Hi. My own opinion, based on what has happened in past years (inflation/deflation) and what is happening today in world markets, is leading me to the conclusion that gold has no where to go but UP. Found the following article, which gives me further reason to go hmmmmm.
Pulled this from www.Stockhouse.com:
DR. DOOM
Exclusive to Mr. Cyriuss
June 23, 1998
Cyriuss Investor Homepage
JAPAN: FROM WORSE TO WORST
Today, Reuters news conducted a preliminary poll of Japanese institutions and economists in anticipation of the quarterly "tankan" survey of the Japanese economy. The quarterly tankan
generally sets the pace for currency and stock market trading throughout Asia. In March, the tankan survey revealed a -31 rating, demonstrating severe pessimism throughout Japan's business
sector. The more positive the rating consensus, the brighter Japan's business leaders view the future. The more negative, well, you get the picture.
While results will be released next Monday morning in Tokyo, Reuters already forecast an overwhelming negative consensus with their poll. If that poll was correct, Japan's latest tankan will show a -42 rating for large manufacturers, down from -31. The major non-manufacturing sector showed a -36 for the latest quarter, compared to -30 for the previous quarter. A Standard and Poor's economist stated, "There's darkness ahead. There's nothing good about the economy."
March's severely negative rating helped precipitate the current slowdown in the global markets, Wall Street included. It also led to the severe and quick decline in the Japanese Yen, which has
since dragged down the Australian and Canadian dollars. Substantial and continued erosion of the Hong Kong dollar, the Thai baht, the Malaysian ringgitt and the Indonesian rupiah were expected
and incidental. (Few seem to care about, or monitor, the Indonesian situation, where up to 1/3 of the population are practically being returned to the Stone Age.)
Devaluation of the Chinese yuan looms heavily on the minds of G-7 central bankers. Compare that devaluation to a nuclear strike against a non-third world nation. It would have the same, although not immediate, impact. The twin, thin threads holding the Chinese back from such a devaluation are: (a) the Japanese Yen is not yet trading as low as 150 yen to the US dollar and (b) the Chinese are eagerly anticipating a rubber stamp approval into the World Trade Organization
(WTO). The 150 Yen line is cast in stone -- the Chinese made it abundantly clear last week that they may be forced into a re-consideration of their promise to not devalue. In the face of an
unexpected economic crisis, the WTO card becomes irrelevant.
With the continued demise of the Japanese economy, specifically the Japanese banks -- whose money is tied-up in Indonesia, Thailand and elsewhere, it would take a concerted G-7 intervention to prevent the Japanese Yen from crossing the 150 level. Some analysts are predicting another down rush that would take the Yen to 180 by the end of this year. That would force the Chinese hand, unless US President Clinton offered them the Moon and Mars, in order to prevent such a
devaluation. Japan will be forced into an unparalleled fund-raising campaign to prevent a further depreciation of its currency. How will they accomplish this?
Until recently, the Japanese had been aggressive buyers of US, Australian and Canadian government bonds. Since January, we have seen steep declines in both the Australian and Canadian dollars. There was some brief news mention, during the winter decline of the loonie, that
the Japanese were selling Aussie and Canadian bonds. Apparently, Japanese bond-dumping continues in both Australia and Canada, drastically lowering the buying power of those countries' currencies.
The next logical move requires that the Japanese commence the sale of US Treasuries. Japan desperately needs to save its banks, whose bad loan totals, at last count, stood at around US$560 billion. Discussions are now underway which may lead to a "surprise" July 8th announcement that Japan is to establish a new bank holding company. This Big Bank's purpose would be to provide Bank Bridge Loans to many of the country's ailing banks. Again, how will Japan raise the funds to bail out those banks?
When all else fails, go to Uncle Sam. In order to avert a major collapse throughout Asia, one that would quickly speed its away throughout Russia, Europe and North America, the Japanese will be
forced to engage in what might become the largest dumping of US Treasuries ever. In the name of liquidity, Japan would hope to avoid a credit crunch by unwinding their foreign currency and asset reserves.
The sheer complications of such a sale would include the rapid rise of US interest rates, the collapse of the Canadian dollar beneath 60 cents and a Wall Street crash that would set a new point and percentage record. That would quickly drag down the world's stock markets and create the worst liquidity crisis modern-day financial markets have ever seen. Central bank printing presses would be running over time to pump currencies into the money supply. US property values would plummet. Commodity markets, especially the precious metals markets, would suddenly reverse the downdraft they've suffered this decade.
The U.S. arrogance that has prevailed during this bull market and has spilled over into foreign affairs will come a cropper. In past articles, we have discussed the anticipated political ramifications, i.e. the Islamic revival across the eastern equatorial belt and into Europe and Russia that would undo most 20th century innovations.
In order to save themselves, in the most radical scenario, the Japanese might dump all foreign reserves and re-value the yen against a gold standard. This would create the New World Order that nobody wants. Such a possibility has already been discussed in the corridors of the Japanese parliament. Who knows who Japan's new Prime Minister will be, let alone what radically new policies may develop, later this summer and next autumn.
The question is not whether or not Japan will pull off this stunt to save their economy. The question is: How long can the Japanese put off the wholesale dumping of their non-Japanese assets?
A lot more depends on Clinton's visit to China than what he originally had in mind. We walk on eggshells, waiting for the results of his visit. After all, he is not dealing, this time, with African tribesmen, but highly skilled negotiators in very desperate circumstances. And, under severe congressional over his Chinese dealings, at a time when his ex-girlfriend is about to confess. The
deck is stacked against a favorable outcome.
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Mr. Short
Exclusive to Mr. Cyriuss |
