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Gold/Mining/Energy : Barrick Gold (ABX)

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To: bill who wrote (988)	2/19/1999 4:37:00 PM
From: Kailash	Read Replies (1) of 3558

Deflation is also a possibility; have a look at the leader in this week's Economist magazine. Inflation turns out to be a historical anomaly, though we are used to it. Between 1666 and 1914 prices in Britain were stable with periods of modest deflation and inflation. We now have production overcapacity worldwide; this is great for consumers as we know from electronics but severe deflation will lead consumers to postpone purchases and slow down the economy - that's the theory anyway. In electronics you get used to this year's PC being better and cheaper than last years (to the point that they're now being given away for an ISP subscription), but all the new features still make them attractive (I just got one and love it). But imagine housing, cars, clothes, everything continually dropping in price - these things don't get new features all the time and it would pay to wait. Interest rates would have to follow the value of money as it drops; Japan would clearly like them to go below zero and give away money to get people to spend. Gold just might lose less value than money in a deflationary economy. Kailash

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