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ARCHIVED DISCUSSION FROM 2/17/2001 All times are U.S. Mountain Time (Yesterday's Discussion.) John Doe (2/17/2001; 21:17:02MT - usagold.com msg#: 48469) @Mr Gresham http://www.chaostan.com/oilwar.html Here's a link to an SA backgrounder from investment advisor Richard Maybury's site. The particular succession of the SA hierarchy may not be the real issue. Maybury suggests other, more important dynamics may be in play. Mr Gresham (2/17/2001; 19:26:13MT - usagold.com msg#: 48468) 714: Thanks "...few conceive how Saudi Arabia functions internally"I'm on the trail...(I know we're not going to find some document that specifies the "x dollars + y grams of gold" formula for keeping visible oil prices down, but we can imagine the behind-the-scene workings, can't we? Their job as a royal family is to balance internal and external allies/threats, recognize realpolitik trends, and survive. The oil price rise immediately upon the Euro launch is a visible event that would circumstantially support FOA/Another's forecast made in '97. Now just to find supportive descriptions of their motives in joining this plan, and agreeing not to crash the dollar prematurely, but now to have withdrawn that support, points the way to Super-POG, no?) 714 (2/17/2001; 18:48:14MT - usagold.com msg#: 48467) And finally (I don't want to bore everybody to death)... http://www.mepc.org/journal/0002_kechichian.htm Nevertheless, until recently, Heir Apparent Abdallah maintained a rather reserved attitude on all domestic and foreign matters, including the so-called special relationship with the United States. This outlook underwent considerable change once the prince saw Washington make good on its promise to support the monarchy by intervening successfully after Baghdad's invasion of Kuwait. His understanding and appreciation of the United States underwent a further reassessment after a 1998 visit to Washington when he briefed senior American officials on Riyadh's views. This was an epoch-making development because the heir apparent was not well known in the United States and, more important, was not trusted by Washington. Espousing clear views on political and economic concerns, including the need to lead the Arab and Muslim worlds as well as invite Western investment into the kingdom, which would require heretofore unthinkable reforms, Abdallah charmed his audiences and established confidence in his ability to rule. Today his influence is slowly beginning to be felt throughout the kingdom and international centers of power. 714 (2/17/2001; 18:42:40MT - usagold.com msg#: 48466) Ahhhh...Prince Abdullah and Saudi oil... http://www.gasandoil.com/goc/news/ntm94164.htm ...recent news even. 714 (2/17/2001; 18:35:29MT - usagold.com msg#: 48465) Prince Abdullah speaks... http://www.arab.net/arabview/articles/abdullah1.html ...and he's obviously a devout man. No mention in particular of oil and politics, but nonetheless a good read to get the gist of his mindset. He sounds rather charasmatic, and Islamic unity appears to be on his mind. There is no separating politics and religion in Arabia. Boxman (2/17/2001; 18:30:44MT - usagold.com msg#: 48464) SteveH post #48461 SteveH, If the PPI finished goods, and the CPI All Urban Consumers lines move as they did from 1973 to 1975, there will be one gigantic "Ouch" heard around the world.MikePS: Black Blade, I will try and get to an update in our industry shortly, maybe tomorrow. 714 (2/17/2001; 18:26:51MT - usagold.com msg#: 48463) More background on Saudi Arabia, including Prince Abdullah... http://www.state.gov/www/background_notes/saudi_0998_bgn.html ...from the US State Dept. 714 (2/17/2001; 18:24:07MT - usagold.com msg#: 48462) Mr. Gresham... http://www.la.utexas.edu/chenry/mena/roles/oil/1998/0021.html ...interesting piece on Prince Abdullah from University of Texas. Though this site is part of a political simulation, complete with disclaimer, Prince Abdullah is known to have been a dissenting voice among the Saudi royals during the buildup of Western military forces in his country during Desert Shield in the fall of 1990. This profile may indeed be more accurate than we know. SteveH (2/17/2001; 18:10:38MT - usagold.com msg#: 48461) CPI v PPI year over year http://attach4.egroups.com/group/lwside1/attach/1442423/8278/gs-144=24=1442423/10-1-10-154/image=gif/YoY%20RoC%20CPI%20and%20PPIs%20from%201947.gif Looks like CPI may start her uptrend sooner than later, eh? SteveH (2/17/2001; 17:48:59MT - usagold.com msg#: 48460) Fredbear Good post! turkey hunter (2/17/2001; 16:01:01MT - usagold.com msg#: 48459) @Mr. Gresham Possible leads to H.R.H. Abdullah http://www.saudia-online.com/business9.htm You might see if these URL's can get you somewhere.http://www.saudia-online.com/business23.htm Mr Gresham (2/17/2001; 15:04:21MT - usagold.com msg#: 48458) H.R.H. Crown Prince Abdullah, & Hard to Keep Up with all of your fine writing and reporting. Is today catch-up day? Windows open at the moment are BearForum, Fleckenstein, Noland, Puplava, Gold Trail, Prechter EW, Saville, and lastly, IRS. I must be a slow reader (smile) (started on that I.R.Code in 1979 and haven't gotten through it yet.Serious question: Anyone have any references to Saudi's next king, Abdullah, and his oil politics in reference to (possibly) sticking it to the dollar and U.S.? I didn't find much discussion in a Search attempt, just mainmedia news and official websites.That would of course be the principal country Another is referring to, and he would be the main man in SA, after his brother, Fahd. ET (2/17/2001; 14:51:20MT - usagold.com msg#: 48457) Ilana Mercer http://www.lewrockwell.com/orig/mercer2.html From the article;"California's Governor, Gray Davis wants to fully nationalize the grid. He is also promising to sue power companies – or even jail their managers – for not selling their juice below market value. He wants to ban power producers from exporting electricity to other states. Theft of private property is also on his agenda, as he threatens to use "eminent domain" to seize power plants. Ludwig von Mises was right. Interventionism leads to socialism and its attendant tyranny." Black Blade (2/17/2001; 14:26:06MT - usagold.com msg#: 48456) RE: USAGOLD http://pub38.ezboard.com/fdownstreamventurespetroleummarkets.showMessage?topicID=2417.topic OPEC leans towards another supply cut-Gulf sourceSnippit:DUBAI, Feb 16 (Reuters) - OPEC oil exporters are leaning towards another supply reduction next month because they fear an economic slowdown will stunt demand for their crude, a Gulf source familiar with Saudi oil policy said on Friday. He said the cut would probably be needed because of a decline in demand for OPEC oil in the remainder of the year and because of a build in inventories, especially in the United States. A rebound in Iraqi exports also was expected, he said.Black Blade: Sorry I don't have the URL to the original, however, the text can be seen at the posted link. Apparently OPEC ministers are determined to keep oil prices at or above current levels. Hugo Chavez, President of Venezuela recently said that he was determined that "oil prices should nor fall below $25.00 per barrel, and not a penny less." OPEC fears that a drop in demand due to a slowing US/Global economy will cause oil prices to drop and an oversupply of inventory. In recent months, OPEC has amazingly been able to rein in the widespread cheating on quotas that hindered higher oil prices in the past. Perhaps "stagflation" will be the order of the day as we go forward. Higher oil prices accompanied with higher energy costs in the US could be the final "nail in the coffin" or the last trigger pulled that throws this recession into utter chaos. A side note, I saw an interview with James Stack on PBS Nightly Business Report yesterday. He gave a good synopsis of the slowing economy and said emphatically that we are in a "Recession." He didn't mention gold or gold mining stocks in particular, however, his strong recommendations were defensive in nature with choices such as Stillwater mining, and Excel energy. Even so, there appears to be a slow awakening in the investment community that not all is well in the US economy. Even Larry Kudlow and Bill Wollman on CNBC have turned around and are more pessimistic. Wonders never cease. I must congratulate many observant posters/fellow knights here at the forum for being on top of the changing economic environment. We have seen the world through real life observations while many so-called "professionals" have seen the world through rose-colored glasses. Keep it up. USAGOLD (2/17/2001; 13:07:12MT - usagold.com msg#: 48455) Statement/Sicily Conference/Comment "The G-7 will say that the world economy will perform well if oil prices remain at current levels, said the official, who can't be further identified under briefing rules. The statement will contain three sentences on currencies, emphasizing the importance of allowing markets to determine the value of currencies, the official told reporters." -- Bloomberg, 2/17/01Comment: Is it now official that the strong dollar policy is dead? The forex markets will have the final say, but the Bush administration seems determined to pursue a new dollar policy apart from the Rubenesque policies of the past. Usually in these annual confessionals among finance ministers and central bankers little of substance reaches the public venue. The fact that the summarizing statement will "emphasize the importance of allowing markets to determine the value of currencies" illustrates -- it seems irrevocably -- the determination of the Bush administration to purse its own dollar policy. That policy could very well be "no policy." One more point: If OPEC indeed began raising oil prices some time back to compensate for inflationary dollar creation, will it lower prices in the face of the well- documented and on-going acceleration of that trend? That remains to be seen, but one need consider the danger of leaving the economic future of the West in the hands of Gulf producers, or could it be that the G-7 finance ministers and central bankers had something else in mind? The statement conveniently and with small diplomacy shifts the blame for the dollar-inflation problem to the producers. We'll see how that plays in Riyhad and Caracas. Old Yeller (2/17/2001; 13:01:47MT - usagold.com msg#: 48454) A question fo Sir ORO ORO,thanks again for all the information and insight you offer to us here at USA Gold.I particularly enjoyed your post#48309,using the analogy of replacing flight crews and losing engines as we clip tree tops and mountains.Keeping with the analogy theme,I have always related to the US dollar build up around the world as being like snow building up in the mountains:one second it is peaceful and serene,then suddenly a trigger...and avalanche,it all comes down at once in a awesome display of brute force and destruction.I feel we all spend a lot of time and effort looking for a trigger or the conditions necessary for creating a trigger.Furthering the avalanche scenario,we are watching snow(general imports)and hard rain(oil prices,interest obligations)constantly hitting the snow pack.But what of the ground conditions underlying the snow.If the slope is unstable,a tremor from below may begin the process.We've all watched the high tech/NASDAQ miracle create untold,unimaginable wealth for those lucky or smart enough to be involved since the beginning of the mania.However,now the heady growth days seem to be diminishing,revenues are flat(IBM,HWP)or in some cases beginning to fall.If the realization should set in,(I realize the growth may sooner or later regain it's momentum)the NASDAQ may revert to the historic mean P/E,which equates to a index of 800 to 1000.Now, back to the avalanche.In my line of thinking,the US dollar build up(snow)is underlaid by questionable ground conditions(derivatives)I feel many of these derivatives are built around the NASDAQ gorillas.If the NASDAQ descends back to historic values,either in a slow salami correction or a bucket of ice water correction could this unravel the derivative structure,thereby imploding our favorite bogeyman;paper gold derivatives backed by nothing but bluster and high ranking bafflegab.I realize this scenario may be highly speculative or even totally absurd,therefore not worthy of contemplation,however if you have the time at some point,I would really appreciate your thoughts on this matter.TIA,Old Yeller Randy (@ The Tower) (2/17/2001; 13:00:43MT - usagold.com msg#: 48453) ET, thanks for the response I want to share some thoughts with you, but a friend is meeting me shortly for lunch. I just want to drop a few keywords while the thoughts are still fresh in my mind so that I can come back to this without losing anything.[quantity -- distribute loss -- savers -- modern ("escape option")] Tree in the Forest (2/17/2001; 12:17:22MT - usagold.com msg#: 48452) Some of the "gold" that I have mined at the BOE "MONETARY UNION AND ECONOMIC GROWTH"by JOHN VICKERSCHIEF ECONOMIST AND EXECUTIVE DIRECTOR, BANK OF ENGLANDCONFERENCE TO MARK THE 150TH ANNIVERSARY OF THENATIONAL BANK OF BELGIUM FRIDAY MAY 12 2000IntroductionMonetary union and economic growth was the subject for discussion at a dinner in London one evening in March 1925. The host was the Chancellor of the Exchequer, Winston Churchill. His guests were the Treasury grandees Bradbury and Niemeyer; the chairman of the Midland bank and former Chancellor McKenna; and an economist called Keynes. In case you were wondering, the Governor of the Bank of England was away.The question was whether Britain should rejoin the Gold Standard, and at the pre-1914 parity of $4.86. Oh to have been a fly on the wall! But we do have the next best thing; an account by a fly at the table, written years later by Churchill's private secretary James Grigg:"The symposium lasted till midnight or after. I thought at the time that the [pro-gold] ayes had it. Keynes's thesis, which was supported in every particular by McKenna, was that the discrepancy between American and British prices was not 2˝ per cent as the exchanges indicated, but 10 per cent. If we went back to gold at the old parity we should therefore have to deflate domestic prices by something of that order. This meant unemployment and downward adjustments of wages and prolonged strikes in some of the heavy industries, at the end of which it would be found that these industries hadundergone a permanent contraction.Bradbury made a great point of the fact that the Gold Standard was knave-proof. It could not be rigged for political or even more unworthy reasons. It would prevent our living in a fool's paradise of false prosperity, and would ensure our keeping on a competitive basis in our export business.To the suggestion that we should return to gold but at a lower parity, Bradbury's answer was that we were so near the old parity that it was silly to create a shocked confidence and to endanger our international reputation for so small and so ephemeral an easement.One thing about this argument comes back to me with crystal clearness. Having listened to the gloomy prognostications of Keynes and McKenna, Winston turned to the latter and said: 'But this isn't entirely an economic matter; it is a political decision … You have been a politician; indeed you have been Chancellor of the Exchequer. Given the situation as it is, what decision would you take?' McKenna's reply, and I am prepared to swear to the sense of it, was: 'There is no escape; you have got to go back; but it will be hell'".Keynes later said that McKenna ‘always lets one down in the end’. The decision to return to gold at the pre-war parity was made a few days later and announced in Churchill's Budget in April. The Bank of England strongly approved, though one director is reported to have resigned in protest, a Mr. Vincent Vickers.I have quoted this account at some length because it contains a number of themes that still resonate today, ranging from the importance of knave-proof monetary arrangements to the difficulties of equilibrium exchange rate analysis. But above all the question of the return to gold, and the events that followed, is a powerful illustration of how monetary arrangements can matter, for the real economy as well as for prices. But how do they matter? Is it possible that a change in monetary arrangements might have a permanent effect on the real economy? In particular, does monetary union have any implications for the rate of growth of the real economy? These are the broad questions that I want to address today. ET (02/17/01; 11:16:51MT - usagold.com msg#: 48451) Randy Hey Randy - I sure appreciate all you do around here. You wrote in part;"... that an inevitable solution to the untenableproblems and imbalances arising from the natural forces imposed by market discipline would be far superior than anyalternate solution which might be prematurely brought about by forcing the hand of legislators and regulators."Sure, it would be difficult to argue with that. As you know, I agree that holding physical gold will likely turn out to be the best way of transporting wealth through a currency devaluation. I'm sure many of the same legislators, regulators as well as other entities and individuals with a vested interest in the status quo also know the advantages of holding gold through the coming storm. It is unlikely any of them will acknowledge they know. I'm sure many of them are accumulating gold.Like FOA, I think in the whole scheme of things, GATA will be more or less ignored by the above entities. Unfortunately for GATA, the public is terribly uneducated in regards to money and economics and certainly about gold and its uses. Most people can't conceive of a situation where they might need gold. When they do realize things have changed it will be too late. I'm sure the marketplace will drive this change, not legislators or regulators. GATA can continue to shout at the legislators and regulators but I feel they would be better off shouting at the populace in general. Unfortunately, I don't think that will do much good either. The only lessons people seem to remember about life are the ones learned at the school of hard knocks.The markets will win out in the end, I'm sure of it. This is the main philosophical difference I have with those that feel the government should constantly be called upon to further the manipulation because the consequences of their not doing so are "unthinkable". This is my main contention with the Stranger's position that reflation is the answer. It simply prolongs the inevitable leaving the end result more difficult to deal with and furthers the distortions. It appears no one wants to acknowledge that their standard of living has been purchased at the expense of future generations output. Now "that" is what will be difficult to explain to our kids and their kids. It isn't hard to understand why we continue as a society to ignore the reality. It ain't pretty.Despite Samuelson's contention that the cause of the depression in the 30's was a hard standard of money, the true cause was an attempt by most to live beyond their means in the decade previous. The depression was simply the result of having to pay back what was borrowed. The same is true today and we will all be better off when this process is allowed to go forward. Of course, it is also my intention to take advantage of this situation as best I can. That is what capitalism is all about. May we see it continue to reign. Thanks for asking. Journeyman (02/17/01; 09:21:28MT - usagold.com msg#: 48450) Ants dragooned to behave as grasshoppers @working-kirk msg#: 48444) http://www.webleyweb.com/tle/libe53-19990815-04.html Hi Working!We grasshoppers aren't the way you think we are. We're very helpful and cooperative, ESPECIALLY in times of stress. It's probably genetic. Don't you long for a chance to help a damsel in distress? But "Scout Helps Old Lady Across Street" doesn't sell many newspapers. This kind of thing isn't dramatic enough for show biz drama either. So we're fed a steady diet of TV, movie, etc. drama to keep our attention long enough to get us to watch (or read) the "commercials." We get our model of "human nature" highly distorted from this constant exposer to drama and headlines.Check-out the link in the header to this message for an excellent "deprogramming."It also helps to remember where the ultimate fault lies: Most folks who live in Kalifornia are victims of their hierarchists' bloated, distorted political processes in a similar fashion that those who live in Serbia, Iraq, etc. are victims of _their_ hierarchists' bloated distorted political process - - - made possible largely by fiat currency (See Joseph Schumpeter, "The Fiscal State.")Regards,Journeyman The Invisible Hand (02/17/01; 07:23:04MT - usagold.com msg#: 48449) Some don't understand that the writing is on the wall http://news.bbc.co.uk/hi/english/business/newsid_1175000/1175319.stm Saturday, 17 February, 2001, 09:45 GMT G7 talks clouded by uncertainties....Belgian Finance Minister, Didier Reynders, told AFP news agency the euro zone could not support the world's activity in the two years to come. The Invisible Hand (02/17/01; 07:08:14MT - usagold.com msg#: 48448) Has this not been written (a few years ago) by A/FOA? http://dailynews.yahoo.com/h/nm/20010217/bs/group_leadall_dc_3.html Saturday February 17 8:38 AM ETUS Sows Doubt on Dollar; G7 Cooperation By Brian Love PALERMO (Reuters) - G7 financial leaders met in Sicily on Saturday, with America's partners wondering whether the new U.S. Republican administration was altering its ``strong dollar'' policy and rolling back on international cooperation. Finance ministers and central bankers of the Group of Seven industrial powers met to discuss the global risks of an abrupt U.S. economic slowing, but found themselves confronted by media interviews in which leaders of the U.S. team appeared to be signaling radical changes in well-worn U.S. policy. On the eve of his maiden G7 meeting, U.S. Treasury Secretary Paul O'Neill on Friday threw currency markets into confusion by casting doubt over Washington's years-old ``strong dollar'' policy -- a cornerstone of the U.S. economic boom of the 1990s. President George W. Bush (news - web sites)'s chief economic adviser Lawrence Lindsey added to confusion among America's European and Japanese G7 partners when another newspaper reported him as taking a far more skeptical stand on cooperation to steer unwanted movements in exchange rates between the world's major currencies. … SHIFTY (2/17/2001; 4:59:32MT - usagold.com msg#: 48447) Canuck Its a three day weekend. What got me was the CRB page showed gold open .No trades. They just went home early.$hiftyBack to bed. Canuck (2/17/2001; 3:55:37MT - usagold.com msg#: 48446) @ Shifty Gold flatlined at 12:15 Yes Sir, I noticed that too; incredible climb and boom, about 12:15 the patient was dead.What's up with that? Mr Gresham (2/17/2001; 3:53:40MT - usagold.com msg#: 48445) Rats Abandoning Ship? http://216.46.231.211/credit.htm From Doug Noland:"Interestingly, yesterday's American Banker carried a lead story titled "FDIC Said to Whisper Fund Premium Warning – The Federal Deposit Insurance Corp. has been quietly warning trade groups that it could start charging banks premiums again by yearend – in part because of fast-growing accounts at large firms such as Merrill Lynch & Co., industry sources said Wednesday." Also from the article: "Industry representatives said the FDIC has cited fast-growing and de novo institutions that have added billions of dollars to insured deposits without paying new premiums as one of the key reasons for the coverage ratios dilution…the poster children for the issue have become Merrill Lynch, which has moved nearly $50 billion from uninsured accounts into insured deposits at its banks in New Jersey and Utah during the past nine months, and Salomon Smith Barney, a Citigroup Inc. unit that started moving money from uninsured accounts into insured deposits last month." Apparently, Salomon Smith Barney is now aggressively moving client assets into FDIC insured deposits, with a structure that includes six separate banking entities providing up to $600,000 of FDIC insurance protection. Coincidently, from the pile of financial reports I read from the last year's third quarter, the one sentence that sticks most clearly in my mind came from Citigroup – Salomon Smith Barney: "Total client assets in the Private Client business grew 24% from a year ago to $1.047 trillion while annualized gross production per Financial Consultant reached $526,000 in the first nine months of 2000…" It will be quite interesting to see how aggressively Wall Street moves to obtain FDIC insurance for all this "money" it has helped create. I know if I were either Sandy Weill or Bob Rubin (Citigroup chairmen) I would do my best to get my clients into FDIC insured accounts, and this current Reliquefication provides a convenient window of opportunity. I can't shake the notion that we are likely in the midst of what in hindsight will be seen as The Great Distribution. " working-kirk (2/17/2001; 1:39:01MT - usagold.com msg#: 48444) They danced and sang all Summer Black Blade in several messages in the California Energy Crisis end his posts with "THEY DANCED AND SANG, AND PLAYED ALL SUMMER"That might been true last summer but consider, what happens when the grasshopper are unable to dance, sing and play?This thought occurred to me because coming up is a possible strike by writers and actors in the Summer. There is also a chance the musician's union may join in in symphony.A novel with the perfect title "Day of The Locust" talks a little bit about what unhappy grasshoppers do when you cut off their enjoymentThe grasshoppers become locust and locusts are a plague. Already grasshoppers of California are feeding off their neighbors like Oregon, Mexico, Texas, Arizona, Nevada and more. But what happens when you take away their motorcycles(gas shortages) You take away their entertainment (movie strike) You take away their wild parties. (The country is in recession and the silicon valley tech companies are in meltdown so who can afford parties) And last, the utilities are still having major problem so it is hard to dance and sing in the blackouts and dark.One of the best books that suggests what could happen is Robert Ringer "The Rise and Fall of Western Civilization"He said: When crunch time comes, one of the worse places to be will be California especially Los Angeles. His suggestion was to get out and buy gold and guns. That book was written about 15 years ago and at the time he could not foresee everything that would happen. My questions to the people in the forum iswhat happens when the grasshoppers turn into locust?One question to consider is will that try to turn into ants and start savingI suspect when the grasshoppers can't dance working-kirk (2/17/2001; 0:35:33MT - usagold.com msg#: 48443) They danced and sang all Summer Black Blade in several messages in the California Energy Crisis end his posts with "THEY DANCED AND SANG, AND PLAYED ALL SUMMER"That might been true last summer but consider, what happens when the grasshopper are unable to dance, sing and play?This thought occurred to me because coming up is a possible strike by writers and actors in the Summer. There is also a chance the musician's union may join in in symphony.A novel with the perfect title "Day of The Locust" talks a little bit about what unhappy grasshoppers do when you cut off their enjoymentThe grasshoppers become locust and locusts are a plague. Already grasshoppers of California are feeding off their neighbors like Oregon, Mexico, Texas, Arizona, Nevada and more. But what happens when you take away their motorcycles(gas shortages) You take away their entertainment (movie strike) You take away their wild parties. (The country is in recession and the silicon valley tech companies are in meltdown so who can afford parties) And last, the utilities are still having major problem so it is hard to dance and sing in the blackouts and dark.One of the best books that suggests what could happen is Robert Ringer "The Rise and Fall of Western Civilization"He said: When crunch time comes, one of the worse places to be will be California especially Los Angeles. His suggestion was to get out and buy gold and guns. That book was written about 15 years ago and at the time he could not foresee everything that would happen. My questions to the people in the forum iswhat happens when the grasshoppers turn into locust?One question to consider is will that try to turn into ants and start savingI suspect when the grasshoppers can't dance SHIFTY (2/17/2001; 0:26:33MT - usagold.com msg#: 48442) Simply Me / JMB I have two wells. I drove one by hand for a hand pitcher pump(y2k) and my electric pump on the other. When I put in the hand well I hit water at 9 ft. I went another 16 ft and still was in water. I have not checked to see how far down the water is now. I pump it every few days. Works great so far. The thing I don't like is the fact that some bureaucrat is telling me what I can and cant do with my water. Im just waiting for gold to do its thing. I would like to move. Gatoraid is OK if you can get past the bite! Big Smile$hifty FredBear (2/17/2001; 0:24:21MT - usagold.com msg#: 48441) Why Inflation Is Winning Why Inflation Is WinningThe constant debate about inflation vs deflation rages on. I will give you some reasons why I think inflation is currently winning.First, as always, we need to define terms. Inflation is defined as "an increase in the supply of money resulting in an increase in the cost of goods." Consequently deflation is "a decrease in the supply of money resulting in a decrease in the cost of goods."So, the question becomes, is the supply of money decreasing? The answer is a resounding no. By any measurement the supply of money under Fed Chairman Greenspan is constantly increasing. The rate of increase depends on the category of money (M1, M2, M3, MZM) and the timing of the measurement. The recent statistics vary from 5% per year to 100% per year depending on when the measurement was taken.Now this should result in increasing prices. We all know that energy prices have been increasing steadily. How about items on supermarket shelves? Not only are the prices increasing rapidly, the sizes of many items are decreasing (a subtle way to increase prices). Home purchase prices are increasing. Auto prices are steady to increasing. Statistics show wages increasing also, even as big layoffs occur daily. Increases in the money supply cause demand to go up causing prices and wages to rise.What prices are decreasing? The NASDAQ, computers, DRAM, cell phones and most technology equipment. Is this deflation, or the result of over capacity and a glut of very competive items? Obviously it's the latter. How about some commodities? The grain sector is at or near long term lows. Is this deflation? No, it's because the world has no problem producing enough grain to feed everyone. Grain are in oversupply just like computers and cell phones. But unlike computers and cell phones, grains can quickly move from oversupply to undersupply with one kick from Mother Nature. Mother Nature can wipe out an oversupply of grains faster than you can say "inventory correction."Some people will say "look at the price of gold." Those of us who have studied the gold market in depth know why the gold price (and silver) is still heading down. As the prices of gold approaches the price of production, less and less gold is being mined, and therefore, more and more existing gold must be used to fill the supply void. With a paper gold market, it is easy to give the appearance of supply outweighing demand. But the available above ground supply is getting less and less everyday.Let's look at this from another perspective. The Federal Reserve has stated that it will begin accepting more types of collateral on its books. What does this mean? It means that the Fed will exchange more and more types of paper (mortgage securities, etc.) and thereby inject (picture of drug addict goes here) more and more paper money into the economy. This is called inflation.Now the only way to truly have deflation is for more debt to be payed off than dollars created. So far, that does not appear to be happening. It may happen some day, and some day soon. But Mr. Greenspan is intent on not allowing it to happen.The irony here is that because of technology, we should have no problem feeding everyone, or enjoying life here on planet Earth. Our technology improvements are consistent with price decreases because we are continually improving processes thereby producing more for less. All of us should be working less and having more fun.But for some reason we have allowed ourselves to adapt a monetary system that requires inflation to survive.Because we have this strange need to keep accumlating "things" we have allowed ourselves to become slaves to this crazy monetary system. This is the exact opposite of how the real world should work. We shuld have no debt, plenty of food, and be hitting the beach and the ski slopes regularly.It is easy to see how all of this will all end very badly. It is not easy to tell the average person that this will all end very badly. I do not think investing only in currencies and bonds are going to save me from the coming debacle. They may perform well vis-a-vis other paper assets. Just as it was believed one year ago that all NASDAQ stocks would rise to the heavens, we are reaching a point where all paper assets will be lumped together as worthless. If you do not believe that this can happen, just look at the attitude of the masses one year ago versus today. Sure many are still in denial, but I am willing to bet they are also in shock. Shock because they never thought the world could change so rapidly. But it did. And it will again in regards to paper assets versus hard assets.I wish I did not believe this because so many people including friends and family will be affected. But the writing is on the wall for anyone who wants to see.An ounce of prevention is worth a pound of cure. And an ounce of gold will be worth many more pounds (dollars, yen, euros, etc.) soon. Pandagold (02/17/01; 00:01:39MT - usagold.com msg#: 48440) HBM, Journeyman, Randy et al (on Demand) DEMANDUser demand would tend to increase when prices fallSpeculative demand (by the sheep) when prices rise ViewYesterday's Discussion.
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