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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: d:oug who wrote (37061)	7/12/1999 11:23:00 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 116778

Doug, One problem with your analogy is that when it comes to contolling the value of a nation's currency, Central Banks MAKE the rules. There are two primary courses of action that come to mind when a nation's currency becomes overvalued and effects their trade deficit, and thus their economic competitiveness. They can raise tariffs and slap duties on goods that compete with their domestic prodution, or their central banks can take actions that encourage weakness in their currency vis-a-vis the country that is competing with them economically or serves as their primary marketplace. There was a time with the Yen was extremely strong against the US dollar due to a variety of reasons, including the perception of each nation's economic strength. The dollar's weakness eventually served to make US products cheaper in foreign markets who apparently were strong enough to afford them. That, and the collapse of the Japanese equity bubble and failure of their stimulative monetary policies, eventually restored a more realistic valuation and exchange rate. But now we're face with the opposite scenario. We have a Japanese economy facing a liquidity trap, where the stimulative effect of lowering interest rates no longer is available, so it is necessary to maintain a favorable exchange rate with the dollar in hopes of exporting their way to economic health. So now we're faced with an obviously overvalued dollar that is hurting US business exports, and a desperate need for Asia (and Europe) to keep it up there until they can get their financial and economic houses in order. The only thing that threatens the dollar is gold. The perception that the US economy is overheated has traditionally been measured by the price of gold in dollars. Keep the POG depressed and the dollar can remain strong until other currencies reach the strength to provide an alternative source of currency value. That serves the interests of everyone, including the US, since when our currency eventually weakens, it will weaken against a foreign currency and not an alternative to paper currency. That means our goods will be more competitive in foreign markets that can hopefully afford those goods, rather than economies that suddenly fall deeper into depression and cannot afford anything. So as I said before, the CBs make the rules when it comes to monetary policy. They can intervene covertly or overtly and no one has the legal right to know what they are doing. So it is with gold. So long as gold is treated as currency, they have the right to lease it (which is a proxy for an outright sale of it). without being obligated to maintain a transparent marketplace. If you want transparency in the gold market, then stop treating it as currency and consider it a commodity where transparency laws apply. Again, in case it's not clear enough for you yet... the CBs make the financial rules, not politicians or lawyers. Gold falls under their authority as a pseudo-currency. Get used to it. Regards, Ron