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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (13828)	7/11/2003 5:43:28 PM
From: Silver Super Bull	Respond to of 39344

RW, Excellent analogy and great post. Kind of spoiled my appetite for a Friday afternoon beer however. DB p.s. Guinness for strength

To: russwinter who wrote (13828)	7/11/2003 6:39:08 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 39344

Put simply, "money" and "credit" are not synonymous...they are during periods where monetary velocity is robust and the conversion of credit to money can be easily accomplished. They are not during periods of financial fragility or instability, or during deflationary liquidity trapping spirals, when lenders are less apt to monetize credit.

To: russwinter who wrote (13828)	7/12/2003 10:47:03 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 39344

monetary policy is effective for fighting inflation, a la Paul Volker Faber in his most recent letter suggested Fed policy under Volcker was not really the cure that it seemed to be. basically, he argues that inflation would have come down anyway, without Fed intervention. and perhaps now it will go up anyway, despite intervention. Faber calls 2003 the "mirror image of 1981". your view on the ultimate futility of credit expansion under present circumstances is a major theme in the newly published The Dollar Crisis. i think this is an excellent book for anyone interested in the coming collapse of the dollar and implications for gold. for perspective on the single largest contributor to our structural current account deficit over the past several decades, and a detailed look at the sterilization and absorption strategies adopted in response, i would also suggest the somewhat more esoteric Japan's Policy Trap: Dollars, Deflation, and the Crisis of Japanese Finance. amazon.com amazon.com

To: russwinter who wrote (13828)	7/12/2003 11:46:17 AM
From: austrieconomist	Read Replies (3) \| Respond to of 39344

More apologies on off topic, but RW brought it here following our private messages, so I'll post it here. To bring anyone who cares up to speed, our exchanges have been (in my view) like ships passing in the night, with RW focusing on credit expansion and its economic impact and with my focus on Fed money supply expansion. I have been posting MZM activity on this thread because I believe that it is a relevant factor to the price of gold, which is the product of the majority of stocks discussed on this thread. So it is relevant. Before making that case I'll splice the most recent activity in MZM research.stlouisfed.org which is the first positive activity for MZM relative to the gold price in 18 months (the graph below is year on year, so trust me that annualized growth of MZM first fell from its 20% growth rate in January, 2002). It is the "first positive activity" in my estimation because the growth in MZM and its trend is beyond the probability of a chance expansion but is indicative of direct Fed intent to monetize debt. research.stlouisfed.org MZM is not itself directly indicative of Fed activity in creating money out of thin air, by crediting a deposit in a member institution by a T-bill purchase, for example, but it is more directly indicative of money creation than the broader measures of money such as M2 or M3. I have also used MZM or, prior to its realgamation to MZM around 1994, M1 since the early 1970s to plot future impact on gold and raw materials in U.S. dollar prices. I am not so concerned with economic impact of money creation as I am in inflation and currency debasement, as I believe those aspects are more directly relevant to the future price of gold. I am also more interested in directly observable cause and effect consequences and I believe that a monitoring of MZM provides it, as I have previously posted here my observation of the lagged impact of the MZM surge in November, 2000 through January, 2002 on raw materials prices (as measured by the CRB Index futures.tradingcharts.com Note that the CRB Index period of 30%+ appreciation began November, 2001, roughly 12 months after the beginning of the onset of the prior MZM surge, and has ended in January, 2003, roughly 12 months after the end of the prior MZM surge. I believe that there is a causal tie between the initial MZM growth pattern and the subsequent impact on raw materials prices as measured by the CRB Index (as the newly created money worked its way through the economy). I also tie this to gold in a rough sense. If the Fed is active in debasing the U.S. Dollar, that is directly positive for gold. It gives me confidence, no matter what else happens -- shorts of commercials, forward selling of producers, central bank sales -- that the investment in gold will ultimately be successful in U.S. Dollar terms. Maybe this is coincidental - maybe not -- but the bottoming in gold and its beginning ascent in early 2001 was roughly coincident with the initial MZM surge in November, 2000. futures.tradingcharts.com Certainly, gold has not looked back since the Fed has expressed its willingness BY ITS ACTIONS to debase the currency. Credit expansion outside Fed activity may have economic impact, but I have not seen any studies relating a tie to that expansion to raw materials prices or U.S. dollar inflation, and that is my narrow focus here.