The loans will all be repaid in due course with mini-dollars. TTFN all

Moon is pretty on the calm ocean....Good night ALL!

OK, a little midnight humor.......

A ventriloquist cowboy walked into town and sees a rancher sitting on his
porch with his dog:

Cowboy: "Hey, cool dog. Mind if I speak to him?"

Rancher: "This dog don't talk!"

Cowboy: "Hey dog, how's it going?"

Dog: "Doin alright"

Rancher: ( Extreme look of shock )

Cowboy: "Is this your owner? ( pointing at rancher ) "

Dog: "Yep."

Cowboy: "How's he treat you?"

Dog: "Real good. He walks me twice a day, feeds me great food, and
takes me to the lake once a week to play."

Rancher: ( Look of disbelief )

Cowboy: "Mind if I talk to your horse?"

Rancher: "Horses don't talk!"

Cowboy: "Hey horse, how's it goin?"

Horse: "Cool."

Rancher: ( an even wilder look of shock )

Cowboy: "Is this your owner?" ( pointing at rancher )

Horse: "Yep."

Cowboy: "How's he treat you?"

Horse: "Pretty good, thanks for asking. He rides me regularly,
brushes me down often, and keeps me in the barn to protect
me from the elements."

Rancher: ( total look of amazement )

Cowboy: "Mind if I talk to your SHEEP?"

Rancher: ( stuttering, and hardly able to talk ) ......
"Th-Th-Them sheep ain't nothin but liars!!!"

Can some-one please explain why "strong vested interests" want to push gold to $250 / oz? It seems to be causing a lot of damage the way it is now, without it going lower.

SCOTTY: If I remember correctly, our resident kitco astrologer, Mr. Sheller had predicted several months ago that silver would hit a major high by this time in July. turned out, probably, to be a low. So much for the stars, hey?????

To : Donald, CMAX, Aurophile

Just finished reading your excellent discussion regarding deflation/inflation. Although many of the arguments put forward by the deflationists are logical, the key point is that there is no limit to the amount of money which could be created within today's monetary system. No regulatory changes or presidential decrees are necessary. Donald posed the question - if the government issued bonds, who will by the bonds ? The answer is that the bonds would be purchased by the monetary agents ( banks + Fed ) with newly created dollars. If they desired to do so, the US govt could inject 1 trillion dollars into the economy tomorrow through the sale of bonds to the monetary agents.

At moment the govt and the Fed are playing a minor role in the expansion of the monetary base as most new money is arising from the monetisation of private debt by the banks. However, at the first sign of a slow down in the supply of new money as a result of debt defaults or other deflationary forces, the Fed will take matters into its own hands. Failure to do so would lead to mass discontent as Aurophile has opined and consequently a failure to maintain political power.

The more signs of deflation which become evident over the next few months, the greater the resultant inflation will be as the monetary authorities over-react.

Regards, Milhouse

First of all, thanks Bart! It's great to once again see the free flow of ideas rather than insults.

Secondly, could someone explain how there can be significant inflation unless the demand for goods outstips the supply? Since the early 80's we have seen the SUPPLY of goods increase dramatically due to greater productivity and the flood of foreign goods pouring into the country. The DEMAND for goods, on the other hand, has slowed as wages have stagnated and baby boomers have become more concerned with saving for their retirement.

It would seem, therefore, one of two things must occur before inflation will become a real concern:

1. ) The people will have to command higher wages and begin spending more money.
2. ) A shortage must occur in the supply of goods.

Given the low unemployment rate and the large corporate profits, it's just a matter of time until labor demands higher wages. And according to Murphy's law the next earth shaking event to disrupt supply is just around the corner.

Millhouse -- They may print all they want, but unless the Feds want to spend most of it into circulation, given that most people are/will be tapped out of most/all of their credit/borrowing power, it just isn't going to get into circulation! At least not the ammounts required to keep a 'stabilized' economy going. Let the Fed print. They'll just be pushing on the proverbial string.

We'll continue to see the Fed not raise rates. They'll lower them when they move them. They have to JUST to try to maintain borowing/keeping currency in circulation. At the same time we are now beginning to see the other governments back off from new purchases of our paper. That does put more pressure on the FED to raise rates. But unless they want to see a market crash, and worse begin, they cannot, IMHO. The bottom line is that if they are REEEEEAL careful, they might be able to extend this 'mess' out for awhile, assuming that 'events' elsewhere do not get totally out of hand.

One 'good' thing about these other little messes raging about is that they temporarily create a bit more interest in our paper markets. But even that goes only so far. 'Things' will have to continually degrade around the globe for continuance of that interest, and in greater degrees. This all may help prop the dollar up, but it does not help peoples credit reports and continuing borowing power. The wage increases that we are now beginning to see are necessary as they help alleviate some of the loan repayment problems and liquidity. Thus allowing people to perhaps make some new loans and borrow some new and necessary money into circulation. Will it be, and continue to be, enough? Short term, perhaps. But unless rates continue to fall, nothing will be enough. The only ultimate way out of the whole mess is to rid ourselves of a debt based economy ( where ALL money is loaned into circulation with interest ) . All else is ultimately doomed to pain and total failure.

for George Cole/SSJ
I believe 60 % is a minumum on a gold run to 375.
Take the gold index ratio in $ ( jse-gold,$ divided by
the price of gold ) - It is now about .65. A regression
line from 1986 intersects present time at 0.9 ( on the
downtrend regression line ) . ) . Taking ( 375/325 ) * ( .9/.65 )
makes 1.6 for me - ie 60 % gain on a return to regression
line. I believe a ratio of 1.1 would be more likely in
that situation which gives ( 1.6 ) * ( 1.1/.9 ) = 1.95.
This type of gain would apply to stocks like beatrix
fregold, western deep. Larger gains with more risk
could be made in dbn-deep/buffels/blyvoor or maybe
St Helena/oryx.
_ RE SSJ question - believe western deep best overall
investment considering risk/reward. Dbn my favorite at
this price if you have stomach for high risk _ Market
treating DD as if it were the original high cost/big
reserve DD. It is ignoring fact that DD is now 75 per
cent Blyvoor and Buffels. DD can be mothballed for
its reserves and shut down and company run on profits
from Blyvy ( marginal ) and buffels in meantime ( we'll
see results soon - DD will be awfull )
Re SSJ question on surface material at WD - sure -
lower grade ore will be run off sometimes. When the gold
price is higher. WD seems to want to maintain steady
dividends/earnings and fund capex smoothely. I would
call this operational "fat" .
Lets see if Barrick ( which seems unconcerned with
dividends generally ) can do this well.
I also tend to like St Helena based latest results and
their tie in with Oryx. Also WD as above and DD.
Market perception Implats is that they have more
longish term supply commitments than Rusplat group and
higher PGM prices wont reflect in revenue for 6 months
or so. Also they have a long standing dispute court
case with a tribe ( mafoking?? ) contesting PGM rights.
Dont get too excited - this dispute has gone on
for as long as I can remember. Stock is very cheap.
Northam however is reported to be in profit at these
pgm prices and looks like grand play. I like all these
RSA pgm plays - ( Lebowa Rusplat pp-rust ) , northam, and
Impala.

Millhouse -- They may print all they want, but unless the Feds want to spend most of it into circulation, given that most people are/will be tapped out of most/all of their credit/borrowing power, it just isn't going to get into circulation! At least not the ammounts required to keep a 'stabilized' economy going. Let the Fed print. They'll just be pushing on the proverbial string.

We'll continue to see the Fed not raise rates. They'll lower them when they move them. They have to JUST to try to maintain borowing/keeping currency in circulation. At the same time we are now beginning to see the other governments back off from new purchases of our paper. That does put more pressure on the FED to raise rates. But unless they want to see a market crash, and worse begin, they cannot, IMHO. The bottom line is that if they are REEEEEAL careful, they might be able to extend this 'mess' out for awhile, assuming that 'events' elsewhere do not get totally out of hand.

One 'good' thing about these other little messes raging about is that they temporarily create a bit more interest in our paper markets. But even that goes only so far. 'Things' will have to continually degrade around the globe for continuance of that interest, and in greater degrees. This all may help prop the dollar up, but it does not help peoples credit reports and continuing borowing power. The wage increases that we are now beginning to see are necessary as they help alleviate some of the loan repayment problems and liquidity. Thus allowing people to perhaps make some new loans and borrow some new and necessary money into circulation. Will it be, and continue to be, enough? Short term, perhaps. But unless rates continue to fall, nothing will be enough. The only ultimate way out of the whole mess is to rid ourselves of a debt based economy ( where ALL money is loaned into circulation with interest ) . All else is ultimately doomed to pain and total failure.

The Inflation/Deflation discussion is interesting. I agree that gold will, in the end, benefit regardless of which we get. We may get both in due course. How the govt plays the scenario will be a factor, how much remains to be seen. As I have enjoyed the humor here I will contribute the latest one I have heard: What's the difference between a woman and a computer? A computer will accept a 3 1/2" floppy. ( ah yes.... )

Sure the possibilities may be depression or hyper-inflation, or the lesser evils deflation/inflation.
Today; the question is MANIPULATION of the precious metals markets.

By creating visions of sugar plums; ( the new era bullcrap designed to send the masses into stocks, bonds and supposedly strong currencies ) the public had better be very careful.

Better to be in some cash, the PM's and the PM producers with cash, good production profiles and minimal debt, both current and long term. If the PM stocks have any debt at all, their production profiles better be damn good.

( Change of handle...see if it makes any difference ) George Cole said "..powerful financial interests in the west want to push gold down to $250.." Can someone PLEASE explain why...and this is not a trick question...nor does it have anything to do with astrology?

to all:

here is the data in 2 charts of the dow to gold since 1903. the graphs are semilog and directly comparable.

i urge you to print them out, detach either the right hand data ratio numbers on chart 1 or the left hand data numbers on chart 2 and attach them together. they are calibrated so the data will fit seamlessly together.
then you can view more comfortably the 20th century ratio in entirety.

the trendlines added are for my own curiosity and are in no way intended to make any sort of point either way.

in the way of commentary the only times 1928-29, ( 1954-1966 rising ) , ( 1966-1972 dropping ) , 1994-? that the gold to dow 30 ratio exceeded 10 x the price of gold occurred in raging bull markets. the sum total of years in the 20th century when this occurred is 23 years out 97 thus far.

sorry about the years on the bottom line being so compressed but my software can't make them any more readable with so much data on one chart.

chart 1

chart 2

Could someone please post what the current gold price is? One site is suggesting it is $318 . Could this be true due to a fall in asia on Sat or is $325.80 about right

ROBH: Found no gold prices so far. Maylasia describes Shanghai Bankers meeting as "Failure".

http://www.jaring.my/~star/current/27stoc.html

Point of view from Borneo on currency problems.

http://web3.asia1.com.sg/borneo/bbonline/sat/jul26h1.htm

Thanks Donald I imagine if it had taken a dive in Asia there would be some comment to that effect in this forum

My profits are made by selling International Stocks, International Bonds and as a Banker, I exchange the various currencies all on a commission/fee basis.

I also deal in currency derivatives, where large corporations and big players hedge their international earnings and/or other investments. Occasionally they make outright speculations.

My good advice increases their profit considerably. It is to my best interest to utilize my research departments to occasionally tilt things in the favor of my clientel. As my profits also increase as well my foxy reputation.

Gold has been so sculptured and is seen as an inflation indicator, while this is to a reasonable degree true, another very troubling situation has developed. There is a very large deficit between newly mined gold and gold consumed in fabrication.

Such a deficit in any other product would make the price of that product increase considerably. Because gold is so widely used as a inflation indicator, I must use every means available to drive its price much below its true value.

I spread rumor to the mass media who willingly accept it. It can be anything, I may make it look love child of mass murderers, or take perfectly reputable folk and associate them with such things - even the Vatican. I will slander mining companies of polluting the earth. My analyist will be instructed to keep it from rising so that my profits will continue. Many Governments accept my misinformation, as we are birds of a feather.

To remain profitable the semblance of healthy or to be healthy economies markets is very important

BB FISHER: You sure have a way with charts! That is a beautiful piece of work. I have printed it out, pasted it together and been sitting here trying to figure out what it says about the future. It shows that 1987 didn't amount to a row of beans. Although it shows stocks are in dangerous territory the implication is that they can go higher, much to my chagrin. It also clearly says that gold can be accumulated safely, don't you think? Take the entire chart, hold it upside down, and look at it reflected in a mirror. Focus on 1980 and observe the plunge in the gold ratio from the point of view of the gold component to today. It is just spectacular. Nothing goes straight down forever. If you think about the mindset of investors, at the high points and low points, the fear and greed jumps right out at you. Perhaps the most dramatic conclusion is that 1966 was the high point of this century. All the commentary about the Dow reaching new highs now is just rubbish. The high in terms of real money was 1966. You have to look at the world through the eyes of gold. Only gold tells you the truth. CPI adjustments are garbage.

I'm sorry deflationists, but deflation is no longer allowed for the forseeable future. You ask, since when is the future forseeable? Since the Great Depression of the 30's. The Great Depression was an all important event that is still today branded into our nation's psyche.

Hyper-inflation on the other hand is not against the rules. It will be easy to blame a number of scapoegoats for the mismanagement of our nation's financial resources. It will be a sickening event to witness the plethora of government and financial leaders pointing the finger to the culprits of the misdeeds. It will be unmatched hypocracy to watch the very ones responsible blaming eachother. It will be sort of like thousands of Jerry Falwells taking the high ground accusing their colleagues of the very crimes they've committed.

Anyone who doesn't see it coming, inflation that is, be forwarned now that it is the inevitable consequence of a democractic society that has lost control and faith in their government.

Although obvious to many now, in 3 years or less, a great wave of hyper-inflation will sweep across the entire world. Governments will be forced to hyper-inflate their currencies to pay off their debts. Hard assets will be king once again ( raw land with water, farm equipment, commodities, gold, gold and more gold.

People will wonder why anyone could have been so foolish as to put their faith in a bunch of corrupt politicians at a time of decaying government leadership and moral values to be trusted to properly manage our nation's financial resources.

Gold has fallen to an absurd level and it's possible it may fall further yet. ( I don't think it will IMHO. ) But if you're planning to hold it for several years, you can't go wrong. It will once again fall into favor in a big way. I for one would not be surprised to see gold valued at thousands of dollers per ounce.

There is enormous upside potential compared to the downside for gold. Governments talk of selling their gold at market bottems, i.e. concern among government and financial leaders that currencies are weak and debts are unsustainable.

Buy and accumulaute gold!

Good mornin ALL.....The sun is tryin to break out....just like Gold!

Ref: CB just bit my ear clean off. It's bleeding profusely. You think it fears me and doesn't have the means to fight fare?

TED: What is this, you have sent down your Fog Bank in retaliation for my comments of yesterday?. That is YOUR Fog Bank. Please remove it at once.

Warning to the CBs: Anymore ear biting and your disqualified. The public wants to see a fare fight and the best man win.

Golden Gloves: I always root for the underdog!

To Large International Broker /Banker.....thank-you for the enlightening insight into your psyche , I appreciate it.

Mornin Donald...fog bank is here too....but it's slowly lifting...Am looking forward to Asian markets tonight!

The EBN site has gold down $7,50, but this probably is an error. The Asian markets do not open until Sunday night, New York time.

John Disney; Thanks for the info re: the upward potential of the SA gold shares!

Why might powerful western financial interest want to drive gold down to $250? To support the dollar. To keep the global stock boom going awhile longer. To convince the masses inflation is dead and buried. To help sell Treasuty bonds at low interest rates.

Inflation is defined as an increase in the money or credit supply that is greater than the increase in the supply of real goods and services . Inflation can happen by 1. increasing credit 2. increasing the money supply. We have had both 1 and 2 for many years in the western economies. The average consumer has an intuitive awareness of inflation and both tolerates it and builds expectations based on it. Wage expectations are based on cost of living adjustments, entitlements are increased based on the COLA. Our "system" is built to handle inflation. There are no provisions made for deflation. Can you imagine the howls if the government posted a negative CPI and adjusted the entitlements downward? Deflation is politically improbable. Serious economic problems will be met with increased social spending with the necessary increase in deficits and that is inflationary. The money will be given to individuals by Congress ( not the Fed ) via checks, debit cards, debt forgiveness ( bankruptcies ) , food stamps, housing vouchers, and any other creative method they can think of. It is not "pushing on a string" as some have said. All western governments have created and tested massive mechanisms for getting newly minted credit and cash into the hands of their citizens. The U.S. alone is spending hundreds of billions per year in transfers to non-producers. To the extent that these transfers are financed by the creation of new money, they are inflationary. Now the U.S. treasury is monetizing the debt. On at least two occasions this year they have purchased bonds while running an annual deficit. This is money from thin air. Inflation is the name of the game. The acid test is your own cost of living. Is it going up or down? Include stock prices ( perceived value of companies ) in your cost of living and answer the question again. If the stock market melts down and the government pumps money into the market in a rescue attempt, this too will be inflationary. The deflation argument faces the daunting obstacle of socialist government.

More evidence that the big drop on EBN is an error:


Sunday July 27 6:36 AM EDT

Dubai gold traders hope for price stability

DUBAI, July 27 ( Reuter ) - Signs that volatile gold prices have steadied and found a new trading range encouraged Dubai
gold traders on Sunday to expect increased Indian subcontinent bullion demand in August.

``If the price stability continues then we could see demand boosted,'' said one Dubai-based trader.

But key Indian import demand remained largely blunted because of the monsoons and market nerves over the possibility of
more gold reserve selling by central banks.

Major festival and wedding demand from India is not expected to be felt in Dubai -- the main feeder market into India --
until late next month at the earliest when the moonson ebbs and farmers reap their cash harvests.

``Most Indian importers are holding off wanting to confirm the direction in the market, to see if it has reached a bottom,''
said one trader.

Bombay-based traders have reported limited arrivals into the world's largest gold consuming country while premiums on
bullion import licences have held steady.

Dubai's benchmark TT bar --3.746 ounces of 24 carat gold -- was quoted on Sunday at 4,505 UAE dirhams ( $1,227 ) , down
from 4,547 dirhams on July 20 but above a month-low of 4,390.

International spot gold was last quoted on Saturday at $325.45-325.95 an ounce, verus a week-on-week of $328.60-$329.10
and $321.20-321.70 on July 13.

The London fix on Friday was $324.10 an ounce.

Dubai's retail trade has received a filip this month after weaker bullion prices attracted buying from Indian-subcontinent
expatriates -- mainly returning home for holidays -- and Gulf nationals traveling to the emirate.

``Imports ( into Dubai ) have recovered this month...Retail demand was healthy,'' said one trader.

Approximately 80 percent of all gold imported into Dubai is re-exported through official channels and also by individuals
travelling to the Indian-subcontinent.

Imports into the emirate reached 46.13 tonnes in June. Traders estimated that July imports would increase to around 50-52
tonnes. Imports in July 1996 were 29.8 tonnes.

More news for related categories: international.


Help

From Argentina Sunday Morning Paper. Some thoughts on the "Tequila Effect", devaluation, inflation and convertability. ( in Spanish )

http://www.lanacion.com.ar/97/07/27/e01.htm

as i have remarked in private conversation of late and for many months now, those of you short the s&p averages had better cover forthwith. starting almost immdediately and continuing into september look for a spectacular dow jones 30 rally to take the average to 8700-9200 with the next 6-8 weeks.

Present gold price 325.90 ( I got this info. from my broker's telephone service, don't know which part of the world )

Demand for gold still the key to price ( Business Day, Jhb. )

Gold producers should look at physical demand rather than be panicked into anticipating an avalanche of central bank sales, argues Kelvin Williams of
Anglogold. - After the unhappy performance of the gold price in recent weeks and the negative debate in the media about central bank sales of gold
reserves, one might be forgiven for losing perspective about our market. However, the price of the metal has steadied, although unfortunately at the lower
extreme of the long-term range of $325/oz to $390. This pause provides us with an opportunity to look more realistically at the influential forces in the
gold market today and what those particular elements are likely to mean.

I hope everyone has found the two charts posted by bb fisher at 5:15 AM. Can we get more comments on the implications?

Gentlemen,
CBs and governments are not gods!!!!
Just as day follows night, deflation follows inflation!!! How high can they inflate? How long? Glass of water for $1,000, or $1,000,000 or even more? Eventually it is beyond governments control and decrease in asset values must occur!!
1. What goes up MUST come down.
2. There is nothing new under the sun.
Both physics and economics teach us that deflation is inevitable.

There is one major problem with a hyperinflation economy that the governments in power fear more than anything else on the planet short of nuclear halocaust. If you look at the history of hyperinflated currencies one fact stands out in so many cases,an overthrow of the existing government as the angry mobs become disenchanted with the government that led them down that path. and in many cases the ruling party that takes over is a dictatorship, or some form of military rule. A deflation economy is a distinct plus for the existing government as it is an easier sell to the people, to tell them times are tough and we must all pull together for the good of us all, etc. If the powers that be are intent on setting up some form of global government, the deflation road, with them coming to the rescue of the masses, will be a much easier path to their intended goal.

Hey, Steve Puetz is back! Where have you been?
It seems that you have been gone for 2 weeks. Im with you re: deflation.

Minimum wage laws are just another way to force more currency into inflationary circulation.

Right Jerry.
So are all the laws on books: environmental, tort,etc.

Zeke: The question becomes: when? We have had 40 years of inflation and the end is not in sight. All of society's mechanisms for coping with economic problems are built with inflationary assumptions. When the only tool you have is a hammer, every problem will be made to look like a nail. Deflation hurts debtors and the biggest debtor is the government. They are a huge player in this game and will not cheerfully suffer the consequences of deflation. I agree that government is not a god, but they have kept the inflation game going for one entire generation. Your example describes wild hyperinflation. That scenario has a very small probability of playing out. The more likely scenarios involve increasing government intervention in various markets and/or increasing payouts via the entitlement safety net. These interventions and payouts will be inflationary and will reverse the current trend towards smaller deficits. An inflation rate of 8% would be the death of this bull in stocks and well within the historical parameters of this quarter century.

Two articles from the Houston Chronicle make the inflationary case:
1. Home resales healthiest in years - quick deals, rising prices and high demand have realty agents excited.
2. Tech wars - taking advantage of big demand for tech-savvy workers.

Home prices are going up and so are wages in my corner of this game.

bb Fisher: Thank you for the charts and commentary. It is indeed helpful and appreciated.

Show me any civilzation in history that has not eventually had its inflation end in deflation. Inflation can stretch out for a long time, but it is a terminal condition. Are we only arguing what stage of this terminal disease we are in now?

Eldorado: Great post at 3:28!! You hit the nail on the head when you said we need to rid ourselves of our debt-based monetary system.

Donald: Yes, and you can have the last word. I am not trying to argue in a negative sense, just test my thinking against the articulate and erudite scholars that frequently post here. I learn here and use what I learn. I credit several folks here with helping me make better investment decisions. Don't tell Bart, but I would pay just to lurk here. I am making some speculative investments, betting that we see inflation first.

Good morning from just outside Beantown. Picked up my Sunday Globe.
Tucked away in the lower right-hand corner of newspaper an article
titled: "Anxious Taiwan watches China."

One factor that would lift gold prices would be belligerency or
threat thereof. Globe reporter Indira A.R. Lakshmanan states at the beginning of her article: "The first step was the 'return to the motherland' of prodigal son Hong Kong. In two years. Macau will revert from Portuguese to mainland rule. And soon
thereafter, Taiwan will come home, too, so all the members of Greater
China's extended family will be happily reunited --with Bejing sitting
triumphantly at the head of the table.

That is Bejing's dream, and Taipei's nightmare."

My question: Are the storm clouds begin to lower over Taiwan---
with what consequences?

Later in the article, Ms. Lakshmanan states, "For its part, the far more powerful People's Republic not only insists it is the only rightful Chinese entity, but has vowed to use force if Taiwan declares independence.
Bejing wrested the United Nations seat for China away from Taiwan in 1971, and has barred the island from joining ever since. Last week, China denounced Taiwan's latest petition drive to reenter the United Nations, and is actively pressuring the last 30 countries that recognize Taiwan to sever relations."

As a student of history, are these unfolding events similar to Saddam Hussein's attempt to wrest away Iraq's "lost province," Kuwait?

Or Hitler's call for 'lebensraum' before taking over Austria, the Sudetenland, and the rest of Czechoslovakia.

Or France's desire to regain the "lost provinces" of Alsace and Lorraine after their loss in the Franco-Prussian War.

Or Italy's cry of 'Italia Irredenta' ( unredeemed Italy ) to regain the
provinces of Trieste of Trentino from Austria.

Just some food for thought on a Sunday morning.

Speed: You are correct that inflation is a monetary event. The supply of credit and currency has been increasing virtually non-stop for 50 years. Of these two, the greatest expansion ( by far ) has been in credit. However, all credit expansions have a limit. In settling the inflation/deflation debate, the important question is have all ( or most sectors maxxed-out on their credit limits?

The rising bankruptcy rate suggests that the average US consumer has. The only significant credit expansion now taking place is in 2 areas: 1 ) Home loans and refinancings, and 2 ) financial market speculation.

When the stock market enters a bear market, the collateral securing home loans and stock loans will become extremely suspect. Then, those sectors will tranform into a chain-reaction deflation -- falling values forcing liquidation thus forcing more falling values.

The question is not: Where have we been? But, Where are we going? Current evidence in bankruptcies and Producer Prices suggests deflation is growing in strength. All that is needed to make the deflationary scenario air-tight is a stock market crash.

Zeke: I went on vacation to Cape Hatteras, NC two weeks ago. Last week, I was catching up on work and writing a new letter ( which I mailed Friday ) . This week I should have some free time to chat and lurk on Kitco.

since the widespread use of paper money, then with wire transfer, then onto credit cards widely issued with limits most arbitrarily assigend by issuers and many credits with no limits the whole thrust of credit creation has been moving steadily OUT of government hands into individual and corporate.

in the 60's the euro dollar market came into being to:

avoid taxation on bonds and raise large sums for coporations who did not want to raise the sum in their home country. it is now and has always been largely unregulated and unregulatable. from my perspective in financial matters anyway, governments have NEVER been weaker than they are today and the trend is accelrating against them. the transnational corporation and the transnational individual is where the thrust of both technology and money is headed.

to many on this forum are fighting the last war. to many on this forum have actually come to believe unconsciously the rant from the media and from governments. oh, you all speak like your hip to what is happening yet most perspectives continue to ascribe vastly more power to governments than they actually possess.

the only things that governments can still plunder and make miseralbe are property and wealth artifacts of the industrial age. all wealth is becoming digital and transnational which no government or group of governments will be able to easily shakedown.

i am surprised by some of the paranoia here. reread the wizard of oz. central governments are all increasingly smoke and noise

Professor Miller of New York University - describes the dire economic and financial consequences subsequent to Japans own excessive and IRRATIONAL EXHUBERANCE: The Bubble Bursts: 1990-91
http://www.gold-eagle.com/editorials/cscb003.html

bbfisher charts These are wonderful pieces of work. Thank you. Looking at them from an Elliott Wave prospective is very interesting. We seem to be in the late stages of a multi-year fifth wave. I am confused by the numbers across the bottom of the chart, but assume that they relate to time. I do not think that the congestion at the 10.00 area near the right hand portion of the chart is the second correction of the fifth ( and final wave ) , but think that the upcoming dive in the stock market and the upcoming increase in the price of gold will be the second correction.
To complete a fifth wave, the ratio does not need to reach the trend line drawn off of the two preceeding tops. It need only to exceed the previous high of 28.61. A special case can occur, called a truncated fifth wave, where the fifth wave does not exceed the previous top. We may be in this situation now, but I consider this doubtful.
May we have comments from more experienced Elliott Wavers?

Puetz: My home loan is secured by my home, not by stocks. My home is going up in value each year. Houston is booming. My area of expertise is in technology and jobs are going crying here for lack of applicants. This anecdotal evidence is highly inflationary. I think we need to define "crash", then try to understand the impact of a "crash" on local economies. I have been in the work force for only 20 years and there has only been one "crash" ( in 1987 ) and that event was so short-lived that the general economy, unemployment, etc. was largely unaffected. Perhaps I represent the majority of boomers who think a 20% correction will be a great buy the dip opportunity and that anything greater than a 20% downturn will be over in 6 months, so what's the big deal? I am personally more pessimistic and therefore own gold and silver. But I will gladly test your thinking as it helps sharpen my own.

Got to jump into this excellent discussion. Very good points have been made by both sides. In my opinion, what makes this such a devilish subject ( besides predicting the future ) is that we currently have no "money" in circulation. I smile everytime I hear the expression "money supply". This is the biggest lie of all. Debt supply would be much more correct. Inflation/deflation is currently part of the mechanics of keeping the game going, the main event ( which in my opinion insures an eventual economic depression unrivialed in the history of this country ) has been the replacement of money ( gold and silver ) with debt. When the game ends, ALL debt ( including "the money supply" ) will become worthless. The people will once again return to gold and silver. If our beloved gov ( the sole creator, by intension, of our current mess ) does not then we the people will have a very large problem.

I believe the events that will lead to the gold bull and financial bear are presently in development but are being suppressed and only mentioned in a brief and cursory manner. All the problems with the 3rd world currencies are the result of the problems related to the real instability in those countries. All over the world the so called economic efficiency programs are causing higher consumer debt and sapping the purchasing power of the working people while financials boom to the benefit of the small rich minority in these 3rd world countries. Dollar backing of So Am debt has created a false financial tranquility in Latin America which is not really justified by the fundamentals. All this is starting to unravel and other countries or big money will diversify into gold as they are overloaded with dollars. I believe Rubin and others know this is occuring and that is their and the WAll St press reason for downing gold.
However, if the crisis is gathering steam their rantings about gold will only support gold if it doesnt budge on their no inflation CB sales talk. Fact is if anything CBs are over exposed to the dollar and will need to diversify into gold China/Japan and Russia are leading examples
I predicted below 320 last week and we made it to 322. I will go out on a limb and say we will touch 340 this week.

Another reason to wonder if trouble isnt around the corner was a story about the possibility of the US being blackmailed by other countries who hold our debt. Negotiators admitted the foreign debt leverage presented a problem in trade deals. This was on CNN and is the type of story you would never think you would hear. Could something be brewing here and they are setting the stage to blame a foreign country when things get out of control. Thoghts on this one anyone ie storys like the CNN story are mentioned to the public to set the stage for the new culprit of the coming problems.

To me the loudest signal just screaming out that deflation is here is the price of gold over the last several years, decline, decline,decline. If there was going to be big inflation on the horizon, gold just as sure as the sun rises in the east would be going up. Dont buy the central bank selling of gold as the reason for its decline, gold is not lying, deflation is in the cards. Steve Puetz, your right on.

Additional thoughts on the bbfisher gold/dow ratio charts.
If the ratio stalls and falls soon, as many here expect, it will have completed a textbook example of an expanding tops formation. This suggests a major decline in the ratio over the next several months ( years? ) .
I am unaware of a method to make a projection of the decline in the ratio from this formation. Do any of you know of such a method?

PLUTO: re you're 01:34 - Thanks for paying attention to my prediction, even if I was wrong. The Saturn conjunction with NYSE Moon was sure to bring a very significant influence to silver, of that I had absolutely no doubt. I went with the historical preponderance of evidence ( the odds ) on this one. I picked the wrong scenario it seems. However, the significant weakness in July, as opposed to significant strength, is not so much a case of "so much for the stars." It's more a case of so much for Sheller as an astrologer. The "stars" came through. I didn't. On the other hand, be fair. What did you think of my call on Saudi Arabia, months in advance, and its announcement just a few days after my target date that it was making an very unusual, and disturbing alliance with Iran regarding oil prices? Keep on keeping score...It's very dangerous presuming on God, so I need all the support AND criticism I can get.

I forgot ANOTHER SIGN OF TROUBLE COMING AND THEY KNOW IT!! They are now talking about LOOSENING the bankruptcy laws. A way to keep money in circulation GO BR and then get your new gold card and start spending again. The new plan will exempt more assets from the reach of creditors. Good business for me but there has to be a reason for this sudden turnabout. IE they know how bad the economy really is except for the few who are rich or have tech like skills. Use the BR laws to keep the credit/spending game going. If they tightened the laws then people will spend less ie borrow less. However, if law is loosened will institutions remain profligate in their lending practices??
HMMM

bb fisher: re your 10:37...."Transnational"... as in One World Government??? I doubt that it will be weak. It is written...

There's an old spanish saying "When they see the b#lls they know it's a boy." We have HAD the deflation. It began in 1980 with the Volcker Fed, and we are witnessing the final lag of low rates, and relativel;y stable prices resulting from the EARLY Greenspan tenure, and powerful global cost and labor changes. Since the recession of '91 ( proof that a cleansingdownturn cannot be tolerated by the American people or their representatives ) the increase of credit and money supply in this economy has been unprecedented. Much of this has clearly gone into the stock and bond markets, ballooning "investments" in paper assets. The pendulum of relative asset class values ( stuff vs paper ) is one of such monumental opposition, that the very weakness in gold for the past 17 years IS the legend of the RELATIVE deflation that has taken place. Gold "went down" from 1980 to 1982. Since then it has been establishing a massive continuation pattern that may likely result in a fresh upwave that will be as stunning to current market participants as the rise from Dow 1000 to 8000 has been. I repeat again that the ONLY and PROPER definition of inflation is an increase in the stock of paper currency and commodity money proxies over the value of the commodity itself. In this case, now that specie - gold and silver - are no longer backing any government issued paper instrument ( along with fictional reserve banking ) even a $1 increase in the money supply by government is inflation. Nevertheless, this is as good as it gets. The huge increase in money stock since the last recession, and the increasing momentum of money creation as a percentagte of that money stock annually, will insure this all emerging in the future, into a totally different asset class than it has at present. What will be extinguished by the "collapse" is not so important for speculators who are looking for something to be long, as WHERE the NEW money and credit that government turns out to combat the collapse goes. This new money enters the economy through government's favored institutions and entities. Which will that be? Will it rush back into stocks? Bonds? or will it be "invested" by government's panicked favorite recipients into an asset that has not shocked and disillusioned them as a turning stockmarket tide inevitably will.
No, I think it is not a case of deflation ahead of us as much as THIS is as good as the deflation gets.

George Cole: Is there any way to determine if EBN Gold and Silver quotes are a mistake?

Inflation/deflation discussion, where we can not agree which way it goes,
just supports a set of conflicting and contradicting "main street" indicators:

1- cost of durable goods ( and housing ) may be growing at low rate but
for the same price you get the half value and expected life ( mostly
due to the use of cheaper man made materials ) . I would say this is hidden
inflation!
2- While salary increases are kept at very low level, most people are
expected to work longer hours + benefits are usually cut more and more.
Deflation!
3- Stock market and price per share ( or P/E ration ) went up
significantly. - Inflation!
4- Bankruptcy rate and capability to repay loans is increasing -
Deflation!
5- Customer debts ( credit cards, loans, etc ) is increasing - This is
inflationary sign.

Very confusing - no clear trend, so more when ( I believe ) we are not
using the same baseline ( e.g. we dont you include the life of the
durable goods in CPI - but when in 10 years you need to buy 2 items
instead of 1 this doubles your price. On the other hand this is what
keeps economy and stocks going - demand )
I think a lot of this is due to increased manipulation by Feds instead of
leting the market go through it natural course.

PROGNOSTICATOR: In each of the previous reversals the D/G Ratio dropped in favor of gold by a drop in the Dow and an increase in the price of gold ie: 1929 and 1966. Irrespective of Elliott Wave, do you see any fundamental reason to think that there is another route?

Returning to Elliott Wave which is currently forecasting a drop in both the Dow and in gold you could, theoretically, return to a ratio of 1 by a Dow drop to 100 and a gold price drop to $100.

PROGNOSTICATOR: I should have read your 10:42 before my last post. The numbers on the bottom are 2 digit dates. The first year is 1903, second year is 1904 shown only bu a 4, etc. through to 1997 ( not shown ) . Why do you feel that a truncated fifth wave is unlikely? Also, could the 1966 high be a supercycle top? That possibility has very serious implications does it not?

BRIDGE: If you read my Reuters post again, you will see that a quote of $325 and change is given for the latest price as of 6:00 A.M. Sunday morning New York time.

All Kitcoites should check out Captain Bill's study of gold bottoms. This is the best single thing I have seen on the net re: gold investing. It is MUST READING for serious gold players..

http://www.the-privateer.com/g-bottom/g-bottom.html

Philippine economist calls for "competitive exchange rate" ( read devaluation )

http://www.philstar.com/site/Preview/assets/cgi_bin/nph-general.cgi?i27_jul27&BUS1

JIN what was the percentage increase in gold last week in Your national currency?

thanks.
away
EB

Spreading lies, deceit, rumor to line your pockets...hmmmmmmmm.

I can only respond one way...

What an ASSHOLE!

Your KARMA is gonna take a big HIT one of these days and the Vatican won't even be there to catch your fall, and you will go from foxy to U.G.L.Y.

AWAY!
EB

i gotta go tee off...

BB Fisher: Thank you for the splendiferous dow/gold charts. My physical chart file is neary 50% BBF charts. If I didn't have them my house would be overflowing with books telling me what your charts say.
Those of old enough, alas, to remember the 1960's know full well that it was *A* top of some considerable significance in oh so many ways.
As you know from my Kondratieff work, I have insisted that 1942 was the post 1929 low ( as RN Elliott thought before his canonization and usurpation by his followers ) and that the early 1970's was the subsequent peak. Your charts show this in vivid detail. And when those doubters who are still looking for a crash "because we ain't had one yet in this cycle" next raise up their heads, i'm gonna bop 'em on the head with 100 copies of the 1971 to 1980 crash log on your charts.
So where are we now in the historical K wave cycle as evidenced by your charts? Just almost exactly on course at about 1944-46. We did the three waves down from the 1966-1972 top to 1980 ( as from 1929 to 1942 ) , and we've done the first leg up from 1980 ( as from 1942 ) . Now we get the first lttle inflation scare ( as from 1945-49 ) and stocks waggle and wiggle at a high level for a few years, and THEN the big push in stocks once more. No crash or deflation in view for about 25 years on your chart.
BBF: You make it sooooooooooooo easy. Thanks.

George Cole: Your 12:40 and Cap'n Bill's gold bottoms study tie in very nicely with BB Fisher's chart. The absolute ratio level of Dow/gold is at the 1976 level at the moment. The absolute gold price fell below the same Gann angle last year as it did in 1975 ( and needs to get above $380 to reverse ) . And in Kondratieff terms, as mentioned below, the ratio and prices in general are at the Kwave breakpoint of 1945-46. All of this ( and much more ) suggest some good times for gold going forward.

savage:

it has been stated by john perry barlow, an early internet thinker and pioneer that "on the internet everyhting is either local or global but nothing is national".

clearly the world is moving rapidly towards one world ( global money ) whilst at the same time towards 1000 city states or locales or nations or whatever you want to called. one world government is irrelevant once we all spend the same kind of money. indeed government is already more or irrelevant for many of us and a nuisance for many more.

i do not want to bring the discussion on to a religious plane as i have little interest in the organized variety. personally, it is just more politics better packaged so no refutation in this life can take place. be that as it may or may not the trends visible to all is an amazing resurgence of ethnic and racial and cultural affinities whilst all who have money to spend wanrt to spend wherever they damm well please in the most convienent manner.

new world order government once worried me until i understood the directions technology was propelling us all. one world money probably, but then isn't that what a gold standard is anyway?... but one world government... not likely anytime soon and if it should be erected it will likely have no more competence, authority or imaggination than does the UN now.

in the information age before BIG just ain't where it's at!

BB Fisher: I love your charts and I can't imagine more than fun than babbling away upon the Internet, but I am reminded that the Internet is as amenable to manipulation ( or even having the plug pulled ) as radio wave broadcast media or the telephone. As those great bastions of human freedom--Germany and China-- have proven, what's free is what they say is free.

AUROPHILE: Can you go over your analysis of the bb fisher chart for me again in a little more detail. I sort of feel that the D/G theory is my invention. I stumbled/fumbled on it after the M2/MB let me down. I am not an EW expert by any means so on three waves down from 1966, can you pinpoint them for me so I can follow along. I see two clear waves. Are you counting 66-71 as a wave?

Reuters article...even Greenspan doesn't know what's going on.
http://www1.netcom.com/bin/webnews?a=Biz_Top:Rl7_jfVRUymonoc

Donald: In Ewave jargon 3 waves down means there were 3 waves from the top to the bottom, 2 of which were "headed" down ( impulse waves ) and 1 which was contra-trend. wave 1 or A was to late 1974, wave 2 or B to 1976, and wave 3 or C to 1980. The comparable moves in the previous Kwave cycle ( IMHO, and I reserve the right to be wrong ) were 1929-32, 1932-37, 1937-42.

aurophile:

your fawning respect for the powers that be have always fascinated me.
but then you surely recall a question i posed to you a ways back and your negative retort never quite satisfied me as fully correct.
but that is another story for another day.

i agree that for most liberty is more trouble than it is worth..as it has always been. my point is simply that it has never been easier in all of human history to as nancy reagan so eloquently stated, just say no. one does not have to shout from the roof or take and ad out in the newspaper to accomplish the goal. as had been said before, of the 30 ways to escape danger the easiest is too leave.
the trouble with technology is that it becomes the master rather quickly. once enough commerce migrates to the net those with real power will lose too much potential business by restricting its usage or its content. if you know what to do it will be the easiest to way to make a buck from a mass audience that has ever existed. every shrewd and honest and shrewd and crooked operator will open a stand.

no sirree aurophile, if you really believe that we are on the upcurve for the next 25 years no way will anyone mess with the internet, cause that is where the money is going and where it will be made. those who would control the masses will have to figure out a way ( futile in my opinion ) to graft "push" technology ( like TV ) onto and inherently "pull" medium.

that should be fun to watch, don't ya think?

AUROPHILE: I remember a book called "The Invisible Crash" during the 60's. This chart sure makes it visible doesn't it. OK, I see how you got the 3 wave count 1966-1980. You say we have had the first leg up. Does that mean you ignore 1987 for wave counting purposes? Is the "first leg up" 1980 to today? You seem to feel that this chart is positive for both gold and stocks in the near term, did I read you right?

bb fisher: "Fawning" respect eh? That'll teach me to praise you....LOL! The permanent tourist folk may think they have escaped the jackboot of the state, but that is only because they are on holiday, as it were, and have left their antennae at home. I couldn't agree more that the "Net" has given the freedom players another ingenious wedge for their golf bag, but it doesn't guarantee that we'll all be as rich and famous as Tiger Woods. Or even as free.

Money Creation: They only create paper promises, they don't create the interest for those paper promises!! A Puppy chases its tail until it gets tried and needs to lay down!! Who owns all the $150,000 houses on your block the inhabitants or the bank?? Who owns all those new $40,000 Suburban's the drivers or the banks?? Who owns those $300,000 children
you've brought up since birth you or the banks?? There is "ZERO" the banks don't own in society today, less say afew choice souls.

Went out last night spent all the money in my pocket, went to instant broke machine and it was closed for transaction updates, so I figured I
try another chartered bank and wha la its was closed also. After searchinga few more banks and instant tellers I realized every financial machine was down for a transaction holiday across the entire Central Okanagan. Never fear we divised a plan of action, go to the service station put gasoline in the tank and ask for some extra "CASH", thank gawd for the gas stations!! "No Fear we got More Beer".

John Disney: Thank you much for your answers, now I`m reassured and will holding Implats :- ) .

Anybody noticed: Bad news last week ( russion publication to sell AU in October ) had lead NOT to weaker AU-price for the first time in last few month. I`m surely no good bottom-prophet, but this is a first hopeful signal, that we have seen the lows. Jump of US-Dollar against the Mark was also good digested by bullion. What will now lead to prices around 250? Are there more Central-Banks which could announcing to sell? Theo Waigel and Hans Tietmeyer will not decide to sell before autumn 1998 ( next german elections ) , because it looks not good for Helmut Kohl: Prediction on inquiry this week: FDP 4%, CDU 33%, SPD 43%, Bndnis90/Grne 13%. When CDU/FDP are selling Gold, next election is lost with safety, because gold-selling is very unpoppular.

Donald:
The chart I got from bb fisher's posting only ran to mid 1993. Nor does it have a price legend on it. So I mispoke the absolute level as being the same as 1976. The current Dow/gold ratio is, in fact, at nearly the 1966 level.
In Kwave terms I believe that we are at the 1944-46 point in terms of commodity prices. Due to "progressive" dollar debasement the times are set to a higher price and ratio.
IN Ewave terms the stock market completed cycle wave one from 1980-82 in 1987, cycle wave two in 1990, and we are well into cycle three ( probably primary 3 of 5, being the next lower degree of waves ) in 1997. Thus the stock market is running a little ahead of schedule as compared to gold and prices in the previous Kwave cycle. On bb's chart the stock market is about at the 1955 point. I think both selected stocks and gold will do well in the years ahead ( and dollars poorly ) . Since gold was "fixed" ( a most "pregnant" phrase... ) in earlier times, bb's chart is in essence a DOW chart until 1971, so working off it to guess at gold's price is trying to solve for 2 variables with one input; but based upon what gold stocks did in the 1950's ( they bottomed ) , I see little downside for gold and the start of its long and inexorable if initially unexciting run to the top in about 2036.

Donald: With bb's 2nd chart printed out in landscape format, the ewave picure I just painted stands out boldly: 1980-87, 1987-90, 1990 to now, with 1990 to now showing primary wave 1 to 1994 and primary 3 to now. A cautionary: you will find nearly as many ewave counts as ewavers... or "flationists." LOL!

http://www.yahoo.com/headlines/970727/business/stories/economy_6.html

Information Technology increases productivity and kills inflation.

AUROPHILE: I urge you to go back the 2 bb fisher posts at about 5AM. He has 2 charts that can be pasted into one 100 year chart of the Dow/Gold Ratio. In order to get full labeling I had to change my printer to landscape mode before printing it out. This is more than a chart of a century, it is "The" chart of the century. I posted my e.mail address. If you can't get it, e.mail me your mailing address and I will send you one by snail mail. ( offer open to all )

Silver is dead, don't bother with the shovels because it don't smell.








1. On 6-19 CDE threw a hammer pattern of classic dimensions, yawn.

2. On 7-11 Standard and Poors' upgraded CDE to 4 stars, from avoid to accumulate, weariness.

3. In most every stock or commodity chat forum you can count on one hand the number of positive comments about silver, heavy lids.

4. Nearly every pundit, with a few exceptions like Ted Butler, are absolutely convinced that silver is either range bound or down bound, hard to stay awake when I hear so much boring talk.

Is it possible that most of us expend such a great deal of energy during our anticipation of trend changes that we are asleep as it passes silently during the night? Do we expect trumpets to sound before all important events?

Any chance for a discussion?

With all due respect to the numerous chartists, the critical question
is---- is gold cheap or not? If gold is cheap, then buy it and burn
the charts.

Gold had a fiat price instituted by the US govt ( $35 ) until Nixon ( 1972 ) lifted the fixed price sale of gold and later US citizens were permitted ( 1975 ) the right to own gold bullion. What impact do these historic events have on the interpretation of the gold/dow ratio ? Do you think that the market had factored into the ratio ( or discounted ) these events ?

Unfortunately, it is difficult to determine what to make of the mid-1970's gold events in relation to the Dow/gold ratio posted bgy bb Fisher. These events were also over-shadowed by the Oil crisis ( 1973-75 ) and a slow recovery of the 'nifty-fifty' ( 50 major NYSE/DOW stks ) after the 1972-74 Bear market. Sometimes statistics do mislead rather than illuminate.

Cheers

GOLDMAN: To try and answer your question accurately, it is 11% higher than it was in 1966. Someone check my math, it is $38.85 in 1966 dollars.

Been out since Thurs. Civility has been restored. What an absolute delight it is to catch up on the gossip in this atmosphere.

May I ask our Guru's; Steve P., Mike S., G.S., Aurophile and all the following 3 questions concerning AU & AG.
1. With out the obvious fixing of todays gold and silver prices, what would today's prices be for AU & AG lacking the manipulation?
2. AU & AG prices with the populace believing that a strong inflation trend was amongst us?
3. AU & AG prices with the populace feeling we were in a depression?
My figures 1. AU@$450-$600 AG@$12+; 2. AU@$600;AG@$20+ 3. Cannot figure, but they should have much greater purchasing power than in 1 or 2. Silver prices trouble me in this scenario.

I have been staring at the Dow to gold chart for some time and it disturbs me for some reason. Why? I will try to delve more into it.

A perfunctory glance shows some trending action -- especially and quickly in downmode. But you could easily see most of these movements take place not only in the ratio, but each movement can be attributed at different times to movement in the Dow or gold itself ( as well as perhaps other
commodities ) . So really, what is the ratio worth?

Perhaps the ratio implies a median point of value of the Dow to gold that ossilates back and forth throughout time only to return to some predicated, perfect value. A number which shows us that all is right with the universe. 16 to 1 was supposed to be the value of silver to gold. As we all know by now, this is not necessarily true for these two commodities. I therefore submit that the dow to gold ratio is not a number that can trade back and forth 'knowing' it will return to some value in the next blah years.

So, what about that economic princle of supply and demand. Could it apply to Gold and the Dow? When you come down to it, Gold is a commodity just like any other. There have always been other mediums of exchange and will always be alternative mediums of value. Gold is just another commodity subject to the whims and forces of supply and demand. Nothing mystical--a value ascribed by the market. And what about the dow? It be said that the dow represents a basket of the commodities we know as stocks. Themselves commodities to be traded, valued, and held. Subject just as gold is to the forces of the market.

So what? Who cares? So they represent a kind of 'commody'...What does it matter? Looking at the ratio one is tempted to begin to draw conclusions as to whether gold is undervalued. Or is the dow overvalued? What does the ratio imply for the future? Is gold going up or down? I don't think we can draw such conclusions. The dow can be compared to the price of tea in China and what are we really comparing--the price of two 'indexes' over time. For each of which the price is determined by the factors of supply and demand in its own separate market. What does it tell us of the
future--nothing. What does it tell us of the value of one compared to another--are apples overvalued when compared to oranges. No. For each the price is determined by supply and demand in their own respective markets. Can one be influenced by another? Certainly people may jump out of stocks and buy gold. Or they may not. They may buy diamonds or swiss francs or apples or oranges. But in any case we'll all see the effect on the gold market as soon as we see it on the dow to gold ratio.

IMHO, the trouble with comparing two price 'indexes' whose markets are not linked as very close substitutes or complements is that we are tempted to make comparisions or project into the future according to what the price of each have been doing. This is a mistake. Understand first, each within it's own market and what you think about the future supply and demand for each separately. Silver is not locked into gold at a certain value and we cannot project into the future using the silver to gold ratio. Silver has its own market to bear just as the dow index and gold does.

This all is written in the good faith and hope of proper anaylsis of the markets. BTW let's all hope the market for gold lightens up.

BOB: I had thought about your question some time ago. It would seem logical that the early gold prices, before 1932, being fixed at $20.67 were artificially low. My basis for that is that when Roosevelt took office and took us off gold he let the price rise on the free market to $35 before fixing it at that level. The point is that the free market set the price at $35, the government merely confirmed it.

That being said, it would seem that the 1929 ratio of 18.43 ounces is suspect from a free market standpoint. On the other hand, if we had not had the 1929 crash and, the Depression that followed, the freemarket might have set a lower price for gold during the 1932-1933 period. Thats the best answer I can give. I will take the free market price any time. The historic events you cite obviously have an impact on markets to the extent they influence fear and greed. What we are trying to do now by asking ourselves these questions is to determine what new historic events are in the future and what reaction markets will have to them.

The other day I was lectured to by one of my friends who said the economy is booming. Everybody is just so much more productive than ever before because of technology that the economy will continue to boom with all the cost saving and efficiency.I asked that if the consumer is 3/4 of what drives the economy and if so many good paying jobs have been replaced by the "productivity" of technology besides longer hours etc what will keep on driving the economy except for people in technology work. It would seem that all around one would need less workers.
Although I see lower paying jobs and fewer good jobs as deflationary,gurus such as Sir John Templeton have said that western governments won't allow deflation. I think a backlash will come soon, since at the same time safety nets are being cut away, and more and more voters will be in the same boat as the society becomes a two class one. Inflation will start appearing in other things besides the necessities of life. ( It seems that the government doesn't like to count higher phone bills,electricial bills,grocery bills,insurance bills,transportation,education ) .
Now with this stock market mania, will funds ever start flowing back into gold and other hard assets or will people start investing again in the emerging markets?

TOM: You can re-write your comments and in each case where you have used the word "gold" substitute the word "dollars". They are now just a commodity that can be printed at will. What the Dow/Gold ratio chart shows you is that the Dow price of $8113 is a fraud. The Dow is only $900 or so in 1966 dollars. All these people who think they are millionaires are being hoodwinked. Inflation tells you a lie, gold tells you the truth. What is sad to me is that I look at this chart and see that corporate America went nowhere for 31 years. These numbers of 5%, 4%, growth are bunk. This chart tells you that there has been -11% growth over the past 31 years. This country is in serious trouble, there is no way we can continue to claim that we are the world leader with numbers like these.

1024 bit encription is here. It can't be broken. This is the first step to reduced government power.

Jack: In the absense of forward selling by producers and cheap CB gold loans to short sellers, the gold price probably would be somewhere between $400 and $500. If inflation picked up, $500-$600. This is just a guesstimate, of course.

PNEUMA,

This doesn't qualify as discussion, just a few observations;

1. Comex warehouse stocks are at new yearly lows as of friday. If you subtract the Delaware stocks ( I think reasonable because this warehouse doesn't function normally, i.e., stocks moving in and out, since its inclusion 1/1/97 ) we're at 10+ year lows.
2. Last COT ( as of 7/15 ) showed best numbers ( lowest commercial net short and highest fund net short and lowest public net long ) since origin of report. This applies to both futures and futures+options. Although we've had some deterioration since then, I never thought the dealers could engineer themselves into such a non-short state. Maybe they can do even better ( with lower prices )
3. Possible island formation developing on weekly charts.
4. Found it interesting that in the NY Times article today on Abby Cohen, they showed a picture of her in front of the Goldman Sachs price board. It listed about 25 or 30 indices DJIA, NASDAQ, other major world indices, major currencies and bonds.There were only 3 commodities listed - oil, gold and silver. I found it curious because on a dollar equivalent basis, silver doesn't belong on that board. Of course, that's at current prices.

For what's it's worth, I've always envisioned silver taking off like a scalded cat when the dealers had themselves positioned as good as possible and when they knew the cash market couldn't lure sufficient leased metal to satisfy the deficit. I agree, we won't get much warning.

Here is what they will be reading in Oz when they get their eyes open.

http://www.afr.com.au/

DONALD: If gold was fixed until 1971, and once released of this restraint substantially increased in value relative to the dollar as displayed by the charts, then it is presumed that if gold were not restrained the Dow/gold ratio would not have reached the 28.61 high. And if that assumption is correct, then has not corporate America performed better than what the chart appears to indicate. Or am I missing something.

Donald-
Your observations are well taken. As I see it, your comments mean that gold represents a good of finite quantity ( hopefully soon enough ) that can be compared to the Dow to show the Dow in constant dollars.

SKYLARK: At Bretton Woods in 1944 we agreed to redeem dollars for gold at the $35 rate when when they were presented by Central Banks. Starting about 1962 the free market in gold, operating in London, didn't think we could keep that promise. Gold reached $40 at one point as I recall. The Fed supplied the gold at a loss rather than admit there was a problem. In 1968 they gave that up as losses mounted and established a two tier system. CB's at $35 and free market was allowed to float. Charles DeGualle of France started to put the pressure on as he felt that the US did not have enough gold to cover the CB dollar holdings at the $35 price and that we were printing too many dollars. Finally Nixon closed the window in 1971.

Reviewing the XAU and Spot Gold price charts today, I concluded that the current "Bottom" was July 7, 1997. Historically XAU lead the gold price in a gold bull market ( in 1985 and 1993 ) . A recent drop in the gold price did not result in significant drop in XAU. I know it is a little too soon to tell if it is truely a turn-around. I appreciate any comment on my observation

Let me say, first off, that this has been one of the most fabulous intellectual Sundays in Kitco History. This will be included in "The Best of Kitco" on CD Rom & Zip Disk. AUROPHILE & BB FISHER: To paraphrase Will Rogers, "I never met a chart I Didn't like." And to paraphrase Father Flanigan, "There's no such thing as a bad Chart." Thank you both for a wonderful Sunday. BB: "Whilst"? Can I surmise you are from the Mother Country? Re your 13:47, I worship at your feet! AUROPHILE: Your 15:15 has me totally baffled. I think I'm on overload. I will get back to you on your gold top for 2036. Between the TWO of you, Thanks for the magnifico repartee!!!!
PNEUMA: HI HO SILVER. Just buy some. JACK: Manipulation is PART of the markets. Let us learn to love it and live with it as we did with the bomb. The Price is what it is. Just GET REAL...GET GOLD. Just buy some.

Fidelity Select American Gold & Precious metals Charts
5 Years, 30 day and hourly charts at:
http://www.geocities.com/WallStreet/5969
Click on Gold Sectors

GEORGE COLE: What evidence to you have that would support such a high price of 400 to 500. According to GFMS, taking into account producer supply and scrap less fabrication demand, there was a short fall of only 290T in 1996. As to producer hedging, producer forward sales on the demand side of the equation created a positive influence in the market in 1996 as producers were taking off more hedges than adding to them accounting for additional demand by producers. Net CB selling in 96 only contributed to about 250T which was above average. Further only 1/3 of the above ground gold supply is held by banks and the substantial remainder in private hands. Even considering the amount held as jewelry, there must be an enormous amount held as investment and other use, which is evidenced by the high LBMA turnover. And these investors are going to do what a prudent investor would do with a non-performing asset. And it does not take much marginal selling to bring the price of gold down in value. Presumably that is why gold has historically performed better in response to economic conditions, and why it has been used as an economic indicator, as opposed to demand and supply considerations based solely on fabrication demand and producer supply. During the past 10 years of so, there has been a trend of disinflation and a favoring of financial assets as so very well demonstrated in Fisher's charts that has attributed to the fall in gold. Not to CB selling since such selling has been minimal and certainly not due to producer hedging since any such hedging does not add to supply over a period of time.

Below an article on the setting up of CLS for currency settlements. Admitting there is a serious possibility of GLOBAL CURRENCY BREAKDOWN is gold to my ears. One cowboy on his high horse and the whole basket of eggs ( currencies ) is smashed, only the GOLDen egg will not be smashed.

Global banks found CLS company, G20 dissolved


ZURICH, Switzerland ( Reuter ) - The world's major banks have
jointly founded CLS Services Ltd. as part of their ambitious
plan to create a global foreign exchange settlement bank.
With the birth of CLS Services, the banks dissolved the
Group of 20 ( G20 ) , the informal group that acted as a catalyst
in setting up what could become a one-stop shop for settling
deals in the $1.2 trillion per day foreign exchange market.
All the members of G20, which together account for some 40
percent of daily foreign exchange volume, have become
shareholders of CLS Services, founded on Tuesday in London.
CLS, chaired by Stephen Thieke, managing director of J.P.
Morgan, will be open to participation by other banks and
instititions that provide netting services, said Rob Close,
director of payments strategy at Barclays Bank.
``CLS will provide an opportunity for others to become more
directly involved,'' Close told Reuters.
Close declined to specify the size of CLS's capital, but
bankers have estimated the cost of developing a CLS bank at
between $70 million and $80 million.
The hope is that CLS can integrate or closely cooperate with
the Exchange Clearing House ( ECHO ) and Multinet International
Bank ( Multinet ) , the two institutions that currently offer
multilateral netting.
Talks between ECHO, Multinet and G20 have been under way for
some time with the aim of offering the banking industry an
integrated solution to settling foreign exchange transactions.
Another group of commercial and investment banks, the Group
of 40 ( G40 ) , also favors a single-industry solution and will
meet CLS next week to discuss cooperation.
The founding of CLS marks a milestone in the efforts by
central bankers and the banking industry to reduce the risk of a
breakdown in the foreign exchange settlement system.
CLS Services has been set up to develop a bank that can
offer real-time settlement of foreign exchange transactions,
based on the principle of Continous Linked Settlements ( CLS ) .
Live testing of the CLS bank's settlement system is targeted
for the first quarter of 1999.
The system would synchronize payments in foreign exchange
transactions and thus protect banks from the risk of a
counterparty failing during the settlement stage.
CLS is a response to concern by central banks over the
fragility of the foreign exchange settlement system and the
systemic risk it poses to the global financial system.
Foreign exchange transactions account for the lion's share
of domestic payment systems. Disruptions to foreign exchange
settlements could quickly cause gridlock in global payment flows
with serious implications for economic activity.
Turnover in the daily foreign exchange market doubled from
1989 to 1995 to an average $1.2 trillion. But since each trade
involves at least two payments, bankers estimate that daily
transactions could be around $3 trillion.
Worried over systemic risk, the Group of 10 ( G10 ) central
bank governors last year called on banks to quickly improve
their settlement systems, both within their own back-offices,
but also industry-wide.
So far G10 central banks have been consulted about the CLS
project and view the initative as a constructive step in
reducing foreing exchange settlement risks.
G20, founded in 1994, links the following banks:
ABN Amro, Bank of America, Bankers Trust, Barclays Bank,
Banque Nationale de Paris, Bank of Tokyo-Mitsubishi, Chase,
CIBC, Citibank Credit Suisse, Deutsche Bank, Dresdner Bank, Fuji
Bank, HSBC Holdings, J.P. Morgan, National Westminster, Royal
Bank of Canada, Swiss Bank Corp, Societe Generale and UBS.

'Evening folks, been busy setting up DTNstant system, anyone familar with it? they say it takes up to 48hrs to load all data , its got RT quotes, alarms etc, been screwin with it for past coupla days.: )

BBL wife says its dinner time

What a pleasure to read the chat today. Bart is my hero! Whattasite!!

Earl ( 15:53 ) Welcome back...ain't it great!

U.S. Comes To The Aid of Soro. http://www.afr.com.au/content/970728/world/world1.html ... It good to have friends in high places.

Results for next weeks Korean Stock Market available now.

http://www.koreaherald.co.kr/kh0728/m0728b04.html

Korean bailout planned.

http://www.koreaherald.co.kr/kh0728/m0728b01.html

Pneuma 15:37 The only positive thing I can think about Silver
is since alot of silver is producted as a by producted of
gold mining, that if gold mines are shut down then this would also
decrease the production of silver. Anyone else have any ideas for
a bull case for silver ??

MikeSheller: I baffle even myself on occasion...:- ) What I was trying to say is that stocks are ahead of gold in the Kwave cycle, as if that were not alrady clear on other grounds....From 1945-49 both stocks and gold ( gold stocks since gold was stable ) flattened out or went down. Since stocks are so far ahead this time, I suspect just on these grounds alone that gold will outperform.

Can anyone tell me why, according to EBN, the Dollar is down nearly
3 % versus the Singapore currency?

AUROPHILE: As a fellow long E-Waver, you should be interest in the following from an interview with Robert Prechter, which I recently received by Mercury Mail:

"The markets have reached an apex in a century-long wave, and are now poised for a correction that will wipe out virtually all their gains of the past several decades."I am totally serious about the retrenchment to 400," says Prechter. "But I can understand why most people wouldn't be, since it is something that has happened only once in this century, and once in the early 1700's [in the London stock market] before. "Prechter's Elliott Wave Theorist has been predicting the Big Fall since 1983. ( In wave theory, "patterns always repeat themselves, but it is difficult to predict the periodicity," responds Prechter. ) "

I would like to thank all for the many valuable contributions today which makes me appreciate how little I know and how much I should know.

bb fisher: re your 13:47...we can agree to disagree on this one point. I enjoy your charts & market savvy.

Professor Miller of New York University - describes the dire economic and financial consequences subsequent to Japans own excessive and IRRATIONAL EXHUBERANCE: The Bubble Bursts: 1990-91
http://www.gold-eagle.com/editorials/cscb003.html

Byron -- I started a simple enough task on Saturday.... I wanted to replace a hard drive with slightly 'larger' one. No problem I thought.... Then Windows NT reared its dark side! I am still 'semi' on line here. The price you have to pay for a few extra gigabytes! ( Not in money either! )

Regarding Schwabee, I haven't heard anything from them yet. If the technology gods allow it, I'll drop Schwab an E-Mail, sometime! Back to work on the P.C.

I just did a reality check on Dell Computer. Someone check my math.
Closed Friday at 163 ( down 7 ) which, by coincidence, is exactly the price of one-half ounce of gold. There are 334,944,000 shares outstanding. ( Not counting options ) Dell Computer is worth 167,500,000 ounces. All the gold on deposit in the Federal Reserve equals 263,390,000 ounces.

Soros continues to make enemies....Malaysia's prime minister Mahathir Mohamad continued his attack on Soros saying speculation that destablizes currencies is a crime....Way to go George!....Currency crisis in S.E. Asia could give gold a big boost if it gets much worse...

Geo Soros is a LIBERAL IN THE HONORABLE ROOSEVELTIAN SENSE OF THE WORD!!! He is pushing for more freedom including the so called free states of Eastern Europe.

Go George!!!!!

Fantastic debate Re: Inflation/Deflation, by thoughtful, and outstanding,
provocative stated positions. ( Donald, as special mention. )

I have, and continue, to accept Deflation, as a present, and a forward
position. Not in 25 years, but in fact, exists at present, and gaining.

Investment, in gold, is the only constant, it is basic in nature.
Fear, can be a positive emotion, it isn't always, a negative force.
You, can only be used - IF - You, want to be used.
Arrogance diminishes Wisdom.

Governments ! control, of Central Banks, NO.
World Central Banks, control Government, YES.

Elected Politicians, control government, NO.
Non-Elected Officials, Mandarin, career Professional Government Official,
control, Elected Politicians, YES.
They, ( Mandarin ) are the Government,YES.

Conspiracy, Manipulation, by Central Banks, NO.
Business, taking care of Business, nationally, Internationally, YES.
Modern Artificial Control, by Government, Business, Labour Unions, YES.
( Government = Mandarin ) ( Labour Unions = Labour Mandarin. )
( Business = Business Mandarin )

The FREE spirit of 1920's is dead, Bureacrat in 1997, is a massive and monolithic, force of uniformity. ( Business-Government-Labour Unions )
The Bureaucrat of Russia, is the same monster, in the Free World.

Russia crashed because of such a Bureaucrat monster, we will also, to be
sure. The reasons are the same ( Modern Artificial Control )
BOTH Bureaucratic in nature, they ( Mandarin ) expect, the people can not act, without the state, as the control mechanism.

Investors, require up-to-date-and-minute-information, therefore,
government, has the need for information, and require that the population
be forced to provide all private and intimate information, if you do not
provide information on demand, the Mandarin government will force you.

The reasons, that deflation is here, and will continue, the
people, are about ready to over come the Mandarin Government, ( it ) may
have been necessary, during the COLD WAR, but, no longer. Inflation,
is a real existence, to be sure. Realizing the fact that money, wealth,
has been created from nothing, via, paper money.

Nothing = Something, most interesting. ( You must believe, eh! )

Vanities & Vexation, will be the short circuit, of the Modern Artificial
Control System. Continued Inflation !, my take suggests, NOT A CHANCE.

Einstein, suggested, when one gets lost, in their understanding of life,
one should look to nature for the answer, well, here in Canada, we have
four seasons, the fall, brings on the winter, and spring is the rebirth.

Evening WW....Go Malaysia!...

First EBN return of the night is in and Gold is down .25.....

TED: Do you think we have a bottom here because no one else expects it ....do bankruptcies mean disinflation or nothing else than loose credit being offered to an already bankrupt "debtor" ...if there is disinflation will gold go up even though it has been coming down for 10 years because of it ....are we going to get an inflation kick with improving global economies as suggested by the strength in oil and other cyclical stocks even though global inflation is the lowest in 25 years ... if there is inflation, will gold respond despite that it has not to recent earlier threats ... is Prechter right with his 400 call or are the others who predict a rising DOW infinitum ...... will our gold stocks rise if the DOW corrects just because of it .... does a deteriorating trade deficit mean anything when the governmental defict is nearly wiped out by the economy and less bonds are being issued because of it ... can the FED control an economy when it admits it does not know what devil is making it run .....is coke overpriced merely because its capitalization is greater than the GDP of India .... does it matter if there are more dollars scattered about in the world than sand on a beach... do the banks, governments, and everyone else that one can possibly think of conspire to demote gold ...... or are you like me, I have no idea ( : )

Bloomberg News' 9:00 p.m. report has spot gold down $1.00 to 325.

bb Fisher: GREAT Dow/Gold charts. Congrats. But I find that I get a better feel for golds movement by flipping the page over, and then upsidedown! ( Try it...you will see what I mean! ) P.S.:Now reading a little further, I see Donald suggested the same thing by
looking in the mirror...anyhow.....

Millhouse: thanks for your Sun Jul 27 1997 02:17 ( @Deflation ) . It filled in the blanks.

Donald: I think you have hit on something.......this dow/gold ratio. Throw out the CPI, M1, M2, M3, gann lines, Elliot waves, K waves, John waves, Jill waves, ( I wave! ) , and interplanetary and celestial influences. If this centurys paradigm hold true to form, and according to bb fishers chart, we are at the marked peak of a transition from a probable 30:1 ratio to 2:1 within the next 5 years. This could be a 15x revaluation of gold during this period....$5,000 gold is alright by me!

All:
Comex v.s. LBMA dilemna: I still have not seen a ration and complete explanation how this little tail can wag this huge Dobberman. This is still one of the great pieces of todays puzzle that is not yet in place.

Cmax

I am like you and I have no idea but just many guesses...I do believe though that there is no "evil conspiracy" to keep down the price of Gold!
My feel on gold and gold shares is while they may go lower I think there is so much more potential gain compared to the downside risk that it is a no-brainer.....especially if there are no time constraints involved....

Zeke ( kentucky.com ) :
Gentlemen,
CBs and governments are not gods!!!!
Just as day follows night, deflation follows inflation!!! How high can they inflate? How long?

Zeke: Inflation is a question of REALITIVITY, not absolute numbers. If a car used to cost $3995 and a house $22,000; and today a comparable car costs $39,950 and the house $220,000, that does not mean that the prices will come back down numerically, because the have "inflated".
How much were you making when a house cost $22,000? How much do you make
today? Its all realative. Take Brazil...they just added a zero every few months to their currency...and kept on truckin. When ALL things rise numerically in value together, there is no real inflation, except for those who hold long term fixed rate paper.

*except for those who hold long term fixed rate paper*

Cmax

TED: Well said, thats the bottom line.

Hi Vieserre! That would be a first for me...eh..! EBN Gold down .85...

Deflation: Any supposed deflation that may be felt at this moment, is only proof that the goverment has finally overcontrolled and overtaxed business, free enterprise, and mans creativity. Almost all of my well to do friends that are self-made have thrown in the towel and thrown away what were once very productive business because of this overtaxation. ( I myself intend to do this same on December 31 ) The downside risks and costs now outweighs the upside profit potential.
With all these productive peoples throwing in the towel, how long do
Americans REALLY believe that service can feed on service, that is.......
............ a banker who recieves money from his his stock broker who recieves his money from the insurance agent who recieves from the real estate agent who makes his money on the lobbyist who pays his money to the prostitute. What Im driving at is that service CANNOT feed on
service forever. Somewhere, SOMEONE has to produce a THING. And if no one is manufacturing, and who were once the producers are now in the lower risk business of mutual funds....WHO will provide the foundation for the country? Yeh, you can say that we are forging toward a New Era of technological production....but there is one great fault with this theory.....in that technology is intended to REDUCE human effort and
manpower requirements. A country that simply thinks technology is the answer, and not free market with minimal taxation, have really sealed their own fate. The producers are now overtaxed and striking, and we truely have the final chapters of Atlas Shrugged
now unfolding, but 40 years late.
As more and more factories shut down, and as more technology replaces more workers, we have the basic scenario for deflation, which interestingly ALLOWS THE GOV TO FLOOD THE WORLD WITH MORE AND MORE PAPER MONEY WITHOUT CAUSING AN APPARANT INFLATION...... FOR THE MOMENT......

AN ENIGMA WRAPPED IN AN ANOMALY is the theme of a meticulous dissection of Central Bank Gold Operations & Its Ramifications. New analyst goes by the handle of Red Baron:
http://www.gold-eagle.com/gold_digest.html

For a laugh, http://www.abn.com.sg/feeds/commodities.html has silver up $1.06. Boy, they sure are making a lot of mistakes this weekend.

C-MAX: The issue on LBMA or OTC trading vis a vie the Comex with regard to price leadership is a question I have raised repeatedly on this forum and elsewhere with no substantive response, except for Earl's amplifier hypothesis. It is a missing link in my analysis, one that I have seen no analyst touch on, and one which I would appreciate your comments on if you find an answer.

China, Singapore, Malaysia stocks down. All the rest of Asia is up.

Anyone have good quote on silver.....took a look at EBN and ABN...they
are wacked out.....take a look

PAUL: They seem to be off by exactly $1.00. Kitco is showing $4.33

The dollar is very weak against all the currencies except the Asian currencies that are under attack. Mabye Hashimoto fooled us, sold his treasuries and bought silver!

DONALD: Where are you getting your quotes on the dollar, from where I got it, the dollar was up almost across the board.

BOB July 27 @ 15:29
John Lipsky chief econmist at Chase Manhattan, said, before the House
Banking Committee this week: "Todays workers produce more in less time,
primarily because the large-scale introduction of computers is helping
them to do a better job"


Scientific American, July 1997 *Taking Computers to Task*
By: W. Wayt Gibbs, staff writer.

THE PRODUCTIVITY PUZZLE
Which direction businesses follow is important because productivity
growth is "at the crux of economic sucess" says Stephen S. Roach, chief
economist at Morgan Stanley. "It is the only way a nation can increasing-
ly generate higher lifestyles for its households and separate itself
competitively from

BOB July 27 @ 15:29
John Lipsky chief econmist at Chase Manhattan, said, before the House
Banking Committee this week: "Todays workers produce more in less time,
primarily because the large-scale introduction of computers is helping
them to do a better job"


Scientific American, July 1997 *Taking Computers to Task*
By: W. Wayt Gibbs, staff writer.

THE PRODUCTIVITY PUZZLE
Which direction businesses follow is important because productivity
growth is "at the crux of economic sucess" says Stephen S. Roach, chief
economist at Morgan Stanley. "It is the only way a nation can increasing-
ly generate higher lifestyles for its households and separate itself
competitively from its peers"

That much economists agree on. But the past decade has seen vigorous
debate over the seemingly poor payoff from industrial nations' 25 year
bet on information technology ( IT ) as an engine of economic growth.

Businesses buy computers for many reasons but most ultimately aim for
two goals: lowering the labor and overhead needed to make their product,
and raising the number and price of products they sell.

In both cases, ( IT ) investments should boost national productivity,
corporate profits and standard of living. What puzzles economists is that
productivity growth measured in the seven richest nations has instead
fallen precipitously in the past 30 years, from an average of 4.5 percent
a year during the 1960's to a rate of 1.5 percent in recent years.

The slowdown has hit the biggest ( IT ) spenders-service-sector industries,
especially in the U.S.-hardest. Most of the economic growth of the 1990's
can be explained by increased employment, trade and production capacity.

Computers' contributions, in contrast, nearly vanish in the noise.

In his book, "The Trouble with Computers" Landauer points out that if
mismeasurement is the answer, it must be mismeasurement on an implausibly
colossal scale.For if productivity growth was in fact just 1.25
percentage points higher than the economists have measured since 1960's,
then by 1995 official statistics understated the U.S. gross national
product by roughly $1 trillion, an error of about $10,000 per house hold
per year.

Many industries that made strategic investments in technology to become
more flexible and responsive to changing markets, Roach says, have in fact accomplished quite the reverse. " Here's the rub," he explained,
"About 85 percent of these outlays over the years have gone into banks,
securities firms, insurance companies, airlines, retail and the like. It
used to be that these companies' main assets were people"

During recessions, they could lay off workers and remain competitive.
"But now they have this massive infrastructure of installed ( IT ) " whose
expenses are fixed, he points out, adding that in the next recession,
"there could be an extraordinary crunch on their bottom line. So there
is a real downside here to the information age."

For all the useful things computers do, they do not seem, on balance, to
have made us much richer by enabling us to do more work, of increasing
value, in less time. Compared with the big economic bangs delivered by
water, steam-and electricity-powered machines, productivity growth
in the information age has been a mere whimper.

EBN and DBC have the dollar up strongly against most major currencies. Looks like the yen is going down tonight.

That said it all !

6pak: Thanks. Scientific America article brings up old but important debate. Good counterpoint.

Cheers

EBN Gold down .60 and Slver up 5 cents....

If this whole deal comes down society will go on as J. Goldblum says in "the LOST WORLD" life finds a way. Hopefully we will rid ourselves of the selfish materialism/liberateranism that has gripped the so called higher levels of society. I hope we have a govt that urges us to all pull together according to their ability to pull and build a more equitable society that instills more than acquisitive values. Of course some of these values are necessary but should be minimized in their emphasis. I think a good mkt downturn and recession/depression creates the possibility of a much more progressive political paradigm than now exists. Maybe we will get lucky and get FDRII. God Willing!!

6pak: questionable value and "Big Bang" is supported by some recent
studies which tried to measure ROI from IT. ROI is declining due to
extremely fast pace of IT. Many re-engineering and other IT related
projects are superseded by the new projects shortly after the
implementation ( or even before the full implementation ) because the
technology becomes obsolete ( or the implementation fails to bring the
advertised benefits )

Goldman: Regarding your 15:38 -- Good point. Gold is cheap. Before we took Economics 101, we learned the basics: Buy low, sell high. Gold is low relative to credit-supplies, therefore buy gold.

JKLDSJ ( Q,
to my calculation before and after the crisis should be...
1/july/97 appr u.s.1:2.4880 r.m vs u.s.1:2.6530 r.m ( 28/july/97 ) !the malaysian ringgits almost lost about 6.5%.so we have to paid more .
325 per oz+1.50 premium*32.148* ( 2.653-2.4880 ) =1731 rm or 653u.s more to 1 kilo of gold!my good ness......!how do you think we want to buy in such a high price.To my personal point of views,i think most asian players will wait and see for the more stable price.
any comments are welcome!

Puetz, here is an other perpective of the effect of delation with Japan after the bubble seven years ago.

What is bodering me is that they bought bonds not gold.

http://www.latimes.com:80/HOME/NEWS/WALLSTCA/t000066626.html

Oliver

Go on vacation. Come back. Some improvements, ( esp. absense of whifling ) and some deterioration, ( WW - back to his political rhetoric ) . C'est la vie.

I am not a Clinton or Rubin fan ( as they are probably in part killing my gold investments ) but they have it right on taxes. Minimize capital gains tax reduction to the wealthy and give tax relief to the working class poor. Some will say this is welfare yet these hard working Americans pay SS/Medi plus sales taxes IE they pay taxes and at a higher percentage than some of what I call the incredibly greedy rich who want it all and make the lower class hard working people sound like unworthy individuals. This is hypocrisy at its worst/ Go Clinton/ Rubin hold back welfare for the filthy rich as much as you can. When we retake Congress we can raise taxes on the rich and give relief to those with lower incomes. Clinton basically has it right in wanting to emphasize tax relief based on lower earnings and less or no relief for those with higher earnings. I am writing to the Bean Town " Globe " tomorrow!!