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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: dwight vickers who wrote (820)	11/20/1998 12:36:00 PM
From: ahhaha	Read Replies (1) \| Respond to of 3558

I didn't say major inflation. We will only inflate up to the major structural intrinsic deflationary down trend. It is interesting that you say deflation is the norm. You've been trained by the reining psychology. From 1935 until 1980 we were in a regime of rising inflation. From 1980 until now we have been moving sideways. If you look at a chart of CPI, you will see that except for one month periods it has never declined on a sustained basis. The FED is now embracing or finding acceptable higher and higher levels for the CPI rate. I don't see how anyone can conclude we are in deflation, or now, even disinflation. The disinflation intermediate period ended 9/1/98. In coming years higher levels of CPI will be deemed acceptable. People become trained to the higher levels and don't squawk. If the changes in CPI are rapid, then economic factors can't adjust to them, so you get belated FED action to contain them. The dollar has been persistently weak since 9/1/98 and should continue so with upsets in the trend caused by new bouts with flight to safety. Japan wasn't a problem earlier this year, but now it is a problem. Funny how those things work out. The dollar weakness factor only exposes the fact that it we can't compete against hungry foreigners. Protectionist sentiment is rising and that only would tend to encourage inflationary strikes. An increase in duties and tariffs though would also have the offsetting effect of sending Asia back into the tank and therefore increasing the flight correction to the dollar's downside. Inflation is all over the board in various countries. Few are deflating, if any. Inflation is a country wide phenomenon rather than a worldwide one. It would take a worldwide currency to enable the latter and very well may be the case in the distant future. The FED couldn't let the rate even get to 4%. They'd tighten even if it meant a guaranteed stock market crash. With this recent dumb move their fear has pumped up the stock market and increased the probability of the very thing they are trying to avoid. If they had just left things alone, no doubt we would recess. So what? Excesses are then corrected. Instead they are making the outcome twice as bad. Since the advent of the FED in 1913 the problem never has been one of pushing on a monetary string, deflation. The problem is the abuse of money creation to engineer prosperity. The FED and the people are addicted to the money drug. For a brief period after the peak in inflation in 1980 the FED actually practiced monetary targeting and generated a very constructive economic outcome as reported by Greenspan and the boys from '91 to '93. They said that "all we need to do is control the aggregates and thereby achieve a 0% inflation rate". The people can do the rest. For various mistaken reasons they scrapped this policy and went back to the very thing that created all the trouble which became pronounced in the late '60s. The problem is the belief that final demand can be managed by the creation of money in excess of productivity in order to prop up or eliminate economic resting periods. The resting periods are critical for capitalism in order to rid society of the unproductive. Otherwise without a natural destruction mechanism, the dross accumulates until the entire society is pulled down in a horrendous destructive upheaval. Greenspan used to know this, but he's forgotten the critical lesson of acting on principle rather than expediency. He shouldn't be blamed too much since no one else has ever been able to assimilate that lesson. It is why Friedmann would not accept the FED chairmanship. He would be the one guy who would pull it off and be reviled by the drug addicted forever. You'd probably benefit by thinking in terms of +-4% rather than +-20%. You don't need 20% inflation for hell to break loose. 4% is enough because expectations are heavily built around an assumption of no inflation. The entire country is leveraged to the slightest degree of inflation through COLA and other drug driven protection schemes. Once you have a rising change in CPI that is embedded, all the horrors come out especially on the cost side of doing business. That's where the error lies in just about everyone's thinking. They extrapolate linearly because it is the Occam's Razor thing to do, but it is the interconnection and legislated protection against price increases that have been instituted since 1980, which will realize a non-linear acceleration of costs.