Thai Guru's Gold und Silber ... (Informationen und Vermutungen)

    The Deflation Dog Didn't Bite After All


    by P. Gardner Goldsmith


    [Posted May 4, 2004]


    Many people are unaware of it, but there has always been a Fifth Horseman of the Apocalypse. Overlooked in scripture, he has been there nonetheless, waiting with rancid, baited breath to gallop across the world and leave his destructive hoof-prints in the rubble of Western civilization. He is, according to many government spokesmen and media pundits, the Horseman called "Deflation."


    Next to dire warnings of SARS, Mad Cow Disease, and the hegemony of conservative talk radio, the big "scare story" of 2003 was that deflation was upon us, or approaching. Beginning as a trickle in the first quarter of '03, the reports turned into a flood after April. Suddenly, dozens of "experts" and policy analysts lamented with great wailing the forbidding approach of the destructive force known as deflation. Politicians spending other people's money advised us that the Federal Reserve had better do something fast, because the dollar was, as many phrased it, "too strong."


    Today, with the passage of a year to allow for dispassionate analysis, the anguish appears to have been misplaced. Not only has the US economy not fallen into a deflationary period, it has continued to see a consistent, though low, decrease in the buying power of the Dollar—a continuation of the inflationary behavior of the Fed that has been its salient characteristic for most of its existence.


    In May of 2003, members of the Bush Administration began "talking down" the dollar, hinting that they wanted to see it lowered in value relative to the Euro. American Enterprise Institute economist John Makin was quoted in a May 26 Scripps Howard News Service article as believing that a 10 to 20 percent decline in the dollar would increase "economic growth" to 3% by 2004.


    Three factors were cited to promote this crusade against deflation.


    First, the US economy was supposedly in a recession. Reports abounded that 2.5 million jobs had been lost between August 1, 2001 and June 1, 2003. Despite the fact that new home sales set a record in May of 2003, with a jump of 12.5%, many people believed that the Fed ought to lower interest rates to "jump-start" job creation with less-expensive money.


    Second, the dollar was at a premium compared to other currencies. Its value was such that our money bought more foreign goods more easily, and this was seen by US manufacturers and the politicians who pandered to them as dangerous. It had caused a long-term "trade deficit." Americans weren't buying American-made goods, and that was supposedly bad for the US economy.


    Third, signs of "inflation" in most sectors of the US economy, especially the all-important sectors which comprise the "M2" money supply data[i], were virtually non-existent. Many people believed that without a little inflation there could be no increase in American wages, thus no increase in demand for US goods, and no increase in demand for US workers. The Fed board members were apparently in agreement with all of these assumptions, and they followed a loose money policy throughout the entire year.


    But there was a misunderstanding at the core of nearly all the opinions and prescriptions, one which still persists today. This misunderstanding serves to deceive people about the nature of the problem, and about the remedies needed to cure it.


    The trouble stems from the popular mischaracterization of inflation and deflation.


    Inflation is often described by reporters as an increase in prices, nothing more. No investigation is conducted as to why prices are increasing, or what effect that has on the average person's standard of living. Even the term "standard of living" is left a sort-of mystical phrase, undefined and impenetrable.


    In fact, "inflation" is what causes prices to increase. It is a general increase in the supply of money in relation to the supply of goods. More dollars chasing the same amount of goods, or a slowly growing amount of goods, means higher prices. Your dollar will buy less. You will have to work harder to get the same products, and your standard of living will be harmed.


    Additionally, the loose money that causes inflation also spurs improper investments by businesses, banks, and lending institutions—what was termed by Austrian economists as a "temporal warping of the supply curve." The presence of inflated capital leads to misallocations of funds for unproductive ventures. In time, this leads to a collapse when consumers respond negatively to inflated prices, and this leads to excess inventory, loans left in default, unemployment, and a general decrease in the standard of living for nearly everyone.


    Many economists used to fear inflation. They watched for it like hawks looking for mice in the fields. But recently the talk has been about deflation. Some policy makers have even proposed that we define a slower rate of increase in inflation as deflation. Why the concern? Why the manipulation of the language?


    First, it should be noted that these terms have become ciphers. Inflation and deflation are often used by government economists to describe the supposed "growth" or "contraction" of the economy. In a world where political appointees try to control the value of the dollar, inflation and deflation are measurements of their own monetary manipulation. They are not really measures of "economic growth," but are estimates of capital expansion, which may, or may not, be connected to real economic growth.


    According to the "experts," deflation is defined as a general decrease in prices, brought on by a decrease in consumer demand. Depending on whether you want to put the cart before or after the horse, this decrease in demand can either be the effect of a recessionary period, or the cause of it. Central bankers rarely seem to have a good handle on the concepts of cause and effect.


    Recently, a few commentators at the White House and elsewhere have told us that deflation is caused by a relative decrease in the money supply itself. The scarcity of the dollar makes it more valuable. The dollar buys more goods, and prices fall. The dollar becomes more valuable and exports decrease. The dollar becomes more valuable, and people get laid off.


    But in real economics, there is a reason for deflation. Deflation is an increase in the buying power of the dollar, it reflects, and is a direct result of, greater productivity. When people are more productive, more goods and services can be produced at less cost, thus making the dollar stronger, allowing it to buy more, and allowing prices to drop. This is not a bad thing!


    The entire purpose of free exchange between individuals is to allow them to be more productive, to allow them to work less for the same amount of goods, or for more goods. Since we have different skills, I can produce one thing well, and you can produce another. Protecting your freedom to do what you do best, for me to do what I do best, and for us to exchange for goods and services on the market, lets society have the best products most efficiently. As you improve your skills and the tools needed to make your product, you will be able to make more for less work, which is what we all want. We want to get more for less work, not less for more work.


    Being more productive means less effort is required to make certain products, allowing us to improve our lives, and allowing us the free time and free capital to make new products that will, in turn, improve our lives even more. In a free market, the dreaded horseman "Deflation" is nothing more than the decrease in prices brought about by greater productivity. As prices have dropped for goods such as DVD players and computers, we have had to use less of our money (or less of our effort as represented by our money) to buy them. Our efforts get us more, our toil is less. Our lives are better.


    Contrary to the three major arguments of the pundits, one should not fear deflation.


    The argument that deflation is the cause of unemployment, that a naturally strong dollar puts people out of work, is manifestly absurd. Unemployment is not caused by a strong dollar. Unemployment is not caused by greater productivity. If that were the case, the proper prescription to solve unemployment would be to destroy all technological advancements that increase productivity, thus making it harder to produce things, making more effort go into the same products we once built for less, and making it harder to use free capital to begin new job-creating ventures. Reducing the value of the dollar is akin to such a palliative. It harms the patient more than it helps.


    It also hides the true reasons for unemployment, which are government spending and taxation, inappropriate monetary policy, regulations, and restrictions on market exchange. The most recent recession was visited upon Americans for precisely the reasons just noted, and due to the powerful financial impact of the terrorist attacks of 2001, not because Americans were somehow "too" productive.


    The argument that a strong dollar has harmed American exporters, and thus Americans in general, is only partially right. A strong dollar does make foreign products more appealing to American consumers. Many of those consumers are also manufacturers, who can, like retail consumers, buy their products for less. This allows them to be more productive, to sell their products for less. That extra consumer capital can then be utilized to buy other products, or invested to start up new, more productive businesses. Peoples' lives are improved. By trying to protect politically connected US businesses from foreign competition, American politicians do damage to the economy as a whole. For every special US company that is helped by a barrier to trade, consumers are harmed eight times as much.[ii]


    But what of the "deficit" in our balance of trade?


    The balance of trade is just that, a balance. Few people are aware of this, perhaps because very few reporters know it or bother to report it, but the numbers that comprise our balance of trade with foreign nations are composed of more than just goods and services. They also include capital. For every dollar spent on a foreign good, there is a foreigner with a new dollar. He has to do something with that, and if the US economy is appealing, if the US worker is productive, if the US dollar is strong, then all of those valuable dollars that went out to buy foreign goods will return to the US as investments and purchases in the capital market. One need not weaken the dollar in order to help US exporters at the expense of US consumers and manufacturers.


    Likewise, one need not weaken the dollar to "help" spur employment.


    Those who argue that inflation is needed to keep people employed might as well argue that a fire should be put out with gasoline. Placing more money into an economy does not expand that economy. It does not make the economy more productive. It merely makes more dollars chase the goods being produced, raising prices, and harming everyone. Some have argued that with a little inflation, there is incentive for consumers to buy rather than wait to buy, and that in a deflationary economy, the incentive to wait would stagnate sales.


    This is fallacious. As the prices of VCR's and televisions decreased year after year, people did not wait to buy them. They bought the products as they needed them. Falling prices were beneficial to everyone, including the producer, who was able to sell more as his price of production fell.


    In today's world of monetarism, economists often cite a "low inflation" or "zero inflation" policy as the optimum for the United States. But those who truly believe in human ingenuity and productivity as the greatest means by which to improve our lives must recognize the appeal of falling prices and a rising dollar. As George Selgin argues in his work "Less Than Zero"[iii], such a paradigm would allow long-term improvements in productivity to lower prices in various sectors, and, possibly, in the economy as a whole. Occasional problems such as natural disasters or military conflicts would periodically cause negative supply shocks, raising prices. But these would be natural factors in the equation of supply and demand, natural parts of a dynamic economy that is responding to consumer demand and to real changes in productivity, not artificial government manipulation.


    It is a wonder that people who work on monetary policy every day don't recognize the value of what Selgin calls the "productivity norm." Of course, if we had a productivity norm—allowing real prices to actually drop in response to productivity—many of those policy makers would be out of work. Right now, they can make bundles trying to explain how bonds, CD's, stocks, short-term loans, long-term loans, imports and exports will be affected by their own manipulation of the dollar.


    In 1971, President Nixon and other world leaders agreed to drop the flimsy pseudo-barriers against currency inflation their governments had imposed under the Bretton Woods Accords of 1944. From the moment Nixon's team entered the meeting, it must have been understood that all bets were off regarding US monetary policy. Completely removed from any price fixed to a commodity such as gold, the buying power of the dollar was free to be reduced any time politicians saw fit. And they saw fit quite often. From 1972 to 1981 the average inflation rate was 8.48%, compared to the decade prior, which stood at 3.09%.[iv] Democrats and Republicans alike were aghast, asking what could be done.


    But since the years 1982 through 1984, when the US monetarists supposedly took on inflation and got it under control, the problem has not gone away. The ten years following the Reagan Administration's attempt to better husband the dollar saw an average inflation rate of 4.8% (1984-1993, inclusive). The following decade saw inflation at an average of 2.4% (1994-2003, inclusive). This simply means that it has taken twice as long for the government to reduce the buying power of our work by about half.


    Put in other terms, in 1972, it took $5 to buy the same amount of goods that $1 could buy in 1850. Ten years later, in 1984, it took $12.44. Twenty years later, in 2004, it is estimated that it costs $22.44 to buy what one could have bought for only a dollar in 1850.


    And as government policies continue to whittle down the value of the dollar, there are still economists and media pundits telling us that it is productivity we should fear.


    Given their track record, perhaps it is these government boosters who ought to make us nervous. Perhaps we ought to look critically at the monetarists' performance and realize that the value of the dollar ought to be determined instead by the people trying to buy things and make things with it. After all, it represents their sweat, toil, hopes and dreams in the ever-changing market, and as their efforts pay off in the form of greater productivity, the value of the dollar ought to rise, not fall.





    --------------------------------------------------------------------------------


    Gard Goldsmith lives in New Hampshire. elggrande@msn.com. See his archive and comment on this article on the blog.


    [i] This is the primary data pool which the economic sorcerers at the Federal Reserve use to measure the amount of money in the market relative to Gross Domestic Product. When they cast their magical monetary runes, the M2 is very important.


    [ii] Bovard, James. 1991. The Fair Trade Fraud. N.Y.: St. Martin's Press. P. 5.


    [iii] Available from the Institute for Economic Affairs, London. Visit http://www.IEA.org.uk for more information.


    [iv] Calculations can be made by referring to the chart provided by the Federal Reserve Bank of Minneapolis.


    http://www.mises.org/fullstory.asp?control=1506

    Fed bereitet Zinserhöhung vor
    04. Mai 20:20, ergänzt 21:12


    Die US-Notenbank (Fed) hat die Leitzinsen wie erwartet beibehalten. Allerdings will sie in ihrer Geldmarkt-Politik nicht länger «geduldig» sein.



    Die US-Notenbank hat am Dienstag wie erwartet die Leitzinsen in den USA unverändert gelassen. Dies teilte die Federal Reserve (Fed) nach der Sitzung des zuständigen Offenmarkt-Ausschusses in Washington mit. Das Votum sei einstimmig gefällt worden, hieß es.


    Mit der Entscheidung bleibt die Höhe des Zinssatzes für die kurzfristige Geldbeschaffung der Privatbanken bei 1,0 Prozent. Auf diesem historisch niedrigen Niveau – dem tiefsten seit den 1950er Jahren – stehen die Leitzinsen bereits seit Ende Juni 2003.


    Chancen und Risiken für die weitere Konjunktur- und Preisentwicklung seien weiterhin ausgeglichen, hieß es im Statement des Offenmarkt-Ausschusses. Zudem verwies die Fed auf ein beschleunigtes Beschäftigungswachstum. Die Währungshüter deuteten damit auch eine baldige Zinserhöhung an: Anders als in den vergangenen beiden Statements verzichteten sie auf die Formulierung «geduldig» im Zusammenhang mit ihrer Geldmarkt-Politik.


    Anhebung noch im Sommer


    Experten rechnen mit einer Erhöhung des Leitzinses noch im Sommer. Die jüngsten Inflationsraten würden einen solchen Schritt rechtfertigen, sagte Devisen-Analyst Carsten Fritsch von der Commerzbank. Sowohl Verbraucher- als auch Erzeugerpreise waren im ersten Quartal annualisiert um fünf Prozent gestiegen.


    Allerdings sei eher kein radikaler Zinsschritt zu erwarten, so Fritsch weiter. Vor allem der Termin der US-Wahl im November spräche eher für eine «graduelle Straffung der Geldpolitik» im laufenden Jahr. (nz)

    Fed lässt Leitzinsen unverändert


    Die amerikanische Notenbank (Fed) belässt die Leitzinsen noch auf dem historischen Tiefstand von 1,0 Prozent. Gleichzeitig signalisierten die US-Währungshüter eine Zinserhöhung.


    Washington - Die Notenbanker unter Vorsitz von Fed-Chef Alan Greenspan fassten ihren Beschluss einstimmig. Das Ende der lockeren Geldpolitik werde in angemessenem Tempo kommen, teilte der für die Geldpolitik verantwortliche Offenmarktausschuss (FOMC) in Washington mit. Allerdings ließ er die Formulierung vorheriger Mitteilungen aus, wonach er "geduldig" an seiner geldpolitischen Haltung festhalten werde.


    Die Risiken für die Preisentwicklung seien ausgeglichen, teilte die Fed außerdem mit. Die Risiken für ein nachhaltiges Wirtschaftswachstum bezeichnete sie als nahezu ausgeglichen. Zum Arbeitsmarkt hieß es, die Neueinstellungen nähmen zu.


    Analysten rechnen mit einem Anziehen der Leitzinsen spätestens im Sommer. Am Donnerstag berät auch die Europäische Zentralbank (EZB) über die Leitzinsen. Sie liegen in der Euro-Zone zur Zeit bei 2,0 Prozent.

    [Blockierte Grafik: http://www.goldseek.com/news/LemetropoleCafe/lmpc.jpg]


    http://www.lemetropolecafe.com


    May 4 - Gold $391.50 up $4.10 up - Silver $6.02 up 1 cent


    Gold Shares Catch Fire / What Is The Fed Smokin’?


    Zitat

    We hang the petty thieves and appoint the great ones to public office... Aesop, Greek fableist


    GO GATA!!!


    Gold came in sharply higher, some $3 to $4, as the dollar was hit hard. However, true to form, in went up exactly $6 when The Gold Cartel executed its $6 Rule maneuver and that was all she wrote for the rest of the trading session. The sickening and relentless price management continues to go on and on and on and is met by gold industry silence. The leaders in this industry are more than pathetic as a group.

    Gold left a sizeable gap, but did manage to close above $390, which is a first step towards recovery and did also broke its downtrend from the highs:


    June gold


    http://futures.tradingcharts.com/chart/GD/64


    The gold open interest rose 1628 contracts to 247,500 as the funds increased their short positions.


    More on those "10+++" gold fundamentals. Gold bullish items of the day:


    *Oil took out $39 per barrel and closed at $38.98, up 77 cents. Gasoline made new all-time highs.
    *The dollar fell .97 to 90.05, while the euro leaped 1.51 to 120.77.
    *The CRB continues to recover, rising 2.38 to 277.64.
    *The Fed kept interest rates unchanged declaring they can’t see any kind of inflation problem???? That inflation is "contained." Contained to what, everything that is important to us? What are they smokin’ in Washington? Of course, the fact they won’t deal with raging inflation is very gold friendly.


    Along this line of thinking:


    Treasury market reverses quickly; now at session lows
    The 10-year note was unchanged prior to the Fed announcement, rallied about a half point, and has now plunged almost a point to a loss of (13/32) to yield 4.55%. The 30-year is suffering most, (25/32). The short-end of the curve is back to unchanged on the day, with the resulting curve steepening implying a relative lack of confidence in the Fed's inflation-fighting ability. –END-


    The bond vigilantes "get it."


    The June bond contract put an outside day reversal to the downside
    http://futures.tradingcharts.com/chart/TR/64


    Dollar holders "get it too" (it is in BIG trouble again):


    June dollar


    http://futures.tradingcharts.com/chart/US/64


    Belatedly, the CNBC crowd has been forced to acknowledge soaring commodity prices which are running the gamut from cheese, to bacon (pork bellies are at all-time high), to steel. The weak gold price of the past month stands out like a sort thumb. If gold were trading freely, it would be rising ahead of other commodities much as the stock market often leads the economy.


    Silver continues to suffer from stale long liquidation. The open interest fell again yesterday to 96,440, down 1425 contracts. After a firmer open, silver managed to gain 15 cents, but then fell back, actually going down a couple of cents near the close. Silver is trading as it ALWAYS does after a battering. NEVER have I seen it roar right back up after a massacre, and this was an extraordinary massacre. However, it has spent some time now composing itself and the silver drop was so severe and the market is so oversold, we could see a


    VERY sharp silver rally any day now.

    [Blockierte Grafik: http://www.goldseek.com/news/LemetropoleCafe/lmpc.jpg]


    http://www.lemetropolecafe.com



    The John Brimelow Report


    Bears in trouble


    Tuesday, May 04, 2004


    Indian ex-duty premiums: AM $11.42, PM $8.60, with world gold at $388.10 and $391.15. Continuing well above legal import level. Subject to minor pauses after abrupt rises in world gold, there seems every likelihood that India will be a net importer until world gold sees the high $4-teens at least. Reuters carries a Singapore-deadlined story suggesting there is demand elsewhere in the East as well:


    "Physical demand for gold has picked up in Asia, pushing up premiums in key bullion trading centres, as consumers take advantage of low prices…"


    The price is so low, and I see a lot of physical buying in the market here," said Ellison Chu, a senior manager at Standard Bank London in Hong Kong… dealers said physical demand would prevent gold from breaching the crucial $376 an ounce support."


    "In Hong Kong, gold bars command a premium of 30 U.S. cents an ounce to London physical prices, up from 20 U.S. cents two weeks ago as China's long holidays spurred demand for jewellery. Hong Kong gold bars were at a discount of 15 cents in March… Gold bars… were also 30 U.S. cents an ounce more expensive than London physical prices in Singapore…"


    Since, as mentioned previously, there is reason to believe that a revival in the Korean "trans shipment" trade is in effect subsidizing the movement of bullion into the Far East, this perceptible increase in premiums is rather impressive.


    Both the Shanghai and the Tokyo markets were closed today.


    Yesterday in NY in ScotiaMocatta’s words:


    Zitat

    "After opening at 387.50/388.00, light fund selling forced gold to a low of 386.20 before physical buying provided support. As the euro strengthened, dealer buying helped gold rally to a high of 389.50."


    but as Standard London reports


    Zitat

    "good investment bank selling into the close knocked the yellow metal back to $387.40, a marginal gain of forty cents on the day."


    This is a pattern and a provenance, as noted yesterday, which is suggestive of a short position being defended. Gold traded only 27,936 contracts; open interest rose 1,628 lots to 247,500.


    How much short selling went into the last week’s slide, particularly the dramatic 103,393 contract, down $12 day last Wednesday, is, in the immediate future, the key question for gold. To the surprise of several observers, the small rise in open interest reported for that day has not been reversed. As Rhona O’Connell sensibly remarks in her valuable weekly commentary on http://www.thebulliondesk.com ,


    "Gold’s story last week was a question of professional downward pressure meeting strong physical buying interest. News stories and economic figures would both suggest…that much of the selling came from professional and technically-driven quarters and that the move was over-extended…. on Wednesday…Selling was heavy in New York with fresh short positions opened…India remains a very strong purchaser and while there have also been pockets of interest in the Far East"


    UBS suggests:


    Zitat

    "There are signs that the broad metals market is beginning to stabilize …COTR data for all four precious metals shows that considerable liquidation has taken place in all these markets and we now believe that many are looking oversold… The COTR report… showed that gold saw more long liquidation in the week to 27th April as Comex trading speculators cut gross longs by 1.8Moz and added 0.25Moz of gross shorts. As of that time, the net long position stood at 12.36Moz (from a recent high of 22.5Moz), but this precedes the large sell-off that occurred on Wednesday so the net long position will be smaller still since then - probably around 10Moz. We believe that the threat of long liquidation has passed"


    For the net spec long to have fallen another 2.4 Mm ozs since last Tuesday, since when open interest has been static, of course suggests huge shorting. The Bears are very vulnerable here, and absolutely need helpful news.


    In passing, one might note that gold retains its confidence- building function in France, where the derisory income contribution to the French Fiscus of the interest income proceeds of the proposed sale – rising eventually to a whole $240 Mm !!!! – clearly reveals the exercise is entirely cosmetic, designed to conciliate opinion, probably not all of it French. Only if signs appear of the updated Washington Accord being broken is this of any significance to gold.


    JB


    Note: The Indian premiums tell us how strong gold demand is in India. High premiums mean there isn’t enough local gold in their domestic market so buyers raise their bids in the international market to secure supply. Indians are fond of buying price breaks like we just had. This buying supports the world gold price on breaks.


    Another note:


    Jim Sinclair was quoted by some of the London gold folks yesterday, which doesn’t happen too often as the Brits are not fond of quoting us Americans on the markets.

    [Blockierte Grafik: http://www.goldseek.com/news/LemetropoleCafe/lmpc.jpg]


    http://www.lemetropolecafe.com


    CARTEL CAPITULATION WATCH


    The US stock market was all over the place. By day’s end the DOW and DOG closed slightly higher.


    GATA’s Mike Bolser:


    Hi Bill:


    The Fed took no action at their New York open market "Desk" today, an action that moved the repo pool down to $19.17 Billion. There was no discernable effect on either the DOW's or the pool's moving averages as each stay in their previous up trends.


    The gold price today exemplifies the "six-dollar rule" mentioned so many times by Bill Murphy. The fact that such a constraint can be located throughout the historical gold price records going back to 1995 is convincing evidence that a controlling hand hovers over the market. The manipulators doubtless will offer that it is their "right" to sell gold and depress the market pointing to carefully crafted COMEX rules that favor short selling.


    It is the job of gold investors and those attempting to short the distorted and artificially supported DOW to be aware of the major forces and to avoid the pitfalls erected to trap them. The DOW continues to aim for 11,750 on Labor Day while gold is rising too. The DOW is in a phantom bull market while gold is gold.


    The charts updated daily at:


    http://www.pbase.com/gmbolser/interventional_analysis


    May provide insights into timing issues by showing that the gold cartel has up days and planned down days for the DIVG.


    Of paramount importance is the reality that there is a plan being carried out by the Fed and at the moment they still have gold to sell. Even though the Fed is in a retreat they continue to display a capacity to counter attack so the prudent observer will choose those retreats to launch they own buying. The old saw of buying the dips (for gold) has never been more appropriate.
    Mike


    Dave Lewis on the Fed’s pronouncement:


    The FOMC has spoken and it looks as if those hoping for a swift end to the period of "accommodative monetary policy" to borrow from the Fed, will be disappointed. As those who were looking for such an action might include the Asian Central Banks who were forced to swallow some bitter medicine of their own a few years ago, trading over the next few days could be interesting.


    To quote from the release:


    The Committee perceives the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. Similarly, the risks to the goal of price stability have moved into balance. At this juncture, with inflation low and resource use slack, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.


    What I want to know is, if the current commodity price trends suggest to the perceptive eyes of the Fed that inflation is low what will have to happen for them to admit that it is high? Stay tuned, I imagine we will get the answer to the question in the next few months.


    From an investment perspective, that the Fed feels unwilling to tighten policy even incrementally suggests to me that the US$ is still not the medium in which I wish to store my savings. I try to avoid short term price forecasts and I won't break that here. From a medium term perspective though, the longer the Fed waits, the more inflationary expectations, based on the experience thereof, will build.


    regards


    Dave Lewis
    http://www.chaos-onomics.com


    Anything but the truth seems to be the motto of the Bush Administration:


    5/4 WASHINGTON - Bush administration officials were wrong to prevent a budget expert from giving Congress estimates of the cost of Medicare legislation, congressional researchers have concluded.


    In a report made public Monday, the nonpartisan Congressional Research Service said efforts to keep Richard Foster, the chief Medicare actuary, from giving Democratic lawmakers his projections of the bill's cost — $100 billion more than the president and other officials were acknowledging — probably violated federal law.


    Recent estimates set the bill's cost at more than $500 billion.


    Foster testified in March that he was prevented by then-Medicare administrator Thomas Scully from turning over information over to lawmakers. Scully, in a letter to the House Ways and Means Committee, said he had told Foster "that I, as his supervisor, would decide when he would communicate with Congress."


    Congressional researchers chided the move. "Such 'gag orders' have been expressly prohibited by federal law since 1912," Jack Maskell, a CRS attorney, wrote in the report. The report was requested by committee Democrats after majority Republicans refused to subpoena Scully and White House adviser Doug Badger to testify about their roles in keeping cost estimates from lawmakers.


    Rep. Bill Thomas, R-Calif., the committee chairman, said he would be willing to issue subpoenas if laws had been broken.


    A spokesman for Thomas did not immediately respond to requests for comment.


    -END-


    Anything but a free press too. This is the US free press which GATA knows so well. Craig Harris reported the following in his commentary last evening:


    "Today reportedly the Editor and Chief of the "New Iraqi Newspaper" quit citing US control over the content. If you've been following along, that shouldn't be surprising. The first step in the subversion of a democracy is the control of the "free press", which has been accomplished nearly completely in the US. Imagine my shock at reading these allegations....is everyone getting it yet?"


    The French are making noises about selling gold again. As JB says, unless they are going to break the Washington Agreement, this is meaningless. Seems to me to be more establishment poppycock. GATA knows the French know what we know. They would be mad to sell their gold down here as they understand what has to happen to the price down the road.


    5/4 PARIS - French Finance Minister Nicolas Sarkozy proposed Tuesday that 500-600 tons of gold held by the Bank of France be sold in the coming five years after an agreement with the central bank.


    The bank would hold the proceeds but the interest from the money raised would go to the state amounting 200 million euros every year after the first year.


    In April, Bank of France governor Christian Noyer said he was open to selling gold held by the bank as long as the proceeds did not go directly to state coffers.


    In March, 15 central banks, including the European Central Bank and the Bank of France, agreed not to sell more than 500 tons of gold a year from 2004 to 2009.


    The plan to sell gold was announced during Sarkozy's first major policy speech since being named late March and which included other plans to sell state assets such as real estate and industrial stakes to bring down the deficit.

    AFP


    GATA’s Business Wire Release challenging Jessica Cross to a debate made http://www.thebulliondesk.com. No way it could not have been brought to her attention. Since no one has been willing to debate us for over five years, I don’t expect she will jump at the chance either.


    From http://www.thebulliondesk.com:


    There’s cause for concern about gold

    MineWeb 4 May 16:15


    An Open Letter to Jessica Cross, Managing Director of Virtual Metals, from Gata Chairman Bill Murphy

    BUSINESS WIRE 4 May 16:15


    What is with these people at Virtual Metals? Are they bought and paid for by The Gold Cartel? From another article last November; the same drivel about India:


    Indian gold demand to continue its decline


    By: Ken Gooding
    Posted: '26-NOV-02 22:00' GMT © Mineweb 1997-2004


    LONDON -- Annual demand for gold will drop by 200 to 300 tonnes in India, the biggest consuming country, unless some radical changes are made to the way western producers approach that market, according to Gary Mead of Virtual


    Metals Research & Consulting.He pointed out that 200 to 300 tonnes represented up to 8 percent of global gold demand, so producers could not ignore this threat…


    Also, De Beers' successful promotion of diamonds was encroaching on gold's dominant position in India while "the platinum industry is sniffing at the edges." At the same time, gold retailers were less enthusiastic because their profitmargins were being cut by the hallmarking recently introduced. Meanwhile, the Indian government remained "anti-gold" because imports of the metal placed a big burden on the country's balance of trade and absorbed valuable hard currency.


    Mead said Virtual Metals had carried out on behalf of some major gold producers what was probably the first in-depth research into demand trends in the Indian market. There was a tendency in the past for producers to take for granted the fact that demand in India, which accounted for 25 percent of the global total, would continue to grow….


    Mead said: "The basic message is that this is a market under serious threat and that that threat may emerge much more quickly than some people seem to think. But there are some things those marketing gold can do. I am pessimistic but I don't think the game is over." -END-


    What a bunch of malarky. Café members know from John Brimelow’s fine work that Indian gold demand has been VERY strong these past six months.


    Chuck checked in last evening and got his screaming bottom today:


    Bill:

    Just got in. One more day of a gap up and not filling, and two 1% intra-day declines in the gold indices. It's pretty amazing how bold the gold bears are becoming. Now they can predict a another 10% decline in the HUI even as so much of the evidence is screaming bottom. I think that if we are in the most stupendous of times then the market should reflect the absurdities of it. The end of 1999 and the beginning of 2000 were no different. I was always saying "I can't believe that no one sees what is going on." And then it happened. How much more today!


    Just another day of wounds and annoyances. Probably right after the "Googlemania" comes to the market. Shades of the dot-com mess.


    Chuck


    Houston’s Dan Norcini responds to queries from his fans:


    Dear _____:


    I am of the mind right now that I could care less what the gold mining shares are doing. They are completely in the hands of the crowd following the foolish gold advisors who have pushed the panic button. These same people who are now in the process of selling down at these obscene levels will be the same ones buying the tops in the months and years ahead. That is how I see it.


    My investment in the miners is not tradable. I am in this for the long term because I am a believer in the long term future of gold and what is coming down the pike in regards to this nation. I simply will not sell my shares. Period! When someone can convince me that the fundamentals that lie behind a long term bull market in gold have changed, then I will listen. Until then, it is all nothing but market noise and meaningless noise at that. A bit down the road from now it will be seen to have been nothing but a "blip" on the radar screen.


    I trade the futures for short term income and the bullion price is what I am interested in. The miners will come around when gold breaks up and out of its current range. If that takes until summer; so be it. I will buy more and more of the same shares that these dolts continue to throw away down here in the gutter.


    One man's trash is another man's treasure.


    Let's put it this way:


    I am in the trash collecting business these days and am enjoying it immensely. For me to be able to buy GSS under $4.50 is too good to be true. If these nitwits want to sell it all the way down to $3.50 or even lower, I will be there to take all they want to dish my way along with lots of other great companies and promising juniors and start ups. My perspective is not a week or even a month in these shares; it is years.


    The market capitalization is simply too small in the shares to allow for these people who all have decided to cough up their shares at the same time because some "advisor" they cough up their hard earned money to every month has told them to do so. it is still a case of too many trying to fit thru the eye of a needle.


    Have you ever watched an old Western on TV and seen a cattle stampede? All you have to do is to spook a few in the herd and the rest follow in blind panic not having a clue why they're even running except that the animal next to them is doing it.


    The Native Americans knew this tendency of Bison and used it to their advantage to great effect. They would start the dumb animals running in a blind panic and head them towards a cliff where the brute beasts would dash themselves to pieces on the rocks at the foot of the cliff as they went over it en masse. All the Indians had to do was to go down and gather the spoils. They never even had to waste an arrow or a lance. The buffalo did it all to themselves. Sound familiar? Now who do you think the bison are this time around......????? Interesting thing is the native Americans put great stock in the skin of the buffalo. Talk about getting FLEECED!


    Take care and best to you,
    Dan Norcini


    Good afternoon, Bill!


    I know you're busy this time of day preparing "Midas," but I wanted to get these out to you right away. Hopefully in time for your nightly commentary.


    Without wasting a moment, here's what happened on this glorious day for gold bugs everywhere. Nothing less than a total victory, I'd say. So, let's get right to business.


    First, here's the 3-year chart of the HUI:


    [Blockierte Grafik: http://www.lemetropolecafe.com/img2004/DVA050404A.jpg]


    Notice the 200-day moving average (curvy blue line) was violated to the downside last year for a few months (green circle). This is exactly what happened last month (purple circle), but for some reason every gold bug in the world was looking for the sky to come falling down. Will we never learn!?? Also note that the Relative Strength indicator is clearly pointing upward now (red circle) and the MACD indicator just barely turned up today as well (blue circle). That's great news! In fact, if there's anything to panic about, it's sure as hell not on this chart. If I had an extra million sitting around, I'd be backing up the truck.


    Next, let's have a look at the 6-month charts of some of our favorite miners.


    [Blockierte Grafik: http://www.lemetropolecafe.com/img2004/DVA050404B.jpg]


    Notice that the grueling power downtrend in place over the last month (straight blue line) has finally been pierced to the upside—and decisively! (green circle) Also note that, like most of the mining stocks, this one fell all the way back to just below its 200-day moving average (curvy blue line). Additionally, the RSI and MACD indicators have both turned up in most convincing fashion.


    Here are a few more mining charts. Just refer to the paragraph above for explanation, because without exception they all exhibit the exact same characteristics! It's a beautiful thing!


    [Blockierte Grafik: http://www.lemetropolecafe.com/img2004/DVA050404C.jpg]


    [Blockierte Grafik: http://www.lemetropolecafe.com/img2004/DVA050404D.jpg]


    [Blockierte Grafik: http://www.lemetropolecafe.com/img2004/DVA050404E.jpg]


    [Blockierte Grafik: http://www.lemetropolecafe.com/img2004/DVA050404F.jpg]


    Bill, I think these charts simply speak for themselves. There's nothing else to say except that it looks as if the worst is over (on the other hand, that's probably what Custer said just prior to the arrow through the heart).


    This appears to be the mother of all buying opportunities. In short, I wouldn't wanna be short...


    Derek


    The gold shares finally caught a bid, a lot of them. This very oversold market finally woke up with all the gold companies in the HUI going positive, most very positive. The HUI closed at 118.94, up 11.20, its biggest move in a long time. Coeur D’Alene, Bema Gold, and Golden Star Resources all were up more than 10%. A number of others such as IAM Gold and Goldcorp were up 8% plus. The XAU gained 4.35 to 86.48. Nice to have the pain end for a day.


    HUI


    http://bigcharts.marketwatch.c…&o_symb=hui&freq=1&time=8


    This has been some siege the past month. Today’s technical action and lack of Fed response to serious US inflation tells me we have seen the worst of it. The bottom is in, finally As mentioned in my mini-opus yesterday, the bad guys now have the funds turned the wrong way. With the fundamentals so bullish, this would be the perfect time for The Gold Cartel to cover as much of their long-term existing short position as possible. Should they do so, both gold and silver could move violently to the upside in the weeks to come. We shall see.


    GATA BE IN IT TO WIN IT!

    Und schon sind wir wieder auf den Weg nach oben!


    Die Minen machen bereits wieder etwas mehr Freude im Depot.


    Wenn ich mir die Charts im letzten Posting ansehe, das heute von der GATA veröffentlicht wurde, höre ich es ganz deutlich, und laut rufen:



    KAUFEN - KAUFEN - und nochmals KAUFEN!


    Gruss


    ThaiGuru

    Tuesday, May 04, 2004, 5:37:00 PM EST


    The Gold Creed


    Author: Jim Sinclair




    Please repeat after me: "In 103 days or less gold will trade at $480."
    I know this because:


    China is doing the right thing by increasing interest rates to decelerate growth to a comfortable 4% pa.


    Increased interest rates are part and parcel of a major bull market in gold. Therefore, I can rest assured that we are in a major generational bull market in gold. Increased interest rates are more often dollar negative than dollar positive. The only time increased interest rates are dollar positive is when the shortest term interest rates rise ahead of similar rates for currencies competitive to the US dollar. There is no chance of that occurring with a Fed that uses the word "measured" when considering higher rates.


    Geopolitics is a guarantee of higher gold prices, certainly when you factor in the new strategy of al Qaeda to disrupt Saudi oil supplies.


    Gold mining shares are asset based situations that will be valued according to asset value per share not P/E ratios. This can be seen in the valuation for acquisition that occurs within the industry itself.
    Therefore the low in gold shares can be considered in as of now.


    We are therefore at the starting gate for gold's mercurial rise which now will move to and through $419.70 and then to $430.30 on its way to and above $480.


    In 103 days or less gold will trade at $480


    :rolleyes:

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