Monday, September 26, 2005


Has US 'Lost Control' Of It's Budget?

The Independent had this report on a discussion with Fed boss Alan Greenspan. "Bitter disagreements over global economic policy broke out into the open yesterday as the French Finance Minister claimed that Alan Greenspan had admitted America had 'lost control' of its budget."

"In an extraordinary revelation after a meeting between Thierry Breton and Mr Greenspan, M. Breton told reporters: 'We have lost control,' that was his [Mr Greenspan's] expression. 'The US has lost control of their budget at a time when racking up deficits has been authorised without any control [from Congress],' M. Breton said."

"'We were both disappointed that the management of debt is not a political priority today. The situation that is creating tension today on the currency clearly the American deficit.'"

"A clearly irritated senior US Treasury source said: 'Things can get lost in translation.'"

"Speaking at a meeting of the International Institute of Finance, Zhou Xiaochuan, the governor of China's central bank, said people were right to worry about imbalances. 'The US has always run a fiscal imbalance and current account imbalance but in the recent two years we see the magnitude of the deficits is historically high. People start to worry,' he said."

I remember in the 90's when the economist were screaming about $150 billion defiecits. I read somewhere that if the Gov used GAAP accounting the 2004 defiecit would have been sround one trillion dollars!!!!!

Since they monkeyed the inflation numbers the only place this is being publicly recognized is in energy commodity prices. And of course inflation unrecognized by todays CPI.

Do you think we can contract the money supply enough with assett losses and taxes (high energy prices) to avoid interest in the teens (aka 70's)?

How long can central banks depress the price of gold by selling their reserves?

As your articles and research point out:
Holding gold is iffy at best.
I have noticed that the miners run in cycles (share price) throughout the year (3-5 cycles) in response to gold hording and futures commitments.

I can't really find any attractive gold plays other than catching the miners on the downside of these cycles.

As insurance against global currancy meltdown I believe I gave you IAU and CEF exchange traded securities. These are commoditized shares of gold holding companies. I believe this would remove most of the large transaction fees incurred with coins or bullion.
Just posting for activity in here.

Question /Topic?

Platinum and Palladium have not surged as much in ratio as the other metals have. An oportunity? Or real demand is down compared to the others?
The money supply should shrink dramatically as the economy slows. I agree with Robert Prechter on this; the US economy has been in a form of a recession since 2001, we just haven't noticed it. That's why they call it a 'jobless recovery.'

OC Bear,
Those metals are more industrial and subject to drop when the economy slows. Same with silver.
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