My point exactly. If a price rise in gold was going to be viewed as that deleterious to the world economy, then in fact the economy must be in a real mess otherwise it could withstand that increase.
Mark, the global economy IS IN A REAL MESS, in case you haven't been reading the news lately. Asia is only now recovering from the Asian contagion of two years ago, and is likely getting ready to be slammed again by Y2K fears.
There is too much capacity of production, while the means of sustaining demand has diminished with the global turmoil. It's not like the demand isn't there, but that the means to develop it and encourage it are not being taken by nations like Japan because of tough political decisions they have to make with regard to monetizing their debt.
Now when Japan begins to finally monetize their debt and devalue the Yen, China will follow, and the dollar will grow stronger in comparison. That will require liquidity to be added to the US economy in order to lower the dollar's value, and at THAT TIME you may see gold rise in comparison, or hold its current value.
But the issue is that the demand for goods and services has to be properly serviced, not capacity restricted. That's like telling the Chinese who don't have automobiles that they will never be able to obtain financing to buy one. The demand is there, but not the credit capacity.
I really like Armstrong's comments on the railroads and the current information age. The dollar was backed by gold but because of the productivity gains provided by railroads, it was imperative to increase the money supply to accomodate this new economic growth. But limited gold supplies prevented this. Thus, they began issuing silver certificates as well in order to finance the additional growth.
But Mark, metal was used in times when there was relatively LITTLE transparency of banks or their liquidity. Banks were issuing money/certificates directly based upon their OWN holdings of gold and silver, not of the govt. And even with gold backing there were still panics because of the lack of transparency in these banks. Gold did not provide "integrity" during these times, now did it
That is why the Federal Reserve was created, to regulate, and enforce transparency in banking transactions and liquidity, as well as acting as the lender of last resort to these insitutions.
Lack of transparency is what caused these Asian banks to fail or get into trouble with over indebtedness. Once that is changed, there may be even less need for gold since that transparency provides the confidence that gold provided in the past.
Gold should be sold off so that it finds a market equilibrium. As a result, individuals can accumulate that gold as a hedge against some absolutely catastrophic event that completely undermines or destroys their govt (as well as every other out there, unlikely as that sounds).
Integrity in finances comes from having the appropriate regulatory monitoring policies in place that bring transparency to banking transactions, not having a shiny yellow metal locked up in vaults that never see the like of the public eye.
Regards,
Ron
Regards,
Ron |
