could be worth over one trillion US$,

would you buy gold for all to see? No.

If you had this much wealth, would you

want others to see you as getting “rich”

from oil sales? No. How could you

hold and build your massive wealth over

many years, but still have everyone view

this people as “in debt and just making it”?

The answer comes from the distant past.

Take in gold as the CBs force it to fall against

all other forms of value.

But, how can 100million + ozs of gold be

equal to all the oil in Arabia? It all depends

on how it’s valued, simple yes?

If a CB says gold is $300oz, we say he is

nuts! But, if $300 or $250 gold buy $19 oil,

perhaps the CB is smart!

It is far better if $19/oil buys $300 gold than

$100/oil buy $5,000 gold!

What if the oil states offered to buy gold with

oil, OUTRIGHT? No currencies involved. “ We

will produce flat out, all the oil you want. And, we

offer this oil as payment, per barrel, to buy ( say? )

25US dollars or gold priced by us, at ( say? ) $10,000oz.!”

The answer is very simple, the world would sell them

gold for oil. I tell you now, this almost happened!

You think long and hard on this as the outcome would

have been far different from what all think.

Instead, the BIS set up a plan where gold would be

slowly brought down to production price. To do this

required some oil states to take the long side of much

leased/forward gold deals even as they “bid for physical

under a falling market”. Using a small amount of in ground

oil as backing they could hold huge positions without being

visible. For a long time they were the only ones holding

much of this paper. Then, the Asians began to compete on

the physical side.

How will this all end? As the CBs never sold much

of their gold, they are still locked to the deals thru

the BIS. In the real world it was stocks of gold

outside the governments that got traded. And that

trading multiplied many times. Today, more gold

is traded than exists! This paper today, has become

the “gold pricing standard” without backing. There

is no way out! As we have now reached production

cost, we have reached, “THE END”! Without real

physical to supply the oil states, they WILL bid for

gold with oil! The BIS will do the only thing they

can, halt all trading and declare gold a

“world oil currency”! To that end, all forms of paper

gold will burn.

How long till this starts? I understand that the CBs

are slowly winding down lending, then sales. This

will, no doubt start a paper panic at some time. It

could take weeks or a year, I do not know.

As for the old agreement of oil/gold ratio, it went

out the window after the gulf war.

More later.

Yes, I would hold off on celebrating the low inflation numbers just yet. Low cost goods are fine but, when you lose your job because of them and have no income to pay the bills with, who are you going to be mad at? This is why the printing presses and credit creation will be running full tilt. Getting shot is painful... Much better to inflate. :- )

I had put my money where my mouth was...

I have been killed....washed..burried...Run over by the ...@&%!

But,..the toughness goldbug realism in me will survive!

....As we say in this great Canadian lost Toundra,

live in this environement,

Down ...but not OUT...!

Group Therapy at kitco is EXTRAORDINAIRE. Thank you Bart.

with 10 million ounces ( 311 tonnes ) in 1996 and 22 million ounces in 93.

I've been watching Comex warehouse silver stocks decline since 1993 when they were about 270 mil ounces. Last year they declined to 129 mil at one point then Comex added another depository with about 56 mil. Stocks rose again to over 200 mil in June then rapidly declined to 126 mil--where we are now. Are we going to get surprised again with some new find of a large silver deposit or are we really running out of silver.

The charts seem to agree that the 93 high in silver warehouse stocks and subsequent decline is an accurate accounting since silver did bottom around 3.50 and has been in a slow uptrend ever since.

is a start and should help you understand.

For a number of years many persons have tried

to invest in gold using the tools of past gold

encounters. Even thought the last several

upswings in bullion always took the gold stocks

along for a ride, this time it will be different!

Ever ask someone if they owned gold. They

might say “ yes, but only 5% of my capitol

is in it for insurance” Was it bullion? “No,

my broker is to smart for that, he put me into

a good gold mutual fund.” “He says, if it really

looks like it’s going to go up I’ll also have you in

some comex futures or options ”

During the first bull market of the seventies we saw

few mining stocks outside South Africa worth owning .

Because they were relativity new to the game

most people stayed with bullion. There certainly

were no mass gold options and there were even

fewer gold coins around. Most just brought

whatever bullion bars they could find and as their

past European counterparts did, they just waited it

out.

Today, the public went “whole hog” for paper

gold and has paid a great price. Wall street

invented this game from the previous war as

a way of keeping customer “gold money “ in

house! The shame of it is that these tools not

only would not work in this new market, but

they also gave the street a way to short gold

even more effectively. In many cases the public

brought little more than “long paper” from the

street, with no gold at all on the other side!

No one will ever have the truth on this as the

falling price made most people close out

without ever calling for the goods!

A good deal of the numerous mining paper

capitol was used to enrich the sellers while

the buyers actually had no chance of seeing

a profit. That’s because the commodity

these securities were based on was all but

guaranteed to go down as forward sellers

were given a green light to sell paper gold to

the limit of their financial resources.

To make a long story short, many people

who would have purchased bullion years ago

have now squandered much of their “safe

insurance money” on wall street. It is no wonder

that many WESTERN gold investors have now turned

bitter on gold. If they knew the truth about

this new market they would have turned their

bitterness on wall street instead.

MUCH MORE TO COME:

Drowned,..Red-throated on Thanksgiving Day...?

It was suppose to be a free market.....It is all manipulated.

I lost a bunch in St. Gen. Group., still don`t know where this madness will end.I am bleeding to death not because these stocks did wrong but because it is a fake game where the T.A and fundamentals are out...and sheeps get in a slaughter-house.

The fundamentals were looking so bright.

Beg your pardon if someones get involved because of me.

I am not going to give up anyway...back to hit the sky..Flying again if I can find a new job at my relative old age of 54,..18,000 hres flight time,immaculate background and ,thanks GOD in good health.

Starting all over again,

See you in the FUTURE.

I think we are heading towards trouble with the Asia meltdown thing. The US economy will be effected. There may well be a fall on the DOW to 6000-6500 but I can't see the collapse of the financial system as we know it. The central banks and the governments of the world just won't let it happen. There will be some sweetheart deal done; a nod here a wink there, and life will go on pretty much as before. The consequences of doing otherwise would be to bad to contemplate. Can't really see a return to the gold standard either.

So, hold your gold; have fun with it. It probably will rise and make us a bit richer but predictions of $2000/oz and world economic catastrophe and collapse? Hmmmmmmmmmmm I don't think so.

Hope all you Americans have had a great Thanksgiving. Be glad that you have lots to be thankfull for ( except if you are a beggar on the street ) .

price was approaching 800. My friend commented the people there were 'working people'. The average purchase made was small - 1-2 oz.

I bought a five ounce bar and it was beautiful.

I showed my 5 ounce bar to my brother's father-in-law who at the time was

the vice-president of one of the larger Toronto stock firms. His only comment was buying at the top eh!. His response floored me but I respected his opinion. I thought about his response and went back down to the bank a few days later and sold the bar.

I spent some time watching the people who were buying ( I was a student and had lots of spare time ) . They were working people and were all convinced gold was 'going over 1000'. At the time inflation was 15% and

interested rates 22. In hindsight it was an obvious top.

The pendulum always swings too far - now it is toward the undervalued side. Where it

price was approaching 800. My friend commented the people there were 'working people'. The average purchase made was small - 1-2 oz.

I bought a five ounce bar and it was beautiful.

I showed my 5 ounce bar to my brother's father-in-law who at the time was

the vice-president of one of the larger Toronto stock firms. His only comment was buying at the top eh!. His response floored me but I respected his opinion. I thought about his response and went back down to the bank a few days later and sold the bar.

I spent some time watching the people who were buying ( I was a student and had lots of spare time ) . They were working people and were all convinced gold was 'going over 1000'. At the time inflation was 15% and

interested rates 22. In hindsight it was an obvious top.

The pendulum always swings too far - now it is toward the undervalued side. Where it

price was approaching 800. My friend commented the people there were 'working people'. The average purchase made was small - 1-2 oz.

I bought a five ounce bar and it was beautiful.

I showed my 5 ounce bar to my brother's father-in-law who at the time was

the vice-president of one of the larger Toronto stock firms. His only comment was buying at the top eh!. His response floored me but I respected his opinion. I thought about his response and went back down to the bank a few days later and sold the bar.

I spent some time watching the people who were buying ( I was a student and had lots of spare time ) . They were working people and were all convinced gold was 'going over 1000'. At the time inflation was 15% and

interested rates 22. In hindsight it was an obvious top.

The pendulum always swings too far - now it is toward the undervalued side. Where it

Nature herself makes it clear that the production of gold is labourious, the guarding of it difficult, the zest for it very great, and its use balanced between pleasure and pain

Diodorus Siculus, first centuary BC

Gold is the most exquisite of all things ... whoever possesses gold can acquire all that he desires in this world. Truly, for gold can he gain entrance for his soul into paradise

Christopher Columbus, 1500

The first quote applies to gold in 1997, very painfull. We certainly felt it in Kalgoorlie

The second certainly applies to the Rothchilds. Will it apply to gold 1998 - I hope so.

Christopher Columbus, he had something to do with America, or am I wrong on that point?!

Aye,

Haggis

G'Day again....

I have never been to Fort Knox. If gold is not a store of wealth what is the point of having any security at Fort Knox?! Surely, if gold is not a store of wealth, the US Government would not require any security.

I think not.

The Chaps in London are creating a new market for gold ..... Japan.

Aye,

Haggis

Greetings from Kalgoorlie In Western Australia.

Long has man travelled in the realms of gold

During a centuary of mining in South Africa, some 4,000 million metric tons of ore has been treated from the Witwaterand deposits, resulting in the recovery of 37 million Kg of Gold ( 1200 million ounces ) . An estimate of total global production is 3.85 billion troy ounces, which could occupy 18.5 metres cube - a small volume.

The focus of the South African production is controlled by companies directly and indirectly controlled by the Oppenheimers and Rothchild.

Given the toil, trials and tribulations inherent in the production of this gold, and the subsequent accumulation of wealth, does anyone seriously think that they, interests controlled by Rothchild, are going to give it away?! I think not.

Gold mining is not easy, a clear example recently demonstrated by Pegasus Gold Inc at Mt Todd in the

Greetings from Kalgoorlie In Western Australia.

Long has man travelled in the realms of gold

During a centuary of mining in South Africa, some 4,000 million metric tons of ore has been treated from the Witwaterand deposits, resulting in the recovery of 37 million Kg of Gold ( 1200 million ounces ) . An estimate of total global production is 3.85 billion troy ounces, which could occupy 18.5 metres cube - a small volume.

The focus of the South African production is controlled by companies directly and indirectly controlled by the Oppenheimers and Rothchild.

Given the toil, trials and tribulations inherent in the production of this gold, and the subsequent accumulation of wealth, does anyone seriously think that they, interests controlled by Rothchild, are going to give it away?! I think not.

Gold mining is not easy, a clear example recently demonstrated by Pegasus Gold Inc at Mt Todd in the

If you have any doubts because you have changed other medications, don't forget to get that PT test! Best if you get it at the same lab every time. If you don't, make sure you right down how they do the test, the INR and the ISI. With all of these numbers, you will have a better chance of understanding the result if you ever get tested at another lab.

Don't let your blood pool in your legs! Regular exercise, I'm sure, is what will be recommended if not already.

Speedy recovery! --- JTF

Clearly there are a couple of billion people that have never made a phone call. The not so modern type people.

The vast majority of the population does believe that gold and silver are money. Add up the population base of China, India and Africa for starters.

You believe that technology is omnipotent. Technology, touch your thumb and second finger together on the same hand. Technology in plain and simple terms.

The two idiot economists should have been given the Ignoble Prize.

You live in a virtual financial world that has been created woth smoke and mirrors. Poof, your financial world is gone and when the puff of smoke clears all that will be left, gold and silver and some thug with a gun calling itself a partiot.

I forecast slower growth, lessened tax receipts, higher deficit, lower exports, bear stock markets, higher unemployment.

I'm also expecting higher gold prices for a variety of reasons.

You appear to be bullish on paper and bearish on gold.

Let us keep us informed from herein.

Crystall Bal: I think your post to LGB said it better than all of mine. It is all in the perspective -- those who have seen hard times know why gold is important, those who are too young to have seen hard times, and have failed to read their history books think gold is worthless. What amazes me is that LGB likes to straddle the middle ground. It must get uncomfortable sitting on the fence all the time.

When people try to convince me that gold is worthless I think of one of my relatives who escaped the communist chinese takeover in china, and how many chinese own gold -- simply because it is a way to carry wealth when you must leave your home because of civil unrest. The chinese know about gold, because they went through at least 3 currency debasements over a 6000 year period, when it was harder to debase a currency than it is now with electronic/plastic money. I also think of those europeans who routinely have gold accounts -- LGB must not know about this either. Perfectly acceptable to have a gold account in europe. The devastation of wars are much more recent in Europe than in the USA, so the europeans know the value of gold.

What really amazes me is that the Belgians have forgotten already! ( Or more precisely, the Belgian government has conveniently forgotten ) .

I just hope that our gold is still in Fort Knox. Just imagine what would happen to the dollar if someone announced that all the gold was sold! That day would be the day that gold went up, not down.

Anglogold CEO sees reduced gold output - WSJ

NEW YORK, Nov 28 ( Reuters ) - The chief executive of South Africa's new Anglogold forecast a major decline in world

output of gold if its market price stays under $300 an ounce for any length of time, the Wall Street Journal reported on Friday.

Anglogold is the corporate vehicle for a merger that will create the world's biggest gold producing company.

The Journal quoted Anglogold CEO Bobby Godsell as saying in an interview that ``if the price stays below $300 for any length

of time, a huge amount of gold production will come out.''

Godsell's statement followed a drop in the price of gold to below $300 an ounce on Wednesday, its lowest point since 1985.

In the interview, Godsell also called on central banks to clarify their positions on gold reserve.

http://biz.yahoo.com/finance/971128/anglogold_ceo_sees_r_1.html

When the wake up call comes, gold will skyrocket. In the meanwhile just as you say yourself, it is still worthwhile buying gold coins.

You are are right that gold coin transactions cannot replace electronic money transfer. I don't plan to put all my assets into gold. In fact I know we have had a conversation like this before, and you have many more gold coins than I do.

What is important is the gold offers an anchor to reality for any electronic currency that is developed, eg the University of Warwick economic symposium in 1990.

Until governments are no longer able to corrupt their currencies, the people of the world will need gold, and gold coins. Just as you do.

My problem is that I think gold has room to go down before it goes up, barring an international crisis.

As we have seen, there are posters on this site who do not believe that gold is a store of value. Just how many of the Central banks believe this, and how many do not?

I think we can get a better estimate of how much lower gold can go down by making a list of the central banks, how much gold each one has, and whether we would expect they would sell gold at this point.

I doubt the following banks would sell gold now, because they know better. ( 1995 numbers, in million ounces ) :

USA 763

Germany 95.2

Switzerland 83.3

France 81.9

Where is the rest of the CB gold? Is there any left among those that do not believe gold is an asset of value? I sometimes worry about the USA, because we could be dumb enough to sell gold. If anything, given the size of our economy, we should be buying it. Fortunately our own AG knows the value of gold, since he has said only about one month ago that we should go back to the gold standard.

LGB2_A: I've got one for you. Why did our R Rubin say that the USA is currently buying gold if it is no longer a store of value?

imho Tom supplysider@msn.com

To you I guess over 6000 years of history is to be forgotten. If the average american or european feels the way you do, it is not surprising that the new world's central bank is not supposed to have very much gold in it. Strangely enough, the Swiss will have not have any part of that. I wonder why? The Indian government is moving toward gold accounts, because their people will buy gold whether or not it is legal anyway.

If you really believe what you are telling us, why don't you sell all of your gold coins? Then I will know that you practice what you preach!

As you rightly point out -- these assets are not secure unless they are in the form of gold, platinum or equivalent. It is not how much saving that you have that cushions a depression -- it is how much saving in hard assets.

Interest rates rising

Prime rate is now 5.50% and projected to rise vs 4.75% a few month ago.

Cdn $ falling

Was between 72 and 73 to US $ . It is now barely over .70

Stock Market falling

Check out the TSE. check the Gold stocks ( or aren't they Canadian eh? ) check out Nortel ( high of $155.00 cdn to today's $126.00 )

Payroll Taxes increasing

I'm referring to the mammoth increase in Canada Pension Plan ( oh yes a little decrease in UI )

Unemployment rising

Over 9% and more to come as the layoff in the resources industry take its toll.

Poverty

Check out today's Toronto Star, where it cites that over 1.5 million children live in poverty , 500,000 higher than in 1989.

http://www.thestar.com/

Quebec

L. Bouchard,

Hopefully I answered your question.

DEBT, derivatives and overvalued markets are our problem. That's why a well diversified portfolio in physical assets ( ei ) gold, platinum is the best strategy for years to come.

The US $ will lose its battle with Gold. Every other currency has. It's a matter of time.

However, it may be that the decaying attitude, both in the US and Canada which will be the catalyst.

I once wrote a thesis on the Roman Empire and its fallout. To summarize it A country will fall from within before it falls from without

I doubt there is any historical data that would substantiate this idea -- it would be nice if it were true -- as inflation ( other than the post WWI germany type ) is preferable to the sudden trauma of deflation ( followed by inflation ) .

Unfortunately, however, I don't think any single country in the world can avoid the Kondratiev debt - hard assets cycle, even if we don't have a world-wide depression.

bank finds the economy strong enough to justify a third interest rate rise, which instantly pushes up all borrowing rates.

Governor Gordon Thiessen has said the economy needs cooling, the dollar needs saving and it is the job of the Bank of Canada

to make policy now for 1999. Such foresight does not apparently engender any concern about the fallout from Japan and the

rest of Asia even though the Canadian dollar is weak because Asia's woes have weakened commodity prices.

http://www.theglobeandmail.com/docs/news/19971128/ROBColumn/RCOOK.html

I stand currected! This means that the two-tier system that ANOTHER was referring to was in existence. It would be nice to know how this worked, as it must still be in place. My guess is that real gold sales were necessary. My problem is that I remember doing a calculation of how much gold was needed over the last 5 years to support a $10 price differential in oil, and calculated that the central banks would have run out of gold!

Where did the subsidy for the two tier system come from?

I find it interesting that the OPEC group was accustomed to 26 barrels of crude/oz gold before the dollar went off the gold standard. OPEC has been getting significantly less income than the pre 1972 price ever since!

I doubt that the 17 barrels/oz price can be kept up much longer if oil is priced in dollars, unless the price of oil in dollars goes up fairly soon. If the US survives the massive deflationary processes going on elsewhere in the world, we will be in for an inflationary shock -- probably created by the cost of oil going up. After that time, a gold rally will be unstoppable.

OTTAWA, Nov 28 ( Reuters ) - Bankruptcies in Canada rose to 8,854 in September from 7,632 a year earlier, the

Department of Consumer and Corporate Affairs said on Friday.

The department said 940 businesses and 7,914 consumers went bankrupt in the month.

The total figure was higher than August's 7,800 bankruptcies ( 872 businesses and 6,928 consumers ) .

For the year to date, 75,478 bankruptcies have been registered ( 9,376 businesses and 66,102 consumers ) , up from 69,358 in

the same period last year.

If I am right, it may get worse before it gets better. Not good for the markets. My guess is that agricultural disruptions are going to increase.

It strikes me that the dollar has not really been freely floating in relation to oil and gold, despite the fact that the dollar was ostensibly off the gold standard since 1972. I still don't understand how the forces of oil supply and demand affect the price of oil -- inflation of the dollar should be factored in. For some reason, it is not. I think we need to understand what is the mechanism that prevents the dollar from floating freely relative to oil and gold.

One thing I do know -- any artificial system that distorts true equilibrium pricing of a commodity leads to major trouble sooner or later. It is much better to accept the current hardship of the rising price of oil than to prevent it, only to cause a sudden shift to equilibrium later. This is always the ultimate consequence of price controls. We all remember what happened to oil/gold in the 70's.

I do not think that the official entry of the ECU/EMU/EURO by itself will cause the dollar/oil relationship to change, simply because there is no indication that the new ECU/EMU/EURO currency will be any stronger than the dollar.

The combination of higher interest rates, fall of the TSE market, lower exports will significantly affect GDP growth in 1998. Therefore higher deficit, more unemployment ( presently at over 9% ) and ultimately lower US imports.

Canada, Mexico and South America represent over 45% of the US exporting market and major trading partners. The overvalued US stock market along with the WEAK trading partners, are the ACHILLI to the giant. You're only as strong as your weakest link.

With Asia already fallen ( lower US exports expected ) that leaves only Europe ( excluding Eastern Europe ) as the only healthy market for the US.

Earnings by US multinationals and share values will diminish.

Global trading has been the 'new paradigm'. Money flows where there's less risk ( presently the US ) later ( next 6 months ) ...we'll see.

The US $ will tank. Gold will soar.

Good morning Donald -- glad to have you back!

Is Donald_A the new, improved, upgraded, Mark II, enhanced Donald?

http://www.afr.com.au/content/971129/world/world4.html

He did reiterate earlier that is is short the Hong Kong market...sees

likelihood of China devaluing its currency.

Gold prices have only 'fallen' in US $ terms, but risen in other currencies. WHEN not IF the US $ tanks, speared by competitive reasons ( ei ) auto industry and the Dow tanks ( inevitable as the rewards for financial returns will be more attractive in battered markets ) . Gold will soar in US $ terms. Gold will shine as it is presently shining in other currencies.

Regardless of which scenario unfolds, the booming Japanase Nikkei market or the gloom and doom scenario ( more catastrophic for the US $and all paper currencies, as confidence erodes ) The US $ will tank. Gold will soar.

Date: Thu Nov 27 1997 09:02

Leland ( What Another has been saying..in speak-plain-talk ) ID#316193:

http://www.gigweb.com/news/it/report/

Leland, this report is very good! I will add to it

tonight and add some replys.

http://www.canoe.ca/MoneyNews/nov28_japan.html

weighting for the third time in six weeks ) on German equities was due to increasing concerns about a market were 45 percent of companies were in sectors

such as chemicals, engineering and autos where the global growth backdrop suggested earnings were vulnerable.

http://biz.yahoo.com/finance/971128/research_alert_goldm_1.html

Got to leave so will not respond further, have a good day.

IMO, there is great danger of trying to predict market activity on past events for it is exceedingly difficult if not impossible to duplicate all factors that enter into a market - including the psychology of the market - to make an accurate clinical comparison.

Yes the maddening crowd is there. I cannot help but believe, if I may be so bold, that some of the gold stocks have been taken to levels by this crowd due to tax loss selling, fear, fund redemption, margin calls and the like which make them so cheap that it makes them the best bet on the board for a January recover. That is my bet.

As you say: La plus ca change la plus c'est la meme chose

Best Regards

Article by Robert Gottliebsen ( Editor )

Despite the turmoil in Asian markets there is still a

chance that there could be another bull phase on Wall

Street. But all the participants should understand that the

long-term risk factor in the American market is escalating

as a result of events in Japan. As readers will recall, in

February this year I came back from the World Economic

Forum in Switzerland believing that the state of the US

economy was unlikely to trigger a big fall on Wall Street

in 1997. I still believe the US economy is basically

sound.

Readers of BRW over the past 16 years will know that I

have strong admiration for the views of the veteran US

economist Dr Al Wojnilower. During the 1980s,

Wojnilower was widely known as Dr Doom because of

his early predictions of the 1987 crash. Henry Kaufman,

who made similar predictions, was dubbed Dr Death.

Both men suffered ridicule in the later stages of the

1980s boom. In the 10 years following the crash,

Wojnilower has been almost continually optimistic

because of the great strength he saw in the overall US

economy. Occasionally he raised concerns about

inflationary pressure but, overall, he has believed strongly

that there were good reasons behind the strength of Wall

Street. Now, for the first time since the 1980s, he has put

on the Dr Doom cloak again and is predicting that,

although there are forces developing that could send the

market to higher levels, all the elements are in place for a

significant fall in about two years. As with all long-term

predictions, the timing is uncertain; he says the fall could

happen much sooner, or a little later.

On the upside, the collapse in the Asian markets and

other emerging countries, plus sluggishness in Europe,

makes Wall Street the only game in town, so it is

capable of rising substantially.

Although there is a severe shortage of skilled and

unskilled labor in the US, which will almost certainly lead

to moderate wage rises, the likelihood of cheap Asian

imports, resulting from the currency devaluations, will

moderate some of the inflationary pressure. A small rise

in interest rates is possible in the US as a result of

domestic events, but it should not be sufficient to turn a

bull market into a bear. But gradually the momentum of

the US economy is moving from an emphasis on growth

in the real economy to sharp rises in capital values.

The US investment community is becoming very

deal-oriented and business structures are being set up to

escalate the value of capital assets. Companies are

borrowing money to buy back their stock because they

cannot find investment avenues that will produce the

desired returns from their capital.

The use of derivatives increases the gearing of the

market, and ordinary Americans are now big participants

through their investments in mutual funds. Most cannot

or do not borrow to buy shares, but many have allowed

their home mortgages to rise and this provides the capital

for them to play the market.

Wojnilower says the last time the US experienced a

boom in capital values without an overall economic boom

was in the 1920s. That boom was ended by a sharp rise

in interest rates, which spiked the stockmarket. It was

the fall on the stockmarket that did so much damage to

the economy. Wojnilower, wearing his Dr Doom hat,

predicts that in the year just before or just after the turn

of the century there will be a stockmarket fall of such

magnitude that it will harm the economy, as is happening

now in Asia. The higher Wall Street goes, the more

vulnerable is the US economy to a serious stockmarket

fall.

What if the Japanese turn off the tap?

If inflation in the US is not the most likely force to bring

about a crunch, how will it happen? Wojnilower believes

the Japanese banks and the Japanese economy are the

key to long-term trends on Wall Street. Readers will

recall that last week I pointed out that the Japanese

Government was being forced to rescue the banking

system and this was good news for Japanese recovery.

The collapse of the big stockbroking firm Yamaichi

required the Government to assist depositors and it will

need to follow that pattern with the broken banks.

Wojnilower believes that much of the capital that is

boosting Wall Street is coming from the Japanese banks

as they recycle Japanese trade surpluses. The banks

have also been a big force behind the Asian economies.

At present, the big US investment banks can borrow

Japanese yen effectively at a negative interest rate. The

yen base rate is very low and the currency is falling. All

stockmarket booms require the availability of cheap and

plentiful capital. The Japanese have provided this on a

scale never seen before in the world. How long can they

keep up the pace?

If the Japanese Government had bailed out the banks five

years ago, it would have been a fairly easy exercise. Now

it is much harder because the banks have lost much

more money in their excursions into Asia. An earlier

rescue would have stimulated the Japanese economy,

less capital would have been diverted to Wall Street and

Asia, and the markets would have been kept under much

better control.

If the Japanese Government continues its rescue

strategy it will be the beginning of the recovery in Japan.

That is good news but it may have a side-effect.

Wojnilower says that less money might be available to

finance the Wall Street boom and the present token

interest rates would become inconsistent with higher

levels of Japanese economic activity. A lift in Japanese

interest rates would be, in effect, a rise in the rate for a

key source of capital for the US stockmarket. Wojnilower

believes that Japan, in effect, has become America's

central bank. Obviously, the chief of the US Federal

Reserve, Alan Greenspan, might take issue with this

downgrading of his role. Nevertheless, the Japanese are

supplying the funds for the boom and if they turn off the

tap or increase the price, it will come to a rapid end.

If the Japanese Government cannot or will not stand

behind depositors, then the world crisis could come

much earlier, because Japan would not be able to

continue providing the capital required to fuel the US

sharemarket.

The idea that Japan has become the central bank for the

US and the world and that Japanese capital is partly

fuelling the rise in the US stockmarket, will be foreign to

many readers. Yet, once you accept that idea you can

see that Japanese interest rates and/or the availability of

Japanese capital is vital to Wall Street's continuing

success.

Wojnilower could be wrong, but few economists have a

better record for long-term predictions. Wojnilower is the

senior economic consultant to Credit Suisse Asset

Management Australia. He warns investment managers

that they cannot afford to heed his advice because if they

pull out of the market and it rises, they will lose their

business. Investors forgive managers who go down with

the market but they are harsh on those who sell in the

expectation of a fall and instead the market rises. So

Wojnilower's long-term view must be ignored by most

global managers. Long-term predictions are hazardous

but they enable us to isolate the forces at work. We will

need to follow these currents closely in the year ahead.

Meanwhile, beware of predictions that Asia will be back

on its feet again in two years. The fall in asset values is

too severe to allow most of the countries involved to

achieve a quick recovery. Nevertheless, it is reassuring to

observe that some Australian companies, while realising

there is no hurry, are preparing to acquire good

businesses that come on the market because their

owners are forced to sell. The countries to our north will

recover and they will be much stronger for the

experience.

I think you mean EDDIE GEORGE not Lloyd George - Lloyd George

is very quiet on this subject because he has been dead for some

time.

I was confused on this too - I thought Eddie George was a song

and dance man.

I spoke to a guy this morning that runs several

mining funds. He pointed out something that I thought

was interesting.

He reminded me that various central banks hold gold

valued at various levels but all near or well below the

market.

And THIS king of chimpanzee accounting actually drives

business decisions. I was told that Germany holds

their gold at 100$/oz ( ) - so if they sell gold or

lease it or whatever they THINK they are MAKING money.

The Japanese may do the same thing and he has no idea

how the Chinese account for gold.

If one is stupid enough ( and I think central bankers

qualify ) - then destroying the gold price ( by leasing

gold ) until it sinks to say 100$/oz in Germanys case

makes perfectly good sense.

A fairly simple solution to this problem would be to

get the CB to value gold at the market price - Anything

else is serious self-delusion.

But how do you do that

Rubin said he made a tidy profit by buying in

equivalent gold at 300$ to offset coin sales at 350$.

WOW !! a boy genius - Now how does he account for the

gold he bought - AT WHAT PRICE - does he keep it

in a special box