"Think now, if you are a person of "great worth" is it not better to acquire gold over years, at better prices? If you are one of "small worth", can you not follow in the footsteps of giants? I tell you, it is an easy path to follow!" --ANOTHER (THOUGHTS!) 1/10/98
[View early writings of ANOTHER (and FOA) at USAGOLD (5/1/98 - 9/3/98)]
WELCOME to the Trail Widens...the Fifth Archive for "Walking the Gold Trail"
USAGOLD is pleased to offer these special pages of unfolding commentary that are sure to challenge conventional perceptions of the gold market and international monetary affairs. Content for these Gold Trail pages is in the hands our two anonymous authors, "ANOTHER" and "Friend of ANOTHER" (FOA); and based on our past association with these popular commentators, we are confident that the message will continue to be as fascinating and as worthy of careful study as anything you will find on the web today.
Through these special pages we can now "Walk the Gold Trail" of current events; anticipating the road ahead while leaving this easy-to-follow trail of commentary behind.
We encourage you to follow along (or to catch up), and then to join your friends at the USAGOLD Forum to share in the discussion. It should be noted that we do not edit or seek to alter ANOTHER and FOA's presentations; they appear here as submitted by the authors. With that, we have finished lacing on our own hiking boots, and stand ready to enter the yellow wood, taking the path less traveled by...
(Archive I) The
Trail Head -- Start
here for earliest archived Gold Trail posts from February 2000 - June
(Archive II) The Long and Winding Road -- Gold Trail posts from June 2000 - January 2001
(Archive III) The Scenic Overview -- Gold Trail posts from January 2001 - April 2001
(Archive IV) Nearing the Great Divide -- Gold Trail posts from May 2001 - June 2001
July 2001 to September 2001 (Archive V) This archived commentary has been re-arranged and presented in chronological order so that you may begin reading, naturally, at the top. However, you may click here (Scroll To Bottom of Text) for the later commentary.
FOA (07/12/01; 21:16:43MT - usagold.com msg#81)
On the trail.
Has everyone seen West Side Story? Or for that matter any story that portrayed human group loyalties and commitment. How about the Three Musketeers? These stories and plays reflect our involvement in groups and often depict how we stand together as a team. In the first case a gang, in the second as "all for one and one for all". In the second, if one member is insulted it's a reflection on the whole group. If that hurt one walks away then the whole bunch is suppose to walk together?
Well, it's no different in political circles, too. My interaction here at USAGOLD is similar to a tiny part of our political world. A world some of my friends call home, no less. It's very clear to most of them that I'm not actually political here, just calling plays as I see them on the field. All done for the benefit of whomever has tuned into this station and wishes to hear.
It should also be clear that I have walked away this time, just enough to still honor the cause. Far enough to make a point,,, yet close enough that my private thoughts and discussions can still be heard. Thoughts and discussion with a message of gold's evolving place in the world.
So, on this Trail only, I now must remain.
As we begin today, I noticed a side path that lead away from the GoldTrail. At it's end I see a group of people listening to some person standing on a tiny stage. Let's ease over there and see what this funny looking guy is saying.
Onward now,,, quietly:
Gentlemen, thank you for coming here today. Once again I'll be offering up some of my views pertaining to gold's new place in the world. For those new here we are covering the subject, today, in a somewhat broader manner. Again, thank
you for your time and consideration.
I see we have several Americans here tonight. Good! You can help explain to anyone seated next to you, what "a roadrunner" is. That little ground running bird is native to a good portion of the southwestern United States: the object of a children's cartoon years ago. It seemed he was always running around some mountain curve at incredible speeds! I always liked the part when he would chase other characters so fast that he sometimes ran right off the cliff side road! Then ended up suspended in mid air; his little legs going full speed as if he never knew he left the road.
Ha! Ha! You know, I always think of that image when listening to modern Western Gold Bugs. Especially over the last ten years or so. Like our "roadrunner" cartoons, they carried their hard metal message so long and so fast that they ran right off the Trail, too. Not knowing that our Gold path would one day curve and follow it's natural way back to it's beginnings.
Over this time a lot of hard money thinkers stayed suspended in that same position. Right up there in the open for all to see. Over and over they would look over at us "new thinkers", standing on the mountain and yell:
---"you fells are on soft economic ground and it's all gona slide out from under ya"!-----
Hearing that we would lean over the edge and just yell back;
------"we know that, but mind your legs guys and keep um moving"! It's a long way down if you stop out there!" ----------
Ho! Ho! Ok, all of you can see where I am going with this.
For years we had this image in our heads that gold was a hedge. A hedge against what? You name it: war, disease, bankruptcy, inflation, bank failure, money failure! If something caused a problem in mankind's world, then gold was a good thing to perform as a hedge against it.
It didn't take much leg work to research why so many thought that way. We had a whole world of history to reference this and the last couple of centuries produced copious works by noted economic thinkers on the subject. Most all of their work could be boiled down into a few simple concepts for us lesser minds to understand.
Let's see...... gold is money...... gold was used as money....... and gold circulated as official government money not too many decades ago. And one more........ no currency could live without gold money backing it.
So, it seemed that if for any good reason we had a disturbance in "the economic force" then all roads must eventually lead back to gold use in it's well known money context. It's demand would surge while it's price rose and that price action would hedge our other loses. That is loses we incurred to our net worth because of any of these mentioned problems. Fair enough. I can understand that. In fact, I think most everyone did.
But what happened? Over the last 30 years or so, something seemed to be changing in the way all of us perceived our need for gold. Indeed, was it perhaps that this new world was ignorant of the fact that a fiat currency could never last as money? Was mankind now blind to the known fact that a fiat currency, once removed from it's association with real gold money, was dead on arrival?
From 1971 thru 1980, we had every form of the above mentioned problems. In triplicate! Our dollar, stripped of gold backing, was surely on it's last legs and slowly sliding into failure. It was officially a fiat currency that we all were taught would burn from inflation in a short time. Yes, gold went to $800 but it should have kept on going if it was this historic money? There were enough
dollar assets in the world to buy up every ounce and then some! Thereby replacing all that fiat wealth with gold wealth! Still, the real demand for actual physical gold failed to drive the price higher or sop up any and all gold offered. Something just didn't add up.
We were not without teachings on this! Anyone, with any understanding of economic function or hard money theory, knew that super price inflation was coming and that action would drive the real demand for gold to the moon. Still, it didn't happen. Our dollar price inflation was mild by failing fiat standards and gold never left the launch site.
Another fifteen years went by. A period of time that should have vaporized any circulating fiat currency, unattached to gold. Especially as the world's reserve currency was printed in numbers that only a computer could add up. It seemed the general public was not as lost as hard money thought predicted. They kept right on dealing and saving in dollars, leaving physical gold to drift.
Looking closer at the big picture:
It further seemed that through out our recent decades of changing economic function, the use and need for currency fiat was being impacted by a new demand use. Something not fully understood, but there never the less. This market action was not lost to some planners. Planners in big political systems that had opposite game plans from each other. Both trying to use fiat's and gold's changing function for their own advantage. On one side their designs would eventually rework everything, including removing our dollar system. On the other their reasoning was to just survive... gold or no.
Truly, over this time, we experienced every form of financial dislocation. Some inflation with some deflation,,, wars and political failure,,, 3rd world economic failures and even swings between small storms and perfect storms! Still, underneath it all, riding just beneath the surface, this "new demand" force was affecting the use of what most thought was a worthless currency. Helping to keeping fiat use in tact, even without it's needed gold money backing. Something different was happening. Something as unique and impossible to hard money thought as "computer bytes" were once unique and impossible to the function of a new economic world.
To be sure, this whole fiat system was engaged for political motivations. Governments waged war against gold and other fiats for various reasons. Some factions fought gold to protect the image of their currency. This was a throwback to 30 years ago and was still important to certain big players.
Until a few years ago, a currencies gold price still indicated said currencies value. Some also waged war to keep gold in a range so others could accumulate real physical cheaper. Almost like an economic bribe?
In these and other functions, credit gold was employed to shape a lower trading price for physical gold. As long as the currency using public or the gold using industry didn't demand too much gold to settle expiring credit gold contracts,,,,, the unlimited nature of fiat based gold trading allowed as much paper gold to be sold to as many that wanted to buy. While all of this was but simple political maneuvering, it could not have been pulled off without the help of that mentioned above; a "new currency demand".
Political forces noticed that the public was well attached to using fiat without gold backing. Most were more engaged to bet on gold's price, as a hedge, instead of owning gold outright, as a hedge. With such a setup in play, the paper gold market could be expanded without physical settlement
fear. All the more so if traders, betting mostly on gold's price, feared a currency loss as much as physical delivery. In this, they always dumped their dropping contracts to settle in cash before the dreaded delivery ever came.
For sure, over all this time people brought and kept gold in large amounts. But that demand and it's trading volume was a trifle in the overall physical and paper trading volume.
The total demand for holding physical gold as a hedge was falling away just as it was needed to force credibility upon a inflating world dollar gold system. Without full physical demand, gold stores, worldwide could circulate in an ever lower price spiral. Always leading it's old disgruntled owners to sell, fulfilling just enough settlement for the next real gold buyer. Only to be repeated again and again as the paper system produced another lower value for each new buyer/ owner. Eventually bringing gold to it's plateau price today. Where it is trapped between the falling demand to use physical ownership to hedge currency risk and digital currency's new use demand that keeps economic players in the fiat game.
I suspect that if a tremendous dislocation event occurred today,,, under the current dollar gold system,,,, our paper gold price would indeed collapse! It would do this as investors committed to hard money thought failed their own cause. Them and others would continued to cycle real gold out of their portfolios,,,, round and round the circuit,,,,,, as contract gold prices fell away. Contract
owners would drive those prices ever lower in their rush to escape even the illusion of delivery.
To the incredible shock of our modern "roadrunners" their gold would slowly fall in almost any financial panic. Falling in price as their neighbors traded each and every last ounce down to the bottom. Only if a complete currency / banking washout occurred would gold find demand as a real wealth trading vehicle again. The only kind of demand in our modern world that will once again return gold to it's ancient value ranges.
But this is not the end of the story. Nor is it how the final act of this play will unfold. I expect the above wealth demand to be politically reinstated. And timed to destroy the credibility of our current dollar paper gold system.
This ongoing discussion will embrace and follow this political reality as it unfolds in our time. Unfolding into what is about to become the greatest bull market in gold our world has ever seen. To fully understand how this will come about, we need to understand how some political forces are using both gold's and fiat's changing function in our modern economic structure. To grasp that, we all must understand what money is today, yesterday and tomorrow.
So keep those little feet going mr. roadrunner!
We will pull you back in long before gold hits $30,000.
Count on it! (smile)
OK folks, this is more than one can stand for a day. Let's quietly ease back to the trail and think about all that for a while.
Michael, Randy,,,,,, I hope this system has a lot of space because I can tell that I (errrr,,I mean this fella) has a lot to say! He also needs to address where others think his view is all wrong. Who knows? I could be all wet! It's going to be an long discussion for everyone reading, too!
Especially if you two guys join in?
Uhhhh,,,,, I didn't mean that the way it sounded (smile)
FOA (07/16/01; 12:42:07MT - usagold.com msg#82)
The evolving message of gold
Once again, after walking only a short distance, we come to a clearing where a speaker is beginning his talk. Let's just stand here on the hillside and quietly listen!
Ladies and gentlemen, good evening an welcome to our ongoing traveling talks on the changing world of gold. Thanks again for being here and we will get started now.
Much thanks to the USAGOLD people for recording and reproducing these discussions. Also a hardy appreciation to their Randy for organizing all our thoughts as they were presented in the TrailGuide context.
I begin tonight by reading an item from the very first TrailGuide walk. Then proceeding on to expand in more detail from our points in earlier talks. For the benefit of those who missed our last discussion, this thought picks up that theme very well:
"""""""""""""""" Our most broad view, expressing our strongest position is this:
From ten or perhaps twenty years ago a political will, a concept, was being formed that would today change the economic architecture and power structure of the world. Within this change, gold would undergo one of the most visible transformations since it was first used as money. We expect that, starting three or four years ago, the gold market itself has started responding to this sea change. As such, in our time, physical gold will enter the greatest bull phase in it's human use history. This my friends is the very trail we walk today. During our hikes and fireside chats, we will point out this political will, consider the logic and express our reasoning for this position. All the while observing the "river current", in the form of events, that will soon confirm our view."""""""""""""""""""""""""
First off, I want all of you to know that I was a hard money Gold Bug for decades. Actually, I still am in many ways. Yes, in spirit I am one of those little "roadrunners" mentioned in our last talk. Still storming down the gold money trail. Fortunately for me, and my portfolio position, I started looking at a realistic human / political side of money thought. A side most of us never grasped quickly enough to help us; because evolution was changing it before our understanding could catch up. My slow learning curve was speeded up with help from some very sharp people. Today I still see things using a hard money position; but, just as the world has turned and time passed by, my position has evolved quickly enough to flow with our human tide.
The major object of our discussion tonight is this thought:
--- the present state of affair in our gold market isn't just the result of political motive alone. --
I'm carrying this over from our last talk; that mentioned a new demand for fiat.
Yes, it's true; a simple political motive explanation would, indeed, solve all our problems. For many Gold Bugs this explanation does end their need to think much further on the subject, but their continued financial loses in the gold arena says their problem was never solved as such. Indeed, there is plenty of political push and pull going on to overtly move the market and we will later cover most of that in other talks. But, to underscore our isolated point, tonight, we magnify a few thoughts.
Had the dollar run it's inflationary course, in a manner and time period that history records all fiats as doing, there would have not been any contest for us to follow. From 1971, had dollar prices of everything soared, as hard money theory said it should have, every asset in the world would have seen hyper prices reflecting our run from this inflating currency. Perhaps not all of the wealth held in dollars would have went into real gold: some of it surely would have competed against the politically contrived paper gold markets. But, in spite of official thrusts, enough cash would have went into physical to drive it's physical dollar price to at least $1,000 or $3,000 over the last 30 years. It didn't.
The dollar did very much inflate from a printing press viewpoint and did so without massive price inflation. A 30 year repudiation of much hard money dictum. This tremendous rate of currency creation could not have been contained in a way that held off price rises with coordinated Central Bank support alone. The amounts of currency created and the build up of official assets held in CB vaults, to support the inflating currency, did not come close to matching each other. Even in a reverse fractional banking context. This one observation, simple to grasp as it is, points to another demand for fiat currency that did not exist when hard money thought was first built.
Over the last few decades a new demand use for digital money, or fiat unbacked paper money, has helped absorb most of this extra printing. The velocity of and gross increases of both private and world trade gave a use to worthless digital transactions and helped build a value that didn't exist in fiat currency before. This effect had to be real, because the world took in every last dollar that was printed and didn't dump them off to buy other real assets. A process that would have matched printed money rates to price inflation rates! I'm speaking of dollars alone, of course.
And there is more to observe that this alone.
In recent society's demonstrated use of unbacked fiat currency, they were advancing a trend to use currency in trade only; while owning wealth assets outside the known money context. As society advanced and trading volumes mushroomed, the need for more digital units increased more so from their trading function than their value retaining function.
This process was rendering the whole school of hard money thought useless as a strategy to to defend one's savings from inflation: as these inflating digital units failed to create a meaningful price inflation. The expanding universe of fiat was best used to gather real wealth, at stable fiat values, each time the fiat cycled through your domain. The object became; to gain fixed value wealth in quantity instead of gaining finite wealth and waiting for it to gain in value.
This is all completely beside the point that all this action will one day destroy the dollar unit as a saving / debt denominating vehicle. We will get to that later. Right now we are gaining an understanding about this money evolution in it's basic trade use and how we should advance ourselves using it.
Owning wealth aside from official money units is nothing new. Building up one's storehouse of a wealth of things is the way societies have advanced their kind from the beginning. What is new is that this is the first time we have used a non wealth fiat for so long without destroying it through price inflation. Again, a process of using an unbacked fiat to function as money and building up real assets on the side. Almost as if two forms of wealth were circulating next to each other; one in the concept of money and the other in the concept of real wealth.
This trend is intact today and I doubt mankind will ever pull back from fiat use again. Fiat used solely in the function of a money concept that I will explain of in a moment. If we inflate this currency to it's death, and I expect we will, then the world will just start a new one and the process goes on. Note the minor examples of this process in various third world currencies as they kill their own kind and advance to using the king fiat dollar. The local currency printers eventually fail their task, so the next nation state's fiat comes into use. Currently, in the major category, the dollar is giving way to the Euro. Ha! Ha! In logical progression of this we will, one day three hundred years from now, be using the new mighty Argentina whatever as the world's next great fiat. (smile)
Understanding all of this money evolution, in it's correct context, is vital to grasping gold's eventual place in the world. A place where it once proudly stood long ago. In the time before us, fiat monetary policy, interest rates, appropriate debt levels and even speculative stock market binges will all be regulated to how a fiat does it's singular job of being just money; not functioning as a long term savings vehicle. How well that job is performed will depend on a free market trading value of gold wealth.
All of this transition is killing off our Gold Bug dream of official governments declaring gold to be money again and reinstitution some arbitrary gold price. Most of the death, on that hand, is in the form of leveraged bets on gold's price as the evolution of gold from official money to a wealth holding bleeds away any credible currency pricing of gold's value in the short run.
To understand gold we must understand money in it's purest form; apart from it's manmade convoluted function of being something you save. Money in it's purest form is a mental association of values in trade; a concept in memory not a real item. In proper vernacular; a 1930s style US gold coin was stamped in the act of applying the money concept to a real piece of tradable wealth. Not the best way to use gold, considering our human nature.
Modern society thought, has taken a step beyond our schooled understanding of money. Going beyond, by taking a step backwards and embracing a practice more real. By accepting and using dollars today, that have no inherent form of value, we are reverting to simple barter by value association. Assigning value to dollar units that can only have a worth in what we can complete a trade for. In effect, refining modern man's sophisticated money thoughts back into the plain money concept if first began as; a value stored in your head! Sound like something that's way over your
head of understanding? I'll let you teach yourself.
So, you think we have come a long way from the ancient barter system; where uneducated peoples simply traded different items of value for what they thought they were worth. Crude, slow and demanding, these forms of commerce would never work today because we are just too busy.
Lean back and think of all the items you can remember the dollar price for? Quite a few, yes? Now, run through your mind every item in your house; wall pictures, clothes, pots and pans, furniture, Tvs, etc.? Mechanics can think about all the things in the garage, tools, oil, mowers. If one thinks hard enough they can remember quite well what they paid for each of these. Even think of things you used at work? Now try harder; think of every item you can remember and try to guess the dollar value of it within, say, 30%. Wow, that is a bunch to remember, but we do do it!
I have seen studies where, on average, a person can associate the value of over 1,000 items between unlike kinds by simply equating the dollar price per unit. Some people could even do two or three thousand items. The very best were some construction cost estimators that could reach 10,000 or more price associations!
Still think we have come a long way from trading a gallon of milk for two loves of bread? In function, yes; in thought no! Aside from the saving / investing aspects of money, our process of buying and selling daily use items hasn't changed all that much. You use the currency as a unit to value associate the worth of everything. Not far from rating everything between a value of one to ten; only our currency numbers are infinite. Now, those numbers between one and ten have no value, do they? That's right, the value is in your association abilities. This is the money concept, my
Unlike the efficient market theory that was jammed down our throats in schools, we all still use value associations to grasp what things are worth to us. Yes, the market may dictate a different price, but we use our own associations to judge whether something is trading too high or too low for our terms. We then choose to buy or sell at market anyway, if we want to.
In this, we have moved little from basic barter. In this, we are understanding that an unbacked fiat works because we are returning to mostly bartering with one another. A fiat trading unit works today because we make it take on the associated value of what we trade it for; it becomes the very money concept that always resided in our brains from the beginnings of time.
In this, a controlled fiat unit works as a trading medium; even as it fails miserably as a retainer of wealth the bankers and lenders so want it to be.
The American dollar has brought it's makers a lifestyle that is at odds with this new thrust in money use. A reserve currency today must allow it's value to be set solely upon it's money function, not it's function of retaining wealth. Use trends today are forcing money creation policy and money values to be determined by wealth outside the official money realm. All the while the dollar holders are fighting to stop this from happening. Free Gold markets would today destroy the current dollar exchange rates and render it's debt creation null and void as a proxy to buy us things for free. Much is at risk to the lifestyle our old gold dollar relationships brought us if gold trades free. Much is to be gained for wealth savers, today, who buy gold for it's wealth function and forget it's current dollar created price.
I'll go further into the other aspect of money titled; "Who said we were suppose to save this stuff"!
Next time in our talks on the evolving message of gold. Good night and thank you for being here.
Ok, folks! I checked the schedule and there are several more of these talks coming. After those are done, we can take a real good hike and check out where the trail is going. The GoldTrail that is!
FOA (07/20/01; 09:57:51MT - usagold.com msg#83)
Why do we need to save this stuff anyway?
Can't believe I brought folding chairs on the trail! (smile) I guess I'll also take notes with the others here. Hey, lower in the front, I can't see! OK, it's getting started. Let's hear what that guy is getting into this time.
Good evening. I hope all of you rested well into the morning and had time to consider our thoughts from last night. Today's talk is, once again, a more detailed continuation of our theme: the evolving message of gold. I'll begin now.
Again I'll read a small piece from the TrailGuide series and use some slight editing to make it more clear. From that we can move into our subject:
"""""""" Our modern gold market and the price illusion it creates is little more than a product of the fiat dollar system; a design that denominates the trading of most gold credits in a contract form. Is it a free market? Why yes, very free. But, really free, in the sense that contract supply is unlimited. Investors and the gold industry, in total, brought into this paper based gold; even though they fully well knew 90% of the trading volume was represented by only cash equity collateral on the other side. Some of it private and some of it official. Knowing that, they somehow expected that those contracts were limited in creation by the fixed amount of gold in the world. Their mistake, not the markets.
Clearly, anyone schooled in classic hard money Thought should have known that this was but another gold inflation; another version of a typical fiat gold inflation and a transitory era between money systems. This was a time to gather gold over years, not invest in the leveraged aspects of gold's new fiat versions. Nor, to buy into the gold industry that owed it's life and cash profits to the
maintenance of such a system; transitory as it was."""""""
To paraphrase that TrailGuide thought let's repeat what I said last night:
""The expanding universe of fiat was best used to gather real wealth, at stable fiat values, each time the fiat cycled through your domain. The object became; to gain fixed value wealth in quantity instead of gaining finite wealth and waiting for it to gain in value.""
Anyone, that understood this new fiat era, knew that this is how you handled the evolving process. For myself and others, knowing that gold's inherent value could not change much and was historically undervalued in it's comparative value to all things, we brought gold in quantity. We tossed aside Western concerns about shifting currency prices of gold. We did not try to paper leverage a finite amount of it; as some were trying to do in betting for a higher currency price to come. A price value, by the way, that would never arrive in this era. That higher dollar currency price, so many were leveraging for, would not be allowed to surface in paper values while the present pricing system still functioned.
It was plain as day that the whole world could sell gold short; with most financing deals and future deliveries predominantly structured towards cash settlement. With little more than margin money and no gold at all; you, me and that "man behind the tree" could all help set the price of gold lower with little thought of dealing in actual physical metal. With such a system firmly ensconced in investor minds, as the one and only true gold market, only a partial percentage of the coming price rise could ever be reflected on paper; as gold's price discovery system was and is eventually inflated until it fails it's purpose.
Such is the way our gold arena has evolved in our present financial culture. This entire realm represents the conclusion of a convoluted, decades long, attempt by mankind to tie his fiat money concepts to physical gold. These centuries of gold / money tie-ins will end in a colossal breakup of the entire fiat money plus gold concept; leaving gold and fiat to trade independently of each other.
Unfortunately, it's the dollar's watch this will all end on as this gold failure is running in parallel to the dollar ending it's position as a world reserve currency.
The dollar faction's war on gold is now lost as their whole system of fiat gold creaks under a load of failing credibility. That failing credibility is being driven home as the Euro system pumps far more dollar based paper gold sales into the system than their actual physical gold sales. All the while structuring a stand alone system, aside our present dollar gold world, that will later identify gold's
pure value in traded physical only form. For all of Europe, London sales included, the BIS sanctioned Washington Agreement was little more than a settlement of some official accounts; taking their CBs somewhat out of harm's way prior to an unimaginable rise in gold values.
The US Treasury, coming a little late to this recognition, is trying to get in the game by renaming some of it's gold stocks. They are trying to show some involvement; but their political motive, to actually deed over their gold, will only become powerful enough after the real breakup begins. The great gold reserves, so many Americans think they own, will leave our shores at prices we will later think are sky high; only to watch those values double and triple again! The US will be forced to use a good portion of it's gold to just keep the dollar in the game; still, no amount of gold will make it a reserve currency again.
The incredible simple design, of using gold in the Euro political thrust, is what has hidden it from our Western view. So far, have we advanced, that few of us can fathom gold ownership having any purpose outside using it for leverage gain and credit lending. Four fifths of the rest of the world will later grasp the Euro concept and embrace it completely.
While many in the gold industry note the harm this paper selling is doing, we can hardly fault the Euro side's reasoning behind the paper sales. It's no different than selling short a stock you think is going to become worthless. Any investors that brought these paper gold goodies, because they thought they represented real gold, can just put up the cash and ask for delivery! The trouble is that the ones that point to the Euro CB sales and yell the loudest, never had the cash to buy or intended to buy gold anyway. They played the game for more dollars, not gold! They cannot see the different political gold reasoning behind Euro faction thrust vs. dollar faction thrust and proclaim that these are one in the same. Confusing the issue for all gold investors.
And the beat goes on!
Looking back, for a moment, at our last talk about the money concept; we can see where most of our money failings originated from our thinking that gold was, itself, money. Actually one writer, on the USAGOLD forum, hit the nail on the head when he said that; "money is just a book keeping accounting of real wealth". Indeed, as we mentioned in our last talk, money is an associated value in your memory and, for help, usually recorded on paper.
We were first alerted to the "gold is money" flaw years ago. When considering the many references to gold being money, in ancient texts, several things stood out. We began to suspect that those translations were somewhat slanted. I saw many areas, in old text, where gold was actually more in a context of; his money was in account of gold or; the money account was gold or; traded his money in gold. The more one searches the more one finds that in ancient times gold was simply one item that could account for your money values. To expand the reality of the thought; everything we trade is in account of associated money values; nothing we trade is money!
The original actual term of money was often in a different concept. In those times barter, and their crude accounts of the same, were marked down or remembered as so many pots, furs, corn, tools traded. Gold became the best accepted tradable wealth of the lot and soon many accountings used gold more than other items to denominate those trades. Still, money was the account, the rating system for value, the worth association in your head. Gold, itself, became the main wealth object used in that bookkeeping.
This all worked well for hundreds and perhaps thousands of years as fiat was never so well used or considered. Over time, society became accustomed to speaking of gold in the context of money accounting. Translations became all the more relaxed as gold and money accounting terms were mingled as one in the same. It was a subtle difference, then, but has become a major conflict in the money affairs of modern mankind; as gold receipts became fiat gold and bankers combined fiat money accounting with gold backing.
Last night we alluded that humans have not changed all that much in their barter trade associations. We, today, use fiat record keeping to associate trades for every thing we want. It's in the same mental concept people used a thousand years ago. Our tendency is to freely trade and value things up and down the association scale; that flexibility in our association accounting means fiats cannot remained fixed to any real wealth. In modern money terms and concepts; that means the prices of all things must be free to flow up and down in any amount. Our modern perceptions of inflation and deflation upon debt values only serve to destroy the understanding of this basic drive.
This need to change valuations is a human trait and is the main force that keeps attempting to break gold free from modern money attachments. We inherently wish to use gold as wealth and trade it's changing value within the same universe of moving values all other tradable things exist in. However, for credit banking sake, we tried to fix gold's value into our fiat money accounting so we could lend the "money concept itself"; lend money in lieu of real things. As just said, gold could never be attached rigidly in our accounting money concept because that requires it's value to be fixed
Our world has built fiat system after fiat system; and all upon the notion that the money concept can be lent in lieu of lending wealth. This debt, in money terms, requires said money values to remain stable or the banking system fails it's purpose. In this, governments, banks and political stylists always try to entwine gold into the money system and control it's value for the sake of money debt viability. Such is the conflict in our gold money culture today. Our dollar is just one more fiat coming to the end of it's timeline as it's basic flawed concept, again, destroys the savers wealth.
The question stands in modern times: Why do we need to save this stuff anyway? Indeed, fiat is only a trading medium that reflects our 1 to 10 value rating of any good in trade; and that rating is a just value for only a short time. Fiat purpose is maintained for those that save it for later use over short terms, not long term accumulation as wealth or for spending far in the future. Real wealth is what humans save for the future and this is where our basic instincts drive us.
The incredible explosion of fiat use, sense it became a non wealth holding in 1971, bears this out. Fiat values, the world over, reflect only our tradable values placed on all things. The dollar, nor the Euro, have any value of themselves except for the denomination of tradable goods. The mismatch that has occurred is in the massive debt our world dollar use has developed. A debt that cannot be traded back into the US economy to receive goods at anything close to today's prices.
For years American lifestyles encouraged it's political system to protect their banking /debt credibility at all costs; so we could buy others real goods without sending real wealth to pay for it. We did this in the only way we knew how; in body, mind and spirit, our political economic purpose promoted the dollar and it's debt to be as good as gold and a substitute for real wealth holdings. Even a substitute for real wealth to be held in reserve behind other currencies! Still, in parallel to this US thrust; for thirty years fiat use evolved on it's own to embrace the non wealth trading aspects of "the money concept". Leaving in it's wake a world of worthless dollar debt as people brought wealth outside the "money concept" anyway. We are, today, in a transition away from that dollar mess and much of our wealth illusion will passing from our grasp in the process.
In every way, society is trading it's way back to where it started. In the process, gold will find a new value from it's history in the past:
" a wealth of ages savings for your future of today."
Thank you for attending these workshops. We will continue these discussions for a time and later envelop current events into our thoughts. It's been my pleasure, good evening.
OK,,,,, I'm out of here,,,,,I think I'll just fold my chair,,,,, hike over to the Trail restaurant for some
Tuscany vintage and good Italian food,,,,, not to mention a plate full of political sauce. (smile)
Amazing how the GoldTrail connects to so many parts of life, society and economics!
FOA (07/26/01; 18:08:48MT - usagold.com msg#84)
"The wind will blow"
I thought it was a good idea to tack this notice on a large tree.
It says that:
"another talk is to be given here tomorrow (fri) on the evolving message of gold"...... The Wind Will Blow!
Ok,,,,, good enough for me,,,, I'll bring some coffee and snacks. Unless a storm blows in and shuts down the presentation,,, we'll see everyone then.
FOA (07/27/01; 15:20:44MT - usagold.com msg#85)
"The Wind Will Blow"
Welcome to our next series of talks on the evolving message of gold. Today's discussion is titled;
"The Wind Will Blow".
As our modern society has evolved, we currently use fiat and own wealth in a way that demonstrates exactly where both values stand within our lifestyles. The examples abound everywhere in personal finances. Fiat has, today, become both a trading medium and short term savings asset. This long trend, in American money use, suggest that an acceptable price inflation cost for both theses uses has been evident for some time. Even though world use of our reserve currency has made an illusion of most of our real costs structures.
The concept that wealth is the long term savings asset that most strive to attain has been evident also. Even with US taxes on it's profits, real wealth assets still overcome that disadvantage by providing far less risk in an increasingly hostile world. However, in the background, behind the enormous, overshadowing expansion of public and personal debt, this new meaning and usage's of wealth and fiats are difficult to perceive. Most of what the general public has come to believe as real wealth is simply forms of paper ownership of wealth producing industries and paper claims on real assets that can never be recovered at today's values. This is true in most all items, not just gold.
Aside from Western cultures taking this debt expansion far beyond their means, our trend of buying things and not saving fiat currency, long term, should have sent a signal to money officials; but it didn't. Dollar inflation was exploding to meet a new fiat use demand and not creating a price inflation to match: a process that should have encouraged our economic engines, the people, to save the currency itself. In hindsight, they were spending it; not to escape future run-a-way price rises, rather they were doing what comes natural; trying to save real wealth by buying it. Even if they were buying mostly a value illusion.
After 1971, the entire dollar system was too far down the debt road to change step; that is to allow all forms of real things to fluctuate up and down in dollar value. This would have required gold to rise into several thousands, even then! They were still trying to maintain dollar value for the viability of expanding dollar debt and that meant changing was not an option; especially for a system built on debt that required the illusion of a stable gold price. Still, the nature of fiat use was changing the world over and would have grave consequences for our entire dollar support system years later.
Contrary to Western thought, our use of money has not changed since time began. It's true that "Gold is the only money the world has ever known"; as long as one accepts that barter is the only trade the world has ever known. In the context of barter, gold has been our only money. Once we stamped gold with official unit sizes, perhaps done a thousand years ago, money became an associated value used as an intermediary between uncompleted barter.
We barter goods and services, today and anytime money has been used, using a bookkeeping system of value comparisons; all done to better convey a sense of values between ourselves. All done in the confines of what we call our world economy. The use of fiat today involves half a barter trade; then keeping the currency as an associated value and hoping it doesn't lose too much of that value before we complete the other half of the transaction. This works in a high speed trading environment where fiat is not saved long term.
I'll read an item from our last talk:
"""" Fiat purpose is maintained for those that save it for later use over short terms, not long term accumulation as wealth or for spending far in the future. Real wealth is what humans save for the future and this is where our basic instincts drive us. The incredible explosion of fiat use, since it became a non wealth holding in 1971, bears this out. Fiat values, the world over, reflect only our tradable values placed on all things. """"""""""
The money concept, we have recently spoke of, did not suddenly evolve! Nor did our dollars suddenly become unbacked credit items after 1971. Well before the dollar's separation from gold all money bookkeeping, and all it's forms of currency moneys, were actually credit items.
Circulating cash dollars, official metal coinage and other previous fiats, themselves thought of as a final hard payment, were never anymore than a known tradable value. A trade credit owed to you as long as one held the money unit. Even with gold backing the dollar unit, money's value was always in it's exchange for something else we wanted. Gold values behind these fiats was used to represent some fixed tradable value the money unit stood for; not to be the money unit itself.
Gold, in ancient trade, could not become the thought of money as we know it today. It was the end of a barter transaction; two pieces of gold for one cow demanded no other trade to complete the deal. The use of money back then did not entail nearly as much associated concept, it was the
use of outright barter. Today things are, indeed, different!
What purpose is there in understanding the descriptions and perceptions in these last few talks?
Because there is a conflict between society's basic desire to use our modern money; or "our modern concept of money as it has evolved".
Our natural drive to use money, in lieu of barter, is to use a simple bookkeeping credit trading medium that keeps track of our barter. This requires our embrace of the fact that every item in our universe of wealth constantly changes in value. Even as gold changes in value; both up and down.
The unnatural convoluted drive, of many, is to use this same "money value concept" to borrow real wealth "use"; instead of borrowing the actual wealth itself to gain said "use".
This second item comes under the heading of trying to get something for nothing and is everywhere in Western Thought!
If we lend an item of real wealth, say a tractor or chair, it's future value is unimportant to the lender as long as the real item is returned. It is the "use" that is lent, not the money concept in the form of a trading value. In this process we recognize that, because the value of things change, the debt to be repaid is the item of wealth, regardless of it's higher or lower value. Only it's "use" changed hands during the lending and repayment of debt. All is well.
However, lending the value contained in our modern money concept exposes the lender to uncertain gain or loss of tradable value because it's the value that's being lent, not the actual "use". Without some way to lock down the value of money, over long periods of time, the industry of money lending (banking) fails it's purpose and risks it's profit if tradable money value falls.
This is the trend that is killing the dollar today.
It's not that price inflation may erupt; it hasn't done much in 30 years compared to the money printing volume. Our demand for more fiat has absorbed most of what we issue.
It's not that the massive dollar debts won't be paid; they will as long as it's in more cash. Payment in real wealth, such as real goods and services from our local economy, was never an option. We simply couldn't do it!
The risk is; that our money system requires dollar and debt stability for lenders and said banking system must regain that lent tradable wealth close to par. Further, the money system is backed by this debt being stable; so without said stability the currency system fails.
The contrast here is that modern fiat use trends are advancing towards flexible fiat money. Not so much flexible against other currencies; flexible against all other wealth, including gold. The more a currency can adjust to commodity and industrial use demands, the more in demand that currency reserve system will be. The immovable past structure the dollar is built upon demands it's values be defended with complete hyperinflation if necessary. Prior to EMU, there was no other reserve currency that the world could run to. Now, the dollar cannot deflate and take the rest of the world into deflation with it. The tables are turned; deflationary policy will not defend the dollar. Only inflationary policy will. Make no mistake, we are not calling for price inflation to end the dollar's reserve rein! We are calling for "inflationary policy" to dethrone it while said hyperinflation follows.
So begins and ends our long march that attempted to steady the value of modern money by firmly attaching it to the value of gold.
So ends man's march to fix the value of gold, even during short term use, while we still naturally wish it to change.
To comment on the present
The very changes needed in our money universe, today, would kill dollar demand by devaluing all dollar assets in super higher gold prices. The debts and the dollars would remain; only 90% of their current illusion of value would vanish. Hyperinflation in prices of all wealth objects will be the workout result of this process. As such, opposing dollar political motive will force the US to give the markets what is needed; both gold and gold prices beyond imagination.
As has been mentioned by others in several public meetings;
"The world is in the midst of what could well go down in history as the first recession of this modern era of globalization".
We must point out that this is lacking some breath of perspective: in reality this will be a dollar based recession and one that the world will repulse from by advancing the use of a more flexible currency unit; the Euro. A unit that will match modern needs for fiat by marking the value of all debts as they change; by allowing a free market in gold wealth to exist outside the "money concept".
The captains of oil have not seen all of this in a vacuum. Selling irreplaceable oil for a currency entering the end of it's trend was not an option. Gold prices were lowered in exchange for a short term wait; to see if Europe could do what was intended. They did.
The next step will be an orderly exit from dollar use; a somewhat destruction of all dollar gold pricing; and a super price inflation for US dollar assets. We are not at the end my friends, we have just come to the beginning. For physical gold advocates that understand the difference between real wealth and leveraged real wealth, the time arrives when values are reflected with the speed of the wind. Truly, in our time,
"The Wind Will Blow".
At our next talk, we will move completely away from concept and into current events.
Titled "Political Gold - how much of it is ours"
Ladies and Gentlemen, thank you so much for listening tonight. I look forward to our next meeting.
still hiking the path
FOA (07/31/01; 21:14:43MT - usagold.com msg#86)
Looks like I'm here tonight to escort everyone to their seats,,,,,,,,the guest speaker will be here in a min.,,,,,, Uhhh??,,,,, could I see your tickets please?
All right, it's starting,,,,,,,,,,,,,,
Good day to all our guests and thank you for arriving early. Our talks are an ongoing progression on the subject; the evolving message of gold. We will begin now.
Starting off, I'll read an item or two from the TailGuide series: A Tree In the Making. Please read again this portion of his series for clarity.
"""" But, greatness is within those that know life is dynamic,,,,, what we do is never certain and subject to the leadership of nature. That person will spin the Bonsai on a table for hours, days, and even years as he styles what will work for that period of growth,,,, perhaps planning the timeline in a currencies development. A cut here,,,,, a change there as time grows the next limb. In the processcreating something we all recognize, can use, understand and enjoy,,,,, yet,,,, different in many ways from what we knew or saw before. """""" -----
""""""Understanding the events that got us here and how they will unfold before us is what this Gold Trail is all about. Everyday our political world is pruned like two Bonsai, in an effort to shape a more healthy future. The dollar tree is failing because it needs so much dead wood cut off,,,,,, but if it is pruned it will not resemble the mighty Bonsai it once was! The Euro tree is growing as it is being styled,,,,,, what it will look like we have an idea,,,, but not a complete picture. It's hard to imagine that anyone can look at an early Bonsai and shape it's future some 20 years out? But, that is exactly what someone did with a tree on the roof of the Monkey Bar in Hawaii; indeed, this is what has been in process for so long with our changing money system.""""""""""
We are, today, at the very conclusion of a fiat architecture that is straining to cope with our changing world. Neither the American currency dollar, it's world reserve monetary system or the native US structural economy it all currently represents will, in the near future, look anything as it presently does. Trained from birth, as all Western thinkers are, to read everything economic in dollar system terms; we, too, are all straining to understand the seemingly unexplainable dynamics that surround us today.
Western governments, the public and several schools of economic thought are attempting to define and explain what extent these changes will have within our financial and economic world. Most are all striving to see this as the next plateau of dollar integration, carrying us onto the next level; looking always higher for what this next level will bring in social, financial and lifestyle enhancements.
Governments look for a correct policy mix; one that will serve their political motive when the next cycle moves higher. The public looks for the next great investment or industry to be employed in; to enhance their well-being all the further. Economic schools, as represented by both the financial industry and the academic areas, all want "their take" on the next cycle to be seen as the correct one.
After all, this is just one more in a long line of up and down economic cycles that are so common in American economic leadership.
However, all of this positioning has left out, this time, one important, almost unthinkable question; what if current trends are moving away from using our dollar reserve system? Even further, let's ask; what if the last decade's efforts to prolong dollar use, both internally and worldwide, have inflated it's worth to such an extent that it's now vastly overvalued? Asking more; what if the architects of a competing currency system and the major players that helped guide it's internal construction, all took a hand in promoting the dollar's extended life, it's overvaluation and it's use; so as to buy time for this great transition in our money world?
Most average Western Citizens and dollar use nations have pined everything on this ongoing dollar system. Their jobs, debts, investments, retirement and lifestyle expectations all depend on the dollar always being what it is; a world reserve money that buys them more than one can create during a lifetime. As true as that thought is, few understand the implication or even want to consider their life without a supreme dollar. But, just as a large portion of world inhabitants are accustomed to using more than one currency; those of Western Thought would have trouble grasping the perception behind this simple offering:
------ I once walked across the globe and brought two persons together. I gave each $1,000 US dollars in cash. The first replied; "You can't be serious? Is this as good as it gets?" The second replied; "Oh my, thank you! In all my years of life I never knew it could be this good!"------
One reply is the product of a life with unquestioned debt availability. Where the majority of debt users cover their burden with an ever growing supply of new credit money. In this economy, not to mention this person's perception, almost free debt can purchase anything and everything.
The other is the result of local money debt being built upon foreign dollar debt reserves and covered with payments of real wealth from the sweat of one's brow.
Within this theater of thought, we can begin to picture how Western perceptions cannot grasp our on going curve on the money road; much less a twist in the Gold Trail! Follow with me, if you will, as we expand some thoughts from TrailGuide's last talk, a few days ago.
"""""" As our modern society has evolved, we currently use fiat and own wealth in a way that demonstrates exactly where both values stand within our lifestyles. ---------- In hindsight, they were spending it; not to escape future run-a-way price rises, rather they were doing what comes natural; trying to save real wealth by buying it. Even if they were buying mostly a value illusion.""""
The purpose of this portion was, I believe, to deliver food for thought. The conflict, for investors and thinkers to discern, was in the evolution of fiat dollar use. While practically every historical evidence pointed to a devaluation of the dollar, within US border use, dollar use demand expanded along side of very little price inflationary pressures. Still, even with years of low inflation numbers, a cause that traditionally drove money into long term savers pockets, investors rushed to seek their perception of real wealth. Fulfilling an ages old drive to own "something" for the long term. As the final conclusion, partially phrased above, pointed out; most everyone tends "to read everything economic in dollar terms"; even buying into paper dollar versions of a value illusion. To this end, Americans have continued to save for serious consequences by buying every kind of dollar dependent real asset they can; stocks, business, debt, farms, industrial metals production, etc. and expecting it all to act as real wealth. Some of it will, most of it will not!
Further on from "The Wind Will Blow":
""""" After 1971, the entire dollar system was too far down the debt road -------- the nature of fiat use was changing the world over and would have grave consequences for our entire dollar support system years later."""""""""""""""
Having evolved a dollar reserve money system into a straight debt fiat currency, without gold involvement, the entire dollar function became locked into one basic premise: for the system to survive, it's core reserves of debt values had to remain somewhat price stable as the currency inflated relative to GDP. Over the next 30+ years their dollar controllers, the fed and treasury, thought they had a fairly good handle on the system as they managed banking reserve requirements. To their amazement, it turns out today, that digital use demand was the best function that supported their efforts all the while; by increasing the world's use and need for currency. Had they understood this modern economic function early on, they could have somewhat printed the currency outright with almost the same result while arriving at today's destination. They could have let gold float, not to mention they could have skipped a large portion of the debt build up that will now end the
Most, if not all, of this perspective is only now coming to light as the Euro builds pressure on the dollar. The better architecture of the Euro system is leaving little room to adjust as the US fed must singularly act to inflate their local currency in a historically new and unprecedented fashion. The actual debt machine that built much of America's lifestyle is now going into reverse as it destroys it's own currency; one built upon a stable debt system with locked down gold prices.
Going further and paraphrasing what TrailGuide writes:
"""""""It's not that price inflation may erupt --------- ------------It's not that the massive dollar debts won't
be paid---------The risk is; that our money system requires dollar (goods prices) and debt stability -------- so without said stability the currency system fails""""""""""""
Without an international floating gold reserve pricing, to balance against their devaluing debt reserve, the entire dollar banking system can only rely upon extreme dollar inflation to float it's accounts. Price inflation will have to be ignored. To this end the group of dollar supporting countries, we refer to as the dollar faction, has locked itself into a box. It must find a way to float gold prices with a gold reserve that only drains away if world gold price rise.
There once was a time when citizens owned their trading vehicles; all wealth, including gold, was free to barber. Then ruling authorities stamped most of those gold trading vehicles as "legal tender" and made them money objects; dependent upon value associations instead of barter. No doubt to collect taxes as running nations was a costly affair.
Extending the point:
Around 1975 Americans were given the legal right to own gold again. Many did not then, nor do they today, see any reason to own gold as their treasury has gold with which to back their currency. The logic of this perception is clear and simple to the casual observer. However, take out one US legal tender dollar and read it's cover carefully? Does it say it is your currency? Is your name on it?
The US dollar is a note, a security that specifies a value the holder is owed. You may keep it or spend it or even trade it, but it does not belong to you. It belongs to the US Treasury and is created by the Federal Reserve; both political entities. What a person owns, when holding a dollar, is the value that note is tradable for; the value that is owed to you and said dollar note represents. In
every way it is real money; in that it's value is in it's tradable value association; not of itself. If the dollar itself had real value, it's use would constitute barter; not the use of TrailGuide's money concept.
If you think you own the currency of this country, understand this one item: the political entity that the dollar is owned by, can cancel it's legal tender status at any time. There by removing your use of it's holdings!
The only gold Americans ever owned, prior to 1933, was the very gold coins they carried. They owned it because it was a true barter vehicle. Even if the Treasury removed it's legal tender, "money aspect", from said gold coins, you could still barter the value contained in the gold. By 1971, Americans owned no gold and all gold held in the name of the US Treasury was "Political Gold" owned by the government.
The perception, by some, that because the government owned the gold, the citizens own it too. This flows from a similar convoluted logic; that stock holders of publicly traded gold mines own the underground gold. In reality, if the mine was dissolved, both processed and reserve gold would be sold and "Legal Tender" money would be distributed to it's owners. Not gold.
The same is true for Political Gold. All gold held by the state, unless distributed first to it's citizens, is subject to world wide "Legal Tender" political claims first. The precedent for this is clearly revealed as the Swiss must ship their "Political Gold" to others first; while sending currency to satisfy gold claims against it.
As the IMF has recently extended this protocol, swapping gold at different values, to settle political debts; this action further justifies the US being able to use it's gold to defend it's currency's settlement function. Aside from the US minting eagles for public sale and it being against the law for gold reserves to be sold outright to open bidders.
To draw a conclusion from this "current event":
Deep Storage gold
Americans have the right to buy and own the "Wealth Of Ages". As events draw to a close upon dollar use, we can expect outright use of America's "Political Gold" in restraining the speed of it's currency's burn. To compete in the new architecture of a Euro System currency, unrestrained trading of gold will advance it's dollar and Euro price significantly. With political pressures to tax private physical gold trading as low as possible, expect enormous taxing and windfall profits rules to impact all other forms of gold ownership. Indeed, long before such changes are in place investors will rush to be in the correct ownership place, well ahead of the fact.
Of Fiats and Gold:
It is ironic that both roads have curved as time moved on. One returns to it's roots, as a wealth value today, few have ever know. The other becomes the money a modern future requires. Both on a different path and building for our better future.
Next time I will discuss; what one should realy expect to see when all paper burns; and how close political events are saying we are to that fire!
Thank you for taking the time to come here and listen to these talks. I wish you well and good night.
Ok, everyone please leave the Trail as you found it,,,,,, no trash or drinks. (smile) We will meet here for his next talk when it comes. I'll comment in between.
FOA (8/2/01; 12:52:55MT - usagold.com msg#87)
Walking On Solid Ground
Walking On Solid Ground: Hiking the Gold Trail
Ok! We have quite a crowd here,,,,,,, this morning. This must be an overflow from our recent Talks Series. There are more of those scheduled next time; but today we will go for a hike. As many of you already know, and some newer visitors are finding out, there is a price to be paid to hear mine and others Thoughts. Yes, you have to use your legs and mind, because most of the gain here comes over time and distance. If one want's the whole story you will have to walk with us and watch it unfold. Out here, there is no waiting at the Trail Head for someone to return with a complete report. The understanding is found within yourself, while completing the trip, not just at the end.(smile) I'll speak loudly so those in the back can hear. Packs on,,,, keep up, now! Let's hit the trail!
It's a clear day, today, and easy to see how the world is changing. Once we thought that everything in the name of "dollar money" was an anchor of financial stability while our organic planet changed; we now know that even our money systems have seasons, too. Watching evolving events with a Physical Gold Advocate based perspective, over this last decade, demonstrates this perfectly. Indeed, from here on out our world now has two major fiats and their competition is going to prove that anchors do not hold because they are attached to the weight of gold; rather money is made
stable by moving it's value with gold.
Look to the left
The gold perspective, most people have employed, is little more than a shadow of what the political gold world, in it's immensity, is all about. Shallow Western perspectives and their view of gold, being just it's dollar price, proved over and over how dangerous such a narrow thought can be to one's wealth. Making the object of one's gains to be "the inflating denominator of wealth", fiat money, instead of "the real wealth itself", gold; leaves us at the mercy of any political money evolution! When seasons change, as gold trail hikers know they always do, the risk becomes the "question" so many gold bugs have grappled with this last decade; can my investment in the price of gold keep up with and purchase an equal value of physical gold itself? For most, it has not, as paper leverage hacked away at their wealth held in paper gold assets! The future may be even less kind!
An investment in the gold industry, not just mining, can be nothing more than an investment in a business that balances fiat production cost against fiat market prices for it's product; gold. The return, if any, is always in fiat and places this portion of one's wealth smack on the tracks of more political manipulation. Today, we can see this play out all over the world as fiat returns in the gold business head towards and even sink below zero. The investor watches this fiat illusion of his net worth drain away while the opportunity to build a real wealth of "bullion ownership" escapes yet again.
Playing the various paper gold investment games is no different. When the time comes, when the dollar season really changes, dollar denominated paper gold bets will do well if they can just break even. The real wealth owner will stand aside this burning of paper and watch his coins and bullion explode hundreds of percent ahead of any fiat paper gains. This is what the real world of a gold advocate is all about.
Onward the trail,,,,,, look off towards the end
I, myself, own gold for one purpose; to save a real wealth that's in addition to all the other things I own. I save it this way because it outmaneuvers, sidetracks and escapes all political money evolution. It does this in such a way that I will later have the same relative amount of real wealth for my future needs. Or, in the very worst case, have close to the same as I have today. Still, the upshot of this is an additional aspect that is good for me and bad for so many players trying to leverage gold. Pause and see this:
-----The very political motive that is moving our world away from dollars has, for some time, changed the dynamics of straight bullion values. In the long 20 or 30 year process of evolving our currency world, the time span required to do the job has rendered gold far below it's worth; "relative" to all other things. When the seasons change, as mentioned before, bullion will first have to find it's true "free from money involvement" price in the world. From that point it will return to do it's best job of marking the historic process of falling currency values; unproductive political currency inflation. It will do this so well because physical gold will return to it's roots. It will again be recognized as the best,,,,, "lowest taxed",,,,,,"barter wealth",,,,, the world has even known! Low gains taxes will not allow it to replace digital money; as will it's inability to duplicate fiat's efficiency.
Rather gold will accentuate fiat use by becoming a real wealth reserve that compares fiats against each other thru a single arms length medium. Unable to control this gold medium, because it is no longer money and subject to credit entanglements, national fiats will resort to competing against each other. The free markets as we have always wanted them! First worlds, third worlds, all worlds; trading for what they can do, not what they can control.------
Back walking again
During this short and slight moment in time, a decade of years in the making by our human measurement, physical gold has become an investment of a lifetime to persons like myself. A wealth of ages that will not only transport my savings forward, during fiat evolution, but will increase my total wealth many times over. From there it will defend that value against all comers; all fiat price inflations!
This is the opportunity paper traders forsake as they bet on a train that's running away from them.
Further we walk
I have tried to point out that the gold concept today is not one of just matching dollar price inflation in the future. If that was all we owned gold for, one could have covered that with several stock market games years ago. If $500, $700 or $800 was the goal, it becomes just another commodity bet and there have been plenty of other leveraged "plays" that already beat that. No, buying gold today is a political move; one that will add political sized returns to this gold advocate's wealth.
For this reason we outline the political "fiat against fiat money nature" of the battle more so that the gold to money battle. In the future, for any currency to compete against the Euro, native gold markets will have to trade at least in equilibrium with a Euro based free gold price. This will further pressure "political money posturing" to relinquish all fixed gold relationships with their moneys; fixed legal tender gold coinage included. This could become a very convoluted affair for gold coin investors. Especially if Euroland eventually mints a free floating gold coin; not dissimilar to the K- Rand! Not to be confused with Robert Ms 100 Euro or Germany's new offering; perhaps it will be
called the "Euroland" gold coin? In fact, I bet it will (smile).
Coming to a nice clearing
While I am not unloading any of my various Eagles, maples, etc.,,,,,,,,, I want my involvement with gold to be as free of fiat involvement as possible. As an extension to this, all out of circulation, old gold coins make an excellent contribution to this thought. A powerful thinker once said that old gold coins will one day be treasured as forms of antiques in addition to their gold values. Few enough in circulation to carry extra value, but not rare enough to dissuade one from selling or trading them in the future.
To this end that same gentleman made a statement that embellishes the entire trail of Thought we walk today. It inspires countless large and small private gold advocates with a warning for a future we must prepare for and a call to stand guard!
I'll say the words again to end our hike.
"when a thousand hungry lions fight over one scrap of food, small dogs should hide with what's in their belly"
"we watch this new gold market together, yes?"
The sun is going down and it's time to camp here for the next speaker. Something about burning paper; I won't want to skip that one. Thank you each and every one for walking with me on this very fine day (smile).
MK (08/02/01; 17:31:52MT - usagold.com msg#88)
Huff. . . .puff. . . .huff. ... .puff
Hello, FOA. I've been climbing all day, and just when I think, I'm not going to quite catch up, I round the bend back there and see you sitting on that rock just beaming at me. It is good to see you, my friend. Good to meet you here on the Trail.
I want to mention before all else that this hike we are on now -- The Message of an Evolving Market -- is nothing short of phenomenal, and would like to take this opportunity to ask your permission to use a portion of it in the upcoming News & Views. We've decided to go to a larger quarterly publication to augment all that's going on here at USAGOLD. You might be interested to know that Randy just informed me by e-mail that just today he has registered several new posters including "gold-hearts" from Germany, Paraguay and Sweden. Now if we can just get them to post! It used to be that investors would call and say that they were inspired to act on the basis of something they read in the newsletter. More and more, their interest is piqued by something said or published at USAGOLD. So, we change with the times my friend, and this too is a message from an "Evolving Market."
Like some at the main forum, I took an interest in the Legal Tender discussion from the Political Gold post and, it is something you said in that essay, that brought me over here for my first post.
This I find very interesting:
". . .All gold held by the state, unless distributed first to it's citizens, is subject to world wide "Legal Tender" political claims first. The precedent for this is clearly revealed as the Swiss must ship their "Political Gold" to others first; while sending currency to satisfy gold claims against it.
As the IMF has recently extended this protocol, swapping gold at different values, to settle political debts; this action further justifies the US being able to use it's gold to defend it's currency's settlement function. Aside from the US minting eagles for public sale and it being against the law for gold reserves to be sold outright to open bidders."
This idea of a gold drain from the U.S. to those countries holding copious amounts of U.S. Treasury paper, as a form of settlement, is something I, like you, see as a consequence of a potential post-1971 U.S. dollar order breakdown. You are quite right to imply that gold mobilizations are often related to settlement issues including currency breakdowns and possibly even gold carry trade settlements (wherein the central bank acts as a gold lender of last resort). For the press and some economists to underplay the role of gold in international settlements is to throw a cover over the truth and maintain the fiction that gold's role is secondary, when it is not. It is in fact primary and the cases just in the last decade are legion. The Argentine treasury for example is devoid of gold. So is Brazil's. So are a dozen other countries which have experienced currency problems. (Leaving aside for a moment, all the hapless third world countries who have entrusted their gold to the gold carry trade.) In Q1, 1998 S. Korea -- a country that uses 25 tonnes of gold a quarter -- exported 250 tonnes of gold in defense of its currency! The sure route to rebuilding a currency is to somehow associate it with gold. So we have Russia and the Chevronet, the Islamic Dinar movement, and gold reserves in the ECB.
Along these lines, I think I probably speak for many when I say I am intrigued by your statements about a future U.S. gold mobilization in defense of the dollar. Somehow I think there's a great deal more to your thinking than what is contained in that paragraph.
I guess my major question has to do with the settlement price in such a situation. At the current price, I think the 8000 tonne U.S. Treasury hoard would be sitting in Brussels, Tokyo and Beijing within 30 days of the mobilization's announcement. With something like $6 trillion floating around the globe, few would dismess that concern. Could you give us some details on your thinking?
Well, I need to get back down the mountain, FOA. It's getting close to dinner time and that cloud rolling over that mountain to the West looks like it might spell trouble.
Good to be here, good sir. I always enjoy these discussions. MK
FOA (08/02/01; 21:35:33MT - usagold.com msg#89)
Few words can describe.....
Well,,,,,, my goodness,,,,,, just when I thought everyone had gone home,,,,,, here comes MK!!
Ha! HA! I hope no one sees us right now because what a pair we make up here. You are gasping for air and I'm lost for words??
Not to worry for long. After a rest your golf conditioning will show up and good speech will overcome my surprise! (smile).
FOA (08/04/01; 08:54:48MT - usagold.com msg#90)
Marker on the trail: Does the game begin?
While work is in progress to reply to MKs question; I thought a few markers on the trail, from time to time would be helpful.
From The Times WEDNESDAY JULY 18 2001 (see link above)
Misery deepens for US high-tech industry
BY LEA PATERSON, ECONOMICS EDITOR
-----A SHARP contraction in US manufacturing has pushed American industry into its longest uninterrupted period of decline for almost 20 years, figures revealed yesterday. -----------
------industrial output dropped a larger than expected 0.7 per cent in June. This was the ninth month of contraction, the longest unbroken period of decline since 1982.------------
--------- Capacity utilization fell to a 18-year low of 77 per cent. -----------
-------- "Another sharp decline in output confirms the damaging impact of a strong dollar, excessive inventories and weakening sales," Matthew Wickens, at ABN Amro, said. -----------
Unlike past periods, when America rolled over the top of another economic cycle, this fall away should begin to develop into a permanent downhill slide! Never before in our post 1971 financial cycles have we defended the dollar against a reserve rival while trying to adjust world financial policy during a building recession.
This time the world may slow somewhat as we fall away; however, they will not have to follow us into an inflationary money policy that floats all ships in the same reserve currency ocean. America is, for the first time, about to experience the impact of such an arrangement.
As the "strong dollar" gives way, the effects mentioned above by Mr. Wickens, will fold over time and again in a historically new inflationary trend the likes of we have never seen. Each time our output declines the resulting "excessive inventories and weakening sales" will not overcome the effects of ever rising prices.
Just as our dollar's exchange rate falls, placing us in a better competitive position, localized price inflation will mute that effect. One again producing the calls for lowering "the too strong dollar" from that level. Over and over the game will cycle; producing a kind of inflation we have never known! A kind of price inflation that cannot be overcome with "typical accepted" inflation investments of the
This time, investing in "the industry" or "business" that produces inflation hedging investments will not work enough to do the hedging job. From oil companies to coal companies,,,,,,,, home builders to lumber producers,,,,,,, carpet makers to gold miners: costs will outrun their ability to create an after tax profit.
Even leveraged games of paper will fall victim to political moves; aimed to protect local currency use.
The world is changing and we are on the right "Trail" to understand it all. The "burning of paper" wealth is coming and one of our future talks here will describe it all so well!
FOA (08/06/01; 09:37:25MT - usagold.com msg#91)
Hello again MK!
Glad you could meet me here in Denver and share this next presentation. We can talk a bit before things get started. Yes, it was very good to have seen you up there, on the trail, and thanks for complimenting the first parts of this "message". MK, you also presented a question to me that I'm sure was rhetorical: permission to use some of these works in News & Views?
Oh my! You build a forum rock for Gold Advocates to stand on and present their case from; then you ask such a question???
Sir, you are the epitome of what gracious courtesy strives to become! Yes, please do use even the smallest portion of offerings as you desire and do feel free to disagree with any point in them. (smile)
Michael, the reason for our city meeting, today, was so we can step behind this closed door and listen in on a discussion there. It's in progress and we are suppose to be here, so let's go in now.
Hello to everyone that just arrived.
In this talk we are shifting the schedule a bit to delve into a political money issue: as the question was presented by Mr. Kosares earlier. He is the gentleman that's just entered and is standing to our left. Not only is he also an educator of gold issues, to the public at large, he is also a keen observer of human dynamics in the political sense. So, this particular area of thought was the attraction for his being here. It's a privilege and honor to have him sit in on our discussion.
To start off:
Someone once asked me if all of our thoughts were on the level? Well, at a young age I often thought there was difference between fact and opinion; then I learned that everything spoken was opinion and anything written was fact! A few years later, someone told me that anything spoken is not true and all things written is opinion! Last year I was told that everything is an opinion and nothing is true! Ha! Ha! So, today, I state for the record that all of our Thoughts are Absolute fact!(smile)
We are asked to expand our thoughts pertaining to "a future U.S. gold mobilization in defense of the dollar" and elaborate on what "the settlement price in such a situation" could be? These truly are exceptional, thought provoking questions, and will require an equally dynamic explanation. I'm assuming most or all of you were at all of these "message" talks and have our past, long running, basis of context in mind. To understand our position, one has to grasp how position we came to know it.
I am sure most Americans are uncomfortable at the prospect of our stores of Political Gold being shipped off to defend the dollar. Uncomfortable as this may be, unprecedented it is not. During most of the years of an active Gold Exchange Standard gold was routinely "shipped off" from nation to nation to satisfy foreign demands. Not just entirely to defend our dollar's value; the aim of these operations was, then and now, more so to keep the dollar in settlement use.
Yes, the dollar's continued use for trade settlement and the defense of that valued use was always the aim of these gold trades; but even below this is a deeper meaning to this function.
From a dollar point of view, shipping gold then, and now, was in the same context of defending one's currency on the exchange market. In the context of this use; gold was not sold as a commodity, rather it is clearly traded as an officially earmarked "good" that can further support the "tender status" of internationally held dollars.
The psychology of "gold exchange" is more manifest in our "legal tender" function than most strive to understand. Standing aside, for a moment, from our previous discussions concerning modern fiat demand's impact on the dollars recent value; we look more closely at the logic of this "tender"
Local dollar currency, circulating within US borders, is given political value because of it's legal tender designation. Dollars outside our domain, while often sharing the same trading value, are not covered by that law. Even though, through protocol they are commonly accepted, they are not legal tradable money; unless they re-enter the US again.
The process of defending the dollar by shipping gold is, today as much as yesterday, an expression of maintaining political "Legal Tender" status for international clientele. Indeed, as an ongoing trade deficit in the US has become irreversibly structural to the integrity of the local economy and remained in this function for many years; the legal tender function of foreign dollar reserves comes very much into question. It begs this suggestion: does the international dollar have any internal political force backing it's value overseas? This question can only be addressed by shipping gold in a legal "currency defending" process.
During most of the "gold exchange standard" period our dollars were nothing less than contracts for gold in storage. As we all know, to defend such a non expiring gold contract nature, as the dollar was held then, one must sometimes perform as the note is written; and gold on demand was said performance. Indeed, the circulation, use and retention of international "dollars in reserve" was built upon both; it's old gold deed form, that could be traded for gold, and it's use as a viable "legal tender" vehicle, to buy local US goods.
Over the last decade or so, with both it's gold deed function and "legal tender" function blocked by political motive and structural economic forces; the currency can and must be defended through other means. Further, our international dollar has degenerated away from being even basic "money"; to being little more than an international derivative of derivatives; that represents currency swaps, gold loans, uncollectable foreign debts and still more gold swaps. In this end stage of failure, our external dollar arena must eventually be defended with performance, if demanded; if it's use and credibility as an international settlement medium is to continue. With the US now clearly proceeding into a recession, and doing so with the competition of another reserve currency for the first time, local price inflation will prove irresistible in undermining international dollar exchange values.
If foreign political motive decides to no longer support international dollar denominated gold derivatives with physical delivery or refrain from using gold as a trade settlement; the US will have to choose between shipping it's gold or seeing all international dollar structure and use fail! In it's place, Euro system currency would easily become the main reserve as soaring gold values would
replace "tender" value lost from dollar failure.
We think that: given ongoing lifestyle enhancements afforded to US citizens from the current dollar's value as a reserve currency; the loss of this standard is of greater importance than the loss of gold! Local political motive will answer this foreign dollar value challenge by using gold as somewhat of a bribe for letting the air out of the dollar slowly. The result will be a massive dollar price rise in gold that performs over several years; as the reserve function transition politically begins.
The nature of the current dollar based gold market, outside US borders, is perhaps leveraged 1,000+ to one and will require ever greater physical gold shipments, at ever higher values, to maintain dollar credibility. This failure process will draw US gold stores out in the form of "currency defense"; not as gold sales aimed at keeping the price down. A purely legal defense use of politically owned gold.
Still, gold shipments will always be far behind the price curve and only be done as last resort crisis operations. Further, the rise will be so intense as to provoke a complete cessation of all derivative gold trading within US borders. Long before this occurs traders, both foreign and local, will bail out of our gold derivative markets even as physical prices rise. A spot physical gold market will be all that remains. Something local citizens will cherish and paper brokers will deplore!
To date, these gold shipments have been ongoing but have not, yet, involved original US political owned gold. The bullion involved has been metal subjugated from foreign third world countries through dollar for gold swaps; executed thru US currency protocols. Mr. Kosares is correct in observing how foreign gold is drained from these nation in trade for debt relief and crisis support. In classic form, we will be the next in line to be "swapped out" also!
I expect that "our" crisis will begin by year end as the Euro foundation becomes complete in the issuance of real currency. The new designation of our gold reserves is a classic signal that a major crisis is coming. A suspicion will eventually arise that native US money growth, now approaching 20%, will accelerate in hyper form to save it's banking function and political gold stores will not be
available to redenominate the currency. The very thought of a loss of reserve status for the dollar is on everyone's minds and will soon break out into open currency warfare. By then; the Washington Agreement's restrictions of bullion supplies will begin to bite as players demand gold and rush from the failure of contract credibility. By then: it will become known that the only way to stay whole, without bullion relief, will be in aligning one's self within the Euro Zone of financing. Those that started early in resolving some of their political gold debts will be the first to receive backing. England? Swiss? The rush will be on!
How far will gold rise? At first blush, foreign dollar assets will not, in any way, return home! They will circulate offshore; either from lack of understanding of the issues, a thought that things will be worked out or from foreign exchange controls aimed at protecting the failing US economy!
These reserves will circulate until their gross exchange value simulates a figure that can be reasonably expected to "buy something" within the US; ten cents on the dollar could be a guess? However, keep in mind that the fed will be printing like mad, local prices will be soaring and no one will be chasing dollars like they do today. I expect that physical gold trading, within the US, will follow far behind foreign trading for a time. Perhaps a $5,000 to $15,000 ratio will be a thought as dollars within the US will be worth more than outside. Still, the relative value of physical gold will eventually converge as a trading standard is reached.
Keep in mind that there could be a gap between physical prices, reflecting reality, and futures prices crashing. The Western gold world looks to the current paper gold price as the value for bullion; even though it is but an illusion. A market trading 90% derivatives and 10% physical cannot, in any stretch of the imagination, produce a gold price relative to real things.
For years academia has gone round and round about how the US illegally went off the "gold-is-money" standard. Well, I know that and so too has most every hard money person has delved into this area. All of those days are never going to be reworked to change history; so why waste our time on a wrong that's not going to be brought to justice today? Well, we can look at some of those particular points so as to find clues for a better context concerning our subject.
As you know we have discussed, at length, how gold is not money; rather it is the very best form of physical wealth barter the world has ever known. We also separated money from gold by defining money as a "retained value thought"; a thought that exists between both sides of a barter transaction as an "associated tradable value". In this, the fiat dollars we know and use today; represent today modern money in the very best of this money context.
The result of such thinking draws a conclusion that fits perfectly into our fast paced world. Fiat currency, unbacked except by it's legal tender statutes, is a fine immediate trading medium for short term buying and selling. It's best saved for short term use, only, and spent to buy any and all forms of real wealth. Of course, if it's printing production extremely outpaces even basic GDP, it's use value eventually falls.
The problem for our dollar is that it has entered into this modern "single use" fiat world, as a currency promoted as "real wealth saved"; and the use of gold, as a parallel long term savings vehicle, is dismissed and cloaked in an illusion of price. No fiat can serve it's modern function while becoming entangled between these opposite forces of use; a wealth for saving and a money for trade.
Many times officials have tried to mitigate this cross function failure by storing gold in government control and printing fiat in a straight ratio to gold owned. Hopping to keep gold values static so as to retain fiat values and keeping a fractional reserve banking system viable and expanding; while having said stable fiat values stabilize it's debt that's held as a reserve. In the real world this cannot function as all prices and values are dynamic. Including gold and all forms of money!
Further, we hire auditors to count the gold and the money to make sure they match. Counting the gold is easy, but counting fiat, in it's endless credit functions and derivatives, time and again proves an impossible affair. Eventually the stores of official gold must have their value "controlled" thru fiat credit entanglements; all for some ridiculous balancing act.
It is, and will be, far better to just hire auditors to do the best they can to count fiat issuance as an independent function. Then, allowing gold wealth ownership to return to the public and freely trade outside it's old official money and credit entangled realm. There, gold can be used to "tender" in the form of real purchasing power; as the real wealth trading item it always was.
Concerning this subject; we find collaborating evidence to this chain of thought from the fathers of our constitution. Note that they do not mention gold and silver in the context of money! Few hard money people or historians have thought seriously about the context of this wording, or how the minds of that era were thinking. Consider the word tender as one version of the dictionary presents it:
Middle French; tendre to stretch, stretch out, offer ------ also --------- to present for acceptance.
----Article I, Section 10 of our Constitution says, "No state shall make any thing but gold and silver coin a tender in payment of debts."-----------
Clearly, even then, gold was connected in thought with being something one "stretched out" and presented for acceptance. These are common perceptions from a time when much of what one brought and sold came to them through barter. Even though these early colonies were closer in time to our modern use of money associations; their lives were still very much in an era where, perhaps, 50% of trade was still outright barter!
Truly, in their perceptions gold and silver was a "good (tender) in the settlement (payment) of trade (debts)" and no state should make anything else to function in that context. But what about something outside this context? A medium of trade different from bartering gold wealth for goods?
-----Would American fiat money one day be issued as a "medium" in trade, more so than using gold as a "tender" in barter? ---------------
The common use of fiat currency is and was a natural evolution into using "money", in it's pure associated value form, as a medium for the trade of goods; far removed from using gold in a "real good barter" context as a "tender in the (final) payment (settlement) of trade (debt).
American money law may have been desecrated over and over again; however, nothing in our original thinking precludes us from designating "the money concept" as a "legal tender" in trade along side gold or silver as a "tender" in trade.
In reworking the definition of "note" as it appears on our currency, perhaps it is the money our system never had time to allow it to become. In another time and another place, fiat will be know as:
-a written promise to trade at a determinable value a variable sum of other goods to the bearer--
The difference between use function and value function, of our money, was most surely convoluted for political gain and banking credit interest. Truly, American history has shown we did a terrible job of rendering this ages old gold barter function useless in a modern world. Mostly because of our complete lack of money vs. barter understanding. Today, we enter the "end time" thrashing of such a currency experiment.
Thank you for attending and I thank Mr. Kosares for his presence here. Sir, please drop in at any time.
Back on the trail again to watch it all unfold! (smile)
FOA (08/07/01; 09:43:59MT - usagold.com msg#92)
Thought I would ramble a bit while we walk this 1/4 mile circle in my back yard,,,,,, here on the trail. Only a few here today,,,,,, so we can talk quietly .
Couldn't help but notice that MK posted some of his fine points from ABCs of gold! I saw it while attending that discussion, yesterday, in Denver (smile). You know, for people that lead a hectic life, that book is all one needs to understand the meanings of gold. Just do as the thrust of the text implores; put yourself on your own gold standard and save some of your wealth in gold. After reading all of it, it's a real simple concept grasp. Don't put off the necessary things required in your daily life so as to buy more gold; that just puts you in the same category as most sweating goldbugs! Saving gold, over the long run, will allow one to enjoy the wealth when it truly does appear. This, perhaps, was the centerpiece of Another's thrust, so long ago: just buy gold as you are able and as the understanding comes! Perhaps that just proves that the ancients were smarter than we are today; they owned gold and didn't need to hear all the politics.
Yes, I have had a copy of the ABCs for some time (smile). Only, I had to go through all kinds of antics to acquire it. You know,,,, CPMs private club of clientele gets all this stuff real easy, while guys like me have to pay a small fortune for it on the black market! But well worth the cost. (huge grin) Wait a min.,,,,,,,, I'll pull a copy out from my backpack. I'm only doing this because we are few here today,,,,,, I'd get thrown off the trail if anybody finds out.
I like the part on page 69:
---------- The American political process today is characterized by the politics of debt -------
Well, here,,,,, pass it around so you can read it.
I think far too many people try to think of gold as an investment instead of an asset. Aside from modern financial doublespeak, with brokers of every kind and nature trying to sell us leverage,,,,,, the old world ideals of real property and ownership imparted a much more stable meaning to the term, "asset", than we place on it today. In Old French; assez ------ enough------ implied a holding that was appropriate. Or Latin (1531); ad to ,,,,,,,,,,, implying a build up of things.
Truly, the return on an asset, placed into use, was a return of the value of that use. Not an increase in the value of the asset. We watch gold today and see it only as an investment that returns little. It should be seen as an asset we can acquire at a very low real value. In such times we should consider this action as an opportunity to ------"ad to" or the building up of things.
We are all trapped in the society we came into this world with. The history of mankind is an endless record of "us" coming to terms with the the people we love,,,,,, but their politics we cannot stand! The ideals are always there to reach for but for the life of "us" our little group, in our little time frame, cannot come together to reach for the right thing. Strangely enough, within this America, there go I.
A friend once tried to insult me in a toast; referring to me as the best and smartest mutt he ever knew. Ha! Ha! I lifted my glass, in front of all, and drank with a loud gulp. Then returned the compliment; "to my family and friends, from the best dog in the pack"!
All that: from a fifth generation, typical Anglo-Saxon that was born in the "USA". I walk this land, upon which my home is owned, and tear for a future we may face. Oh the irony of it all; that one day my time will end with a pocket full of gold and left fist full of Euros,,,,,,, whist a sword drawn to defend this soil of my fathers. Against all comers,,,,,, here stand I,,,, America or nothing,,,,,, my country, my sole! To the attackers I say " these are my people,,,,, so right and so very very wrong".
The seasons change, so do I
and the better part of life is in knowing why
I'm off the check the path!
FOA (08/09/01; 10:27:19MT - usagold.com msg#93)
"everything to do with a gold bull market"
I'm just placing another "rather large marker" here on the trail for us to follow all the conflicting stories that come out; especially as all this moves into a higher gear. Note the first news item and how it reflects the paper pusher view of dollar advocates; all taken from USAGOLD NEWS FEED:
US euro futures data could spell currency trouble
-------Europe's single currency could be headed for trouble if data on U.S. futures traders' positions is any indication. Recent figures from the Commodity Futures Trading Commission show that speculators have been fortifying long positions in euro futures for almost two months, a situation some see as a contrarian sign of an imminent decline.----------
-----The Commitments of Traders report showed that speculative interest was nearly flat the week of June 12 and has steadily built up to the current long bias, analysts said. "It is a fairly bearish signal,----------------
------ But the fate of euros really hangs on the performance of the U.S. economy, since the gains in euros have been largely a factor of weak dollar fundamentals.------------
The last item above could just as easily be printed in Another format that better indicated the new financial market ahead:
------ But the fate of DOLLARs really hangs on the performance of the EURO ZONE economy, since the RECENT LOSES in DOLLARs have been largely a factor of STRONGER EURO
Puts a different view on it doesn't? Now read a bit of reality news from today's item:
Dollar Falls to Three-Month Low as Extended U.S. Slowdown Seen
-------- New York, Aug. 9 (Bloomberg) -- The dollar fell to a three- month low against the euro as a report of rising U.S. jobless claims reinforced concern the world's biggest economy won't revive anytime soon. ------- Since a Federal Reserve survey yesterday showed stagnant growth the past two months, the U.S. currency has shed about three- quarters of a cent versus the euro. Today's report that more workers than expected filed claims for unemployment benefits last
week drove the U.S. currency to the day's weakest level. --------------
------- ``People are questioning the relative strength of the U.S. economy'' after the Fed survey ----------
----- U.S. corporations would likely welcome some further weakening in the dollar, as gains in the currency make their products less competitive overseas. General Motors Corp. Chief Financial Officer John Devine criticized the government's strong-dollar policy yesterday, telling reporters that the currency's strength -----`is destroying the manufacturing competitiveness of this country.'' -------------
-------- The euro started trading in January 1999 at about $1.17, and since falling below $1 in February last year, it has twice failed to sustain rallies above 95 cents. ---------------
-------- Today's euro gains also came as the European Central Bank said in its August monthly report it will ``closely monitor'' whether interest rates are appropriate, a signal it may be preparing to lower borrowing costs as soon as this month. A rate cut may bolster expectations for
a rebound in European growth. -------------------------
Notice our General Motor's CFO's comment --------- "the (dollar's) strength is destroying the manufacturing competitiveness of this country.'' -------!!!
This should read --------"the Euro's weakness is destroying the manufacturing competitiveness of this (USA) country.''
This item of relative logic is further confounded in that the Euro is hardly week! American media, being dollar biased as it is, has used every moment to educate us to see how far the Euro has fallen. When it fact the Euro has only fluctuated in a tight band; just below a currency level that shifts "American real productivity" competitiveness toward the next largest economic block. Giving the world financial structure every reason to move into Euros to denominate and settle trade.
Consider this item: ------ The euro started trading in January 1999 at about $1.17, -----------
Using this 1.17 figure blurs our reasoning just enough to allow one and a half years to pass without anyone complaining it's fall. We are positioned to look at this process as --" oh see the poor old Euro, it can't hardly get back onto its feet". Consider that that 1.17 figure was nothing but a "nano-second" spurt, more similar to an IPO (initial public offering); relative to almost no actual
goods trading. In it's beginning setup we can see that the real range, from hindsight over a period of time, was between around 98 and 83. This is the area where the ECB/BIS wanted the new currency to occupy in its war to unseat the dollar. Yes, the Euro is only down some 10% as of today! This is not the sign of a failing reserve system of 300+ million people!
Also note the above -------- Today's euro gains also came as the European Central Bank said in its August monthly report it will ``closely monitor'' whether interest rates are appropriate ------
Suddenly the tide has turned and the ECB is seen as ahead of the curve while still in a non inflationary management position; relative to the dollar. Going forward everything the fed does will be seen as stroking US price inflation. Perhaps this is the reason Another said that Mr. D, of the
ECB, can and is about to leave. His hard job is done! Only to see Mr G, of the Fed, beating a hasty retreat! Truly, no one wants to reside over the transfer of our US horde of political gold as prices soar,,,, both of gold and all local goods!
This not only has "everything to do with a gold bull market", it has everything to do with a changing world financial architecture. And I have to admit: if you hated our last one, you will no doubt hate this new one, too. However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and
every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this.
Clearly, the coming drastic constriction in dollar financial trade will trigger a super "print press" response from the Fed. They will not be pushing on a string; rather picking up the ball of twine and throwing it! All the while using the old 1980s "monetary control act" that opens their use of
magnetizing almost anything and everything. They won't be adding reserves to the banking system in the future; rather buying any and all debts from anyone that needs fresh cash. Believe it!
For the first time,,,,,,,, our industrial production, along with the demand for industrial metals like silver, will fall away even as hyper inflation in prices takes hold.
For the first time,,,,,,,, demonstrating that no other asset is equal to gold, even though promoted to be!
When the coming paper illusion price of gold is destroyed, sending its trading price way up and way down, several times, before shutdown,,,,,,,,,,,,,, the thinner paper markets of lesser metals will be absolutely devastated. Yes we will see $50.00 silver in our time,,,,,, $50.00 for a hundred ounce bar,,,,, that is! No less a relative price decline for the other metals is in store. Even if these
actual dollar numbers prove incorrect,,,,,, relative inflation adjusted prices will show the exact same ratios to gold. The gain will truly be in gold!
Gold,,,,,, a wealth for changing times,,,,, a wealth as new as it is old!
Note to MK:
Nice change, going to a quarterly paper! According to
Will Rogers "everything I know I read in "News & Views"!
errrrr,,, I think that's what he said? (smile)
FOA (08/09/01; 10:39:26MT - usagold.com msg#94)
This item below:
----- magnetizing almost anything and everything ----
---- monetizing almost anything and everything---
But then,,,,,, you already knew that? (smile)
MK (08/12/01; 11:16:50MT - usagold.com msg#95)
A couple comments. . . .
Greetings, my good friend.
I would like to first of all thank you for your very kind words. It is you -- not I --that deserves the accolades. At every turn in this trail you bring us new mental challenges and new understandings of the economic and financial times in which we live. I have always said the message of FOA and Another, whether one agrees with it or not, inspires a deeper meditation of world affairs -- beyond the pablumatic representations of CNBC, et al. How many who read these pages could say that they have not walked away with something valuable each time they walk this Trail? That's why I am proud -- make that honored -- to sponsor and be a part of this page. A humble bow in your direction, FOA.
So now you mention that Another believes that the ECBs Mr. Duisenberg is on his way out and it appears that you also take seriously the report from News Max that Alan Greenspan may be close to retirement as well. These would indeed be major changes on the world financial scene that I do not think the markets, including gold and stocks, have even mildly factored into current pricing.
So now do we see what the French might do with the ECB?
I have always thought the French central bank to have a Gaullist heart no matter what was happening in the French politicial sector. It has been unwavering in its position on gold leases (strongly against) as well as its position on gold reserves ( strongly for). Of course, the dream of a united Europe was seeded and nurtured by Charles DeGaulle, the same man who said:
"Indeed there can be no criterion, no other standard than gold. Yes, gold which never changes, which can be shaped into ingots, bars, coins, which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence."
DeGaulle was a strategist and masterful politician. He understood that gold was the key to breaking away from the dollar for Europe, and that idea has stuck in European politics, particularly French politics, from immediately after the War. He led the move to repatriate European gold from the United States in the 1960s (at $35/oz). He led the move in forming the intellectual beginnings of a United Europe. And now France and Germany together can dictate the direction of the EU confederation. It seems that gold has staked out inviolable territory in the EU thanks in large part to the French Gaullist influence within that country, and it will be interesting to see what a French head of ECB might do next.
Those among us who treat the suggestion of a gold drain from the United States to defend the dollar as unpatriotic should recall that the United States and Great Britain have not been the victims of a hostile takeover with respect to our lost gold reserves. As a matter of fact, the United States and Great Britain invited it, indeed acquiesced to it -- just as Great Britain invited and acquiesced to the drain of gold reserves over the last few years. All justified -- then and now -- by one lame-brained analysis after another. I have always said that nations do not ship gold reserves because they want to; they ship gold reserves because they have to. Usually, as you point out, for political reasons -- and the gold becomes "political gold" meant to buy time or prevent one politican or another from being blamed for the collapse of the dollar. So we sink ever deeper every day (with more and more dollars piling-up overseas by the day, the result of a massive U.S. balance of payments problem) with no apparent solution on the horizon. Let's make that no apparent solution save one: The threat of destroying the U.S. export market if its trading partners fail to hold U.S. government debt. Why wouldn't the U.S. gold reserve come into play under such circumstances. To be sure, there are those who believe it already has! (Though I, for one, do not relish that possibility.)
Back in 1997 when I was still writing in mainstream publications, MoneyWorld magazine published an article I had written titled: "The Real Story Behind Central Bank Gold Sales." I wrote the article having suffered through dozens of articles published in the mainstream press that the "central banks" were selling gold and would continue to sell gold. This, they maintained,was the weight hanging on the gold market that would not let the price go up. We should keep in mind that this article was written long before bullion bank involvement (leasing and carry trade programs) in the gold market became common knowledge and widely blamed for gold's woes. My goal was to destroy the mythology that "central banks" as a group (in its entirety) were pro-gold sales because they were not.
I started with a simple division of central banks. I put the United States, Great Britain, Canada, Australia and New Zealand in one camp and called it "the Anglo-American countries." I put Germany, France, Switzerland, Italy, Netherlands, Portugal, Spain, Belgium and Austria in the other camp and called it "the Countinental European countries." I then tracked their gold reserve holdings as groups from 1965 on. The results were incredibly interesting. They also spelled out in very clear terms that it was not the "central banks" who had been gold sellers through the period but the Anglo-American group. In order to understand what is really going in the gold market, I see this division an an important demarcation point.
Total Anglo-American reserves went from 15,754 tonnes in 1965 to 9197 in 1996 -- a loss of 42%. The U.S. went from 12,499 in 1965 to 8138 by 1996. Of course much of that came well before Nixon closed the gold window in 1971, but some was also sold in a series of futile gold auctions in the mid-1970s. Britain went from 2012 tonnes in 1965 to 717 in 1996 (and now 350 tonnes due to the latest round of gold auctions to kick off the 21st century.) So Britain's gold reserve is almost nil. It now holds 17% of the gold it did in 1965 and explains the virulent anti-gold posturing by the British press, politicians, international bankers and bureaucrats. But if Britain's gold situation seems remarkable, Canada's has been even more prodigal. It now holds 9% of the gold it had on reserve in 1965. And the policies of currency destruction continue in that country virtually unabated.
Continental Europe in the same period went from 17,740 tonnes to 16,007 -- a drain to be sure but nowhere near what the Anglo-American countries had sold. Since 1996, the only anomaly in this pattern has been the Swiss sales -- one I am still scratching my head over. You will note that what was lost in the Anglo American camp did not show up on European central bank balance sheets. Some of it showed up in the Asian official sector, but the majority of it, it would seem, has gone into private hands -- a trend I suspect will continue given the history of monetary management over the past 100 years on both sides of the Atlantic.
And then there is always the potential for secret acquisitions on the national level -- operations too sensitive to reach the International Monetary Fund's annual blue book tallies -- something I would not totally discount. I recall Toyoo Gyohten's comment of several years back. He is "the" heavyweight in Japanese banking circles and former chairman of the Bank of Tokyo. "The size of our gold reserve," he said, "really did affect our status in international monetary discussions." Japan for the record holds 750 tonnes -- up from 292 tonnes in 1965. That statement was made prior to the famous Iyaru Hashimoto (former prime minister) comment that Japan would sell U.S. Treasuries and buy gold indicating that the at the very least, the Japanese at the highest levels have discussed gold ownership.
So you see, my dear FOA, you are absolutely correct about the potential for dollar settlement for gold. One thing I have learned over the many years I have studied the gold market is that events seem at time to move glacially only to rev up just when you least expect it. The British sales are part of a long term program tied to the policies of John Maynard Keynes and the defense of the dollar. That era is coming to an end with the recent rumblings by the Bush administration to reduce the influence of the IMF (a creation of John Maynard Keynes along with the World Bank and the rest of the Bretton Woods system).
I too foresee a new international financial architecture wherein gold plays a key role.
I would like to hear your thoughts on the potentiality of Alan Greenspan's retirement before going further. Do you see this as part of a larger picture related to euro introduction? Or just good timing for our Fed chairman. Knowing Mr. Greenspan's affinity for gold as pointed out in the Gilded Opinion piece "Gold and Economic Freedom" -- an essay which he recently said he would not change a word of.
I would point out to our readers that if I am understanding you correctly, and I think I am, you think that these gold movements of gold out of the United States would occur at very high dollar prices -- a currency windfall for gold holders. Are you also saying that at the same time buying gold in the United States would be problematic?
Do you believe there is anything the United States might do to prevent an extraordinary gold price?
I know, and would point out to our readers, that this is all conjecture, but it is interesting conjecture.
FOA (08/13/01; 07:24:30MT - usagold.com msg#96)
Political Gold 2
Hello MK and everyone!
I thought I would add a few thoughts now; before working on several new "talks" and a long absorbing reply to MKs post here.
OH boy,,,,, did everyone read J. Turk's latest? I did and am carrying a shovel with his name on it. (smile),,,,, if I ever run into him I'll use it to cover the guy up with praise and admiration! Fine work and great conclusions! This should just about cap the story as it breaks open.
Of course, the US still owns it's gold and has yet to ship any of it's official stocks of the same. A quick check of the ounces held in storage will confirm that. Any physical gold that has "walked from our accounts", to date, came from some other supplier. We contend that this bullion was the
same stores that were "lifted" from other 3rd world countries in return for US support during their various banking and currency crisis of the 90s. See back as few talks.
Now, the big question is; will the US stand behind it's international "legal tender" obligations and ship it's official gold when serious crisis and currency support protocols demand it? Our record isn't good in this area. In 1971 our dollar held an even closer connection to gold that any of the modern IMF "paper gold" substitutes today and we still closed the window! Still, we think that at this time in history, given the Euro competition, US "political gold" will be shipped to keep the dollar in play. Nothing illegal, mind you, just basic currency defense as needed.
Several years ago, many gold bugs and gold advocates missed the path as the trail turned. Something I pointed out at the beginning of these "message" talks. As most of you will no doubt agree, almost all gold discussion still centers around "the dollar's war with gold". Truly, the evolution of this story will be how that war ended then and now the dollar's war with the Euro began! A very large part of that war strategy, employed by the ECB/BIS, was to let the dollar / IMF faction hang themselves by expanding and supporting the whole arena of this dollar paper gold market. Inflating
the gold market place with so much "paper gold" that we would eventually have to bankrupt ourselves just to keep the dollar in the war game against the Euro.
Because Saudi Arabia is a member of the BIS and marks it's currency to the SDR, we are going to be hard pressed, for oil reasons, not to ship against demands. Perhaps, oil's continued settlement in dollars is directly tied to gold,,,, Do ya think?
Further, much of the current credit in our modern gold market place is backed with this "legal tender" of the IMF. As we have contended for years, 90% of the entire modern
dollar gold market is a paper game first, and that will burn as the dollar loses it's position as the reserve currency. All these Giants that are holding physical gold and credible paper" are going to win big as escalating gold values displace their dollar asset base. There are a few of you smart cookies out there that "NOW" understand what we have been getting at for such a long time.
We have said all along that how much credibility your "paper gold" holdings enjoy will depend on just how important you are in the scheme of worldly economic and political affairs. Last on this list, I can assure you, are all the paper traders on various public and "industry use" gold exchanges. Did I once hear some paper brokers scoff, on various internet forums, that real gold supply was what was moving the market,,,, and that all this talk about paper gold was a joke?? Hmmmmm,,,, the trail is soon to become very, very quiet on this account. I say into this silence, plan your "asset" moves wisely as the future is now directly before you!
Yes, the war now is between the Euro and the dollar! The Washington Agreement placed gold "on the road to high prices" as it signaled a phasing out of Euro support for our American gold values. How fast gold can, now, rise will gauge how much staying power the dollar has in all this. If there is any gold war now, it's to be in just how fast the dollar gold market can disintegrate into worthless
IOUs! So, don't count on this destruction of our paper gold market to mark the real value and availability of physical gold; that ratio will split somewhere down the goldtrail. This action will scare most harden gold investors to death; especially the ones in leveraged gold stocks and lesser white metals!
Ha! Ha! What a revelation and change of events for paper gold players. What an exciting day and future for physical gold advocates! To paraphrase and old 1970s texas oil commercial:
------ "If you don't have a gold broker, get one! You'll love doing business with Centennial! ----
Note: MK, an idea for your company T-shirts:
a picture of a loan convertible car going west down the highway with the top down,,,,,, the rocky mountains, downtown Denver and a sunset silhouetted far in the distance,,,,,,, the wind blowing thru the passengers hair,,,,,, a small HY sign to the left with " ROUTE USAGOLD.com" on it,,,,, under it all the caption,,,,,,
------ The fastest gold freeway in America! ---------
Ha! Ha! Ho! Ho! I'll take a dozen large! (smile)
FOA (08/18/01; 12:57:31MT - usagold.com msg#97)
Hello again, everyone.
Yes, I am still working on several posts. Some of then involving the current SDR discussion and how its evolution has changed the face of modern bullion banking. Randy Strauss offered a very good map of how these international paper gold assets came into the world. I'll draw a few more lines on the paper to show where that map leads us today.
No, our bullion reserves are no more ours than navy war ships are ours. Still, both items are fair and legal assets to use in defense! One in war and the other in currency skirmishes. Truly, it is coming to that.
I am between entertaining and talking to some thinkers about what comes next, politically. Hope to get some of this into words next week. Have a good weekend (smile).
FOA (8/22/01; 05:18:54MT - usagold.com msg#98)
From the USAGOLD news site
I'll be back a little later with some "coffee cup" discussion and views of MKs last post here (and much more) (smile).
Here is one that most dollar bulls never saw coming:
German economy improving: Ifo
------ MUNICH - The German economy showed signs of improving on Wednesday after the widely-followed Ifo index of the western German business climate rose unexpectedly to 89.8 points in July from 89.5 points in June. ----------- Analysts had been expecting a sharp fall in the index, which is conducted by the Ifo economic institute and is closely watched by financial markets. ------------ The euro broke the psychologically-important level of $0.92 shortly after the figures were released, rising to its highest level in five months. ------------------ end
The war between gold and the dollar has been over for a while now. The action, today, is between the dollar and the euro arena and this is what will break the price lock on gold. Leaving gold bugs with a lot of questions that ask why this: both systems will strive for a higher currency price for gold; one doing it because they have to; the other doing it because they want to! The casualty on this battlefield will be the world gold market as we know it. A market caught between how Western perception thinks gold's price should be "discovered" and at what price level trading in physical gold craters the entire paper structure. A structure of American based "paper gold".
We have been saying for some time that this will be "the" show to watch unfold; but only if your holdings allow you to stay still in your seat as it happens (smile).
FOA (08/22/01; 09:25:51MT - usagold.com msg#99)
In your message # 95, posted here on the trail, I saw a nice invitation to engage in some "conjecture" and a warm cup of coffee. Sounded too good to pass up. Actually, the seasons are changing, high up here on the trail, and it won't be long before cold weather demands much hot coffee to follow the path. Later, I'll be at my little house in Florida as winter arrives in the northern half of the globe. As you know I live in several places, but our USA is the only real home. (smile)
You mentioned DeGaulle's famous quote that ended with: "as the unalterable fiduciary value par excellence". He made that statement in 1965, but Pindar also said in 522-442 BC: "Gold is the child of Zeus. Neither moth nor rust devoureth it."!
Do you see the common thread linking these thoughts; neither time or lineage brought these gentlemen to think of gold as money. Ha! Ha!, I just had to throw that in there (big grin).
Actually, referring to your chain of thought,,,,,, I don't think we can be so sure that the Gaullist of our reference period can be the same as the ones in power today. Our Charles, the one that passed on in 1970, was a military man and even taken prisoner once. His thoughts on gold and money were molded from a harsh war experience and an extreme political interventionism common in that era. To this end, his positioning had to promote French nationalism, even in money affairs, if his Fifth French Republic was to hold up. To his credit, and far more important than his gold stance, he planted many of the seeds we see as trees today. Back then, he was leading France to be part of a greater regional economic power; early on he stroked Russia, China, even Iran and Iraq. Even though none of these nation states remotely resemble, then, what they are today; the thrust was an
ideology to unite the economies more so than the powers.
Mike, in this, you are so very correct to note his "forming the intellectual beginnings of a United Europe". Still, the hard money people and leaders, we grew up with, have all moved on. The ones now in "positions of influence" and "outright power" are our very piers. Many are not far from our age group and in this; the range of life experiences, so similar to ours, so shape modern money thought. Yes, they studied the same history books we did, but have evolved to embrace different forces shaping this, oh so, different world. If you want to see the Euro Gaullist of today, just look into a mirror and try to reach for their same understandings. Its not hard to do.
How long will this era last; how much will it all change the dollar's timeline; can EuroLand ever be the same animal it once was??? Questions that only time will answer. For us, today, we follow their progress for our direction and understanding.
In a recent Financial Times article out of Paris, Jacques Chirac (French Precident) and Lionel Jospin (prime minister) were both noted for talking about the coming ECB succession. One of the few points they agree on (few indeed) centers around the fact that a Frenchman will head it next. Still, more so than knowing who will lead; understanding the political strategy that's unfolding is what counts. Seeing all this with my eyes, we can envision the posturing very clearly.
As this reserve currency transition, or perhaps war is a better term, moves on; the ECB must shift it's thrust with a leadership statement. Wim Duisenberg provided an excellent political cover for selling into the American paper gold market; as it exists around the world today. His national pedigree demonstrated a distinct flavor against gold as a monetary reserve. Truly, the ECB could not be seen prompting all their big bullion banks to short American paper gold, if they ECB / BIS were serious gold advocates. In our time of Western thinking, who could understand such a contradiction? But, politically, the game was to serve two goals; temporally support the dollar for trade settlement until the Euro was on its feet (sending gold prices down); and inflating the American lead gold market until it burst from over issuance. A good chuck of this ties into the SDR
issue that I'll get to later.
Now,,,, with the US vs Europe economic war in full bloom today; and Euro money policy in a position of leadership; and Euro circulating currency about to begin; it's time for a shift of thrust. Jean-Claude Trichet, or at least someone of his same pedigree, will usher in a new position;
"physical gold is a great asset for private and official sectors to save"! Bamm!!! Suddenly, our decades old paper gold game will run smack into a new idea; "Euro promotion for private gold ownership" and "high gold prices are good"! And more importantly; this concept will be presented from the controllers of the next reserve currency!
Contrast this against a whole world invested in gold as a hedge,,,,, by owning all of an American sanctioned paper gold market that's inflated 1,000 times beyond physical reality. (smile) Makes a physical gold advocate feel real good inside; like this warm cup of coffee! (double wide smile)
This is the new Gaullist; a variant time traveler who arrived from failed official gold wars that pitted currencies against bullion. Never again!
FOA (08/23/01; 07:32:49MT - usagold.com msg#100)
Apologize to all,
I was about to do a series of
posts yesterday and
ran into some communication / sending problems.
Have everything written up but can't pull it up from my location.
post as able.
FOA (08/24/01; 10:54:30MT - usagold.com msg#101)
Well,,,,, with my replies drifting somewhere in cyberspace, I asked our speaker to return and address a whole cross section of recent developments. Besides, this guy always could hit the mark better than me. (if I don't find those documents, some heads are going to roll for sure) (smiling with a medieval ax in my hand). OK,,,,, let's chair up to a nice round table talk:
Good evening Mr. Kosares, nice of you to spare some time to join us.
Historically it's appropriate for French thought to be, once again, influencing Euro Zone gold policy. In an Alpha / Omega analogy, their pro gold stance should prove to be a fitting conclusion of our 30 years of gold suffocation. It will also be most satisfying, I presume, for them to see gold valued and used independent of money function and American's "dollar foreign policy".
I agree with you, in that gold has its own territory staked out within a broad range of EU economic and currency initiatives. In time, this policy will be much more clear and further entertain a close scrutiny from all other domestic powers. I submit that this day has always been on record "as coming"; even though noone could mark it prominently on their calendar until now.
We enjoyed your dissertation about "the threat of an official US gold drain". It records, not only the numbers, well, but also points to long running common political attitudes concerning gold and its prominent position in international currency valuations. This recognition of gold being an important official currency measure, is something Western Gold Bugs have consistently longed for. Now with it openly acknowledged thru outright manipulation, these same thinkers object to it's being used in a similar manner as currency? It seems they want gold branded "important"; only as long as such branding makes the price go higher; not lower. In their minds this somehow places bullion in a different category from currencies that are routinely forced up and down for political objectives.
Ah yes, to this end I must present a exert from my good friend who cannot keep track of his files (smile):
---- You know,,,, I look at the last several decades of modern paper gold trading and cannot help but think of Arizona (state in the USA). Throughout the region they have roads going over old stream beds labeled "dry wash / subject to flooding". With this context I can construct a good analogy with American gold investors.
A guy begins building his house of wealth in the middle of one of these dry washes. A known gold expert comes along and tells him; "hey buddy, that old stream bed floods from time to time". The Bug says,,,, yea I know, but I only plan to be here for a quick trade or two,,,,, I know it's unstable and washes out every so often,,,,,, taking all paper values with it. I'll just catch some good sun between the rain,,, I'll be ok.
Well,,,, years go by and the rain comes and he gets washed out a few times more that usual,,,,,, but the guy still stays,,,,,, even thought the paper gold price keeps getting washed ever lower. Then,,,,,,, a huge unending wash comes even when no rain is falling. After seeing his house of wealth float away with a falling paper price he decides to walk upstream and find out why all this water keeps
driving the gold price down??
By god,,,,,,,, miles later he finds a government dam that suddenly started releasing tonnes of water all the time. He raised hell and said it wasn't right,,,,,, but the man at the valve said they aren't doing anything any different than what this type of "paper market"-- I mean stream bed,,,,, was built for. This is a derivatives market, son,,,, meant for betting on the flow,,,, not building a house from it!
If all the public is just speculating on when the rain will fall,,,, why is it so wrong for the government to do it,,,,,, and help maintain your lifestyle to boot. Besides, if all your gold talk is so right,,,,, then we are catering to gold advocates and making physical prices more reasonable???
But the Bug says,,,,,, hey, this isn't a natural market,,,, I mean stream flow!! This bed was only suppose to flow between natural dry and wet spells,,, like a real free bullion market! In reply the valve man asked,,,,, who the hell told you that??? The Bug answered:
I learned it from My Broker!
American dollar policy has built a substantial wall of separation between its currency and gold. More philosophical than material, the last decades of official declarations have served to block any useful "voluntary" return to high dollar gold prices. At every turn of the road, treasury and fed spoke persons have said that a low gold price indicates good dollar management. The price and time needed to reverse such a "learned experience" would, today, be enormous. Thus, we see a trapped currency policy that can only travel toward intense dollar inflation, riding ever lower paper gold values until both processes default; both printing press and price wise.
The reality of all this is that dollar gold prices could have soared as far back as 1971 and the world could have gone its way. I believe that noone would have left the dollar then, even with $5,000 gold, because no other currency system was ready to assume the dollar roll. Yes, US inflation rates would have soared and world economic trade would have fallen victim to mangled exchange rates: but that happened anyway and the dollar would still have retained it's reserve status.
This drive to prove the dollar, in low gold prices, now comes to its destine end. An end extended by inducing paper gold inflation backed by ever more official involvement in the world gold markets. The dollar faction is pumping paper gold to support the dollar while the Euro / BIS faction has shifted to doing the same to destroy the paper gold market faster. In recognition to my good friend's story --- the water flow is now washing away dreams and exposing houses built in the wrong place---. Indeed, why on earth would Western thinking Gold Bugs believe in a paper gold system that could only show value if it was not inflated? Did they expect a deflation in paper gold to drive prices up?
Their government considers their current derivatives based gold market to be just as important a tool in economic and international affairs as the dollar gold exchange standard was prior to 71. America opened the dam to let gold contracts flow thru the dry wash then, as dollars were printed to inflate the largest paper proxy the gold market traded with: dollar gold!
If this was important to maintain US lifestyles at that time: so why would it not be important now? They destroyed worldwide wealth held in gold, in the form paper dollar proxies. They changed the very currency of the world to gain an American end. Now Bugs cannot believe this same system would inflate their same little market to extend the same courtesy again? In the process, this time, also destroying the whole of the gold industry.
A strong dollar policy is built upon a low gold price; once again by inflating the widest scope of the usable gold markets: credit gold. In an incredible contradiction, it seems that the real fools are the gold bugs who buy into this paper market expecting some kind of deflation to drive the contracts higher? In order for this to happen, the US would have to counter modern gold thought with policy that said; high priced gold is unimportant to dollar policy. More than ever, with Euro competition creating a currency war, dollar gold must fall or the whole system must freeze up! Dollar prices cannot rise until the entity of our credit gold market is removed from function. This will happen.
I have presented this topic many times and again state that "all gold paper will burn". Most mine values included. Then and only then will gold values soar as physical units traded. Not before. As an adjunct, the illusion of most American paper wealth will also burn with this process that
transitions the dollar away from reserve status.
At the right time the Euro Zone will withdraw from the IMF, leaving the US and its factions as the only support for dollar credit assets held overseas. Then the evolution of SDR use our guide knows so well will be complete. This will leave the SDR interpretation open to only one avenue to finding support: it's basket currency function dissolved, gold will have to flow from American based stocks. With most of the present official credit gold leverage built upon IMF protocols, the US will find itself shipping ever higher priced gold to defend an ever lower valuation of dollar exchange rates.
With the world credit gold markets paralyzed in default and dollar credibility placed in question along with American economic stamina; physical gold will return to official hands in Europe in exchange for Euros. A paradox observed as high gold places more demands upon Euros and sends the dollar ever lower.
In all of this Alan Greenspan will say good by. A gentleman of his ability and stature will find no use for a position he cannot change from; a good general does not only retreat. Any lesser player can buy public and treasury debt for the purpose of constant hyper inflation; there is no policy strategy or gamesmanship in this.
As for gold being a problem to buy in the USA? Once again, I point out that American policy has only the wish to manipulate its currency valuations with official currency trading. It will be in the US advantage for gold prices to rise and rise strongly. An acknowledgment to Euro planning and a defeat for 30 years of American gold misuse. If treasury gold is traded at all, it will be within official channels to help control dollar values.
However, as paper gold values freeze up and their use fails the public, physical bullion brokers will become a popular as "crude oil" is to producers. I wish you "a deep well" in your affairs, my friend, and will respond more for a time.
Thanks Mr. speaker,,,,
FOA (08/27/01; 19:00:06MT - usagold.com msg#102)
From USAGOLD news feed
European Money Supply Growth Accelerated in July, Analysts Say By Sonja Dieckhoefer
--------- Benchmark interest rates in Europe are currently 100 basis points above rates in the U.S., ``causing investors to turn to Europe,'' said CDC's Nehls-Obegi. That may also have lifted M3 in July, she said. The ECB said ``non-resident holdings of money market paper and debt securities issued with a maturity up to two years'' have been distorting M3 growth figures higher. ---------
The beginning of a reversed carry trade? I think Michael Kosares called this one long before anyone else could see that far down the path.
I'm working on a rewrite for the trail. Watching, hiking, talking and writing all at the same time.(smile)
MK (08/27/01; 19:22:43MT - usagold.com msg#103)
Is that Milton Friedman I see peeking from behind that boulder??
Hello again, my friend. From your last post I was struck by this statement, one I am still pondering:
"As for gold being a problem to buy in the USA? Once again, I point out that American policy has only the wish to manipulate its currency valuations with official currency trading. It will be in the US advantage for gold prices to rise and rise strongly. An acknowledgment to Euro planning and a defeat for 30 years of American gold misuse. If treasury gold is traded at all, it will be within official channels to help control dollar values. However, as paper gold values freeze up and their use fails the public, physical bullion brokers will become as popular as "crude oil" is to producers."
I am particularly interested in your view that " it will be in the US advantage for gold prices to rise and rise strongly." Of course that is 180º from the current policy where the messenger throttled, imprisoned and killed in the hopes that the vacant dollar policy is not exposed to the world. Of course, as you have pointed out the euro could very well change all that. I also detect a hint that the oil producers might want "oil for gold" when you say "it [gold settlement] will be within official channels to help control dollar values."
I don't know if you saw the story today, but our friend Milton Friedman (who once proclaimed that the U.S. gold reserve should be put on the block and sold en masse to the highest bidder) proclaimed today that the euro was a "a big mistake."
What I think you might find fascinating are the reasons why he believes this. According to Forbes magazine, Friedman slammed the the euro "saying that it would create monetary turbulence and discrepancies instead of promoting political unity."
God forbid that we should suffer "discrepancies!"
Whoa, , ,Ho! Ho!
It is not difficult to see what he is really saying. The euro is going to get in the way. It's going to cause "turbulence!" (not that the dollar hasn't served this purpose all too well on its own.) And then there's "political unity." How could the Europeans be so . . . .well. . . .so totally uncooperative."
Here's the capper:
The esteemed Stanford professor goes on to say that "the U.S. should pull out of recession in 2002 but that recent Fed interest rate cuts could lead to inflationary problems."
"I believe the United States is already in recession," said Friedman, "The fall in production and employment show that clearly. Whether or not we use the word 'recession' is just a question of semantics," He also pointed to the Fed's seven interest rates cuts this year as reason to look out for inflation next year. "With the very unusual Federal Reserve policy of successive interest rates cuts...the key problem once the recession ends in 2002 will be how to control inflation," he said.
So its very clear:
With inflation just around the corner, it is difficult enough to deal with one inflation indicator let alone two. . . . .two safe havens not just one. What's the dollar to do?
Guess it all get's down to a matter of perspective. I've always contended that if the U.S. gold reserve is to be sold that it ought to be offered to the American public on a first refusal basis. (Grin.)
Thought this would be enough to raise a comment or two. . . . .
My best to Another, and hoping this finds you both well. MK
FOA (08/28/01; 10:34:03MT - usagold.com msg#104)
Just a walk down the path!
Good day everyone.
---- Two roads diverged in a yellow wood, And sorry I could not travel both -------- I shall be telling this with a sigh---Somewhere ages and ages hence: ----I took the one less traveled by, And that has made all the difference ----
This partial caption, as it appears at the top of our trails page, tells of the Gold Advocate story through out this modern gold era. An era that has so very decimated the savings of traditional hard money paper gold bulls. Clinging to all their failing theories, they assumed were financial hard money law, only to watch those market dynamics evolve away in our political world; taking much of their wealth with it.
So, down the single path we go and boy has that decision made a difference! As Physical Gold Advocates, buying and holding real gold for the future, we have avoided taking an enormous hit to the "safe side" of our long term savings. When one adds up the net accumulated loses from a decade of "gold market timing", in and out "leveraged plays" and good money poured down the "liar's hole" of gold mining prospects; is it any wonder so many are clamoring for the government to come clean and return policy back towards support for the "illusion of our paper gold market"? Back towards the leveraged player's favor so he can get even: perhaps even with coin buyers?
In a large part, this explains a lot about the cross currents and confusion gold buyers hear in today's media. Two entirely separate factions are in the gold game; one vocal and unhappy, the other quiet and very pleased to buy gold at lower prices. If you invested in the commodity side of our gold industry, that's the new gold supply side produced by the mining sector, you need a higher price or
your investment will eventually become zero wealth! If you invested into the real asset side of the market, physical gold owned and held as part of your long term wealth, higher values will one day come and easily match all the considerable currency inflation that has already arrived. For these buyers, life is good as lower prices and time are both on their side.
But, what of the guy that brought into our leveraged gold markets; thinking it was a free market that represented the real value and price for gold bullion? Was he a victim of a government currency supporting scam that rendered his leverage a loss? Or was he the victim of an market industry that told him not to buy physical gold, instead take advantage of the leverage we can sell you?
Ask yourself: who said years ago that we know how it all works and how to out maneuver this dollar inflation stuff, ,,, who said the paper leveraged gold markets were the real free markets,,,, and we know how the government does all this because we are professionals,,,, and we have a good leveraged play that will beat that inflation when it comes and beat it X times over!
The answer we hear: "Now that these leveraged plays have and are turning into toilet paper,,,,, we want to know why the government made us buy all this stuff" ,,,, instead of real gold????
In our society, dominated by Western Thoughts about savings wealth and the use of leverage to gain it, Paper Gold Advocates have advanced the logic of their position by using overlapping reasoning. Promoting an idea that share ownership in an industry, that sells gold to make a cash profit, is the same as ownership of the gold product they produce. This is the same thinking progression where history records a shoemaker's children without shoes. Following this you, as a paper gold investor, also risk a situation where your family goes barefoot, without real wealth, while political maneuverings wipes out your stock and trade business investment; not to mention your wealth. In the same social dynamic where friends point out the shoemaker's bare feet, physical gold advocates will one day be asking; "but I thought he owned a gold mine?"
I read all the fine articles and elaboration about the woes of our gold mining industry, it's investors and losers that played leveraged paper bets against this evolving market. Still, we are struck by a glaring flaw in their presentations: instead of taking the high ground with Physical Gold Advocates and advise dumping paper investments in this politically manipulated market and buying gold with the proceeds, they sink to the background and wait for a legal retort that would eventually lock up their lost illusion wealth for good. In the process they are trying to legitimize their use of the same failed logic the mines and paper brokers pushed; "buy our industry not the gold product its all based on"!
For decades, this entire paper hard money reasoning reeked from terrible political understanding. They tried to sell hard wealth logic packaged into something new players couldn't resist: ----- " I know you are a smart gold thinker that knows the real money inflation score! And because you are immersed in Western Thought, you can understand our logic better than most average people; let the other simple people buy real gold while you buy something that is just as good and pays off x times better; all our near gold substitutes"! ---------
Truly, the reactions we are hearing today, on many gold forums and all over the hard money media, is the "hangover" of investors being sold that logic as a "static" law of the money universe! Without their being exposed to the fact that money, gold and politics are all an intertwined dynamic human action; coursing through nations and society, as organic players fight to hang onto our real wealth and savings over time.
The notion that "real wealth" and "money function" could be combined and retained, for trade use and as a long term savings for average man, was a dream for hard money socialist. These two separate forces were stamped together and coined by a narrow logic that never would concede how incompatible it was with changing human desires.
Again, this "hangover" of loses is the result of layer after layer of misconception being placed over real gold ownership. The sad fact is that those who stand outside the ranks of Physical Gold Advocates will mostly not ever catch up, financially, with simple gold owners! The world, it seems, turns once again as it always has.
Yes MK, I saw Milton over there behind that rock. His comments and understandings are like the wines his old (part owned) vineyard produced; sometimes ok, sometimes bad. Years ago, when I lived in San Diego, we often went to his winery: San Pasqual in the Temecula valley area,,, if I remember right? Don't think he owns it any more. I never liked their wines, but one of his wine vinegars was absolutely fantastic. We stopped at Chinos vegetable farm, around the corner from us, on the way for a sunday drive. While later cooking, I would recall how I could only like some of
Today, my tastes for "a changing currency universe" is proving just as correct in opposing much of his thinking. Along the same lines our friend PH in LA said; we have to stop watching our favorite trees and start watching the whole forest!
You write: ----- I am particularly interested in your view that " it will be in the US advantage for gold prices to rise and rise strongly.---------
I think this whole concept is the most difficult part for people to grasp. We wrote many portions of this logic and tried to tie it into unfolding events so it would be clear. Problem is that this was so spread out, as it occurred over years, it's hard to see it all.
A most interesting part, one I think will be studied later, is in the evolution of our modern paper money dynamic itself. The US was way behind the curve in grasping how our changing "world economic function" was reworking the use, demand and nature of how fiat money settled commerce. Even with all it's awful inflationary attributes, we were evolving with the markets to use our fiat moneys in ways that were in spite of their losing value. Had American money policy seen this in process, they could have dropped the war on gold long ago; the way the Europeans have already.
Still, as part of this political war of economies and currencies, the ECB / BIS played into our gold war theme. Aside from a separate strategy that kept cheap gold commitments flowing for cheap oil,,,,, Euroland played our gold war, too, as we murdered the paper marketplace along with the whole dollar gold system it was built on. I think that the US, just recently, caught on to the "total meaning" of the Washington agreement and is now rethinking what to do with their position.
They shifted their war on gold to become a war on the Euro,,,, only too late. Now, knowing that the Euro is a fact, we must have a super gold price if the dollar is to stay in the game! The question becomes one of supporting a cheap paper price for the sole function of keeping the market and all its bullion players alive. With the war on gold over, they need to turn their tanks around to face the
real enemy but cannot.
If we try to save the dollar gold markets, they will morph into a pure paper system with no gold supply to back them; paper would eventually be priced way below world physical markets. They will become a pure cash settlement item, in a way like the OEX. This will easily drive oil pricing into Euros. If we adopt a week dollar policy, trash the IMF and it's SDRs (prior to ECB withdrawal) we will have to supply gold bullion outright and allow a true market price based on some currency supporting function; still at thousands per ounce. Our entire anglo - London gold markets will spin off hugh,,,,, nation busting financial loses. By the way,,,, this is why our boy is driving for EMU as soon as possible. (smile)
In all of this; the main story / component is oil supply! We must keep our dollar function, if only in a diminished fashion, in order to buy oil imports. Once the dollar fully fails, everyone (our partners like Mexico and Canada) will bolt for using Euros as reserves and international settlements. OIL value in the US would spike sky high even as local inflation drives alternative energy supplies to
become uneconomic to produce. Even at $200 a barrel equivalent.
You write ------ Guess it all gets down to a matter of perspective. I've always contended that if the U.S. gold reserve is to be sold that it ought to be offered to the American public on a first refusal basis. (Grin.)---------
Mike, I know you guys have written some fine thoughts about how the government may one day take our private gold back. I have to allow that we never know what they will do: a lot of nuts become favorite leaders??? Still, we say that the government already has it's gold back. They took back what was "legal tender" , then ,,,, and won't try to get at what is now private gold wealth.
Just like the dollar tender in your pocket, US bullion is not yours to begin with. They have the right to call it in. This area is also a hard concept for gold thinkers to come to grips with. After decades of being told that the gold in Fort Knox belongs to the public, the truth that it doesn't and never was Its impending use as a currency supporting supplement is shaking people up that believed that position. Soooo many investors thought that this gold reserve was there to back their currency at home, at some future high price, that they reasoned they could just buy gold mine stocks with their investment moneys for an added play. Letting a future currency deflation and a rising gold price meet at some high price in the middle and back up their other surviving shoe box savings! Again, this ain't gona happen! Our currency is going to inflate to hell, even as we clean out our official gold reserves to ship overseas. If ever there was a story to buy gold for your own,,,, this is the tail that will create a killer offtake the world over!
However, the political choice, as you alluded to above, should will be allowed to buy our governments gold,,,,, if offered,,,,,, OR have that gold keep oil prices down to $90 a barrel so we can still drive SUVs. I wonder what will happen???
As a side item: I see where George Mitchell sold out his Mitchell energy and development. Funny, I know a guy that used to play with him as barefoot boys on Galveston streets. He said that young George once wondered (as boys do) if a small growth in his nose would finish him off. I think he had internal radium treatment for it or something?? Oh my,,,, who would have known that this barefoot brilliant friend would one day sell out as a billionaire?? What a wonderful, free country!
I'll post more about SDRs and Randy's notes if things don't go haywire again!
Thanks all (and MK)
FOA (8/29/01; 06:09:54MT - usagold.com msg#105)
Perceptions: The evolving message of gold and what it means
Here are a few quick observations:
It would be nice if our Fed could manage it's dollar policy with an eye on value only. This was suppose to be their job but it became morphed into an economic policy instead.
In his comments today, the ECB's Welteke makes a clear distinction between these two institution's thoughts on the matter:
------ Firstly, it isn't the ECB council's mandate to steer economic growth, but to stabilize the value of money. Price stability is the top goal of the European System of Central Banks. The U.S. Federal Reserve has a mandate that includes growth and employment targets ---------------
Notice that phrase "to stabilize the value of money"? After several decades of evolution, US traders have come to equate the value of a currency as to whether money policy is delivering them investment profits or no. If local prices of stocks and real estate are rising, then a money's exchange rate should also. It's only natural because everyone the world over will want in on the "next great investment"; where ever that process is being played out!
Of course, that's not the way money values are determined; but because international trade has delivered money flow control into the hands of an "out of control" dollar derivatives market, this is the thinking dynamic in charge. No greater case can be made that; world wide currency values are but an illusion while being measured with a dollar reserve system. We see this ever so clearly today as the ECB strives to place a real value upon their currency by employing strengthening rates of return behind it; saying that a nation's currency is worth something aside from structural economic function alone. All the while the Fed is inflating the dollar as an open sign that the dollar is worthless if our economy goes "only sideways" for a while.
What an incredible reversal of perceptions for American traders to latch on to; we are buying into the dollar inflation as a permanent structural component of our economic and financial markets. This trend is something we, as gold / Euro / oil people, have been promoting will happen for some time. As the Euro matures, this ongoing dynamic will lead to; a dismantling of our dollar reserve system; a flow of us gold out of the country as an only means left to maintain dollar settlement; a rising gold price that first disables, then destroys the current world dollar gold market; hyper inflation within the US and a critical loss of oil imports at cheap dollar valuations.
Our way of life and quality of life will be changing as this plays out. Truly, for those that understand, we will not actually lose anything real; rather we will lose the illusion of wealth Americans have come to value as their given right. An illusion we trade to the world and with each other in the form of an overvalued currency and the assets it denominates.
Again, I'll have more on this if this complex computer system stays together (smile).
FOA (08/31/01; 16:03:51MT - usagold.com msg#106)
Off the trail and on the road! (smile)
Well,,,,,, I tried to get this incredible cluster of wires and chips to work correctly, but to no avail. My computer is fine, something wrong in the private network that supplies me. Anyway, I'll take this interlude to work in some travel time. Have a great Labor Day and I'll be back in a few weeks.
While away, some points to consider:
On the plus side; all thru the 90s it was the best currency to store your extra cash in. No matter if one loved it, hated it or thought it was near destruction, the dollar worked well for its owners. It worked more so because of the way the world changed in using currencies. Not because we managed it so well.
On the negative side; it is a self serving money that caters to one and only one nation state. The needs of all other users of this reserve currency are cast down into second class status.
Because it has been in this reserve position so long, the gross amounts that circulate outside the borders are completely out of any proportion that our local economic structure could service.
Even with a huge, record breaking trade deficit, our fed shows no concern to slow further dollar printing.
The level of sophistication of world trading systems has bypassed the need for a one world, all serving currency unit; like the present IMF dollar system.
Its structure, using several central banks, is very close to our dollar system. From that point the closeness ends.
Its political structure is much more appealing to world wide users. Because it's based on a number of different nation states, its management policy will tend to carry more of a worldly mix of initiatives. Not something for everyone, but far better than the dollar.
Its built to have more of an internal function that services EuroZone trading. If it becomes the best (or last) man standing, such an internal flow will cause world trade to flow thru Europe instead of using Euros bypass trade around Europe. This alone will keep it from being a world reserve. Gold wealth may come back to serve this end.
Will it fail?
I don't know! I do know that it will endure. The reason I have moved the cash side of my wealth into Euros is not because it will outrun gold or, for that matter, outrun the dollar in the near term (Euros are a small part of my asset mix with gold being the largest). I changed because I expect the dollar to fail in a super inflation as the world moves on. I expect the Euro to not fail at all or fail less?
Further, the main reason I own gold is because the current dollar gold market does not show us the real gold value at this time. There are a whole host of political reasons why this is so. Still, as the dollar fails, American gold reserves that still exists as the final backing will have to be used in a pure physical market to somewhat deflect the dollar's fall. You can count on the fact that the majority of that US gold will not be, in any way, used to shore up a then failing paper market. As this plays out the current Bullion Bank / london market will lock up and once again rob the paper owners of bullion. No different than the way pre 1971 foreign dollar owners were robbed before the payoff.
The paper gold bulls of that time were waiting for big boys to default on their gold debts,,, like GATA is waiting for today,,,,,,, so the bulls could collect. Didn't happen then and won't happen now.
I expect the dollar to fall away from its present stature in world trade. Bring with it a changing lifestyle for all Americans who have hitched their wealth to dollar related assets. Unfortunately, most gold mine operations are in that league.
I expect gold to do a sky shot, not because of coming us inflation, but first because of a paper gold market abandonment. Then, super dollar price inflation will only drive it higher.
The dollar system, as Mr. G. well knows, is locked into a structural inflationary trend that cannot be stood aside of because of the Euros existence. Any attempt by the fed to raise rates to slow dollar printing will stall our economy further. The Euro system will not, as in the 70s and 80s, have to follow our stance; they no longer have a mandate to bank unneeded trade dollar excesses. They have been sending this strong signal for some time by selling off dollar interest. This trend is going to accelerate as the Euro builds. They have no purpose or reason at this time to get into a real war with the dollar. They are at war just by laying comfortably with a Euro return a little above us for
their work to be done.
Good luck all
MK (09/02/01; 10:05:38MT - usagold.com msg#107)
The Now Very Clear European Position and Remembrances of Harry Browne's "You Can Profit. .." Books from the Early 1970s. . . .
I see your #106 as one of the most important messages you have ever posted at the Trail or at USAGOLD. In some ways, it is a recapitulation. In other ways, it is groundbreaking.
I believe you are correct. The Europeans will be content to let the dollar take its own course in full knowledge that the seed of currency freedom it has planted is fundamentally sufficient to meet the needs of the new Europe. I do not think however that this was clear until the last euro rate cut. Your post focuses those considerations. Europe will be no more aggressive than it needs to be. As a casual political observor, I believe that this policy is a mistake that forces Europe to play the inflation game along with the United States, and that is not the way I would have played the game given the opportunity. However, I'm not the one calling the shots in Europe. I am an American businessman and investor and in that capacity I am not so much interested in the world as I'd "like it to be" but as "it is." I'm sure my European counterparts feel the same way.
What do you believe this now very clear European position means to the European currency holder and the U.S. currency holder (in the form of savings and equities)in the medium to long run? Do you believe gold ownership is important to the European investor? It is clear that you believe it essential for the U.S.-based investor as you foresee a complete dollar breakdown.
In reading your last message, I was struck with how close it came to Harry Browne's analysis in the early 1970s. In two books, "You Can Profit from the Coming Devaluation" and "You Can Profit from the Coming Moneatary Crisis", he laid out a thesis very similar to the groundwork you have laid in your #106. The Wall Street establishment and press considered him the lunatic fringe back then simply because most people never heard of such a thing. He was simply ahead of his time. And he turned out to be absolutely correct.
Here is what you said that made me think of the "You Can Profit Books":
"Further, the main reason I own gold is because the current dollar gold market does not show us the real gold value at this time. There are a whole host of political reasons why this is so. Still, as the dollar fails, American gold reserves that still exists as the final backing will have to be used in a pure physical market to somewhat deflect the dollar's fall."
Of course, this is precisely what happened in the 1970s. Harry Browne made the same argument back then -- that the $35 gold price was both an institutional fixture and institutional fiction. Europe took advantage of that situation by reclaiming a substantial gold reserve. When the London gold pool (both de jure and overt) broke down at the $35 price, the devaluation (both de jure and and overt) quickly followed. Additional formal gold sales proceeded from there from both the International Monetary Fund and the U.S. Treasury.
Since today the gold price is both an institutional fixture and institutional fiction much the same process is in motion at present -- only de facto and covert. Are you suggesting a similar result? And with the euro present and accounted for, will it lead to a new world order?
FOA, I want to thank you again for sharing these thoughts with us. I think we may have come to a new Trailhead -- perhas one that looks vaguely familiar, but then again perhaps something totally different. I am convinced you are correct that the Europeans believe that there is a certain historical inevitability to the dollar's demise and there is no need to hasten the process.
The real controversy in the weeks and months to come will revolve around what this might mean to both European and American savers, equity investors and gold owners.
FOA (9/29/01; 16:52:01MT - usagold.com msg#108)
Back on the trail.
Well,,,,, I have been home for a few days and my travels were more an adventure than a vacation. During this period of terrible tragedy for our nation, and pain felt for those lost in the destruction, my little world was only shaken in comparison. Still,,,,, almost all my communications was lost for weeks.
I'm back now and am facing a mountain of communiqué from friends and associates. With all that is currently going on I have no intentions of "catching up" with the news thread right now. I just try to jump in as I am able. Truly, this is an unspeakable turn of events and only moves our events timetable that much further ahead.
Michael, Randy,,,, all,,, I'll be back later.
---END of (Archive
V) July 2001 through September 2001---
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