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The World Changed on September 11, 2001

TRUE or FALSE: Round Table Members Make Their Case
(As posted September 24 - 30, 2001)

USAGOLD (9/24/01; 20:13:59MT - usagold.com msg#: 62283)
A CALL TO CONTEST! A CALL TO CONTEST! A CALL TO CONTEST!
We have endured much over the past several weeks. What this contest demands of its participants is some "soul" searching. . . some "political economy" searching. . . some "belief" searching -- a call on our greatest skills in erudition and posting. There are those who might think this is not the time for a contest, but I would say there could not be a better time. As we reach into the depth of our own souls perhaps we can help our fellow goldmeisters, our friends and associates.

The statement is this:

The world today is a different place today than it was 9/10/01.

TRUE or FALSE.

Each entry must be marked in the subject box as:

****The World Is a Different Place Today Than It was 9/10/01 **** (Surrounded by stars)


The winner was promised a pre-1933 gold British sovereign from the Royal USAGOLD Treasury, two runners-up guaranteed a one-tenth ounce gold U.S. Eagle. However, in the course of judging the entries, three posts were found to be of such high merit that each of these three were awarded a hefty gold sovereign for their efforts. Congratulations to Solomon Weaver, whose calming, reassuring post was the very first one received in the contest; Simply Me, whose post of practical insight was the final one received at the contest deadline, and Usul, who dilivered a economic missive suitable for the Gilded Opinion. They are reprinted below for the benefit of future visitors.


Solomon Weaver (9/24/01; 22:31:38MT - usagold.com msg#: 62289)
Surrounded by Stars
MK - what do you expect from a philosopher/biologist.
****The World Is a Different Place Today Than It was 9/10/01 **** (Surrounded by stars)

FALSE

The world, our great planet earth, since its very inception has indeed been surrounded by stars, and will as such remain into stretches of time inconcievable to mankind.

Born of stars herself, heat within her bosom continues to unleash forces upon her fragile shell. The myriad of elements created within her star father, and collected by her mass as dusts of long forgotten stars, are sequestered into the folds of her precious living skin.

In long suffering patience she has quietly melted these elements, a cauldron of living stone...a dance between dripping stalactites, covered with biological cells which live deep in her tissue as they have for 2-3 billion years, and the fervent heat of her core which continuously provides the underworld with the energy of transformation. Quiet and deep recesses which slowly create crystals, and veins, only to see them slowly over millions of years be subsumed and remelted...the history of this transformation being visible in structure for hundreds of millions or billions of years.

And on her surface the action of the sun on the oceans, creating the tides and wind, has created a great overworld where forces act not in millions of years, but in cycles of days, and seasons....and years. Here a different type of transformation has occured. An explosive and vibrant cascade of life has formed...dancing almost like fire to greet the loving energy of the father sun. The history of this transformation is only visible in places where this life was captured into the underworld, slowed and held in stone...otherwise, it takes only a season, a year, maybe a few dozens of years and this life structure has passed on...recycled and reinspired through the cycle of birth, death and decay.

Now on this shining yet fragile skin, a new creature, even more fragile has emerged, one which is able to dream and awaken a mind which can transmute the living and non living strucures of the mother's skin. This creature has entered the underworld and enlivens the treasures found, metals of all kinds, concentrated and pressed into structures of strength, beauty and utility, sands melted into high purity layers of electrical semi-conducting microstructures.

This creature has also learned to travel the oceans and the skies, has learned to till the earth to hold his crops. From the highest airs of the stratosphere, to the snows falling on Anarctica, to the waters of the deepest tropical jungles, traces small and large of his species' presence are found. Collected now in swarming billions, threatening to create radical almost irreversable bio-destruction, some living in gold lined castles, others living in destitution and hopelessness, a new point in puctuated equilibrium awaits.

The only hope for this new creature called man is if he will fashion a golden mirror...a perfect reflection with a hue that exposes and nourishes his compassion. The perfect reflection of himself in the golden mirror will be his guide to transform the under and overworld into a union which will be the launch pad to the stars...which have always surrounded us.

Gold, the metal of the Incas and Egyptians, discovered in the last millionth of the earth's life, is a physical discovery of the potential of the great golden mirror. In the modern times, it is brought forth to every hand, as each and every must look in the golden mirror and make a choice. This physical gold trades as a good against our currencies to assure its availability to all who save from toil, and aspire to something greater...the earliest images from the golden mirror we wear on our hands and breasts are only a symbol of the spiritual gold it must awaken.

A day? How does a day make any difference to the stars....the golden mirror is deeper than the markets and the prices.

In our hearts, even here at this forum, we seek eternity, and our souls (as MK has asked us to search) know that all events great and small are as nothing but a small breath blown into the winds of eternity.

POOR OLD SOLOMON


Simply Me (9/30/01; 23:32:04MT - usagold.com msg#: 62729)
****The World Is a Different Place Today Than It was 9/10/01 ****

TRUE.

The world changed on September 11, 2001 because the American people changed. This giant and powerful United States is motivated by it's people. That's one of the reasons it takes so much to move this country in any direction. When we feel safe we squabble about ideals and political theories and dividing the fiat and the territory.

On September 11th, no one in the country felt safe anymore. And no matter where you were in the world on September 11th, the world became a more dangerous place. It doesn't matter who planned the attack. It doesn't matter who carried it out. What matters is that on September 10th, the sleeping giant (the people of the US) was feeling healthy, safe and secure. It's only worry was (the giant thought) a normal and temporary economic downswing. On September 11th, the giant was feeling wounded, angry and violated. And when the safety of the people of the United States was threatened, the entire world became less secure. It was the sudden realization that if such a massacre can be inflicted on the wealthiest and most powerful people in the world, then anyone anywhere can be subjected to the same fate, or worse.

On September 10th, the less secure parts of the world were investing in the sluggish but "safe" United States. In secure times, people invest in homes and commerce. Wealth is trusted to the hands of others.

On September 11th, there was no safe place left in the world...so investment was pulled out of stocks and put under mattresses or turned into gold. In insecure times, people pull their wealth back to their own hands. When the survival instincts are awakened, people want quick liquidity and portable wealth, ie: cash and gold.

The people...the grassroots, where ALL investment begins...did not read all the anti-gold articles and hear all the anti-gold reports, they just did not hear gold being recommended. And, as Trail Guide/FOA has said many times, gold is embedded in the every-day man's psyche as true-wealth-in-hand through thousands of years of proven use. So, when survival instincts were awakened, gold (and silver) was the first thought after immediate family safety. And it was CHEAP safety, because the paper market had made it so. But the paper market cannot get liquid so fast at these prices...and so the price of gold rises, driving the paper shorts out. And as the paper shorts get out, the price rises more! And as the price of gold rises, the dollar falls, drawing even more interest in gold. And so the cascade of events goes.

It was trickling in that direction on September 10th. Yes, on September 10th, the stock market was already headed downhill. Yes, the dollar was already beginning to lose value. Yes, we were seeing upward pressure on gold. But on September 11th it became a barely manageable flood. And just as soon as another event reinforces our fears, the flood will overflow the "short" levies and the paper market will fall.

The markets run on emotions even in the best of times. And when emotions turn fear, anxiety and insecurity...the money runs to gold.

simply me


Usul (9/30/01; 07:49:20MT - usagold.com msg#: 62696)
****The World Is a Different Place Today Than It was 9/10/01 ****

FALSE

The world may indeed appear to be a different place today, but what has really changed is not the world but the perceptions and behaviours of its people. People haven't changed, as a study of the writings of ancient civilisations will show:

"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed less Rome become bankrupt." - Cicero (106-43 B.C.), 63 BC

He also said, apparently, "You must look out in Britain that you are not cheated by the Charioteers"- I guess you have to substitute for the word "Charioteers", otherwise little has changed.

Something has nevertheless changed, and it means that future historians may very well date the beginning of the next Depression from the terrorist attack on the United States, even though the stock markets began to roll over in Spring 2000. However, this bear market has begun, not with a terrifying Wall Street crash, but with stealth and hopes for a "V" bottom and a quick recovery. Why has the ongoing bear market failed to register with many people with the seriousness it deserves? It can be summed up in one word, confidence.

Back in the 1920s, people were supremely confident, until their illusions of permanent wealth and prosperity were shattered in October 1929.

Herbert Hoover's 1928 campaign promised:
"A chicken in every pot and a car in every garage."

The spirit of confidence was expressed by Irving Fisher (Yale University economist) who said:
"The nation is marching along a permanently high plateau of prosperity."


People were confident in the economy, confident in Hoover's governance, and confident in the stock market as an indicator of the strength of the economy and a source of profits.

But eventually, between Black Thursday (October 24) and Black Tuesday (October 29), the Wall Street Crash knocked out that confidence. Hoover lost the people's confidence in him, and lost the presidency in 1932 to Franklin D. Roosevelt. Loss of confidence contributed hugely to the banks' problems; no longer confident, people rushed to take cash out of the banks and by 1933, around 11,000 of America's circa 25,000 banks had failed.

Alan Greenspan noted in the July 1966 issue of The Objectivist:

"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... The world economies plunged into the Great Depression of the 1930s."

A long economic cycle links today with the 1920s and 1930s- this is best illustrated by perusal of the charts presented by Alan M. Newman, editor of H. D. Brous & Co's "Crosscurrents"- particularly "Dollar Trading Volume" (http://www.cross-currents.net/charts.htm).

Since 1995, there has been a runaway bull market in stocks centred on Wall Street. Easy money -- the plentiful supply of easily obtained credit, and the FED's willingness to lower interest rates at the slightest provocation, has been fuel for the growth of a speculative mania built on easy debt rather than savings, in a similar fashion to the excess credit of the 1920s, and the resulting debt burden and the desire to rebuild savings will keep the bear market going for longer than most people suspect.

In the 1930s, people compensated for their feelings of insecurity and loss of confidence through the escapism of radio and movie musical entertainments. As people turned to the radio, the sale of physical records suffered as people could listen to music without paying for every record. Today, people can download their music of choice without restriction to a playlist or timetable. The growth of the internet has closely followed the recent bull market, as the growth of Microsoft mirrored the growth of RCA in the 1920s.

In 1932, Bing Crosby sang this poignant verse:

"Once I built a tower, up to the sun,
brick and rivet and lime.
Once I built a tower, now it's done --
Brother, can you spare a dime?"

Since the attack on the World Trade Center, thousands have been laid off, particularly from the air transport industry, which in the 1990s had been growing steadily. Just as in the 1930s, as illustrated by Crosby's song, the people who helped build up that industry have now been let down:

"Once I built a railroad, I made it run,
Made it race against time.
Once I built a railroad, now it's done --
Brother, can you spare a dime?"

The sudden shock of the WTC disaster and the forthcoming uncertainties of the War on Terrorism (just as the Iraqi invasion of Kuwait of August 2, 1990 and the ensuing spike in oil prices gave a sudden shock to the confidence of American consumers), will dampen spending and push the economies of the Western world further in the direction of recession. But we have been promised anything but a quick end to the uncertainties of the War on Terrorism.

Consumers have now become fearful of flying and are reluctant to go shopping for anything that might be considered discretionary, as jobs cuts spread from aviation through to dependent industries. The University of Michigan's consumer sentiment index fell to 81.8 in September, the worst drop in confidence for 11 years.

With an atrocity on their home ground unseen in the 20th or 21st centuries, people in America, and many other countries whose people worked in the WTC and will be involved in the War on Terrorism, have suffered a shock to their confidence in their safety from threats of further terrorism, chemical and biological attacks included.

Many people have been touched by a tragedy far beyond those who lost their lives on September 11th. There are close relatives, friends, business associates, customers... of those people, and also of those who have lost jobs in the following loss of confidence in air travel.

Yet despite the widespread perception that "the world has changed" since September 11th, the truth is that the retrenchment of the stock markets had already been in progress, and confidence had already begun to be lost. On September 3rd, the director of the UK's Confederation of British Industry, Digby Jones, said:

"Clearly the economic slowdown facing the UK is now spreading beyond the internationally exposed sectors typified in UK manufacturing."

And on August 28th, it was reported that: "U.S. consumer confidence fell unexpectedly to its lowest level in four months in August as a weakening job market weighed on consumers and threatened to undermine retail spending".

East Asia's loss of confidence led the West's, in the wake of the Asian financial crisis- as was illustrated by these headlines:

Business confidence drops due to Asian Crisis - December 1997
Hong Kong's lost confidence - January 1998
Crisis of confidence despite rally - January 1998
Japan economy stalls as confidence wanes- - MOF head - January 1998
Asia leads to crisis of confidence - January 1998

We can clearly see the effects of lost confidence in Japan's Nikkei, still falling from its high in late 1989.

Here are a few more things for people to be uncertain about now:

Will deficit spending and skyrocketing money supply after September 11th set fire to inflation?
Will conflict in the Middle East cut off oil supplies, sending energy prices soaring?
Will the financial infrastructure survive the loss of the companies in the WTC?
Will deliveries and just-in-time business models disrupted by grounded transportation cause shortages and price inflation?

A strong economy depends for its continued health not just on the availability of finances, but also the confidence of people that their money is safe in the bank, and the confidence of trading counterparties that payments due will be honoured. Without confidence, people are inclined to withdraw their money from anything that may be perceived as risky. Early to go are the high-risk investments (junk bonds). Financiers are less inclined to lend to business ventures; funding for new business development dries up. Businesses let people go. The economy slows, and the willingness of the high street consumer to spend is sapped by their awareness of industries suffering and other people losing jobs.

Consumer confidence may well have peaked in January 2000 - "Consumer Confidence Is Highest Ever" said the press. Consumers had no fears about the valuations of the stock market and demonstrated their confidence in profligate levels of spending while savings hit an all time low.

In a speech by Paul A. Volcker, on January 27th, 2000, he said:

"A world of convertible paper currencies, a world that has long since abandoned the discipline of gold, and a world in which money can move so freely, necessarily requires high confidence in its basic monetary institutions"

By Spring 2000, however, most of the stock market indices in the West had seen tops that have not since been bested. The technology-laden Nasdaq index began to fall heavily in April 2000, as confidence began to be lost in the earnings potential of high technology companies. Until the WTC tragedy, it was generally hoped that the loss of confidence was confined to the speculative high technology area.

The masters of banking systems try to maintain confidence by maintaining liquidity, but confidence itself is more fundamental. If people have lost confidence, no amount of urging them to borrow and spend will work. If they perceive a high risk of redundancy, a threat to their sources of income, they will want to keep as much of their personal wealth in reserve as possible, no matter how low interest rates are lowered.

MIT economics professor Paul Krugman said in May 1998:

"... if people have low expectations about their future incomes, then even with a zero interest rate they may want to save more than the economy can absorb... And in that case, no matter what the central bank does with the current money supply, it cannot reflate the economy sufficiently to restore full employment..."

Efforts need to be made to encourage investment in businesses that have a sound plan, proper control over spending and debt, not businesses that promise the earth on sketchy concepts, only to suck in large amounts of financing and waste it on frivolous purchases and ineffective business models. And this will not be achieved simply by making it easy for businesses to obtain funding. There needs to be a weeding out of the unsound businesses, bad debts, and establishment of financial stability and sound control of credit. And nothing encourages financial stability and sound control of credit better than an economy firmly linked to gold.

When on May 1st 1821 the Gold Standard, with a fixed price for gold, was formally established in Great Britain, there followed a long period of price stability with monetary policy, in effect, on auto-pilot.

As George Soros pointed out in December 1997, without a currency fixed in some way -- to a relatively stable currency, or gold, the currency of a heavily indebted nation can depreciate in a self-reinforcing process, because this aggravates the problems of repaying the external debt and further undermines confidence. And not even Soros could say how far that process would move away from equilibrium. When a currency depreciates, the value of an investment denominated in that currency falls, and the currency buys less goods from abroad. Of course, wealth held in gold instead of depreciating currency would be preserved.

Increasing gold prices are considered an important indicator of inflationary pressures, and an indication of loss of confidence in paper money and stocks. By corollary, a loss of confidence in paper will lead to a growth in interest in the ultimate store of value, which is gold.

As Adrienne Roberts of the Financial Times pointed out on September 29th, "Gold has risen 7 per cent since the attack on the US while oil and base metals have fallen. Gold has also outperformed equities, illustrating its negative correlation with most other asset classes"

President Nixon took the dollar off the gold standard in 1971. The US national debt subsequently began to grow exponentially (a graph may be perused in the U.S. National Debt Clock FAQ), until today it exceeds $5 Trillion, a colossal debt.

How does gold give us confidence? Let me quote the French central bank governor Jean-Claude Trichet, who said in an interview with Central Banking magazine in February 1998:

"Gold is a very important element in the credibility of the currency in the eyes of our people. It is one of the elements on which confidence in the currency is based, particularly in the eyes of public opinion. It is often viewed as the ultimate reference asset."

Here's another quote, from Peter L. Bernstein in September 2000:

"And because gold is chemically inert, it doesn't ever tarnish, it gives people a sense of being in touch with eternity. I think this is the magic of it. It stands for security and assurance"

And another, from Alan Greenspan in May 1999:

"Gold still represents the ultimate form of payment in the world. Fiat money in extremis is accepted by nobody. Gold is always accepted."

Gold, therefore, is clearly excellent compensation for loss of confidence in the paper economy.

One of the greatest gold fields of modern times, the Rand, began with the discovery of the aptly named "Confidence Reef" on the land of a Dutch farmer, about twelve miles west of Johannesburg.

Gold is no-one's debt; the only financial asset that is not a liability on someone else's balance sheet. Its value derives ultimately from the labour required to mine it from the earth -- relative to the labour required to obtain more common substances. Gold buried in the time of the Roman Empire can be dug up today, after the rise and fall of several civilisations and their paper currencies, and it not only holds its bullion value, but also acquires numismatic or historical artefact premium.

Hold gold, and its value will never collapse like a speculative dot-com stock.

Hold gold, and its value will endure; even the most highly regarded companies, (Marconi for example) can fall from a high profit, cash rich status to a loss-making debt-owing skeleton by the imprudent decisions of its controllers.


And because time and space permit, allow me (your sitemaster) to include brief excerpts from two other posters that I particularly liked. Call this section "Honorable Mention" if you will... but I had to draw the line at just two, otherwise this project would grow large as gold nuggets would be highgraded from each and every one of the outstanding contest entries. Thanks again to everybody for a successful and insightful series of posts. They are now safely on permanent record in the Forum Archives.


Wky_Woodsman (9/25/01; 18:15:02MT - usagold.com msg#: 62360)
...The accumulation of some gold as wealth, the setting aside some fruit of our life's work, imparts to us both a sense of freedom and a sense of security. It sits there under our watchful eye, collecting no fiat interest but nevertheless a reassuring safe harbor. Our golden holdings are the same as they were before 9-11. Consider assets still in play as "investments"; they are sailing the same heavy seas that they were sailing prior to 9-11. On the one hand we have gold in the harbor while the alternatives are ships that have not come in yet.

Take heart fellow knights and ladies, you have prepared well for the future. Be calm! Steady as you go. Let the future come to you.


Hipplebeck (09/30/01; 11:40:03MT - usagold.com msg#: 62699)
****The World Is a Different Place Today Than It Was 9/10/01****
True.
But then the world is a different place every day isn't it?

We humans live in a constant state of change; ironically, that is the one thing that does not change.

Throughout time people have tried very hard to build a concept of stability that protects them from this scary reality. We build institutions and monuments out of limestone and granite to give the illusion of permanence. We trust in the belief that our God is eternal and does not change. We even deceive ourselves into believing that we are the same entity that we were as a little baby when it is obvious we are not. In our desire to build up a concept of stability so that we can have some bearings on what life is all about, we must acquire for ourselves those things we observe that offer those qualities.

That is why man has chosen gold as the stabilizing foundation for the concept of money. It endures. It has physical weight that one can directly feel. It doesn't waste away. It is rare and desirable, infinitely divisible and permanently beautiful. It takes effort to retrieve it from the earth. Nothing else serves this purpose as well as gold. We all know instinctively that gold will still be here when our paper dreams are not. Isn't that why we call it treasure?


© 2001 All material is copyrighted property of the indicated contributor, presented at USAGOLD by permission. All rights reserved.

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