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Gold/Mining/Energy : Gold Price Monitor
GDXJ 121.93+0.8%Jan 9 4:00 PM EST
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To: Zardoz who wrote (20925)10/7/1998 10:59:00 AM
From: E. Charters  Read Replies (1) of 116846
 
Well think again. The money supply has risen out of all proportion to the worth of production and intellectual property wealth in the last 20 years. It is a gigantic inflated balloon, yet it is not being used to produce with, just to acquire existing assets and to speculate in the resale value of securities. But the securities' underlying business is not that good to justify the p/e ratios. Except in mining where traditionally low, it is now abysmally low. That is because the metals trade is a long term and primary cycle whose absence is not felt for a significant fraction of a generation. But it is the only way some countries like Canada get significant foreign exchange.

Gold cannot be held out of whack for long. The Asian derivatives debtors are defaulting and that could collapse derivatives markets and free up gold from its major controlling influence. Gold in real terms should be many times it present price. To buy a commodity today the price you pay is twice what you would pay in real terms because of taxes. Add to that the 6% inflation for 70 years and you have a monstrous price index increase only partially offset by the large wage increases. Nontheless inflation will always outstrip wages. The large increase in the money supply of the last twenty years is 90% inflation. It is not accompanied by attendant huge price increases partially because of the flood of cheap Asian production and the use of most of the money in buying financial instruments. This cycle is ending and the crunch will come. The spectre of hyperinflation is everpresent and could hit at any time.

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