The large sell off of Gold by the bank of england is our early warning sign that the rats are jumping ship. The bug time investors need a safe haven to park there money in during the shaky transition period. They will loot the b of e and then Imf gold resreves next, leaving the fiat money system worthless with nations unable to make good on their debts to the world banks. Cost of goods will rise and so will gold. think the rich are going to snap up all the gold they can get their hands on to weather the y2k storm with. If y2k is bad their gold will skyrocket in value. If y2k is not a 10 they will still fair well during the economic slowdown that is already in progress. Follow the actions of big money, they put all this Gold on the market because the rich are demanding access to it. Do likewise there will be no other safe money havens that wont be affected by y2k other than Gold and silver. Remember that gold and silver is debt free money currency is not. Currency requires debt service to keep it value, If people cant pay their bills post y2k because of massive unemployment, What do you think they will spend their money on first buying groceries for the kids or paying joe banker for the car or house. Figure it out, Buy gold now while it is still cheap, and stockpile coin cash. the paper may become devalued quick post y2k.

-- y2k aware mike (y2k aware mike @ conservation .com), July 07, 1999

Answers

Hey mike, That theory is slightly off. I think the gold sales are actually to stabilise the current world economic situation which is quite shaky. We couldn't well afford big inflation numbers and a cratering stock market now could we? This would allow investors to really panic and then think a little about Y2K while they sit in the unemployement line which woulld lead them to panic further once they had time to ponder....well you get the picture.

It's the economy stupid.

No, actually it's the powers behind the economy stupid. I'm a big investor in the lead market right now.

-- Gordy (g_gecko_69@hotmail.com), July 07, 1999.

Hey Gordy! Stop with the stupid stuff will ya', it makes you sound like a 1996 macaroni liberal.

Now I don't know if y2k aware mike is right or not on all of this, but I live by intuition and I believe the stock market is going to take an enormous hit, even with a 2 or 3. And for all of you out their who think maybe the British arent so financially savvy, think again. For the past 300 years the British have held a trump card in military and or finance, in Europe especially. They are our allies. This includes our brothers in Canada,Australia,New Guinea, and New Zealand.

Can you say, what the hell is Mike talkin about?

Sorry folks, I was just divin in Boston Harbor, I guess I snorted some of King Georges' tea.

-- godblessWSChurchill (midwestmike_@hotmail.com), July 07, 1999.

y2k aware mike has got a pretty good handle on it Gordy. Gold is gold is gold. Fiat paper money is fiat paper money... you get it.

Asia, Latin America, etc., also play guys.

-- George (jvilches@sminter.com.ar), July 08, 1999.

Does any one here remember Mercantilism?

From Webster's Online:

"Main Entry: mer7can7til7ism Pronunciation: -"tE-"li-z&m, -"tI-, -t&- Function: noun Date: 1873 1 : the theory or practice of mercantile pursuits : COMMERCIALISM 2 : an economic system developing during the decay of feudalism to unify and increase the power and especially the monetary wealth of a nation by a strict governmental regulation of the entire national economy usually through policies designed to secure an accumulation of bullion, a favorable balance of trade, the development of agriculture and manufactures, and the establishment of foreign trading monopolies"

Perhaps the resident gold fans can explain the failure of Spanish mercantilism....

Regards,

-- Mr. Decker (kcdecker@worldnet.att.net), July 08, 1999.

Now Mr. Decker,

You know very well that gold still retains its function as international payment vehicle even after mercantilism sort of died with Smith's Wealth of Nations.

The mistake that the Spanish made was hawling all of that gold back to Europe from the New World. The Kings and Queens didn't understand that it's a commodity subject to relative price fluctuations, albeit a special one over the years.

-- nothere nothere (notherethere@hotmail.com), July 08, 1999.

BANK RUNS is the name of the game Mr.Decker.

Here and abroad.

B-a-n-k r-u-n-s , understand?

-- George (jvilches@sminter.com.ar), July 08, 1999.

Wrong and wrong. The royalty of Spain confused gold with the real "Wealth of Nations," i.e. productive capacity. The new "gold" is information. In short, would you rather have the exclusive rights to Microsoft Windows 2000 or a really nice stack of gold bars? (laughter)

Second, Y2K bank runs are a new "urban legend." See my other response to explain why we have enough money (M1).

-- Mr. Decker (kcdecker@worldnet.att.net), July 08, 1999.

Like anything, gold only has value because we believe it to have value. Certainly, historically gold has gone up in value in times of trouble...........however that does not necessarily mean it will respond that way in the future. Information is now the commodity of real value.

Also, holding gold provides you no interest or return on your investment unless the value goes up.

Anyone can have their long term opinions.....the facts from the last year though show that money invested in Tech Stocks returned a FAR higher percentage than the loss that gold brought.

-- Craig (craig@ccinet.ab.ca), July 08, 1999.

In response to Mr. Decker,

"Wrong and wrong. The royalty of Spain confused gold with the real "Wealth of Nations," i.e. productive capacity."

Did you say I am wrong because I agreed with you, or because I showed you that I have similar historical knowledge that most on this forum would not challenge? The Spanish caused a classic hyperinflation for exactly the reason you state. That does not negate the fact that countries cannot trade "productive capacity" except through exchange of commodities (one of the primary ones STILL being gold, another of which COULD be information) or people capable of working, I suppose. Do you disagree that gold is STILL used today to settle international payments between countries, even though mercantilism is a bankrupt idea?

"The new "gold" is information. In short, would you rather have the exclusive rights to Microsoft Windows 2000 or a really nice stack of gold bars? (laughter)"

Information is great, but we all still need functioning tools to use that information. Information is nothing more than a form of capital (human or otherwise). It is subject to depreciation like all forms of capital are. Y2K sucks because we are all about to see the depreciation rate of a LOT of capital go from an average of about 8% per annum to 25% (IMO). Seeing this, I have traded some of my shares of Microsoft for some gold coins. It's called a hedge.

"Second, Y2K bank runs are a new "urban legend." See my other response to explain why we have enough money (M1)"

As I stated above, the existence of M1 in our economy (particularly its role as medium of exchange, but perhaps also its role as store of value) is as dependent upon computer systems functioning properly as any other part of our economy. Furthermore, bank runs depend a LOT more on peoples' expectations than they do on computers. I don't know if there will be bank runs associated with the uncertainty that I expect to arise in peoples' minds as we get closer to rollover. Being risk averse, I am not taking any chances. I am gladly give up several months' worth of interest for the certainty that I will have cash for items I have failed to stock up on between now and rollover.

As the Boys Scouts say, "Semper Paratus" --ALWAYS prepared.

-- nothere nothere (notherethere@hotmail.com), July 08, 1999.

The price fluctuations of gold did not destroy the Spanish empire... it was the mistake of mercantilism. Gold is not wealth NOR is it a major medium of exchange now. In fact, the bulk of money moves around the world electronically. Almost all of this money has NO connection with gold whatsoever (much to the dismay of "gold standard" fans.

As proven by David Ricardo, even countries with an absolute advantage in production can benefit through trade. By the way, trade does increase productive capacity by allowing a more efficient allocation of domestic resources.

I do not argue that information is more than capital... but it is the most valuable form of capital. (Oh, I'd like to see your supporting data on the "average depreciation rate" of 8% and your formal analysis on a 25% projection.)

I took most of my profits in April and have been sitting in short term T's. Everyone ought to act in accordance with their own risk tolerance. On this we agree. In my opinion, though, gold is just another pretty metal.

Regards,

-- Mr. Decker (kcdecker@worldnet.att.net), July 08, 1999.

The spanish stole so much gold from the indians they flooded the european market with SIX times as much gold as europe had had before.

They SPENT the lot defending europe from the moslem hordes. (bunch of romantics)

So of course the price collapsed.

A more critical investor would have buried the lot, let the moslems take most of eastern and central europe then moved in and taken over the whole stinking continent.

-- hunchback (quasimodo@belltower.com), July 08, 1999.

Not to beat a dead horse, Mr. Decker, but to agree and clarify.

"The price fluctuations of gold did not destroy the Spanish empire... it was the mistake of mercantilism. Gold is not wealth NOR is it a major medium of exchange now. In fact, the bulk of money moves around the world electronically. Almost all of this money has NO connection with gold whatsoever (much to the dismay of "gold standard" fans."

While I have never fully studied the collapse of the Spanish economy, my understanding is that their hoarding of gold (due to mercantilist policies) resulted in hyperinflation in their economy. Too much money chasing too few goods is never a good thing, as I'm sure you would agree.

"As proven by David Ricardo, even countries with an absolute advantage in production can benefit through trade. By the way, trade does increase productive capacity by allowing a more efficient allocation of domestic resources."

I think I stated this in response to one of your posts on another thread. Arrow's mathematical proof 40 years ago was brilliant in its simplicity, but for Ricardo to prove in prose that comparative advantage trumps absolute advantage so soon after Smith's "Wealth of Nations" was nothing short of genius.

"I do not argue that information is more than capital... but it is the most valuable form of capital. (Oh, I'd like to see your supporting data on the "average depreciation rate" of 8% and your formal analysis on a 25% projection.)"

Capital is only as valuable as its relative price times its marginal product. I am only arguing that the relative prices and the marginal products could shift dramatically as a result of Y2K. I always considered 8% per annum to be pretty standard. I've used it in at least one microeconomic study, but I'd have to check the national accounts documentation for the economy-wide average. Our gross investment rate is usually between 12% and 15%, and 8% depreciation would leave a net investment rate between 4% and 7%. Sounds about right to me. I have made no formal calculations about tripling the depreciation rate, but if you have any suggestions on how you would want to calculate it, I'd be willing to put it on a cocktail napkin and go through it with you.

"I took most of my profits in April and have been sitting in short term T's. Everyone ought to act in accordance with their own risk tolerance. On this we agree. In my opinion, though, gold is just another pretty metal."

I'm glad to see your "anything short of TEOTWAWKI" ass is covered. Gold is a pretty metal and that's part of its charm, but it has other features as well. The supply is relatively stable, and doesn't tend to depreciate. The metal is relatively pliable (meaning you can coin it without too much cost). And it fills teeth pretty well too.

I'm not advocating a gold standard (although I have yet to be convinced that the idea has not merit), but gold is part of my CYA portfolio.

-- nothere nothere (notherethere@hotmail.com), July 08, 1999.