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Gold/Mining/Energy : Barrick Gold (ABX)
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To: goldsheet who wrote (2715)5/15/2002 9:07:46 AM
From: nickel61  Read Replies (2) of 3558
 
Not to lapse into a conspiracy theory or anything, but that is exactly the reason that the US TReasury under Robert Rubin and Larry Summers, allowed the hedge funds to play the gold carry trade so aggressively and to encourage various central banks to sell or lease off their gold reserves. It provided the needed "cover" for the lowering of US interest rates without the market(read here international investors in US Treasury bonds) being afraid of having their capital inflated away in reduced purchasing power over time. As long as gold price could be shown to be stable to down over time the US dollar could continue to appreciate in value and the US government could continue to issue increasing amounts of US dollars to purchase world exports, stimulate the economy and hype up the Wall Street driven stock and bond markets.

It was the appearance of low "inflation" supported by the government mandated ratcheding down of the CPI numbers for budget and political reasons(namely to save indexed systems like Social Security and Medicare from bankruptcy)that allowed us to convince our trading partners to recycle the US Trade Deficit back into the US Treasury bond market which allowed the interest rates on Treasury debt to be bought lower then they would have otherwise been, thus giving an renewed boost to the economy in the period 1996-2000. The one thing that could have signaled danger to the bond investors was a rising gold price signaling that their purchasing power was being eroded faster then the low interest rates could compensate them for.
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