Replies to post #9807 on Explor Resources Inc. (fka EXSFF)

[reward_to_risk]

Gregory,

"When Money Dies" by Fergusson (first name escapes me, Alan, Adam?) is an excellent study of the Weimar inflation and the destruction of the mark. Essential background reading for anyone who wants to understand what von Mises was describing when he talks about credit bubbles always ending in ruin, either voluntarily or inevitably.

The historical experience (US in the 1970s and early 80s) is that the gold price can explode while interest rates are rising, until rates rise to a point where the inflation-adjusted return on treasuries is greater than the genuine rate of inflation (Gibson's Paradox, which also explains why the gold price must be controlled by central banks). The American experience was Treasury returns approaching 20% before the gold price rise was broken. History rhymes, so I would predict that interest rates rising 2-5% would do little to stop the price of gold, while making the US govt's debt burden unbearable.

You also asked about gold production increases in the near future. I think we are seeing consistently declining production from South Africa, Peru had a bad year, and I believe Australia's production was down also. China is a growing producer, but their gold never reaches the international market. That is also the case with other producers, and is likely to be the case with even more countries going forward. So I would make a disctinction between absolute production (which is fairly constant overall and falling in some leading producing countries) and new production that actually reaches the world market. I see little chance that production reaching the world market will increase appreciably in the next few years. Also permitting is becoming more difficult, smaller discoveries are being made in areas without water and mining infrastructure, govt taxes and royalties are making marginal mines unprofitable in many countries, the rights of indigenous peoples are being considered more strongly, etc. No reason I see to expect world production reaching the market to rise sharply.

GLTALs,

RTR

[gharma]

If it is possible to have a weak dollar with high interest rates

Isn't it widely thought that high interest rates would be the kiss of death for the US dollar as it would force the US government into a visibly bankrupt condition due to the ballooning in the amount to service the debt.

Someone mentioned buying interest in Europe as perhaps involved in the price move today. I am seeing that the shares moved up 27% on the Frankfurt market last session.

[777111xx]

Gregory.... very good info. Thanks. If my memory serves me correctly, when we had the high rate of inflation under Carter's administration that was (I think) contributed to consumption behavior by the baby-boomers with little savings and investing going on. At that time, didn't gold also make a big leap upwards mainly tied to inflation? We had gold and silver setting new highs and of course interest rates were double digit as the fed kept trying to curb consumption behavior. I have no idea how the dollar stacked up back then, but it was probably a contributing factor as well. I think that may have been the case, but as I say my memory is not so great.