Friday, March 04, 2005

Addiction to Paper Money – America in Denial

Greenback account is not worth the weight in dollars
Youssef M. Ibrahim
Special to Gulf News
Published March 2, 2005

-- If you are parking life savings or investments in US dollars it is time to worry, says American billionaire George Soros, granddaddy of currency trading.

Right now, America imports almost 50 percent more than what it exports.

Robert Hormats, the vice-chairman of Goldman Sachs International, told The New York Times last week that the United States last year alone pulled in 80 percent of total world savings. That means the ones in trouble are those who lent the money, not those who borrowed it.

It is now estimated that America has to bring in some $60 billion per month just to repay interests on the bonds and deposits foreigners have lent it.

We have seen it before - the Kuwaiti Al Manakh souk, the depressions of 1929 and 1980s in America and the collapse of dot.com, to mention some.

To keep paying for the interest on the pool of treasury bills, notes and bonds it holds, the United States must continue to attract even more money from overseas...

This is like a drug addict who has to take bigger and bigger doses to just feel stoned. And we all know how drug addicts end up.

One question raised by South Korea, Japan, Europe and, indeed, the Arabs is how long they would be willing to finance this drug binge and why should they.

Even if they are collecting interest on their money the total value of it is less - so one cancels the other. The big heat attack comes when these countries say enough is enough.

That means no more money coming into America, and no ability by America therefore to repay existing commitments, therefore a further drop, maybe even a collapse, of the dollar altogether.
[Middle East Times]

A blast from the past...

Asia fills her boots: dollar reserves skyrocket
By John Berthelsen
Jul 15, 2003

"But the longer American excesses are financed, the more inevitable will be the ultimate collapse of the US paper-dollar standard that has been in place ever since Richard Nixon broke with Bretton Woods by ending the dollar's link with gold in 1971. The result will be a massive devaluation against gold of Asia's hoard of dollar-exchange reserves." [Asia Times]

The U.S. Trade Advantage with China

Jason HommelGoldisMoney.comDecember 17, 2003

There are misconceptions about our trade relations with China. Misguided U.S. patriots complain about the cheap Chinese labor taking away domestic jobs and U.S. politicians blame the cheap Chinese currency, and complain about the unfair trade advantage that China has.
Those are one-sided views. Here's the truth: We have the trade advantage with China. We send a little paper dollars that they cannot use, and we get a lot of great stuff that we buy and use continually. We give paper money that is an unjust weight and measure, an abomination. We are cheating them; they are not cheating us.

Just like when any conquering nation benefits from slave labor, the local peasants who are unhappy and unemployed feel that they are priced out of work, and so they complain and beg for government handouts. It was not much different back in the ancient Roman Empire.

Of course, the above is from the dust, so how about this one...

SILVER STOCK REPORT #54 -- by Jason Hommel

Even as recent as 100 years ago, a silver dime was a day's wage. A silver dime today costs about 50 cents, at $7.20/oz. for silver. If the world returns to using silver as money, that silver dime might be worth about $150 or more--which is what a day's wage is in U.S. dollars today. Thus, a $5000 investment in silver bullion today may be worth about $1.5 million, or more, in the future. [goldnewsweekly]

And from an email from Jason on Saturday, March 5, 2005...

Currently, silver is 300 times cheaper than historic norms lasting for 1000's of years, when the silver in a dime was worth about a day's wage. The reason that silver is cheap today is that no nation on earth is using silver as money. Monetary demand started to end in the late 1800's, and finally ended in the late 1960's. In the last 60 years, the trend has been to consume, in industry & electronics, nearly all the silver ever mined since the beginning of time. Thus, we currently consume 900 million oz. of silver per year, but only mine about 600 million ounces, continuing to consume what little silver is left.

...Today, silver bullion itself is up from $4.15/oz. in the spring of 2003 to about $7.30/oz. We hit a peak at $8.40/oz. in April 2004, and the trend is still up, and up in a parabolic way, with the rate of increase accelerating, suggesting a price of about $15-25 in the next year, on the way back up to historic norms of about $2000/oz., which I believe we will exceed due to the shortage, and the renewed awareness that silver is quite useful as money, because it is not fraudulent like broken paper promises.

Whatdya think.


Still wanna defend your paper money?


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