"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 Nearing the Great Divide...the Fourth 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
May 2001 to June 2001 (Archive IV) 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 (05/06/01; 20:30:52MT - usagold.com msg#69)
A Tree in the Making
Let's gather around and begin with a talk first, then an extended hike. I'm sorry to be so late and am also happy you didn't decide to start without me (smile)!
It's good to see so many familiar faces. It looks like the whole forum is here! There is MK with his warm cup,,,, Randy away from his tower,,,, and Mr Gresham who is just back from a historic visit to the "The Pearl City Tavern". His visit there (see #53150) was in response to my recent return post [#53119]. More on that in a moment.
I brought something with me today, as an example of human foresight. Yes, this fine ancient rosewood Bonsai tree. It's one of a collection I own and is quite old. Some of you may have already experienced these "works in progress" at The Bonsai National Arboretum in Washington DC.. Or perhaps you traveled to Elandan Gardens (in Bremerton, Washington State), where Dan Robinson has collected and displayed some of the oldest Bonsai known. Indeed, he has collected them from all over the world! They are priceless.
It's important, for our talk today, to understand the difference between many of the Elandan Garden ancients and most of those at traditional museums. Mr. Robinson retrieved many of his specimens from mountain tops after they had been growing for hundreds and hundreds of years. Untouched by man's hand, they formed most of their shapes by fate of nature long before Dan found them. The more traditional Bonsai, started by people, were formed and trained from birth. Hence, their more standard styling.
So,,,,, what does all this have to do with the old "Monkey Bar" at the Pearl City Tavern? The same bar that our Mr. G just paid a mental visit to? Well, many years ago I was there for wine and dinner. The place was rumored to be a hangout for spies and international intrigues, but I didn't
happen upon any (smile). Later in the evening, I was taken up on the roof and given a private tour of their Bonsai collection. One tree, in particular, was a spectacular item that had been passed through over ten generations of Japanese lineage. It was here, on the roof of the Monkey Bar, that I first began to understand how societies endeavor to manage the events of life yet never fully control it's outcome. And further, it seems the difference between great leaders and simple manipulators is perfectly demonstrated in the art of Bonsai.
The blatant controller will twist and turn, cut and destroy,,,, in an effort to replicate an image he has seen in the past. The beautiful landscape scene he remembers as perfect,,,,, all good and all right for himself and perhaps society at large; this system he strives to repeat as the bonsai grows. In the end,,,, he fails,,,, unable to reproduce what once was. Killing the system,,,, the tree,,,, the old currency. The very thing he and we all wanted so much to grow.
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 process creating something we all recognize, can use, understand and enjoy,,,,, yet,,,, different in many ways from what we knew or saw before.
Onward a bit
Thank you Michael, for your outstanding post today (#53135). I suspect, my friend, you have always raced before the wind! Perhaps a fine example for others to see as they drag anchor on the rocky bottom of history. It's sometimes good to seek safe harbor, I know, but this time the prize will go to those that outrun the storm (smile).
I see that our poster ET has gone away for a golf trip. Too bad, I wanted to remind him to be sure to bring plenty of currency along to pay his travel expenses (grin). In this world we all need much; blessings from above,,,,, family,,,, home,,, friends and good health. But after all that, one must have currency and an enduring, tradable wealth asset that places our footing in life on equal ground with the giants around us,,,,,, gold! Understanding the events that got us here and how they will unfold before us is what this GoldTrail 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.
OK, it's late for me and I plan on walking for some time this trip. So, let's camp here and rest. There is more trail ahead.
FOA (05/08/01; 09:59:55MT - usagold.com msg#70)
A Tree in the Making #02
Well good morning everyone!
Waking up on the trail is always a great experience. Our thoughts are fresh and the air is clear. Indeed, clarity is something that us real Gold Advocates are now fully experiencing in these latter days. Over a fresh cup of coffee, we can look around and for the first time begin to place the GoldTrail landscape in proper perspective. A perspective that breaks the old illusions of gold's paper worth and replaces it with an understanding of it's coming dynamic value as real wealth.
Down the trail,,,,
gold will no longer be able to successfully carry the Western name of Money so as to allow for it's political price fixing. A process that, it seems, has been with us for generations. Enslaving millions of hard workers by always officially classifying the terms and value of both their paper currency and their metal savings. Always inflating both items for the good of society's never ending political agenda. Then, never allowing Another currency to command an equal reserve position so as to engage and weigh the motivations of more than one political arena. Engaging and weighing these fiats not just within the exchange rate function, but additionally against the real wealth function of gold. (see MK's post below)
Allowing FreeGold to circulate as a wealth asset would denominate it's true worth through the much larger real demand of "Wealth Possession" instead of paper possession. Such a gold scale would measure our world reserve currencies against each other instead of against our Western concept of gold as official money. But, in addition, on a more higher level, prevent any one country from subjugating other nation states through fiat dominance. To more fully grasp the impact of "Possession" and why ancient gold was worth so much more as FreeGold; hike again that part of our trail (FOA (04/18/01; 20:20:06MT - usagold.com msg#64) Lombards, Normans and Franks.)
Both as official wealth and private wealth, physical gold will march with us into a future at values the likes of which we have never known. Understanding the how and why this would all come about took time and personal reasoning for each of us to sort through. Much of our background building would not have been possible without this modern internet. Further, without the fine folks at CPM, this unfolding story would not have been defined in mass, for all to see. Events now slowly build the story on their own as we become ever more secure holding physical gold for the acts that will follow.
Onward a bit:
I'm handing out these reprints of two important explanations of what we have meant and the perception that has been created. These are perceptions built upon not only our ongoing discussions and hikes here but also the refining input of the thousands that walk with us on the USAGOLD forum. Below defines their authors take on Another's thrust. I would say they are very much on the mark. First, from Randy at the Tower (USAGOLD sitemaster):
Randy (@ The Tower) (04/17/01; 13:37:02MT - usagold.com msg#: 52046)
Mr Gresham, nice question (msg#: 52041) --- "Was the Washington Agreement the most significant event in gold since you were last posting in 1998?"---
If I may be so bold, let me anticipate ANOTHER's answer with an answer of my own.
The most significant event in gold since the dollar's gold default in 1971 has been the successful launch in 1999 of a long-awaited new currency system built upon neutral (meaning, multi-national) management and, more importantly, a floating gold reserve structure that finally abandoned the now obsolete "fixed" gold legacy of the failed Bretton Woods structure.
With this new reserve structure, the prevailing institutional incentive -- from '71 to the end of the millennium -- need no longer be one of "price suppression" for the perceived market value of gold.
In this light, the most significant element of the Washington Agreement is seen to be NOT the amount of pre-announced gold sales, but rather, the self-imposed curb on gold lending operations by these European central banks. And if you think about it, this action with the Washington Agreement was nearly just a predictable inevitability from the moment the eurosystem committed to provide for freely floating gold reserves. The "tools" of the prior suppression are on the outs. Believe it. The WA simply announced the foregone conclusion in a package suitable for newspaper headlines.
Just as the value of the post-'71 paper dollar has long been propped by the international yet artificial "mandate" to hold these dollars almost exclusively as reserves (acting in tandem with the dollar settlement for oil and the overhanging debts of the "Third World"), through this new currency structure gold (and its price/value!) has now been "officially" set free to replace these dollar reserves (savings).
The reason this full transition has not already occurred is that institutional interest still exists to foster the smoothest practicable transition until that unknowable moment where the final remaining *SNAP* in the adjustment occurs.
Speaking for The Tower and personally, I continue to buy gold with excess funds because I prefer the real wealth of gold over managed paper (and digital) contract currency. As a bonus, the real wealth value of same gold will provide a pleasant benefit upon full completion of the transition in world currencies' reserve structures. (An understatement, to be sure.)
Absolutely, Sir Randy!
As clear as mountain air. Next, the most recent treatise from USAGOLD (who is this guy? smile):
USAGOLD (05/06/01; 09:48:35MT - usagold.com msg#: 53135)
ET et al. . . .On Currency Competition Quote from ET:
Randy asked me the other day what I thought about the "suffering" that has been caused by the US currency hegemony. Why do you think he would ask this? My guess is that he believes great suffering has come to pass and I certainly agree with him. However, he then goes on to say we should adopt another version of the same thing, apparently so the suffering can be spread around a bit. ---------
I have spent more than a small amount of time analyzing and interpreting the Another/FOA message, and I think you have reduced their message to a very narrow interpretation that falls short of of the mark. The statement above is indicative. As a result, I thought I should comment on the subject because I think you've missed a great deal of their message. I hope to add to your thinking as well as to others who may have fallen into the same misreading of their analysis. The danger in this sort of thing as always is that I may not be saying things with which FOA and Another agree, but I think my recapitulation accurate and if I'm missing something, I hope the other participants will fill in the gaps. I will not comment beyond this on this subject, because, as always, I am sensitive to playing too large a role here at this esteemed table. Those who are bored with this sort of thing, I beg your indulgence. Those who revel in it, I think you will find much to chew on. . . .per below.
Onward. . . . .
You and Randy are correct in pointing to dollar hegemony as a source of much suffering in the world -- intended or not. In fact President Bush has expressed the same reservations, more or less in a backhanded way, in his criticisms of the IMF during the campaign. So none of us are alone on those concerns. I think however that you need to expand your understanding of what Another/FOA are trying to convey, because it is not a simple advocacy of the euro over the dollar -- but a much deeper and important advocacy of competition in currencies, much as we have competition in other realms within the economy. This lack of competition is the problem with dollar hegemony and makes it possible for New York based multi-nationals and international banks to make bad (non-repayable) loans in the third world and then turn around and impose stringent conditions through the IMF that strap the local economy and eventually send the people into the streets -- ala Indonesia a year ago -- agitating for "economic" justice. (And of course that's just one example of the excesses of a monolithic reserve currency) Years ago, such injustices would have been fertile ground for Communist agitators, but now with the fall of the Soviet Union perhaps the multi-national crowd has been unjustifiably emboldened. In the long run, competition for this market from Europe, with an agenda of its own, would be good for the dollar and the international economy as well as the U.S. and Europe, and therein lies the real thrust of the FOA/Another analysis.
Let me take this a bit deeper:
I do not believe that Another/FOA are advocating a fiat euro which would "replace" in toto the dollar. Instead they advocate the euro, dollar and gold should "compete" for the hearts and minds of ordinary people (in terms of the currency they employ to store wealth), important financiers (as a hedging methodology), and, yes, central banks and nation states (as a reserve asset). In the case of nation states, the competition would inherently create circumstances leading to each doing what is necessary to make their "reserve" better than the other "reserves."
Under such a regime, the importance of gold ownership, for nation states, as well as individuals, would not be diminished because any nation state is capable of dalliance along the road to currency inflation making it necessary for the other participants to "hedge" their holdings. It is in fact a novel concept built closer to the von Hayek foundation of competing currencies -- including gold -- than possibly your own reliance on a gold standard as the ultimate and only magic dart that will find the target's center.
In fact there is a danger there that you might have overlooked. Take for instance the widely disseminated Kemp/Polyconomics New Bretton Woods proposal of a gold standard being bandied about in the conservative press. That proposal pegs the price of gold at $300. A major problem quickly surfaces: Whatever's left of the U.S. gold supply would disappear completely within six months of posting the $300 price -- the work of Continental Europe begun in the 1960s/1970s will have been fully rendered. The danger of course is the gold standard you would like to see is not remotely connected to the gold standard others, more politically inclined would like to see, so you always end up with this warmed-over version of a gold standard that gets right back where we started.
As a matter of fact, I see the FOA/Another currency concept as closer to the tenets of libertarianism (and Jefferson) than a gold standard because of the exchange restrictions which inevitably follow. In other words, we would very well be right back in 1971 with the United States once again facing the prospect of shipping its gold reserve to Japan and Europe in defense of the over-produced dollar. (Unless of course, the price were set at something like $3000 to $5000 per ounce -- then you might have some equilibrium.) Idealistically the gold advocate would most certainly would like to see a gold exchange standard -- but at what price and what would be the economic consequences if it were to be set where it should be? Polyconomics offers up this
arbitrary $300 price because it wouldn't break the current international system, but when it comes to real political/economic policy ideals and practical reality often clash. It's always nice to hear someone like Jack Kemp speak glowingly of gold, but before we roll over and cast adoring glances at the politician perhaps we should better understand what the politician is actually stumping for, and in the Kemp/Polyconomics case it is more currency hegemony under the guise of a free international gold standard, a hegemony paid for by the American people in the form of its gold reserve.
Currency hegemony is precisely the opposite of competition -- it is, in fact, the imposition of a currency, even gold (at a stated currency price, of course), on the population. As such the euro is important in that it challenges that hegemony, and does so with the key concept of utilizing gold as a "currency without a country" to act as a reserve for interventions if required -- a breakthrough. Re-read Mundell on this. You and I and the rest of this forum could be talking about the need for a gold standard now, tomorrow, the day after that and for all the days remaining in both our lives, and I do not believe we will be any closer to its imposition then than we are now -- thanks to the wayward and half-baked thinking on the part of some of the very gold "advocates" who are supposed to understand economic history well enough to anticipate some of the consequences. In
other words, the gold standard probably isn't going to happen. In the meanwhile, practically speaking, the best option is for all of us, including the various nation states to own gold as a talisman against our own worst instincts.
If Randy is concerned about hegemony and its effect on various populations, I don't think it's because he would like to replace that same hegemonic error with another. I think he agrees with FOA/Another that competition paves the road to a better international monetary system. I do believe, as FOA/Another do, that with the euro we are talking about the currency of the future here, and I believe that the dollar will eventually be modeled after the euro. Not only that, I believe we are talking about, not just the currency of the future, but the international monetary system of the future -- for what its worth. Sometimes the world heads off in a direction even if we don't want it to.
Once again I'll reiterate what PH hinted at in his post: For most investors the world over, the ownership of gold is a pragmatic undertaking, and what FOA/Another are advocating is a practical, hands-on solution for the average investor -- personal gold ownership. I think Randy agrees with this position, as do I. I can envision private gold ownership as a necessity even under a gold standard -- because there is little doubt in my mind that if the government were to undertake a gold standard even under the best intentions, with Lewellyn Rockwell serving as Chairman of the Fed, it eventually would botch the whole scheme -- politics being what it is. (By the way, I can't imagine a currency regime at this late date that would allow only the circulation of specie. Therefore, you will always have various derivatives in circulation along with the government largesse, currency printing, tinkering with the gold price which threatens the value of the paper. Gresham rules.)
In the end, he who owns the gold, makes the rules. And it is the personal ownership of it that will carry the day on a practical level while governments will do, well ...... governments will do what governments do.
Ha! Ha! Now, that was good! What chance do us poor hikers have against a mountain climber like that? Legs like tree trunks and a mind the size of Bolder (Colorado?). (grin)
My friends, think carefully about these while I go over to see what Econoclast dug up on the trail. I asked him a question on 04/25/01 usagold# 52540 and I think he found something! A little later today we will continue the hike as I address the views above. Even later, I will post Another's latest Thoughts here on the Trail. Events are unfolding and it seems the BIS is thinking of making some changes.
FOA (05/08/01; 20:54:48MT - usagold.com msg#71)
A Tree in the Making #03
Across the high pass,,,,,
The other day I came upon Econoclast working the Trail. After asking him to define what his actions would be to defend a modern gold standard, he replied and his answer hit some gold! My initial #52540 request in summary was: ---- How do we stop this ages old evolution of "thinning our gold" when our economy slows?---------
I'm going to take parts of your find and comment on it out of sequence. You write in #52646:
------Any system that could possibly be thought of or proposed must include the use of law. Part of the answer (transparency) includes a complete treatise of the "new" laws written in simple, direct English (8th grade level-2 pages instead of 2000). The laws would be directed towards controlling the bankers, not the people for a change. The laws would be written with input from bankers, but not by bankers. Penalties for financial fraud/counterfeiting/etc. would be severe. ---------------------------------This new gold dollar system would function alongside the current FED system. Any large debts (mortgages, business debt, most importantly, govt debt) would be denominated in fiat dollars. That way govt could continue to operate (maybe, ha ha) and the banksters could still have their play money to manipulate and try to capitalize on. A free market would exist to redeem back and forth as necessary. This free market would show the relative worth between the two currencies. ---------------
Excellent thought sir. Econoclast, using your thrust as my platform:
One of the major problems faced by past hard money planers was that any time real wealth, gold, is denominated as credit money, it always placed the relationship between the rule of law and the rule of gold at odds. If our laws defined gold as official money, and lent it, then by association the law had to define a portion of gold that did not exist in circulation. That portion was the contract asset held as bank savings. Yet, a person's claims against it identified said gold as real. This was and is an inherent contradiction because no law can define the value of real wealth held in contract.
This particular fiat form of hard money owed it's existence upon a continuous function of the economy. What the above means is that you cannot take something real and lend it over and over, as banks do when lending fiat, and still demand that the law recognize said contract moneys as hard legal tender.
I would state that no form of lent gold be recognizable or enforceable in the court of law as a legal tender contract. One may borrow gold, relend it, or even borrow against it, but that gold would not be valid in the payment of all debts both public or private. It could not, by law be legal tender. This is not to say the trading of gold would not somewhat supplant currency in function. It could and most likely would to a degree, but it would no longer carry a credit quality that fiat would in the form of a time function. Indeed, in our modern economic structure, a credit time function is very valuable and gives digital contract currencies their demand.
To deal in the future,,,,, to borrow,,,,, to capitalize would require the use of a fiat function. Gold could / would be a final trade; I'll give you ten cars (or gold) for your house,,, deal done. If I want more time to pay, I and we must engage a fiat loan.
-------weaving OUR gold supply, literally, into gold dollars--------Contracts could be denominated in gold dollars, however these "gold notes" are strictly non-transferable. If someone wants to sell their gold note, they can't. It is only enforceable between the parties that entered into it originally. All forms of paper gold are illegal-fraudulent. Any debt larger than the legal tender law amount has to be denominated in fiat, smaller can be negotiated.------------
Once again, it looks good at first but later evolves. By mingling your gold currency into the contract / credit realm, it once again creates gold loans that are at odds with human nature. Yes, the gold notes may not be transferable, but the lent gold currency is. It is at once someone's asset while also another's liability. The gold currency in circulation expands thru the nature of loans. When these loans fail on a national scale (major downturn) the legal tender laws defining our new gold currency will be changed. We thin our gold again in an ages old cycle aimed at covering debts that are the common citizen's savings.
Still, we are not far from the position you see. We must remember that neither currencies or gold define society's economy. Business can function using fiat alone. We have been doing just that for a number of decades. Installing a trading medium outside lawful money that acts as a wealth savings and a final trade will not destroy the bankers, governments or paper credit inflation. But, it will allow society a way to judge political efficiency. A nation's productivity will then have two scales to measure with, one it must live with (final payment) and another it cannot live without (future payment).
We shall see (smile)
Thanks for digging deep
FOA (5/9/01; 07:20:23MT - usagold.com msg#72)
A Tree in the Making #04
Sun's up, time to move:
We have covered a lot of ground and this framework, when viewed in context, helps explain much of what has happened with gold over the last twenty or thirty years. Even more so over the decade of our 90s.
Many hard money investors drifted with this evolution, right into it's most volatile decade. Thinking they were part of a much more efficient, changing, paper marketplace. A market that was utilizing all the modern trading system in order to not only advance gold perception but add profits to their accounts. It's been a painful mistake for many.
Our modern gold market and the price illusion it creates, is little more than a fiat dollar system that denominates gold credits in contract form. Is it a free market? Why yes, very free. But only free in the sense that supply is unlimited. Investors and the industry in total, brought into paper based gold and yet they fully well knew 90% of it had only cash equity as the collateral on the other side. Then, 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 inflation, a transitory era between 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.
In USAGOLD #53135 (see earlier), the perception was stated that; -------As such the euro is important in that it challenges that hegemony (my note: dollar's), and does so with the key concept of utilizing gold as a "currency without a country" to act as a reserve for interventions if required -- a breakthrough. --------
a currency without a country! In order to implement such a currency, gold would require laws that would keep it within it's wealth concept. Gold in possession would be wealth in possession as long as governments could not use it as credit money. In my discussion with Econoclast, I took his legal meanings and applied them to this "wealth without a country" position.
Keeping gold out of the fiat arena would be more simple than many hard school advocates envision. The key to that is found in the implementation of international law. The leading economic countries (EuroZone in the future) would have but to establish a protocol that forbid the enforcement of collateral attachment anytime physical gold is traded, lent or involved in a trade. In this context, no banker would lend you gold to buy a house if, in a default, he could not claim your house in a court of law. Even private parties would never lend gold if the asset behind the loan could not be claimed for nonpayment. It's that simple. With a stroke of written law, the trading of gold as wealth would become a final payment with no possible credit implications. Our official fiats and wealth without a country would never again function as one.
When USAGOLD went further to say that; ------that competition paves the road to a better international monetary system. I do believe, as FOA/Another do, that with the euro we are talking about the currency of the future here, and I believe that the dollar will eventually be modeled after the euro. Not only that, I believe we are talking about, not just the currency of the future, but the international monetary system of the future -- for what its worth.----------------
Yes Michael, this future is before us. As hard money advocates, I think we failed ourselves by falling out of the loop of economic evolution. Truly, we have circled the earth and now return to our roots. Only, once unearthed after all these years we cannot recognize them.
We lost our ability to advance with the advances,,,,,, to grasp that ours is a credit society compared to none before. Even the world's gold dealers operate on credit,,, on loan,,,, on fiat! It's our accepted way of life,,,,, to function within this era,,,, as loans both personal and official live and fail. We gamble,,,, we bet,,,, we play at life. Sometimes suffering the loss, no matter the gain.
We are no less than the citizens of Rome, only they knew how to keep their wealth aside the "games people play". They understood the "possession of gold"!
Further on we walk,,,,,,
Within this perception we can separate the actions of goldbugs and gold advocates. Western goldbugs strive to fix the current system. They hasten to make right the paper markets that have failed their gold industry investments. In doing as much, they push for a return to a status quo that never existed, failing to see that this past decade was but a passing,,,,,, an evolution,,,,, a transition that started long ago. I doubt Gata will ever see the end they seek as our gold market will fail sooner rather than "in time" for their legal resolution. They fight a good, worthy fight and call needed attention to the situation. But fail to "seize the moment" by clinging onto the past. The gold industry is lost as time and marches past. As events transpire, gold in the ground will be of less importance to common man and officials alike that gold on the surface. Gold will be produced, but it will be a far less profitable experience than our future gold price will dictate. Truly, it's a gamble no different than guessing the future of dollar fiat. Perhaps a small win, but more likely a large loss.
The future a Gold Advocate seeks is not found in Euros, Dollars or just gold. Rather it's found in understanding the Euros impact on the dollar's value and how that will change the gold markets,,, forever! The political motivation in all of this is the show of the century and worthy of our respected attention. Even now, the oil card we have discussed for so long is changing our dollar way of life and quickening it's fall. As seen in the Black Blade chronicles. Was this connected to the planning for gold and Euros? You bet, grasp it or no, we will feel it's full effects later.
Onward, my friends, this trail is only just now becoming extremely interesting. Truly, the ownership of physical gold will make this trip even more so,,,,,, perhaps even,,,, fun? (smile)
FOA (05/15/01; 09:50:11MT - usagold.com msg#73)
Fed - BIS - ECB - China
Boy, things are shaping up for a real good Trail hike in a week or so! Let's look at some recent items and try to come up with a plan for our walk. Consider:
There was a little mention in some circles about China buying gold recently. I think Gata got wind of it, too. Here is an old post I made at the main forum:
Trail Guide (04/25/01; 15:04:48MT - usagold.com msg#: 52536)
Comment to Randy's post of:
Randy (@ The Tower) (04/24/01; 10:38:48MT - usagold.com msg#: 52458)
Follow-up on my comment last week that China has lately been a net been seller of silver
------Philip Klapwijk, managing director of GFMS, explained at Monday's conference of the Gold and Silver Institute that China sold near 60 million ounces of silver in 1999, with additional sales of 40 million ounces per year likely over the next couple years. Continuing...----------------
Your (Randy's) words:
--------China is simply lagging by one Century in performing this act. Many of the other nations of the world unleashed their silver reserves near the arrival of the 1900's when the usage of silver was abandoned as redundant within the banking sector. And in contrast, not surprisingly, global gold reserves have GROWN since those days. Further, the dollar can be expected to suffer a worse fate than silver when it, too, loses its particular reserve and settlement role within the international banking system. And gold? All reasonable signs show that it shall maintain the king position as THE reserve asset par excellence for a long time to come. Get you some. ------------------
You know, your thoughts got me thinking (grin). I have time to do that right now as my files are restored.
Following your chain of thought about China silver,,,, I noticed a comment from Bush that we would fight them over Taiwan. Then silver gets hit real good (the day the comment was made). Could it be they are unloading silver so as to buy Euros and gold prior to calling it splits with us?
They do have more silver than their needs require (possibly more than all of us require).
If they are, indeed, going to run with the Euro later and the ECB is marking gold (not silver) as their main "wealth reserve", then it makes sense for China to position themselves this way. It also makes sense because as an addition, Hong Kong has so many dollar reserves they, too, could never unload them. Following the Euro system lead, they could afford to let their dollar reserves burn as long as they had even 15% of that value in gold prior to full "Euro roll-in".
If any EuroZone based gold paper they (China) own that had a US originator (US financial institution) and that defaults; with China's approval, that paper could be restructured to pay back in Euro currency assets. Courtesy of the ECB /BIS. Forcing the US originator to dump dollar based gold hedges (that's a lot of paper gold) as they buy Euro coverage to ensure exchange matching. Of course, extrapolating this system wide, we would see paper gold credibility plunge (therefore it's bid price also) aside from the Euro exchange rates spiking on the dollar. All the while out right trade in physical gold or "five day" (super spot delivery) would spike to the heavens. I do wonder if we are, as I said a number of days ago, seeing history in the making with lease rates doing strange things now? (smile)
OK everyone, could it be that Europe and China are linking more closely? With China not only playing the Euro card, but also seeing this future economic powerhouse (EuroLand) as a two way market for their goods? Lets look at a more recent item out of the IHT:
Europeans Grab a Piece of the (American) Action
Mark Landler New York Times Service
Tuesday, May 15, 2001
China Has a Change of Heart on Bond Sale
HONG KONG For American investment banks in China, politics has often been a handmaiden to business, enabling the more savvy firms to elbow aside their rivals with comparable credentials for deals.
Now, with the debut of a potential $1.5 billion bond offering by China, the Americans have gotten a taste of their own tactics. And politics, far from being subordinate, may have played a decisive role.
On Thursday, the Chinese government announced that three top U.S. investment banking firms - Goldman, Sachs Co., J.P. Morgan Chase Co., and Morgan Stanley Dean Witter Co. - would handle its first overseas bond deal since late-1998.
The next day, three European banks - Barclays Capital Group, BNP Paribas SA, and Deutsche Bank AG - issued a statement saying that they had been awarded the portion of the offering that would be denominated in euros.
OK. Next, we move to an excelent commentary in the COMMENTARY & REVIEW portion of USAGOLD (get your password if you want to read all of it). In this, Michael Kosares notes how the latest LBMA volume seems to show that the gold lending business is unwinding. He writes:
--- """LBMA April gold turnover was down a steep 12.5%. That could very well be the largest drop since the LBMA started publishing its daily volume figures. If nothing else it clearly signals that something is changing, and perhaps changing abruptly, in the gold lending business.""" end ----------
Combine this with a recent,,,,,,
almost permanent overall rise in gold leasing rates,,,,,,,, the
start of which began with a rate spike that was only lowered when
England was forced to reduce it's London gold sales to 20 ton
from 25 ton,,,,,,,,,,,,, then, the ECB no longer following the
FED and continuing it's responsible management of it's money rates,,,,,,,,,
our Euro creation spawned this new high world oil price from currency
competition and that's beginning to bite the weekest financial
structure (USA),,,,,,,,, and some thing is indeed changing!
We have completely agreed with the ECB policy, in that they see the EuroZone as the stronger (in overall economic function) between them and the USA. Stronger, in that they could handle a short term dollar oil rise if it lead to Euro settlement. In fact, the recent 1/4 point cut by the ECB, as opposed to the several cuts by the FED, is enforcing that note of distinction upon producers as the FED will and must cut much further. They (the FED) now risks exposing that their purpose of lowering rates is a effort to save the bookkeeping side of it's derivative bloated financial structure, not rebuilding of the US economy at all.
All this, in an effort to slow the dollar killing effects of sharing the currency reserve function with the EuroZone. Only one step in the complete loss of reserve currency altogether. We will see this spelled out as they pump dollar reserves from now on,,,, over and above any possible economic need. The result will be a slow and steady slide into higher and higher price inflation inside the US.
(Look to Randy at USAGOLD to repost this progress)
The pressure may be pushing toward a colossal "transition" of financial power later this year as the Euro begins it's final stage of EMU; the distribution of circulating Euros. Once complete, EuroZone economic dynamics will lead them to no longer need Dollar reserves for international use or the backing for their currency. A fact not lost on China and other major dollar holders. If events proceed as expected, they (EuroZone and or China) may just discard these assets as worthless. Especially given that with the US running a tremendous trade deficit, dollars cannot return on a "net / net" basis without plunging it's exchange rate to nothing! Perhaps it's worth further watching how our long bond treasury paper is sold ahead of the fact!
With all this in the background, we now feel a disruption in the force (old line from star Wars movie). The recent BIS meeting may have set the stage for an eventual monumental change in the way gold is traded, owned and valued. The very fact that a major portion of the US gold stock has been changed in status in a way that would allow it's movement (ownership); means that the US has now entertained the same position as England is doing regarding gold and the EMU with Europe. We (the US) are preparing for the destruction of the dollar's gold world. In this, some players will have to be saved (with real gold) if the dollar is to have any existence at all in the new Euro reserve function.
At some point, our dollar denominated paper gold system will crack and plunge in value as it's credibility to be converted into real gold is destroyed. In the process taking down most of the gold industry. An industry who's stock equity value is daily market to and closely follows said dollar gold system. In time, we will all understand the currency supporting function and the industry killing nature of a Free Gold price. As it's surging value more than compensates the dollar's lost value in the hands of foreign CBs.
This particular line of perception is being driven home in recent ECB commentary as their President, Mr. D., has discussed the very mechanism to delineate foreign held Euro money assets. (see Randy's recent ECB news) Assets that, per my above to Randy, will explode in numbers as our busted paper dollar gold market drives these institutions into Euro financing arrangements. These new, increasing, non expansive assets will be balanced by their system's surging gold price and exported bullion from other nations. A process that in part allows the US to adjust it's gold ownership just to stay in the game.
The world is changing and the Physical Gold Advocate will be the ones keeping score!
I'm going fishing now. Both, for the real item and with one that knows the name of our recently caught prize fish. I'll make a few more comments on Centennial's forum before going. Rest up, the big walk is coming!
FOA (06/04/01; 09:36:54MT - usagold.com msg#74)
Back On The Trail!
Well, it was some trip,,,,, and yes I did catch some fish. Person has to eat you know (smile).
Now,,,,, fishing is a slow sport at times and leaves time for conversation with others on deck. And because this little boat had room for more than two,,,,, there were a lot of Thoughts to talk about,,,,,, even during the dinners of our catch.
So, I be reading some of your recent conversation on the USAGOLD FORUM, and return to deliver some promised letters, thoughts and hikes. Good to be back (smile).
FOA / Your TrailGuide
FOA (6/9/01; 16:36:42MT - usagold.com msg#75)
A letter from Another to me.
My friend, I must now walk your trail in closer step. Events are closing that bring the changes we have long seen and prepared for. The time grows short as these conclusions prepare to make appearance. The last of these Euro price ranges are in sight and even the Duisenberg hints his work is done for this new currency. A hard task was completed by him, his acknowledge to the French in May 98 was with a timeframe few could understand. Now his containment is done. With introduction of notes and coins, this money will become it's own director and his work will be well received. A good day, indeed!
All were present at the meeting. I think contractual conversion became topic of some urgency. This BIS must now consider the values these forms will hold in ours and their new futures. Values that will no longer be dictated in dollars, rather realigned in conversion and gold market failure. Truly, this failure of current gold will be reflected as anguish in these western goldbugs, both bankers and investors. All done as the saving wealth for your gold advocates and new reserve bankers finds it's new mark in our time. Your work, good man, has been as trying to reconcile the religions of this world. Telling both they are just while only one can be right in the end. So it is in this day of gold.
Some knew what was coming from the beginning. With the Hague Conference of Heads of State in 1969 sprang Copenhagen Report of 23rd July 1973. We pointed and all continued to turn away to follow where power was, not where it was going. With the Solemn Declaration in Stuttgart (1983) closely followed by the Single European Act (1987) even the BIS then understood the final goal. Margaret (Thatcher) soon expressed that signing that proposition (the Solemn Act) was her greatest mistake in office. While I do agree with her on a strategic political basis, such reflections by British leader only exposes the ignored, nearing failure of their shared singular currency dominance (both USA and England). Little is expressed of the wealth lost of our peoples and that of most Western economies as these government's efforts to preserve this failing system drains real wealth from our world.
Now these leaders full attention must focus on this money transition itself as Blair's next initiative (the Euro) will lead to a realignment of contract values of all kinds. Before the fact! The Maastricht Treaty allows that by Jan. 2002, all contracts will be converted into euros and new contracts must be denominated in euros. Because Blair has overseen the signing of both Amsterdam and Nice Treaties, his closest people understand the full impact Britons intentions will have on this world's paper gold market. As it be contractually expressed in dollars. The credibility of these to not only represent gold but to maintain loan collateral on books will lead to several high level agreements to address this loss. Indeed, how does one transition a metal contract without moving the metal once again? Especially if the Euro suddenly, without explanation, rises in value. A rise that leaves only the door of metal fulfillment? All eyes must now search for a way to transition this beast as it's use and function will fall away as the Euro further expands. Some of your American gold must come into play during this game of kings. It must, as the BIS will sanction a complete disposal of contract liabilities from metal into Euros unless some real US gold is given up. Something your Bush will endorse but not without a price! As contract gold falls in price while expanding the physical price. I suspect it (official US gold) will be given up at the exchange rate of many thousands and even that will be the little drop of water that allows dollars to remain in this game. Our time arrives, my friend. Even as fools make effort to gain wealth in a gold market that will soon exist no more.
Tested now are the economies of both EuroZone and DollarZone with high crude values. The response of both is known. The ways of dollar wealth hasten their demise, even in the face of ECB restraint. Open and outright are they (FED) to discredit their position. This test is done and the verdict arrives soon. As with gold and oil, Dollars and Euros will neither any longer flow in the same direction.
FOA (6/9/01; 19:32:22MT - usagold.com msg#76)
Keep an eye on any lose rocks and boulders, an earthshaking event could come at any time. While our walks follow historically proven paths, the destruction of many of today's fake trails may hinder our progress of understanding for a while. Big loses by people, both large and small, who don't own what they thought they own, usually cause them to panic down the hill sides. Right into our little physical world! (smile)
I know there are some hikers here that understand the flow of water and how it expands over a "flood plain". But, many do not or cannot perceive how physical gold will rise to seek it's own level. A level equal only to other gold, in the hand and very physical. Or at the very least, gold owned, deeded and individually partitioned in a secure account vault.
I am taken by the mind that processes logic for it's own financial advancement. Usually, it (the traders mind) does a good job of gathering the facts, then inevitably it sees said illusion where reality appears. Even to the point of selling this same illusion to others that know it isn't there (smile). Our present gold market is just such a cloud on the wind.
All over this mountain there are guides that promote the huge overhang of contract gold. An overhang that has no real metal supply to settle it, if push came to shove. Even if a large portion of official gold was brought into play, the world paper gold market just could not be traded for real metal. On this most agree. Still, these same traders that understand and sell this concept, spend their days trying to know the exact time the default will occur so they can buy a bunch of paper contracts and profit. In their mind, they see that a major default will bring in an unlimited number of buyers. Both to get new contracts and to close out short positions.
In a very broad way, this view extends well into the rest of the not so visible gold market. The problem is that today, a timeline change in the currency markets is about to completely undo the end result of this strategy. The end result of this colossal change will break the gold markets into valuations of different amounts. Just like water, gold wealth of different properties cannot attain the same level. In the event of a large enough default, the entire world of paper gold trading will be forced into full cash settlement. The question will be presented: "if there isn't enough gold around to settle these commitments, then there isn't any point in letting the price rise further to effect still no metal settlement",,,,,,, " This was a contract trading market anyway, not a gold market"! Further, the international banking industry, in accords with their governments, will enforce a kind of "position limit" on the amount of gold liability they or their customers can carry. Both long and short. It will have nothing to do with the exchanges, rather it will be a bookkeeping problem being addressed by the banks. Still, it will impact the illusion price we use for gold,,,, downward. The net effect of this will be just the opposite of what paper gold players expect as positions are "force liquidated" prior to even a "cash settlement". This sudden dumping of major contract commitments onto the markets will drive the cash settlement price of gold,,,,, ?.
This is the reality of the political banking world we live in. Neither the EuroZone or DollarZone banking world is going to let the destruction of the Anglo/Dollar gold market shut down their financial system. Take some loses? Sure! But this portion of the pie is nothing compared to the troubles to be managed by the US (our Fed) as the dollar's roll as reserve is removed. Granted, once the game is underway a true Free Gold market, trading noncolateral gold, will come about. It will be endorsed as governments settle a small portion of their political scores using physical gold reevaluated up into the "low oxygen zone". Mostly it will be US gold being moved.
These goldbug guides (mentioned above) are mostly playing for a currency profit, not gold. The same is true of "in the ground" gold advocates. While their profits and loses grow and fall in line with most gamblers, slowly, these players are losing credibility as the paper markets out play these goldbug's net worth. As events they expect to repeat are rebuffed by massive "cash backed" selling of paper gold, the expected "big" profits always fail to arrive. It's been this way for as long as Another said it would! Yes, something could change and send paper gold through the roof before anyone can stop it. If it does,,,,, good! Physical gold will do very well! But, I doubt these profits will ever be sent out as checks in the mail. Believe it!
Witness the recent long blowout of paper players on the comex? The so called "big traders" these guides thought were about to demand delivery. They were not the real "Big Traders" (I know) were they? If they were they would have demanded delivery even if the short side sold 500,000 contracts short. Even it they (sellers) drove the paper price down with empty sales! The reason these real gold advocates (Giants) buy physical gold is because they are waiting for this dollar casino of a gold currency market to shut down. This reality will end in a locked, no delivery market! Once again, Believe it!
Truly, this recent move was long "little traders" wanting to make currency profits without the real assets to back it up. Nothing more. We will see more of this as it all comes to it's end. When the real gold run Another points to comes,,,,, no one will profit anything near the amounts physical gold advocates will.
As I have said so often, the numbers we look at for today's gold price are an illusion. Because there is no real physical market large enough in scope to balance the paper trading settlement price. The price for physical gold unknown. To our advantage, gold is sold by past and present owners and this supply helps lend credibility to the market. Without it, we could not buy any gold, only cash settled contracts. A type of settled market that, if you read Another's letter, is not far away.
We all have trouble understand how there is no value known for physical gold. Yet, if we look at another market we could grasp this issue. Take American real estate:
We all have an idea what that house down the street sells for. But consider that that price does not reflect the true value of the physical house. Just watching the 30 year loan rate tells us where most home prices are going. I think (as an unreal example) almost every person would agree that is the fed went into the market to buy any and all 30 year house loans until the rates fell to 1%,,,,,, home prices would explode! Conversely, if all credit for houses was shut off,,,,,,,,, cash deals only,,,,,, home prices would crash!
How does this reflect on our gold market? We can see where a cash house is worth one price while a credit house is at a different level. The physical is the same even though means of trading and owning it generate an illusion value. You don't truly own a house brought on credit, in this light we can see that you live in something actually owned by the bank. But, you benefit by trading it if the price rises. Actually, currency profits from ownership illusion.
Our gold market has been in this same illusion fog for decades. The gold so many in the industry think they own and trade is truly just a commitment of another entity to supply you with said gold. By far, we buy, sell, lend and borrow something of an illusion. Paper trading dwarfs physical by an incredible amount. Mostly because the majority of us investors do not want to actually possess, and therefore use the physical gold. This price illusion is exactly the opposite of my above example. The credit gold price is driven far below the real gold price because supply is easily expanded to extend to anyone wishing to trade an illusion. You have just seen such an event on the US comex recently.
Other guides all point out that this cannot go on forever as eventually "Real demand usage" catches up with available "real supply". I agree. However, society has a way of changing the rules when the economic wealth that their savings are based on comes into risk. Our fiat banks will not be allowed to fail. Just as in 1971, when that real gold demand suddenly expands it's boundaries to include ordinary gold investors, the supply rules will be changed again. Fortunately for us Physical Gold Advocates, the next rule change will evolve from a reserve system that has no threat from a rising dollar gold price. Even if the contract markets crash and physical gold traded in Europe goes into the thousands, the Euro will find strength from such an occurrence. The ECB will embrase it and promote the same.
Dollar gold in the thousands,,,,,, USA inflation going hyper,,,,, The EuroZone dealing with the changes as the BIS settles all our gold dealings,,,,,,,,, And cheap Euro oil making sure Europe doesn't fail too.
Do I wish for this? Only a fool would comment to ask such a question. Am I preparing for this transition? Another would be happy to see that I am! (smile)
Thank you all for walking
I'm here for a while and will be adding more over the days
FOA (06/12/01; 11:23:21MT - usagold.com msg#77)
-----Cavan Man (6/10/01; 19:35:39MT - usagold.com msg#: 55822)---It's getting dark on the gold trail.----------
Hello Cavan Man, let's walk a bit!
I just looked outside my cabin, here on the trail, and everything looks very bright to me. (smile)But one has to allow me that view as I saw this "New Gold Market" a long,,, long,,,, time ago and began making adjustments. Adjustments in the kind of wealth I own that would carry me for the whole trip. Not just these little side trails (trades) so many Gold Bugs are still trying to make pay off.
It is difficult for us to define, in explanation form, a new political perception as it evolves. Especially with old Gold players still presenting their gold views in a "has been context". Trying to explain the latest paper pricing moves as if it will fit into their past game plan. It doesn't and as time passes everyone is slowly seeing that something is changing. Michael Kosares has the best game for new advocates and I think some of them are now going that way. Just buy gold from a dealer that sees thru the fog and forget the stories of "has been leverage". True, that leverage payoff may somehow show up for a while, but none of these players will get much of a check compared to what's coming.
Yes, it is frustrating for anyone that cannot see the whole picture. Gold Bugs watch as their portfolios are further impaired as a result of investing habits that cannot evolve. Again, all based on old perceptions about today's gold. While I, too, enjoy watching TI (technical interpretations) and daily movements in the price functions of "gold substitutes",,,,,, none of this has any bearing on what "real gold" values are today or will later be as this all plays out. You see, the drama is in the political game and that game is what will determine how soon and by how much the "real value" of gold is displayed. Non the trillions of paper gold trades made around the world today, on this failing dollar gold market, can define the real value of gold.
By now everyone should understand that for every dollar that can be bet on a rising price of "paper gold"; three dollars can be made available to create and sell them the other side of that bet. When the big political moves come later and change our currency game, therefore our gold pricing game, this very same fiat contract creating ability will stand against your receiving the later value of physical gold. As expressed in a paper price.
Truly, the market is not manipulated so much as it has found a short term opposing balance. A timely political balance that has used this unlimited fiat creation as the gold price controller. A force being used to smooth a transition from one currency to another. Gold Bugs use this very same fiat creation to buy long "fiat gold contracts" and then complain because the banking reserve system, we all use can do the same. These "Anti Gold Bug" traders can create and supply just as much fiat power to sell us gold as we can use it to buy gold. Then when our futures / paper price remains the same and it's a cabal killing us. Actually, it's the modern Gold Bug's desire to shun physical gold ownership that's killing him as that desire was discovered and exploited for political means. It's free enterprise,,,,, Gold Bugs created a demand for something paper and a paper supply creation is delivered.
I marvel at how advocates of paper investing spend their time trying to determine when someone is going to buy up and corner this kind of paper market. Forget it, it's not going to happen. No one can force a paper market that has unlimited creation potential. And only a fool would try to demand delivery of a good he doesn't have the assets to pay for,,,,,, and do it in a market he knows doesn't have the metal to deliver. I know this, you know this, the government knows this and the Giants know it. Far better to just keep buying gold that will one day be correctly valued when this market's political use is done. So, have you somewhat positioned yourself for the great cornering of this "gold printing press",,,,, or are you more smartly playing the Kings game?
A few comments on your post items:
--- 1. Comex defaults.------
Yes, once again, here is an area that brings out the most impassioned analysis of most gold bugs. They all watch and wait for this big event so their paper gold substitutes can finally get them back to even. (smile) Still, everyone has their leveraged bets, in some form, waiting for the big one.
On a side note:
I smile at this because we read about the great percentage gains leveraged people are enjoying every time "paper prices" make a little move. Lost in the discussion is that this "New Gold Market" has removed such a tremendous percentage of their wealth already, that several 100% moves in these "gambles" would not make them close to whole. On a complete, long term Net / Net basis.
Someone points out their paper purchase at the lows of say, just a year or so ago, and they are now ahead and you could be too if only your ears could ignore Another. Ha! Ha! Or even buy the lesser metals, as that's where we will make it all up. Always lost in the logic is the fact that these "Gold Bugs" don't or won't advertise their previous adventures. In Hawaii (where I had lived in a small place for some time) the locals have a name for this "thought process"; "Ocean Money"! It floats in on the tide, rots a while, then floats out. (smile) They say:
"Look at that new guy, he's leaving town with a million! Must be a real successful Bro caus he only lost 9 mil to beach rot! Managed to keep some! Came here with ten million and now is on the airplane bragging to his friends. Talking about how they could leave the islands with a million too,,, if all those listening would follow his lead ////// they be rich too!
Ha! Ha! Cavan Man, I think you
(and others) get my point as this connects to our new traders
at the forum. With good instincts, they will rot only a little
(huge, oversized smile)
So what are we looking for when I watch the paper gold prices and comex? What gets me excited when the market begins a little move? Well, it's not the fact that it's going up, rather we are looking to see if the impact of political change is working the gold derivative's credibility yet? I am looking for some wild spurt of trading that lasts for several days or weeks. Open interest rapidly surging hundreds of thousands of contracts, then just as fast plunging away. A paper gold market, containing tremendous price changes ($100++ or more per day, both up and down) that begin to call into question the ability of Comex to function. Not so much question it's function as an price setting exchange, rather question if it can later function at all in the metal settlement process.
Where the big positions on the opposite side of the longs (shorts) find themselves in a changing world market without physical supply,,,, at almost any price. Brought on by a currency transition. Where big physical bullion dealings (one tonne ++) between real buyers and sellers,,,, outside and away from the exchanges,,,,, begins to run at a huge premiums to our contract based paper trades. Perhaps hundreds of dollars or percent higher,,,,, even impacting the ebb and flow in the coins world as misguided investors quickly sell for profits only to find no market goods later at twice the price.
In this environment, the big shorts on all paper based exchanges will be selling these new "cash created contracts" to the very limits of their capital. And trust me, they will not reach those limits because an unlimited amount of credit will be made available to them. Remember,,,,, for them,,,,, regardless of the supply,,,, the demand,,,, or the price of physical traded metal,,,, as long as the paper contract price doesn't close "up" too much,,,,, there is no risk or call on their capital. They can just keep on selling.
But, eventually (perhaps over only one day!) the outside the exchange demand for physical and it's escalating premium, will most likely see legal force from their physical buyers driving long players to demand delivery. Even if it cannot be delivered. Long,,,,,, longggggg,,,, before these delivery demands ever fully surface, comex will state position limits, cash settlement and trade for liquidation only. For you new people, this is exactly what they did during the Hunt silver fiasco. They have to do this because the articles these exchanges were created under manifest these trading places as price setting and price hedging establishments. Where the greatest majority of their trading is meant for cash contract settlement, not physical delivery settlement.
In this light, only Gold Advocates understand that default on Comex is really the forced non metal settlement of a contract at a contrived paper price. A price far below the physical traded price. Most likely a last day of trading price that settles out hundreds of percent below the world price for physical metal trading,,,,,, as it appears the very next day.
The big difference today (from the HUNT problem then) will be in the nature of this default. His was brought on by private investors buying a commodity. Today, gold market default and failure will be forced upon the dollar gold world by a sudden lack of "price setting" credibility. And that loss of credibility will stem from the stressed conversion of dollar contracts into Euro denominated units that demand "market based performance" (physical priced valuations) or an escalated (higher) Euro based cash settlement. This all will manifest in a lack of credibility in paper dollar gold trading that can no longer be marked to the market at the same value of physical gold.
This failure of price matching,,,,, this failure of contract conversion into metal,,,,,, this failure in the world gold market to any longer be able to correctly price real bullion,,,,,, will lead to a wholesale dumping of all dollar contracts that have US based performance,,,,,,and start a fall away of all dealings based on present protocols dollar market gold exchange.
As a side note: This will not apply to the paper silver markets as silver will not have the Euro vs. Dollar political struggle. A struggle where the ECB members are trying to loosen their main asset (gold) as a reserve wealth backing to replace the massive loss of dollar reserves. Remember, further back on the trail we covered how these reserve dollars will be simply cast down. In this light, silver trading will bear the brunt of selling in an effort to balance loses from a gold exchange that no longer works. Because silver has no hope of an official free market, it's paper pricing system may run amuck until it's price plunges to??? This is the reason so many countries that are contemplating a switch from dollar to Euro use are selling physical silver and buying gold (China, India, etc). It also explains to movement of gold between countries that planned outright Euro conversion.
Back to gold's paper pricing breakdown:
It will not lead to the collapse of world banking so much as it will lead to a reallocation of value between assets vs reserves. Which are and which are not. Further, a loss of paper exchange trading will drive gold to it's true physically traded price. Gold in the tens of thousands per ounce will represent:
,,,, it's real currency value in today's expanded fiat world,,,,,,, then later it will advance further on the price inflation coming to the USA. This is where so many thinkers cannot see super priced gold. They are seeing the present illusion of gold value as it's base. Later, a gold move from say, $10,000 to $20,000++ will only represent a 50% rise. Liken to an oh so understandable $300 to $600 today.
,,,,, the total rejection of owning gold in any form except the real thing,,,, no amount of gold supply will come close to equalizing this current ownership imbalance built up over many decades. If anything, sellers will be confounded as nothing keeps pace with the gold rise. Once sold, it only costs double to rebuy.
,,,,, a return of old world values in that gold is worth owning as a lifetime wealth asset beside your cash and other investments,,,,,, While the US will experience a massive retrenchment of it's wealth perceptions, our move into gold will be chaotic and traumatic. Other parts of the globe will fare well. Life will go on. Remember, people talk about how the US makes a quarter of the worlds products and services and say the rest of the world cannot do without our operating as usual. But, they forget that we consume all of it (that 25%) and then import more. Our production fall away will mostly be at the mercy of our own slow down. As the dollar tumbles on exchange markets, so too will our cost rise to produce anything (massive hyper price inflation). Rendering a net / net non gain in world trade advantage. In other words, our goods may very well rise in price faster than our dollar falls. If anything, we become even less competitive with Euro based production.
This new realigned price of gold will offer no threat to the Euro as it does to our Dollar. The open gold value calculations by the ECB proclaim their intention to allow gold to rise as a Euro enhancement. Not a Euro replacement item. Remember, old world values dictated that gold was
not a competing money any more than Microsoft shares are against the dollar today.
Gold, from times past was a wealth asset more so than it was in the form of money. Granted, it became the fastest moving form of wealth, but as it traveled on the road it was still simply seen as a tradable wealth. It has been American and Western ideals that made gold a lend able money and forced it's competition against failed currency systems. We set currencies in fixed gold amounts and then inflated the currency. No wonder gold competed against currencies. The ECB will allow gold to go to the moon and everyone will love them for it. People will use the Euro whether gold is at 1 Euro or a trillion.
Arguments against this new logic (by failing Gold Bugs) are little more than a throw back to their outmoded Western money logic. ET (a USAGOLD poster) even thinks that by freeing gold to rise to whatever level it wants,,,,, we are somehow governing it??? That direction of thinking is caused by "promoted investing". The logic is to somehow invest in gold (the industry or it's paper leverage) more so than owning the metal. Leaving the agenda of physical gold storage to be something the official governments or private enterprise should do for us. They base their concepts on a return of gold recognition as a somewhat official government money after price inflation discredits the local
Such logic suggests we buy into the various SEC sanctioned (government) paper gold substitutes while governments somewhat allow a devaluation of their money against gold. Say to $800? In this way the dollar is saved a little while the gold exchanges continue life as before. This, my friend was a failure in the past and the future will provide a very different rendering.
Higher we go
We have named our big fish and it is Allan himself! The old Gold Advocate, from way back, that knows how to use gold as a system saving tool when backed into a corner. They have reclassified some of the American gold for use later. It is still ours now, to be sure and has not been swapped or sold. It was renamed with the full intentions of our ESF buying dollar reserves from Euro CBs (and others) as the Euro later gains usage (and value) independent of the dollar. In light of the Blair vote, I would rate their move as very smart. This was done (and will be done more so later) to provide backing and settlement against US paper gold commitments owed to and already delivered into oil ownership. This paper is mostly in Euro banks.
This was "part" of the price we paid for oil to flow in dollars this last decade as the Euro was born. This was the price we paid for an extension of dollar use in oil settlement. It will be moved when gold trades at a much,,,,, much higher price. It backs Another's point of long ago that oil was traded for gold in the thousands at that time,,,, we just had to wait for the real price to be shown. It will!
This is the decades long game we are playing for, my friend. This is the big one we own gold for. This will be the defining moment in our time that changes perceptions about the value, reserve currencies and the wealth of ages. Watch with me now, as events prove all things!
Thanks, Cavan Man
FOA (06/19/01; 19:26:30MT - usagold.com msg#78)
Time for a rest!
We are a little bushed from all the recent path clearing, here on the Gold Trail. So, rather than walk the trail today, I want to just speak a little about some various things that may interest some. Let's rest here on the porch and consider:
A long time ago a gentleman told me; "go ahead, use your mind, speak for me as I give to you. Tell them our thoughts, it be good for all to know these things". With that comment, it all started. Even further back, long before we had these internet forums the logic and efforts behind this push was flowing..
Presently, I write almost entirely for myself. Another shares with me when and if as he sees fit. Often, to my consternation, and some embarrassment, his Thoughts do not arrive for copy when I say they will. Truly, this is as it should be.
I (we) expect none of you to consider anything said here as credible. Everything is given as I understand it. If you came with a notion that I am someone who sees the future; grab the children and run far away. For these Thoughts, and my ongoing commentary, are meant to impact exactly as the "gentleman" said they would. People hear them, and whether believed or not, the words leave a mark. A mental mark on the trail, if you will. And later, after the world turns, our little "stacks of rocks" will be easier to understand next time you are passing this way. In fact, your ability to find your own way will forever be enhanced for having seen this path in a different light.
I seek nothing and am paid nothing for this effort. CPM allows my discussion for their clients consideration and perhaps entertainment. It is not given as fact. To this end I offer this as Another has done; so these works are as free as the wind. My word is to remain, here only, until finished or as long as MK will accept me. That is all that binds my hand.
I have an old world kind of logic that requires me to stand upon or feel anything I invest my wealth in. And indeed, my wealth is partially what I know and speak. So to that end, I myself, some long time ago, have stood within the door of CPM's office! Just to look around. I spoke only to the woman at the front desk and was known to no one. By my word, this was my only contact with this fine company.
Now back to the task at hand: some comments and replies.
Instead of writing to every person that has commented to me on USAGOLD Forum over this last few days, I'll just reference a few and their
---- good words ----
and reply further myself.
------ "Thanks for working so hard for us, as always" ----
Thank you, Mr GRESHAM (smile)
------ "Can ya imagine the parallel to UAW autoworkers in the 80's who were smashing foreign cars?? How about out of work financiers rallying in downtown Flint against those "Euro lovin' traitors" who own gold just to undermine the great USA?? I'm beginning to wonder if finding some cozy place in Europe might be a wise move someday." ------------
Ha! Ha! DRAGONFLY, don't be
too hard on humankind! If you decide to go to Europe, keep a place
here also. We are not so bad, just like most of our extended families,,,,,,
hate some and love the others! (grin)
------- "And not to forget MK's latest essay - it's a-(u)wesome." --------
COBRA(too), don't ever make
the mistake of debating MK! I can see his mind and those letters
stand for "Money Knowledge"! (smile)
--------- "Dollar use has expanded in the world over for almost 30 years without being tied to gold, therefore Euro use should do the same. Dollar used the idea of forced liquidation of contracts in 1971, therefore EU should the same in 2002.---------------
GE, just follow your own trail,
sir. It will connect to ours soon enough. See you there.
---------Professor von Braun's latest update at The Rocket School of Economics,,, Excerpt from "Lecture 38"-----
Hi there, RANDY at the TOWER!
Your input did not go without thought. The professor is real sharp
and understands political power. Just look at how Placer Dome
has just been forced to formally relinquished it's holdings in
a major south american property. Between Bre-X and government grabs?????? what a place for us to put our
People forget to consider that taxing power is greater than takeover power for governments. When gold was money in the US, it didn't generate much tax revenue on it's sale. So, they grabbed the cash that at that time was in the form of gold. They didn't make any friends, but you have to admit it was a smart move.
But now it would most likely be reversed. Especially if the wealth reserve (gold) most world nations hold (the US will have a lot less a little later) becomes better taxable as the result of rising prices. In other words, there is no way governments today will grab gold if they can tax it's trade and production at far higher rates to gain fiat bookkeeping income. This avenue is part of what is behind the Free Gold drive that so few can see.
ORO rightly argues that high official taxes are what drive away all economic business endeavors and kills the tax paying goose. However, if the world's greatest wealth asset (gold) can be put in such demand that it's price starts a long steady climb,,,,,, without it competing with fiat money,,,,,, the mines will stay in production even if production is taxed to death and controlled by a new "Texas Railroad Commission". (Thanks Randy #56039!) Let's see, years from now, a mine produces gold at a gross dollar cost of $1,300 and ounce,,,,,, then sells for $27,225 an ounce,,,,,, the government taxes $23,000 an ounce,,,,,, Yup! they will make some good profit on the amount of allocated production they can do.
Just like oil today,,,,,,,, Free Gold is a good deal for tax income. And most gold industry workers will stay in their jobs (although some layoffs will happen) even though it's a dirty, almost break even deal for mine owners. Their business would only get a fraction of the profits from a huge rise in gold bullion and their shares would wallow in uncertainty as gold soars. But, then again, didn't your buddy Will Rogers say something about American risk takers,,,,like:
"staying out of the governments path with your investments is the second national pass time behind baseball"
Ho! Ho! That Will was something!
So, the future may just be a great deal for bullion owners as gold rises! Yes? Even old Aristotle would not have to sell and pay taxes,,,,,, at least until he wanted to sell to buy a better lifestyle. Yes, this is the reason that gold production is today and will be later such a bad investment.
Compared to bullion and rare coins, that is! *[With their regular capital gains tax rates.] *(Ed. note: appended according to following post)
---------------- "CALL ME SIMPLE, CALL ME WHAT EVER...... BUT THAT BAGS IT FOR ME" ---------------------
OK, BUENA FE! You are on the
team,,,,,, onward! (smile)
------ "I do not understand FOA's statement that because the ECB decrees it, gold will not be anywhere, lent or borrowed. Seems to me that what I do with my gold is outside any jurisdiction of the ECB, and the same is true of many others" ---------------
Actually GOLDFAN, your feelings
were easily comparable to those of drinkers during our American
prohibition. Alcohol was against the law but people did it anyway.
In many ways people's actions are the free market that is so powerful
against government laws. During the war, everything from cigarettes
to rubber was rationed and outlawed from typical use. Still, the
market often overcame the law. Heck, even today, drugs and any
number of other illegal activities are done as the law has little
ability to stop the same.
But that's not the kind of law what this vision of a Free Gold market will depend on. These examples above outline rules and laws that restrict actions. For any wealth law to have an effect, it would have to be a known official protocol on the recourse side of disputed claims. Almost like how the dollar Legal Tender is a law in the US and mostly a protocol in the rest of the world. It regulates how you settle currency debts everywhere but has no real jurisdiction overseas. Except through IMF agreements.
On gold settlement, the comex did as much when it changed it's rules on silver during the 1980 hunt fiasco. By stopping the hunts from settling their futures contracts in physical silver, they stopped real people from dealing silver thru contract. At least on that exchange.
I don't expect the EBES (Euro Bullion Exchange System or whatever type name they use) to act exactly, but in the same spirit. No one is going to tell anyone they cannot enter into gold contracts. Sure, we will be able to borrow, lend, option or sell gold all we want. But, unlike those overt alcohol laws during prohibition, today's gold party people be able to drink all they want. (smile) That is deal in all the gold collateral you want. But, if any of those deals go bad because the other side wants to walk, instead of deliver, you will have to settle in cash. In a Euro court of law, no one could bind you to physical settlement if the deal was in Euro Legal Tender. Even if it was in the contract. You would have to accept cash, if contested.
Now, some say this will simply drive all gold deals outside Europe. That's thinking in the present context. But in the future the dollar reserve and it's credit gold market will be in a shambles with people running all over the globe just looking for a place to deal gold at all. Credit gold will be a joke by then as trillions of losses will be outstanding.
The effect of all this would be to drive most every portion of physical gold dealings into "on the spot" buying and selling. Mostly in Euros. A mine could still borrow, using the value of gold as collateral, but it would only be the "cash value" of that gold that could be used in settlement (if the deal went to court). OR physical settlement if both sides had no problem (and stayed out of court).
This kind of legal protocol change, not unlike changing comex rules of trade, only affects the financial side of gold and in no way restricts investors from cash spot dealing in physical gold. Again, it would force the world gold markets to adjust away from copying the old dollar markets that so manipulated the physical gold price in the first place. Of course, no one would be trying to deal gold in dollars then anyway.
In reality, very little physical gold would be borrowed, either ahead of production or from world stores to sell into the spot market. If one owned gold and wanted to liquidate to buy something, you would sell it, pay taxes and use your dollars ,,,, errrr Euros! Gold would, over time, rise to reflect it's real reserve value to both central banks and private owners the world over.
OIL, governments, corporations and families would once again all be buying real gold for the historic wealth value such a metal imparted to a portion of their total asset savings. The demand for gold would once again be generated for it's main "historic utility";
"a wealth no social group could inflate thru monetary credit use"
Gold would would then become a moving tradable asset that tended to value currencies in parallel. A wealth without a country or sponsor. If one preferred to see as MK might, as a money without a country, that's good too!
The effect would be the same. The physical price on gold would respond to the ebb and flow of a rare metal no different than the ebb and flow of currencies today. As the always present inflation tax took away from fiat, as it has done from the beginnings of time,,,,, so too would the various gains taxes take from gold as it was traded for cash to buy things. There would be no monopoly of either over the other. The wealth utility of gold would be matched by the necessity utility of digital money. Fiat would be inflated at "whatever rate" as it stayed in settlement use. Investments would be made and lost, no different than today in our largely "ungold" fiat money world. Only for gold, then, it would be purchased for it's longer term ownership by both official and private interest.
If there is one redeeming consideration here,,,, it is that gold, separate from all money issues, would rise to reflect all the wealth inherent in the world. Just as it's value did in ancient times. But remember, when trying to compare values back then, that bottle of olive oil was worth so much more to life than an equal item is today. However, our modern world has a 1,000,000 times the total wealth as existed back then. Truly, gold has a long journey of price appreciation before it even begins to slow. Our children will not see it's full value reached.
Will such a transition be stopped? Not if it benefits the purpose of everyone and this certainly will. Is it the best? No, I think ORO's directions are the best, but the world has proven we will never live with it. Much less even try to return to it. War "times 2" will not bring us to gold money again. Besides, we live in today and tomorrow, not the past and we have changed our economic dynamics far too much for gold to ever be used as credit money again. Yes, the dollar will fail and it's whole economic system will slowly (or quickly) fall away. But, we are an energetic lot and have already planned the next replacement.
So onward we hike to see how the path turns.
OK, enough for now. (smile) I want to thank everyone that read, commented or considered these thoughts. Both here and on the main forum as well as OROs great works. I'll reply more to other's posts when I return in a few days. Perhaps then Journeyman and I can go out for some burgers and beer on the USAGOLD Forum,,,,,, while we talk about our differences on gold (smile).
FOA (06/19/01; 19:47:46MT - usagold.com msg#79)
Left am item out and messed up my poem. Here is the corrected:
So, the future may just be a great deal for bullion owners as gold rises! Yes? Even old Aristotle would not have to sell and pay taxes,,,,,, at least until he wanted to sell to buy a better lifestyle. Yes, this is the reason that gold production is today and will be later such a bad investment.
Compared to bullion and rare coins, that is! +++ With their regular capital gains tax rates.++
OK, good day to all
FOA (06/28/01; 17:36:00MT - usagold.com msg#80)
The sun begins to rise!
Reading Michael's Commentary & Review, posted today at:
------USAGOLD (06/28/01; 09:01:37MT - usagold.com msg#: 57063)
On Kemp, van Eck, and Dogs Who Know When a Storm Is Approaching-----
I seems some thinkers are seeing
what is happening now along with the implications this will have
on our economic structure. MK is right, Mr. Kemp is coming around.
So too must any one that considers the big picture. Truly, our
Randy is not the only person that is tabulating this incredible
pace of money creation.
Today, US money authorities are caught in a trap that can only lead to a real inflation. Not the little 10% to 20% runs so many were frightened by in the past. Rather a price inflation spiral that marks the closing era of our dominant currency system,,,,, the dollar reserve.
After all these years of expanding our debts, our business and our leverage in this economy, there now comes a time when it will expand no more. This is such a time. Once pushed over this hill, our economic train ride takes on a different feel. Official strategy, policy and thrust is all at once changed to maintaining the system's function with little regard to long term economic results. Money quality is abandoned for just some measure of continued money demand. All eyes are trained on maintaining financial asset values with little regards to saving the main economic structure's profitability, such as in the manufacturing sector.
Rates are lowered time and time again as money substitutes expand at ever higher rates. Suddenly there is now no room for a fed induced business slowdown. Because such a change would not just slow the economy, as in the past,,,,,, it would wreck the actual currency structure.
We have but to notice the reverse reaction present in today's exchange rates, compared to years gone by. All at once, the currency must have inflationary policy to keep the exchange rate up. Where in the past such a lowering of interest rates along with a money expanding drive would have driven the dollar down. With this understanding alone, we can know our system is over the hill,,,,,, past the end of our currency timeline,,,,,, heading down into the final inflation.
As long as the Euro can stay behind the dollar on exchange rates,,,,, our trade deficit must grow,,,, our internal manufacturing sector must weaken,,,,, and our financial structure must have ever more money aggregate expansion to stay solvent. This is the deadly cycle we are in. To escape, we would have to lock down our money expansion in a way that, today, would crash the dollar and cede it's reserve function to the Euro. Our bet is that we will inflate until the system fails completely. Truly, the ECB and most of EuroLand has made the same bet.
On the subject of dollar strength:
This is not the first time investors have picked the bones of a dying economy. The examples are there for reference. During the fall of Rome, traders flocked into the city to trade property and do deals,,,,,,, even as hell approached from the north. Today, the world is biding up our currency in the same insane attempt to catch the last trade before the golden goose is gone.
Where will wealth travel:
The Euro system did not build this trap. We built it ourselves by demanding a lifestyle that only debt could produce. As the years passed, our trap only grew larger. The Euro project is the result of planers seeing our trend and making ready for it's eventual finish. Yes, they are just like us but the only difference is that their train is only a small way up the hill while ours is already on the other side,,, picking up speed to the bottom. Will investors jump ship later, as big time dollar price inflation begins to mark our system to the market? Some say they won't. I say the same mentality that drives traders to buy goods in our burning dollar house today will easily send wealth to EuroLand when everything here is on fire. Look around, consider the Western perception and you judge for yourself.
Michael's mention of Bill Gate's wealth being enough to almost buy our gold reserves should speak volumes to Western Gold Bugs. Still, most of them still talk of $500,,, $600,,, $800 gold as a worthy level. It's as if they were lost in some time warp of years gone by. Truly, our money inflation has soared so fast and so far gold's real price implications are completely off their radar screen. With comments like; "$1500 gold would mean total financial destruction in this country",,,and ,,, " the gold price will only match inflation, so there is no gain in it",,,, it's clear they are lost in time and space.
Physical gold will soar when our burning dollars render the anglo paper gold credit system unworkable. Real bullion will never be able to service existing paper gold credits. Most owners will be forced to accept trailing currency payments that come in at hundreds of percent below actual bullion prices.
Because our dollar reserve structure has shielded us from a true price inflation, gold players keep looking at modern production costs as an accurate gauge to judge even the commodity production price of gold. Using that as reasoning that gold can't rise to far. Using the old logic of: " if we can produce gold for $350, then $2,000 gold would bring tonnes of it out of the woodwork and the ground!"
Well, if the dollar reserve function was removed, real goods price inflation in the production cost of gold would drive it's base dollar cost into the $0,000+++ range. And even that would only accommodate the price inflation currently in the system. With the end time drive of dollar inflation, we are now entering, gold production costs worldwide,,,, in dollar terms will soar.
Just this small area of gold's commodity function should send signals that gold prices are far removed from even Western Gold Bug reality. Truly, it will later rise to a level beyond imagination.
The fact that people are thinking out loud (in the WSJ) about allowing gold to go free ,,,, even clearing out the US reserves,,,,,, indicates the enormity of any workout to balance the current Bullion Bank mismatch. Free Gold and Credit Paper gold cannot coexist once the credit side has expanded for so long. The markdown within the banking credit system would discount all credit gold for years to come. The anglo dollar system for expanding gold credit assets would be gone for a long, long time.
In reality it should be clear to anyone that knows how governments react when the system cannot balance. Everyone goes home with what's in their hand,,,,,, as laws are abrogated and contracts are dissolved. Settlement comes in the form of something less than real, mostly cash below the mark. Stationary assets in the ground are tagged to pay way more than their fair share of the workout. Leaving the owners in the same boat as the paper players.
So, on we go,,,, as events give shape to a ghostly illusion "noone" could see from afar. The world turns and a new currency is formed,,,,,, and a new gold market takes shape.
We not only watch,,,,, we watch with understanding!
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