Zeev's Turnips Patch-No Politics (ZEEV)

[mlsoft]

Zeev...

At least on the intermediate term future of the $USD we agree, having changed my opinion of a sharp dollar drop a while ago, as noted in #msg-498736. I believe the $USD will drop from current levels as foreign capital is repatriated for domestic needs and the unsustainable current accounts deficit begins to take hold, but Japan and Europe (especially Germany at the moment) look to be headed economic woes that at least are as bad as our own.

I have been saying for months that Japan had little or no chance at a recovery, and I believe that is becoming evident now, with severe economic problems in their future. The current decline in the German economy has been even more rapid than I was expecting, and it will most likely spread quickly to most of Europe, forcing the ECU to rethink the 3% rule, among other changes that will become necessary. Even more than our Fed, they are still fighting the old war against inflation, rather than the real threat of deflation.

I do not completely share your view on the effect of the dollar on gold though. While it is obvious that gold would benefit greatly from a rapidly falling dollar, there are a number of other forces at work that I believe will work the price of gold higher. The threat of economic dislocations throughout the world (especially in Japan and South America), the similar threat of domestic problems with our money center banks with their massive loan losses and derivative problems, and the continuing threat of war and terrorism all are conducive for the price of gold, in my opinion.

And that is all it is ---- my opinion.

mlsoft