AfterThoughts 1 2.pdf

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(9/22/98; 11:15:31 Msg ID:85)

My post to Mr. Aragorn is lost? Will send again if able.
Friend of Another

(9/22/98; 15:21:04 Msg ID:92)

TO: RAINMAN (9/22/98; 10:19:25 Msg ID:83)
Rainman, We do disagree on this reserves issue! To make my point I'll start with my
most solid concept and work forward. First, people are the real backing for any
currency/money. It doesn't make any difference if circulated money is gold or if
circulated paper currency is backed by gold and silver. When no one will use it or
accept it, money it is Not! All the gold and silver in the world could be stamped into
coins and if people are not willing use it, it can't be money.
You have heard this called the confidence factor. Well, I think a persons confidence
in money is built after money is seen working, not before. We are not born with this
confidence, it comes only if money continues to buy goods and services at a constant
price, over time. People will accept fluctuations in the buying power of money, but
that tolerance has limits. Once currency starts to fluctuate in it's purchasing power or
exchange rate, citizens begin to require other types of backing for their money in
order to maintain confidence.
This backing, to maintain stability comes in only two forms that I know of. The
currency can be turned in or exchanged for real items held by the government
Treasury as backing (gold?). Or, the Central Bank can purchase the currency in the
open market using Exchange Reserves as Backing. The obvious, well documented
problem with this comes when the government doesn't have enough Backing to
maintain confidence in the currency. As in the case of the dollar, they have created
more currency unit obligations than they have Exchange Reserves Backing to defend
it with. If the need arises. I know that you already fully understand how this works.
My point? Modern digital currencies are today defended in the open market with
Currency Exchange Reserves, not Gold. Most countries call their gold reserves. But,
no country today classifies it's Gold as Usable Exchange Reserves . The Euro will!
Of the 40 to 50 Billion in reserves that the ECB will hold to defend the Euro, some
15% will be Gold Bullion. Unlike currency reserves that will be sold to purchase Euros
as defense, gold reserves will be added by selling Euros to buy gold from the EMCBs.
At present, the dollar has only one competitor for reserve currency status on the
world stage, gold.
The dollar has been made strong in a low gold price.
To compete with the dollar for world reserve recognition, the ECB will add Euros to
the EMCB (European Member Central Banks) to replace their gold. The EMCB will
then be free to purchase gold on the open market, using no longer needed US dollar
reserves. Remember, the Euro will be the main currency reserve of Europe. The ECB
will not have to sell it's currency dollar reserves as they are a small token amount for
balance. The roaring price of gold in dollar terms will now make up the lions share of
Real Reserves backing the Euro!
In this context, the ECB will have no problem using the new dollar gold valuations to
cover any dollar commentments of it's overextended members. Now my friend, you