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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: paul ross who wrote (12880)	6/11/1998 11:15:00 PM
From: ahhaha	Read Replies (2) \| Respond to of 116795

If you got the info from the Japanese, I can understand why you're perplexed. You're inferring that the Japanese have deflation and a rapidly rising money supply. How is that possible? Although the Japanese are the one people in the world who could through their philosophy of life enable a liquidity trap, even they have been sufficiently corrupted by materialism to realize that discipline is not delicious. Why should the yen rise when the available money is factored into dollar denominated securities? The only thing that Japan has to fear is, fear itself. If the BOJ decided to open the money floodgates, I assure you the problem would be over for them. They are very close to doing that because the yen's decline is substantially raising their oil costs even though the oil price is sliding as fast. They both are feeding on each other. More yen weakness means slower Asian economies which means less crude oil consumption in face of a worldwide glut. OPEC can't reduce the marginal supply fast enough if Asia remains a basket case. This will all change when the BOJ pumps. Then the oil marginal supply reductions will kick in and the US will suddenly have an inflation explosion. It will explode because the FED is sleeping at the switch. They should have been tightening, but instead they're letting the entrenched structural inflation grow teeth. Then all the supports will be kicked out. The dollar will fall, Asia will reverse, and all the deflationary protection from Asia's malaise will evaporate. The FED will have to crank fed funds rate initially up to 7%, but that won't be enough. That would have been enough months ago because it would have slowed the growth in money aggregates, production, and confidence, and would have prepared the US for the transition to a consumptive Japan. The FED talks big about preemptive strike and monetary discipline. All the discipline was lost when year after year of managing the aggregates seemed to have no effect on output factors. So they have gone back to rate management. This is a total disaster and is the equivalent of fixing prices in a free market which enables a misallocation of resources. Asia wants to take fed funds lower, but the FED sells rps to prevent it. Rising wages wants to take fed funds higher, but the FED buys rps to prevent it. The market never discovers where the equilibrium price is. The market just goes along and nominally marks to market. When trouble hits, the market gyrates wildly trying to figure out where it ought to be. Even then the FED interferes creating more confusion. If inflation gets rolling, you'll find the free market sorting things out fast and they won't care what the FED thinks it can do. People won't lend at a rate under their fear of inflation. The only thing the FED can do is pull some dumb stunt like the mindless Russians and raise rates through the roof in order to regain control. You see, that's really where they're at. They are control freaks. In a way that's what they did in 1979, but they chased the market upward all the way.