Forum Archive Index - July 2001

["mrgoodall" <mrgoodall@xtra.co.nz>]

Geoff   I  wish  you  well , but  imho  gold  is  no  safe  haven  it is
now  just  another  commodity ,  what  happened  to  the  gold  price
during  the  asian  crisis  in  98-99   . ?
The  day  countries  stopped  pegging  their  currencies   to  gold ( i
think  it  was  called  the  gold  standard ) it  changed  the  future
value of  gold  altogether.
the  US   dropped  the  gold  standard  in  in  believe  the  late  1930s
or  early  1940s.
Britain  sold  huge  reserves   in  the  last  decade,  there  is  actually
a  glut  of  gold  another factor  why  the price is  low.
The exploration  and  retrieval  of  gold  by  and  large  becomes  cheaper
and  cheaper  because  of  technical  advances  (  chemicals  used  to
extract  the  gold  from  the  mined  ore ,   more  efficient  machinary)
many  mines  that  were  once uneconomic  under  previous  mining  methods
now  become  profitable   (    although  the  margins  maybe  getting  too
tight  for  some  operators   regarding  recent  news  from  various  mining
companies,   they  have  the  added  problem  of  hedging ,and  trying  to
predict  future  gold  prices..
if  a  world  depression  was  take  place which  is  of  course  possible
but  obviously  not  something  anyone  would  want  to see  i  suspect  we
would  need  help not  from  gold  but  more from a devine  source.
In  the  great  depression  gold  did  not  help  the  30+ % unemployed
in  fact   during  that  time   the  world  economies  had to (via  the
governments  of  the time)  spend  their  way  out  of  depression  by  way
of  a infrastructure  building  programme  (  dams ,  roads  bridges etc)
the  great  Mickey  Savage  and  the  government of  the  time, played  a
pivotal   role  in NZ s (  using  the  same  methods) recovery , not  to
mentions  Britains  dependance  on  our  primary  products . .
The  next  depression  would  take  place  in  a  totally  different
environment  ,  but  when  your  broke  your  broke !!  and  you cant eat
gold
mike g
----- Original Message -----
From: Geoff Brown <brownz@xtra.co.nz>
To: <sharechat@sharechat.co.nz>
Sent: Saturday, July 07, 2001 8:36 PM
Subject: Re: [sharechat]US Market


> Here is a posting from hotcopper site and its basically what I believe
will
> happen soon.........I have, over the last 6 months been putting my money
> where my mouth is.... by  selling most of my tec shares( I still own cag
and
> itc )....I am slowley buying gold shares. On our farm we are selling all
our
> stock paying back debt and leasing out our farm to these cwazy dairy
farmers
> who believe that trees will grow to the sky. I think we are approaching a
> major world depression. Can you suivive one????????
>
>
> US Currencies and Bond market are about to crack
> By Philip Angers
>
> In 2000, the U.S. trade deficit set another new record, rising 31% to $435
> billion. However, the US government has so far managed to finance this
> deficit with foreign cash inflows. The dollar has been strong because the
> foreign money coming out of U.S. stocks is not going overseas. Instead,
it's
> being re-invested in U.S. T-notes and T-bonds.
>
> U.S. bonds and notes are still seen as the ultimate flight-to-quality
> investments (having replaced the traditional international currency GOLD).
> In order for the sluice gate to open and foreign capital to begin pouring
> out of the United States, the bond market would need to break down.
Unlikely
> you say, I don't think so, in fact such an event could be but weeks away.
>
> This year, the Fed, in an attempt to stimulate the US economy, has cut its
> target for the federal-funds rate, the rate at which banks lend one
another
> money overnight, by 2.5 percentage points to 4%. Wednesdays, .25% cut
brings
> it to the guideline rate of 3.75%. However to date, this has been largely
> ignored by the share market and the American consumer.
>
> Savvy investors understand that lower short-term rates do not necessarily
> mean lower long-term interest rates. During the past two Fed cycles,
> long-term Treasuries changed direction well before Fed policy, correctly
> anticipating, each time, that the Fed had overplayed its hand. Bonds are
> forward-looking. As soon as they feel Alan Greenspan's rate cuts have
> crossed the line from stimulative to inflationary, the bond market will
> crack. (Gold should also begin to rally.)
>
> Not only does the Fed's latest rate cuts make the dollar less attractive
> than the euro, a declining bond market could finally send lingering
foreign
> capital back home overseas in an ever accelerating trend.
>
> Considering that March 2000, (very near the start of the new millennium)
was
> the peak in the NASDAQ and since then all the major stock markets in the
> United States, Japan, continental Europe, and Britain have fallen, it is
> fairly clear to see that we are 12 months into a global stock market
> recession.
>
> Even the poorest economist regards stock markets as good lead indicators
of
> broader economic trends. A year after the 1929 crash, in the second half
of
> 1930, the U.S. economy itself had headed downwards. This is natural
enough,
> because investors, who are themselves involved in all the businesses of
the
> country, respond both to current events and to their expectations for the
> future.
>
> Businesses are now reporting that they have missed their past forecasts
and
> are lowering their forecasts for the future.
> Stock markets also relate to credit markets. When credit is easy, money
> flows into markets. Credit is not as easy as it was. Bankers become
worried
> about the security for their loans, as both stock market prices and
property
> values start to fall. In the United States, consumers have been saving too
> little and borrowing too much. Credit markets will tend to become less
> liquid, and that will push asset values down further - not just in the
> United States but worldwide.
>
> In the 1970s, inflationary pressures centring on the oil market nearly
> destroyed the world currency system. In the 1980sthat inflation was
brought
> under control, with interest rates going up to 15% or even 20%, and many
> ruined businesses and lives. In the 1990s, after a mild recession Alan
> Greenspan and the Federal Reserve allowed a huge inflation of asset values
> to occur, even though Alan Greenspan knew it was irrational and therefore
> highly dangerous. This boom went completely out of control in President
> Clinton's second term. Now that boom is over.
>
> In the 1930s, the collapse of a credit boom, which had not gone to
anything
> like the same extent, was followed by competitive devaluations. There will
> be competitive interest rate cuts, and therefore competitive devaluations
> again in this decade. The euro is far too low relative to the dollar at
the
> present time and the Japanese would like a cheap yen to boost their
exports.
>
> How can the Fed boost their economy? The US needs to see a weaker dollar
if
> it is to remain competitive from an overseas trade point of view, however
a
> lower US dollar could signal an exodus of foreign capital. The Fed has
> consistently tried lowering interest rates but so far both the US economy
> and stock market have ignored their attempts at stimulation. In these
> circumstances, it is very hard to boost the liquidity of the system.
>
> The Japanese in the 1990s tried everything, including zero interest rates,
> and nothing got their economy out of recession. This is where gold comes
in.
> At present the gold price is far too low. A vital monetary asset is
> undervalued. The central bankers need to create additional liquidity, and
a
> higher gold price would help them to overcome their present difficulties.
>
> The next few weeks will show the direction of the US dollar. Further
> weakening of US interest rates will do little or nothing to stimulate the
US
> share market but will have a further weakening effect on the US dollar.
The
> previous Bull market, the strength of the US economy and the expanding US
> deficit have all been financed by foreign funds inflows, but I now believe
> the tide has turned and the flow of money will be out of the US as
offshore
> investors see little reason to hold US dollars any longer.
>
> The final curtain will come as the falling US currency heralds the demise
of
> the US stock and global stock markets.
> Will Australia be exempt from this scenario?
>
> The Australian stock market has not reached anything like the highs of
> overseas markets and it could be said that it is still fairly valued. The
> Australian dollar has already corrected in advance of other world
currencies
> and inflation is in check. But what effect will HIH Insurance have on the
> Australian economy? Already the effects of this national disaster are
> beginning to be felt.
>
> The Australian government believed they could stay recession by
stimulating
> the building industry, thus creating jobs and bolstering manufacturing.
> However, today builders are struggling to acquire the builders indemnity
> insurance that is required by all shire councils before the building of a
> new home can commence. Many builders are already going to the wall and
> tradesmen are finding that not only is the building boom that was created
by
> the introduction of GST over, but that the building industry is going into
> decline.
>
> Many other areas of Australian industry will shortly be affected by HIH
and
> other large companies will shortly follow the example made by One.Tel
> leaving the unemployed in their wake. If the rest of the world goes the
> recessionary way, then there will be little requirement for our natural
> resources and what else does Australia have to sell?
>
>
> Ends
>
>
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