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Gold/Mining/Energy : Barrick Gold (ABX)

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To: russet who wrote (2144)	9/28/2000 8:50:47 AM
From: nickel61	Read Replies (1) of 3558

And what is to keep that country from printing up a totally inappropriate amounts of the currency compared to their productive ability to repay? I think we will both agree that the main component of all debt is trust that it will be paid. Like all other obligations to be paid, the US dollar fluctuates in people's perception of value compared to other currencies and to gold. If the confidence of the holders of these US dollars where to waiver and the huge trade deficit ($370 Billion in 2000) were to force the recipients of all these dollars to want to exchange them rather than sending them back to us to invest in our hot stock markets what would happen to the currency? I agree that the main thing people look at when they are taking our promises to pay is our productive ability but they also look at our rainy day reserve that will allow us to weather the time when things aren't going our way. Gold is the only one of these reserves that is independent of the ability of someother country to repay. I can imagine that you would agree that holding US dollars that we printed up in our reserves is not really a reserve at all but just paper money that would be useless in a true crisis. Much like paper rubles were worthless in solving the crisis in Russia over the last ten years since no one believed that they would hold their value-they were simply printed like monopoly money when the need arouse. It would also be a little disconcerting to have only Japanese Yen in the reserves with the persistent recession and burgeoning debt that is beginning to seriously hamper that formally great economic power. The Asian currcncies and the Latin American currencies have proven they are very vulnerable in a crisis so if there was something that had an independent value such as oil does or platinum and paladium perhaps these would be good stores of value for that rainy day when our citizens become concerned about the value of our currency. As I am sure you know the value of the US dollar has declined by over eighty five percent since it was taken off convertability into gold in the sixties and that is an alarming rate if you examine it in an historical context. THe value of gold while like everything not innate in nature is one that does have a two thousand year tradition and the concept of it's worth is imbedded in three quarters of the worlds population such as the Indian SUbcontinent and China and the middle east that still use it as a safe store of value. But in a way you have pointed out the very reason why the Ministers of our government and their friends in the financial markets are so antagonistic to the store of value that gold offers. It is their only competitor in their desire to have what ever amount of credit or money they print up be regarded as solid and as good as "gold" since it is the yardstick against which debasement of the currency is measured. The Bureau of Labor Statistics in an attempt to achieve the politically popular task of muting the effect of the increase in the CPI on the Cost of Living Adjustments has raised obsfucation of the true rate of inflation to an art form and the two major currency blocks in the world that compete with the dollar, the Yen and The Euro , for their own political reasons are in a race to make sure their currencies are lowered against the dollar to ensure that their export earnings and jobs are still possible in one case and that the competive advantage allowed by a low exchange rate will allow their socialist welfare states to realign themselves and restart their economic dynamism in the other. In this enviroment it would have been only gold that would have been popping up as we extended unlimited amounts of new money supply in US dollars. Gold would have been screaming like the warning canary in the old time mines that something was going on. So it has been muted by a series of amazingly blatant smear campaigns and the continued selling pressure generated by the leasing and selling of the "redundant" Central Bank gold from the worlds central banks.

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