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DRDGOLD Ltd. Message Board

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  • ahhaha2 ahhaha2 Apr 29, 2004 2:52 AM Flag

    Pierre Lassonde's remarks

    [Interest rates will not rise much because debt levels are too high to allow that without significant strains on the world economy.]

    If debt levels rise, rates rise with them or lenders refuse to lend. He must add that in order to avoid such stress monetary authority must come in to provide money to keep rates from rising. We haven't gotten to that point and we're nowhere near. Also, it is exactly that that monetary authority must not do to prevent feeding the inflation monster.

    [Dollar is in a bear market rally. This will not last because it worsens America's current account deficit.]

    He's got the cart before the horse. The expanding US economy is what drives down the dollar because foreigners are the low cost producers. We send dollars over there and they must be recycled here. The US is less efficient, call it, inflates, at a faster rate than the foreigners, so the repatriated value increment of the dollar is lost and the nominal currency dollar must reflect this loss of intrinsic value. So the dollar declines.

    [As soon as that begins to show up in the statistics, the dollar will go into another swoon.]

    It moves long before that because the dollar operates in a free market. The free market sniffs out the right price long before results of price changes can be tallied.

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