Hutch,
Regarding M-2 and M-3. The numbers on Oct 96 were 3786 billion and 4862.7 billion and today they are 4297.1 billion and 5779.6 billion.
Seems pretty heathy to me.
Regarding the gold short positions and the price, I see it this way. Gold demand is around 4,000 tonnes give or take ( or I should say, was before the Asian crises took it down quite a bit ) and mine supply is around 2,400 tonnes. The difference has been met by CB selling and borrowed gold hitting the market by producers, hedge funds, fabricators, etc. The amount of borrowed gold has really increased over the past few years. That number may be as much as 7 thousand or more tonnes now.
Using the wisdom of one of America's greatest philosopher, Yogi Berra,- the gold loans are not a probem until they are a problem. The S&L problem in the US erupted quickly, the hedge fund problem erupted quickly and out of nowhere and caused by supposed genius' and backed by big league bankers all over the world. The gold loan short position can blow up at any time.
Credit to financial institutions is toughening up all over the world. Hence, Greenspan's rate cuts. The gold loans are being scutinized right now and that means calling some of them in. That will further tighten supply as the price of gold goes up to ration the supply,then the game begins. Right now, the gov ( and I will disagree with you on this one ) is desperate to keep the price of gold down and they are doing everything they can to accomplish that objective.
I worked with Veneroso Associates before embarking on my lemetroplecafe.com venture. A ways back, Terry Smeeton, who was a top dog at the Bank of England, told Frank at a gold conference that the gold loans were 3300 tonnes or so a number of years back. Last year, when he was writing his 1998 Gold Book Annual, he told Smeeton ( before he retired ) that he had discovered that the gold loans now were 8,000 tonnes or more. Smeeton clammed right up and would not talk to Frank again.
The situation is very precarious and potentially catastrophic. Bankers are just beginning to understand this. Smeeton knew it last year and tried to talk down the gold loan situation publicly after that.
Yes, it does not have to blow up tomorrow. But, neither did many of the highly regarded hedge funds.
Bill |
