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Americans Discard Old Rules, Invest and Spend With Abandon

HAPPY BIRTHDAY! O Mighty Oaken Table of Yore...(commemorating the fisrt anniversary of the forum's inception)

Top Five Events for the Gold Market in 1999

Who is the new Fifth Horseman?

canamami (8/8/99; 6:48:40MDT - Msg ID:10620) GOLD SOVEREIGN WINNER
Americans Discard Old Rules, Invest and Spend With Abandon

The object of this post is to discuss the heading "Americans Discard Old Rules, Invest and Spend With Abandon", tying the heading in with a discussion of gold. I will argue herein that the traditional American economic rules are (1) that debts are to be repaid in real money, and (2) that wealth is to be created and accumulated through useful and/or necessary activity. One can track the abandonment of the old American rules by the changes in policies relating to gold.

The ultimate rules in any society are those found in the Constitution by which that society is governed, followed by the statutory, regulatory and (in the Anglo-Saxon world) the common law rules.

Several of the core, "old American" rules are tied up in the relationship of debtor and creditor, and the manner in which debts can be repaid. For example, Shay's Rebellion ( an attempt by farmers to prevent mortgage foreclosure) constituted one of the triggering events for the creation of the US Constitution. The creditor class believed that the federal government in a federal union would be more inclined to prevent the debtors from defaulting on their debts than would the State governments. Thus, Article 1, Section 10 of the Constitution states in part "No State shall...coin Money; make any Thing but gold and silver Coin a Tender in payment of debts;...pass any...Law impairing the Obligation of Contracts...". These provisions prevented the States from monetizing debtors' debt by coining money in an inflationary manner. It prevented any State from compelling anyone to accept chickens, venison, wheat, coal, nickel coins or anything but gold or silver coins in satisfaction of a debt. It also prevented any State from nullifying contracts in the "public interest" - i.e., to put a modern, topical spin on it, from requiring the acceptance of paper in satisfaction of a gold futures contract, because an increase in the POG is bad for the public and rewards undeserving goldbug creditors. In addition, Article 1, Section 8 placed bankruptcy law under federal jurisdiction.

These old American values were abandoned for domestic purposes in the New Deal. I have read there are still New Deal-era Acts of Congress on the books prohibiting the use of gold as currency, by prohibiting contracts from requiring payment in gold. Thus, the New Deal Acts of Congress rendered nugatory the constitutional provisions restricting the States to making gold and silver coins a form of tender. This represented one departure from the old rules requiring that debts be repaid in hard, real money.

Internationally, the old Confederation could not ensure repayment of American debt incurred in the Revolutionary War (I believe there were both foreign and domestic creditors - my U.S. history is shaky). Moreover, the Confederation could not easily borrow, because it could not force the various states to pay their share of the debt. Thus, Article 6 guaranteed that debts of the old Confederation continued to be valid against the new federal government. (Contrariwise, see 14th Amendment, section 4, where Union debt is rendered unquestionably valid, but Confederate debt is invalid). Generally, Article 1, Section 8 accords to the Congress the general authority over money and currency, and the power to ensure that the US' international debts are repaid. Of special significance is Congress' power "To Coin Money, regulate the Value thereof, and of foreign Coin..." as well as the power to punish those who counterfeit the "Securities and current Coin of the United States". When read in conjunction with the limitations on State power, the implication is that U.S. Money is gold and silver Coin, and the power to punish the counterfeiting of such coin is reserved to Congress, so that no State would be able to effectively inflate the Money of the United States by refusing to prosecute "counterfeiters", which could undermine the United States' ability to meet its international debts with real money. Thus, leasing the government's gold to allow hedge funds to use the gold carry trade to leverage investments, is contrary to old American values in that it inflates the money supply and is pregnant with the possibility of default, while potentially depriving the government of real money to meet international obligations.

One manifestation of the American value of keeping international debt commitments was the statement of Republican politician (later President) Calvin Coolidge -- "They hired the money, didn't they", when opposing forgiving European debt. Of course, a later Republican -Richard Nixon -- breached the United States' international commitment to honour the Bretton Woods Agreement concerning gold/dollar convertibility. Later, the US-dominated IMF made it illegal to tie any currency to gold, while the U.S. Constitution contemplates gold and silver Coin as the currency of the U.S. This is an example of discarding the old American rules.

The Constitution proscribes both Congress and the States from creating "Nobility". The early Americans viewed the European nobility as wealth-sucking layabouts who lived off the working classes in exchange for specious governmental and military services. One catalyst for the American Revolution was the belief that the British aimed to maintain an excessive military presence in the Colonies, at the Colonies' expense, as well as a belief the Colonies would be made to pay for an Imperial military infrastructure which did not benefit the Colonies. The constitutional provisions limiting pay increases for the President and members of Congress (see the old but recent 27th Amendment) until an election intervenes, and limiting expenditures on and the quartering of the military, can be viewed as manifestations of the anti-"Nobility" sentiment.

However, much of the international monetary inflow which has fueled the recent stock market and bond boom can be viewed as an economic rent resulting from the US' provision of governmental and military services to the rest of the world. For example, the US dollar was allowed to become the reserve currency partly due to the US' political stability and economic dominance after the war. It was permitted to keep this role after abandoning the gold/exchange standard partly because of the West's reliance on US military power. Of course, much of this inflow is due to the sophistication of the US economy and securities regulation, and the US' military security (i.e, no risk of invasion or military defeat), which is a real value to foreign investors. However, to an extent, insofar as the US is dependent on foreign economic rents due to its central military and governmental/political role, the US has internationally become the "Nobility" which is outlawed domestically. Insofar as individual Americans benefit from such foreign inflows of wealth, without providing services in return, they are receiving unearned wealth like the European nobles of yesteryear.

The US Constitution also contemplated that wealth would be earned due to useful or necessary activity. As was stated previously, one is not to become wealthy by evading creditors. Further, Article 1, Section 8 contemplates protecting the "Writings and Discoveries" of scholars and scientists, as well as rewarding those who capture enemy booty during a declared war (Letters of Marque). Nothing in the Constitution contemplates games of chance, or pyramid schemes. However, some current market commentators openly contemplate that capital gains are to be secured by buying early into the stock market bubble which is to be created by leveraged boomer pseudo-savings-cum-pseudo-investments which have no place else to go. Such commentators make it implicitly clear to readers with half a brain that getting out before the bubble deflates is also part of the game. This is a game of chance-cum-pyramid scheme, pure and simple. One commentator even suggests this game be played by fully mortgaging one's home, though he asserts selling your home outright and leveraging the shares bought with the proceeds is preferable. This is not investment (buying a share of an ongoing, legitimate business) with savings (retained earnings representing foregone consumption). What such commentators suggest is using borrowed money to win a game of chance, so that one need not forego current consumption to ensure a secure future. Trying to get rich by playing games of chance or concocting pyramid schemes with unreal Money constitutes a clear and new departure from the old American rules.

To conclude, I submit that one can track the discarding of the old American rules by tracking the abandonment of gold and silver Coin as the US Money, such abandonment itself being an example of discarding the old American rules.

Broken Oak (08/05/99; 14:38:50MDT - Msg ID:10434) SILVER EAGLE WINNER

Those centuries "Old" rules were forged in the fires of pervious periods of 'abandon'. It has ever been so. As memories fade and generations are diluted with fresh inexperience, a slow process of communal forgetting begins. Today we stand in a peak experience of inexperience where no pain is remembered. We stand as 'gods' in the world.

Even the gods of the ancient Greeks were subject to the visceral passions and compulsions, which we read, as all too human. We, today, may stand as 'gods' astride the globe of finance and economy yet we also are governed and dominated by greed and fear. These twin rulers over men lead them repeatedly to the same mistakes. These compulsions, greed and fear alternately, etch the course of every 'new era' which has been declared by those who have forgotten.

Euphoria is folly's intoxicating liquor. We have come to a time of forgetfulness, greed and excess. This period of abandonment brings the seeds of its own destruction. One day the party will end. It always has ended and it always will end. Today's generation will suffer what every foolish generation before them has ever learned: there are rules and you disobey them to your own destruction.

One of humanity's oldest rules is that the currency system must have underlying value apart from its use as money. This 'old rule' has been steadily abandoned over the past 100 years in Occidental society. Today we stand as 'gods' walking a tightrope leading to nowhere and without any nets and no way out other than our fatal 'fall' from the heavens.

Unfortunately the present system of money and economy is unusually vulnerable in that debt is its foundation and strength. In the past money were expressed in terms of something other than the mere concept of money. Today we use currencies, which in and of themselves have no use. In the past money were minted in materials that had intrinsic value apart from their use as money. There was an inherent desirability for the underlying material whether it was gold or silver or copper or wheat. We could view this as a 'backing' of the use of it as currency. Today's 'money' has no such support or recourse unless you are interested in remaking it into some kind of paper product.

Historically, where gold and silver have been found they have inevitably been used for money; as a medium of exchange, as a means of savings. These precious materials have almost universally been found to posses those qualities that make for the best of money. So they have been used repeatedly and widely by many different cultures around the world. Gold is recognized and 'universally accepted as payment' according to our own Alan Greenspan. Far from being a simple commodity it is used as money in many parts of the world today as well as amongst the highest levels of banking in the world.

Today's investor 'gods' have no use for gold. To them it is uninteresting because its numbers do not 'perform' as well as their vaunted stock trades. They have forgotten the old rule: he who has the gold makes the rules. Today the prices of stocks are high and the price of gold is low. There is another old rule: sell high and buy low. New blood does not know this rule, yet. They do not know by experience that gold holds the polar opposite position of power in the world of finance that speculative investments hold. They will learn this the hard way.

The bold will buy gold. No one will convince the many to buy gold today. They will buy it after it has been proven to be the correct choice. This is typical behavior for that crowd. They only buy what has gone up in 'price' and then they are burned when the price collapses on them. At this point they are at the pinnacle of the high prices of stocks. As one has said 'I can't bear to watch this'.

The bold will buy gold because they know that the six thousand year 'old rules' still apply, that humanity as a group never learns except by hard and painful experience and that they *will* take their place among those who make the rules for those who forgot them.

Will you be bold?

Peter Asher (08/07/99; 18:20:47MDT - Msg ID:10582) SILVER EAGLE WINNER
Whoever said that the cure for writer's block is to just write, should also have quoted, "Be careful what you wish for; you may get it." I hope this tome will provide enough insight to make the longish read worthwhile.

"When the Music Stops"

Martin Luther said "Give me the child, and I will give you the man!" If the child sees the old rules abandoned, he will grow to be one who plays by new rules, or by no rules. From parent to child and also from the environment the child grows up in, comes a concept of how the world works. Sadly though, his concept is usually formed encompassing a very short period of time. Long-term awareness of the workings of man are not grasped by the multitudes. "Those who forget history, are doomed to repeat it."

The current fashion of investing and spending with abandon has occurred before, but never to such a great extent by such a large percentage of society. In this century there have been several peaks of economic 'prosperity'. Some, such as the post-war boom of the forties were built on real production, whereas the prosperity of the Roaring Twenties and the mid-Seventies were built on 'wealth transfer bubbles'.

Economists fail to educate people on the underlying realities, mainly because they get buried in such factors as the money supply, debt, credit and governmental control. They lose sight of fundamentals that are as immutable as the laws of gravity. The concept of wealth is not clear to contemporary society. Unrecognized is the fact that wealth is garnered by creating product for exchange or is obtained by transference. The difference between these has become blurred beyond all recognition. That phenomenon is not new. It was the tangle Ayn Rand was trying to unravel in Francisco's speech beginning with. "You cannot 'make' money."

The question, "What is money?" has been a principal topic on this Forum. I am referring here to money in the form of legal tender. The failure to understand what money is, comes in part from the failure to realize what it is not. Money is not a thing; it is a right. Specifically, a banknote is a purchasing right issued by a government. It entitles its holder to acquire goods and services. It is issued in exchange for the delivery of goods and services as earnings or in return for future delivery and interest, in the case of a loan. Or, it can be transferred from one to another via trade. It is in the activity of trade that money takes on the apparency of being a thing, a commodity to be obtained, rather than a record of production and entitlement.

What becomes lost is the reality that, regardless of how much money one or all has, the goods and services obtainable are ultimately only created by production. This is the state of a society when, to obtain money, it becomes immersed in the activity of trading rather than producing. In trade, the wealth must come from someone else. For every trader's profit there must eventually be another trader's loss. Even if the man in Atlanta knew this, he was a member of a society that believes that it's the other girl who gets pregnant, the other guy who causes it, the other driver who can't hold his liquor, and the other criminal who gets caught. Naturally, it's the other guy who loses in the Market. But of course that's also what the other guy thinks. If millions are made in day trading, then millions must be lost in it. Why should it surprise anyone that someone dropped $500,000, while thousands of day-traders are 'making' money at the same time?

In the Forties and Fifties, there were performances in schools and summer camps of a play called "The Monkey's Paw." It's a story of an older couple who come to possess a talisman that will grant them three wishes. Naturally, their first wish is for a large sum of money. The next day, the constable appears at their door to inform them that their son has been killed in a violent auto accident. The insurance money is exactly the amount they wanted. Simple lesson: Money can not appear out of thin air. It must represent some past, present or future activity. Money is how man 'divies up' the quantitative production of society. That play should be part of lesson #1 in any course in economics.

(I suppose I'd better pause here and tell the other two wishes. They next wish him back to life, and he appears in the doorway, grotesquely broken and disfigured from the accident, whereupon they immediately use their last wish to send him back to the grave. There are all sorts of ways to apply this parable to the present moment, I would think. )

So how did or society arrive at this dynamic moment in economic history?

I think it got started in the inflationary investment boom of the Seventies. By that time the lack of the work ethic was being lamented. Of course, it was always "the other guy" that had the problem. A sense of entitlement had permeated the land. Others owed their work. Individuals began to see themselves as deserving more. As a larger percentage of economic product provided goods beyond the need for survival, there was a far greater amount of goods to be distributed in exchange for obtained money. In 18th century France, just such an excess resulted in the production of guillotines.

In the mid seventies, we were visiting relatives in the Bay Area. They were engaging in the popular and lucrative activity of buying a home, renting it out to cover the payments and then shortly thereafter selling it at a substantial profit. We were still immersed in the 60's philosophy - working with our hands and producing real product for our money. Still guilty of the youthful sin of lecturing our elders, we admonished them about the lack of morality in their activity. They, being environmentally and socially conscious Berkeleyites, agreed with the truth of what we were saying, but they asked us, "What should we do, just watch it go by?"

Well, watching it go by was not what anyone was doing. The typical talk at social gatherings became various versions of "Buy something that appreciates, on credit, and pay it back with cheaper dollars." When the flow of discretionary capital into tangibles triggered exorbitant interest rates, money moved back into banks and bonds. Just as, once a tiger gets a taste of human flesh, he becomes a man eater, the taste had been awakened for the hip and savvy investor to trade for money.

Simultaneous with the development of the nonproductive reward phenomena was the growth of the viewpoint, "I am the center of the universe." It started in the early fifties when psychiatrists blamed the actions of criminals on their unhappy childhoods. Then several decades of the Me generation came along, and at the same time children were being raised to perceive the world as what they saw on television. Art became life, and affluence became what the smart obtained at the expense of the foolish. Marriage became something that failed because your mate did not live up to your entitled expectations. No one was any longer responsible for anything that happened to them.

The final nails that would be used for the coffins of the Columbine students and the Atlanta brokers were forged by the expansion of the "Your Fault" syndrome into the courtrooms of the land. No longer was it just "Sue the bastards!" It was, "Sue the money-owners!" If no one is responsible for what happens to themselves, than obviously someone else is.

This year in schools and brokerage houses, two insane viewpoints converged. Esteem and wealth are not earned. You are owed them. If people do not deliver what they owe you, than you make them pay.

Fortunately, God fashioned man out of a rib bone and not modeling clay. When sufficient excesses occur, even the brainwashed masses see some of the light. The zenith of the no-responsibility viewpoint may have occurred this week when Hillary used the Full Monty of psychiatric platitudes to justify the outrageous events of this presidency. There has been an encouraging media response following her latest discourse of the utterly ludicrous causes and effects, as championed by the mental health world.

The zenith of the monetary excess is also upon us. It is certain that the Atlanta event has focused attention on the mechanics of the unearned money game. Part of this week's market decline, I'm sure, can be attributed to the element of sobriety induced by that event. But that is just helping to bring the inevitable to an earlier conclusion.

"Invest and spend;" that's exactly what this Market and the economy is composed off. The books of the economy have a gigantic double entry. Investors 'save' their money in stocks, but in reality that money is the spending money that has already fueled the great economic boom. The money appears in the bank accounts of the stock sellers, while being perceived as being 'owned' by the stock buyers. A basic law of economics could be written. "One dollar cannot occupy two pockets at the same time." (I anticipate some argument from certain other posters on this).

All stocks, bonds, futures and 90% of demand and time deposits are receipts for money not yet earned, production rights for wealth not yet created. They are often secured by existing wealth, true, but that wealth must still be transformed into legal tender, or seized for whatever intrinsic value it may command.

Legal tender is a receipt for goods not yet delivered. The delivery is, of course dependent on faith that banknotes will remain the agreed-upon form for recording production rights.

The securities and recorded credits around the globe have increased in declared value far more than product has been created to be delivered. Transferring wealth between nations, mega-entities and individuals, has blind-sided most people to the quantitative truth of the global economic wealth. That being that an unprecedented percentage of it is a derived future promise. Paper's unsustainable promissory commitment and the unsustainable economic boom created by just-in-time production are shortly going to result in a lot of broken promises. Stocks, bonds and other securities, are promises of money. Bank notes are a present time via for money. But for absolute, guaranteed money, there is only Gold.

Gold has been disfavored in terms of the legal tender of the world, but that does not negate its senior value. Using and abusing gold for the purpose of profiting on it as a commodity and trading vehicle (its lesser functions) has altered people's perception of its intrinsic value. There have been various arguments made that deflation will drive the monetary value even lower. However, the only way deflation can occur is for there to be a continuous growth in productivity, creating additional real wealth. With an economy built on the spending of its savings, operating at the operational limit of a JIT production flow which, empirically, must collapse next year, deflation simply can't happen.

In the final analysis, is or isn't is far more important than large or small! In terms of liquid assets, when the game of musical chairs comes to its next halt, the only seats in the house may be those made of Gold!

Neo (08/08/99; 13:36:37MDT - Msg ID:10649) SILVER EAGLE WINNER

I stand before thee, knights of the round table, hardened soldiers of the long war and fellow squires. I, Neo, pledge my gratitude to all thee for the education that has been mine for the last three months. I have remained silent, watching, listening and learning! And now I appear before you, lured by the unmistakable scent of that Mexican 5 peso silver coin. (I hope the fact that I write to you from South Africa does not prove to be a problem).

Americans discard old rules? I disagree, for to discard an old rule, one must have lived by it in the first place. The new generation of brokers, bankers and financiers alike have not experienced the debt traps of past decades. Risk management to them is not about managing ones risk so as to optimise profit opportunities, BUT rather about managing ones profits so as to optimise risk opportunities. There is a feeling of invincibility among this new generation!!

I find my answers to the above statement, " Americans discard old rules, invest, spend with abandon"" in the following analogy that I hope will be as interesting for all ye to read, as it was for me to write!

For those who read this next piece, and have not seen the movie 'Matrix' my humblest apologies, but I could not refuse this opportunity to add my analogy.

To me, the Matrix was more that a Sci-fi, but rather a fairly accurate description of our current lives.
It all began with the advent of bartering. Some may say a barbaric practice? The need for a more efficient form of trade arose. And so the system developed from one that was created to serve mankind, into one that rules mankind! Today, this system, this Matrix, feeds off ordinary folk, continually sapping, squeezing, every last hard earned cent from their pockets. BUT there are those who know the Matrix exists, can sense its presence, can see its dark shadow and can smell the rotting corpse on which it is built. These people, just ordinary souls, have felt the presence a long time now. They have filtered the noise that is our media, and lifted their heads above the clouds, where all is clear. And even though countless agents will come and go, disguised as central bankers, bullion dealers and financial houses, they will not be able to destroy that which is GOLD. And it is our fight, our mission, to help as many people see this system for what it is, before it is too late! For you see, they have not discarded the old rules, they just can't see them anymore. They spend, and spend and spend. Feeding the system that feeds them. A perfect cycle, UNTIL a link is broken, and THEN WHO FEEDS THE PEOPLE. Look no further than the recent Asian Crises, and behold the answer, GOLD!!!!

Leigh (09/21/99; 18:32:38MDT - Msg ID:14075) Half Ounce GOLD EAGLE WINNER
O Mighty Oaken Table of Yore
We assemble together this evening, attired in festive garb and chattering excitedly as the celebration begins. It is the first anniversary of our beloved Table Round. Torches cast a hazy golden glow throughout the Hall, and we see that much care has been put forth to make our meeting place lovely and inviting. As we look around, we see faces unfamiliar to us, and yet...curiously, we feel a deep sense of closeness to one another. Excitement builds as we introduce ourselves, and hugs are exchanged. We laugh happily as we hear cries of: "You're just the way I imagined! How delightful it is to meet you at last!"

Our host motions us to the Table, and we take our places. We can see our group as a whole now. There are old friends and new ones, very distinguished guests and happy-go-lucky souls. It is a group that anywhere else might seem incongruous, but we hold each member dear. Our talk becomes subdued as we keep an open ear for the voice of our host. At last he rises and says, "Forum members, I have a most wonderful surprise for you this evening! May I introduce to you, Sir FOA!" We stare at the door in open-mouthed expectation, and a smiling gentleman walks in. He grasps the outstretched hands of those whom he passes, and walks to the head of the table. "Thank you, Mr. Kosares," he says. "I am honored to be here tonight. It has been a most interesting year, and I have enjoyed sharing it with all of you. But I did not come alone this evening. I have brought with me a man who has a strong love for mankind, one who holds much wisdom and a deep sense of honor. I am proud to be called the Friend of ANOTHER!" We Forum members jump to our feet as Sir ANOTHER enters the room. We cannot seem to stop applauding as we gaze upon the kindly face of the one whose thoughts have inspired and guided us for so long.

Our celebration lasts for many hours, yet each moment is touched with a sense of magic. We who entered the Hall as strangers have become the very dearest of friends. Throughout the past year, we have shared each other's concerns, suffered together, helped one another in our quest for knowledge. Daily we learn more about each other. We admire strengths and have compassion on weakness. Tonight we have much to celebrate, and it is to our USAGOLD Forum fellows that we instinctively turn. The lure of the mighty Table Round is overwhelming. It keeps us up late at night, and it beckons us in our sleep. We happily obey its call, knowing that our Forum friends are always glad to hear from us. May there be many, many more years of camaraderie for us all at the Oaken Table of Yore!

Goldspoon (09/22/99; 03:28:00MDT - Msg ID:14110) Quarter Ounce GOLD EAGLE WINNER
***HAPPY BIRTHDAY "O" Mighty Oaken Table of Yore***
What stellar company you are... The quality of posts at this round table makes one humble.. When i started to first read and then post at this fine Oaken table i had only a hint of the members gathered here...

The faces were in shadows hidden by your gilded armored helmets. As my eyes became adjusted to the golden glow here and my ears adjusted to the softspoken words of encouragement and of golden truth, i realized that i was in the company of bravehearts. Hearts tempered by battle and minds of refined wisdom..Unselfish souls willing to share the timeless knowledge of the true Golden Ages. A time stolen from us that i did not even know was missing....

i soon learned that even i had something to add (meager as it may be) to this Golden Quest, almost as if i were drawn here of purpose... Excuse me for some of my past posts dear Knights of the Round Table... for i did not then realize how tall the trees in this forest were... nor how firmly rooted their convictions, nay even of the rich soil of truth and justice from which they feed.....makes one feel small... but proud of one's place....

As the ages roll.. and birthdays pass...
Here!..Here! and raise your glass!..
To one and all who gather here and to every braveheart that endures..remember what every Gold Smith knows..
that the more Gold is hammered, stretched and stressed.. the more that admiration for the metal grows...

Like you, dear friends who gather round here..Kings, Knights, Wizards, and Grand Ladies alike..a toast!!...a toast to Frrreeeeedom, Justice, and the soon return of Gold as Money for All!!.....

Twice Discipled (9/22/99; 15:10:12MDT - Msg ID:14133) Tenth Ounce GOLD EAGLE WINNER
***HAPPY BIRTHDAY! O Mighty Oaken Table Of Yore...***
All hail the Knights of the Round Table ... permission, please, to enter the court, dear Sirs.

I have traveled from a dry and barren land where the word of your wisdom and knowledge is spread with whispers in attempts to conceal the truth you have to share. Tales of your generosity to share your wealth have not even begun to compare to the riches that you lay at the feet of all who will enter into your Court.

This Court is an oasis of knowledge and wisdom in the desert of mirages. In this desert the rulers so cleverly have created a mirage of everlasting prosperity wherein those under their spell pay homage to those with who show the way. But wide is this path and many who enter in are moving in the path of destruction. These followers have convinced themselves in their own minds that their teachers have their best interest at heart, but nay they heap to themselves teachers who will tickle their ears ­ "Oh, look at how our fiat money and strategies makes you so rich!" This Round Table is indeed a group who have dared to stand and say "I dare say your fiat money will make you poor". But alas, you have opened the door of knowledge to enable each and every person to take their destiny in their own hands if they will only gather the courage to do that which they have always been told is foolish. Gather unto yourself those things that are rare and cannot be made by man -- that which has lasted for centuries.

Thank you ALL for showing me, a once desert dweller, the oasis of wealth.

Although the mention of our Maker has fallen in somewhat disfavor at this Round Table, I would like to thank Him for the privilege of knowing, at least in this world of yours, each of you at this Table and having bestowed on me a small portion of the knowledge and wisdom so that I may share with others. Each day I cannot contain the anxiety I behold to reach the Round Table.

I promise to do my best to share the wisdom and knowledge gained, and the portion of wealth that I may retain as we experience this new golden age together. I am blessed so that I may bless others.

As suggested by one of the Knights ­ Gold, I've got me some! Midas touched my fiat paper!

Aristotle (09/22/99; 23:05:30MDT - Msg ID:14167) SILVER EAGLE WINNER
***HAPPY BIRTHDAY! O Mighty Oaken Table of Yore...***
MK suggested that we embark upon a spirited bout of one-upmanship for offering "the most gracious, acceptable and believable compliment of this FORUM...the Table Round -- this meeting place that has become an important addition to our lives" as a one-year birthday tribute.

One year old? My dear FORUM, you have surely been lied to about your year of birth, for you are surely much older than that. You overflow with wisdoms and the richness of grace that only age can provide. No, your life began much earlier in time than September of 1998, for you sprang to life as we knights and ladies each drew OUR first breath and embarked on lifelong quests to gather unbidden, to build, to manifest this noblest of human endeavors as a Table Round--to strive for the key to unlock the full potential of mankind that currently lies hidden in a cloud of confusion. I have prepared a verse that I offer on this occasion which I feel defines our prevailing view:

The treasures of life will remain locked away
until we control our greed;
Our folly it seems is hoarding Gold as the prize
when Gold must be USED as the key.

This noble Forum need not employ an agent (sorry MK) to fish for compliments on its behalf. I say this because this Round Table takes on its form from one compliment after another in the form of the valuable thoughts that each person chooses of their free will to put on open display for the incremental enrichment of mankind. We post, too, for yet another reason. To provide ourselves with a glimmer of hope, like a castaway on a small island at sea who commits a message in a bottle to the endless waves as a small plea to anyone "out there" who might find it and somehow make a difference while we are powerless to do so. And if the currents be against us and the bottle be not found for an age, at least it will one day be known by someone that there once was a forlorn soul who's life nonetheless burned as bright as ever has under the sun.

"Why do we read, if not post?" In a comment I attribute to C.S. Lewis..."To know we're not alone." Nobody gathered here does so for the purpose of making money. Oh, sure, we might justify to ourselves and our inquiring friends and families that that IS the reason, be deep down we know it is not. All the money we have and need we continue to earn in our daily honest endeavors. But we have the nagging suspicion that all is not right, that something is amiss with this money we've honestly earned. We gather here to learn why we feel as we do, and to confirm that we are not playing the part of the fool while the rest of the world walks the higher road in a State of Grace. No, as we gain confidence from one another to raise our eyes and allow ourselves to see clearly, and to allow ourselves to follow our own conscience regarding the direction of our own lives, we realize that things are not as they once seemed. It is we that are traveling the higher road, and immune to the scorn cast about by the masses who are too frightened to leave the herd as we have done.

An unknown author once answered his own question "What surprises you most about mankind?"
"That they get bored of being children, are in a rush to grow up, and then long to be children again. That they lose their health to make money, and then lose their money to restore their health. That by thinking anxiously about the future, they forget the present, such that they live neither for the present nor the future. That they live as if they will never die, and they die as if they had never lived."

Such is the Round Table "embodied" of compliments, and therefore in need of no blatant expression of same. "We gather here." That says enough when you consider who exactly "we" are. Some of us will never know the extent of who is who. It matters not. Know thyself, and you'll know that your own presence here is worth the riches of kings, and as a complement to the group, the compliment is expressed. We gather here to live our lives better, and with hope of being that helpful BEACON to any others lost in the night. That says it all, my dear friends.

WE gather HERE.


Peter Asher (09/22/99; 01:07:30MDT - Msg ID:14105) SILVER EAGLE WINNER
***HAPPY BIRTHDAY "O" Mighty Oaken Table of Yore***
O Mighty Oaken Table of Yore,
Witness to enchanted lore,
Told by wondrous Knights of old,
Of quests renown by deeds so bold.

You've become our Forum standard,
"Knights of Gold" our host commanded.
Drawn by history's shining moments,
Now we stand as Gold's proponents.

First a band, a loyal few,
Inspired ranks which swiftly grew
Into this group we see tonight,
Linked by bonds of truth wove tight.

The young, the old;
The slow, the witty;
Country folk and some of city.
Wise men from across the sea,
Perhaps a Sheik of Araby.

Questing for a realm of knowledge
Far beyond the scope of college,
With passionate informed debate,
This lustrous Gold we venerate.

Gather round this massive table,
Raise your glasses as your able.
Congregate to celebrate,
This Golden Forum's birthing date.

Aragorn and Aristotle,
Open now an aged bottle.
Northy, how 'bout you and Crier
Light us up a roaring fire.

ET, Scottie, Michael, Koan;
Tell us where the next years goin'
Gandalf, wizard of us all,
What's inside your crystal ball?

Leigh and Tomcat, tell us stories,
Tales of monetary glories.
PH shall we now regal
In Y2K by AEL?

FOA you're as a brother
With your distant friend Another.
Caven, tell us where you've gone
Can you find him Megatron.
Canamami, have a look,
Otherwise just ask Canuck

Beesting, Stranger,also ORO,
Tell us how we'll feel tomorrow
Crossroads, Steve and Golden Truth,
Sit by us and give us sooth.

Oh yes, Richard, when we sup,
I'd like to sit with Buttercup.
Then when all is said and done,
Let's have a toast by el St. One.

"When from this castle far you Roam;
O'er towering peaks or seas of foam.
If for your friends you have a yen,
Just go online - your home again."

canamami (9/22/99; 20:48:43MDT - Msg ID:14161) SILVER EAGLE WINNER
***"O Mighty Oaken Table of Yore"***
It is serendipitous that a lengthy trial in which I have been involved ended early, and I was able to reacquaint myself with the Forum in time for the first anniversary. I take this opportunity to thank SteveH, one of whose posts (I believe in October last year) alerted me to the existence of this Forum.

In thinking of an appropriate compliment to the Table Round, I was drawn back to the earliest history of North America, and particularly to the first social club in the history of North America - the Order of Good Cheer (l'Ordre du bon temps).

When the French first attempted to colonize North America, their first settlement (in 1604) was on the island of Ste.Croix, which is in present-day Maine. Unfortunately, this was a poor location and the French were ill-prepared for winter. Thirty-five of the seventy-nine colonists died during the harsh winter of 1604-5. The following year, the colony was moved to Port Royal where others joined, and the winter of 1605-6 did not exact such a severe toll. The following winter (1606-7), to lift the spirits of the colonists and to help them survive the winter, Samuel de Champlain instituted the Order of Good Cheer. This Order was comprised of only the "gentlemen" of the colony, who dined at the table of the Sieur de Poutrincourt, who was the leader of the colony. (The table may even have been made of oak, as de Champlain had built a wine cellar of 5 to 16 feet in height, 6 feet wide and 18 feet long in the habitation of Port Royal, containing at least 45 butts of wine, which each held 108 Imperial gallons; these butts were probably made of oak, and could provide the raw material for furniture once empty). Those around the Table took turns being Chief Steward (a chain around the neck signified one's term as Chief Steward). The Chief Steward was responsible for providing a feast and entertainment for the other members of the Order, and the many guests. The provision of the feast usually entailed the Chief Steward going out to hunt wild game to provide delicacies of venison, moose, fowl, rabbits, fish, etc., as part of the feast, which was served by the Chief Steward in accordance with the rituals of the Order, and which apparently involved the consumption of large quantities of wine. Also, entertainment was provided: the first play ever performed in North America was performed under the auspices of the Order - "The Theatre of Neptune", by Marc Lescarbot. De Champlain's plan worked, and only four people died in the winter of 1606-7 (quite good, given the limitations of early seventeenth century medicine).

Thus, my compliment to the Table Round is to compare it to the Order of Good Cheer. Just as the OGC's membership was open only to the "gentlemen" of the colony, the members of the Table Round is comprised of the Knights - those whose worldview draws them to gold; a worldview which is marked by a desire for hard money, hard money being a pre-requisite for a clear-eyed assessment of economic realities. Such a clear-eyed assessment is necessary for the production of an abundance of goods and services, to meet the needs of family, friends and, hopefully and eventually, the entirety of humanity. (To steal from Preston Manning, the Knights are hard-headed people with soft hearts). Thus, the Forum is like the OGC, which tried to meet the needs of its members and guests, both other colonists and the local aboriginals. Perhaps more important, the Knights value gold as hard money because it provides for true savings, which require a true store of value, to enable us to survive the various "harsh winters" which history teaches can arise, just as the stored wine may have helped the colonists survive the winter. The Forum has provided us with intellectual and emotional sustenance, and sometimes entertainment, to ward off any periods of despair during the POG's long winter. And, with the fellow Knights of the Forum, we celebrate our final vindication as the snow melts and the ice breaks, and the buds of the POG's spring appear.

R Powell (12/26/99; 23:42:40MDT - Msg ID:21678) French 20 franc GOLD WINNER
Europe unites under one currency.

A single currency has gained acceptance during 1999 to serve the monetary
needs of eleven European countries. It should be noted that this new "Euro"
is partially backed by gold unlike other fiat currencies. Speculators
espounding that gold is merely a commodity appeared dumbfounded.

The Bank of England sells gold.

The world financial community has been stunned by the Bank of England's
announcement of planned gold sales before the actual sales. Fiat gold prices
dropped in anticipation almost guarantying the English people a lower selling
price for their gold. Pro-gold investors including GATA point to the
announcement as another example of market manipulation to keep the dollar
value of the yellow metal depressed.

Washington Agreement announced on Sept. 26.

European central banks led by the German and French backers of the gold
based Euro have agreed to limit gold sales and gold leases over the next five
years. The agreement limits sales to 2000 tons (400 tons per year) and
restricts lending and derivative activity to current levels. Fundamental
speculators who base price predictions on supply and demand estimates now
forecast a bullish move for the price of gold as the unlimited supply from
central bank sales has been curbed. Political observers called the
announcement a defence of the gold based Euro
while those with short speculative positions in the gold market hurried to
contain their losses while the dollar price of gold soared.

Bank of England Sale oversubscribed.

The BOE's September gold sale was more than eight times oversold
revealing a
desperate need for physical gold. Speculation abounds that mining concerns
and unknown players of the 'gold carry trade' are attempting to offset hugh
losses incured by shorting gold in the past and, by means of the futures
market, into the future. The names Ashanti, Cambior and Barricks have been
mentioned as holding short futures positions entered with the assumption that
gold prices would not rise. What remains unclear is the amount of these short
positions, to what extent they can be covered or rolled over (refinanced)
into the future and to what levels the price of gold will rise to
accommodate these needs.

Commodity Funds hold long gold positions.

Figures released by the Commodity Futures Trading Commision on November
19, 1999 revealed non-commercial or commodity fund long contracts held at
28090 and short contracts held at 25319. This net long speculative position
for the funds- a most unusual opinion not seen for some time- reinforces the
conception of fund managers as trend following players often ignorant of
market fundamentals. These are big money investors with the capacity to move
markets over the short term, with decisions based solely on technical
analysis- charts. These managers have little or no desire to study or
understand market forces. The chart shows the trend- the fund manager
follows.These are not market manipulators ( although gold market manipulators
most assuredly exist). These are simple chartists who happen to be playing
with hugh amounts of money but care not whether they are positioned on the
long or the short side of any market.

General Review

This past year has shown that gold is money! Backing the Euro with gold
and defending the same with the Washington Agreement emphasizes this fact.
More importantly this agreement implies limits on the supply of gold which,
with central bank sales and leasing, had been unlimited for years. This
should refocus the psychology of all gold investors back to the basic
fundamentals of supply and demand. No market can be manipulated forever.
Simply stated, gold is money and supply is not unlimited.

Farfel (12/26/99; 18:08:26MDT - Msg ID:21669) French 20 franc GOLD WINNER
********** My Top Five Events for Gold Market 1999 *********

1) Barrick Denounces its own shareholders as being "conspiracy theorists" --

following renowned novelist/former shareholder Arthur Hailey's denunciation of Barrick Gold's anti-gold hedging policies, a senior Barrick official declares that many of its own shareholders are complete wackos. The Barrick executive's hostile comments signal a wake-up call to all gold mining shareholders to put an end to the masochistic acceptance of the insufferable status quo within the industry. It is time for gold mining shareholders to tell ALL managements that "THEY ARE MAD AS HELL AND NOT GOING TO TAKE IT ANYMORE!" If it means disrupting shareholder meetings, then disrupt them. If it means voting out existing managements and tossing them onto the streets, then toss them out in a manner no different than the tens of thousands of employees who have lost their livelihoods owing to bad decisions by these incompetent (corrupt?) managements.

2) Marty "Cook the Books" Armstrong alleged to have stolen millions of
dollars from Japanese investors, then converting much of the proceeds
into gold and silver bullion

here you have the most vocal, strident, unyielding, articulate precious metals Bear, disseminating negative propaganda amost daily against gold and silver in zillions of mainstream publications, yet secretly acquiring the physical. His actions may well prove to be the micro- metaphor for what is really transpiring amongst the central banks as they trumpet their gold sales to the world whilst actually acquiring cheaper gold in a most quiet, shrewd manner.

3) IMF releases it latest quarterly report on Central Bank gold sales and reveals a significant INCREASE in global Central Bank gold reserves --

contrary to popular belief and the numerous articles released by the mainstream media, Central banks have become net accumulators of gold reserves. The IMF statistics reveal that at the end of 1997, countries held a total of 886.69 million ounces in their reserves, whereas at the end of the third-quarter of 1999, this number has actually risen significantly, to 947.25 million ounces of gold held in reserves. This net gain suggests that these sales might more appropriately be perceived as interbank transfers, coupled with the acquisition of additional gold from nonbank sources. So the next time a major media organization headlines another Central Bank gold sale, gold investors should realize that the vast majority of the gold sale will likely NEVER reach the public trading markets and the announcement is designed solely to create negative psychology in the public markets in order to scare down the price of gold.

4) Britain announces a lowest bid Dutch Auction for half of its gold reserves as the gold price is about to break above $300 an ounce --

the timing of the announcement by the Bank of England leaves absolutely no doubt that Western nations are actively manipulating the gold price to protect the hegemony of the US Dollar as we approach Y2k, and more importantly, safeguard the enormous gold short positions of Wall Street's bullion banks. Since a gold price in excess of $300 an ounce is a potential spark to enormous short covering, then the US government/Wall Street have drawn a "line in the sand" around the 300 price in order to preclude a gold short squeeze of astronomical proportion. The fact that the British gold sale was announced in advance and designed as a Dutch auction whereby gold is awarded at the LOWEST BID price further proves that the British government's primary goal is simply the diminution of the gold price, NOT central bank reserves' diversification.

5) Kuwait leases its entire gold reserves (approx. 79 tons) in order to halt the frenzied gold short squeeze resulting from the unexpected Washington Agreement announcement by the major European Nations --

in order to sustain US Dollar hegemony and protect the heavy gold short positions of Wall Street's major investment houses, America appears to have persuaded Kuwait to lease its entire gold reserves immediately following Europe's surprise announcement to cap gold sales and terminate gold leasing. Kuwait's decision was particularly stunning given that most Arab nations have a long history of venerating gold. For those who might have held a single scintilla of doubt about the current degree of gold market manipulation, then they need only note that immediately following Kuwait's gold lease announcement, the US government declared it would provide almost two hundred million dollars of military aid to Kuwait. In doing so, the US government proved that it is much easier today to print millions of dollars than it is to obtain a mere 79 tons of gold.

Gandalf the White (12/22/99; 22:46:19MDT - Msg ID:21542) SILVER EAGLE WINNER
"Major Events in the 1999 Gold Market" as seen through the eyes of the Hobbits. Each with a short explanation as to why each was important, followed by a 30 word review of the events and their impact, as a group, on the psychology of gold investors. Stated in normal Hobbit order. (ie. Reverse)

#5 -- "Continuations of the financial "Asian Flu"
That which began in Thailand in July of 1997, were now seen in a number of South American countries and Russia early in the year." These financial defaults and currency devaluations caused shock waves in many segments of the financial markets, including gold. One major impact was the required bailout of the U.S. Hedge Fund by the US FED and FatCat Banks. The Hobbits felt that this was the major eye-opening event of the year. The FED said that the default of the Hedge Fund would cause major negative impacts in the financial markets and that the FED had saved the day by getting the FatCat Banks to bailout the Hedge Fund so as to not rock "the Good Ship Lollypop" stock markets!! -- How is this related to the Gold Market, you ask? Because, -- THIS showed that even with great minds (Nobel Prize Winners) and past performances, things could go haywire very easily !!! It was rumored that the Hedge Fund had engauged in the lucritive "Gold Carry Trade" in addition to defaulted Russian bonds and other forex speculation.

#4 -- "Royal Oak Mines (RYO) Files for Bankruptcy"
The first lesson in the impact of low gold prices on "local" mining operations was seen when Royal Oak Mines was forced to file for bankruptcy, when it could not cover loan payments from operation sales. Additional impacts of other mining firms unwisely using either forward sales or deriviatives trading to hedge, was seen in Ashanti and Cambior, when with a rising gold price, both firms were ask to make multi-millions of dollars of margin calls. This caused concern related to the level and type of hedging of all gold mining companies. Some Mining companies saw the light and either closed or minimized their hedges. Others, continued playing the "ostrich" game. (ie. "hiding ones head in the sand, so as to not be seen")

#3 -- "Armstrong is a CROOK !" (but remember that tricky Dick said too -- that he was NOT a crook.)
One of the most "highly" respected (by some) financer, and vociferous "Golden Bear" and financial talking head was charged with fraud and arrested for failing to play by the rules with Japanese clients funds. Then it is found that the "Golden Bear" is really a "closet" Goldbug, as he secretly maintained a large cache of gold bullion and rare gold coins. This real life story shows the level to which persons fall, in order to maintain the "selling of their book". Numerous other "Guru Golden Bears" continue to "talk down" gold as a "worthless old relic" and poopoo the idea that gold is the "ultimate" money. The real question is: are more of the Sheeple starting to see the real truth?

#2 -- "The "Washington Agreement" !!!!
At a meeting of CB Heads in Washington D.C., a large number of CB's defined the future five years of GOLD sales and the policies of Leasing practices. This announcement, known as the Washington Agreement in effect slamed the door on the Gold Carry Trade. Only by continuing the paper gold markets can the naked gold shorters hope to continue the sham and hold down the price of GOLD Bullion. This turned on the lights so that the darkness could not hide the golden glow of real money -- GOLD!

#1 -- GREATEST buying opportunity of the last two decades !
The price of gold was "maintained" at the lowest level in twenty years by the "BLACK" magic of the "evil corporate empires", so as to perpetuate the "irrational exuberance" that created the "Technology Stockmarket Bubble". This however, allowed the Hobbits the opportunity to gather together their lifetime financial insurance for their future years and therefore was the most important happening of the year for the Hobbits. If you see a Hobbit with a smile on his face, you know that he has either a Maple Leaf or an Eagle in his pocket!!

Usul (3/26/2000; 8:38:53MDT - Msg ID:27504) Tenth Ounce GOLD EAGLE WINNER
****My Fifth Horseman ____Easy money____******
It is easy money, rather than debt, that is the threat- for there is always
debt, yet in good times debt is benign; in bad times debt is crippling.

In the early stages of an economic expansion, the debts you were then
servicing were probably hard-won, and by application of strict tests,
you ended up with a debt burden that was well within your means.
after a long economic expansion, credit is easier to obtain,
but easy money is actually the precursor to crippling debt. Easy money
gets easier, and is never easier than in the last scenes of
this story of a "goldilocks economy". The face of the fifth horseman
will not be seen clearly until the end, which will not be a happy one.

Easy money- low interest rates, and the plentiful supply of easily
obtained credit, has been fuel for the growth of a speculative mania
that must end in a catastrophic financial meltdown.
The fact
that easy money rather than savings acted as the prime mover
for the financial bubble suggests that the debt burden after
the collapse will not allow a rapid recovery.

Recall how Asian economies were devastated in the "Asian meltdown" that started
in 1997, as waves of devaluation were forced upon Asia and Latin America
while their banks imploded from bad debts and risky lending.

The role of easy money in the Asian meltdown was highlighted by
Brett D. Fromson writing on Sunday, November 16, 1997
in the Washington Post:

"The problem this time is that the Asian crash threatens the region's
already-weak banking system. As foreign money leaves, Asia finds itself
with less -- and therefore more expensive -- capital. That hits Pacific
Rim financial institutions especially hard because they've grown
dependent on cheap money and easy credit."

It has been easy money and the resultant debt hangover that has contributed
to the persistent non-recovery of Japans economy.
Japanese reportedly held over one trillion dollars of bad debt,
yet the level of personal savings in Japan remained high.
People remained reluctant to spend their savings as they saw them as a safety
net that must be preserved. Where there are no savings, the effects of a
collapse will be more severe and recovery harder to achieve
(US savings haven't been as low as present levels since the 1930s).

According to US Representative Ron Paul (speaking on Jan 31, 2000),
"Rampant monetary growth has led to historic high asset inflation,
massive speculation, overcapacity, malinvestment, excessive debt, a
negative savings rate and a current account deficit of huge proportions.
These conditions dictate a painful adjustment, something that would have
never occurred under a gold standard"

The economic condition of the U.S. is proxy for much of the Western World,
especially the UK and Western Europe. If the US economy
falls into a second Great Depression, it will have world-wide consequences.
Such large consequences are why we talk about "Horsemen of the Apocalypse"
and seek to identify them.

The US, UK, and Western Europe have enjoyed the fruits of a "goldilocks
economy". If we need money, how easy it is today to obtain loan funds-- why,
the banks even send us unsolicited loan offers, pre-approved, in the mail.
It sometimes seems as if the banks are desperate to lend us money.
Does anyone remember a time when going to the bank for a loan
was a difficult thing?

If money is easy to come by, people won't think so carefully about what to
do with it.

"Easy come, easy go".

This encourages unwise investments. Businesses start up with easy money
availability and their business plans are not scrutinised as they would
have been in a tight money environment. There is therefore a tendency
towards more risky ventures, and what the Austrian economists call
malinvestments. Some of these risky ventures may well be profitable in the
short term, as people are willing to consume fuelled by easy money. But
when conditions worsen, these risky ventures are the first to collapse
and their recent growth has added levels to the house of cards that
will prove to be a danger to the formerly sound levels below.

Easy money availability, big money being made in share trading and business
start-ups encourages corruption.

Stock market scam stories abound, with regulators fighting "boiler room"
operations to peddle shares by using high-pressure sales tactics,
misrepresenting the assets and future prospects of companies,
and manipulating share prices up so that they can sell before
the private investors get wiped out in the subsequent collapse.

In the stock markets, new companies float and day traders rush to buy their
shares on the strength of as little as a few paragraphs in an internet
chat room, or a recommendation from popular television "analysts".
Many of the people pushing easy money into these companies will not
have taken the trouble to read through the details of the
companies' prospectuses or do other forms of due diligence.
I have heard stories of people buying shares in companies merely
because their ticker symbol resembled one that one person picked
up in error, causing the price to rise, and seeing this, everyone else
jumped on the bandwagon, pushing the share price up by sheer momementum

Easy money flows to casual investors, and thence into
momentum stocks that are dropped as soon as they stop going up.
If money was not so easy, there would be a far greater diligence
applied to examining the risks. However, low debt ratings,
lack of profits and sky-high P/E ratios are now ignored in the rush
to place easy money where visions of imaginary future profits dance
before speculators' eyes.

Easy money and momentum speculation are what make for gains such as
the 380% in three days for JB Oxford stock in February 1999,
or the record first-day gain of 600 percent for theglobe.com
in November 1998, or the 185 percent first-day gain for
auction software and network provider FairMarket on March 17th 2000.
By the way, theglobe.com stock closed at $7 on March 24th, a loss of 89% from
its first-day closing price of $63.50.

Recently, broad money supply, institutional funds, commercial debt
and credit extended by banks have all grown aggressively,
and new mortgage debt runs at double the rate of that of a few years ago.

The build-up of debt throughout the economy is illustrated by a total junk
bond market that was estimated at half a trillion dollars by David W. Tice
in early 1999. According to Tice,
"the total junk issuance was $33 billion during 1986, the heyday
of the Michael Milken junk bond era".

The flow of easy money is central to the "economic miracle" that
is in part, as identified by Alan Greenspan, powered by
the "Wealth Effect" of perceived gains in paper assets.
US shares have gained about $US10 trillion in
value in the last decade.

But money that has been spent can not be recovered from paper
assets, because if everyone were to attempt to convert them to
cash, their value would instantly collapse. How then will
business and household repay their debts? Money that is easy
to borrow, may be hard to repay.

At the end of January a reported GDP gain of 5.8% came in higher than
expectations of 5.5% gain. The price deflator, which indicates
inflation pressure, rose 2%, which was also above the 1.5% expected,
and employment costs rose 1.1%, which was above expectations of 0.8%.
All indicative of a runaway economy fuelled by easy money and, for the
moment, supporting the strength of the dollar.

Alan Greenspan once said:
"The excess credit which the Fed pumped into the economy spilled over
into the stock market-triggering a fantastic speculative boom.
Belatedly, Federal Reserve officials attempted to sop up the excess
reserves and finally succeeded in braking the boom. But it was too late:
by 1929 the speculative imbalances had become so overwhelming that the
attempt precipitated a sharp retrenching and a consequent demoralizing
of business confidence. As a result, the American economy collapsed."

Economic distortions and imbalances are what built up in the 1920s, and
in East Asia in the 1990s, in an easy money environment. These imbalances
remained latent until an economic downturn was precipitated and then
by their weak foundations acted to reinforce a spiral of collapse.
The flow of hot money and massive leverage of financial instruments
when put into reverse gear is devastating. A great deal of this
hot money and financial leverage is now focused on the "goldilocks
economies" of Europe and the US.

Even the Fed seems to have succumbed to easy money distortions. Its
Federal Open Market Committed recently decided to keep
the temporarily expanded list of securities eligible as collateral
by the Federal Reserve Bank of New York, that had originally been
allowed specifically for the Y2K rollover.

Has speculative stock market mania has grown so extreme, fuelled by easy
credit, that the only way to prevent a meltdown of the first magnitude is to
pump up the flow of credit backed by ever more questionable collateral?

Financial instruments such as derivatives depend on a carefully
constructed model that depends on known historical relationships
between currencies and interest rates. In mathematics, derivative
functions, being related to the "rate of change" of the underlying
functions, change by large amounts if there are too rapid or
step changes in the underlying function. This is the
Achilles' heel of the derivative model. In the event of any
sudden unexpected change (currency devaluation, or recently, the
unexpected announcement of US Treasury buy-backs) the model
breaks down and there is a rush to close out positions that
were based on the old stable model; in the rush, price
movements become magnified as traders rush to unwind massive
derivative trades.
NB: The US commercial banking sector has nearly $30 trillion of interest
rate contracts.

Easy money makes it easy for companies to finance through debt.
When the Fed, BOE, or ECB raise rates (and they have all been
doing just this), it hurts traditional companies as repayments
increase. But for the "new economy" companies who
have financed themselves through equity and laugh in the face
of rate rises, the day of reckoning will come when their
customers, who buy their products with debt-financed easy
money, suddenly find that repayments are going up and further
loans become unaffordable. The customers could sell
their stocks to raise funds, but if they all do that then the
stocks will crash, and if they have bought stocks on margin
or through credit cards or second mortgages, they could find
that the proceeds are insufficient to cover their debts.
So the "new economy" companies will indeed be hurt by the rate hikes,
it's just that many will not realise this until it's too late.

The United States' borrowing of easy international money has turned
it from the world's largest creditor into the world's largest debtor nation,
with total net international debt of $1.22 trillion at the end of 1997.

In fact, according to Michael Hodges' Grandfather National Debt Report,
the U.S. National Debt (defined as the sum of all recognized debt of
federal, state & local governments, international, private households,
business and domestic financial sectors, including federal debt to
trust funds - but excluding the huge contingent liabilities of social
security, government pensions and medicare) is now over $25 Trillion,
or $93,000 per man, woman and child as of March 1999.

The US trade deficit has been described as "Fueled by brisk consumer demand",
which is just a facet of the easy money phenomenon, as consumers spend their
easily obtained funds on whatever takes their fancy, which usually means
foreign goods. The deficit expanded nearly 14 percent in January to a
record high of $28 billion.

There is a worrying parallel between the worsening US trade deficit,
and the trade situation of Thailand in 1997, which experienced
an 18% devaluation of the baht on July 2 of that year, and was
attributed to currency speculator action following a steep fall in Thai export
trade in 1996 due to competition from China and Indonesia and a drop in
economic growth rate. Few people predicted the ensuing economic collapse
and domino effect spreading to other East Asian countries.

Alan Greenspan has cited the trade deficit as being a major imbalance in the
U.S. economy. Anyone who has listened to Lawrence Summers and his
predecessor Robert Rubin knows that the US economy is predicated on
a strong dollar policy.

The value of the dollar against other world currencies must eventually fall
as the trade deficit rises. Because of the easy money inspired debt load,
the value of paper investments will be decimated. Bond yields will
fall as foreign owners sell their treasury notes, and domestic
owners find it necessary to sell all forms of paper investment to
settle their debts. In fact, hardly any form of investment will
escape punishing losses, except for gold, gold mining shares, and
contrarian funds. There are nevertheless risks associated with
gold shares and contrarian funds, for example, gold miners who
have hedged heavily, betting on a falling gold price- Ashanti
being a prime example. In the event of a general economic collapse,
therefore, the only safe store of wealth is physical gold (or other
precious metal). A study of the relative values of gold and the
dollar over the long term (100 years) will demonstrate that the
value of the dollar has been decimated whereas gold has maintained
its value, even after more than a decade of bear market conditions.
To be sure, this is gold's forte.

The possibility of a stampede of hot money into precious metal investments and
a large increase in real value can clearly not be discounted, as
speculators realise that it is the only true safe haven.

If the dollar collapses through record trade deficits, as
Americans send more dollars abroad to pay for imports than come in
from sales of exports, the free flow of imports will be blamed,
resulting in new pressures for erecting trade barriers. In a parallel
with the 1920s, trade barriers are already being erected, but this will
gather momentum if there is an economic collapse. Erecting harmful
trade barriers with countries such as China will not help political

The deficit with China expanded to $6.03 billion in January from $5.61
billion in December. Competition from China and Indonesia was blamed
for a steep fall in Thai export trade in 1996 that led to the
devaluation of the Thai baht.

The sheer weight of debts are what will make the next market crash so
dangerous, therefore justifying "easy money" as the Fifth Horseman.
The 1929 Wall Street crash led to the Thirties depression as banks tightened
up on credit. It became impossible for people to repay their debts.

In 1997, financing the national debt took nearly 20% of U.S. federal revenue.
The US national debt in September 1997 was $5,413 billion.
Recently it stood at $5,729 billion. This pile of debt, global easy money for
state coffers, will impose a punishing burden on the taxpayer if the economy

People who have been happy to pump easy money into stocks and risky businesses
will, after a financial collapse, be reluctant to do so again. This will
hurt good businesses as well as bad. For as Mark Twain once said:
"The cat, having sat upon a hot stove lid, will not sit upon a hot stove
lid again. But he won't sit upon a cold stove lid, either".

A perceived solution to this is to maintain the flow of credit by supplying
ample liquidity from the centre. This approach was used most recently to
swamp any liquidity drain that might have been caused by Y2K jitters. Yet much
of this liquidity only strengthened the easy money environment that diverts the
flow of funds into the stock markets.

It is not liquidity that must be strengthened, it is confidence. For if
confidence is lost, people will shy away from the stock markets and rein
in their spending. No matter how much liquidity is provided, and no matter
how low interest rates are brought down, consumers will not consume if they
lack confidence. The Japanese economy of the last few years has been the
perfect laboratory demonstration of this effect, dubbed "pushing on a
string". Spending slows down, profits evaporate, companies go broke,
institutions call in their loans. Investors then begin to think twice about
supporting any new business ventures. The conditions are set up for a major
The solution to this is not to push on a string with easy credit,
but to restore consumer and investor confidence through promotion of sound
investment practices and analysis. And nothing encourages financial
stability and sound control of credit better than an economy firmly
linked to gold.

John Doe (3/22/2000; 14:35:37MDT - Msg ID:27294) SILVER EAGLE WINNER
********My Fifth Horseman: Derivative Exposure***********
The financial world is in precarious balance and derivatives are being used to establish and (hopefully) sustain that balance, but not without cost.

This "balance" has been reached via liberal (nay, some would say reckless) application of all manner of untested derivatives contracts. Every movement in nearly every important market in any direction away from "balance" produces an immediate compensation in the opposite direction by adding yet another layer of derivatives to sustain the so-called status quo. These "adjustments" frequently overshoot, thereby requiring other adjustments in the opposite direction, and the system oscillates back and forth until the original impulse is sufficiently damped. The net result: "balance" is maintained, derivative volume is expanded, and the overall system is further shackled and imperiled. It's a derivatives-based Mexican standoff.

Imagine a wooden teeter-totter with two transnational bankers seated at opposite ends, holding armloads of sticky, toxic waste, balanced on a thin steel rail suspended over a huge vat of what once was water but, due to egregious neglect, has now turned to sulfuric acid. The balanced teeter-totter represents the current uneasy state of affairs, the powerful solvent, sulfuric acid, represents "insolvency", the toxic waste represents the unknown dangers of holding massive amounts of derivatives, and gravity, acting on the system as a whole, represents market forces.

Neither transnational banker wants to be lowered into the vat, lest he cease to exist. Yet, interestingly, the banker not initially falling into the vat will also be destroyed. Since no one will be there to counterbalance his relatively lighter load of noxious toxic waste, he too will fall into the vat of sulfuric acid.

Each time one of the bankers becomes frightened because the system begins to move out of "balance", he grabs yet another glob of toxic waste, hoping that it will bring the system back into "balance". However, as more and more toxic waste is added, the ends of the teeter-totter begin to buckle due to the "gravity" of market forces, threatening that the whole board snaps in half. Meanwhile, until the day the board breaks in half outright, the toxic waste continues to eat through both the bankers and their teeter board.

Now, for a more complete picture, imagine all of the above with not two, but a hundred or thousand transnational bankers, all seated at a multispoked teeter-totter as it dips up and down.

bp1 (03/26/00; 22:17:15MDT - Msg ID:27530) SILVER EAGLE WINNER
My fifth horseman to shake off the yoke from our "gold-bull" ...and to restore it to its deserved position can be, will be related with the 1.2 billion Chinese people.

1. Demand... Although the average income is still low, yet there are a lot people are getting very rich ( anybody who recently visited China could have the first hand experience. the recent limited, experimental sales of gold bars is the proof.)

2. Wealth preservation...The Chinese governemnt has been printing money like no tomorrow in order to pump the economy ... As a wealthy Chinese, what do you do? Buy gold!

3. Hedge against any disaster....The Taiwan/U.S. issue...Nuclear threat...Economic war---Chinese dump the US$... Gold comes to rescue.

The list can go on and on. And the stage is set: the legalisation of private gold ownership by Chinese.

Goldfly (3/24/2000; 0:14:42MDT - Msg ID:27394) SILVER EAGLE WINNER
The Fifth Horseman - Hyperinflation

In a room lit by a few smoky torches the League meets to finalize the plans for the triumphal entry of Euro. The largest and ugliest of them all is Hyperinflation. He stands facing the rest of the party:

"So then, we have made our preparations. The stage is set. The debasement of Dollar is at hand. We have pinched and tweaked, prodded and poked. Inch by inch we have taken much ground and all the while our propaganda arm has successfully covered our advance by denying that we have any intentions along this line, or that we even exist! Though he is fallen, Y2K did provide a worthy diversion to cover our activities. Dollar himself appears to be oblivious to our threat.

"Rising Oil, you are to continue your march, the tactical surprise has been complete. At the very least you must hold the ground you have taken and press on where possible. I realize the patchwork of your forces and care must be taken not to strain them beyond their tolerance.

"Stock Market! You will join forces with Oil and ride with him as far as you are able, all the while flying the colors of the Decadent One. When you can no longer keep pace - Quit the field completely! These maneuvers will cause confusion in the civilian populations, panic their leaders, and make our blow all the more devastating when it hits!

You, Asian Contagion, are to continue patrolling the outlands. Spoil the confidence of the people in their local currencies and cause them to clamor for rescue. When you see Stock Market withdraw, that will be your signal to follow me in. I and my minions will be spreading the contents of many bags of 'money.' Dollar's own people shall supply them to me! Though it will be their undoing, they can have no power to resist!

"There will be pockets of resistance, the 'Gold-holders'. And to a lesser degree, 'Contrarians'. Bypass them. They will have to be dealt with by other means, and in any case will not be strong enough to thwart our over-all design.

Hyperinflation turns then and surveys a man arrayed in fine colors, wearing a golden crown. He holds counsel with himself: Today he would ride with this one, but tomorrow....... Ah well, such is the nature of his existence and he would have no qualms presiding at the undoing of this young upstart.

"Euro.....," he says, barely hiding his disdain, "Euro, this will be your chance. You will then ride forth as the Savior, and the people will flock to your standard.......

"So," says Euro, looking down his nose, "you fancy yourself a Kingmaker..."

Hyperinflation grins, now making no effort to hide his contempt: "I ,*Sire*," he says spitting out the word, "am no kingmaker, I am a kingBREAKER!"

Euro's face goes blank, and in the silence that follows he withdraws into himself as Hyperinflation continues: "The people will flock to your banner, Oil will ride to your bidding. You have but to seize the reins of power and make yourself to be the Royal Measure of all things. You shall then have your day in the Sun."

Euro stares hard, as the terrible realization dawns on him. He looks at those in the room thinking; "Is this not the path that Dollar has taken? In the future, will not these scoundrels sit in council against *me*?"

Hyperinflation ignores him while bringing the meeting to a close. The final words are few, each knows already what he must do. He leads them out of the dank interior of the stronghold to the cold twilight of the new day. He mounts his horse, looks down and speaks, saying simply: "To your marches then!" He then turns and speeds off, picking up his escort a stones throw away, and they disappear down the tree-lined road.............

Christopher (3/24/2000; 20:39:54MDT - Msg ID:27435) SILVER EAGLE WINNER
*******My Fifth Horseman-THE BIG LIE********
My first thought was, he lied in every word,
That hoary cripple with malicious eye
Askance to watch the working of his lie
On mine, and mouth scarce able to afford
Suppression Of the glee that pursed and scored
Its edge At one more victim gained thereby.
(1'st stanza of Robert Browning's 'CHILDE ROLAND TO THE DARK TOWER CAME')

He stands aside the road and calls to the masses "What Ho!
Those clouds you see beckon trouble on the horizon, BUT I and only I can see the future. "This narrow road you travel speaks to me of folly even as it tells you of its safety. "Come, turn to the left down yon road and travel without a care, for straight is its way, and wide is its path." "Who? Those men yon that sit their devilish steeds on the side of my road? Why they are only my four finest mates, and they stand ready to escort you down my fine avenue. "Take no heed of them, only shadows they are and they mean you no harm. "Ah, yes but there is a small toll I must charge, only a trade really. "Those yellow coins you hold will be of no use to you along MY lane, and will only slow you down with their wieght and keep you from that which awaits at the end of the road. "Though it pains me to even touch the worthless yellow metal..., here give it to me, and take for yourself in trade these beautiful papers that I assure you will not burden you the least little bit. "Their worth you ask? "A fine question it is, and an answer you shall have. "Their worth...their worth is incalculable my friend, and what more You have my solemn promise that they shall never stoop your back nor cause your shoulders to droop from their weight...A thousand in your purse will be as nothing my fine trusting friend. "Yes the deal is done, enjoy the wide road with nothing to fear, I and my companions will ride with you until the last my friend, until the last."

What else should he be set for, with his staff?
What, save to waylay with his lies, ensnare
All travellers who might find him posted there,
And ask the road? I guessed what skull-like laugh
Would break, what crutch 'gin write my epitaph
For pastime in the dusty thoroughfare,

If at his counsel I should turn aside...

(2'nd stanza and first line of 3rd stanza of above mentioned work)

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