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

To: Vieserre who wrote (1524)	8/12/1998 3:10:00 PM
From: Bobby Yellin	Read Replies (1) \| Respond to of 1911

I just wonder...about wage inflation.. ie bp merger with amoco..how much jobs here will be lost 6000 with asian meltdown,how many jobs with benefits have been cut by technology companies with market selloff how many people will not feel as wealthy or as secure with their market wealth? somebody mentioned that the American Institute of Petroleum said supply of oil should peak maybe in 1999 (didn't see it in writing) and then oil prices will start to rise..good for Russia,Mexico,South America,Indonesia etc).. flooding in China should put bottom in in comodities..the opposite of El Nino should put a bottom in in energy..(maybe I am being too simplistic) there are just so many forces...it just seems as if the governments need to do something in short term to bid time.. it would seem that US has the slowing affect of Asia so it wouldn't need to raise interest rates unless Japan started getting their economy going..etc hope I haven't contradicted myself within this post..

To: Vieserre who wrote (1524)	8/19/1998 8:22:00 AM
From: Pete Young	Read Replies (2) \| Respond to of 1911

Vieserre, 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. So, I'd vote for the following scenario: the western stock markets continue to inflate in response to continued deflation until something (interest rate rise) pricks the bubble. Then deflation, really gets center stage. The Fed lowers rates dramatically, but as we are seeing in Japan such central bank manuevers are like pushing on a string when deflation imbeds itself in the economy. Note that until the inflation of the 70's, those at the monetary controls were still haunted by the deflation of the 30's and were always more concerned about deflation than inflation...look at the great bear market for US bonds from 1945-1981 as proof. Starting in 1981, though, monetary authorities around the world decided to strike back at inflation, and are now seemingly incapable of acknowledging the return of the boogie man of the early part of this century. Consumer demand is the problem, and it doesn't respond to lower interest rates at the lower bound. I read recently in the Economist that in the last three years 30% of Americans experienced below poverty level incomes at some point. What I see from my own point of view is a gathering deflationary storm...the middle class (world wide) is being hollowed out by the arbitrage between First World prices and Third World production costs. The booming stock market is just an end play on that process. (See Atlantic Monthly article from several years ago "The Bull Market in Fear".) I'm afraid we are tipping into something reminiscent of the 20's (Although I can't believe that we could be so stupid as to repeat this painful experience---but that's the genesis of cycles, the people that were most scarred by the 30's have moved off center stage.) If so, the central banks of the world will react, as you stated, after deflation has really kicked in. Monetary policy will then be of no use, and only massive fiscal stimulus will work. Watching Japan react to their situation in the coming year will be interesting. (Hopefully not too interesting.) Pete