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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (24454)	10/22/2002 9:14:19 PM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Hi Maurice, <<<How can the US ease the burden of debt that we have incurred over years? > Learn, Work, Save, Invest and spend carefully. >> Nope, certainly not. US will do as Argentina, Russia, Turkey, Brazil etc had done, namely default, confiscate, and print, followed by shortfalls, to be cured by taxation and more printing. Get with the Script of each and all times. <<<What effect will the measures that the US takes to ease it's burden of debt have on the dollar?> If people run their country well, the value of their country will go up. But that doesn't mean the currency would go up. As Uncle Al KBE is doing, he can keep the currency at a constant value while the value of the USA zooms, by the simple expedient of pixelating billions more dollars into existence. If they run their country badly, it's bad news all round, including for the currency. Debt is okay - it has useful functions. But it introduces volatility risk and therefore risk of loss of assets.>> Come on Maurice, say it out loud with hedge and fudge, the USD will drop against something, and that something will not be Q. The fact that all nations want USD to remain high will ensure that it will, until it cannot anymore. Chugs, Jay

To: Maurice Winn who wrote (24454)	10/22/2002 11:21:27 PM
From: At_The_Ask	Read Replies (1) \| Respond to of 74559

I agree with many of your points, however advances in productivity have been occurring for centuries but that hasn't prevented the inevitable cycles of boom and bust or inflation and deflation. Below are some my answers to my own questions. I got onto this subject because of a discussion of price of gold, but it's really much larger than that. Knowing about these cycles and correctly assessing were we are at any given time is key to good investing and properly valuing any asset. Why does the buying power of the dollar continue to increase? Or better yet if you could name the phenomenon what would you call it? answer: deflation How long has this trend been in place and when was it last not in place? answer: The seventies, we reached an inflationary peak then and have been deflating ever since. Note that the price of gold has been dropping since then. Bonds were yielding 17% at the peak. I guess you could call that a yield bubble. Why do people keep going on about a bond bubble and if bonds aren't a bubble why not? answer: I don't know why people are calling the bond market a bubble. Given the strong possibility of the US entering a deflationary period buying bonds is the correct thing to do. Negative yields are always a possibility. Is the US really making vast profits or are we merely mortgaging the future? answer: It seems tough to say the US is making a profit given the balance of payments we have incurred. How can the US ease the burden of debt that we have incurred over years? answer: Simple we pay back in less valuable dollars, and better yet our exports become more competitve at the same time. What effect will the measures that the US takes to ease it's burden of debt have on the dollar? answer: It will decrease in value relative to other world currencies. How will gold and other commodities perform relative to the dollar after these measures are implemented? answer: They will rise in price as it will take more dollars to buy a constant amount of a given commodity. These were the answers I was looking for. The decline in gold relative to the dollar is not a trend that will continue forever. It's merely one part of a larger cycle that swings both ways. The seventies are a demonstration of what it's like when we are at the opposite extreme of the cycle. Thus those who have shorted gold too heavily will eventually pay, unless they get out in time. The trend is your friend till it ends.