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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Tommaso who wrote (27833)	3/4/2005 6:39:24 PM
From: regli	Read Replies (2) of 110194

>>>Check the behavior of Homestake Mining during the Great Depression; it went from $40 in 1926 to $544 in 1935. Not exactly getting creamed!<<< >The reason that happened was that Roosevelt raised the price the government paid for gold from $20.50 an ounce to $35 an ounce overnight. Homestake stock was legal to own and was a proxy for gold.< Roosevelt raised the price in March 1933. Look at the chart of Homestake, it had already more than doubled even before gold was revalued. Please also note that it increased VERY significantly after the revaluation. It is quite common to use Homestake as a proxy for the gold price during this period as gold did not trade freely in the U.S. home.earthlink.net financialsense.com >>>Now you could say that the U.S. was still on a gold standard and that might have contributed to Homestake’s success as it had a ready buyer in the government.<< >Actually it had been made illegal to own gold, and the government took most gold away from private citizens. Citizens could no longer exchange dollars for gold. It remained illegal to own until the 1970s.< In this context your comment is totally irrelevant. The fact is that the U.S. government made gold illegal to own because it was short on gold. Therefore the production of Homestake was readily sold to the government to replenish gold stocks. A good perspective on that period and the reasons why gold was made illegal to own is provided by David Tripp in his interview with Jim Puplava. financialsense.com Some good comments about what happened to the price of gold outside the U.S. in that period. kitco.com >>> I doubt that the dollar will hold up during deflation in the U.S. <<, >If the dollar does not hold up, what you have is inflation, not deflation. A decline in the value of the dollar is inflation. It takes more dollars to buy things.< The U.S. can experience deflation WITH a falling dollar. The definition of deflation is not a falling currency. answers.com We have recently experienced a significantly falling currency accompanied by very little inflation. The Japanese Yen kept falling from 1990 through 1995 while Japan experienced deflation. conference-board.org >>>Therefore, where do you invest your money when you seek purchasing power protection,<<< >Commodities other than gold. Jim Rogers thinks lead is better than gold. Oil has been better than gold. Even the euro has been almost as good as gold. < I don’t think we were talking about the last few years. The debate was about what happens if we should enter a deflationary period. Should it occur, I firmly believe that gold will do significantly better than commodities in general.

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