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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Axel Gunderson who wrote (668)	8/26/1998 12:47:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

<< I think an idea might be to look at Au as something which is fairly constant in value. Not to be bought for appreciation. >> I agree. I post a variety of items I feel are worth an airing, without necessarily agreeing with the conclusions they draw.

To: Axel Gunderson who wrote (668)	8/26/1998 7:21:00 PM
From: Freedom Fighter	Read Replies (2) \| Respond to of 1722

Thoughts about gold investors. Investors in gold (as a monetary alternative) are essentially taking the position that fiat money will lose its value in a significant and rapid fashion at some point in the future. One that essentially cannot be timed. There are numerous investors around the world today that are much better off now if they owned gold rather than their domestic currencies. Of course, they would be even better off at this point if they held interest bearing US dollars instead. Gold is traded in dollars. Therefore its price and value are closely correlated to the value of the dollar and its use as the international reserve currency. The dollar has been strong and is still the reserve currency of choice. Thus the poor performance of gold in recent years. You should also understand that there are enormous vested interests in government and banking (the establishment) that want gold to be demonetized and fiat money to be generally accepted. Government can't finance its promises via printing gold. It can however, print money. And raising taxes often gets people thrown out of office. A central bank can buy government securities and help finance deficits and debt. This action transfers wealth from the citizens to the goverment in a way that most of the population cannot understand. It dilutes the value of the existing money stock and savings and gives government an alternative means to finance itself. It also makes inflation higher than it would otherwise be. (even if it is zero) Also, this new money stock is in the hands of the government and its constituents first. Therefore, they can buy goods and services at pre-inflated prices. You see, when you increase the supply of money, not all prices spontaneously go higher. It takes a while for it to work itself through the system. Those that receive the money early in the process (goverment) are at an advantage over those that receive it later in the process (usually workers). This process also benefits banks and Wall St. The increased liquidity in the form of reserves can help bail them out of poor lending practices and investment errors. This is a form of indirect taxation, bailout, and a socialization of the banking system. All that said, you should now understand why you won't see too many government, banker, or Wall St. types promoting gold as a monetary alternative or investment. It is not in their interests to do so. That is part of the reason for its poor rap and performance. They want you to love the dollar and hate gold. As an investment, Gold is likely to continue to do poorly until such time as our foreign obligations reach a critical level or our current account deficit causes some holders of dollar reserves and investments to want to cash in, fearing the inevitable decline of the U.S. dollar. Wayne Crimi Value Investor Workshop members.aol.com