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To: C Hudson who wrote (17018)	8/31/1998 1:24:00 AM
From: PaulM	Read Replies (2) \| Respond to of 116796

C Hudson, thanks for letting me take a shot at it. Oldman's deflationary scenario is very plausible actually. It goes like this: it's 1929 all over again. The worlds excessive debt levels and malinvestment have to be cleared through default (think Russia). That means lots of dollars that people thought were there disappear, raising the value of those dollars against all else, including gold. Gold, no longer recognized by the govt as money, must be sold along with stocks, real estate and collectibles to cover debt. Think of huge debt levels as massive shorting of the dollar that must now be unwound. Voila--$195 gold. C, here's why I don't believe today is 1929: 1. The U.S. govt balance sheet is a disaster compared with 1929. A 1929 deflation would result in severe decrease in tax revenues and and likely the Feds inability to pay even the interest on the U.S. debt (which notice at 5% interest rate is growing much faster than our "boom" economy) . That means default or (much more liklely) an inflationary monetization of debt. Therefore, unlike 1929, U.S. bonds and cash will not remain a safe haven for long. 2. The U.S. is the world's reserve currency, but unlike 1929, has been cut loose from any gold backing, even for foreigners. The foreigners hold billions of U.S. dollars and trillions of U.S. debt which they are sure to dump if greener pastures present themselves. And greener pastures will present themselevs as the U.S. attempts to bailout everyone from credit card bankrupts to Latin American speculators. 3. Ever read Warren Buffets works? He states his view very categorically: given a choice between deflation and inflation, the politicains will choose the latter. 4. Shorter term, the dollar is set to slide, as it did in 1994 during the last LatAmerican currency crisis.

To: C Hudson who wrote (17018)	8/31/1998 8:14:00 AM
From: Alex	Respond to of 116796

Will the HK Dollar Peg Hold? And what if it doesn't? Capital flight and confusion would follow a change in the territory's currency peg to the US dollar, warns Tung Chee-hwa, Hong Kong's chief executive. The even more stark prediction of Antony Leung, a senior banker and a member of the government's advisory cabinet, is that Hong Kong could become another Indonesia. As it battles to defend the 15-year-old exchange rate mechanism, the government gloomily invokes the perils of the alternative; a vicious cycle of a tumbling currency, soaring interest rates and a collapse in confidence. It is scary stuff. But would the end of the peg really be so bad? After all, Britain's forced exit from the European Exchange Rate Mechanism proved a blessing in disguise, leading to lower interest rates and a revived economy. The answer has important implications given the government spending spree in defence of the currency peg - some US$14bn (œ8bn) of taxpayers' money after last Friday's intervention - and the possibility that scare stories could prove self-fulfilling. There might seem scope for optimism, or at least reasons why Hong Kong might avoid the worst fate of its neighbours. With property prices already down 50 per cent since their peak, other asset markets showing a substantial correction and wages subdued by the impact of unemployment, much of the adjustment to a post-bubble economy may already have been achieved. Unlike Indonesia, the Hong Kong government has no foreign debt. This removes the risk of default on foreign borrowings should the currency tumble. Corporate sector foreign debt totals between US$50bn and US$60bn. But the structure of private sector borrowings and corporate balance sheets would limit the impact of devaluation. "The magnitude of any potential unhedged US dollar debt problem is estimated to be significantly less than in the crisis economies," concludes Goldman Sachs in a recent study of 60 of the territory's biggest companies. It says the companies could withstand a 35 per cent fall in the Hong Kong dollar, an average borrowing cost of 20 per cent, and a 50 per cent fall in pre-tax earnings before they would be unable to service debt obligations. That strikes a marked contrast with Thailand, Korea and the other stricken tigers, where tumbling currencies triggered a corporate debt crisis. There might also be economic benefits for Hong Kong if its currency fell below the pegged rate of 7.80 to the US dollar. Tourist numbers, which have fallen by more than 20 per cent month on month this year, might receive a boost, while international companies would find Hong Kong a cheaper base. Most important, should a de-pegging be accompanied by a devaluation of the renminbi, then Hong Kong would benefit from increased trade flows from the mainland. There are caveats to these assumptions, however. Many of the potential gains depend on a static environment. But if the Hong Kong dollar peg were to be abandoned it could fuel inflation and trigger further regional currency upheaval, negating trade or tourism gains. Even if currencies held steady, export gains would be offset by a huge increase in Hong Kong's import bill. Imports totalled about HK$1,615bn (œ126bn) last year, almost 20 per cent more than GDP. More fundamentally, any devaluation or de-linking might be hard for the authorities to control. The Hong Kong peg is much more a pillar of the territory's economy, psyche and politics than most other fixed currency arrangements. Introduced to arrest a currency crisis in 1983, it has become an anchor of financial stability, underpinning the territory's return to Chinese sovereignty last year. Given the psychological attachment to the peg, adjustment could easily trigger the territory's propensity to panic. Although the public has so far held its nerve, runs on a number of small brokers and even a cake shop in recent months underline the fragility of sentiment. Add to that the crisis of confidence in global emerging markets and the government's own stark warnings, the prospects of a controlled adjustment are further reduced. "Although a managed float appears to have been the most appropriate policy for small open economies in the region, an attempt to shift to such a regime under current conditions would likely result in an aggravation of the situation a la Thailand or Indonesia," says Warburg Dillon Read. Merrill Lynch is more sympathetic to a floated Hong Kong dollar, arguing it would free the territory's exchange rate from the US economic cycle. Given the uncertainties in the region and beyond, these forecasts are only rough estimates. They may not justify the government's defence tactics, but they do suggest the scale of risk attached to adjusting the peg. The Financial Times, August 31, 1998

To: C Hudson who wrote (17018)	8/31/1998 5:13:00 PM
From: Claude Cormier	Read Replies (1) \| Respond to of 116796

<<Help me! One of the best posters on Kitco is bearish on gold. I'm not feeling well. Quick, I need some very intelligent, perceptive bullish arguments!!!!!! >> Who can forecast short term gold prices. We can only say 3 things: 1) The current trend is down. 2) The sector is deeply oversold. 3) Over the long term, gold will rise to new highs. CC (buying quality junior golds for the long term..and soon seniors as well)

To: C Hudson who wrote (17018)	8/31/1998 8:30:00 PM
From: long-gone	Read Replies (1) \| Respond to of 116796

C, You (some time back)wanted something pro gold, I'll RePost this. Today, it is better than ever!: Great words by Ayn Rand "Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it becomes, marked: 'Account overdrawn.' catalog.com rh