Posted on 10/26/2008 2:23:46 AM PDT by ari-freedom
For decades the prices of gold and oil have closely paralleled one another. In 2003 an ounce of gold would have bought you 12 barrels of oil. Today that ounce will buy you about 11 barrels, even though the nominal price of oil is almost three times what it was in 2003. Thus most of the oil increase is a result of dollar inflation, not traditional supply and demand.
(Excerpt) Read more at forbes.com ...
Those same evil countries were still there in the 90’s when oil was $10 a barrel and everyone was driving gas guzzling SUV’s.
it’s part of his main article about the whole financial crisis
http://www.forbes.com/intelligentinvesting/forbes/2008/1110/018.html
It’s 3 pages. From page 2:
In 2004 the Federal Reserve made a fateful miscalculation. It thought the U.S. economy was much weaker than it was and therefore pumped out excessive liquidity and kept interest rates artificially low. When too much money is printed, the first area to feel it is commodities. Thus the Fed begat a global commodities boom. The price of oil, copper, steel, international shipping—even mud—shot up. The price of gold roared above its average of the previous 12 years. For nearly 4 years the dollar sank against the euro, yen and pound. Domestically the already booming housing market went on steroids. Housing was experiencing above-average price rises because of a favorable change in the tax law in 1998 that virtually eliminated capital gains taxes on the sale of most primary residences. Now with money easy, a bubble mentality took hold. The reasoning was that housing prices always go up; therefore, lending standards could be safely lowered. If a dodgy borrower defaulted, it didn’t matter—the value of the house would always be higher. Wall Street’s appetite for these fee-generating packages of subprime mortgages became gluttonous. Rating agencies also drank the Kool-Aid and gave AAA ratings to this stuff, which, thanks to securitization, was spread all around the world. The Fed and other bank regulators stood by as the bubble ballooned.
Why didn’t the Treasury Department—behind the scenes—tell the Fed to strengthen the enfeebled greenback? Because the Bush Administration likes a weak dollar, feeling that it will improve our trade balance by artificially making our exports cheaper. Not since Jimmy Carter has the U.S. had such a weak-dollar Administration. This mania would never have reached the proportions it did had the Fed and Treasury had a strong-dollar policy.
And who or what is "Francis"?
A character in a comedy. Judging by your comments, I'm guessing you don't see many of these.
what, he’s been saying this for years. If he was president in 1996, we wouldn’t be in the mess we’re in today. He was talking about gold during a time when prices were pretty stable. of course nobody listened to him then.
I don't believe either economic theory is sufficient to the task of understanding what really happens in market economies
Obviously gold is going to track the flow of dollars/euros.
Make that stuff radioactive and the same people would continue buying it.
Frankly I think the whole utility of gold is shortly going to go into the dumper with developments in the new scientific field of "super atoms".
super atoms? why would someone waste $ trying to make more gold out of thin air when gold doesn’t do anything useful except compare prices as Wanniski explains here:
http://www.polyconomics.com/ssu/ssu-041002.htm
Alas, the Monetarists have no real confidence in their own theories and just don't want to face the fact it's going to shortly (in a historical sense) be as common as dirt.
We'd have the same difficulties with the "labor" based unit as we had with gold in an earlier time when the supply of gold was simply not adequate to support the currency needs of industrialization.
So if we had the leadership to drive the price of oil down swiftly and dramatically further than its now falling despite anything attempted by OPEC and Putin and their pals and keep it there, and eliminate quickly our need for foreign oil at the same time, we could create an economic “surge”. The inflation can be traced back to OPEC’s 1973 embargo and its aftermath. The dollar’s primacy could be restored along with our economy.
Well, actually it has a lot of uses as it has some unique qualities, but you’re right, oil does not have the same functionality as a storer of wealth and medium of exchange that oil does.
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