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

To: Gary H who wrote (90239)	10/2/2002 5:53:02 AM
From: E. Charters	Read Replies (1) \| Respond to of 116762

Precisely. It is money that is elastic, not gold. Actually after the ha-ha one has to look at classical economic definitions. It is only because of the money supply being related to gold's price that it appears elastic. I would call this false elasticity. So in fact, gold is buying money -- flexible elastic money. So to be true to economics we would say that debt denomination (money) is "price" or value elastic with respect to supply. Here gold's supply is not the issue with respect to demand/supply in this graph. Of course this scenario ignores gold's demand or uses itself, and focuses only on its component that is related to money supply. There is certain practicality and justification to separating the two issues, but it is not "real world" in toto. We could say this scenario holds gold's supply as fixed. If this were really the case gold's price would rise because of scarcity as well. POG $ \| \| \| \| / POG, or number of dollars bought per OZ. \| \ / \| \ / \| \| -------- ------------------- dollars in circulation--> The above cow-art is nuch too steep and crude but it very roughly representational of the real curve. The fact that the curve approaches vertical and horizontal at its ends is called "asymptotic" behaviour. The X and Y axes are called "asymptotes." The line approaches but never meets, nor ever goes parallel to the axes. (This is possible mathematically with constant curvature, don't freak out.) In fact, over any period of time, there is a tested range at both ends of the curve that are its "practical" restrictions who are "doling out" the money by interest rate policies. Any supply curve is also a demand curve. You could say that as dollar's supply increases, there must (have been) increasing demand for dollars to create the increased supply. (we could think of it as increased "sales" of dollars to the public or borrower) This is true, but denies how and why they are created by governments according to fixed ratios of deposits/assets in banks and according to need to boost economies. This makes much of the level of dollar creation, pure supply side. The borrower who wants (demands) money is restricted by money supply theorists. To be absolutely true again, any supply/demand curve unless it is straight and invariant (A straight line is considered a variant of a curve in this math) has both elastic and inelastic portions. When it is relatively horizontal, i.e. is less than 45 degress down, it is inelastic relatively, when it is more than 45 degrees down to the right, it is relatively elastic. Perfect elasticity or inelasticity i.e. a flat or verticalline on the graph, is "probably" impossible in the real world. IMHO --> Total inelasticity or elasticity is really almost "undefined" in "real world" economics.(i.e. A price that never changes with infinite supply.. or, elastically, a price that could be pegged at anything at any supply, or falls to zero without any change in price at all. (VSE stocks) Zero demand is possible I guess, but in reality is almost never seen. Even Bre-X shares can be hawked as curios.) EC<:-}