GOLD and CRASH, page-5

re: GOLD and CRASH for Joey 70 gold and equities are not usually correlated
Gold has a better correlation to the US Dollar and real interest rates
the DOW drop had no real impact on today rise

the rising trade deficit and also option expire next week may have played a greater part on Gold

i read a good article on the correlation of gold to various assets i'll see if i can find it again i'll post to the gold board

visit the Gold board on OzeStock and have a read of the posts there should help get an understanding
i'll post some other stuff there later



i've said before (not on H-C) that we'll be trading sideways in the major indices for the next 5-7 years
i'll still hold to that


my preference would be to pay down debts, then use the money to buy some good value unhegded gold and silver stocks
stick to metals as i feel the CRB movements the past 12months are leading to a rapid commodity inflation in the US (but probably more from USD decline than demand)

i think there is a real estate bubble in Aust but nowhere near as great as the ones that were present in Japan and US now
that will pop when interest rates are around 8-9% in the next 12-24months (this is harder to call, depends a lot on the US economy and the AUS dollar)

i'm actually leaning towards an inflationary depression, something the economists wouldn't be expecting as i dont think we had one of them yet!

(inflationay depression i mean a period of rising prices for most goods due to price rises in the underlying commodities - oil, metals, and also interest rates)
depression - high unemployment from the casualisation of workforces around the world - (read pay lower wages for casuals than f/t or p/t)

i know there are flaws in what i've said

anyway this is a post i thought iwas pretty good and its from August 2001
i think its from Gold-Eagle

deflation/inflation question

(stock) Aug 09, 12:54



Nobody seems to know for sure. Many think that inflation will become a problem.



Maybe there won't come a financial problem, but if it's deflation, gold might suffer too. If the amount of medium of exchange shrinks (money supply down), the things we exchange with that medium become more valuable. If gold would (again) be seen as a possible medium of exchange (function number one of money), it would certainly go up, thx to the inflation.



There is not realy a reason to flee to gold if paper money becomes more valueable year after year...



So, if gold would only be seen as a means to preserve you capital (second or third function of money), it might suffer from deflation.



But if gold begins to go up, it might attrack capital, even if there's a deflation threat (it doesn't have to be seen as a medium of exchange again to go up in deflationary circumstances).



http://www.miningstocks.com/interviews/ravibatra.html





TAYLOR: Following the impending stock market crash, you have also suggested that the U.S. Economy will enter into a Depression, perhaps of a magnitude similar to that of the 1930's. However, you believe this time, we will also suffer from the ravages of an inflation. Can you tell our readers why you think the U.S. will suffer from inflation rather than deflation? Shouldn't plunging economic activity result in a sharp decline in prices as demand declines? Why in such an environment do you expect prices to rise?



BATRA: Normally we should have a deflationary depression. In fact in all of U.S. history, we have never had an inflationary depression. But I think the future one will be an exception and there are two or three reasons why I think so. First of all let's look at all the economies that have borrowed heavily from abroad and are now in turmoil, like the Asian Tigers and Brazil or Russia. When the trouble started, their currencies collapsed, and not only their stock prices fell, but their product prices and unemployment both went up. So they have an inflationary recession right now. The reason they have not had a depression is because the U.S. economy has remained strong, so they have been able to export and keep their economies going. But it is inflationary in nature, which is the exception to what used to happen in the past. The reason why it is inflationary is that their currencies have collapsed. And that is what I fear for the U.S. dollar as well. I fear the U.S. dollar will fall very sharply once the nightmare hits the U.S.



TAYLOR. That leads me to ask you where would people put their money if they sold the U.S. Dollar?



BATRA: It could go into a variety of assets. It could go into the Euro, the Swiss Frank and quite likely gold because when there is inflation, gold becomes king. Even in a depression, gold will attract money if there is inflation at the same time. It most likely won't go into the Yen, even though the Yen will likely appreciate sharply.



TAYLOR: One other thing I wondered about with respect to inflation in an economic downturn. Is it possible that the existence of a larger number of regional monopolies lead to higher prices than during previous recessions/depressions?



BATRA: It is the monopolistic nature of capitalism that is the ultimate source of the problem. It leads to the rising wage gap and rising wealth disparity and potentially rising demand gap and rising stock prices that cannot be sustained by real demand growth. So that is the ultimate problem around the world and that is also the case in the U.S.



TAYLOR: And you mention that it takes quite a cataclysmic event for a country to make the changes that does away with the rising wage gap. In your book, you noted that for Japan to get rid of its regional monopolies, it had to lose the war to the U.S. General MacAurthur, forced Japan to break up its monopolies because he believed they were the root of Japan's military aggression. Whatever actually prompted Japan's military moves, breaking up these monopolies may have been one of the best things that happened for the Japanese economy. So do you believe some sort of cataclysmic event will be required in the U.S. before changes take place in the U.S. that will eliminate or reduce the wage gap?



BATRA: Yes, that is precisely my thinking. I think the pubic will be decimated by the stock market crash and they will demand accountability and scalps of those in charge and true economic, social and political reforms will be demanded by the people. Most likely, I believe the rule of money in politics will find as people begin to understand what led to the bubble and then the demise of the stock market.



TAYLOR: You talked a bit about the 30-year cycle, which is really intriguing to me. You noted that the creation of money results in inflation. You have some charts in your book that illustrate quite surprisingly to me, that every 30 years we hit a peak in the growth of money and consequently in the growth of the rate of inflation. This 30-year pattern with a high degree of predictability goes all the way back to 1770. The only time the 30-year pattern was broken was around the time of the Civil War. But following that conflict, it has resumed and has remained in tract even now. With the current inflation trend down very significantly from its highs in the 1970's, history

suggests we are due for another rise in inflation. Is this another reason why you think the depression we face will be inflationary?



BATRA: Yes that’s right. As you said, the last peak of inflation was in the 1970’s and now we are moving into the 2000’s. So, yes, this is another reason I think we will head into an inflationary depression.







TAYLOR: So somewhere beginning any time now or perhaps into the next decade say two or three years from now, we can expect a real spike up in inflation again?



BATRA: Yes. I think the market crash itself will spark a round of inflation and then once that round is over there will be some other sources of inflation.



TAYLOR: Is it possible money will come out of paper (i.e., stocks & bonds) and back into tangible assets like real estate, gold & silver?



BATRA: Well, first there will be a lot of destruction of money.



TAYLOR: You mean it will go to Money Heaven, right? Because it is a bubble caused by the fractional reserve system which creates money out of thin air, without any substance underneath it, right?



BATRA: It’s a bubble. A dead bubble. And as debt mounts, money will just disappear. But as the dollar falls, the foreign goods will become very expensive and therefore the U.S. will suffer high rates of inflation. All foreign economies by the way, will suffer inflation too, except the countries with trade surpluses, which are likely to suffer deflation.