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Gold/Mining/Energy : At a bottom now for gold? -- Ignore unavailable to you. Want to Upgrade?

To: Ahda who wrote (1186)	6/21/1998 2:05:00 PM
From: ahhaha	Read Replies (1) \| Respond to of 1911

The Treasury has "full faith and credit". They can tax you. That means they have a claim on your output and can realize it. You can't eat gold, but they can take away the food you grow for tax payment. So why do they need to require gold as an intermediary? Currency fluctuations are caused by adjustments in the assessment of international economic efficiency. Requiring that gold is somehow wrapped up in trading transactions doesn't change currency volatility. When a country runs a deficit against another, eventually the surplus country will reduce the level of activity with the dearth country , if the dearth country won't pay up. Failing to pay is impossibly stupid in that over time any deficit could be eliminated by restricting the amount of goods or services purchased, but not limiting the amount sold. Currencies do reflect the deficit drag, but not by much. The real action, the big component of volatility is output efficiency. Simply defined that means how hard and smart someone else wants to work relative to you. That doesn't have anything to do with gold. You're right about our banking situation being an internal problem. If we inflate and make our output more expensive, we have a problem about selling abroad. The inflation is resolved in recession which brings unemployment and a gradual reduction in the price of our output. The dollar strengthens. The IMF and the World Bank are frauds. They have little money and the money they have they squander on useless, non-fecund projects. It has no consequence to us how the IMF blows the dough we give them. In a way we give it money to pay lip service and generate advertising to sell the world on what good guys we are. The bank's problems have some effect if only on psychology. Roosevelt claimed the depression had a big psychology component. People were depressed because they were depressed. The world believes that if Japan solves their banking problems, everything will be chipper. Boy, do they have it wrong and the failure to realize the error will cause the next worldwide financial panic. After the latest song and dance things will improve for awhile, but then the yen will fail again. I wonder what the boys will trot out to explain that phenomenon? If this is true, gold will rally, and then fail again. In the long run it may be our internally generated inflation that saves Japan. You're arguing an old line about cooperation vs competition. Individuals can cooperate. As groups of individuals get larger and larger that possibility becomes less and less until at the nation level, the greatest economic good is achieved when there is no economic cooperation, only competition. In the asymptotic limit pure competition ends up at cooperation. Nations can be at war and still conduct trade between each other. We put sanctions, trade restrictions, on India because they were doing something politically unacceptable, threatening the continuity of world peace. That action may impact 5% of our trading activity with India. Whether for political or economic reasons the level of trade varies, but the effect on currencies is hardly impacted and only in rare cases is trade suspended. It is in a nation's interest to ignore the cause celebre and without distraction pursue trade. The world is now global. No nation can seek to be internally self-dependent. It isn't necessary and it isn't desirable. You have to remember that many third world countries have nuclear weapons and many others have the physics sophistication to accomplish the same thing. Ubiquitous nuclear weapons force everyone into the same boat. Pure sovereign right is a thing of the past. They way the disparity in labor competitiveness will get solved is the foreign nations will learn to go out on strike and sue for higher wages. Our labor gets more competitive ceteris paribus. That assumes our labor won't try to use foreign labor inflation to inflate its own labor. Guess that's a poor assumption, but there is a time lag between one and the other, the perception of one and the reaction of the other. If most nations are inflating their labor, the level of world trade would fall. The level of world economic activity would recess. Then unemployment cures the problem. First gold rises to reflect the lags and uncertainties in world inflation, and then gold falls because the intrinsic deflation major down trend is reached.