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

To: austrieconomist who wrote (20228)	9/11/2003 9:46:49 PM
From: isopatch	Respond to of 39344

A.E. When discussions of monetary policy occur, the growth in the various aggregates can easily monopolize our attention. But it's not just a question of the supply of money that augurs for inflation or deflation. Also of great importance is the velocity (or rate of turnover) of money. Although I don't have a chart at hand to show it, velocity was very high during the 1970s cycle of inflation. However in recent years, velocity has taken a dangerous drop. Dangerous in that it tips the scale in favor of the deflation argument. economagic.com As long as people continue to sit on or even hoard cash, it's hard for inflation to take hold. But add that the to rapidly growing levels of private AWA government debt, and I think what comes out of the equation is an era of hyper-indebtedness that drives a secular deflationary trend of great power. Let's also consider that aggregate debt was much lower during the 1970s inflationary cycle. To lift todays vastly heavier debt burden enough to inflate at all it would be necessary to engineer a policy that would drive real bond rates at least as low as what was achieved during the 70s. Let's take a closer looks at that LT chart of real and nominal rates from my previous post: martincapital.com As you can see, between 1975 and 1980 real rates on bonds ranged from about -5.5% to a hi of about 1.75%. By comparison, if we move to the rt side of the chart and look at real bond rates during the past few years, the lowest they've been isn't even = to the highest levels they reached from 75 to 80 !! IMO, the more closely we look at the evidence, the more it looks like inflation is just not in the cards. The odds favor secular deflation. But I agree with you completely that continuing competitive currency devaluations driven by the desparation of politicians trying to hold onto markets and domestic jobs for their voters will push gold much higher. Isopatch