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

To: Rarebird who wrote (67376)	4/8/2001 5:39:34 PM
From: Hawkmoon	Respond to of 116779

Rarebird, the trade deficit is only a problem when those who sell us products no longer find the returns they obtain here comparable to the safety and potential returns in their own nations. Take the Japan for example. They have taken interest rates down to almost zero percent again, as well increasing the quantity of money in their system (devaluation). So if I were a Japanese exporter, why would I want to convert my USD revenues and profits back into zero interest Yen denominated assets? Again, I think too much is being made of this trade deficit issue. On a local scale, we see trade deficits all the time between urban population centers and rural agricultural regions in the US. The real issue behind the trade deficit is that foreign ecnomies have been selling us sub-components and commodities, and we've been turning them into higher value products that they either can't afford (due to misappropriation of their economic assets, or a weaker currency), or because of protective trade barriers. This is not so much an issue of the US importing more, but of foreign nations misallocating resources and not purchasing US goods. So do we buy less, or create the conditions where they are coerced into buying more of our goods? And also a big part of the trade deficit is energy derived. We import a tremendous amount of our energy from OPEC and we pay for that in USD. In return, the Saudis have leveraged themselves to the hilt to spur economic growth. In 1999 alone, they had a $140 Billion GDP and a $162 Billion national debt, or more than 100% of annual GDP. Since very little of this money is apparently owed to the US or Europe (that I can discern), threatening the dollar, and thus driving the world into recession is not particuarly in their interests, imo. And Rarebird, I'd opine that it's not a slowing economy that drives money into gold, but anticipation of devaluation of a fiat currency in order to spur economic growth. Gold is merely the last resort for investors who have lost confidence in the economic policies of the current major reserve currency, the USD. The strength of the dollar seems to be quite contrary to what you are proposing. Were your perspective correct, then the USD would have failed that head and shoulders formation, broken the neckline, and collapsed. But it didn't. Instead, it spiked upward to recent levels where it currently faces a double top that could collapse, or merely retrace to support and another attempt to penetrate higher. Personally, I'm not yet ready to through in the towel on the dollar yet. And as I've stated previously, I think AG has plenty of ammunition left, in addition to tax relief. Regards, Ron