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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: cool who wrote (21610)	10/14/1998 5:20:00 AM
From: Alex	Read Replies (1) \| Respond to of 116762

Hurray for The New York Times Memo To: Howell Raines, NYT editorial page editor From: Jude Wanniski Re: Sunday's lead editorial, "Coping With Economic Crisis" There are some nitpicks I would have with your lead editorial Sunday about the global economic crisis, but reading the paragraph concerning the Fed was the nicest thing that happened to me all weekend. To remind you: "A weaker dollar could lead to a higher reported inflation. If it does, that will not be a good reason for the Federal Reserve to back off from trying to stimulate the economy. It is deflation, not inflation, that threatens the world now, and that will not change until low commodity prices begin to move up in a convincing way." The key phrase is the last, about commodity prices. That's what monetary deflation is all about and your editorial gets it right! You don't say what the Fed should do to get commodity prices up, and I take that as a positive too, because the Fed is not likely to get commodity prices up by lowering interest rates. The object is not exactly to "stimulate the economy," as you put it. That phrase implies the government has the capacity to inspire economic activity by doing something positive in this situation -- the usual mistake is to think of the Fed "adding credit" by "lowering interest rates." This is not quite what is going on. The failure of the Fed during the past 20 months to supply liquidity being demanded by the world economy has caused the decline in commodity prices to levels that have bankrupt commodity producers and brought their creditors to their knees. The first commodity that responds to a shortage of liquidity is gold, because of all commodities, it has the most monetary properties. Unless the Fed supplies SURPLUS liquidity now, the gold price will not rise, nor will other commodity prices. In other words, the Fed must give the banking system more reserves than it is demanding now. Yes, prices would go up, but as long as the Fed does not overdo the addition of surplus reserves, there will be no re-ignition of inflation. Jack Kemp and Steve Forbes have suggested $325 gold as a minimum. I would prefer $350, to get all the deflation, but if the only two political people say $325, it is better than where we are now and I will defer to them. (They have other advisors who say gold should be lower than $325 and some who say $325, but no others at the moment who say $350.) If you notice, The Wall Street Journal has not taken a position on the gold price. That's because editor Bob Bartley has been juggling conflicting views of several other supply-siders who have different theories on where gold should be. The closest he has come was in an August 18 editorial, "Time to Relax, Alan," in which he notes the gold price seems too low, at a point when it was at $285. Bob Mundell, who is the most highly regarded supply-side theoretician, says $300 is the low point that the financial system can stand, but he has indicated $325 would be more tolerable. I may have more of a concern for debtors and I'm more the empiricist than the theoretician. In watching gold for the last decade on a day-to-day basis, it has always struck me that the markets seem happiest at the $350 level. polyconomics.com

To: cool who wrote (21610)	10/14/1998 5:27:00 AM
From: cool	Respond to of 116762

D&B: US BUSINESS EXECUTIVES SEE SIGNIFICANT Q4 ECONOMIC SLOWDOWN NEW YORK (MktNews) - U.S. business executives predict a significant slowdown in the fourth quarter when compared to both the third quarter and the year-ago levels, according to a Dun & Bradstreet survey of 3,000 business executives. The depressed expectation levels are most dramatic for the sales and profits indexes, with more modest losses projected for prices and inventories levels. Overall, optimism remains high, but with this survey business expectations have fallen to levels at or below those reported during 1996. "We have a sea change in optimism levels," said Joseph Duncan, chief economic advisor to Dun & Bradstreet. "Since October 1997, the emerging markets crisis has largely had a positive impact on the domestic economy. Inflation was collared, the cost of imported goods sank, and, as U.S. Government Treasury notes became the choice international investment, interest rates fell lock step." "As the crisis continued, perhaps deepened, domestic financial markets -- such as banks and investment banking concerns -- suffered. This is prompting lenders to restrict credit access. In turn, consumer spending levels and business infrastructure reinvestments drop, and consumer confidence levels sink. Even though the American economy has shown surprising resilience throughout the global economic crisis, a significant drop in consumer confidence and spending levels could hasten a significantly greater economic slowdown." Among all firms surveyed, 65 percent expect net sales to increase during the fourth quarter of 1998, down from 71 percent in the third-quarter survey, while the percentage expecting decreased sales has risen from 5 percent to 10 percent. Fifty-seven percent of all executives expect higher net profits, compared with 62 percent in the third-quarter survey, with the percentage expecting decreased profits rising from 6 percent to 11 percent. The number of firms expecting to increase selling prices fell only one point to 32 percent and those expecting increased prices rose by one point to 8 percent. However, this index has been slipping more consistently over the past year. Thirty-five percent of the firms surveyed expect to increase inventories, down a percentage point. And thirty-four percent expect to increase employment levels in the fourth quarter of 1998, down four percentage points from the third-quarter survey. Every index for the fourth quarter posted declines. The sales index dropped 11 points, to 55. The profits index fell ten points, to 46. The employment index declined six points, to 27. The inventories index shed three points, to 22. And the prices index dipped two points, to 24. 15:07 EDT 10/13 © 1998 Market News Service, Inc. --------------------------------------------------------------------------------