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From the Gold Eagle site.

Friday was a hallmark day. Why?

Several events occurred in near simultaneous fashion that highlights a serious problem with the US dollar. I wrote before that the Euro is competition on equal par with the dollar. I told you that the Euro may replace the dollar soon as the world's reserve currency. I said that foreign oil interests appear likely to begin accepting Euro, at first with the dollar, and later by itself, for oil payments. What has me concerned, being a true-blue American, is that these events are unfolding right before our eyes and 99.999% of us are not seeing it happen. It reminds me so much of how the radar operator who allegedly alerted the authorities of the incoming Japanese invasion at Pearl Harbor but no one seemed prepared to listen. We know how that turned out.

So, I ask you to pay close attention. On Thursday and Friday (September 21-22) the following events occurred:

Intel announced a future earnings warning related to the Euro and European operations. Immediately it dropped from around $61 to under $50 in market price on record high volume.

Friday morning, the DOW and NASDAQ futures showed a much lower opening about to occur and in fact the NASDAQ opened 200 points low.

The President announced a 30 million barrel release authorization from the US strategic petroleum reserves citing higher fuel costs for home oil users as the mitigating circumstances for the move. Yet, this is only a two supply in US usage.

The price of oil and gas dropped modestly in response.

The Western Press announced that the ECU (European Central Union) allowed the Bank of Japan, the US, and the Bank of England to intervene on behalf of the Euro, which then made a quick reversal on FOREX markets. In turn, the dollar devalued against the Euro.

Immediately the price of gold shot up $4 + dollars.

The stock market that looked as though it would have a bloody day, actually had a normal day because of the above and due to HP and other tech stock majors stating that they are not seeing the same effect on their operations.

Most people would surmise that these events were not interrelated. Unfortunately, I have to respectfully disagree. Intel is a market moving stock. It is so heavily owned and traded that it has the potential (as was seen) to seriously move the market in either direction. What I see in the above events is a market place set on record high PE levels (Price Earning ratio) with most peoples IRA, 401K's, so on dependent upon an ever rising stock market. Liquidity is known to be lowering or reversing in the markets. This 50 PE for Intel and even higher for other tech stocks, which have been the darling child of the market over the course of the last year, can not be sustained without liquidity.

US saving rates of individuals has recently been reported to be in negative territory. Savings have been replaced in many households by IRAs and 401Ks. That means that any downturn in the market of a significant nature would seriously jeopardize the wealth effect so often talked about. In real terms, it would lower the per capita wealth of those holding 401ks and IRAs. Since consumer spending has been the underpin of the economy of late, any real detriment to household wealth would have a negative impact on household spending and debt levels. In short, the US can not stand to have the markets loose momentum, for there is unfortunately too much at stake. Yet, the US has recently been plagued by an ever increasing reliance on foreign oil. Combined this with the other countries throughout the world experiencing much the same demand for oil, the oil interests have had an allegedly hard time trying to meet oil demands. Yet these same interests have been pressured to increase production in order to keep oil prices down. With a reported 34 year supply of oil remaining, this increased demand for oil today for dollars today only stands to shorten the life cycle of the world's oil reserves all for an asset -- dollars -- that are being printed faster than these words are being typed.

Some have suggested that Europe introduced the Euro, backed by gold and marked to the market price of gold, to eventually replace the dollar-oil payment system. Some have observed that the dollar strength-Euro weakness of late is directly related to the conversion of dollar debt into Euro debt and that the higher value of the dollar is the result of this and scarcity of dollars caused by paying down the tremendous amount of US dollar debt. Now, we have jingling by Iraq to tighten its oil supply to the rest of the world.

Then we have the bullion bank Goldgate fiasco looming that has been heavily documented by GATA (Gold Anti-Trust Action) committee (see www.gata.org). This in the well-documented but heavily eschewed theory that the Banks of the US and England and several prominent US bullion banks and one German bank are heavily involved in the naked shorting of the gold market. Naked shorting is the practice of selling gold that is impossible to pay back in order to depress the inflation-indicating gold price. One highly suspect activity to highlight this theory is the thought that the Bank of England has been publicly auctioning off its gold reserves in order to ensure physical gold does indeed back some of these more important gold short contracts. In other words, world banks have guaranteed some of these bullion bank shorts and that is why England has sold off almost half of its gold (or is about to).

In short, we have the makings of a real mess:

a market overvalued by all historical measures.

a population dependent on that market for its savings and wealth.

a record number of increasing US household bankruptcies.

a significant change in bankruptcy and anti-trust banking laws.

a record number of bank and multi-national buy outs and mergers.

a record number of Stock bull commentators on CNBC and CNN.

a competing currency threatening to replace it in world oil trade.

an oil crisis looming of record size that necessitates the early use of strategic reserves.

a record gold market short position of almost 14,000 tons of gold.

a tame CPI figure that just doesn't seem to understand why I just paid $35 for a dinner for two when just two years ago that same meal would have been under $20.

a government who seems to have taken unprecedented action in a two day period of time to stave off a crashing market and an

ever increasing oil price just weeks before a US Presidential election.

an ever increasing movement to disarm Americans by anti-gun organizations who are well-funded and an Administration that

supports it. Yes, the author is suggesting that anti-gun sentiment is related to economic globalization and the dollar being potentially

dethroned as the world reserve currency.

In summary, all is not well on the Western front. The above spells a disastrous economic and social imbalance that could, however unlikely, result in a recession or stagflation or world debt restructuring of epic dimension -- or so there is that potential. The oft reported and sought after soft landing of the Greenspan Fed may be a ploy to merely posture important key players in a dollar-Gold-Oil-Euro chess game that will change the face of the fiscal world as we know it. Time to pay close attention.

Steve Hickel

25 September 2000

http://www.gold-eagle.com/editorials_00/hickel092500.html

-- Martin Thompson (mthom1927@aol.com), September 24, 2000

Answers

Fine piece. Good analysis.

-- BIlliver (billiver@aol.com), September 24, 2000.

A fairly good article, but a bit biased toward gold. There is no reason to believe yet that Goldman, Sacks, and the other gold banks have lost their iron grip on the price.

-- Chance (fruitloops@hotmail.com), September 25, 2000.