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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (2140)	9/30/1999 10:12:00 AM
From: Paul Berliner	Read Replies (1) \| Respond to of 3536

Yes, I agree that it won;t have a major impact on global capital flows, but it brings to mind a piece of economic history that may shed some light on the dollar's weakness. In the 1600's, gold soared shortly after paper currency was first issued en masse in a particular European country (can;t remember the name, probably was England or France). A respected economic theorist of the time wrote an article that stunned the masses when he revealed to them the the higher gold price was a sure sign that the new currency that they were now holding was rapidly depreciating. Considering how most commodities are priced in U.S. Dollars, and considering their rises of late, it can be argued that this phenomenon is taking effect right before our eyes - that a sure sign that the greenback is depreciating is the higher commodity prices. One only has to look for the dollar's high, which was many months back, to find the bottom in the CRB. What we need to further confirm the theory is a sharp rise in soft asset prices to coincide with the rise in hard asset prices YTD. On another note, as I;ve repeated in the past, if there's one MAJOR lesson that I;ve learned over the last 2+ years, its that government actions break trends in any market or industry. Period. We saw it in the stock market's 'rescue' from a confidence crisis by the Fed last October (I always picture that surprise third rate cut in my mind as Greenspan rubbing two defibrillators together and then jolting the 'dead market' back to life). We saw it with the Hang Seng Index last year. We saw it with the Yen last year. We saw it with Oil during the 1996 U.S. Presidential election. We are seeing it in Healthcare stocks this year. And there are many other examples. Therefore, while I don;t see gold going back to $800, I do see the life of the long, grueling downtrend as over. The governments have interfered and if the above examples apply to gold as well, then a new trend has begun. p.s. isn;t it just as you would expect Henry - just as you hang the trading helmet up in the closet is exactly when the marvelous capital markets yield yet another irresistable development!