See, Russ, I found your thread. On the PM thread you asked me "to keep my eye on the global ball, not just the U.S." Good advice. I just plead lack of time and energy. Hard enough for me to keep pace with the data which I believe is most meaningful to me and my investments.
I track MZM because I have found it to have verifiable cause and effect correlation with U.S. price patterns. And that has particular value to me as an investor because the cause can be observed 12-18 months before the effect. Sometimes the correlation is precise, sometimes not, but even then usually useful for investment purposes. I would welcome references from you to similar patterns with the myriad of U.S. and world forms of credit creation that you discuss.
A question and a response from the PM post. I tried briefly to find the reference but what does "LS" stand for? In support of your skepticism of the value of MZM inquiry and the illustration of the recent history of MZM and the CRB Index you state: "I would say that LS caused it, although MZM might be secondary. I just don't think the fine upstanding young lads who use direct U.S. liquidity pour it into commodities."
Again, what is LS? Then, if you will admit that in your economic theory there is a time lag between the creation of your money and its impact upon the pricing structure, please show me some statistics of correlation between the creation of LS and the CRB Index from November, 2001 through January, 2003.
The second part of your comment misrepresents (innocently enough) what I understand of the money creation process. New money permeates the pricing structure of the economy. No one directly places newly created money anywhere in particular. New deposits are created. Where the money goes is up to each individual who borrows from that new money. As the new money "works its way" through the economy, price levels are affected (there now being more money for the same level of goods and services, it takes more of the same denominated money to buy that same level of those goods and services). Raw materials would be affected before value added manufactured and processed goods and services. 12 months is the time lag I have observed as opposed to CPI price levels where 18 months seems to be the better fit.
I focus narrowly on MZM as opposed to world factors because I am concerned most of all with changes in the value of the US dollar. My wealth, such as it is, is denominated that way, so I am concerned most of all how to protect it in dollar terms. Gold is the logical long term constant, but people (investors) all too often lose sight of the fact how long the "long run" really is. So I am essentially looking for a short term edge because, as Keynes said, "markets can stay irrational longer than you can remain solvent." Gold in world currencies is not yet in a bull market.
"Greg Weldon also did an entire letter on what gold looks like to the rest of the world. (Greg's web site for his outstanding letter is www.macro-strategies.com. You can get a free 30 day subscription.) In country after country, gold is NOT in a bull market. It is signaling deflation. The worldwide wave of deflation has not subsided."
(July 11, 2003 John Mauldin)
I am most of all concerned about a gold bull market in U.S. Dollar terms and I think that discerning evidence of Fed action in monetizing debt (money creation) gives me that.
In response to your question on this post #175, Adrian Van Eyck, creator of the newsletter Money Letter Forecasts, also believes (with more authority and credentials than me) that MZM is the aggregate to follow, because it is the narrowest aggregate most correlated with Fed money creation. |
