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To: Lucretius who wrote (132986)	11/5/2001 11:41:11 PM
From: At_The_Ask	Respond to of 436258

On the elimination of the long bond. In 1930 the Bank of England had its discount rate at 5%. Apparently they did not wish to print more money as they felt their gold reserves would not allow it. They adhered to the Cunliffe minimum, which was viewed as too tight by some at the time. The Chancellor of the Exchequer, who is I presume like the secretary of the treasury, issued a 5%long dated bond and used the proceeds to buy up shorter dated t-bills on which the credit market was then heavily dependent. The scarcity of t-bills caused the t-bill rate and discount rate to fall to three and one third percent. And some how this caused the "real" BOE rate to drop to 4%. The BOE rate two months later fell to 3% while the US and France fell to 2.5%. Im not an economist or a bond guy so alot of this is hard to get my head around. But I think what has happened is that the treasury has taken the initiative, maybe on W's orders, to loosen the money supply further. Maybe Greenies getting cold feet. Also this could perhaps force people to buy more commercial debt and finance enterprise. Who knows it was sort of the opposite of what happened today but the effect was the same. A defacto rate cut by market forces and an elimination of a hiding place for scared money that doesnt want to play the bubble game anymore. Anyway what I believe is happening is we are under going a huge deflation not only in equities but in commodoties; similar to what happened in 29. The deflation was judged against the purchasing power of gold and everything fell even silver. (Beware silver bugs) Gold over the last year has stopped its tremendous decline and reversed course; not in a crazy unsustainable spike but in a slow up trend. Perhaps gold is still money after all. Also the dollar is too high so maybe alot of this is dollar overvaluation. Gold steadying would support that theory against a falling dollar but other commodities should be rising as well.