Jacob, two thoughts, first on gold and it being or not a "store of value". I believe this concept to be anachronistic. I also believe that the CB's have actually made a common decision to never again rely on a gold standard for their currencies. The reason is very simple, a gold standard by necessity dooms the world's economy to perpetual inflation, unless the growth in "stored gold" increases at the same rate as the growth of the world's economy. Thus if the current CB's store of gold (about 20,000 tonnes) was sufficient at a "given price" to support the currencies in circulation, to support a worldwide growth of the world economy at let say 3% annually, the CB's would have to be in the markets for 600 tonnes/years of new gold year in and year out (growing at 3% compound rate). Not only would that be a waste of resources, but it will require constantly increasing the price of gold, since sources extractable at the then current price, would be exhausted, and we would finally have to go to extraction of gold from ocean waters (possible, but will cost more than $10,000 per ounce). There is no rational reason to tie the world economy to the growth rate of gold supplies. If the growth rate of gold supplies is slower then the growth of the world's economy, you have to raise the price of gold and that is inflation. It will not happen. The fact that the CB's have a current agreement to limit the sale of gold is not, IMHO, a reason to be bullish on gold at all, the CB's are not bound legally to do that, can have another summit and change that target, and in any event, will step into the breach if POG goes much higher than $330 or so. Just MHO.
Now, as far as Greenspan wanting to loosen the tight labor market. I take it that anyone that is going to lose his job in the next 12 months can sue Greenspan, the Feds and the Government for hardship etc., Am I correct? After all, there will be a direct "tie up" between Greenspan's current activities and those people losing their jobs (g).
Zeev |
