Economy, the Fed, Gold Rush..

Discussion in 'Commodity Futures' started by Josh_B, Jan 30, 2003.

  1. Josh_B


    Interesting quote towards end of article:

    ...In order for the US to maintain such a program it needs the consumer to spend excessively as we pointed out earlier, to boost GDP. To stimulate such spending it is necessary to increase money supply and create wealth. Therefore the Fed clearly presents a plan to fend of deflation by “any” means. They’ll essentially print money to infinity, which, as we mentioned, drives equity toward zero. As commodities are positively correlated to inflation; we can assume that if money supply is infinity then the “end-game” target price for Gold is infinity as well...

    January 27, 2003

    Executive Summary

    This report highlights the current geo-political risks and their affect on the US economy. An in depth look at possible explanations of the US stance toward these issues is given. GDP and a few of its components are analyzed for static changes that could arise given the policy governing the United States. We take a close look at consumer debt and the cost of servicing such debt, as well as the use of stimulus to boost consumer spending, a driving force of US GDP growth. A comparison between equity investment and gold is outlined with regard to the argument whether gold is a viable investment tool.....

    Includes some interesting charts on consumer debt and consumer debt service payments among others...


    All GDP related data courtesy of: United States Department of Commerce

    All Consumer Debt related data courtesy of: United States Federal Reserve Board of Governors

    Dow Jones Industrial Average data courtesy of: Yahoo! Finance,

    Spot Gold price data courtesy of: Hquote,

  2. nitro


    Thanks for this post..very interesting.

    Apr '03 YG closed +3.60 today...

  3. Josh_B


  4. the money is not leaving solely due to war fears. i posted before, its the double whammy of declining asset prices/values and too much USD (supply), which lowers its value.... if you were a euro slime, would you be looking to buy US equities, have the values decline and then have to convert back to your stronger local currency from USD? if you were a "yank," might not some international bonds and equity markets look "better" than ours? consider the credit quality of some of these borrowers. what's the outllook for deficiet spending from d.c. to main street?

    greenie needs to print some more dough for the mindless consumer and to try and head off deflation, but he doesnt want to weaken the dollar further.... so what can he do, but talk it up - look, every negative report that comes out whether its lower growth, higher unemployment, whatever, is met by a firggin barrage of second-half/fourth-quarter recovery talk, HOPE for improving earnings (revenues suck, pricing power is non-existant and the only way they come up with any earnings to speak of is via smoke and mirrors - 9% yield on pension funds???? - and cutbacks including layoffs). WOW, XYZ Corp beat estimates by a penny!!!!! go sift thru the news on yahoo/marketbrief/whatever and the talk is all about a turn for the better (at some future date of course) and one item is always the need for capital spending.... nobody is spending anything on anything until the are fairly certain that what they will produce has a market! thats greenie's worst fear that the contraction spirals down and once people get gripped by fear they go into a shell... and how are people gonna continue to buy crap they cant afford if they dont have a job or think they might soon lose theirs. friggin' lemmings!

    the market is the ball. let's keep our eyes on the ball...most of the rest is just static and that includes my worthless opinions! or you can listen to the experts and "buy the dips!" checkout IBD, today's star mutual fund manager is making rec's and he's down like 23% a year over the past 3 years (thats turning a dollar into about 46 cents - and counting). dude, PUT A SOCK IN IT? he only needs a 117% aggregate gain to BREAKEVEN! dude, i have two words for him - CASH and SHORT! :eek: :eek: and to top it off he hires a relative (his son?) to co-mamnge... what did he need to get the job other than the same last name, a good supply of BIC lighters to burn through folks retirement funds?

    pardon me, i have to go get 6-months of provisions for my dooms-day bunker under the backyard! LOL! the ones i bought last time this happened have rotted. :D
  5. some good points as it pertains to modern ecomincs and monetary supply, etc... and what has driven the economy and GDP for latter half of century...but goes too far in trying to make a case for gold; a lot of it is crap and propaganda and conspracy theory to make me want to buy gold? please. this guy would want us to return to the gold standard or what, should we go back to the stone age too and barter for goods and services LMAO.
    what is so wrong with creating wealth, unless your a anti-capiatlist commie of some sorts...
  6. if you are replying to me, im not a rabid goldbug.. i also realize that inflating the money supply does not create wealth and that commies are as guilty as capitalists of trying to solve fiscal ills will a little pape and ink. the title of the thread is FED, ECONOMY and gold rush... as i indicated on another thread, ive done business in mexico and if you want to see fiat money in the extreme and NEGATIVE impact on an economy, do some reading about our neighbors to the south.. there are others better qualified to address this subject than i, my original point was that the bull move in gold is not solely a result of the Iraq situation.
  7. Seven


    This is a very weakly written article.

    His Net foreign Investments graph may be right but I just went to the BEA website & looked at Table 1 & Table 6 and their numbers do not line up with that graphs at all. I was just looking at securities - Tsy.'s, Bonds & Stocks usually the most liquid assets & I got these #'s.

    89 - 53.8B
    90 - 31.8B
    91 - 51.3B
    92 - 52.4Billion

    If you happen to go that website notice how US investors have gone from net sellers of foreign bonds over the last 10 years to a net buyer the last two years. Final 2002 #'s will probably be net foreign buyers for the 1st time in 10 yrs. of equities as well.

    I don't know much about this gold conspiracy stuff but the people at seem to run circles around this guys analysis.

    Interesting discussion though...
  8. Reuven Brenner
    National Post
    Tuesday, January 21, 2003
    CREDIT: Kenneth Lambert, The Associated Press

    ALAN GREENSPAN: Is US$350 the target?


    Last month in a speech before the Economic Club of New York, Alan Greenspan praised the gold standard, the first time he has unambiguously done so since joining the U.S. Federal Reserve.

    "Although the gold standard could hardly be portrayed as having produced a period of price tranquility, it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800," he stated. "But in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And in the four decades after that, prices quintupled. Monetary policy, unleashed from the constraint of domestic gold convertibility, had allowed a persistent over-issuance of money."

    Is Greenspan returning implicitly to his long-held strong beliefs, which he voiced explicitly before he became Fed chairman, of having the gold price guide U.S. monetary policy? If so, that would mean keeping the gold price (in terms of the dollar) stable. Under this standard, as Greenspan accurately points out, the price level in the United States stayed stable through wars and much technological and political upheaval. The implication is clear: There is no problem achieving such stability in future, even if the United States goes to war, and even if much technological and political upheavals continue.

    During the six decades since the Americans left the gold standard, prices rose tenfold. This happened not because these decades were more turbulent than the preceding 13, but because of the faddish belief, rationalized by much of the economic profession, that central bankers could do a better job managing monetary policy by setting interest rates and exchange rates than by market-guided, gold-price-anchored discipline.

    The fad's long life is not surprising. Central planing, based on the belief that bureaucrats know how to price wheat, physicians, nurses and teachers better than people involved in the respective businesses, has been enduring for centuries, in spite of evidence to the contrary. The view that central banks could best manage monetary affairs by pricing interest rates and exchange rates thus fit perfectly into this bureaucratic frame of mind. Though, as Greenspan points out, the evidence contradicts this viewpoint.

    Before 1996, Greenspan often indicated that gold prices were guiding his monetary policy. Then he abandoned all reference to them -- until last month's speech. His strong statement comes like lightening out of the blue sky. With another Federal Reserve governor, Ben Bernanke, repeating part of Greenspan's comments, we get a strong signal of where the U.S. dollar is heading -- if Greenspan goes from words to actions. Before we get to the numbers, here is what Greenspan said concerning monetary policy and deflationary pressures:

    "But the adverse consequences of excessive money growth for financial stability and economic performance provoked a backlash. Central banks were finally pressed to rein in over-issuance of money, even at the cost of considerable economic disruption. By 1979, the need for drastic measures had become painfully evident in the United States. The Federal Reserve under the leadership of Paul Volcker, with the support of both the Carter and Reagan administrations, dramatically slowed the growth of money. Initially, the economy fell into recession and inflation receded. However, most important, when activity staged a vigorous recovery, the progress made in reducing inflation was largely preserved. By the end of the 1980s, the inflation climate was being altered dramatically."

  9. Josh_B


    ...The January Defect...
    As goes January, so goes the remainder of the year? Well, maybe. We'll just have to see what the market has to say about that as we move ahead. There are a ton of statistics and studies regarding the "meaning" of January to potential market movement in the remaining months of any one year. Studies of all years. All years ending in an odd number. All third years of a Presidential cycle. And so on. Although we try to always be open to any point of view, there is one set of January data that we have our eye on at the moment. It's this one:


    January domestic equity fund flows are certainly no dramatic change in trend of the last half year. But relative to prior year singular January experiences its a big switch. In the most recent ICI (investment Company Institute) data, it can be seen that domestic equity mutual funds ended 2002 with 4.4% of their assets in cash. Just maybe, the chart above and the data on cash availability in aggregate equity funds are the most important January indicators, do you think?

    some interesting charts on Yr/Yr Change on US Exports of

    ... It's no secret that China is increasingly becoming the destination location of choice for the global manufacturing community in terms of new and replacement capacity build out. Although certainly not in whole, the answer to America's lack of macro capital spending strength can in part be explained by looking at what is happening in China....

    Also looking back at some the comments from the 2001 April archives:

    The Most Dangerous Bubble Of All?

    ... In some manner or another, prepare yourself for the reconciliation of the final bubble. A bubble whose unwinding has the potential to wreak much more real world havoc than those experienced up to this point....

  10. The Most Dangerous Bubble Of All?

    ... In some manner or another, prepare yourself for the reconciliation of the final bubble. A bubble whose unwinding has the potential to wreak much more real world havoc than those experienced up to this point....

    Josh [/B][/QUOTE]

    from another site bear site ( - doug noland - 1/31) quoting FED study apparently from WSJ article...

    “Last week the Federal Reserve released its triennial Survey of Consumer Finances (SCF), the most detailed report card on the state of the household sector’s balance sheet and income statement currently available. There’s no reason to equivocate on the general conclusion: the enduring hysteria that the household sector is over-levered and that this will inevitably be the catalyst for a collapse in spending is an enduring myth. Every cohort of the income distribution, every cohort of the age distribution, and every cohort of the net worth distribution have seen their debt burden (level of loan payments to income) fall in response to rallying interest rate markets and rising incomes. Whether rich or poor, old or young, your debt service burden is highly likely to be lower today than it was in the late 1990s, and there’s a good chance it’s the lowest it has been since the late 1980s, at least. What’s more, leverage ratios (level of debt to assets) are falling just like the debt service burden. In aggregate, the household sector’s debt as a proportion of assets is the lowest it has been since at least the late 1980s.” January 30, 2003, Extracted from a Wall Street economic research report.
    #10     Feb 3, 2003