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--- Begin Message --- -Caveat Lector- "gold price is now
threatening to break the $400 level we think would put a major crimp in the
financial markets and the economy. When gold last broke $390 in late September
it may have been no coincidence that equities sold off"
Another way of looking at it is that when the WMD lies and bodybags
began to add up in Iraq about mid-August somebody resorted to the
old gold hedge, and somebody wanted out of stocks. There's probably
a lot more downside for stocks and perhaps a nudge up for gold ahead.
Only a con artist would suggest that equities went down in September
because of the gold price going up, without mentioning Iraq and
Afghanistan and WMD lies debunked in the same time frame.
-Bob
Vigilius Haufniensis wrote:
Since the Patriot Act requirements follow them if they continue to do
business in dollars, they are switching to euros.Gold's Rise: Something New To Worry About
By: Jude Wanniski, Polyconomics.com
At $385 per ounce and climbing, the dollar/gold price is now
threatening to break the $400 level we think would put a major crimp in the
financial markets and the economy. When gold last broke $390 in late September
it may have been no coincidence that equities sold off, recovering only
when gold sharply retreated. What we now have to worry about is an unintended
consequence of the Patriot's Act, one that almost certainly is
steadily reducing the demand for dollar liquidity in a way that produces
upward pressure on gold and downward pressure on the dollar relative to the
euro and yen. These are in the provisions designed to track down
suspicious transactions that might be endangering homeland security,
specifically those referred to as "Know Your Customer," (KYC). The due diligence
is horrendous, with the problem not in the language of the Act, but in
the way Treasury is writing the regulations. Earlier this month, it
published a "clarification" to Section 326 of the Act, which requires financial
institutions to have a process to identify customers and periodically check
data about them against watch lists maintained by Treasury's Office
of Foreign Asset Control. But while the Act requires financial
institutions to develop the ability to detect and report money laundering by
suspected terrorists, there are more than 46 specific subsections that cover
enforcement requirements.
The net effect is unambiguously to partially destroy the "moneyness"
of the dollar, i.e., in its ability to serve as an international invoice
currency -- also reducing its value as a reserve currency. At the margin,
this acts like a US tariff on the use of the dollar and reduces demand not
necessarily for "cash dollars" in circulation, but in the liquidity
that underpins the dollar. Inasmuch as the Fed pays no attention to the
dollar price of gold as a policy signal, it would not be putting two-and-
two together as we suggest adds up to the falling dollar and the
inflationary implications of the dollar/gold price getting further from its $350
optimal level.
We're getting anecdotal evidence that dollar transactions that
were capable of completion in 3-5 days are now requiring 30-45 days. The
KYC requirements go far beyond mere identification. Inquiries pry into
as much information as possible about the assets and business dealings of
every party, especially if the party is wealthy. The inquiries seem to
want to know all about each party's property, and how that party goes about
making money. From the viewpoint of the disclosing party, there is a
concern both for government confiscation and private competition. Wealthy people
in this circumstance have been and are now relocating to expatriot
domiciles. Since the Patriot Act requirements follow them if they continue to do
business in dollars, they are switching to euros. Here's how one party explained
it on the internet:
"If you are trying to by $100M in paper from a company in England,
it should be a matter of transferring the funds (possibly through an
escrow agent) and receiving the executed documents. End of story. But
now, the Fed wants to know the providence of the paper and your funds. But,
wait! You don't have all of the money. You are borrowing the money
from a bank, with the help of a guarantor, who has secured an insurance
wrap on the deal. Well now, the government wants to know the providence of
the guarantor's funds. Then, when they find out about the insurance
wrap, they have to investigate the insurance company and the individual broker
who will benefit. In the mean time, they find out that the way that you
were put in contact with the seller, was through a broker - let's call
him Al, who learned of the deal from broker Bob, who learned of it from
broker Cal, who learned of it from broker Don, who learned of it from broker
Ed. Well now, the government wants the passport copies and banking data on
all five of the brokers, even though their combined take will only be 0.5% of
the total price paid. If the paper is discounted at 30% of face, then
all five brokers will split only $150K, or $30K each on an even split. But,
until the government learns everything about every party to the deal, they
will hold up the entire $100M ($30M discounted) deal."
If you had not heard, the Moscow Times on October 9 reported that
Russia is again looking at pricing oil sales in euros instead of dollars,
reflecting the euro's growing role as a reserve currency. "European
leaders have long expressed interest in seeing energy contracts priced in
euros rather than dollars to promote the currency and boost price
stability in the European Union. Most energy contracts are settled in dollars,
meaning that for European buyers, trade in gas and oil is subject not only
to fluctuations in their market prices but also to variations in the
value of the U.S. currency. In 1999, just after Vladimir Putin became prime
minister, he laid out a proposal to move Russia's trade out of
dollars and into euros." Is this connected to the Treasury regs? There does seem
to be a link, with the Eurocrats encouraging this move into euros and
getting unexpected help from the KYC provisions.
I've heard indirectly that Treasury officials are pooh-poohing these
concerns, saying there are other reasons causing the dollar to fall
against the euro and that there is plenty of red tape in Europe. This misses
the point entirely, if indeed mega-million dollar transactions are being
delayed by several weeks. The invitation to shift to European red
tape is a tempting one, especially for big transactions and wealthy
participants. There is no red tape in Europe that demands as much confidential
information as the Treasury regs. With the new "clarifications"
issued earlier in October, the anecdotal evidence of a giant screw-up
should be making its way to the top via the big banks. There is nothing in my
memory of this kind of threat to the U.S. dollar as the world's key
currency. It does, though, go a long way in our analytical model to explaining
why the dollar has been losing ground to the euro and falling in value
against gold.
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Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service. www.ctrl.org DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credence to Holocaust denial and nazi's need not apply.Let us please be civil and as always, Caveat Lector. ======================================================================== Archives Available at:
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