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To: bill who wrote (32677)	4/28/1999 6:49:00 AM
From: Bobby Yellin	Respond to of 116759

"How will this affect POG? Is the govt. in collusion with private business the goal of which is to keep the price of gold down because then it can be argued there is no inflation since gold is so symbolic. You might pay twice as much for steak but gold is at all time low" exactly-- I also think there are more systemic problems to the fiat currency system than we know about.. also think as to US economy it is a wag the tail economy..as people grow rich from the stock market rather than from jobs..they buy.. also think we have lost the peace dividend etc..also mother nature might not be so kind this coming winter for energy..

To: bill who wrote (32677)	4/28/1999 7:30:00 AM
From: Zardoz	Read Replies (2) \| Respond to of 116759

For your approval Searle, Jim, Goldsnow & Bill: " I was gratified to see that some members of this thread believe that the real rate of inflation is not being reported. For some time now I've been telling ad naseum to all who would listen that the reported inflation rate is being manipulated." #reply-8772586 techstocks.com I've wouldn't subscribe to the word manipulation, but more to being incorrectly interpreted. As you can see I suspect that real inflation rate is around 6.25%. I, being a monetarist, believe that the FED can and does control inflation/deflation by the use of instruments such as M2/M3... And Investor-ex! came up with much the same number, using dissimilar analysis. As Morgy points out indirectly, a person can look at the price inflation of homes to see that USA is/has been in a inflation economy for a long while. Yes, the US dollar is loosing purchasing power {cost of homes in Washington State was reported on TV the other day as up 20%+ yr/yr. So if inflation is so high, then why doesn't the CPI reflect this.} Too many consider that CPI is an inflation index... it's not. stats.bls.gov:80/sahome.html stats.bls.gov:80/cpifaq.htm Just as there is more then 1 way to measure inflation, there is more then 1 way to measure deflation. "Is the CPI a cost-of-living index? No, although it frequently and mistakenly is called a cost-of-living index. The CPI is an index of price change only. It does not reflect the changes in buying or consumption patterns that consumers probably would make to adjust to relative price changes." Want to buy a Japanese car over an American? If you are to continue to read on further you'd see that the CPI does not take into account lower prices due to fluctuation of currencies. So in affect a lower YEN {120 as oppose to 90} can cause a lower CPI by creating a lower price for base products. It neglects deflation due to substitution. Even from the FED's own site: "Various techniques have been devised to measure different aspects of inflation. The CPI measures inflation as experienced by consumers in their day-to-day living expenses; the Producer Price Index (PPI) captures it at earlier stages of the production and marketing process... and the Gross Domestic Product Deflator (GDP-Deflator) measures combine the experience with inflation of governments Federal, State and local), businesses, and consumers." Finally, if we assume that inflation and deflation are opposites, as many would have you believe, and that GOLD is that absolute store of value; then: Note (1): "...inflation erodes consumers' purchasing power" "...deflation increases consumer purchasing power" Would this not mean gold would buy you more in deflation? After all the US dollar is a fiat currency? But gold has decreased in value, AKA inflation. So GOLD does best in Deflation. An example is the Euro/Oz of gold, if Germany was nearing a recession, then the POG in Euros should shoot up, and from last summer it has. {I'll ommitt the pound for an obvious reason.} Note deflation is NOT the opposite of inflation. Any time you have an increasing purchasing power, you have deflation. CPI can go up, and still have deflation (see: GDP-Deflator). So you agree up till here? No... but it is possible for prices not to change while your gross domestic product gets eroded. So how does the Gross Domestic Product Defaltor effect the CPI? Could the CPI index {inflation} relative to the remaining world actually be deflated; and a 1.5% CPI value may actually be 4-5% true inflation? People may live in USA, but many of their products are coming from elsewhere. Have we not seen the trade deficit increase in USA over the preceding years? So it is possible that CPI can be held down by substitution of foreign products. And this has been holding the CPI numbers lower then what they truly are. Exporting inflation, importing dis-inflation to offset inflation's rise. Now if CPI is an index of price change only, then is not a 1.5% CPI and an decreasing domestic product rate a possible sign of strong deflation. And how does an increasing trade deficit, effect that? "...deflation increases consumer purchasing power".. We'd probably call it a recession? So how about the opposite: A low CPI number, and a increasing Domestic Product as a sign of inflation? " inflation decreases consumer purchasing power" You might suggest that it's dis-inflation. But dis-inflation is only a change from CPI inflation to less. You can remove dis-inflation, and re-inflation and call them for what they are {See note #1 above}. Otherwise, for gold BULLS {whom believe that gold does best in inflation}, the price of GOLD would always continue upwards, as CPI inflation is nearly always positive. So without consideration of other monetary aspects, they CAN'T form a justified baseline. CPI is insufficient for analysis of GOLD alone. Depression are caused by excessive deflation, but deflation has NEVER been negative inflation. In the great depression domestic output fell at the same time as price changes fell {CPI}. This is why we call it a depression. bonds rate = real return + CPI inflation if the 30 years are 5.55%, CPI = 1.5%, then real return would be 4.05% This is the near the target range for the US fed {4.25% real return). But the US Fed uses monetary aggregate to control the economy. So when you look at M2/M3 as I suggest so many times, then you come up with monetary inflation which can/does hide CPI inflation. This is why CPI is meaningless. Even GNP or GDP are better index's for the economy, and measures of inflation. william-king.www.drexel.edu "However, if you need to estimate the purchasing power of the dollar for all sorts of goods and services, including investment goods, the consumer price index doesn't do that, and the Gross Domestic Product Deflator is probably your best choice." Here's what you should consider: quicken.excite.com

To: bill who wrote (32677)	4/28/1999 2:33:00 PM
From: Jim McMannis	Read Replies (2) \| Respond to of 116759

Bill, I'll try to summarize some answers to your questions as to the best of my experience. Trading the XAU for 15 years. RE:" Do you believe that the relationship of the XAU to POG is more direct and more predictable than to any one company? What I've been looking for, I guess, is a barometer"... Gold stocks are about the most homogeneous group you'll find. Therefore the XAU is a good proxy for the movent of gold stocks. It can be monitored easily in real time. Gold mutual funds for the same reason can be a good proxy and trading vehicle. RE:"If I check Kitco and see that POG has gone up a dollar, can I then expect a corresponding rise in XAU?".... On a day to day basis, not necessarily. The XAU will try and anticipate movents in gold and often gets overbought or oversold relative to the price of gold. Usually the XAU will lead gold short and intermediate term. Last time I can remember this not happening was 1985. The XAU caught up. Fact is that when people think gold will move they jump into gold stocks because the leverage is about 3-5 times the same % movement in gold. This is due to the exponental increase in profit margins. Also, after a gold bear the high cost producers should intiially get the greatest % gain in stock price because they have likely been beaten down the most. Also, large well known gold miners should move first because they simply are well known. RE:"Would the fact that the XAU is a basket of stocks smooth out the fact that individual companies may have their share price affected by many factors other than POG but a general rise in XAU would be dependent on POG?" There are always individual cases, major finds, bankruptsies (PGU) etc.. ABX was not in the XAU for many years and propered greatly even in lean POG times. So there is bound to be some smoothing, as with any index. That said, the anticipated direction of the price of gold is by far the greatest influence on the XAU. RE:"The current bitter strikes that have started to occur in Canada aren't about people wanting to have money to buy BMW's. Between taxes and inflation and static salaries a lot of people are being squeezed financially. A recent report has stated that a significant number of people are charging their groceries on credit cards and are unable to clear the balance. At the usurious rates charged by the credit card companies that makes those groceries very expensive indeed. How will this affect POG? "... I'm not sure it will. Generally higher taxes are disinflationary. Consumers have less to spend and are tighter. RE:"Is the govt. in collusion with private business the goal of which is to keep the price of gold down because then it can be argued there is no inflation since gold is so symbolic. You might pay twice as much for steak but gold is at all time lows and you can buy all you want of it so see there is no inflation." I doubt the government is in collusion with private business to that end. The government is in business for themselves. Diminising the importance of gold is very important to those countries that rely on printing paper money and expecting that it will be accepted a legal tender. If a currency is backed by gold it limits how much fiat money they can print so they are somewhat dependent on the POG. Most governments a control oriented these days. They don't want Gold to supplant their paper. Jim