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To: orkrious who wrote (271388)	12/18/2003 6:32:45 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 436258

"Trotsky" on his favorite subject, gold during deflation: Date: Thu Dec 18 2003 13:56 trotsky (Hambone@'where to from here') ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved Fed Funds close to zero is my guess...also, very likely new mutli-decade lows in longer dated yields eventually. the FF rate at 1% is NOT 'low' if we enter a pronounced deflation. if e.g. an unadjusted CPI measure ( Cleveland Fed CPI for instance ) were to decline by 2% per annum ( not an unreasonable expectation imo ) , 1% nominal yield would amount to 3% real yield - quite high for the FF rate. nevertheless, the argument that the Fed is 'running out of ammunition' is quite valid. similar to the BoJ, it will really be in trouble once the FF rate is at zero. anyway, who cares? unless you're an idiot and up to your neck in debt, deflation can only be good for you. your money will buy more goods and services in the future, imo a reason to celebrate. one can also hope that central banks will go back into the ether where they belong once their money system falls into disrepair. an opportunity to return to honest ( non-governemnt ) money may arise. btw., i still think that gold will do well in a deflation - although it will probably suffer a corrective decline at its onset ( i.e. when it becomes widely recognized that the 'reflation' episode is over ) , due to all those bailing out who bought it in expectation of INflation. later on, the fear that the fiat system might go down in flames should drive the PoG. ...and on M3 deflation: Date: Thu Dec 18 2003 13:20 trotsky (a little tidbit for the inflationists) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved the recent decline in the broad money measure M3 is the LARGEST PERCENTAGE DECLINE in this measure in 59 YEARS. so much for 'the Fed can print as much money as it likes' - yes it can, in theory, but obviously it has little control over the actual money supply anyway. that depends on the willingness of borrowers to borrow, and the willingness of lenders to lend. and from the above, it appears that the credit bubble is beginning to deflate - one of the essential ingredients of a deflationary era. is that the long bond yield i see trading back below 5% again today? why, yes, it is!