Re: [A-List] US Imperialism: Gold Rising

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

The following were follow-up exchanges on the New Forum:

Sharefin wrote:

> Also I wonder about your end comments where you say that you doubt
> gold will go over $500Yet at the beginning of the post you clearly
> outline the layout of a squeeze & the effects of such. Do you believe
> that we will get this squeeze & yet the price won't appreciate past
> $500?

Short covering is continuous and the settlements do not occur all on the

same day.  As gold is returned by those who borrowed the gold to short,
it re-enters the market to keep the price down.  Also, the number of
longs has increased, puting downward pressure on prices.  As pog goes
up, the CBs will intervene just as they would when pog falls.  Of
course, since no living soul fully understands the dynamics of the gold
market, because many participants are acting on misunderstanding and
mis-information, anything can happen.  Gold could be a contributing
factor to a banking crisis, but its scale pales against other
derivatives.

But gold at $500 gives a lot of market participants a lot of stress.

Heny C.K. Liu

There are two ways to look at gold.  One is as a commodity and other
other is as a currency or an anchor for currency.  As a commodity, gold
is not exempt from current deflationary pressure on all commodities.
There may be short term special conditions acting on gold, like those
acting on oil, but the overall trend is down or stable.  Yes, there will

be volatility, as that has become a fact of life and there may be
serious systemic default risks. But why pick on gold? Systemic defaults
can come from a number of other sources less managable.

Now, nowhere in the world is the gold standard in operation, with the
exception of some suggestions on a gold dinar, but that is a side show.
So the prospect of gold acting as anchor for any curremcy is practically

nil.  And if it should come to pass, gold will have to shoot up to $35K
and it
will bring on the mother of all deflation.

It is possible that gold may shoot above $500 for a few days here and
there, but the prospect of gold remaining above $500 for any extended
period of time is not likely.

But the prospect of the WTC  towers collapsed by direct hits from two
Boeing 737s was not considered credible until after it happened.  As far

as I know, no one profited from shorting that possibility.

Henry C.K. Liu

I am familiar with Sinclair's views.  The article you cited represents
his proposals, not market conditions.
As for Kitco, its view suffers from single dimensional perspective on
gold.

Back in   Date:  Mon Mar 5, 2001  11:20 pm
I did a simple calculation and posted it on Gang8:

Subject:  Value of  US$


US Government debt: $5,726,774,439,028.95
US Gov. gold holdings: 261,000,000 ounces

POG required to pay back gov't debts in gold = $21,941

Market Price Friday March 2 2001: $262.70

Now take the Japanese as an example, the world largest creditor
economy.  It holds over $400 billion in dollar assets.  Now if the
Japanese were to sell dollar assets at the rate of $4 billion a day, it
will take them 100 days to get out of dollar assets.  After the initial
2 days of sale, the remaining unsold assets would have a market value of
20% less than before the sales program began.  So they will suffer a net
paper loss.

If they continue the sales program, every day, Y480 billion will flood
the market if they sell dollar for yen, or the equivalent in euro if
they sell dollar for euro. This will push the dollar back up agiainst
the yen or euro, in which case the need to sell stops. If they sell
dollar for gold, two things may happen.  There would be no buyers
because no one has the gold to sell, instead of pog rising, the gold
market may simply freezes, with no transaction but rising price.  As I
mentioned in my post, part of the reason CBs lease glod is to provide
liquidity to the gold market.
The second thing that may happen is that pog sky rocketed in currency
terms, causing a great deflation. Governments then will have to made
gold trading illegal, as FDR did in 1930  and we are back to square one.

Remember, it is much easier for a government to outlaw the trading of
gold than it is for it to outlaw the trading of its currency, especially
within its own borders.

The dollar cannot go up or down more than 20% against any other major
currencies without a major global financial crisis.  Against the US
equity markets the dollar has already appreciated more than 60% in the
past 2.5 years, so has gold.

According to Greenspan's figures, the Fed can print $8 trillion more
dollars without causing inflation.  The problem is not the printing. The
problem is where that $8 trillion is injected.  If it is injected into
the banking system, then the Fed will have to print $3 trillion every
subsequent year just to keep running in place.  If the $8 trilion is
injected into the real conomy in the form of full employment and higher
wages, we will have a very good economy, and much less need for
paranoia.

Henry C.K. Liu

Sharefin wrote:

> HenryHere's a couple of perspectives on gold that
> differ.
http://www.tanrange.com/s/ChairmansCorner.asp?ReportID=45898http://www.kitco.com/ind/Appel/dec232002.html

Personally
> I view gold in a different light.I believe that gold acts as a
> barometer of financial confidence & health.And that as the US Dollar
> loses supremacy & global derivatives debts implode that gold will rise

> far above what most people believe. Gold will end up becoming a
> greater mania than the stockmarkets. Regards Nick
>


Waistline2@xxxxxxx wrote:

> In a message dated 12/24/02 7:25:57 PM Pacific Standard Time,
> Annewilliamson@xxxxxxx writes:
>
>
>> Imagine if the three wise men arrived in Bethlehem bearing
>> frankincense,
>> myrrh, and a promisory note signed by King Herod. Joseph would send
>> them
>> packing.
>>
>> But that is exactly what would have happened if City analysts had
>> anything
>> to do with it. How else can we explain their 1990s fashion for
>> dismissing
>> gold as a "barbarous metal", which, just like any other commodity,
>> would
>> supposedly fall endlessly in value as production got cheaper? Much
>> better to
>> rely on sophisticated paper currencies, we were told.
>>
>> Well, those predictions have now been proved resoundingly wrong.
>> Last week
>> the price of gold went over $350 an ounce, the highest level for six
>> years.
>> The return of gold as a store of value provides a classic lesson in
>> markets.
>> It shows they are cyclical and informed as much by human nature as
>> by the
>> spreadsheets of economists.
>
> Comment
>
> "the price of gold went over $350 an ounce . . .  The return of gold
> as a store of value,"  makes me cringe and confirm my dislike for
> bourgeois economic writers, who are no more than salesmen of
> commodities. In this case the commodity is gold.
>
> I possess no specialized knowledge in anything - but once thought I
> had figured out girls only to be repeatedly proven wrong. I do have a
> basic approach to the standpoint of Marx and did happen to real Henry
> C.K. Liu's article on why the price of gold is moving up.
>
> I did send a reply to Henry and asked for six more months to study his
> article along with the series on the history of banking. It does not
> take six months to unravel what is silly in the article above.
>
> Price is not value. Value is the amount of socially necessary labor
> that goes into the production of anything (commodities).  And gold is
> no exception. What the author "forgets" about the price of gold is its
> availability to the various institutions who agree to surrender the
> commodity on demand. The amount of gold available for distribution
> must take into account the state of the current production of gold and
> its projected future availability.
>
> Now gold is mined with an evolving technology that reduced the amount
> of human labor used in the process of production. It's value deals
> with the amount of human labor involved in its production and the
> price is based on a historical configuration, politics and above all
> availability and future availability, for those who invest in gold and
> have rights to demand possession of the product.  Thus, price is
> absolutely tied to demand or availability, and this included locating
> new "finds" for gold production.
>
> Value is not price or tied to demand like price. Value is governed by
> the technology that in turn govern what is required to produce a
> certain amount of gold today versus yesterday.
>
> The upward move in the price of gold can take place alongside a
> downward move in the value of gold based on demand and availability.
>
> Henry does give a general history of the price of gold since the Nixon
> years and the creation of the petrol-dollar and maintains that gold
> will not hit its historic highs. Henry speaks of the price of gold and
> alludes to the value of gold only in the sense of what is available to
> central banks and investments institutions and through availability,
> what is in production as it relates to future demands on the part of
> investors and consumers of gold trinkets.
>
> Hey, I still need six more months to figure all of what I read.
>
> Price is not value and a "store of value" for the bourgeois economist
> means "the holder/containment of price."
>
>
> Christmas Day and I have to go to work and deal Black Jack for the
> people.
>
> Now my girls - 4 and 2 grandchildren had their damn Christmas. Two of
> the oldest wanted to now why one of them had 3 packages instead of the
> 2 that everyone else got. I ignored them and the wife says, "baby you
> really don't understand girls."
>
> I say "fu8k this shit and I am tied of everybody trying to measure
> everything and base it on themselves."
>
> The wife says, "you are truly clueless and understand nothing about
> women and you and your so-called "Women Question ain't shit."
>
> I call a quick meeting with all the girls and says, "Look, Ebony is
> size 8 and her clothes could fit into 2 packages. Shamelle is size 10
> and her clothes could fit in two packages - boxes gift wrapped. Angel
> is size 4 and her stuff could fit into one large box. The Grandkids -
> Tapre and Tekala, stuff could fit in one box cause they are 5 years
> old and eight. Mikki's goddamn clothes cannot fit into two boxes so I
> had to run out and get a third box. "
>
> Everyone laughed except Mikki, which means I am once again in the
> doghouse.
>
> I hate Christmas.
>
> Melvin P