As long as Central Banks around the world continue to debase their currencies in order to keep their goods and services competitive to US consumers (stimulate growth) OR to pay for war OR keep deflation at bay (Bernanke's biggest fear), the price of gold will rise.

Any readers who don't understand this phenomenon, it's not too late to understand what "season" we are in - and it's not paper asset time.

Got gold?

Isn't China also pumping up its money supply, by purchasing dollars from chinese exporters?

Doesn't that mean that all 3 major growth engines in the global economy are depreciating their currencies?

And doesn't that increase gold's chances of rising?

Silver too! I understand that 19th century Brits paid the Chinese for imports with silver, and started pushing Indian opium to Chinese in order to balance trade and stem the outflow of silver! All 3 know the value of silver as well ...

Following up on g034's point but at an askew angle, let me share the debasing situation down in my home town.

The local Dollar Store (I won't mention the chain's exact name, and by the way, it's truly a $ store, nothing more than one dollar, I kid you not. Now there are items less in price but those are far and few between) …. Anyway, the point being they just finished a month long sale; everything in the store costing a dollar was marked down to $.89 cents !!

China is the predominate producer and provider of the products found on the store shelves.

Let me tell you about one product for an example of the competition American manufactures is up against and there are many found in this convenient Mall store.

For 89-cents you can purchase a 6-oz tube of toothpaste with an enclosed new toothbrush to boot ! At first glance you think you are picking up a box of Colgate. Labeling, down to the hygiene recommendations, looks identical.

I tried and found the toothpaste and new brush to be an acceptable replacement and now use it regularly.

Colgate costs $2.59 on sale for the same size and you don't get a toothbrush in the deal.

Holding GLD and a bunch of miners ;)

I hope Japan, China, India and other mercantilist countries get what they deserve - massive price increases in their home countries due to monetary inflation. They are killing the US industry, but we are now addicted to low prices and the USD. A USD that loses, at minimum, more than 3% of its purchasing power every year. Of course, the politicians will blame capitalism, and not their excessive printing to finance socialist policies.

Gee, we just had a "major" oil and gas discovery in the Gulf of Mexico (read: our backyard, no political risk). Chevron and partners have announced that this might "boost our reserves by 50%".
Now exactly what does that mean?
I don't think they said that we would double our oil resources or cut our dependancy on foriegn oil by 50%....I think they are talking about immediate reserves....big deal.
I love this news coming at this time. Just how cozy is George with his friends at Chevron et al?
Cozy enough to float a rumor to knock down spot oil (ipso facto: AU) at mid-term elections?
Gee, let me think about that.
And these guys are supposed to be smart?
How transparent.
It's an insult.
I'm not going to try to play this, but I think they are giving us a good "tell".
Good to have friends.

Warning...meandering post! Following up on Cnote...I have two lovely, utilitarian (made-in-China) items in my home purchased at Costco/Sam's respectively: 4 ft stainless steel tables. They are lovely and oh so useful. One is in my kitchen and serves as an island. One is in my laundry room. They are wonderful tables. I marvel that they are high quality stainless and cost only $100. Though I purchased them more than 3 yrs apart, no change in price. Sure, I had to put them together. But a rubber mallet and a Phillips head screwdriver was all that I needed. I wonder what will happen to Walmart et al when these goods go up dramatically because the USD dives. Chris Dialynas at PIMCO wrote a wonderful article called Trouble Ahead, Trouble Behind (2004). Do seek it out and read it. Thought provoking (and leave it on your coffee table!).

I have no idea what will happen with the USD, interest rates or the market and know full well that no one else does either with any certitude (not to sound arrogant). All of "this" reminds me of the wonderful children's story about 7 Blind Mice (Ed Young). Each are traveling across an elephant and making proclamations about what it is based on tactile perceptions. Such is market commentary and opinions about market commentary---all possess some kernel of truth, yet there is some endemic distortion-omission for tactile senses are plural and rarely distilled accurately into "truth". Trying to piece the mosaic together to gain the clear picture is both challenging and exhilerating. And when it gets so complicated and dire, the refrain of "it's only money" is a useful one. Each of us is our very own heroic character in an economic quest! (I'll credit Joseph Campbell here.) Somewhat less daunting than risking one's life (or health, or loved one's life/health)--which helps keep things in perspective! Throughout it all we must maintain our sense of humor, perspective and gratitude for whatever blessing(s) we enjoy. My current blessing (among so many that I do not deserve) is a lovely Anakema Chilean Savignon Blanc (2006). At $6.79 per bottle, it is the equivalent of Cnote's finding Colgate-like toothpaste at the dollar store! But I'll hazard a guess that I'm enjoying the better value! Where else can you go and get wine, myth, children's book and economic commentary than right here on Bill's page? Apoligies to all!

Apoligies...it offends the eye...apologies

Rigdon: right on. We should be packing our bags off the market until Nov 14 - at least. What is the point of being in the market?

Bill: right on. How can this PM put Canada into this? Maybe that ship will be next named after him. BTW, there is also about those military Boeing planes the gov. is buying (is it really without competition?).

You'd think they'd be more discreet. They must think we are all stupid.

Leisa
You are so hip.
I don't mean that as sarcasm. Sauvignion Blanc has (in the last few years) become the best value in the market place...among true wine afficianados ( and I only use that term because I am studying Spanish in order to secure a more enjoyable life in Nicaragua) SB ...is the business.
How astute.
But of course, your observations here have always been thought prevoking.
Cheers and "good on you".
I suppose I m not the only oenophile here.
Try the 2005 Brancott, Villa Maria...have I wandered too far?
I think so. Sorry guys, I just had such a good day with KRY and my other miners. Had to pop a few corks.
I will, hence forth, be more reserved.

Rigdon...Thank you for your nice post. I'll take advantage of the blog's patience and digress a bit into personal territory. First and last! In 2005 I did two nice things for myself. First, I took a wine course, through the culinary arts program at a local community college. Taught by a professor emeritus at the medical college (microbiolist). The second nice thing that I did was after !^$#$#^%#^ at my job, I laughingly asked my wine professor if he had any openings on the wine tour that he and his wife schedul bi-annually. He said "today I receive a cancellation". Fortuitous! I said hold it. I went home, and "asked" my husband if he would mind if I went to Italy/Spain for two weeks without him or the kids. Of course he said he did not mind. And that is what I did. After 23 straight years of working my potookus (sp? ) off, I went to Italy/Spain with 30 people that I did not know (except my wind professor). It was one of the most memorable experiences of my life. So my goal is to become fluent in Spanish (my 4 years in high school was far too long ago), and go back (with family!). We went to 6 wineries, and I experienced the most incredible generosity of spirit--the extraordinary pride, indeed love, in which we were served the bounty of the land-food and wine-will be something that I remember on my deathbed. The Spanish people value their food and family above all else. An important lesson I think. So now I will enjoy my cheap Chilean wine (but please do try some Spanish cabs, tempranillos, and grenache/tempranillo blends!) with my chipotle spiced pork chops.

Hi all,

Just thought I'd comment -- for those who took only a cursory glance -- that the oil tanker picture linked above is very obviously a fake. (Though "Condee" does have strong, well documented, connections with the oil industry, as do many of Bush's cabal.)

Incidentally, I've never quite understood the need to fabricate evidence against the current administration. It would seem there's plenty of "real dirt" to go around.

This is off topic, but since I'm typing my first post anyway: Does anyone have any thoughts on the current state of the Canadian equities markets? In particular, independent of US slowdown is it to be expected that there will be a strong correction short-term to remove the speculative froth?

I'm curious to read any enlightened comments. My speciality is math, and I think the irrationality of the markets addles me! Cheers.

The photo is indeed a fake. Here is a link to the original:
http://glennz.typepad.com/photos/uncategorized/tanker.jpg

And Chevron did indeed change the name. After a wave of controversy, the company renamed this very visible reminder of the Bush administration's ties to big oil - a 129,000-ton tanker Condoleezza Rice in 2001. "We made the change to eliminate the unnecessary attention caused by the vessel's original name," said Chevron spokesman Fred Gorell five years ago.
The double-hulled, Bahamian-registered tanker was renamed the Altair Voyager, after a star. It still shines, and Condis star is fading fast.

Much as I'm enjoying the thread drift, I'd like to posit an analogy in line with the original topic: mutally assured inflation.

History has shown again and again (and again!) that you can not inflate a currency ad infinitum, just as you can't stay high on cocaine indefinitely. There has to come a 'tipping point', as it were, when the fat lady sings, the party breaks up, the guests go home, and the Bubble collapses

So it seems logical to me that whoever has been hitting the bottle the hardest is going to suffer the worst hangover and most in need of real nutrition. Those calories have traditionally come in only one form: gold.

In terms of inflation, as long as the world's goods and services are priced mainly in dollars then the US will always have a significant trading advantage. China's interest in the US (and dependence on our consumerism) along with the Kissinger petro-dollar system assures this.

If China stopped or significantly reduced buying bonds or if the petro-euro were to emerge then expect BIG inflation trouble. There has been speculation that the war in Iraq was more about Iraq's Nov 2000 change of pricing oil in EUros as opposed to dollars.

ALOHA !!

Way back in 1997 the US dollar enjoyed quite a premium against other fiat currencies. I used to live in Australia back in the mid 70's and in 1997 I had a very healthy income. I decided then that so long as I held a US dollar and paid in US dollars that I could buy on discount. I was wanting to purchase real estate and seeing that the Australian dollar was worth half as much as the US dollar meant all the real estate in Australia was a "half off sale" ... I went there looking to buy acreage and a business to support that acreage. To my astonishment I found a 330,000 acre(yes 330,000) cattle ranch for sale in the north part of West Australia(mining territory). It had 1.5 miles of pristine coastline, a four bedroom house, a pool, 13 artesian wells, 22,0000 head of cattle, barns and warehouses and vehicles ... all for the price of $980,000USD!!!! Now I used to live in places like Newport Beach, CA and now here in Hawaii and I can tell you for $980,000USD in Newport Beach you can barely buy a garage especially if it is oceanfront! But for that same $980,000USD in 1997 I could have bought my own "country" in Australia!

Lets think about this in reverse since most all of us have that sinking feeling about the US dollar's future. It is reasonable to assume that the foreigners whose dollars are worth more than ours will come here on a shopping spree as well ... Best own something that they would want to buy!

Also best stock up on import goods now before the US dollar and foreign inflation makes them more unaffordable.

Also if you are a manufacturer based here in the USA selling goods produced only within the US borders it seems that the rising price of imported goods would be welcome since it would afford a higher profit margin ...

So many ways to look at falling fiat currency as opportunity ... just depends which side you're on! Then on the other hand you can buy gold and silver and remove yourself from the fiat game! Hummmm ... come to think about it ... I used to own a Fiat ... what a pile of crap that car was!!!

What happens when Gold is overbought due to the emergence of ETFs? Doesn't gold become a more liquid currency that could suffer the same inflation issues as USD? With 8B in assets, is GLD changing the hedging power of Gold?

What's interesting is that the Gold held in the US GLD fund is stored in London vaults. Why not Fort Knox?

For Leisa and others, Vina Concha Y Toro, a Chilean wine exporter, ADR symbol VCO, trades on the NYSE.

No position, but I follow it. It's had a recent run and the current daily RSI is @75.

Leisa
Great story. I am aware of some excellent Spanish wines. I like the northern part of Spain, the Picos Europas in Asturia, where they are more likely to be drinking cidre (hard apple cider). Breathtaking scenery. If you go there, stay at the La Tahona in Besnes (98)541 57 49. A great bargain.
Now what's going on the markets this morning...

India also has a current account deficit. Check out the current issue of the Economist. They had some really interesting world market stats. India has just an absolutely huge number of public companies compared to other emerging markets. They have current account deficits. (Contrast that to China.) And they are growing their money supply, as Bill pointed out. I am not an economic forecaster, but these stats do look like there is trouble ahead.