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ARCHIVED DISCUSSION FROM 8/18/2005 All times are U.S. Mountain Time (Yesterday's Discussion.) mikal (8/18/05; 23:51:40MT - usagold.com msg#: 135099) U.S. financial obligations necessitate a golden rescue http://www.etherzone.com/2005/henr081905.shtml GOING, GOING, GONE... THE SAGA OF FINANCIAL RESPONSIBILITY - Ed Henry - August 18, 2005A winner. Contains many of the Ed's best ideas and suggestions backed by expert presentation of official data.Though strong warnings about a future U.S. may gotoo far for some, a need for gold and sensible preparations is aptly conveyed. mikal (8/18/05; 21:04:40MT - usagold.com msg#: 135098) Trigger? Several posters here and at other forums have comented theynow saw a window for an exogenous event. A trigger may have occurred tonight as FT(Financial Times of London) is now reporting that Saudi forces have killed a top-ranking Al-Quada figure. Also in the news are the ongoing China/Russia land and sea exercises and the UK ismaking official plans for dealing with Bird Flu pandemic.And many pension and hedge funds await obligatory end-of-month and end of quarter acccounting reports and revelations, as do many corporations, REIT's, banks, insurers and sundry government, mutual and investment funds. melda laure (8/18/05; 17:40:01MT - usagold.com msg#: 135097) Oil to stay in the 60$'s for years http://www.bloomberg.com/apps/news?pid=10000103&sid=aB5bwfjqFwEo&refer=us But it's not the fault of peak oil! So now Goldman sachs makes it official! It's the oil explorers fault, (those lousy cheepskates) they just wont get off their duff and go spend the bucks to find some more. Never mind that there's precious little to find and that Matt Simmons is saying the cost to put a new barrel per day of production on line is from $20,000 to $40,000 per barrel. Hmm, that's 40 billion dollars per million barrel per day additional supply. A mere pittance for an enterprising chinese Boon Pickens.But, hey, spread that over an oil field lifespan of a hundred years and that's only 75 cents! Maybe they should take a page from the miners. What spectacular new find has come to light in the last four years? Where is the new "south africa" to replace the old?snip:"`Reinvestment rates if anything appear to be falling not rising,'' the report said. Higher taxes, a shortage of rigs and workers and a lack of available oil and gas reserves are all driving up costs, the analysts said. "Maybe Iran really DOES need those nuke plants. They'll be using steam injection to power the suction to grab the last 20% that wont flow naturally. And blowing $20,000 per barrell for a site that will last 3 years, not 100. Either that, or they'll be using Juan Valdez and his burro to turn the wheel. Somebody tell me again why we want to invade this silly little country?But dont worry, there's plenty of oil left. And there's plenty of gold under Johannesburg, if you're willing to dig down 20km.Give my regards to the balrogs lads, I'll buy mine from the gift store, thank you. USAGOLD Daily Market Report (8/18/05; 15:19:58MT - usagold.com msg#: 135096) Page Update! http://www.usagold.com/DailyQuotes.htmlThe Daily Gold Market Report has been updated.If you are considering investments in gold we invite you to request our free introductory information packet detailing the products and services offered by USAGOLD ~ Centennial Precious Metals. We welcome your inquiry and look forward to working with you.August 18 (from MarketWatch) -- December gold fell 50 cents to close at $444.70 an ounce on the New York Mercantile Exchange. But the contract traded as high as $447.70 earlier after dropping more than $6 in Wednesday's session."As far as today's trading goes, gold's early rebound is an indication that the bull market trend is intact, and that the contribution of higher energy prices to the metal's rally was marginal, at best," said Brien Lundin, editor of Gold Newsletter. ... But now, "the underlying support for gold has been outside of the speculative arena, with physical demand emanating from buyers with longer-term views," he said."Oil money from the Middle East, as well as seasonal demand from India are certainly strong contributors to the recent surge in gold buying," said Lundin.Even more demand stems from investors who are looking six months to a year down the road, and "seeing a slowing U.S. economy and the end of the Fed's rate-hike campaign," he said.In that scenario, the investors "don't see gold trading for anywhere near today's prices," he said.Indeed, for the moment, "gold continues to find good demand from the physical sector which will no doubt increase as we head into the festival season in India and the Middle East," James Moore, an analyst at London-based TheBullionDesk.com, wrote in a note to clients.Dale Doelling, chief market technician at Trends In Commodities, said "the long-term trend remains positive for the precious metals and traders will eventually see that [Wednesday's gold-price drop] was nothing more than a tremendous buying opportunity."----(see url for full news, 24-hr newswire)---- Topaz (8/18/05; 14:40:46MT - usagold.com msg#: 135095) Keep diggin Boys! http://www.nymex.com/media/delivery.pdf Comex miners managed to dig 200 odd contract equivalents today before the stope fell in.With only 7500 CE's now done for Aug one thing's for sure, they'll be back on the tools tomorrow!Dig my pretties ...D I G ! Topaz (8/18/05; 14:18:54MT - usagold.com msg#: 135094) Well Done USAGold ...and Clink! Congrats on the "Starter Kit" promo Gents ...every home should have one!Sir C! ...this is good: -As expenditure in the real essentials squeezes out the money available for the discretionary items, these items will lose their pricing advantage, putting a further deflationary spin on the index.When considering the impact on inflation these items we assume as "essential" ...food, energy and whatnot, we need to balance this against an economy which is essentially "discretionary" biased to wit, the enormous impact of China and the spawning of a "discretionary" domestic workforce we've been witness to these last several yr's.I'd be inclined to think that by insulating CPI from these essentials, given aforementioned discretionary bias of the Economy, we're actually "overstating" the inflation number rather than the other way round. TownCrier (8/18/05; 14:11:22MT - usagold.com msg#: 135093) Central Bank Gold Agreement sales limit breached http://www.mineweb.net/columns/london_beat/473856.htm LONDON (Mineweb.com) -- The latest figures from the European Central Bank suggest that the total tonnage sold to date in this, the first year of the second central bank Gold Agreement, have reached 506 tonnes against a limit of 500t. ...If we can assume that sales are now likely to drop right away, then this does alleviate potential overhead pressure on the price.It is perhaps worth pointing out here that official sector metal is a boon rather than a bind to the gold market, especially now that there is an element of transparency about some of the transactions.To illustrate: annual gold fabrication plus bar hoarding demand in 2004 was 3,410 tonnes against physical supplies from the mining sector (net of dehedging) and scrap of 2,850 tonnes (GFMS Ltd. figures). This produced a shortfall of 560 tonnes or 10.8 tonnes per week, much of which was met by net official sector sales.The market does actually need this material to come out if prices are not to gallop higher to reach the appropriate market clearing level and cause disorderly conditions - which could have repercussions on long term stability.Example: after the frantic conditions of 1979 when prices doubled over six weeks, culminating in a spot price of $850 on January 21st, demand dropped like a stone (allied with heavy scrap return in the early years) and it took until 1986 before fabrication levels of 1978 were regained. Furthermore a disorderly gold market sends distress signals to the rest of the financial sector, especially given the amount of liquidity available in gold. It is also important to note that it is not necessarily clear how much of this has come straight into the market or how much has been sold to other members of the Official Sector – it is perfectly possible that some of these sales are transfers between CBGA signatories and other official sector bodies, which means that not al the metal necessarily reaches the private market^----(article at url)----^To be sure, much needs be done as paradigm shifts are particularly challenging for those attempting to maintain "orderly markets" through the progression.R. TownCrier (8/18/05; 13:51:30MT - usagold.com msg#: 135092) 'flation http://www.mineweb.net/columns/curve_ball/474011.htm JOHANNESBURG (Mineweb.com) -- On August 8, following a meeting on interest rates, the South African Reserve Bank (SARB) cited inflation fears, underpinned by record crude-oil prices, as the key reason for why core interest rates would not be cut....SARB cut its core rate progressively from 13.5% on June 13, 2003 (during a year when crude oil averaged $29 a barrel) to 7% on April 15 this year, when crude oil was well on the way to this week's multi-decade record above $67 a barrel.Measured in today's money, crude was around $85 a barrel (the highest since 1865) during the 1980 crude crisis.After the 1980 crisis, the world took a new look at energy efficiency; today it takes half as much energy to produce one unit of economic output (GDP, gross domestic product) than in 1980. But is it that simple? This week, the Wall Street Journal laughed off the US's producer price index (PPI) increasing at a crudely annualised rate of 12%...While the July figures for the US were scary to some, at TheStreet.com, James Cramer said that US inflation peaked with the "spike" in PPI. Investors should no longer be focused on inflation, Cramer argued, "they need to keep an eye out now for recession. Although we're not in recession mode yet, we're in deceleration mode." For investors, the bellwether stock for measuring the impact of crude oil prices is Wal-Mart, the world's biggest retailer. On Wall Street, the stock price is down nearly 20% this year......many of its customers fall into the US's blue-collar paycheck-to-paycheck market. But is modern inflation – or more precisely, its instruments of measurement - all it is cut out to be?In the past ten years, the total cost of living in Britain has risen by just 14%. However, changes in individual constituents vary massively: school fees have increased 62%; hairdressing has risen 58%, holidays are up by 52%, and eating out is 33% more expensive.It is the prices of mass-produced manufactured goods that have fallen enormously: prices for clothes are down by 42%, shoes by 31%, and consumer electronics by 63%. The price falls are almost fully attributable to the entry of the world's "engine room," China, to the world economy.However, Chinese demand has increased prices for items where the world's most populous country lacks legal infrastructure (benefiting financial services) or where the goods or services are non-tradeable (housing and education), or which must be partly or fully imported (crude oil being the leading example). ^----(from url)----^ otish mountain (8/18/05; 13:37:43MT - usagold.com msg#: 135091) Belgian Re: S. African miner's strke Last week you made a remark about the ending of the miner's strike but did not expand any further.I'm interested on your "take" for what I thought an abrupt ending of this dispute.My impression was a settlement was forced quickly by big money.I had thought this strike would be a long drawn out affair, I didn't know miners were deemed an essential service. TownCrier (8/18/05; 13:12:55MT - usagold.com msg#: 135090) Delhi to cut VAT on bullion http://www.business-standard.com/bsonline/storypage.php?&autono=197671 New Delhi August 19, 2005 -- Desperate to woo back bullion trade, which has shifted to low tax-regime states such as Gujarat and Rajasthan, the Delhi government is firm on cutting value added tax (VAT) rates on precious metals to 0.25 per cent if the VAT panel fails to make other states raise tax rates to one per cent. "This time, we will not wait beyond August 24 for VAT panel to take a decision in this regard. We have lost almost all of our trade in bullion to Rajasthan and Gujarat because of lower tax in these two states," said Delhi finance minister A K Walia. The state will lower VAT to 0.25 per cent from one per cent in line with sales tax in Gujarat and Rajasthan in case no agreement is reached in the empowered committee meeting, he said.^-----(from url)----^It's always nice to see occasions where market forces and politics work together to bring about an improved structure. And in this case, I refer to the reduction of VAT on bullion further toward the zero-percent ideal.Should give you hope that it is only a matter of time before these forces continue their favorable work in this arena and manage to move the pricing mechanics toward the physical-based ideal.R. Goldilox (8/18/05; 12:25:16MT - usagold.com msg#: 135089) Calif. home buyers stretch to afford homes - study snip:August 18, 2005 12:15:33 (ET)By Jim ChristieSAN FRANCISCO, Aug 18 (Reuters) - Home-ownership in California has increased to a level not seen since 1960 but it is coming at a high cost and risk for home buyers, according to a study released on Thursday.To keep up with soaring home prices, Californians are setting aside a dangerously large share of income for house payments and taking on risky mortgages, according to the Public Policy Institute of California.It found 52 percent of Californians who bought a home in the last two years spend more than 30 percent of their total income on housing and 20 percent of recent home buyers spend more than half of their income on housing."That gets to be problematic," said David Yeske, a certified financial planner in San Francisco and past president of the Financial Planning Association. "When your mortgage represents that percentage of your income, you've got no room for error if some other expense comes along."California home buyers are assuming such risk because lenders have relaxed lending standards. That has helped lift the state's homeownership rate, or the percentage of households owning their own homes, to 59 percent, compared with a previous peak of 58 percent in 1960, according to census and other data compiled by the Public Policy Institute of California."Higher debt-to-income ratios are possible because more and more lenders are foregoing the fiscal practice of limiting housing costs to no more than 30 percent of income," according to the center's study. "Instead, they are qualifying buyers for loans that consume 40, and even 50, percent of their income."HIGH PRICES, RISKY LOANSLenders have little choice. The percentage of households able to afford a median-priced home in California is shrinking and closing on a record low 14 percent set in the summer of 1989, according to the California Association of Realtors.The minimum household income needed to buy a median-priced home at $542,720 in California in June was $125,870, based on an average mortgage interest rate of 5.71 percent and assuming a 20 percent down payment, according to the realtors group.A year earlier, the minimum income needed to buy a median-priced home in the state was $111,420, when the median price of a home stood at $468,050 and the prevailing interest rate stood at 6.01 percent."People are stretching, doing whatever they can do" to buy homes in California, said Beth Haiken, a spokeswoman with mortgage insurer The PMI Group.That includes taking on interest-only mortgage loans, which carry long-term risk should their low interest rate components expire during a period of high interest rates."We're concerned for borrowers because they may not fully understand what may happen," Haiken said. "In three or five years, we may be in a different credit cycle and they may not be able to refinance as easily as they expected."Last year, 46 percent of loans used to buy homes in California had interest-only components, up from 23 percent in 2003, according to LoanPerformance, a mortgage research unit of First American Corp."In the San Francisco metropolitan statistical area, that percentage was 59 percent. San Diego was 62 percent," said LoanPerformance spokesman Bob Visini. "It's really being driven by affordability."-GoldiloxBuy now, pay later continues to increase the risk factors and the number of buyers "out on a limb". This will end ugly! Goldilox (8/18/05; 12:09:30MT - usagold.com msg#: 135088) Gold defies pressure from dollar rise snip:AN FRANCISCO (MarketWatch) -- Gold futures edged higher Thursday, defying pressure from a stronger U.S. dollar after a more than $6-an-ounce drop in the previous session.At last check, disappointing European economic data and demand for U.S. Treasurys spelled strength in the dollar against the euro on Thursday. See Currencies. Strength in the dollar usually eases investment demand for gold.But the "trend in the dollar is still down and the market is just testing the resolve of the dollar bears at this time," said Dale Doelling, chief market technician at Trends In Commodities.Given that, "the long-term trend remains positive for the precious metals and traders will eventually see that [Wednesday's gold-price drop] was nothing more than a tremendous buying opportunity," he said.December gold was last up $1.70 at $446.90 an ounce on the New York Mercantile Exchange after dropping more than $6 in Wednesday's session.Silver for September delivery traded up 1.2 cents at $7.005 an ounce. Goldilox (8/18/05; 11:50:13MT - usagold.com msg#: 135087) Employee rate @ Clink,If everything is on sale, maybe we'll get a 5% "special rebate" on the CPI. Or maybe the same bank rate as the "employees".I caught this one on the second read (after caffeine). Too funny. We may get the employee rate, but we'll NEVER get the "bank rate".Your "hedonic" evaluation of the inflation numbers is probably right. You should copyright that one! The Hoople (8/18/05; 11:49:06MT - usagold.com msg#: 135086) Clink! Essential spending crowding out discretionary spending, putting further price pressure on "core" items you say? Kinda like measuring housing inflation with imputed rent. The bigger the housing bubble the more it drives DOWN the rent, hence CPI. Which is about 24% of the whole index. They are clever little deceivers aren't they? If rents ever begin rocketing they'll then go to real estate value basis and capture the entire housing crash as "deflation". George Orwell meets Rube Goldberg. Goldilox (8/18/05; 11:46:37MT - usagold.com msg#: 135085) derivatives @ Clink,I usually watch the OI carefully, paying particular attention to the put/call ratio. A high bias one way or the other usually suggests that the sellers will pound accordingly near expiry.As miners are subject to the price received for their product, both company and commodity fundamentals factor into the equation. Clink! (8/18/05; 11:27:18MT - usagold.com msg#: 135084) @Goldilox Well, that would be the theory, but I'm not betting the farm on it (just a couple of acres :^] ). Of probably more importance is to see where the balance of the open interest is and look at the share price with respect to that. If they are the same, I wouldn't expect to see much change before expiration - after all, don't derivatives make for smoother market operations ?!About the CPI, it has just occurred to me that if the CPI is more a measure of discretionary expenditure, it is an even worse guide to real inflation than I thought. As expenditure in the real essentials squeezes out the money available for the discretionary items, these items will lose their pricing advantage, putting a further deflationary spin on the index. If everything is on sale, maybe we'll get a 5% "special rebate" on the CPI. Or maybe the same bank rate as the "employees". Clink! (8/18/05; 11:13:26MT - usagold.com msg#: 135083) @ Topaz Well, that is certainly Another view of things. Maybe one of the whacks will just keep on going down. When I read the Trail, I wondered what clues there might be to the approach to that Awful Liquidity Crunch in gold futures - you may have come across one of them.C! Goldilox (8/18/05; 10:46:36MT - usagold.com msg#: 135082) "Core" numbers - Cost of Living (and dying) indices @ The Hoople,Yes, the entire idea of "core" inflation is an anachronism whose time is long past. The items deleted from the "core" calculation make up about 90% of the "living" expenditures of working households. Housing, Energy, Food, Medical? What else matters to millions of people living from paycheck to paycheck? Oh yeah - back to school clothes.I know. Let's have an inflation index that only measures the flow of "discrestionary" expenditures, as the other items fall into the same category as "death and taxes".Speaking of the macabre, the SM "winners" in this sideways shuffle are tobacco and "defense" stocks. Wanna make big money? Buy the stocks of companies whose product is population extermination!Today everyone is watching the Vioxx trial to see if Big Pharma's purveyors of death and disability will fare as well as tobacco in the "Kangaroo Courts".Look to the public funeral companies for big returns - there's no discounting in that market! USAGOLD / Centennial Precious Metals, Inc. (8/18/05; 10:27:26MT - usagold.com msg#: 135081) Especially designed for those who are taking their first step... http://www.usagold.com/gold/special/starter.html The Hoople (8/18/05; 09:44:40MT - usagold.com msg#: 135080) Goldilox, rotten to the "core" numbers Orwellian statistics indeed- wouldn't it make more sense if food, energy, and housing WERE the core- and dvd's and all non-essential imported stuff non-core? I have maintained for years that if they stated true inflation in these CPI/PPI numbers entitlements would already be bust. Same for pensions and retirementss tied to cola's. Apparently many others are now agreeing according to the CNBC poll I just saw. 77% said they thought CPI understates inflation while only 17% thought it overstates inflation. Gold and bond rigging is paramount to the success of this fraud. Can't have gold at $2,000 if the CPI is "tame" at 2.3%. No 30 yr. bonds at 84 either. And then there's that whole housing bag of worms if Fannie's derivatives by the trillions implode. To me wealth destruction is the only option elitists have for us. Their goal is for as few as people as possible to realize it's happening to them. In that regard CPI's and PPI's are sort of tranquilizers. I prefer to be non-medicated. Goldilox (8/18/05; 08:47:39MT - usagold.com msg#: 135079) Are we endangered by a new Savings Paradigm? snip:'One Account' Blurs Savings and Mortgage debtThe new savings paradigm is most apparent in the design of a relatively new financial product called a "One Account" released about two or three years ago by banks and financial service companies in the UK. The idea of the "one" account is that an individual does not need two separate transactions, one a mortgage loan, the other a savings account. Normally, if a homeowner keeps them separate, the savings account proves inefficient. The individual is in effect giving the bank his savings and then borrowing it back at a higher rate of interest.Why pay a "spread" on your own money? What the "one" account does is to give the individual a mortgage, but with flexible repayments (within certain broad limits.) This way, if there is extra cash at the end of the month, the individual simply pays down his mortgage, thereby increasing the net equity in his home. If in the next month he needs money, he increases his mortgage debt somewhat. So long as at the high point of each year, the debt stays below certain pre-agreed limit - which are related to a normal amortization schedule - the lender is happy. From the individual's standpoint, the beauty of this scheme is that he is paying off the more expensive mortgage debt. The reduction in interest expense provides a better return, than the saver would get from interest on a savings account. And the 'one' account may also reduce taxes, since there is no savings income subject to taxation. (This type of account works best when the mortgage debt, or the least a portion of it which can be prepaid and reborrowed, is at a floating rate.)This type of loan flexibility has helped individuals to think about savings in a more powerful way: The real challenge is to increase one's net wealth, not just the balance of their personal savings accounts. And this notion has helped them to see their homes as a vehicle for savings. It is obvious that increasing net equity increases their wealth. And home equity is increasingly liquid wealth too, because there are myriad financial methods (remortgaging, equity release loans, selling-to-rent) for releasing that equity. With this liquidity achieved quickly and cheaply, equity-in-the-home becomes almost indistinguishable from equity in a savings account or in a securities account.Government officials and their economists may be out-of-date, if they think that the balance of a savings account matters to the new breed of Home-Equity-Savers who have grown up in our age of quick-and-easy financial services. Logically, most people will put their efforts into increasing their aggregate wealth, more than trying to hit some mythical cash savings target. Ironically, in a time of soaring property prices, this objective has encouraged many to borrow even more money in order to buy a bigger house than they need, or a second property, in the hope that the value of the larger property investment will increase, pushing the investor's net equity to a higher level. And what's wrong with becoming a landlord? Particularly, if the amounts to be received in rentals, exceed the amounts paid out as interest. It is not only big hedge funds who can enjoy the benefits of a "carry trade." So we see that, the new wealth paradigm has the impact of increasing debt and reducing traditional savings. -GoldiloxFinancial experts have always warned "Don't put all your eggs in one basket". For the vast majority of homeonwners, home equity is their last remaining basket. It seems wonderful as long as hyperbolic FED liquidity increases remain intact. Any "crack" in the FED dyke will likely crush those with single basket scenarios. The "mortgage miracle" is more and more resembling the Pied Piper's siren flute! Goldilox (8/18/05; 08:36:41MT - usagold.com msg#: 135078) DON'T LOSE FOCUS! http://www.financialsense.com/fsu/editorials/vaughn/2005/0817.html snip:Gold is definitely looking exciting on the charts!But already as we watch gold rise closer & closer to breaking its 20 year highs we hear "Oversold!", "Oversold!" being shouted by pundits. Is gold over sold right now & due to come back down a bit? A good question to ask & my answer to this is – "So what?""…the outlook for gold remains positive despite recent dips in the gold price. The prevailing opinions were supported by a recent study, released August 9 by commodities consultant CPM Group. In its Gold Survey 2005, CPM said the market is still benefiting from the most sustained investor buying in at least 60 years…" The Gold Report, www.theaureport.com, 8-11-2005Let me put in a plug here for "The Gold Report " as this is an excellent source for gold market related news & is published by the respected & successful Streetwise, Inc. Anyway, the point to be drawn by gold's present price action is that a new trend & a new long term trading range is slowly & methodically being established.The temporary swings & oscillations are less important & are really irrelevant to the simple fact that ultimately gold is heading much, much higher. Just as the hand on a Grandfather clock swings back & forth price oscillations are to be expected, but it is the formation of the longer term higher trading range that is the important fact to understand."Dr. Clive Roffey, editor of Gold Action, recently told readers that he was classifying the recent correction in gold shares as "a minor breather in a continuing bull market and am looking for the gold stocks to move to new highs. The resource stocks keep on moving and I expect to see continued new highs across the whole of the resource area," said Roffey." The Gold Report, www.theaureport.com, 8-11-2005Probably more money is lost by those who try & to establish an exact top & an exact bottom to a market. What is that old saying about those who don't see the forest for the trees? I think wisdom necessitates us looking today at the overall forest and not the individual trees. And I see an entire vast forest growing on the horizon as gold climbs in the long run to new highs that will in due course bring a ton of new campers into the woods.-GoldiloxAnd now a view from the "other side" of the forest . . . Goldilox (8/18/05; 08:33:09MT - usagold.com msg#: 135077) GETTING TO THE "CORE" OF INFLATION PROPAGANDA http://www.financialsense.com/fsu/editorials/schiff/2005/0817.html snip:Yesterday the Labor Department reported that July Consumer Prices rose by .5%. Today we were informed that July producer prices rose an even sharper 1%. Though these are very serious numbers, indicative of a chronic inflation problem, Government officials, Wall Street strategists, and the financial media tell us not to worry. Excluding energy prices, the so called "core" CPI rose a benign .1% and the "core" PPI a somewhat less benign .4%. Measuring inflation while excluding energy prices makes about as much sense as dieters weighing themselves while excluding all the fat around their stomach, hips and thighs. Just how did this ridiculous concept get started in the first place?Food and energy prices have historically been quite volatile, up big one month, down big the next. To prevent economists from jumping to erroneous conclusions the concept of the "core" CPI was developed. It has been argued that by looking at the monthly numbers without these volatile components, economists get a more accurate read on the true impact of inflation on consumer prices. Excluding food and energy in no way implied that such prices were not important components of the indexes, just that their prices tended to be more volatile, and hence less relevant on a monthly basis.In 2002, when oil prices began their steady ascent from $20 per barrel, the common wisdom held that the rise was a temporary phenomenon based on global terrorism and the build up to the Iraq War. As a result, economists began ignoring the actual CPI in favor of the "core" as everyone knew that rising oil prices were a temporary phenomenon. Based on that false analysis, at least it made some sense to exclude rising oil prices, since the belief was that higher prices would ultimately be reversed. However today, with oil prices above $65 per barrel, and more economists having resigned themselves to the inevitability of even higher oil prices in the future, why is anybody still looking at the core?Since 2002, oil prices have been anything but volatile. They have in fact been quite predictable, rising steadily for four years. In such an environment, excluding them when measuring inflation is a farce. Yesterday, CNBC showed a graphic which revealed the divergence between oil prices and the over-all CPI. Though historically the two have been highly correlated, recently they have diverged. CNBC's conclusion was that the U.S. economy was now so efficient that oil now has less influence on over-all consumer prices. Far simpler and credible an explanation is that either the data is being manipulated, or the lag between rising oil prices and rising consumer prices in general has lengthened.-GoldiloxI have to agree here. "Volatility" is NOT defined as measure increase, but rather "cyclical ups and downs". The BLS and FED "big lie" has been based on previous, but no longer relevant assumptions, to aid the accompanying political slumber. Goldilox (8/18/05; 08:22:21MT - usagold.com msg#: 135076) Nasty Fractal Scenario http://www.urbansurvival.com snip:"George, is the global economy at the brink of a breakdown much greater than its predecessor in 1929? How do the current imbalances compare to those late Roaring Twenties' similar circumstances of consumer-level forward consumption, debt, overvaluation of assets, and industrial overcapacity? Will the devaluation and asset decay process at the end of the second 70 year sub-fractal - contained within the 140 year Second Grand Fractal cycle beginning in 1858 - be greater than at the end of its first 70 year sub-fractal?A chicken in every pot and two cars in every garage has been replaced with eating out three of seven nights at the plethora of fast food and dining opportunities that 'froth' the highways and typify the service type of economy the States have become. Three SUV's and a Hummer distributed between a primary residence and an investment residence have superseded the two cars in a garage. Buy a radio or washer on credit has been bested with buy and buy with abandon everything imaginable with ubiquitously facilitated debt from refinanced or second mortgages based on the surety of ever appreciating house prices -the latter caused in part by fed fund rates 1/4 of the rates in 1928.The evenly balanced declining and increasing annual GDP growth rates prior to 1929 have been replaced with continuous positive annual GDP's growth rates during the past 45 years. The great creditor nation status of 1929 has been substituted with a beggar man debtor bravado country wearing only the emperor's new clothes. Its treasury is writing bad checks against future income that can only be guaranteed if the remaining 57 percent of the US private (nongovernmental) work force becomes governmentalized allowing a Weimar type of hyperinflation. In short the consumer saturation point of 1929 looks very appealing against the very poor economic hand that America now holds. Consider America's current financial balance sheet and thereafter consider how badly the unbalanced excesses of 1929 unfolded.In the next nine weeks, data - which has always been there - will be re-recognized. GM's and Ford's junk bond status and their probability of default on a collective 450 billion dollars of debt will reappear. The thousand mirrors that reflect a single dollar in the derivatives markets will have key reflecting glasses broken erasing the image in 925. The housing bubble, that is so historically remarkable in its uniqueness in that virtually all know it to be a bubble, will crack. The microcosm of forward consumption in the last two months of the American auto business will witness the expected necessary microcosm of historically poor follow-on monthly sales. Major airlines will throw in the towel declaring bankruptcy and pension amnesty. Declining monthly GDP will receive attention. The real position of the individual debtor and the debtor country in the face of declining asset valuations and projected tax revenues will get its due. Fiscally impossible city and state governmental pension funds whose futures are tied to the equity markets and escalating real estate property values will have a viability reality check. For the first time in many years the concept of consumer retrenchment will be seriously and widely explored as a probable scenario.The comparative initiating decay fractals at the secondary summit, with respect to March 2000, of US equity indices suggest a very remarkable primary revaluation. Watch the general trend and descent of the long term US note and bond debt markets as exiting money from equities and commodities flows into these long term debt instruments driving their interest rates lower. Gold has potentially only one more week before completing its maximal 12/30/30 weekly growth cycle with an abrupt devaluation. Opposite to gold, the dollar will transiently trend well. Expect the unexpected. Within this quantum fractal decay process, expect nonlinearity. Gary Lammert http://www.economicfractalist.com/ "-GoldiloxI'm not going to blindly accept all his predictions, but they're worth reading, as his studies link some very real issues. I'm going to try to compare Tim Wood's Cycles work to this cycle description and see if they jive.It's interesting that major prognosticators are beginning to diverge wildly as we move into what looks like a very volatile autumn market. October, with its storied SM history, always seems to carry the spectre of "readjustment" on its shoulders.. Topaz (8/18/05; 04:43:20MT - usagold.com msg#: 135075) @Clink! Why you ask, dunno, but try this on and see if it fits.The Market - in a deteriorating economic climate, will naturally ebb toward Cash and Gold. The Cash at present is $/Oil and the Gold is Bullion......hence the Dollar run-up from Jan, and anecdotal Gold shortage, driving Gold accumulators to shop @ Comex.Our pricing of the various markets is at present, by and large "futures" rather than "Spot" determined ...and Comex likes it that way but, to maintain the appearance of a "market" in Gold, they have to put Gold on the Line every couple of Months ...and WHACK!If this trend gets out of hand, our out-months will go into backwardation as "faith" in the markets ability to determine Spot ...and time component (ie: the wait until - say - December) ..are BOTH discounted.The upshot could well see Gold "price" plummet ...with Bullion being unavailable to market. Odd?... slim chance? maybe,...but perfectly logical in this current environment.I've been fixated on Comex since March Sir C! and Gold is doing exactly as I've been expecting.Silver? we won't mention Ag 'till Sept ...it's misbehaving.There Randy, I didn't mention the D word once! ViewYesterday's Discussion.
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