Date: Wed Mar 30 2005 11:34
trotsky (Hambone, 10:44) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
indeed - the purported 'increase in net worth' on the back of a huge bubble has only made the economy even MORE vulnerable, since much of this new-found 'net worth' has been extracted via refinancings. the fact that home equity ownership is at a 50 year low says about all that needs to be said about that.
i don't know if any of you are familiar with Dr. Richebaecher's work, but he provides a much needed antidote to the mainstream economic consensus. by dissecting the data ( something mainstream economists somehow never seem to do, at least not to the same extent ) with his Austrian scalpel, he shows that much of the accepted conventional wisdom about the US economy's absolute as well as relative strength ( compared to e.g. Europe ) is basically a mirage. it's like the Wizard of Oz...as soon as you look behind the curtain, you discover that the mighty wizard is nothing but a frail old carny barker.
as i have often mentioned, US government produced economic statistics deserve a Nobel prize for the best works of fiction money can buy ( yes, they're not for 'free'. tax payers actually pay vast sums of money to stay adequately misinformed ) .
the picture they paint is akin to a Potemkin village...their only function is to pull wool over everyone's eyes.
as i've also mentioned before, this explains the 'jobless recoveries' and similar 'conundrums' ( including the failure of the bond market to decline meaningfully ) - if economic performance were measured correctly ( i.e., sans hedonics, imputations, chainweighting, etc. etc., the by now well-known bag of tricks ) , no-one would call it a recovery. it's of course true that ( mostly due to the inventory cycle as well as the greatest amount of monetary and fiscal pumping in history ) the economy HAS come up for air from the depths of the '01-'02 crisis...but compared to previous recoveries ( i.e., the ones deserving of the term ) , this one is basically the weakest on record, and built on quicksand to boot ( namely the RE bubble ) .
we're going to enter an even more painful post bubble adjustment once the housing bubble and the echo bubble in stocks go bust...the popular ( in the mainstream ) idea that 'we had the biggest stock mania in history, and got away with it' couldn't be more misguided.
Date: Wed Mar 30 2005 10:36
trotsky (BleulerMalpass and the savings rate) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
this is actually the usual polyanna pablum that was heard at the height of the Nasdaq bubble too.
we're all of a sudden supposed to count the phantom wealth that has briefly appeared as a result of Greenspan's serial bubble policies toward 'savings' to arrive at a 'true' savings rate. this is complete nonsense. the pool of REAL funding does NOT change one iota when house prices rise by 40% in single year in say San Diego. they're STILL the SAME houses. they're not 'worth' more, only the value of the fiat currency has fallen relative to them. one needs to differentiate between 'value' and 'price'. the traditional method of calculating the savings rate is the only one that makes sense, and since it allows for historical comparisons it shows that savings in the US have collapsed. the reason why the polyannas and Keynesians are looking for excuses to deny this is that they know it's not sustainable and is the surest sign we have that living standards will eventually decline dramatically. without savings, no productive investment. and without productive investment, economic stagnation and decline are assured.
the pool of real funding in fact is in trouble, and the more phantom wealth is 'produced' by inflating the money supply and providing easy credit, the more pressure is exerted on the pool ( since money out of thin air promotes consumption without preceding production ) . the phantom wealth will of course disappear, as it always has throughout history and everywhere. the debts will remain.
on a more general note, the more articles you see in in print about how neither the collapsing savings rate nor the soaring current account deficits matter, the more convinced you should become that they DO matter. as Mr. Nyquist has recently pointed out in a rare incisive missive, the main subconscious motivation for these verbal hot air assaults is FEAR. fear of the inevitable decline that these data points predict.
in conclusion, if Mr. Sinclair somehow failed to spot the nonsense Malpass has spewed in this WSJ editorial, he has successfully avoided to waste valuable time.
Date: Wed Mar 30 2005 10:13
trotsky (frustrated et al. , Wood vs. Turk/Norcini) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
sorry i didn't find the time yesterday to reply to the posts that were made in conncection with the article by Tim Wood which aimed to debunk the latest GATA claim.
in brief: i have of course read Turk's rebuttal as well as Norcini's piece, and the Wood article was already, imo, a pretty thorough rebuttal of their rebuttal.
i acknowledge of course that there's a relationship between commodities and gold, mostly via the currency connection ( i.e., a falling dollar usually produces dollar price rises in both gold and commodities, and a lead-lag relationship is involved ) . however, as everyone should know, gold is NOT primarily a commodity in the sense of say copper, or orange juice. the difference ( as Mr. Fekete never tires to point out, and as i have previously also mentioned in connection with gold supply/demand analysis ) is gold's large stock-to-flows ratio, which makes it a form of money, a ( or rather THE ) natural commodity money.
GATA purports that one can cherry-pick a year in which gold made a historic blow-off rally ( widening its lead over the CRB at the time dramatically ) , compare the gold prices of THAT year ALONE to the CRB values of the day, and thereby come to statistically significant conclusions about what that ratio should be nowadays ( barring, what else, a vast conspiracy ) . now, even if you know nothing about statistics, it should be obvious that this is nonsense.
never, ever make assumptions about 'fixed' relationships between markets. one only needs to look at the wide fluctuations of the gold/oil ratio over the years to realize that this is an exercise in futility. what Mr. Wood has done by means of looking at the gold / CRB correlation over different time frames, was to show that the correlation has varied enormously over said time frames, which indicates that GATA's loudly trumpeted 'conclusion' about gold/CRB isn't worth the paper it's printed on ( even though of course many people will continue to believe it anyhow ) .
in any event, if there's any comparison that really makes sense, it is that with other forms of money. and on that score, gold has beaten the pants off every single fiat currency since it began to float in 1971. it has in fact been FAR stronger than even the strongest competitors ( like e.g. the Swiss Franc ) .
i wonder what would happen if that came to GATA's attention - would they claim that there's a conspiracy to artificially increase the PoG vs. other monies?
i offer you a different conclusion: it proves that no government and no central bank has had the power to truly keep the gold price in check over long periods of time. they have been unable to hide the inflation of their fiat money completely ( although admittedly, they did a good job psychologically ) . historically, gold's purchasing power is in fact at the higher end of its range over the past 200 years.
of course the statists HATE gold....of course someone like the socialist Gordon Brown, who purports to 'care for the poor' ( while himself having not even the foggiest idea what it means to be poor ) really wants only to find excuses to ambush the gold price.
of course the central banks are dishonest in their claim that the WAG is in place to 'support' the PoG ( in reality it's a half-assed attempt at keeping everything as obscure as possible by faking transparency ) . this is all true.
but it doesn't matter - not even overt manipulation attempts during the late 60's and throughout the 70's could avert a primary bull market, and in the end a manic bubble, in gold.
it does not matter what they do...they can't keep the market from going where it wants to go.
the best example of this impotence is the Japanese Yen. it's a fiat currency they can print unlimited amounts of, and in spite of the biggest intervention spree in human history, it has gone up anyway, completely defying the efforts of Japan's ministry of finance and the BoJ.
why would anyone believe gold could be more prone to 'success'? it makes no sense in view of every shred of historical evidence we have.
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