the central force of finance

From: Forrest Bishop (
Date: Wed Feb 20 2002 - 03:29:32 MST

----- Original Message -----
From: James Rogers <>
To: <>
Sent: Tuesday, February 19, 2002 9:46 AM
Subject: Re: AGING: perhaps we are over the hump.

> On 2/17/02 7:59 PM, "Duane Hewitt" <> wrote:
> > In the current environment positioning yourself to be sheltered from the
> > implosion of fiat currencies appears to be prudent. (In other words buy gold.)

Dear Jame Rogers,

I have found most of your posts to be most delighful reading and usually very well informed. I take exception to this particular
piece in its entirety.

> There is no necessity that fiat currencies implode.

All fiat-currencies return to their intrinsic value- zero. There are no exceptions in the experimental record. Current experiments
are progressing in much the same manner as prior runs, albeit with novel and rococo leveraged permutations- OTC interest swaps, gold
swaps, metal leasing, claims on SDR certs on top of SDRs on top of gold certs on top of ?, etc. See Doug Noland's column at, e.g. "Financial Arbitrage Capitalism".

> Mismanagement HAS
> caused a large number of fiat currencies to crash, but it isn't an intrinsic
> property of fiat currencies

A currency 'crash' or 'collapse' or (price)-hyperinflation is an emergent property of unbacked claims on assets. The crash is driven
by the same deterioration of credit quality and loss of investor confidence that heralds a stock or bond crash. The diminished
demand for cash balances (e.g. the meme "cash is trash") characterizes hyperinflation.

> and there are a few currencies around the world
> that have long histories of being relatively well-managed.

This is a startling juxaposition of words. One might as well declare a child-sex ring, a counterfeiting racket, or a pyramid scheme
"well managed". The longest lived fiat curency in history is the so-called US Dollar (yet another Statist lie, btw), which has
inflated by 1000% (i.e. has lost 90% of its purchasing power) during my lifetime. There is *no way* to prevent the total destruction
of an unbacked currency.

> In this light,
> it may be better to evaluate currencies like you would evaluate so-called
> value stocks, by looking at their management history and guessing whether or
> not that historical management trend will continue.

Looking in the rear-view mirror at a few red and blue lines is not the same as studying economics and the intertwining of monetary
and geopolitical history. For example, the history of the Federal Reserve and the the history of global warfare are one and the
same. If war is the health of the Sate, inflation is the bulwark of militarism.

> As a separate issue, gold is not generally a good investment (nor are most
> mined commodities these days). Ignoring fluctuations caused by political
> concerns and a weakening perception of its "intrinsic value", there is the
> problem of it being not nearly as rare as it used to be.

There appear to be about 120,000- 140,000 MT of gold *aboveground*, though these figures are disputed. Something less than 20 grams
for each human alive. Gold is as rare as ever, though gold-denominated instruments (paper gold) may have reached an historical high,
similar to the situation in the late 1960's, and in the early 1930's. This inflation (issuance of multiple claims per available gold
atom) is responsible for the current low price of the metal. See for example the GATA derivatives report- and various
articles at and so on.

> There is a
> continuing problem where production capacity has outstripped demand

Production has been running roughtly 2/3rds of demand for at least the past ten years. The other 1/3 has been met through scrap
recycling, possibly central bank selling/leasing (this is somewhat debatable), other dark and murky means. The gold market is the
most difficult market of all to track. After spending a few hundred hours rifling through various FRB, BIS, IMF, LBMA, COMEX, etc.,
etc., reports, I've learned it is also the most sophisticated. Gold is the central force of the financial universe. Nothing changes
on New Year's Day.

Forrest Bishop
Chairman, Institute of Atomic-Scale Engineering

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