Agora Financial’s Rude Awakening

Jump to Comments

Baltimore, Maryland 

• Why inflation in China is increasingly important to your savings,
• Gas, silver, wheat, rice, corn…investing in the era of “peak everything,”
• Send in the clowns…a vacuum of common sense and plenty more…

Joel Bowman, reporting from Dubai in the Persian Gulf…

“Supervisors cannot predict the next crisis,” reads a front-page story in today’s Financial Times. “Though they can certainly work to exacerbate them,” the following line might have concluded.

In the wake of the fallout from the wave of subprime hurt crippling the US housing market and the ensuing credit contraction, would-be political witchdoctors and knaves of every stripe have mounted their pedestals claiming to have the solution.

The shortage of credit has incited panic…which invariably leads to an even greater shortage in common sense. Otherwise moderately intelligent men and woman jumped on the opportunity to offer the most dangerous four words a politician can ever mutter: Something must be done!

“There is huge political pressure to be seen to do something,” proclaimed one “senior US policymaker” in the FT article. But seen to do what? Isn’t the best politician the one who is not seen? Or heard? Or felt? Like waiters, politicians are the most effective when we notice them the least.

So the farce continues. The debacle in the financial sector will no doubt spawn a fresh breed of panacea-laden politicians professing to know exactly how to “be seen” to be doing something. They will intervene and “rescue” the poor drowning sods that mistakenly took profligacy for the road to profit.

That, of course, is the nature of man; to fix things…especially when they do not need fixing. A man’s wife may stand in need of little more than a cuddle, for example, when the barer of bravado will step into the fray with the “solutions” to her problems…all the while worsening the situation for his wife and, in the long run, himself.

So who and what will benefit from all the political tomfoolery? And, more important, where will you and your dollars be at the end of it?

In today’s column, Agora Financial executive publisher Addison Wiggin takes a look at the forces massaging the value out of your dollars and lends some insight into what you can expect as the farce kicks into full swing.

This excerpt comes from his bestselling book, Demise of the Dollar…and why it’s good for your investments. A few weeks ago (in the midst of the current common sense vacuum) an updated version of Demise was released. The figures are scarier the second time round, but the message is the same. Addison provides the details below. Enjoy…

—- Investing in the Era of “Peak Everything” —-

Oil hit a new record high… Gas could soon be $4 a gallon… silver, wheat, corn, you name it — all the “resources” of daily life are soaring in price!

Yet there’s a way to protect yourself and profit in the days ahead…

Join Us in Vancouver in July for an Exclusive Look at… 

A View From The Peak : Seeking Profits in a Time of Risk and Scarcity .  

——————————————–

The Twilight of the Dollar
By Addison Wiggin

What is real money? This question should be on the minds of every investor and everyone who observes what happens at home and abroad. The U.S. government has done an excellent job of convincing us that all of those dollar bills being exchanged work as actual money. In fact, though, everyone knows they have no tangible value.

They are backed only by (1) a promise by the government to honor the debt, and (2) assurances from the government that the money does have value, that one dollar are worth one dollar.

Both of these promises are questionable. How can the government promise to pay its debts when the total of that debt keeps getting higher and higher? It’s already out of control. And in our fiat money system, the implied promise that a dollar is worth a dollar has to be looked at with suspicion as well.

This is not just an exercise in economic theory. The near future could prove to be a financial disaster for anyone who continues to have faith in the strength of the dollar. In fact, a collapse is inevitable and it’s only a question of how quickly it is going to occur.

The consequences will be huge declines in the stock market, savings becoming worthless, and the bond market completely falling apart. As the value of the dollar falls, that dollar will no longer be worth a dollar; it will be worth only pennies on the dollar. It will be a rude awakening for everyone who has become complacent about America ‘ s invulnerability.

The monster lurking in the near future has been caused by government policy. Our leaders have allowed foreign interests to take control of our economic destiny, and we cannot necessarily count those foreign interests as allies. We are not threatened by imminent invasion or loss of freedom to move about; but the extravagant American standard of living is about to be changed, drastically and suddenly. This has come about by three changes in fiscal status. First, the strength of the dollar and the level of interest rates are no longer in the control of the Fed.

Second, good jobs have been sent overseas, and the so - called recovery has consisted of low - paying jobs. Third, because average wages are falling, Americans cannot afford inflation; even with our increasing credit card and mortgage – based bubble economy, the illusion of prosperity cannot go on forever.

Loss of Control over the Value of Money

The Fed has decided that nothing can ever stop the U.S. economy. Continued growth is inevitable and — the ultimate delusion — our officials appear to truly believe that they can control it. If the economy slows, no problem. The Fed has declared lower and lower interest rates as a means for encouraging more and more debt — and that is called sound policy.

Crisis and Opportunity in the Twilight of the Great Dollar Standard Era 153It’s not just the consumer who has spent beyond his means. The government has led the way by bad example. U.S. borrowing has expanded to the point that foreign central banks own major portions of the U.S. debt. The Bank of Japan held $ 668 billion of Treasury securities in 2004, compared to the Federal Reserve holdings of $ 675 billion.

In other words, the Bank of Japan nearly matched the Fed in ownership of U.S. debt. 1 (Shortly after the first edition went to press, Japan began cutting its holdings, down to $ 582.2 billion as of September 2007 — less than the debt the Fed owns, at $ 666.4 billion. If you just add in China, South Korea, and India, the Asian central banks own a lot more debt than the Fed does.)

With so many Asian currencies tied to the dollar, isn’t it in their interests to keep dollar values high? Yes, but only to a point. Asian central banks will ultimately allow the U.S. dollar to fall to contain inflation in their countries. And the more debt those central banks control, the greater their control over the U.S. dollar — and over the standard of living in the United States.

Should we fear Asian inflation? In 2008, growth of gross domestic product (GDP) is continent - wide at an expected 9.8 percent, slightly less if you look at recent past performance in Vietnam (8.2 percent), Singapore (7.5 percent), Malaysia (6.1 percent), and South Korea (4.9 percent).

The surprise is China, where growth is expected to slow down from 10.8 percent to 9.8 percent in 2008. With the exception of Japan, which is struggling at 1.5 percent, my point is real GDP growth in these countries is two and three times ours in the United States. Ultimately, these trends will lead to inflation, and the best way to fight inflation is to let your domestic currency grow in value. And here is where large holdings of U.S.
debt become important. Because Asian central banks hold such vast sums of U.S. debt, they can also

We are now seeing a trend in Asia toward buying fewer U.S. dollars and then selling the holdings they already have, as well as selling off U.S. bonds. All of these changes will force the U.S. dollar to fall and interest rates to rise here at home. In other words, Asian inflation is held in check and transferred into U.S. inflation. This will ultimately be the price the United States will have to pay for allowing its federal and consumer debt to get out of control.

Joel’s Note: Addison’s work in his book, Demise of the Dollar…and Why it’s Good for Your Investments, earned him another position on the bestsellers list and acclaim from his intrepid peers in the industry. If you have not yet read it, we suggest you grab one of the newly released updated copies and uncover what’s really happening to your currency, your country and ways you can protect your investments. Click here to order now.

— Strategic Investment —-

Elite “Market Alliance” Warns…

Brace Yourself for the Next 5 Super Shocks of the Coming Market Apocalypse…

“I called every market expert I could think of into the room. We closed the doors. And then we came to only one possible conclusion…”

“Over the next 12 months…and despite all the bank write-downs, market bombs and “bailout” talk already…there are at least FIVE MORE DEVASTATING NEW FINANCIAL SHOCKS ahead.”

“If you do nothing now, you could lose everything in the very near future.”

“Or you could take the seven ‘financial survival’ steps we pounded out that afternoon, all detailed in the new Strategic Financial Survival Library I’d like to send you for free.”

Read on for Full Report Here.

——————————————–

[Joel’s Note: We’re off to rid ourselves of a few (dollar-pegged) dirhams
this eve at our favorite jazz bar here in Dubai, but we’ll be back tomorrow
with your regular Rude ramblings.

If you have read Addison’s Demise of the dollar (and even if you haven’t) and
would like to comment, simply email us at the address below.

Until next time…

Cheers,

Joel Bowman
Rude Awakening

aussiejoel@the-rude-awakening.com