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

To: Rarebird who wrote (26328)	1/16/1999 5:12:00 PM
From: Hawkmoon	Read Replies (3) \| Respond to of 116764

Rarebird, I also am concerned about Stagflation. But I think we have a different definition of what Stagflation is. The definition is a decrease in output combined with a sudden rise in prices, often involving external factors such as the Oil Embargo of the '70's. But in the first 1/2 of 1999, I think we will continue to see expanding production as foreign economies attempt to increase production and exports to increase revenue flow (in order to maintain payments on their debts). This may be impacted by credit crunches as lenders become concerned about Y2K compliancy and the business continuity of their borrowers. But for commodities, I think anyone producing a commodity will endeavor to sell it to raise cash to meet their commitments. However, Y2K will be different story for our economy and especially those overseas. I fully expect a massive debt default by Asia and Latin America. This will reduce the money supplies of both the US and European currencies, especially since so much Latin debt is denominated in Euros. Such contraction of money supply is deflationary and destructive to the credit system. Businesses will go belly up due to inability to get credit, anything people can sell to raise cash, they will, including personally held gold. Face it, you can't spend gold... you have to convert it into cash to spend it and the more gold that is sold will be sold at low prices to its latter worth. Gold will be sold, cash raised, and THEN LATER ON, when the prices have hit rock bottom in the commodities markets, to include gold, then inflationary pressures will once more rear their ugly heads making gold more valuable relative to cash. You can't have stagflation with higher prices and that isn't happening. In fact, were it not for the Fed pumping out tremendous liquidity (printing dollars) to sustain a semblance of price stability, prices would be even lower and the dollar MUCH STRONGER. But eventually, the Fed and ECB will run out of easing room and wind up like Japan where no matter how low interest rates go they can't boost productivity. Now it is possible that the US Dollar may weaken in favor of the Euro, but in that case owning Eurobonds would seem to be the best investment as that currency is strengthened. But this increased strength will only be temporary as economic output contracts to such an extent that instead of lowering rates, the gov't will be forced to deficit spend to prime the economic pump and force the economy to expand. Now I may be crazy about my timing, but I think that there natural cycles and events that must transpire before gold REALLY SHINES. I have little doubt that we're heading for depression-era times again based upon what we've experienced over the past two years. But I want to buy gold when blood is running in the streets in the gold markets, such as hocking your wedding rings to raise cash for rent. Eventually, all that gold that is being accumulated has to be sold and converted into cash or bartered for other goods. But since it is difficult to find gold denonminated in anythng less than 1/10th of an ouce, conversion to cash is more efficient. And as that gold is sold, it is thrust back into the marketplace, increasing its supply and lowering its price. So those that sell gold to raise cash will be selling to those who have cash to spare for buying gold at bargain prices. I think I want to be the latter, until someone can convince me why gold is ready to supplant both the Dollar and Euro at the same time. I'm not against gold, but I'm trying to get it at the cheapest price and logic would dictate to me that we haven't seen it yet. (minus some kind of short-term short squeeze) Regards, Ron