In their most recent dealings, the Communist Chinese figured out quickly that BC could be bought off, and would give them almost anything they wanted, after they greased the wheels. I do not blame them one bit -- it is we who should be blamed for permitting espionage to be a simple matter of a Democratic party donation. No moles necessary.

http://headlines.yahoo.com/Full_Coverage/US/Intern/

Problem is, I think they ( Chinese ) are smarter!!

On a more serious note, I don't like the doings in Kosovo. Perhaps that is where some of our military are going -- to join NATO in a bombing run of some kind. The Serbs have not given up on their ethnic cleansing craziness. Haven't heard anything recently about Turkey and Cypress. Perhaps it will be military conflict that will wake gold up.

FV et al seems pretty sure about gold buying by Japanese and Swiss entities. But -- the gold shorts dominated the markets. I placed a small bet that June 14 would be a short-term turning point for gold, partially because that is near a full moon, and partially because a number of market predictors have suggested that this might be a short-term turning point.

I did this for another reason: Either gold will turn up from here, or it will have to reach new lows very soon. I don't believe that gold can go much lower without serious repercussions. Namely a stronger US dollar. Hence I think $280 is the approximate gold bottom.

If gold goes below $280oz US, that would probably start a new mqajor round of devaluations somewhere in the world, and a depression might not be far away. Worldwide depression is still a very likely reality, even if gold starts to go up in US dollars.

Have you watched South America? Brazil, Mexico, and Venezuela seem to be in free fall. Incidentally, I am making a profit in my Mexican put 'funny money' , but I bought 'reduced value' options rather than the regular ones. I think that was a mistake as the regular index puts and calls seem to be far more sensitive to the market behavior than my RV ones. But -- if money is involved, the lesson learned is remembered longer.

There is an erie feeling that something like that is going on now. Clinton decides at the same time, all is OK and says, 'lets take the short route to China'.

The fireworks are about to begin, and the next 8 - 12 months will go down in history.

http://theramp.net/royal/links.html

So, do the next best thing, an ounce of prevention at judicious moments...

It's a funny thing though, I never met a tech stock that I couldn't go long or short on at the stroke of a key on my computer, but the PMs.... :- (

Live and learn... Boy, did I learn...

This article is a must read for gold/oil/ and EURO bugs.

I personally thought is was full of compassion and had a real spunky ending, I give it two thumbs up.

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

Asian economies are in a tailspin. The price of gold is rising in their local currency terms, but they can't afford it or, are probably selling what they have to take profit/raise 'cash' ( for food maybe? ) .

Gold is priced in DOLLARS, currently the worlds STRONGEST currency and getting stronger ( for whatever reason that you care to ascribe to this phenom ) . Untill the 'Buck' 'breaks', I don't think gold will do that much ( except go down ) .

One possible hope for mining share holders would be take-overs in a mining industry consolidation.

Everyone who enters the financial markets learns this lesson sooner or later. The only difference between us, is the price we pay for our 'education'. BTW, ALL of us have paid this tution.

I don't believe we can have it both ways at the same time, although farfel apparently thinks we might experience the worst of both worlds simultaneously. I don't claim to be an astute economic theorist, but it has always seemed to me that before the gummint would allow a real recession to get under way, with the possibility that it might become a full-blown depression, they ( the gummint ) would REALLY pull the stops and try to INFLATE their way out of a worsening jam.

After all, Volker and his cigar DID seem to be successful in taming a potentially lethal inflationary threat in the early eighties. But I think it was a near thing and credit and paper proliferation are MUCH worse today than back then. Having said that, I STILL think gummint will opt for an inflationary flood rather than the alternative.

History DOES repeat itself, but never exactly, or in the same way. I think we all expect surprises in the next few years; I know I do. I would still rather take my chances WITH gold than face whatever is coming without it. I know a lot of goldbugs out there are hurting and it's not funny . I am doing a little hurting, myself. Sometimes my dark side surfaces and I find perhaps a little solice in black humor with respect to the PM's, but I am not insensitive to the pain others must be experiencing. All I can do is wait a little longer and hope that my faith in gold ( and silver ) has not been misplaced. My guess is that a lot of goldbugs out there are doing the same thing.

of the measures of government. It wrests from the hands of the 'economic csars' their most redoubtable instrument. It makes it impossible for them to inflate ( or deflate ) . That is why the gold standard is furiously attacked by all those who expect they will benefit by the bounties from the seemingly inexhaustible government purse. - L. vonMises

European Central Bank, said in Frankfurt that gold

has been found to be carcinogenic. The banker stated

we are sitting on literaly tons of toxic poison.

So... lets say, a new currency is hatched ( Japan, Korea, Indonesia, etc plus open an invite to China ) ; lets back it at 27,000 tonnes, Japan picking up 1/2, and the others the rest, or if China comes in, a different split; lets call it the SEACA ( South East Asia Currency Accord ) ; offer it up as payment for oil... all of that will make the average political heatseaker in DC, London, Paris, etc take notice, and settle some long term and short term scores.

Unfortunately in the short run, that would also leave the bankers in Japan somewhat short of breath, ( as well as the bankers in USA an the West in general ) but would sure as hell make the point that SEA ( SEACA ) will start to control their own destiny.

Perhaps this would take more 'balls' than has been demonstrated in the past. BUT, perhaps some of the 3000 - 4000 tonnes that has changed hands in the last year is sitting in some secure place ready to be enabled. Perhaps they have even secured some delivery in terms of paper promises.

To me that says... Gold through the ceiling.....SEA currencies up.... solvency up,,, $$ down ( big Time ) .. return on even a little Gold sold to meet new demand at that point, would justify the journey. Now they can bale out at least some of their bankers.

The only problem would be that a Lexus would be more costly... but then again we could sell Fords in Japan for next to nothing. !!

Its a strategy. Someone must be working on a version!!

Here is the kicker - when we went to the location of the next plane in the terminal I noticed that there was virtually one passenger every square foot. I think it was mostly TWA - with international flights. Then I realized why the runway was so busy. I have never seen St. Louis like this -- it seems dangerous to me given what I know about the airtraffic controllers and their 2-d radar.

Perhaps part of the reason of the air rage is the extreme congestion at major airports.

Lastly, I take off my hat to the pilots ( and the rest of the crew ) as well as the air traffic controllers who work under these wild conditions at St. Louis airport. We should at the very least upgrade to 3-d radar, I think. Not just an upgrade to y2k compliant.

It is a pipe dream to think that the MIF/BOJ officials could

be decisive enough to implement any effective fix to their

problems, they have been consistent in dribbling out weak

efforts, remember the Big Bang? They are like deer in the headlights,

completely afraid to rationalize their books and take necessary steps

to halt the erosion thats been going on since 1989s crash.

It doesn't help to have the political establishment paralyzed by

ongoing scandals either, nothing affirmative gets done, currency weakens,

a few tidbit billions in US$ reserves are squandered defending a

defenceless currency, on it goes until there is no more jing or

credibility.

Here is the kicker - when we went to the location of the next plane in the terminal I noticed that there was virtually one passenger every square foot. I think it was mostly TWA - with international flights. Then I realized why the runway was so busy. I have never seen St. Louis like this -- it seems dangerous to me given what I know about the airtraffic controllers and their 2-d radar.

Perhaps part of the reason of the air rage is the extreme congestion at major airports.

Lastly, I take off my hat to the pilots ( and the rest of the crew ) as well as the air traffic controllers who work under these wild conditions at St. Louis airport. I hope the other major hubs are not like this.

I don't believe in fairies ( except on some of my

flights ) and I don't believe in the PPT. However,

today's market action is changing my beliefs in

the existence of the PPT.

On last night's world news ( ABC? ) there was a

segment on Air Rage, the sibling of Road Rage and

how today's air travelers are more crowded, more

harried and more short tempered than ever before.

Just last month I was flying into the USA's busiest

airport when the #1 Flight Attendant entered the

cockpit and advised that we had a problem. Seems a

rather belligerent passenger in coach had struck

the passenger in front of him over the head simply

because he reclined his seat back. He then threat-

ened to kill him if he reclined his seat again. I

promptly had the FA upgrade the innocent passenger

all the way to the front of the aircraft and radioed

ahead to have the police awaiting our aircraft upon

our arrival. There's definitely an evil wind afoot

these days.

http://www.newsday.com/ap/rnmpwh1f.htm

If you are referring to the La Nina cooling effect after our unusually hot El Nino, then I would agree with you. However, I am not sure our El Nino is over yet. Could be. Those cycles are related to the sunspot cycles, but I think the correlation is weak. Haven't reviewed that in detail.

( Tolerant1 - the exceptions are Babar and Winnie Pooh, who, of course, are real. Kisses to Queen Celeste ( Your Mumm ) .

Someone took me to task recently for being gleeful about the apparently ailing Dow, because it was dragging gold down with it. My response to that is surgery is not without its pain and there will be some bloodletting along the way. The extinction of evil in the long run will benefit those of pure heart and good will. Gold WILL come shining through, ultimately.

HB

Notional wealth

Notional best economy in 50 years

Notional 4.3% employment

Notional 1% inflation rate

Notional money

Thanks for use of the term 'notional' .... it fits this situation better than anything else I can think of.

Headline of BBC News : Japan Goes into recession. ( This is the first one since 1974. )

http://news.bbc.co.uk/hi/english/business/newsid_111000/111377.stm

Closer to home, they're worried about Russia. Europe's banks are more exposed than our own. Then there's Kosovo.

Be sure to click on the story in the frame to the right:

Business: Catching the Asian Flu.

( summary of affect on financial markets )

The gloom can also affect financial markets more generally. Stock markets across Asia have had dramatic falls in recent monoths. If investors believe this is the end of the stock market boom globally, they may decide to switch out of equities entirely, into safer forms of investment such as bonds.

This could hurt confidence in markets generally. And falling stock markets could mean that the people who have benefited from the increase in stock values will feel less wealthy. In the US an extra $12 trillion of notional gains has been sitting in the accounts of the 30% of the population who own stocks If the fall in notional wealth makes them spend less, this could weaken economic growth in the Western industral countries. And it could also make people demand higher wages, raisiing inflationary pressures.

Gee, with all this gloom and doom in the major press headlines, I guess we can take the rest of the day off.

Has anyone seen an ad like this elsewhere? Would be interesting to see who paid for it.

http://www.newsday.com/ap/rnmpin0t.htm

http://tiger.golden.net/laird/TimeXAU.htm

There is an interesting point made by someone in the last 48 hours, and that is that real short term interest rates in the US are actually on the tight side, and have been for some time. This is probably part of the reason for the strong US dollar. This may have been a mistake, but on the other hand, a lower short term rate would make the US market bubble even worse. Mistake or no, as Gollum says, the controls may not be responding as expected.

Also, I would guess that the Euromeisters want the US dollar strong and gold weak why they position themselves for an economic recovery and a successful launch of their new currency. If you can sell US dollars and buy EUROs while the dollar is strong all the better. It will thus probably be some time before the Dollar/gold carry trade reverses in a big way.

Regardless of what happens from a technical standpoint there is the matter of all of those derivatives trades. We need Donald's expert sleuthing to spot worsening earnings reports,etc in the banking industry. It is entirely possible that the final straw will be internal to the US markets, rather than external this time -- a slew of bad earnings reports form derivatives trades that went sour. I would feel alot more comfortable about the SEAsia situation if we had the Yuan devaluation, and an annoucement of a boatload of Japanese bank failures. Too early for the Yen carry trade to reverse.

June 12, 1998

Review & Outlook The Yen Dilemma

The sliding yen, which almost touched 144 to the dollar in New York trading yesterday, has been sinking markets around Asia. Tokyo stocks were off 2.1% Thursday after 1.2% Wednesday, and Hong Kong dropped 8% in the last three days. This presents a dilemma not only for Japanese policymakers but for monetary authorities around the world.

Exchange rates are best seen as a reflection of monetary policy. The yen

falls against the dollar because the Bank of Japan is supplying too many yen or the Federal Reserve too few dollars--relative to the demand for each currency. The yen's nearly eight-year low clearly reflects collapsing demand, as the Japanese economy sinks into outright recession. But if the central bank tightens to protect the yen, it will deepen the recession. Or conversely, concern over the value of the yen inhibits the aggressive easing indicated by Japan's rising unemployment and declining producer prices.

Given this dilemma, the Bank of Japan has expanded its monetary base by

about 10% over the last year, but this is not reflected in broader measures of money. One widely used measure, M2 plus CDs, has grown only 3.5%. A lot of cash is going into futons, while banks are not eager to lend and their customers not eager to borrow. The economy, in short, suffers from a lack of Keynes' animal spirits.

Other Asian markets are falling because a low yen threatens another round of competitive devaluation. Devaluation by Hong Kong or China, which kept their currencies pegged to the dollar during last year's debacle, would be a major event for the world economy. Hong Kong is sticking with its currency board, letting interbank interest rates spike to 14%; this will not help local stocks or the local economy, but is undoubtedly a better choice than devaluation and the inflation that would ensue. Those who think devaluation will boost an economy by boosting exports should notice that Korean exports in May were lower than a year earlier. In the former Asian Tigers, indeed, the key to real recovery is re-establishing currency stability.

The Asian turmoil has not yet affected U.S. prosperity, and European markets have risen on the prospect of the Euro, which is to say, greater currency stability. The U.S. may even profit as investors flee Asian markets for the dollar. But yesterday Treasury Secretary Rubin warned that the weak yen is almost a world-wide concern, while Bank of England Governor Eddie George warned that Asian financial thunderstorms create a dangerous environment.

This environment especially deserves careful attention in the corridors of the U.S. Federal Reserve. In theory, after all, the weak yen may be a sign that the Fed is too tight. Indeed, this may not be mere theory, with the dollar also strong against the mark, gold below $300 and no sign of domestic inflation. As Chairman Alan Greenspan said in his testimony Wednesday, the U.S. economy is the best in memory. Markets were relieved by his suggestion that the Fed will not tighten; but it seems to us the

more pertinent issue is whether it should ease to help Japan and the rest of Asia.

At the Fed, it's heretical to suggest that managing the world's primary currency carries international responsibilities. In fact, the Fed blew apart the Bretton Woods monetary system by studiously ignoring these responsibilities ( in French eyes, abusing them ) . Particularly with the advent of the Euro, a currency representing a trading bloc the size of the U.S., it's certainly time for Mr. Greenspan and the rest to start to think more deeply about the world-wide impact of their domestic policies.

With the world economy clearly in a non-inflationary mode, traditional central bankers are still scouring the horizon for excuses to tighten. The Bank of England, indeed, just did boost its interbank rates, apparently because workers were getting paid too much ( and probably,the latest speculation runs, over the opposition of Governor George ) . This can only delay British harmonization with the continent and the Blair government's expressed desire to eventually join the Euro.

The very least the Fed can do for Asia is to keep its eye on the price level, and avoid tightening for spurious reasons such as too much economic growth or too much vigor in the stock market. With a real danger of deflation, the Bank of Japan could afford to expand its monetary base until broader money shows some vigor. Restoring growth, not protecting the yen, should be the first priority.

Given the essential monetary dilemma, though, Japan needs another policy lever to restore confidence and animal spirits. More infrastructure spending--Keynes' digging holes and filling them back up--is scarcely the answer. The problem is largely psychological, and the answer is to improve incentives in the Japanese economy. This means an explicitly Reaganesque policy of permanent tax cuts that reduce marginal rates. Repealing the VAT increase that started the latest downturn would not be a bad step; reductions in personal taxes would be even more explicit.

This implies, of course, shaking off the orthodox preoccupation with ex ante budget deficits. But on current course--no real fiscal stimulus because of deficit fears, and no real monetary stimulus because of the yen--Japan is headed toward more recession, larger deficits and a national funk. As we are seeing this week, it is likely to carry with

it the rest of Asia. The U.S. and Europe should not imagine that they will be permanently immune.

Yup, fat dumb, and happy. Edith! Get me another beer!

GM workers on strike? Hmmmm........