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Gold/Mining/Energy : Gold Price Monitor
GDXJ 93.43-4.5%Nov 20 4:00 PM EST
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To: Bobby Yellin who wrote (42939)10/14/1999 12:50:00 PM
From: JungleInvestor  Read Replies (1) of 116764
 
<<The Fed argued that its policy was not inflationary because the money supply in the United
States did not rise unduly. The fact is that it had been exported to build the base for inflation abroad. As I showed in an article
published in 1971, it is the world, not the national dollar base, that governs inflation.>>

Great quote. Now to put this in context for the current world inflationary buildup, recall that at the end of last year interest rates were reduced an incredible number of times (believe in the 40's or 50's) by central banks around the world to forestall deflation. Milton Friedman determined that the money supply effects of interest rate cuts (or increases) are felt in 6 months to a year. A too rapid expansion of money supply is the cause of inflation. So we are now in this 6 month to year window and lo and behold, inflation is rearing its ugly head. The too rapid expansion of money supply causes commodities such as oil and gold go up in price. So two factors are at work currently in pushing up the price of oil: the interest rate cuts of last year and the OPEC supply cuts. Any future Fed rate hikes to reduce inflation will be felt 6 to 12 months out - so the horse is out of the barn.
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