Here is what I think is happening in the US ( other countries a separate topic ) :

The treasury trend clearly shows a deflationary trend as JP notes. Commodity prices could still be dropping rather than bottoming. And, if more of the world goes into a depression you can rest assured prices of imported goods, and importable labor will drop some more!

AG knows he is caught in this deflationary spiral whether he likes it or not. All he can do is devalue the dollar -- 'not too quickly' or 'not too slowly' Tall order, as in reality he probably doesn't really know who fast the dollar must come down.

The beauty of the currenct scenario is that the WJC situation is keeping the baby boomers from investing in the markets, among other things, thus giving foreign investors an incentive to invest in their own countries, instead of the US. In 1925 the scenario was very similar in one sense, since many European countries were deep into a depression, and desperately needed cash. To do so, they enticed the US FED to lower rates with the subsequent painful events that followed. But now -- the WJC situation prevents AG's expansion of the money supply from ballooning the equities markets, and presto! - equity starts flowing to foreign countries where they are needed.

Also, by inflating the US dollar at this point, AG may also be figuring that he is insulating us from a future depression, since he is expanding the money supply now, rather than after a recession or worse is evident.

IF AG pulls this off, the inflationary effect of expanding the US money supply will exactly cancel the deflationary effect of market forces outside the US. HA! Quite a juggling act.

This is the ideal situation. In reality, the path AG has to take is fraught with minefields, the odds heavily against him ( and us ) .

First, as Grant of the Interest Rate Observer notes, our monetary credit/debt/expansion method of stimulating the economy progressively weakens it, so that each time the FED does this, the stimulus is less effective. So, nearly 70 years from the great depession, the margin of safety must be very narrow.

Secondly, the derivatives situation threatens a liquidity crisis of biblical proportions.

Thirdly, financial shocks from Japan + China, South America, or Europe threaten to disrupt the orderly process that AG wants.

So, AG may be brilliant as a FED chairman, but he would need to be nearly omnipotent to pull this off. Highly unlikely. I think he is human, despite the hype.

So -- my conclusion is that we are most likely to be buffeted alternately by inflationary and deflationary trends for some time to come, until the current debt implosion/deflationary period in the world is over. World derivatives trades winding down to nothing, and worldwide equity markets much lower than they are now.

Then and only then will gold equity investments be safe. Until then we must be very alert to ride the highly unpredictable gold bug Tsunami, or bail out and buy physical gold.

Here are the numbers from the U.S. Treasury's debt to the penny page. The latest data is for Sept. 29, 1998. One day to go in fiscal 1998.

09/29/98 $5,523,785,740,880

09/30/97 $5,413,146,011,397

That's a debt increase of $110,639,728,483 ( according to my calculator ) .

The Social Security surplus is a wonderful thing, isn't it? Especially since it consists entirely of U.S. Treasury IOUs.

Throughout September, the chorus was growing: The IMF ( pick one ) blew it, needs to be reformed, needs to be abolished, needs funding, doesn't need funding, etc. What also became dangerously clear as September wore on is the simple fact that the IMF is NOT the lender of last resort and never has been. That is the job of the U.S. Treasury.

A Fed rate cut was looked upon as the universal financial cure-all. Well, sugar pills sometimes work, but this one obviously hasn't. The initial reaction is that Uncle Sugar hasn't made the dose sweet enough. Now, the chorus is: We need more and bigger cuts, and THAT will solve the problem.

Please note, in connection with this chorus, two simple facts. One, we have plummeting U.S. stock markets and plummeting Treasury long-bond yields, a phenomenon unseen in the U.S. since the 1930s. Two, this scenario, with bond yields and stocks racing each other downstairs, is precisely what marked the initial stages of the Japanese meltdown in the early 1990s. And look at Japan ever since - especially now.

Gold is stirring, without doubt. Next week, we have the IMF/World Bank meetings in Washington. Most of the participants will know that these are crucial. The world is no longer looking to the IMF, it is looking straight at the Fed and the Treasury. They issue the world's Reserve Currency, and they control the value of the cash that everyone from Potemkino to Patagonia has stashed under a rock as getaway money.

We have updated the Dow/Nikkei comparison charts and the $A/$US Gold comparison charts at The Privateer website.

...............,,,,......Newmont Mining Cl @26.375 +2.125

Ratio NGC/NEM is 1.0995, not NEM's BS of 1.025.

If you are correct, I would conclude that this gold rally will burn itelf out, and commodity prices will drop once more. I find it very hard to guess what is just aroung the corner, so I am reduced to watching for dropping commodity prices, and a possible stock market collapse.

If the dollar continues to drop, eventually we will have a period of rising rates, although it may be temporary, followed by more deflation.

If bigtime inflation returns soon, it will probably be due to a falling dollar.

I think the only thing that is clear is that the markets will have a rocky road ahead -- with future upswings and downswings. We will not have a steady deflationary fall in interest rates. Or steady gold rallies. We goldbugs will have to be nimble so that we do not wipeout in the goldbug Tsunami.

Much tougher than simple inflation, as we are being swept to and fro.

Namaste' to all living things excluding Clinton, Clinton defenders and the IMF

BUY GOLD!

He was surprised that I had not lost money in 1998, and that I believed that we were in a bear market. He, like many others, must be assuming that this is just a correction, and that WJC will overcome his tribulations. He did know about LTCB, but his comment was that they wer just Hedge fund operators that overextended themselves -- not a sign of potential global financial disaster.

Please look at the SP-500 in 10 year graphical form, and you will see that it has a regular cyclical pattern of rallying and leveling off, reaching newer highs on each rally. This time however, the 'correction'/downturn has gone almost all the way back to the beginning of the 1998 rally.

My point is this -- the cyclical rally pattern is probably still intact, and fairly soon the US markets will go up, and the boomers ( and others ) are likely to pile in -- only to find the rally fail. A 'bull trap' for those who naively think the bull market is still intact. The previous cyclic pattern of the market bull gives an estimate of how long this bull trap will last -- I would guess peaking early next year.

Any comments from the Elliot wave theorist when we will have our bear market rally?

Gold is doing very nicely today. Perhaps AG has left gold alone this time so that the dollar can devalue. Perhaps the CB's have bought the gold they need -- for now. Now I regret using more powder. But -- if gold continues to rally in the face of falling worldwide markets, we have our proof the the gold bull has begun. Will be interesting to see how far they can fall before the gold equity rally fizzles.

Of course, if AG sees a real financial crisis, he will do his best to push gold down once more.

Reminds me of my visits to Castroville in Calif. where so much effort is made in coming up with new uses for artichokes.

Bet Fidel's got his own list for new uses for Cigars.

But -- if confidence in the US dollar fades, look out below for the US dollar -- and be ready for a fantastic gold bull Tsunami. For a time, anyway. AG will not be able to stem the hemhorrage of the US dollar if it really gets going, though he will try to prop up the dollar short term go using gold derivatives. Eventually the gold bull will be so strong that even AG will not be able to stop it. Could be months from now, though.

Perhaps if the dollar/gold carry trade is unraveling, the dollar/yen carry trade will too. That should mean US dollar down relative to gold, and US dollar down realative to the Yen. As I recall the dollar has been dropping relative to the Deutschmark, which is interesting given the new leader they have. Perhaps there is a EURO/dollar carry trade developing, despite the EURO-bearish news we are picking up. The EURO, as the new 'kid on the block' may be getting preferential treatment. The EUROpeans certainly have lots of US dollars to sell, like Japan and China.

It may be my basic suspicous nature, but I am worried about Communist China, Japan, and South America financial/market troubles doing a number on the US equities markets, gold equities included. All depends on whether the US dollar continues to drop, thus tending to push up the price of gold.

One last item -- I also get nervous when the US dollar drops -- shades of 1987. Did have a nice gold equities rally for those that were nimble and gutsy, before everything crashed. No signs of rising interest rates to indicate a financial crisis in the US dollar -- interesting, isn't it? The US dollar is dropping, and the financial markets are not responding in the usual defensive manner. That must be telling us something, but I don't know what. Unless -- the dollar is expected to rally -- again. More flight to safety coming, but this time the dollar and gold both go up?

But this time flight to safety may be only to US financial markets, tempered by what foreign investors think of the WJC XXXGate scandals.

Interesting times. I agree with Panda. Gold is looking better than it has in years. But -- is there a torpedo heading our way we do not see, and are all equities worldwide about to go under? Hard to say, but it certainly does suggest that we should keep most of our powder dry. Lots of opportunity to make money in gold stocks, as our recession gathers strength. And US dollar inflation will return -- eventually. Gold will be thousands of dollars an ounce by 2010-2015.

1998 version as told by Friend of ANOTHER.......A Greenspan ( =Wellington ) fights currency battle.......tells his Big Boys in Commercial Banks to lend lots to LTCM as they will make killing if thay bet, against all expectations, that dollar will win. Banks don't want to be embarrassed by making so much, so ask Greenspan to engineer lull in dollar battle..........dollar falls..........Big Boys from Banks ride in on Greenspans orders and buy LTCM cheap............................................................... ( Still to come..........dollar battle enters final stage, rallies sharply...........value of LTCM [now owned by Big Boys] rises sharply .......... US Banks now richest financiers in World )

They say we never learn anything from history........so Friend of ANOTHER must be right.

P.S. Here is gold input..........If the dollar index rises above its 27Aug high of 115.8 on the Bank of England index and reaches 120.0, and gold falls on the Dabchick gold index below its January 9th 1998 intra-day low of 67.5 to 60.0............then if these two events happen together, gold will fall to $226. ( Sorry Glenn, but you still lose your bet, cos you said $225. )

Regards............Dabchick

John Disney ( Advanced GET ) ID#24135:

To All

Please do see Tom Joseph's analysis on the sp500. This

is one guy I would NEVER go against mainly because he

has no axe to grind and no agenda other than making

money with his software .. which is the BEST.

If HE says that the sp500 is looking at a failed 5th

wave down or a double bottom .. better listen IF you're

interested in profits.

Also .. see his chart on ASA .. perfect .. target

top of wave 4 down or 27 .. it was there for all to see.

MGLR and Silver Lending Rates are supplied to the FT by NM Rothschild .

GOLD------------1- month---------3-month--------6- month---------12- month

LIBOR--------------5.34--------------5.31--------------5.25----------------5.06

MGLR--------------3.97---------------3.64-------------3.54-----------------3.29

Gold Lease Rate-1.37--------------1.67-------------1.71------------------1.77

( Change ) ---------- ( - 0.10 ) ---------- ( + 0.01 ) -------- ( - 0.01 ) ------------- ( - 0.01 )

SILVER-----------1- month---------3- month-------6- month----------12- month

LIBOR--------------5.34--------------5.31--------------5.25-----------------5.06

Silver Lend Rate--2.80--------------2.00--------------1.40-----------------1.40

Silver Lease Rate-2.54--------------3.31--------------3.85-----------------3.66

( Change ) ---------- ( - 0.10 ) --------- ( - 0.25 ) ---------- ( 0.00 ) --------------- ( + 0.06 )

The lines labelled ( Change ) = change in lease rates since yesterday's figures.

Regards................Dabchick

My first reaction was disappointment. The bills looked cheap. Fake.

The font used for the numbering on the back and the extra white space reminded me of Carribean money. Pretty but not valuable. The graphic rendition, open and friendly. Wrong. The appearance of the bill does not connote permanent value. Reserve Currency? The seal on the obverse seems primative. President Jackson's eyes are tense, his brow furrowed. He looks worried. On the back again, what, has the White House been renovated by Beverly Hills architects?

My wife kept asking me, Are you sure it's not fake? as she turned it over and over in her hand when I got home and handed her one. My wife's from a country where the greenback has always meant real money. But this bill does not look like real money to her. I wasn't certain. The source conveyed its verity; it came from an ATM. Surely no bank will put fake money in their ATM. If a man I did not know and trust had given it to me in exchange for a purchase, I'd have asked for a real $20 bill.

Out of this context, this well known and trusted point of distribution, the local ATM, the bill looked like nothing more than a piece of paper with numbers printed on it.

On the 'fridge under a magnet is a Mexican 1 peso note from my childhood dated 1967. I recall clearly that it bought a candied apple from the window of the schoolbus as we sat waiting in the heat with my legs sticking to the torn plastic seats for all the kids to board in Guadalajara. I returned there with my second wife twenty years later. Muy malo, muy malo! said the anonymous voice on the hotel phone in a call to our room after we'd just checked in without a marriage certificate. From that trip on my desk is a coin that bought me another candied apple two decades years later. A 1000 peso coin. The 1000 peso coin was pulled from circulation in the early 1990s after revaluation in Mexico's latest attempt to make the peso a meaningful unit if value. Does that mean the old 1 peso note is now legal tender? For all debts?

Tonight this became clear. The US government must do anything to maintain our faith in the dollar. Everyone's faith. For when faith is lost, all is lost. It is nothing to destroy a nation's economy to preserve the dollar. Where dollars are truly challenged soon bombs will fall.

Shall we sell Treasuries for gold? taunted the Japanese premier over a year ago in the boldest angry challenge to the dollar ever publically expressed. The Euro is an ostensibly peaceful challenge.

Do not misunderstand or underestimate the implications of this.

The seeds of war.

-EJ