would rise somewhat. Deflation was always the final outcome.

One of the central themes, in these thoughts, was concerning how this coming deflation would impact plain old residential real estate. You see, most of these guys advocates selling excess residential property because it was, sooner or later, going down for the count. Mostly because the mortgage markets would be destroyed in the deflation and nobody could buy.

-- Note: The reader has to understand that these discussions were directed towards people and investors that had plenty of net worth. And I do mean Plenty! The argument wasn't about how to survive; rather how to balance a truly conservative estate portfolio. --

As time has passed we can see several major flaws in their thinking. Flaws that cost them a bunch of credibility, if not personal money. One point, that I have touched on here several times, was in understanding just how much ourselves and our economic structure would and did evolve into accepting fiat money use. Even though it was, "god forbid", separated from gold.

In one area alone, the bond markets, investors reacted far different than deflationist thought they would. Twenty ++ years ago, it was expected that just gross increases in money printing alone would be enough to crash the bond markets. Not talking about price inflation here, but money inflation and that should have started a deflationary fall in our credit markets. It almost happened, several times, but never followed thru. It seemed that the market function had evolved to accept fiat inflation as a prerequisite to modern economic function. In a like comparison to today's thinking; investors assumed that as long as we had an expanding economic stance, sourced by inflating fiat supply, price inflation would not impact long bond credibility. We saw confirmation of this over many years. We saw that our credit markets, especially long bonds, were used in spite of
the price inflation threat. Indeed, there was a ready market demand for bond purchases.

In hind sight, long term holders of bonds did do very well if their position was part of a balanced holding and they didn't need to sell at bad times. Even now, dollar bonds have gained as rates are pushed lower.

Back to the thought:

This whole IMF dollar system has always been based on an expanding fiat theory that swells GDP over time. Investors that bet on deflation coming along, after each of our bouts of inflation, were badly burned as deflation was overcome. Economic function returned, essentially because price inflation could not rout the overall market for long credit.

The flaw in all of this was in the reserve structure of our Dollar IMF money system. The fact that the world had to walk, lock step, with our money policy meant that their goods production would almost always be cheaper than ours; keeping local US price inflation under control. In other words; local US based price inflation could not get out of hand as long as the rest of the world was willing to use their economic production to control it by selling into our expanding fiat system.

In this, the dollar could be inflated without end while our credit markets functioned in a non inflationary environment.

But there is an end.

A money system like this has a definite timeline and that point is reached when the world can move away from keeping price inflation low in the US. That point is reached when Another money system comes along to challenge the dollar and, in the process, offer these other goods producing countries a chance to buy some "lifestyle" for themselves.

At first, the show is dull as investors keep right on buying into the dollar argument above: that an expanding fiat base builds non inflationary growth. This is one reason traders still buy US long credit, not to mention chasing rising dollar exchange rates; they expect more of the last several decades of economic theory to keep right on going. It won't.

The dollar faction saw its match early in the 90s as the Euro was taking shape. To counter this threat, as I have outlined here in several ways, they promoted derivative hedges as a way of insuring dollar dominance. These hedges, including gold derivatives, only served to leverage the entire dollar / IMF system beyond its ability to serve as a real fiat money system, today.

I mean; that our whole dollar landscape has now become just a trading asset arena: its now evolving away from any meaningful currency use to trade for real goods. It can head in no other direction because our local economic structure, the USA economic base, cannot possible service even a tiny fraction of the buying power currently held in dollars worldwide.

So what does this have to do with Real estate?

Take a look at any broad section of the US; Northeast, SouthWest, etc.. If any of the deflationist were correct, their reasoning back in the late 70s and early 80s should have produced at least an average fall in Residential real estate. Can any of you find an "average" of property today, that is lower than early 80s prices?

Of course I'm not talking about the spikes in Hawaii, New York , Denver or San Francisco; those are just blips on an ever rising inflation scale. Even if they fall some from here, it isn't part of a deflationary act playing out. Average home prices will rise all across this country no matter what the future economic holds. A super inflationary stance by the Fed means that even unemployed workers can buy a house and pay for it! Watch how this all comes about. The dow will not be much different when seen ten years from now; a drop to 5,000 then off again, is a real possibility!

The same is true for anything perceived as something real: "even silver" (grin).

The difference is in the drastic ups and downs derivatives will place on all asset markets. Silver may hit my .50 before taking off and so will many other real assets. My point is that we are on an "end time run" in fiat dollar production that will soon produce a spike in real price inflation that crushes hedge vehicles. One item alone, physical gold, because it is the main wealth asset behing the next currency system, will outrun everything by a wide margin. No matter the derivative's hold on it!

As the Euro builds a base, it will drive an inflationary recognition into our credit markets, then freezing up our derivative markets. That perception will fuel a complete failure of our bond markets and force the fed to buy up any and all credit; paying in full. If needed, Bush and congress will see to it that enough money is printed so we are paid in cash for everything! Don't laugh, this is where we are headed. In the mean time, whether or not our economy is growing, stalling or failing, will have little or no impact on price inflation.

You see, living with real serious price inflation goes something like this:

---- "Honey, I talked to Fred again, he can't sell his house! Poor guy, he has had it up for two years now and has to raise his asking price again. No takers, yet. The last couple was just about to close but took a month too long; they almost got the cash together, too. He backed out to raise the asking price, again. Oh well, that's not so bad, we had to jump ours up three times before selling."
----------
Inflation runs crazy when a money system is forced to "print out". We will "print out" our dollar, too. Getting there just takes time and an alternative system to cause it.

In the mean time look for the premiums on cash bullion and cash coins to begin rising well above contract and futures prices. I have been watching for this confirmation for some time. This one signal is all we need to confirm that a breakdown and total failure of dollar based bullion markets is near. I expect we will hear and excuse like this:

-- The settlement price on future contracts is really a wholesale price. Besides, because we are moving into full cash settlement of gold, without physical delivery, you can take this wholesale price and add whatever premium is necessary to buy your physical gold. No matter that our wholesale settlement cannot match a payment for bullion cost plus premium; just use more leverage to buy more contracts than you need for outright physical. See,,,,, it all plays out! (BIG BROKER SMILE with little horns sticking out of his head) ----------

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

People, take a hard look at Randy's post on the main forum. His ----# 64186 Monetary choices -- ECB holds rates solid, dumps dollars------- goes a long way to showing the mindset of the Euro system. (thanks for sharing, Randy) This stance is very appealing to a whole host of nations outside our dollar faction world. We have but to look no further than Britain to see that this is true.

------Blair says 2002 EU summit key for euro, economy -----
Thursday October 25, 2:41 PM EDT --

LONDON, Oct 25 (Reuters) - British Prime Minister Tony Blair said on Thursday the success of the euro and the wider European economy hinged on the EU's ability to push through
long-discussed economic reforms next year.

Blair, launching a Belgo-British conference in London, earmarked the European Union's Barcelona summit next year as a key staging post and said the success of the launch of euro notes and coins was crucial not just for the 12 euro zone members but for Britain too.

"We have an interest in this," he said, stating his policy that in principle his government wanted to join a successful single currency.

"Barcelona will be critical in how the world views the development of the European economy," Blair said.

If the summit is a success, it will help make the euro a success, he said.-----------------

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

Another thing we can count on and I mentioned this before:

The moment England is seen as even a "virtual" member of the Euro club; the world will jump on every physical ounce of gold available at whatever dollar amounts anyone will part with it,,,,,,,,,,,,,,,,, and sell every paper gold play into the dirt in the process!!

I say, know your dealer, buy your bullion early and watch for this act to begin. It's closer than you think!
------------

Thanks for hearing my thoughts
TrailGuide

PS: I'm going to stay on this track for a while because I think something may be in the works. I'll post as able (smile)




FOA (10/25/01; 09:30:26MT - usagold.com msg#124)
A quick report and comment from my office on the trail.


Once again the ECB is acting in a way that lends credibility to it being a true hard backer behind the Euro currency system. The ECB is taking an international, long term stance to managing their money and the dollar faction hates it. They hate it, because such a policy position is no longer open to them as we are forced into a super inflationary direction from which there is no turning back.

It won't be long until this downturn in the US drives the dollar into the toilet and leaves the Euro as the "last man standing". As the gap between inflation rates and returns on Euros grows, that currency will be seen more and more like a world class money. World class; in that the Central Bank is more driven to keep the money strong and not base its policy on local politics the way the US does.

---- Remember: Unlike the Fed, which has a mandate to boost jobs, the ECB's main task is to combat inflation.------

----- Over the last decade or so, my nation (the USA) has always played it's economy and financial arena as a free market driven system. Well, it always looked that way as long as the dollar's reserve function helped deliver those free trade benefits. But, low and behold, let us turn down a little, come under a little preassure and our socialist printing pressed go into overdrive.

The call goes out to bail out the Airlines, banks, brokers, insurers, post office and anyone else that's in trouble. Protect our Steel industry and to heck with the world: this free market idea can take a hike, boys. --------

The media concentrates on treating the dollar more like a stock investment than a major international reserve. Considering the way our Fed is socializing our money policy now; perhaps the dollar has embarked down that road and is becoming " just a quick trade investment"! Perhaps a Hyper Trade investment, at that.

I think the majority of Western money theorist want this perception in place:

--"lower rates build the economy and therefore the currency, too!"--

Never mind that this flys in the face of everything we and the IMF taught the third world about money policy over decades! A policy that says: your country is going down the drain because your money policy is not free trade structured like ours is! Now, we suddenly cheer any policy that trends to support us and try to explain it in a "dollar supporting" slant.

We do this, because we want the dollar market to deliver our investments out of the current US fire storm; it has nothing to do with the strength or hardness of the dollar. In this respect, media cheer leading has little to do with the dollar being a sanctuary for foreign holders during troubled times, either. It has everything to do with local internal US investments going bad. To hell with the hard currency policy we taught you: -- a return on money that's above inflation or free market competition to weed out the week: -- We want my money back and hang the world!

This is a repeat of the same message sent in 1971 when we dropped gold.

I think the ECB and the BIS have known, for some time, that this would be the typical US reaction whenever some trouble really came along. They just waited untill the world twistes the wrong way and sure enough, the US dove for the bait! This is why Europe and the BIS structured the Euro system so it could completely discard all dollar reserve function if needed.

Truly, if the dollar IMF system can be the reserve for all internal US banking assets; then the Euro could easily do the same in Europe. Especially as US inflationary money printing eventually drives our price inflation rate to a level that makes dollars and dollar debts, outside the US, valueless assets! Paying back those debts will be like tossing a nickel where one once launched a bill to settle a debt.

Today, many dollar investors have a terrible flaw in their view of Euros; not unlike Western thinking gold investors. They curse the Euro as it strives to reverse the very trend that dollar lovers say is taking down their own currency. Standing next to them, gold players curse the dollar and buy illusions of gold assets; but at the slightest move up can's wait to sell their gold paper for more dollars. Then they tell everyone that they are making wealth by building up their holdings of a failing currency. I tell you this simple minded human game has bankrupted more than one nation of
peoples.

I buy Euros because that's the currency I intend to keep through out this transition era. Of course I own dollars and will likely keep using them right thru any super inflation. I never expect the dollar to disappear. Most hard money investors, with extra funds to hold, also have that same view. They are simply wanting some of their wealth in the next international currency trend. A trend who's management policy is based on creating a real return; not socializing the currency holder wealth thru US and Japan like give-a-way interest rates.

Apart from our Western trading crowd, who consistently lose their money, Euro owners and Physical Gold Advocates own these items with no intentions of selling these to make more dollars. They hold them because the world financial system is changing faster than trading can compensate; and this trend will accelerate to run right over traders as their markets shut down around them. Believe it.

So, I say, good for the ECB and more so, good for gold. I'm playing the leverage that modern dollar derivatives are delivering to my door step; buying cheaper gold and cheaper Euros. The leverage in gold mines is delivered to us; in that derivatives markets force them and stale physical longs to supply the world with gold at almost free prices. At least until the dollar crashes this illusion gold market price. The leverage in dollars is delivered to us; in that the US must super inflate their currency to support its derivative hedges, in the process creating Euro exchange rates at low levels.

The game goes on and Physical Gold Advocates keep right winning while leverage hard money types pour their wealth on the ground. In this day, at this time, investments in most dollar assets and any other "gold want to be" metals is to be doing little more than to play the leverage side of a
failing derivative.

Physical gold is the only wealth to hold and the only wealth that can and will stand beside to the next reserve currency system; the Euro. The history we are writing will further prove this to be so. Events are moving our way. I say; find yourself a coin and bullion dealer that has a grasp of these
events and stay with them thru it all. The world is moving towards high priced gold on a free physical only market and physical shops will find themselves at the center of this evolution.

USAGOLD: get you one
(smile)

Thanks
TrailGuide

FOA (10/23/01; 10:30:12MT - usagold.com msg#123)
The real world

No backpacks today. Lets just stroll over to that clearing where I'll be giving the talk. In reality, I'm just sharing with everyone the thoughts and views of a like minded gold advocate. Someone we rarely understand but somehow always knew.

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

Hello again and I welcome everyone to these ongoing talks on gold. Talks that focus on where gold and its market is taking us: -- an evolving message from an ancient metal.

It's wonderful to be with you, here in the American West, with its clear skies and cool dry air. Meeting here on the gold trail speaks to our senses in ways no city location can; imploring our minds to hearken back to what is real and alive in our world. While standing here among the mountains and trees, our financial perceptions begin a change; recasting our thoughts of accounts and credits into hazy feelings of virtual wealth we never really knew. Suddenly, bonds, stocks and paper investments descend to lower levels of importance.

It was as true yesterday as it is today, and will again be so tomorrow; that the touchable things in life are what make us whole as much as they make us wealthy. Our bodies are real, so too is the earth and all upon it: is it such an unreason that our wealth should not be real also?

For myself and many others that hear our message, the answer is no. No, it is not unreasonable to clearly own and touch what our efforts in life have brought us. I suspect that during this era, within this moment in time, events will eventually define such logic more clearly and prove it to be sound beyond any doubt.

Times change, my friends, history moves on and so too will mankind's perception of wealth. Once our perceptions will evolve, not in a forward matter, but rather in an ages old oscillation that returns us back to saving wealth itself; instead of a paper promise of wealth. With a regularity of seasons, as sure as the phases of moons, a changing of "political will" is once again about to redefine what our virtual written worth really is. In response to these changes, often made with little more than the stroke of a pen, mankind will seek a secure position. A position that will more so value an ancient wealth: a golden savings that no politicians could ever write the value of.


- As my friend would say out here: onward we move

Once again we hear the voices of shock and dismay among modern gold bulls. Followers of paper values who, ironically, display the same emotions each time their gold strategy fails them. In cycles that seem to repeat on regular schedules these investors wager on the price of gold instead of investing in the physical attributes of the real thing. In doing so they fall victim to their own misunderstandings: -- falsehoods represented by their own perceptions of what our Western gold market does and does not do.

Somewhere over the course of these last decades, Western Gold Bugs learned that it was very easy to wager on the price of gold. During this time a market evolved that made it far more convenient to bet on gold that to own it. But as this market expanded to include retail gold buyers, even simple reasoning seemed to be cast aside and all logic was lost. Truly, these were becoming markets that traded opinions and failed to produce wealth.

---- Did we Consider that: if it was easy for me to buy a gold wager, is it not just as easy for one to sell a wager?

Throughout this period, Gold Bugs seemed to reach conclusions about their paper markets that were never real. They understood how rare and valuable gold was. Yet, they fully well expected these same attributes to be reflected, not only in physical gold, but also in the price of their paper wagers. The reasoning was presented as such: -- investors that wanted to bet on the price of gold going up were unlimited in number and their demand could easily overwhelm the supply side that created these paper wagers. -- Conversely; investors that wanted to bet on the price of gold going down were limited in number and their supply of these paper wagers could never keep up with demand. You have got to be kidding?

But why would this be the case?.

They looked at this paper market and tried to think of it as a physical market. They figured that any investor that sold a wager, had to have his hands in the actual gold market, so as to supply the physical gold his wager was created against. Somehow, in our gold bull logic, we never grasped that perhaps 99%+ of the "world's" paper gold game always settled in cash. With the wager / seller simply losing his currency if he is wrong.

In a further convolution of logic, paper gold bulls never thought real world reasoning applied to them. If our paper gold bears didn't have the gold or the cash to buy the physical item, if they were demanded to do so; -- neither did our paper gold bulls ever want the physically delivered gold either! Nor did they have their hand in a cash bin deep enough to to do the deal.

---- The purpose and structure of these markets was always ignored.

The reality that confronts gold players today is that their perception of this paper market is flawed. The entirety of the world's paper gold markets are structured to capture the currency price of the metal; not actually deal in a majority of the physical aspects of it. Lost in this reality is the understanding that these markets do not impact the supply and demand for gold as much as they make a "virtual" price for gold.

Those in the business of selling paper leveraged gold to investors love to point out that long buyers can and do demand from the shorts to deliver bullion. But these same sales clerks quietly ignore the fact that short sellers can and do demand delivered cash from the bulls! When we have a market where both sides run from the other's physical demands; you are left with a paper arena that makes a "virtual" market price; not a fundamental supply and demand price.

-----Supply and demand

Also lost is the very real perception that the sum total of dollar based paper gold wagers, that can be created on both sides, is only limited by the sum of dollar liquidity floating in the world. In this logic; the number of bets on where the price of gold is going is unlimited on both sides and has no corresponding connection to the actual physical supply of gold bullion.

What "IS" firmly grasped by every major player in this market is: -- If at any time a majority in the market were to attempt to use these paper markets to extract a gross amount of physical product, the rules would not be changed! Rather, the rules would be enforced and the players would be cashed out and sent into the real physical markets to do their deals. Only then would fundamental supply and demand, based on gross dollar liquidity, create a "non virtual" real price for the product.

-- Disappointment rules the day!

Time and time again Western gold players are finding out that as dollar inflation creates more liquidity, the same of which will eventually drive price inflation, it also creates more liquidity that paper wagers can use to sell against our "virtual" gold price. While this is truly a fundamental fact of currency supply, Western paper gold bulls want to use this liquidity to leverage and effect their long side only. So as to capture a gold price moves on the upside. But they don't want others to use an equal amount of this liquidity driven leverage to supply the other side of these wagers to send gold's prices downward.

We wanted a free market and a free market is what we got: -- but it doesn't move the virtual price toward the gold bull's favor. Now they are mad because their bets are countered while physical gold advocates scoop up an almost free metal: -- using the liquidity that dollar inflation is producing. Truly, if ever there was a way to profit from gold mining, today, it's by buying this almost free physical gold the mines are producing; while mine players and paper gamblers pound their wealth into the dirt. This is what PGAs call benefiting from the leverage in mining (smile).

--- Supply and Demand: one more time

In a convoluted stretch of reason, "virtual" gold bulls wanted these markets to be regulated so the supply side of these paper creations would pay off on their bets. The bulls wanted to be able to create all the buying leverage they wanted while the bears would be locked into delivering a metal who's total world amounts are fixed. The bulls wanted free leverage without the using full amounts of real cash but wanted the bears to mark to the market with real gold buying power for every wager they made. If there is manipulation in our paper gold arena, it's in this area of investor understanding. What these markets "truly represent" is the misconception about gold in our time.

If the gold industry is unhappy with the prices their product if bringing from this paper market's leverage; they should be pushing for a change in the rules so as to force physical delivery upon everyone in these markets. That is; force delivery upon both sides! They don't, because their
financial structure is so completely immersed into the current function of these markets. Many of them and their banks could not handle a real gold price that runs out of their derivative's trading ranges.

Western paper gold bulls fueled the creation of these markets by supplying the demand for such gold vehicles and governments helped their currencies by using these same as FDIC like stickers on their reserve positions. They all wanted a place where they could bet on gold, using maximum
leverage, and not have to fully fund the physical delivery of bullion if it came to that.

Somehow in the process, everyone was thinking they were doing an end run around the slow thinking, stupid gold advocates the world over. Hoping that coin and bullion buyers, who were creating the physical demand, would one day feed the leveraged paper profits of paper players. Hoping that the rules would be changed just enough so gold could be kept in a nice tight range (300- 500).

We are seeing the results today as this fraud of a paper game as it comes to an end. It's not nice to watch. Busting, not only the dollar factions that played this sector for their best interest, but also denying any profits to the whole gold industry that chose to ignore the long term best interest of gold's market value. The same industry that decided to cater to the singular greed of a small group
by sacrificing high gold prices so leverage plays would work. In the process they played a political game to limit gold prices from getting too high and will now suffer on the altar of a "gold price without a range".

They can call the outcome anything they want: "bullion at a premium to comex" or " comex at a discount to bullion". Either way the whole system is destine to split and leave the paper players holding an incredible bag as bullion runs away with the help of fundamental gold factions in Europe.

So the message to paper players, gold mine owners and the gold industry is clear:
--we are in a world where free markets rule and political games bite the hand that feeds them
-- if you don't like your profit margins on the market you are forced to sell into, close your mines like the rest of the world's business is told to do,, if you can!
-- if paper players don't like their investment returns because the leverage is eating their lunch, move to another area,, you are free to choose -- or better yet
-- go control your controllers if you don't like the way it is in this evolving political world
-- in the mean time we PGAs are and continue to exercise our free market rights
-- we will keep doing something to advance our wealth: buying physical gold!

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

Next talk is about inflation, titled:

---- "Forget deflation! The deflation theorist are losing their wealth fast enough for all of us!" --

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

OK: lets head back and rest up for the next round
Thanks
TrailGuide

FOA (10/20/01; 08:50:20MT - usagold.com msg#122)
Taking broader steps: heading towards a clearing


Onward

I'll repeat a remark made here on the trail before:
-----[One day the ECB will be] Moving their quarterly "marking to the market" of gold assets to using a local Euro Zone spot physical price; a price that will prove to out run the dollar "paper gold" market's ability to keep up. Such a play will emphasize "physical gold" positions for hedging as opposed to "paper gold" positions.-------------

Follow my steps

The coming dollar currency crisis will be, very much so, driven by an across the board failure of all derivative market function, not just in our gold derivative markets alone. As these risk dispersal markets built up over the years, that system allowed the dollar to continue in its reserve roll. The very failure of this hedge system is what will begin to transition the world away from dollar holdings. Not to mention settlement use and retention in CB reserve function.

Truly, our dollar's value would have never arrived at or retained its current level, for so long, had foreign CBs not supported it by making a background market for derivative exchange management and low rate gold loan commitments for major world investors to use. Within this tremendous mass of paper risk assets, our modern paper gold markets find their home.

When this whole quagmire of dollar support is allowed to fall away, the true nature and worth of paper gold derivatives will truly come to light. Prompting a trading recognition of their real value and their quick disposal. The ensuing price action will sever investor's faith that there is an equal connection between the owning of; what is the fundamental value and leverage of physical gold assets and simply capturing gold's currency price changes in paper asset form.

This change in market pricing dynamics will shift investor perception and force private and public wealth hedgers to see physical gold as having a far greater leverage over paper positions. An image and position the dollar gold faction and the entire gold industry have fought against for years.

This transition in hedge book policy will set off a new dynamic trend in our gold markets where physical gold soars to find a fundamental value modern gold thinkers knew existed. A value steeped in gold's rich history of being the very best barter wealth savings in the world. A value that gold could never find when tied into official money systems.


Our evolution of thought will find its roots in an inflationary financial crisis that is now beginning to unfold in dollarland. In fact, "all" dollar hedging systems will most likely meet the same fate as the effects of a real, serious price inflation in local US markets escalates. In the final overview, physical gold will be seen as the only real risk hedge; in fact; the only world class asset "that can perform such a task"!

Onward further

In simple political terms; the very leverage that all modern currency supporting derivatives represent, never could be allowed to perform; in large outright quantities! Once real inflation begins to demand that these hedges truly spread financial risk with real performance, resulting in a pile
up of loses, the political solution used time and again will return as the time honored utility that saves the day:

------change the rules------!

You see, just as there wasn't enough real gold stored in official US vaults to match pre 1971 dollars at the then existing exchange rate, there isn't enough "tradable gold" to match the inflated paper gold markets today. Both then and now, the paper derivative's function to relate and capture the value of gold was blocked from functioning.

Pre 1971; people held dollars because the physical gold that those dollars should have represented and could be traded for, hedged the risk of government sponsored price inflation. But, people found out, too late, that those gold derivatives; those pre 1971 dollars; would never be allow to function as risk hedges. We found once again that man's ability to maintain a constant link, a constant derivative value, between official money and gold,,,,,, was always an evolutionary failing trait.

The response will be exactly the same for our problems now as it was then.

-- Then --:
The dollar faction universally abrogated all gold delivery options against dollar currency and implemented cash settlement against all claims for gold. In other words; implement a pure fiat floating exchange rate and close out all gold claims by saying that investor holdings in dollars were equal to gold. In hindsight this was just another illusion; dollars were only ablr to capture the gold price if that relationship was controlled thru paper market valuations.

Then -- to -- Now:
By saying that dollar cash, using the old 35 dollar controlled rate, was the same as owning gold; the Western world embarked down the same paper road we travel today.

Modern "Western Thought" is convinced of an illusion; that capturing the price of gold is as good as capturing physical gold. Indeed, this thought was further extended to include capturing a leveraged price of gold.


--Now--:
A process is in the works to change our dollar / gold relationship again, after derivatives were inflated beyond use. Now, even the price of gold can no longer be captured on a par basis between derivative gold paper and real physical gold as the preceived value of gold is soaring. Once a super currency inflation breeds super price inflation; the derivative markets will begin to fail their hedge purpose and their trading value. These asset themselves will become the real risk.

Dollar supporters have no choice but to "NET OUT" at even any derivative hedge that may risk the system. That is, "Net Out" in a way that completely voids their risk transferring purpose as they are settled in dollar cash "no matter what effect inflation is having on the currency's value or your other dollar assets! Remember, the financial world today turns on dollar assets that are hedged; not just pure bare holdings! Block the hedge markets from performing and the dollar itself is unseated.

Make no mistake, every official rule and regulation ever written for currency crisis management involves not only currency profile assets, but also gold profile assets. With this concept in grasp; it's easy to see, with gold derivatives so widely used in current dollar support functions today, why they will be impacted as part of the paper mass.

Modern derivative usage involves gold derivatives and a new evolving crisis policy management will function somewhat the same as in 1971. It will arrive as some "net out" policy directive and universally abrogate all gold delivery options as part of the package. Any gold derivative that is used to support dollar currency exchange rates will be reworked to implement cash settlement against all claims for international currency derivatives written for gold.

Further

Is it no wonder that Euro Banks have no fear from writing short gold paper. Because the entire Euro money profile is in the background for them. Running in parallel to and not in conjunction with the current dollar system. Any Fed policy that must break the risk transferring dynamic of derivatives, to protect our US banks, will open the door to the ECB's dumping IMF protocols and using the Euro alone as their sole reserve currency. This will immediately shift all dollar derivative plays onto the market, dynamically devaluing our dollar in the process. The ECB would then be cashing out holders of their gold loans in Euros as dollar physical gold prices spike and paper gold prices plunge.

Higher still; we climb

Of course, the big difference is that Euroland will encourage a physical only market price that, in turn, also floats Euro gold values to the sky. All in an well balanced effort to replace the massive dollar asset base it lost. In this; the Euro will become the first currency block that functions as a local reserve, yet under scores its image with huge non- monetary gold assets. Is it no wonder that EuroLand citizens will be buying gold as much for its prospects to rise as for its ability to be a wealth savings. In this it will hedge the future remains of a dollar failure and its impact on the world system.

If Mr. Huge EuroLand bank owes the ECB system gold worth 100 million in current gold deals; with each 1,000 euro rise in gold he finds himself able to settle in less received physical gold. In a true "cashed out" transition of currency reserve hedges, each ounce of contracted gold owed could be
reduced many times. Every player in the gold system, that is caught with their pants down, will rush to be a part of any Euro workout. Indeed, for every major player that was long the gold loan system, for the purpose of buying gold, cash outs in Euros will offer the only return. Official players in the oil sector would eventually be receiving American gold (but that is Another story).

Pause here

Remember; we have presented, for some time, that official gold stocks were never physically "in play" to the degree the gold industry suspected. It has always been our position that it is and was "gold commitments" that were behind the market, while official physical gold was traded mostly within the CB system or delivered to the most pertinent oil players. The Swiss operation points to an end time settlement of these for the Euro side of things.

ECBMBs (European Central Bank Member Banks) never really sent out very much real gold; they just lent their good name to the BBs. That means cash pooling for the loans also. So, when a new currency transition workout proceeds, the members of the ECB are receiving Euro cash in payment for gold loans. In hindsight; it will be seen that they lent the commitment to sell gold only long enough for US inflation to end the dollar's timeline and bust its dollar system. Around ten or fifteen years over this recent concluding period?

Truly, the gold that is filling the fundamental demand deficit never was the gold coming out of CB ranks; this position was and is the gold industry just looking for an answer to explain what was truly an paper market problem impacted by official currency games!

Besides, if your business is financially structured within an ongoing paper gold market and needs said paper to trade at par with physical gold; you don't want to consider an outcome where you may be trapped selling your product at a discount! Better to fight for a rework of the same markets. A process that robs physical gold owners of fundamental value by reinforcing the paper market illusion for the benifit of a relatively small group of gold players.

That will not happen this time; believe it!

In a final thought that explains the fundamentals that tarnished gold:

The gold that filled "the supply demand gap" came from tired Western thinking gold bulls the world over. Over the last years of our dollar's timeline, they transitioned their portfolios from holding physical to holding essentially unallocated forms of leveraged paper gold. This took place in both public and big trading firms.

To the thinking of these smaller world players, who made up this mass of original physical gold ownership; future gold, options, gold stocks and long gold loans, all captured the price of gold in this modern era. Indeed, for them it was all the same and suddenly so logical and simple. But, they did and are losing their wealth to the paper monster and now,,,,, just when they thing gains are in their grasp,,,,, the rules were changed again.

let's rest here; that clearing is in sight; where some speaker if giving a talk

Packs off for now

thanks
TrailGuide



FOA (10/18/01; 08:22:07MT - usagold.com msg#121)
There they go!

(At the trail head, loading the packs)

Quick, use your binoculars, watch the action on the other side; across the paper gold valley.

Do you see them? Right over there, follow my point? Just under those low bushes; next to that big bolder; making their way out of the paper valley. Yep, that's a big paper gold trader, going over the top. Ya see em? Ha1 Ha! Sure sign the seasons are changing!

These guys, and others like them, are trying to run ahead of a trend we already knew was in process. They are going over to the other side of the paper gold mountain. If only they knew about USAGOLD a long time ago?

Yep, us PGAs beat um to the punch and those pikers

(slang for hikers on some peak in Colorado [smile])

will pay a big premium to be in our dust! Indeed, they are headed where our very own gold trail has been: in the middle of a physical gold market transition that finds its roots in
Europe.

Yup,,,,,, silver is back into the 4.20s as China sells it to buy gold; while the question of what to do about gold paper gets more official consideration every day! The dynamics of money is in flux, for sure!

Keep loading your packs, people, take lots of stores for a true wilderness experience under a starlit night; a big hike is coming.

TrailGuide

(thanks Randy)

FOA (10/15/01; 07:49:09MT - usagold.com msg#120)
Continuing from my last talk:


(returning to the trailhead parking lot: walking along the road with a few Gold Trail hikers I ran into along the way)

Boy, I wish those other day hikers would have returned from their walk before I had to leave. Sure could have used a ride to the auto store. Who would have thought I couldn't get my oil filter off? It seems the more we advance our so-called "modern lifestyle", the more complicated simple things become. Now it takes a $10, special angled grip wrench just to undo a simple filter and the darn thing broke just when I needed it!!!!!

You guys probably think this is all normal? But, I tell ya, all this complicated engineering only works when nothing goes wrong; the fella that designed that oil filter never thought somebody (me) would accidentally push a little more than needed; breaking the wrench and causing a problem that
stopped the whole car from running.

(now done with the car, sitting on a log with the guys)

You know, the gold market was put together the same way as my car: over the decades, a whole bunch of financial engineers each designed their own little part of the mechanics. Each one of them structured their little part to work perfectly as it functioned in the overall operation of the engine.

These fellas did exactly what their boss told them to do; make your part work and don't worry about all the rest. In truth, this dynamic works fantastically in a mechanical environment; devoid of organic imperfections. But, apply this kind of design into an economic function and sooner or later you're asking for all hell to break lose!

You see, a fuel pump won't look over its shoulder to see if the gas tank really has all the liquid the dash board fuel gauge say it has. Such a mechanical system, as an overall part of the engine function, will keep right on running until the very end! Now understand that..... if a person, emotions and all, was running that pump, he would eventually see what's what and go running down the hall screaming "we're almost out of gold,,,,, errr, I mean gas!

Let's take a hike:

You know, modern financial engineering incorporates all the physical factors of "just in time delivery" management and labels it "just in time dispersion of risk". In other words: they try to take all the perfect workings of a mechanical operation and replicate it into financial dealings. But, financial instruments, while understood by us as being paper bonds, stocks and bank accounts, are actually completely organic! They are, like money, really concepts of value we hold in our head; not oil filters or fuel pumps we hold in our hands. The "worth" of things is a "value" we mentally
create thru countless interactions with each other as we go thru the day: interactions we call "the markets".

Onward

It's no accident of nature that our world monetary structure embraced derivative expansion as it has over the last ten or twelve years. I think we can say that this modern creation of risk management began around 1988 or so. ( It's funny, but I remember living in San Diego and reading a paper about a gold company called Barrick that just started only a few years earlier?)

The record of derivative evolution meshes seamlessly with the recent need for supportive dollar currency measures; a strategy of maintaining a failing system that was ending earlier than expected. Truly, a decade ago, noone was going to carry the dollar any further, waiting on the endless delays of Euro creation, without some way to hedge risk. We had hit the end of the dollar's timeline to early; we had missed the mark.

The US could not physically save the dollar, then, with gold backing or the production and sale of real goods. In the course of all the previous dollar expansion, the gross liabilities of taking dollar asset conversion into anything real, and originated locally in the US, would have made us economic slaves to the world for decades. The only answer was to let the dollar kill itself while you create an illusion of risk dispersion in the form of derivative protection; a form of backing if you will. With this "illusion of risk dispersion" in hand, called a derivative hedge, the world currency system and its denominated assets, continued on. This "just in time risk management" was and is adopted into every present day currency that carried the dollar as reserve backing. This includes all the old Euro moneys and the Swiss and British etc.. Thus, in time, derivative use supplanted IMF protocols and SDR functions; sidestepping the whole basic structure of controls built upon the old dollar based system.

This derivative buildup has effectively removed US fed policy from being a controlling factor in dollar use and expansion. Gone were the days when the Fed could force everyone to disinflate with us. Today, if we slow our money printing, the outside liabilities would crush our banking and ,therefore, our economic way of life.

It's no wonder that Alan Greenspan has commented so often on the need to control derivatives yet has no workable plan to counter their function. Truly this dynamic was created to counter his function and few can understand this! In effect, the dollar was placed on a one way street that required it to be inflated into infinity. All as a means of protecting dollar originators; the US banking system. Dollar leverage, that is actually US liabilities, is now built up endlessly. This all points to a nonstop, end time need for an uncontrollable inflationary expansion by our fed.

Randy S, over in the tower at USAGOLD, has shown us a complete record of this current era of dollar creation. While others were waiting for a "little bit of 6%, 7% or 8% inflation" to show its head, are given a weekly guide of this new Fed policy agenda and its dilemma. An almost endless acceleration of reserve creation that, strangely enough, coincided with each increase in the confidence that the Euro was for real.

Today, our fed is confronted with a daunting task. The Sept. tragedy served to force its hand and show its true policy in the open and the risk that is driving it. We as consumers welcomed a derivative driven dollar expansion, the stock market assets it produced and the better lifestyle it brought us. We even thanked the political will that made this so; not knowing that the seeds of leverage that produced our illusionary gains were handcuffing our ability to ever stop the process. We are now learning that managing a dollar economy and the "derivative risk" that brought it, all works very well. In our first real test of "just in time risk management" our Fed is and will provide buying power to gobble up any and all risk, "just in time" and without end.

With this the decade long cries for comparison of our "US free market driven economy" and "Europe's terrible socialist polices" fall silent. It seems that when our "free market" created assets are threatened to be exposed as an illusion of value, Americans embrace any and every form of government socialistic bailout known to man. Perhaps, our much exampled form of a "free market driven economy" was little more than "free as long as derivative risk is covered with social money" "just in time".

Now, we will follow this trend in an accelerated fashion, until all derivative process is exposed as nonfunctional outside a massive hyperinflationary policy. Our wealth is and was nothing but an illusion of safety and created in our own minds. Within this mix is contained all the various gold derivatives we have come to love so well. The future failure of a gold contract does not mean that the long holder gets his price or his underlying good; it means his derivative fails to shelter his exposure by matching his other loses. In terms closer to a gold bug's heart; paper gold in any form will not match up anywhere near the price of free traded physical gold.

We are on the road to high priced gold and under priced derivatives. The same thrust will be apparent in all financial derivatives. Further, we are on the road to a fully "cash settled" contract market for gold; here in the US and abroad. In the time ahead, just before serious real price inflation rears its head, look for most all dollar based contract commodities markets to be restructured into pure "undeliverable" cash settlement markets. Markets that, also, many gold producers will be forced to use. The day of big premiums on gold coins and bullion is coming and
coming fast.

Let's head back to the parking lot and home and get ready for another day. A real hike is coming.

TrailGuide

Randy, please rework the recent mistakes on the trail, in your time(big smile). thanks




FOA (10/10/01; 07:07:06MT - usagold.com msg#119)
At the Trail Head parking lot

I'm here to post a notice that another guest speaker will soon be talking somewhere on the trail. I think this one will be covering fiats or moneys, not completely sure?

(leaning against my car, while talking to a few day hikers)

After yesterday's awful writing I went into my back property to hide and do some gardening. Some of the guys that help me out came over and dug in. It wasn't long before they, once again, started telling me what to do and, in a weekly ritual, I fired the whole bunch! By now they know this is my usual banter and just kept right on working,,,, and still telling me where and how things should be planted! The truth is, after all these years I'm still learning from them. Looking at the whole situation; I know I can talk better than they can garden, but I also know they can garden better than I can write! So, there is a certain symmetry ,,,,,, somewhere in this scheme of human affairs. It requires us all to put up with the other's weakness; especially if we want the other's understandings.

(pulling a cloth from my pocket and cleaning my glasses while talking)

On most parts of this Trail, I could walk with my eyes closed; while in other areas I would need six maps and two GPSs units just to know north! Right now, I can tell ya what's most likely out there, but in those strange areas; not really sure?

Take this Euroland gold coin thing? My guess is we won't see this anytime soon. I suspect it will be something like a K-Rand, with no marked currency denomination, but different in that it will be a hybrid legal tender. If you look here in the US, gold coins are somewhat a currency as they stand.
Just like IBM stock, real estate and most any other asset, we just have to sell it for currency first; pay our taxes and then use the money to buy something. The process only becomes illegal if you use the stock, land or gold to trade directly for something and don't pay your taxes.

Mr. Strauss pointed out that the current trend in motion is that all VAT taxes are being lifted or phased out on gold trading. Eventually, most of the world will have only some form of capital gains taxes on gold. This is fine and is bringing gold into focus as the one and only metal asset the official sector is trying to work with. But I think there is more to it than this.

As I said many times; Europe it looking to bring gold back into use as a very tradable asset. Perhaps "the most very tradable asset" but still outside the fiat money context. They want to keep the government's and socialist's hands off gold and its market function so it will serve everyone as a
savings medium. But, they also want it to gain as a trading medium so the combination of the two will create immense demand.

To gain in the "use department" I suspect we will see some push to drop all gains taxes on gold used in official coin (Euroland) form. In place of that, there will be some form of excise tax charged on payments / trades done using these gold coins. Most likely, you will have a choice of paying
completely in gold or Euros but not a combination of both. Probably, gold will be used for large purchases because gold will carry a very high price by then. And too, 1 gram coins will be the norm; being the size of our one ounce now, but with alloys. I doubt gold will ever be used in regular store / retail sales. In other words, I could go into my bank and use 50 Eurolands containing, say one ounce fine gold each, and pay off my $200,000 mortgage; minus some 15% excise tax on the deal? I could probably do the same thing with regular bullion, too, but would pay a somewhat higher gains tax rate; instead of the lower excise tax.

Anyway, this is all in the "for what it's worth area". Go ahead and take your hike,,,, I will be here giving the car a tune-up and changing the oil when you return. Then I want to talk some more about the words of Mr. Strauss (smile).

TrailGuide



FOA (10/9/01; 14:55:32MT - usagold.com msg#118)
Patching the trail!
Well. I read thru my last post and thought it was ok. Then I returned, pulled a copy off the printer and gulped. Don't we wish we could change these things? Here are some corrections and expansions.

[Sitemaster note: msg#117 has been properly amended to incorporate the corrections FOA indicated in this post, #118.].

sorry about this,,,,, I think I'll go hide for a while.
Just a TrailGuide

FOA (10/9/01; 10:05:48MT - usagold.com msg#117)
PIZZA,,,, Bronco's,,,,,, Tonne of Yellow Metal,,,, and USAGOLD: Ha Ha,,, a gold advocates dream come true (ssssmile)

Background for everyone

All through out this period bullish gold traders have lost their shirts trying to bet on the price of gold. It wasn't until around 1995? or 1996? that these same traders even began suspecting that the price of gold was manipulated. As years turned into decades, hard money traders plunged theirsavings into our gold markets as up and down cycles drained their leveraged gold wealth. All the while thinking that the highs and lows, that were killing them, were just the ebb and flow of paper prices representing the fundamental demand and supply of physical gold. With Mises like faith they knew, someday, the currency inflation that has driven our financial markets and economies upward, would meet its end; finally taking their leveraged gold position to the top. It didn't happen then and it won't happen now; not as they are playing it! Period.

Remember, this writing is coming from one of the longest running (now ex.) "Hard Money Socialist" anyone has ever seen!

Without mentioning any names, I can remember when some of today's most avid supporters of the manipulation cause were shouting down, not only Another's voice of reason to buy physical, but anyone else that suggested manipulation or a "political thrust" was controlling the paper price.

Today, countless gold people around the world point out that gold is a manipulated item. While being on the right track, they are still using the wrong perception to grasp the dynamics of these markets. This lack of perception is what keeps them from positioning themselves and other gold
people correctly: positioned to gain wealth when a stake is finally driven in the heart of this paper monster.

The efforts by most are focused in one direction; to once again make our paper gold markets reflect the real rarity and actual fundamental value of physical gold bullion. While my heart, support and courage goes out to all gold bulls that strive for this end, it's chances of happening are the same as having government moneys return to being backed with gold: zero chance!

This grip on physical prices, that paper trading has, is only going to be changed because dollar gold derivatives no longer work. Not because some form of private lawsuit, world disaster or private coin buying is going to redirect investment flows. Only an official government change away from supporting their currency with paper pricing will do it,,,,, and don't expect the USA to be at the forefront of this move.

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

Lost in all the confusion is the distinction between investing in the price of gold and investing in gold itself. Perhaps 90% of all the investing in today's worldwide, dollar settled, gold market is done in this first way mentioned. Yes, the market is structured, contractually, to settle in gold. However, in practice, in norm, and in past legal precedent, it is accepted that paper gold trading is meant to only capture the price movements in gold while ceding, what could be, controlling physical trades and
their price setting function to other market areas.

Obviously, this is the way it all started, years ago, with the physical trading and its fundamentals dominating the lesser paper trading. But the market evolved with the paper contractual trading becoming 100 or more times the size of the physical side. But everyone already knows all this,
right?

What doesn't seem to be obvious is the "why for" the paper market grew so large. It grew to dominate because world wide dollar expansion reached its "non hedged" peak. In other words, the dollar's timeline was ending as its ability to produce non price inflationary economic gains came into
sight

In order to push dollar holdings further, international players needed and purchased "paper financial hedges" to balance their risk. Within their total mix of derivative hedges were found "paper gold price hedges"; modern gold derivatives. The important thing to remember is that these positions are not and never will be used to demand physical gold. They are held to buffer financial and currency risk associated with holding any form of dollar based asset. To work these items don't need to really perform "dollar price movements" in the holders favor as much as they are present in the portfolio to act as insurance stickers.

In that truth, these paper gold positions act like FDIC insurance at our banks. It can and will manage only a small determined portion of bank runs,,,,, not a full scale failure of the banking system. In a real full banking failure we would all get, perhaps, 80% of our covered $100,000 and 10% of the rest.

The same is true for these gold position's performance; real gold delivery along with true price performance, matching real bullion trading, would be only for the very few. For that matter, an actual functioning paper gold marketplace would be for the very few, too! But, in the same way a bank account owner understands the credibility of FDIC insurance when times are good; the international dollar asset owner will not grasp that modern paper gold hedges cannot be allowed to work until after a real serious price inflationary run begins.

For the first time in this portion of the dollar's timeline and our lifetimes, such an inflation is about to show its face!

==================

While so many of our gold bulls salivate at the prospects of some player calling for delivery and driving the gold derivatives market to the moon; it ain't gona happen! Our world of dollar based gold derivatives has grown so large and become so integrated into supporting (hedging)
international dollar assets, the central banks will band together to crush any delivery drive.

This is in the ECBs intrest as I will explain in a moment.

If some big player said he was going to take 100 million ozs out of the paper gold market, the Central Bank systems would just order him to trade out for liquidation only and go to the cash market to buy his gold. Don't think I'm confusing Comex positions and their rules as being different from the rest of the world gold market. What works on comex works everywhere when the system is at risk. The controlling governments, who's domain Bullion Banks reside in, would, could and will force those holders of bank busting positions to simply cash out for the good of their
system.

By the way; not only does a liquidation market send baby gold bulls running to sell, also, the BBs would be selling enough additional paper to temporally send gold down $100 bucks so our boy would trade out with a little less cash (smile). Then he would find an opposite "premium" spike in
the cash markets, waiting for his order.

I hope my little dose of reality drives some sense into our gold community. This is the reason Another says only fools try to buy their gold all at once on the paper markets. "NOONE" is going to exercise their "corner" until the dollar based gold system is changed.

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

OK, thanks for waiting, MK, I'm getting to your point. (smile)

Mike, while I'm writing this, I see gold selling off (silver more so). Once again, we see where the paper based trading has plenty of selling power and completely dominates the physical fundamental markets. How may postulated, even just a few years ago, that with the fed expanding the money
supply by a year to date "one trillion"; that paper gold could not reflect this inflation? This only further confirms that this form of market "hedge" is failing to function for its owners. Changing are coming, my friend, changes are coming! Back to the story:

==================

Paper gold derivatives became a major force in allowing this last, end time, demand for dollars and subsequent surge in it's value. This is why Another said it would run way up, even while being inflated, before the end would come.

Only now are we coming to a point where theory meets practice as Alan Greenspan now is and must hit the presses. This forced printing inflation, currently happening, is the very precursor to a lower dollar exchange rate, rising real price inflation and the very first destructive test of paper gold derivative hedges. As price inflation rises the US will protect its own banks and the short paper gold portion of these positions they created. They will sell all the paper gold they can in order to stop these hedging positions from functioning and breaking their writers.

On the physical side, the US wants and needs a higher price as they ship real gold commitments to help balance our sinking ship. So, the dollar supporting paper gold position we have sold for years will now block our ability to gain some ground with high US gold reserve prices.

In turn, Euro factions will also sell into the paper gold dollar system to help further discredit its hedging function in the face of dollar price inflation. Now to the good part:

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

If you are a major international dollar asset holder, watching this evolving transition, how would you act? Remember, not only is paper gold not rising to reflect real dollar price inflation, even physical gold cannot react because the dollar based market, as it currently functions, keeps physical subject to paper discovered prices.

With the world dollar gold markets completely locked from rising and performing their portion of a hedge function for your portfolio,,,,,,, because, if they rose trillions would be lost by the writers,,,,,,, what asset based currency would you escape into.

How about a currency that wants you to redirect your fiat hedging to using outright physical gold instead of paper gold leverage? A currency, with a stated free gold pricing policy, that will allow your physical hedge to function in place of that locked dollar gold market; and function in a
currency supporting way.


They say:We understand that there will be an inflationary transition form this dollar world because we, ourselves, must absorb a certain portion of all the past created dollar inflation. A portion of pain we and the world must all bear in order to economically get pass this period. But, at least, we offer a position in the wealth of ages to reflect this financial loss as it is manifest in price inflation.

We will allow and support any physical gold Euro price rise to balance this action.


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


Mike,

the leverage today will be in a physical gold position, not any other form of gold ownership. By accumulating physical gold today, we are truly walking in the footsteps of giants; advancing with them as they work thru this singular, long term political move. Truly, the oil producers also fully understand and appreciate this position.


Yes, I think it is theoretically possible to see physical Euro gold priced very high while traditional American paper gold markets become cheap, non functioning, cash settlement shadows of world spot gold values. In the near future, there will be no form of arbitrage between physical gold and this failed , crushed dollar gold market because it will only allow cash settlement. While a

US physical gold free market will be locally encouraged, it will most likely simply be a shadow function of Euro Gold prices. Besides, politically, unless we once again stop all gold ownership and or implement exchange controls,,,,,, all gold buying money would head to europe. Besides again, politically, a Euro based free market will end all fictions of gold's true value anyway. (This is my private understanding or scoop, if you will) I also expect a European gold coin to become real usable legal tender (not a collector item) and be named the "EuroLand"". Again, a barter asset that is taxed when used. Just as we have sales taxes and excise taxes; gold coins used outside an investment realm would be taxed. (again, this is but the shadow of an evolving down the road position as I can best grasp it)


I also fully well expect that most world gold mine production will be forced to ship gold into the leftovers of the dollar cash settlement paper market until the Bullion Banking system is made whole on their physical side. In adjunct to this, the ECB and BIS will play a major roll in cashing out failed paper gold positions for certain clients. Cashing out in Euros, that is.


A US workout to cover its failed paper gold position will most likely be using gold industry profits. It could be done via "windfall tax legislation", plain tax or part of any variety of emergency financial arrangement. All built in order to allow our current gold reserves to be repriced at higher world levels and help our dollar stay somewhere in the next currency system. Considering the size of the failure, real gold will outperform any and all investments once this all gets started. However, we should not be naive and not expect some serious taxes of our own on bullion sales. Still, only just enough so as to keep currency tender protected from being supplanted with illegal gold use. Illegal in that too high a rate and everyone would use gold in barter and stopped paying their capital gains taxes all together.


Dollar hyperinflation and super high gold prices are closer than many think.


MK, while I think you have always understood our thrust, if this post is sinking into the readers understanding,,,,, the words should be jumping off the page at them. Let's hope so.


Now, I think I will do some gardening and also have a pizza later. Sounded too good to pass up! (smile).


thanks

TrailGuide


I hope to later comment on the good wor