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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 (1700)	9/24/1998 1:32:00 PM
From: ahhaha	Respond to of 1911

About the supply and demand for domestic labor, there is no question that the foreign alternative has kept domestic propensity to inflate in check. Starting about 1 1/2 years ago this beneficial state has undergone a change because prosperity and profitability of large corporations emboldens all to seek what they perceive to be "their fair share". You could call it the product of greed. As long as the perception of wealth remains the demands for rising wages will remain. Greenspan said yesterday that productivity was good. That claim isn't supported by the other branches of government nor by most university economists. The best proof is corporate profitability. Large corporations are sensitive to labor cost changes without commensurate labor productivity gains. Labor productivity is unstable when exceeding 2.5%. When labor demands for compensation exceed that percentage, corporate margins are squeezed. Labor is demanding more than 4% in pay plus a vast array of benefits whose cost is unclear, but could be higher than direct compensation. It isn't monopoly unionism operating across all industries that is necessary to start the spiral. It only takes one visible group, say, the telecommunications workers, to start the ball rolling. Others see what they get and expect at least the same. You could call it the product of envy. Foreign workers see the same thing and have been doing the same thing. Before Asia went on a psychological melt down, there was rising strike activity. Once the world starts back on the road of recovery which actually has already started, you'll start seeing a revival of strikes for higher wages. It is only natural and we have set the trend. If Asian central banks after an initial pumping to restore confidence back off and let rates rise, strike activity would disappear. You could call it the product of fear. Layoffs versus hiring at the micro level is a poor measure. No economic consulting firm would place any kind of value on it because like business cyclical processes, it is too evanescent to have weight in consequence. It is absurd to say that people work harder now than they did in the '70s. If labor output intensity could be measured, it would be determined that it never changes. My guess is that they work easier since machines are doing more and more toil. We have more stress now. It's a wash. Rising oil prices don't help any economy including Saudi Arabia. The Saudis have to buy manufactured goods from elsewhere so if they realize a 10% benefit from rising oil prices, they will have to pay 15% for higher priced goods, the extra 5% comes from the labor inflation factor. It is only very gradual changes that can be easily swallowed and that's what will happen in oil. There is too much downstream supply for the price to significantly advance. Whereas gold is pegged to oil now, that will be changing in the coming era of structural inflation. You said oil price increases causes inflation. Rapid change in oil prices takes time to be factored through the cost to produce all goods and so appears to be what people call inflation since oil is one of the core input factors. The government's intent to protect Americans from the presumed greedy oil companies by fixing wellhead price in 1954, created a disbalance between production and consumption. If the government hadn't done that, the price would have gradually increased commensurately with demand and creeping inflation so that substantially more would have been produced. The oil embargo and the difficult ensuing adjustment period during the '70s wouldn't have occurred. Maybe the will to inflate would have been muted too, but when labor believes it must protect itself from inflation, the demands are non-negotiable. The foreign work ethic will disappear just like it did here. It is human nature. Once that is in place the world will close and the entire world will go out on strike. On strike, close it down. On strike, shut it down. In that environment gold has a rosy future.