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

To: Bobby Yellin who wrote (1521)	8/12/1998 1:26:00 PM
From: Vieserre	Respond to of 1911

Bobby, It is a most important issue and one which leading economists differ on. Clearly, fiscal expansionary steps have been and are currently being considered by Japan and have been undertaken by China and other Asian countries. With respect to Japan, owing to the bank and other inherent problems, previous fiscal steps have not stimulated the economy. And in view of the the deflation that is occurring, many economists question whether the present economic steps being considered will revive it. These economists advocate that the only way Japan will be able to recover is by inflation by the printing of money. Their thesis is that the Asian problem is not a currency problem, but one of excess capacity and consumer demand. If Asian GCP is to grow, steps must be taken to stimulate consumer demand, but a consumer will not spend if he/she believes prices are going to go lower. There is also a split among leading economists, including the IMF, as to whether the FED should continue its relative strong real interest rate policy to combat incipient inflation, or whether it should relax rates in view of deflation concerns. As you are aware, those advocating continuation of the high real interest rate cite high employment, robust retail sales and stock market as reasons for maintaining the rate. While those in favor of relaxed monetary policy cite the flat yield curve, high global demand for dollars, CRB index, and gold as evidencing lack of global dollar liquidity which is contributing to deflation. The FED is obviously in a difficult position as it is reluctant to raise rates in view of Asia and to lower rates in view of employment. Thus, when it does react, it will react to consequences then in place which will then be more difficult to control. As far as Europe and the new ECB policy with respect to the control of inflation, there is a split between those favoring a banking policy based on money growth as Germany maintains, and those favoring a policy, as in the US, based on a number of indicators. Thus there is not currently in place a clear cut monetary or banking policy in this regard. Moreover, since the "Economy" will be new, there is great uncertainty how this will play out. As to Russia, falling commodity prices are taking a political as well as an economic toll and it is hard to see how the country will manage if commodities continues to fall - but will the FED and other global authorities conduct their banking affairs with this as a primary consideration? In any event, it appears that global events, if not out of control, are increasingly not being controlled by but are controlling global banking authorities. How this will resolve is too complicated for any ones' clairvoyant powers. It clearly evidences great uncertainty and risk, which the dollar - not gold - is receiving the benefit of. It is something to consider that the WGC expects the gold imports into Japan this year to be the least in the last 15 years, Taiwan's has fallen off substantially, and other Asian countries are similarly being affected - even though gold is at the bottom of a 15 year trading range, inflation has increased in those countries which have devalued, and there is great global economic risk or uncertainty.