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Gold/Mining/Energy : Gold Price Monitor

GDXJ 101.44

+3.5%

4:00 PM EST

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To: goldsnow who wrote (43681)	10/24/1999 12:29:00 AM
From: ahhaha	Read Replies (2) of 116756

Your prudence is based on rate parity currency protection. Europe and the US are not equal economically and so to pursue similar monetary policies would be disastrous. The US is undergoing market tightening which the FED has been resisting by fixing fed funds rate below equilibrium. The market is on-balance selling bonds because it sees the economic climate is changing to domestic inflation. European economies haven't developed to this point yet, and so to mindlessly adopt another country's monetary policy to preserve a worthless end would abort the fledgling recoveries taking place there. After the ensuing carnage those countries would be forced to open the money floodgates to avoid a widening recession. Teitmeyer stated this parity linkage was incorrect and that each country must pursue an independent policy. The Euro doesn't wag the dollar. The dollar's conversion value changes don't impact the European competitive position because Europe output is created at an effective lower cost than our's. Since Europe is a demand regime when they create fiat currency it weakens the Euro, but not as much as the increased efficient output strengthens the Euro. The name of the game is output and the result is win-win. Currency creation per se would cause the Euro to fall and output to rise, but ECB lowering of interest rates would cause the Euro to rise and output to rise. This seems paradoxical. Once one recognizes that Europe is a demand oriented regime coming out of recession then the seeming ambiguities in asymmetric monetary policy can be understood. Of course, Europe also could raise rates to defend a fiction. It's a fiction inherited from the way things used to work. They worked that way because all these countries were rapidly inflating. All countries in the world have some inflation, but none are rapidly inflating (assuming at least 4th tier status). If Europe like Japan goes to the well too often, then they will end up with the past. the problem is that they ever go there. That problem starts with the US FED. If the FED didn't interfere with market's determination of the price of money, no other country could either. This is a consequence of the dollar's reserve currency status. We would all have to work to add value.

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