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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: Freedom Fighter who wrote (673)8/26/1998 7:46:00 PM
From: Axel Gunderson  Read Replies (1) of 1722
 
Thus the poor performance of gold in recent years.

Forget recent years. When has it ever been a good performer for any sustained period? Like you said, it has been a hedge against currency collapse.

Also, this new money stock is in the hands of the government and its constituents first.

And historically that has been true of gold as well.

Government and people can play about as many tricks with gold as they can with paper or electronic money. A couple hundred years ago maybe that wasn't true, but today we can "inflate" the supply, just like printing money. It may not be as physically easy, but that can be compensated for by govt manipulation of exchange rates.

Something else that is consistently missing in the financial discussions is realism about supply. There is one continent (I'm sure you can guess which one) that when things get rolling there is going to be a source of a huge supply of gold.

Gold is likely to continue to do poorly until such time as our
foreign obligations reach a critical level or our current account deficit causes some holders of dollar reserves and investments to want to cash in, fearing the inevitable decline of the U.S. dollar.

Just remember that on a net basis, foreigners cannot get out of holding dollars unless they exchange them for our goods and services. In other words, they would have to let us run a considerable account surplus.

Axel
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