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Gold/Mining/Energy : Newmont Mining(NEM) & Newmont Gold(NGC)
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To: The Barracuda™ who wrote (263)6/30/1999 10:47:00 PM
From: ahhaha  Read Replies (2) of 587
 
I've always held that lease rates are irrelevant. It is a marginal activity and so marginal inputs effect it. If the price of gold is held hostage to such marginal conditions, it means that there are no significant conditions available to move total demand and supply. When that changes since lease rates are sensitive, they change first when a total effect is starting to develop.

I read this lease rate business as an indicator that bullion lenders don't want to continue lending, so they ask for higher rates to discourage the lease. The only condition where this exists is if bullion lenders believe the price is low and is about to reverse. They certainly don't want to lend an appreciating asset and let someone else get the gain especially since they are effectively short.

What has brought about this change in expectations? Conditions are being put in place for the entrenchment of inflation. For the last 1 1/2 years the FED and the circus of world economy has unwittingly engineered these conditions and now the combined effects are about to hatch. It is amazing since they have gone to the ultimate degree in looking for the source of the problem. None of them know.

I'll state for the nth thousandth time that the problem lies in what Von Hayek called the pretense to knowledge. That means that FED believes they know where the proper rate of interest on loanable funds should be set and they interfere with the free market mechanism by continuing interventionist policy. This isn't necessary if you let the market determine the cost of money and practice maintaining the growth of money commensurate to the rate of potential output.

The FED can do the latter with great error and the interest rate market will hardly be effected. There would be pretense there, but the outcome of bungling action is infinitesimal. Interest rate volatility would be remarkably benign, certainly far less than what the experts cook up at the FOMC under a regime of interest rate management policy.

Now we have the cycle back. The pain of the last 20 years has been squandered. That means FED raises rates and sits until inefficiency in output causes the effective return on created money to be less than the value add of labor and machinery. This is the embedding process.

In this process the cost of funds doesn't commensurately cool demand for them. The inefficiency factor adjudicates the differential. The result is that both higher and lower incremental output is more expensive and has to be afforded by raising prices. The price increases are small enough to be accepted by a wealthy thinking public. The job of the FED eventually will be to break this sentiment by Draconian interest rate increases. They will be Draconian because they are effectively erring on the side of ease. They don't know what is easy or what isn't, so they err on the side of what the people want: more prosperity.

The effect of this psychologically has now been subtly been moving sensitive mechanisms which represent the first indication that we are now in the "vicious cycle". This cycle does not portend the end of western civilization and all the rest of the nonsense you hear from Chief 'Bugs, but it does introduce overt distrust among the big operators, in particular, central banks. You see the result in the lease rate.
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