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

To: macavity who wrote (40997)	11/6/2003 2:39:20 PM
From: AC Flyer	Read Replies (2) \| Respond to of 74559

>>One of the reasons that we are not experiencing a 'classical' deflation is that we are not on a gold/commodity standard. If we were, I believe that we would have seen a 1932 type crash. (Where Price in an non-expanding currency goes down to Earnings). Instead we will see a Japan type bear market. (Where Earnings catch up with price in an expanding currency).<< And this is bad? Or somehow an argument for gold? I don't think so. One of the bedrock arguments of the gold bugs is that, because fiat currencies are being "debased", the price of gold, as measured in those debased fiat currencies, will inevitably rise. I suggest that this is economic nonsense, as what is really important is the value of gold measured in its exchangeability for items of true objective value - i.e. goods and services. Thus, in a period of unprecedented increase in the global supply of goods and services, the goldbugs should kneel and worship the great Uncle Al for running the printing presses to support the fiat price of gold.

To: macavity who wrote (40997)	11/6/2003 5:00:20 PM
From: Mark Adams	Read Replies (1) \| Respond to of 74559

13 rate cuts, 3 tax cuts, employment flat to down. Perhaps it is a good thing we have Fiat bullets to fire. Now that they've been fired, we will see what the future holds. If there are survivors, perhaps a new book will be written with the lessons learned.

To: macavity who wrote (40997)	11/6/2003 7:10:53 PM
From: Mark Adams	Read Replies (1) \| Respond to of 74559

I think a fundamental flaw with the idea that more gold drives prices higher in terms of gold (monetary inflation) is the propensity to save. If we are 49'rs, and we have two chickens and a ten pounds of carrots, and 3 gold coins, we can set the price of a chicken at one gold coin, and one gold coin per ten pounds of carrots. Now if only we had a bit of rice, and maybe some celery, well we could rustle up a fine bit of chicken soup. But instead, lets say that we work the ol stream with a pan, and create a new gold coin each. If we both prefer to stash our gold coins pending a trip to the city, where there are fine whisky and dancing girls, then the price of chicken and carrots will likely remain unchanged, despite a nearly doubling of the monetary supply. It is this choice of what to do with the new money, that determines if we see inflation, or maybe I should say when we see inflation. This is another case where it isn't the 'stock' (ie money or debt) which matters so much, but what the 'actor' (ie you or me) do with the stock, and the ultimate results of those actions. Is the appearance of inflation only delayed until that trip to the city? Perhaps by then the supply of whiskey will have grown, with the construction of the new still, and the price of whiskey will remain 1 gold coin per bottle even though there are now 5 gold coins in circulation instead of three. All in all, the catalog of goods available to purchase grows over time. And like I said before, we can use money to demand things from society, but society sets the price we pay. If we all demand whisky, then the price of whisky will likely rise. If instead, we all squirel away our gold coins for the company of a dancing girl, the price of whisky may fall.