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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (25163)	8/11/2003 5:43:19 PM
From: Rarebird	Respond to of 89467

Interest rates were rising in the late 1970's (and now?)for two reasons. First, the premium demanded by lenders for compensating for the perceived credit worthiness of the borrower rose. Then, on top of that, the premium demanded by borrowers to offset the perceived lower future purchasing power of the currency rose. It was this second component of the rising interest rates -worry over the future purchasing power of the $US which had, by mid 1979, become worry over the SURVIVAL of the $US - that led to the Gold blow off in December 1979/January 1980. Back then, Gold was only reined in by 18 months of 20% plus market rates which compensated US investors for these fears and gradually, over time, lured them away from REAL goods back into financial instruments. The result was the recovery of the $US followed, when interest rates started to subside again, by the start of an almost 18 year stock market boom in August 1982. Moving forward, the situation is even more promising for Gold; for Greenspan's hands are tied because of the tremendous amount of debt in the system.