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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (34070)	6/7/2005 12:36:13 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Tue Jun 07 2005 12:22 trotsky (IDT@London gold pool) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i believe it began in 1961 - the idea probably was in discussion a while before that. the drain on its reserves began in earnest in 1965 ( i.e. that was the first year during which the pool didn't get as much gold back from its dip buying than it lost from its spike selling ) . in 1967 the devaluation of the Pound caused a massive run on the pool's gold - it lost over 1,000 tons in a few week's time. it finally gave up the ghost in '68 when France withdrew in the face of mounting US deficits as a result of the Vietnam war...in the end, the pool basically collapsed in chaos, as daily sales sky-rocketed from a few tons of gold to about 230 tons in a single trading day. Fed Chairman McChesney famously announced that the gold/dollar peg would be 'defended to the last ingot' - a few short weeks before the pool's ultimate collapse ( initiated by, what else, a 'banking holdiday' in London ) . they closed the London gold market for two or three weeks...and then the 'two-tier' market began ( CB's still traded at the peg, everybody else traded at the market price ) . note that at the time of the pool, gold was a MUCH larger percentage of CB reserves than it is today. not only that, they also held far more gold in absolute tonnage terms. i would say the CB's power to influence the market is much diminished since then - especially considering that the amount of fiat currency in circulation has grown about 20-fold ( rough estimate... ) since then. Date: Tue Jun 07 2005 12:05 trotsky (spenser, 10:39) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved imo the bond market is signaling that the 'reflation' experiment of 2002/3 is destined to fail. it worries about an increasingly evident global economic slowdown ( recent data points: the Shanghai property bubble is bursting; Baltic Dry freight rate index is plunging; leading indicators in the US are in their 4th month of going down, while the manufacturing ISM is a hair above going into contraction mode, UK economy seems to be mired in recession already ) . last but not least, and related to the above, the market probably senses that the real estate bubble ( which is a global bubble, and has begun to break in some places already ) is going to mean-revert ( which is the polite term for 'going down in flames' ) , which would further reinforce the worrisome trends noted above, and bring a flood of capital fleeing into government bonds. certainly the bond market isn't strong because it thinks the Fed is such a good 'inflation fighter' ( it is after all the very engine of inflation ) . Date: Tue Jun 07 2005 11:58 trotsky (frustrated@ECB to cut rates?) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved this seems in fact highly likely now - since even the hawkish chief economist Otmar Issing has begun to talk about the possibility of a rate cut.