Date: Sun Dec 07 1997 18:45
ANOTHER (THOUGHTS!) ID#60253:
Will we have"Deja-vu" again?
Some people have followed the gold market from 1970. Some have followed it all their lives, depending on when you were born. Some say they were right, as the market has fallen and they held"no gold". They council from experience and a short life.
But, some have traded gold from times before. Those who trade with the sun know we will never have"Deja-Vu" again. This market is unlike anything from the past. And those with a"short life" of investing will learn from this coming future as gold will show their knowledge was limited to where they stood on the mountain!
Unlike the past, this market has an end. And this end will not be for those who have waited to buy! They see this bottom at $100 or $200 or $250, and they will buy at the turn as no fool should have held from $360! But, I say they will buy only paper if lucky!
All should make ready and be holding metal only, as the turn will move $100+ the first day and $200 the second day as comex is closed! It will trade no more from the 3rd day on! The gold market of your youth will be no more! For those who were smart from experience not to buy at $400, will look at $600 as"the deal of a lifetime".
To close,
Try to live in this outcome and see how different the world will be. It will not be the end of all things, only the changing of most things in"western thought". The"Digital Currencies" will still trade, but we will value them as not before. Anyone who has sold gold they do not have will not be allowed to cover that position. Anyone who has brought gold they do not have will not be allowed to cover that position. Many will lose all they have in a world without honor! Looking back, one will ask,"how could I have thought that noone wanted gold, when more of it was being brought than existed"? Indeed, more gold than exists or will be produced in the next ten years! And some say,"only a fool would say the market was cornered".
During that time, a gold stock in the hand will not trade on an open market! And the government of the country, of the land, of the mine, will no doubt speak with you of new taxes on GOLD!
A year has passed as the winds of change have started to blow. Waste no more time on paper gold, you have suffered enough. Play paper games no more, as the future of your family waits a decision.
Oil is only priced in US$ worldwide. Gold is only priced in US$ worldwide. It is important that this process of dollar backing continue, as it is the only thing keeping this"digital currency" alive! It is also important that all other currencies seek the US$ for backing, as they would not survive on their own. Why would not these countries just hold oil or gold for backing? Because oil is not buried in their back yard and real gold would bankrupt them in a minute. You see, a country can buy all the paper gold they want as that gold remains on deposit at the BIS controlled CBs. But, if they try to buy real gold outside the LBMA system the price would explode and the BIS would not come to rescue their currency. All real bullion outside the system must remain available at production cost prices ( in US$ ) for the cross trading of oil thru the LBMA. There are only two threats to the world fiat currency system at present. The oil states could stop buying US$ for oil and drop all paper gold for real bullion. Or, the masses could buy up all the physical supplies thereby breaking the OIL/GOLD/US$ bond.
The paper gold market controlled by the BIS/LBMA system is, alone equal to more than all the gold in existence. This market works like a hybrid currency using approximately twenty to forty percent of all CB gold in leased form as backing. The paper behind the lease is a form of CB/gold and is used as a"fractional reserve" that has built this huge market. This system has worked and does work well. You have but to look at the good value that is received when dollar debt ( digital currency ) is purchased with oil. The world works! But this system cannot continue. There is a limit to how far gold can be inflated in quantity using"fractional reserve leasing" as backing. The fatal flaw was found in the"forward sales" of unmined gold. The whole system counted on the expansion of cheap mining techniques to supply much more gold at a cheaper price far into the future. This happened to a degree for a few years but then just leveled off.
Now the LBMA continues to flood the market with paper gold as if nothing has changed! But it has, we reached production cost! That wasn’t suppose to happen until the mining industry had raised supply many times what it is today.
To close:
Notice that we say"they use oil to buy gold" and"they use oil to buy dollars". You should try to think in these terms as oil is the real value here. Oil functions as the true gold for the modern world. Indeed, it was only when the world started needing oil for everything that gold was dropped as backing for the US$ and replaced with oil!
The falling price of physical gold only hurts the mining industry ( and it's stockholders ) and leveraged paper buyers. All others benefit from a lower value of gold. Look now as even the western public are buying coins. They help themselves even in the face record Dow Jones.
Will the BIS try to settle this unbalanced market by destroying LBMA? Or will they drive the CBs to lease another 20% in an effort to inflate this"paper gold currency". Just like the fiat dollar, if inflated it loses value. This is not lost to the oil states.
I oil says"I am currency" and I will buy gold for $10,000/oz.. Then gold will be at that price. Then all the bullion reserves will ballance debt for oil states.
If Arabia says,"I will sell oil for $10US a barrel or in gold valued at $10,000" what do you think would happen?
If I had gold I would get oil very cheap! Or if I had only US$ I would have to pay the higher price of $10.
In this day this cannot be, in that day it will look correct. This has been discussed for that time to come.
I will be gone for a time.
Someone once said,"noone wants gold, that's why the US$ price keeps falling". Many thinking ones laugh at such foolish chatter. They know that the price of gold is dropping precisely because"too many people are buying it"! Think now, if you are a person of"great worth" is it not better for you 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! An experienced guide is not needed for this trail, look around you and see. The real money is selling ALL FORMS of paper gold and buying physical! Why? Because any form of paper gold is loosing value much, much faster than metal. Some paper will disappear all together in a fire of epic proportions! The massive trading continues at LBMA, but something is now missing? The CBs are no longer lending! They will not anymore! We have reached production costs. Oil will have nothing of"gold paper" if gold must stay in the ground! And a CB values the wishes of oil far above it's return of leased gold! Hear me now,"if gold tries to go lower than US$ $280 the BIS will buy it OUTRIGHT in the OPEN for all to see"! They must! They will! I know. For no currency system could stand if"Oil" were to bid for gold!
Oil has kept"the deal" as the CBs sold paper to lower golds price! All is fair. Asia will bid for gold not as in the past. They now know that the free flow of oil has more value than the Pacific economy. But the price that was paid may be more than the world currency system can endure.
To close:
The US$ has risen on a flight of fear. That will now end as the LBMA shorts are given to wolves. If this fire burns too hot, gold will turn and it's trading halted. The price of oil will explode as gold becomes the"world oil currency"! Even now oil has locked the IMFs gold, Asia will bid against them no more. We come to extreame times.
Risk not your wealth in paper, we enter a period of truth.
To be continued
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Date: Sat Jan 17 1998 20:45
ANOTHER (THOUGHTS!) ID#60253:
For those of simple thought, such as I, gold is good to own. But, for those of need for reason, read from one who speaks to me:
The Cornering of Gold!
The final outcome of"Too Much Oil","Too little Gold" and"Worldwide Digital Currencies".
For years the governments could create currency out of nothing. But, during the last eight years, the modern currency systems have taken the final step. As digital charges in a computer, they have become but"emotional thoughts" of trading value. This is to say,"a currency unit exists only during the moment of trade". During this time, when real things are in transit, paper currency has value as an expected"trade completion". It exists as a human thought. Complete the transaction and the thought is gone, the currency unit dies.
Think about it? If for a time the world commerce stopped. All would live from what they had for, say a week. During this week, all currencies and the debts that back them would not exist! Without trade, modern currencies have no use, no value, no purpose.
During our modern age, a currency can be anything. Corn, lamps, cars, tables, anything could be used as a concept for a digital currency. You see, it exists in concept only. Even gold could be used as modern money. The real item is not used, only the concept of"how it would be used during the transaction of commerce"."Real value is not needed for modern money, as it is only used as a trading unit"!
What does all of this have to do with oil and gold? For most people, nothing. But for some people, everything! You see, some persons do not want to hold an"operating business" and the present value that represents, as their wealth. Nor do they want to hold encumbered assets or debts of others. Wealth, to these people, is not represented by a"digital trading unit of commerce".
History has shown how many persons, or groups of persons, have tried and failed while trying to corner a commodity. Greed was always the factor, as acquiring real wealth to pass on to family or country was never the aim. Using paper currencies ( or debts of the same ) to purchase these commodities, always brought on the undoing of the scam. During some years, even gold was used as a purchasing unit, as gold was the currency of that time.
But, today we come to a different period, with a different factor and circumstance. For during no period of history has an entity used a commodity to corner another commodity! The intent is not to"corner", but the result will be the same. This action is coming about because of a gross, huge mismatch of the value of gold and oil! We are not talking about the price of these items ( in any currency ). We speak of the total amount of physical gold, worldwide and the total amount of oil worldwide. During the last twenty years, the world has made oil an absolute necessity for life as we know it. During the same time, gold has been degraded to a"kind of commodity that we may need sometime but, I'm not sure". With the public, government and the business community holding these thoughts, it is easy to understand which item is needed first and which would be dumped. In this day, people would sell gold for oil, no contest!
Consider the amount of oil that is used daily. Consider the future value that this consumption places on reserves in the ground. Compare this to the amount of gold consumed daily. Notice I said"consumed daily", not"traded daily". Clearly, the consumption of oil compared to the consumption of gold places a much higher value on oil reserves than gold reserves. With no replacement for the use of oil ( at present to lower prices ) and no"needed" use for gold in today's thought, we have the ingredients for a mismatch in value of epic proportions!
The supply of oil was a problem in the 70s. Several nations actually cut off the supply to make a political point. Many thought that the"embargo" was an attempt at"cornering" the oil market. We may never know the true reasons for the large increase in the price of oil, but one thing is clear. The value of oil in today's economy is of far greater importance to maintaining present"asset values" than at any time in the past. Today, the future value of all commerce is"well bid" into every asset value! Without oil in good supply, at a currency price that allows a reasonable lifestyle, all assets would lose much relative value.
This"need" for supply is not lost to governments or their Central Banks. No single asset class or segment of the economy, by itself is more valuable than the supply of oil. This brings us back full circle, to the problem of"digital currencies" and the"mind set" of much of the simple ( and rich ) third world persons. To many of these people, wealth is the surplus of life's work that you pass on after death. Currency is something you, spend, trade or hold for a few years. It isn't wealth. Gold ( and silver ) is"on the list", so to speak.
This same mindset creates a worry in the back of many a mind in the oil states. It is clear to most, that even a small amount of gold in the asset mix, makes one appear"less western" and therefore"less foolish" when the concept of value and currency are discussed. But, the problem has always been that oil is"so large" in relation to gold that any attempt to convert, even a portion of ones assets creates a distortion in the markets. Of further concern is that; everyone knows that western minds don't like or want gold, but if they think you like it they will trade it up in price for the sake of"sticking it to you".
Enter the world of"paper gold".
Yes, gold just like currencies has been"digitized". If you brought gasoline, made from oil sold under $20/bl, you are part of this system! For just as the"digital currencies" are created for trading only, paper gold was created for the trade of oil. In a very broad sense, it was created as an"extra" or"kicker" to allow the purchase of small amounts of cheap gold in return for a full supply of oil. In reality, this gold paper represents the future production of gold ( from the ground ) to balance the reserves of oil ( also in the ground ). The huge amount of"paper gold" traded and outstanding today is now in excess of all the gold in existence above ground! In essence, it is of the same value as the currencies,"the thoughts of nations, blowing in the wind". The Central Banks gave value to this paper by selling and lending some of their gold stocks. But, as economies became hooked on cheap oil, and demanded more of the same, these same CBs had no choice but to use fractional reserve gold lending" to pump the gold market.
Now we approach the final act.
There is one oil state that no one will play for a fool. The CBs will sell all of their gold or the nations will nationalize all mines and operate them at a loss. One way or another, most of the paper gold market will be honored. Why? Because oil will bid for gold if they do not! We are not talking about an oil embargo or rising oil prices. Indeed, oil will become very cheap for those that can supply physical gold. This deal will not require the agreement of all oil states. Only one can start this, the others will gladly follow.
A large oil producer, with plenty of reserves and unused capacity, can say: We now value gold at $10, $20 or $30,000/oz.. That is the rate we will use to sell oil. We will go to"full" production and offer at $10.00us/bl.. Pay us in physical gold and USD ( or EUROs ) as a 50% mix to the above rate to equal $10/bl..
It would be a deal like none other! Oil, worldwide, would drop to $10.00/bl and every economy would do very well, IF they had gold. All gold would immediately be arbitraged to the above prices thereby creating a"world oil currency" large enough to handle oil. This creating of a new"specialized currency" will be the result of the first"commodity corner" that ever succeeded!
But what of the current currency/debt structure? We will cover that in a later article.
I feel this way also:
Do you really hold dollars?
It is important to understand that few persons or governments hold US dollars! Look at any investment portfolio and what you will find"are assets denominated in US$". This sounds simple, but it is not. You have heard the phrase,"money is moving into real estate, land, oil, stocks or bonds". It is a bad meaning, as it does not what it says.
All modern digital currencies do not go into an investment, they move THRU it. The US unit is only an exchange medium to acquire assets valued in dollars. US government bonds are the usual holding. No CB holds any currency! They hold the bonds of that currency. The major problem today, is that digital currencies have erased the currency denominations of all government/nation debt holdings! Even thou a debt is marked as DM, USA, YEN, they are in"real time" /"marked to the market" and cross valued in all currencies! No currency asset, held by CBs today are valued in the light of a single issuing country, rather"all currencies are locked together". To lose one large national currency, is to lose the entire structure as we know it!
There is an alternative. Gold! It is the only medium that currencies do not"move thru". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say"gold moves thru paper currencies". Gold can be used to revalue any asset, and not be destroyed in the process!
Mr. JTF has asked:" I would be very interested in your response to my comments regarding why"paper gold" trading cannot distort the price of physical gold significantly -"
Reply:
In times of plenty, people say one thing about physical gold, but in time of change they do the opposite. History has shown that when paper assets start to be revalued downward by gold ( gold rises ), it's physical supply dries up! People and governments"HOLD" the real physical and trade the paper, even gold paper. Never before in history have we had a gold market such as today's! It has cross currents from every direction.
You have CBs that highly value gold, but need it's price in currencies to fall as a means of pricing oil.
You have merchant banks creating a huge"digitized paper gold" market for trading only.
You have other CBs holding gold in the form of"paper commitments" and calling it physical.
You have some CBs having nothing to do with any of this and buying in the off market.
And finally, we have the threat of gold becoming an"oil currency" with the risk of total nationalization by any country that is short of both oil and gold!
The Paper Gold Market today could completely destroy the physical market by shutting down all possible trading as the currencies are devalued by gold in a massive upheaval!
Silver will always be part of"gold money". But, is far too small a market for large, modern economies. Silver will do far better than any paper asset, only it will serve better as a"personal holding" than as a major money. If it is of your way to balance wealth, then silver will show value.
Metals have not shown their true worth for many years as the world has done very well. This is very good. But, all things do change! As it is our time and place to live this change, our thoughts must view the future as it must be. Who can know the minds of men and countries as paper burns?
Consider, can they all buy silver?
The most important thing to observe is that Mr. Buffett did NOT use any form of paper to represent his silver. No options on silver, no futures, no options on silver futures, no silver mining stocks, no leased silver deals from mining stocks and no MARGIN! Most of the large buyers of metals are buying the physical, outright. Mr. Buffett had Berkshire
Hathaway purchase silver as part of it's long term"economic investment outlook". Not to be confused with a leveraged, quick profits bet. Understand, that Berkshire plays within the"world paper economy parameters", they are not looking for a currency replacement. What is not seen, are the personal holdings of Mr. Buffett, Mr. Soros and countless other"world wealthy". In those accounts you will indeed find silver, but also, much more gold!
Note, that he was buying thru much of last year. So were a number of others. The one common thought from them all is that,"the real wealth will be held in PHYSICAL form"!
"you may also follow in the footsteps of giants"
What are your"THOUGHTS" regarding the major currencies being backed by PM's?
Mr. Junior,
Any nation/state can put it's economy/currency on a gold standard. They only have two requirements. Own a stockpile of gold and raise the price very high!
In the past, when currencies were gold, a nation could not lower the amount of gold backing it's currency ( raise the price of gold ) because it lowered the currency unit worldwide and created payment imbalances. Today, no nation/currency is on a gold standard. The first country that starts will own the rest for some time.
Find me a country with many needed resources, little debt in relation to the assets and a national pride to lead? Let them price gold at many thousands not only in their currency but also in their resources! The world would buy from them, cheaply in gold but dearly in all other unbacked currencies. The markets would do the rest!
The large modern currencies, of today have only debt ridden economies to back them. They cannot change as debt blocks their path."To change is to live and to live, some debts must die". The owners of much of this debt must lose if change is to occur. Even the new EURO will not be backed by gold! It will HOLD gold only as insurance against the worst outcome, war.
Yes, an oil state comes to mind! It could even be China!
Some see metals from a view of only"supply and demand". Supply must be put for use and real demand must consume to produce a product. It is not this way with all things! If a person holds gold, must that holding is viewed with the one purpose, to sell some day for profit or loss. It is for some minds that gold in both hands can have no use? Such a mind can only see value in paper terms. For such thought finds gold as wealth, only if it is someday turned back to paper! Paper, indeed! A dangerous position to hold for the future in our lives!
Brokers and traders will show you,"turn your gold into wealth","put it to productive use, Trade It"!"Sell your gold and buy it again, many times"."Do this and find the value lost from your youth"!
But I say, spend your time in the company of truly wealthy ones, see how they make gold lie very still! Know this now, the world will again, in your time, feel value in gold as never before. And that value will be as the"productive use of holding wealth thru the fire of change"."Yes, you can also walk in the footsteps of giants".
Think now in light of the real world around us. Hold your assets in the sun of day, what do we see? A government bond denominated in a currency? Now, remove the currency from the bond, show what is in your hand? Hear me now, we see nothing of"productive use"! Yes, there is supply of the currency, and we have demand for the currency, but the end product is as the space between stars! Even in this"light of day" a trader/ government will tell you,"hold not that commodity, gold, for it is as a dead, unproductive asset". I say, run from these lies, for they see not deep in the future!
Is this not true? I an slow, but many think for me. Read please:
"Noone can see the value of a real asset when knowing how many currency units it is denominated in. Value is only known when holding one real asset next to another real asset and comparing the currency unit valuations of both. Use as an example, a $75,000 $US Mercedes and a small apartment, also $75,000. They can be traded using the currency as a temporary holding until the transaction is complete. The car and apartment are viewed as having productive use of equal value. However, it is the items that have the value, not the currency unit! The currency is of but momentary value expressed as"the intention of a trade completion". Complete the trade and"poof" the units hold no future value. At this point in time, everything in the world is"denominated" in currencies that have no use, except to complete the trade! Trillions upon trillions of digitized currency are currently being held for the"completion of commerce", extending out into other lifetimes! Of course we are speaking of any form of currency denominated debt, be it government or private.
The major threat to this collection of wealth holdings would be the introduction of any real asset currency. Any country that could"resource a currency" of use the world over does pose a threat to the wealth of nations greater then war! It is in the realm of possibilities, that a gold or oil based system would bring a resolution to the present structure as equal to" a nuclear war of currencies". Our concept of value, would indeed have to start over."
Mr. Cjs1, To say"this is good" or"your view is a good one" in my world, is to say"I agree" in your world."good thoughts flow as cool water for a thirsty mind"
Usw.
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