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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (612)	8/25/2001 11:03:57 PM
From: isopatch	Read Replies (1) \| Respond to of 36161

Excerp from Paul Kasriel's 8/24 economic commentary. "There's another reason for political pressure to be put on the Fed to keep inflating. The US is a debtor nation, in fact, the largest debtor nation in the world. Moreover, the bulk of America's external debt just happens to be denominated in US dollars. Unlike other countries whose external debt also is denominated in US dollars, our central bank can print the dollars. When debt servicing becomes burdensome, inflation can relieve the burdens by lowering the real debt servicing costs. Now, the debtors of America are not going to directly petition Alan Greenspan to speed up the printing presses. But they are going to press their senators and representatives to do something to relieve their economic pain. And because Alan has done nothing to disabuse Congress and the administration of the notion that he is the global economic kingpin, some chips are going to be called. If the major central banks are intent on reflating, as I have asserted they are, what kind of investments might outperform? Inflation-protected government bonds are an obvious candidate. And given the likely decline in the dollar's foreign exchange value, you might try to find some inflation-protected bonds in other currencies. Euro-denominated ones would be best, but I don't know that any exist. Commodity-related investments might be "interesting," as they say. If global reflation is in, global industrial production is likely to revive. This will mean an increased demand for industrial metals. One metal in particular could quickly be in short supply -- aluminum. A lot of smelter capacity has been taken off line in the US and Brazil because of the increased cost of power. This capacity cannot be brought back on line quickly. So, aluminum prices could shoot up quickly. There's another metal, not so much an industrial one, that might do well if the Big 3 central banks reflate. It's a metal whose value increases when global investors can't get an "honest" return on their money in any major money market. I can't give you the name of this metal for fear of being branded an even bigger kook than I already have been. But I'll give a hint to you Seinfeld devotees out there. Jerry had a shirt named after this metal. The seventh person who sends me the name of this metal gets a free subscription to this publication. Keep one thing in mind, girls and boys. If printing money created genuine wealth, the Weimar Republic between the Wars would have been the richest nation in the world. Paul "Croesus" Kasriel Director of Economic Research"