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

To: Vieserre who wrote (1494)	8/5/1998 11:14:00 AM
From: Bobby Yellin	Read Replies (1) \| Respond to of 1911

pei-intl.com would hope you and AHHAHA and Larry comment on Armstrong's views on commodities,dollar and yen

To: Vieserre who wrote (1494)	8/5/1998 11:58:00 AM
From: Bobby Yellin	Respond to of 1911

re china: exchange2000.com

To: Vieserre who wrote (1494)	8/5/1998 12:45:00 PM
From: ahhaha	Read Replies (1) \| Respond to of 1911

The savings rate should never be an objective of any policy. It is set naturally by the habits and attitudes of people. You can't legislate morality. The measures of savings are all faulted in that they measure quantities of money of the wrong form. They are built on assumptions about saving vehicles of the past. Savings exist in the form of bonds, stocks, real estate, and currency. Just because someone converts one form into another, you can't conclude that the pool of savings has changed. Savings exist to support the borrowing extension, not for a support of consumption. When interest rates rise, the traditional measures of savings tend to rise, and vice versa. Savings is big in the schools of demand management, but shouldn't be looked to as a determinant of economic health. The fuss in Asia is about competitive position and the sword rattling comes from potential fiat currency adjustments. There is no benefit except over the short run of devaluing your currency. It pushes up exports at the cost of domestic inflation which extracts a tax greater than the benefit accrued from higher exports. The outcome is a less competitive economy in time. Like savings a cheaper currency shouldn't be a goal of policy. In fact, increasing competitive position shouldn't be a goal either. When you practice good economics you get a small competitive advantage if your trading opponents don't have as good or sound economic policies. You say, "It would also seem incontrovertible that a trade deficit due to devaluation of foreign currency is disadvantageous to domestic manufacturers as it affects the price on which they can sell their products." You have forgotten to add ceteris paribus. But that paribus doesn't abide. If China devalues, it forces Japan to get more competitive. They either can devalue too or raise interest rates, decrease taxes, or pursue other options to gain back the paribus. Then you get competitive devaluations and a trade war where no one benefits. It ends up in both going bust. You never want to open Pandora's box of devaluation, because the devaluer is the most severely punished. Trade deficits are an abstraction. They are self-correcting. It just means the nation has bought more than it sold. It just means that some industries haven't sold as much as they could have and others have bought more than they would have with a different currency ratio. So what? How does that lead to financial chaos? Even in the case where a nation is buying oil and generating an arrearage in payment, the oil sellers will just stop sending them product. That is the true effect of trade war, a slowing of trade because of loss of confidence. Trade deficit maintenance on the contrary demonstrates trade confidence. Trade deficit with Japan during the decade of the '80s neither slowed our import rate nor did it extract a financial cost. If anything it forced our nation to factor a bigger amount of dollar flow into our treasury market. This history continued into the '90s and now we have the dollar at an all time high. According to your demand management theory that shouldn't have occurred. The net import forced us to get more competitive regardless of what monopoly labor wanted. We didn't have a trade war that would have occurred had we followed the exhortations of labor and hiked trade barriers to protect domestic inefficiency. Instead we got a gradual adjustment that made the country wealthier by forcing all of us to work smarter. Why does more dollars in international banks cause the conversion rate to fall? That is true if we are inflating faster than our trading partners, but we haven't got there yet. It isn't the direct quantity of dollars that is of issue. As the turnover rate rises the quantity rises. That's a linear function of world trade levels. Why can't be debt be paid down by opting to forgo consumption? That's the effect of rising interest rates. Last time I checked the current deficit of the US was falling which is the effect of high real rates over decades. A falling deficit means a falling national debt. Indeed, it is the size of the national debt that has been a major contributing factor in the intrinsic long term deflation going on. It's an albatross around the neck of socialist economic thinking. The other factor is falling marginal world wide labor cost and technological improvements in the ability to supply raw materials. As a demand management type I guess you don't care much for Voodoo Economics, but it is the placement of incentives to create wealth that got us out of the socialist economic policies that evolved out of the '60s. Those growth incentives can enable this country and the rest of the world to cause a growth of wealth that completely dwarfs the accrual expectations of future liabilities. With the albatross in place the growth in liabilities is severely constrained. That won't be the case though if we fail to learn from the past as usual and end up using the wealth so far created to go on a bleeding heart, do-good, all power to the peoples squandering fiasco. That is possible because the FED can engineer a stagflation and the universities can see their opportunity to become the great providers of socialist wisdom, inducing a devolution back to the '70s. Gold has always been a lagging indicator mainly because inflation is primarily a psychological phenomenon. The psychological aspect means it is sentimentally priced. Central bank selling, jewelry demand, etc., is irrelevant. These are pseudo reasons trotted out to explain short term price fluctuation. Total demand and supply don't determine price. Econ 101. The persistence of marginal demand and supply determine a trending price regime. With gold the sentiment provides the persistence. The sentiment comes from lack of trust. The FED generates that lack by pursuing demand management policies like they are doing now. They are targeting interest rates. The current gold pricing is meaningless, just random walking. Dynes hasn't said, "yes, it's ok to buy gold now". When you hear guys like him, you know the prices in the supermarket are rising and have been doing so for months.