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

To: Hawkmoon who wrote (43708)	10/25/1999 2:32:00 PM
From: ahhaha	Read Replies (1) \| Respond to of 116758

Malaise is psychological. The psychology was reversed when currency was made available. It's as evanescent as that. The Japanese banking crisis which was similar to the paper tiger we experienced during the '93 S&L loan "crisis", just evaporated when confidence was restored. Remember all those dire predictions about gloom and doom coming out of the domino theory of US banks leaning on S&L shenanigans? What happened to all that "so bad"? No longer operational because it was never operational. The media gave the S&L crisis the term "crisis". Does that mean it was a crisis? The same is true of Japanese banks. You are being victimized by media made economic hokum. Debt is never an important macroeconomic factor and always corrects itself regardless of what is done about it or how much worrying attends it. During the '80s one of the favorite whipping boys trotted out to explain all problems was the budget deficit. The complaining about it peaked 10 years after the reality peaked. When the US went into surplus hardly a word was spoken. Just how bad was or is the Japanese banking problem? I addressed all of this more than a year ago in great detail on SI and what I got in return was so much irrational nonsense that you could see the degree of media poisoning that had occurred. It simply amazes me that anyone could believe the change of numbers on bank statements could change the momentum of a country's output. That's the problem. We don't let anything have consequence because our CBs stand ready to provide liquidity for no reason. Liquidity traps are not possible in demand oriented regimes. Demand orientation was mistakenly learned from the "so bad" of the '30s and now has become the 20th century's greatest problem. "So bad" justifies an on-going money drug addiction. A little drink never hurt anyone. You haven't understood what I mean by demand orientation. Japan is not demand oriented and so lowering rates doesn't create money. That isn't liquidity trap. You need demand orientation and then attempt a lowering of rates which doesn't cause money supply to rise. If both those conditions are in place, then you have a liquidity trap. This occurs when fear to borrow is high. That's not the same thing as fear to spend accumulated savings. You have to understand the linkage between demand for output and demand for money and what "pushing on a string" means. Japan would be pushing on a string by lowering rates to encourage industrial activity earmarked for export. The string gets taut like it has over the last six months when fiat currency is created, because the new money goes to domestic internal final output and that is what Japan needs. Of course, they also need to persist in transforming their economy away from export obsession a la neo-mercantilism. Gold was confiscated to undermine the appearances of a liquidity trap in the '30s? Gold was removed from circulatory availability because the FED and Treasury felt a run on the sovereign gold backed dollar would cause the country's gold to disappear. This would not cause the monetary base to contract necessarily, but at the time monetary authority felt that would occur. They hadn't the experience with fiat creation that we have now and so they reasoned and acted based on classical principles which dominated the thinking of the time. A contracting base is not a liquidity trap. It's pure deflation and preventing that was another motivation. It was FED largesse in demand orientation during the '20s that enabled the stock market bubble which the FED felt they needed to undo by raising rates in the early '30s in order to prevent the export of gold. The policy was perfectly wrong and exacerbated the economy's reaction to the stock market shock. The FED learned a lesson from that: we have to bail out anything all the time or "so bad" will befall us again. That's what Greenspan did last year and that opened Pandora's Box. The outcome is the persistence of inflation with a continual possibility of major economic bust which would return us all to a point below the Grreeaaattt Depression in the Stone Age economy.