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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: ubetcha who wrote (15193)	8/18/2002 7:05:59 PM
From: sea_urchin	Read Replies (1) \| Respond to of 82650

Thanks, Terry. >it is inevitable that the dollar goes down, and then gold will go up. Lowering interest rates will expeditite this scenerio. The gold price hasn't always moved in the opposite direction to the dollar. In recent years, however and as you imply, the gold price has been considered an index of inflation. Low POG = Strong USD = Low inflation. There are disadvantages in this linkage not the least being 1. That the US owns most of the gold in the world and therefore a high gold price is actually beneficial to the USD. 2. A low POG is very deflationary which, at this time, is the last thing the Fed needs. In fact, if the US is to get out of its enormous debt bind it has to , simply has to, avoid deflation. As you say, this means more printing, lower interest rates, higher gold price and a lower USD but there is a snag --- neither Europe nor Japan, nor even China, are prepared to revalue their currencies upwards. The world is holding the USD "over the strong currency barrel" and is refusing to let it devalue. The devaluation/revaluation, and presumably inflation/deflation, machine is stuck. So, now what will happen?