Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : GOLD-XAU -- Ignore unavailable to you. Want to Upgrade?

To: Richnorth who wrote (150)	11/22/1997 6:34:00 PM
From: Mark Adams	Read Replies (3) \| Respond to of 1756

Any comments on the article found in this weeks Economist at economist.com I'm long gold mining stocks, but if the Central Banks consider this position valid, troubling times could lie ahead.... <snip> Yellow peril A provocative study* published this summer by America's Federal Reserve also deserves attention. It concluded that the world would be better off if central banks sold their gold, and it offers a novel explanation why. Keeping gold reserves off the market, argue the authors, means that resources are wasted. Extracting new gold from the ground, at an average cost of close to $300 an ounce, is not necessary. If the demands of gold-using industries, from semiconductor makers to dentists and jewellers, could be met by running down stocks rather than mining, there would be a considerable economic gain. The study estimates that if all countries sold their gold, this would result over time in a net gain in economic welfare of $368 billion. Of this, $342 billion would go to governments, while private-sector users of gold would be $198 billion better off. In the loss column, private owners of gold would be $102 billion worse off due to lower prices, and gold producers would suffer to the tune of $70 billion. The study has the usual disclaimer that it reflects the views of the authors and not those of the Federal Reserve. But the fact that the holder of one quarter of all official gold reserves is asking whether gold could be put to better use cannot be dismissed lightly. The big holders of reserves among emerging economies, such as China and Taiwan, have little gold in their vaults. If the smaller central banks continue to sell gold at a modest rate, then the price may hold steady. But if the big central banks dump the metal then gold could meet the same fate as silver. In the 1870s both Germany and America stopped the regular minting of silver coins. Germany in particular began dumping silver on the market, and by the early 1900s the price had tumbled by two-thirds. For gold bugs, central banks' diminished affection for the yellow metal may not have a silver lining. * "Can Government Gold be Put to Better Use?" By Dale Henderson, John Irons, Stephen Salant and Sebastian Thomas. Federal Reserve International Finance Discussion Paper no. 582. June 1997.

To: Richnorth who wrote (150)	11/22/1997 11:30:00 PM
From: paul ross	Read Replies (2) \| Respond to of 1756

Follow this line of reasoning and I invite comments (maybe not a TB attack). To bail out its ailing banks the Japanese govt. comes to the rescue and in effect prints a whole bunch of money . This puts downward pressure on the Yen, with the Y/D going towards 150. The US, facing a lot cheaper Yen and a real lot cheaper other Aisan currencies, does what in response? Does it inflate too. US products, including its debt, become very expensive for Aisan buyers and US trade deficit soars. This whole crises is about a liquidation of debt. And the easiest way to pay for the mistakes of the bankers is to take a little out of everyones pocket debasing the currency. Maybe the pressure by the backers of the ECU and the future Aisan currency unit have put too much pressure on govts. to lower their inflation rate too quickly. This has caused a world disinflationary (deflationary) environment, with little way for over spending govts. and over lending banks to adjust so rapidly to this change. After all a debtors best friend is a fixed loan rate in an inflationary environment. In effect, the patient is getting severe withdrawal symptoms, he just needs a larger dose of drugs (more money supply). Let me say I subscribe to the von Mises and Austrian school of economic thought, that the best way to resolve such a crises is for the govt. to get out of the way and to let the chips fall where they may.Inflation just forestalls the inevitable. PR