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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: yard_man who wrote (6550)1/30/2004 1:49:37 PM
From: ild  Read Replies (1) of 110194
 
Date: Fri Jan 30 2004 13:35
trotsky (WileE) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
of course there are big differences between now and the 70's - but i tried to restrict my observations to things i believe will hold true in any period. e.g. i'm convinced that the important tops will once again be marked by divergences.
as for the differences, the most important one is that the 70's were an inflationary, K-summer period, while we're in deflationary era now. gold's purchasing power increases far more during deflationary eras than during inflationary ones, and the gold stocks can be expected to perform better and more linearly - i.e., the corrections will likely be less severe than those observed in the 70's. a significant difference is also that the central banks have lost all compunction about papering over financial and economic crises by printing a lot of money - we're constantly floating in a sea of liquidity because they fear that the overleveraged credit system might otherwise collapse.
the funny thing is that it will probably collapse anyway - eventually. note the example of Japan: in a modern day fiat regime, an essentially insolvent banking system can survive on artificial life support for quite some time. not FOREVER, but for a long time. a side-effect of the money printing is that there's always a crack-up boom SOMEWHERE on the planet, like e.g. now in China. that creates demands on basic resources that can't be supplied properly, and thus have to be rationed by price. good for us, because that's how we got a boom in the commodities.
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