Obviously we are having difficulty with semantics, terms and purpose. But in terms of your purpose: to use monetary measures (specifically MZM) as a future gauge of inflation, and thus gold appreciation, let me first state how I view gold's relationship in this. I view gold as a potential beneficiary of capital flows, period. That's what's going to drive POG big at the margins. And a lot of that is in the institutional framework. Hathaway describes it well:http://www.tocqueville.com/brainstorms/brainstorms.php?id=136
Several changes are occurring that may drive capital flows: 1. liberalization of gold trading and ownership in China. 2. the new gold ETF. I'm in a "where's the beef", "show me the money" mode on all this, but I'm still waiting in somewhat ansy fashion. The potential is certainly there.
But, I'm regressing from your points about using monetary liquidity as the gauge. Sure, but why just MZM? The real driver of bubbles (including a potential one in gold) around the world is "dollar based liquidity" (LS or old maid cards), and that's slopping around almost exclusively abroad. Your guys at BCA illustrate LS based bubbles well in fact,
bcaresearch.com
even if they're cavalier about it (to them everything seems to be a mini-bubble, and events like 100:1 insider sells of tech stocks can be explain away with fuzzy nonsense).
bcaresearch.com
LS is almost totally and completely driven by the credit and debt creation machine in the US, and not much else.
MZM or US monetary aggregates are almost exclusively the domain of US speculators, hedge funds and financial institutions, who use it to front run (ramp) and set up the various US asset bubble (stocks, housing, and especially bonds) to then dump on the chumps (clerks at the BOC and BOJ, etc.) abroad who get all the LS (old maid cards) from $50 million an hour trade imbalances (and now $40 million an hour govt borrowings) that they must then try and recycle. The American public has been set up big time in this (crime?) as well, since they get to pay (or default)off the underlying "collateral" for the inflated assets the debt is based upon. It's a fine little operation in fact, only wish I had access to all the free easy credit (and captive US financial media) at the window myself, I'd go nuts too, except I'm not that greedy or a criminal.
<my observation of the lagged impact of the MZM surge in November, 2000 through January, 2002 on raw materials prices (as measured by the CRB Index>
I would say LS caused it, although MZM may be secondary. I just don't think the fine upstanding lads who use direct US liquidity pour it into commodities. Since there is actually "real economy" activity abroad, LS or global money supply (MG) may be the real driver of commodity cycles, not MZM. Sure looks like one is coming, but important caveat. Once LS starts down after the US consumer borrows and spends his last dime (figurately) the game is over, and probably fairly dramatically.
So I guess we sort of come to the same end result, but I process it totally differently than you do. Keep your eye on th global ball, not just the US. |
