From the Publisher's Desk
"The time is now near at hand which must probably determine whether Americans are to be freemen or slaves; whether they are to have any property they can call their own-The fate of unborn millions will now depend, under God, on the courage and conduct of this army. Our cruel and unrelenting enemy leaves us only the choice of brave resistance, or the most abject submission. We have, therefore, to resolve to conquer or die."
- General orders, 2 July 1776, in J. C. Fitzpatrick (ed.) Writings of
George Washington vol. 5 (1932) p. 2
The Decline of Amerika!
During our recent sojourn, we couldn't help but over hear a group of
American tourist complaining about paying US$25 for a so-so lunch
buffet at a tourist stop on their literary.
"I don't mind paying ten bucks for lunch, but twenty five dollars is
ridiculous," said the Yankee man in his mid forties.
Hello! $10 for lunch I thought? One can barely buy a meal for ten
bucks at a fast food joint these days, at least outside Amerika!
The problem is that tour group, as well as most Americans, simply don't
get it. They don't realize that the USD has dropped more than 45% in
these past few years for any number of reasons, intentional or not on
the part of the US authorities. Other than oil prices this dollar
depreciation is not easily discernible until one leaves Amerika and
travels abroad. Then Americans are in for a real "sticker shock!"
Oil is hovering around and nearly at US$150 per barrel as I write
these words. Many say US$200 per barrel is not unexpected before 2009
arrives! Nearly everyone is blaming the oil companies for 'raising'
prices. The fact of the matter is that the rise in oil prices is due
in good part, but not solely, to the declining dollar. A little
history can go a long way in explaining the rapidity depreciating
dollar and how it affects everyone, even non Americans.
From the mid 1980s to September 2003, the inflation adjusted price of
a barrel of crude oil on NYMEX was generally under $25/barrel.
In 2000, oil prices were $20 per barrel. During 2004 the price rose
above $40, then $50. A series of events led the price to exceed $60
by August 11, 2005, briefly exceed $75 in the middle of 2006, fall
back to $60/barrel by the early part of 2007, then rise steeply to
$92/barrel by October 2007 and $99.29/barrel for December futures in
New York on November 21, 2007. Source
Meanwhile let's take a look at the USD: For the U.S. dollar, the
first administration of George W. Bush was the worst era since the
crash of 1987. Since it peaked in October 2000, the value of the
dollar has fallen by more than 45% relative to the euro - which means
nearly a 70% rise for the European currency. From a height of 1.179
Euros to the dollar - or $0.821 to the euro, it has reached its
current historic low of 062 Euros to the dollar. (As of this writing,
one euro is now worth $1.595). As the downward spiral of the dollar
continues, a chorus of voices warns about the scope of the
depreciation, and demands measures to reduce the U.S. current account
Is anyone listening?
I have not heard a single US presidential candidate or a single US
major news outlet be it newspaper or television, mention a single word
about the declining dollar being behind (mainly) the rising cost of
Even New Yorkers Say No To USD
Whilst tuning in and out of the 2008 Presidential Campaign on CNN, a
piece about the US dollar caught our attention.
It appears that even in New York City, people are now beginning to
reject US dollars in favour of foreign currencies such as the Euro.
CNN interviewed an antiques dealer who has a large sign outside his
store in New York City saying "EUROS ACCEPTED".
The dealer went on to say that he first started accepting Euros when
he went to Paris and had his dollars rejected. He said, "In France
they were like, urgh! Dollars? No!" The man had been to Paris over
the years many times and said that attitudes to the US dollar had
changed dramatically. Whereas before the man said European businesses
had the attitude of "Oh great the Americans are coming, but now its
like we are a third world country." Therefore from now on this New
York businessman is accepting Euros wherever possible.
This is a real life example of how the dollar is losing its respect
and good reputation all over the world, even in New York!
Although we do not feel that the Euro is the best currency, as we
would pick gold and silver above all major world currencies, it
appears as if almost anything is better that the US dollar. We expect
to see more rejection of US dollars and other major currencies as this
financial crisis continues to unfold. Once inflation gets out of
hand, expect to see all currencies being rejected in favour of
physical assets such as gold and silver.
America may not yet be a third world country, but the American dollar
is certainly a third world currency and that is one of the main
factors driving gold to between $2000 and $3000 over the next few
years. You can invest and profit from this crisis by investing in
gold and gold stocks.
The former president of the Federal Reserve Bank of St. Louis,
William Poole, said that both Fannie and Freddie are technically
"Congress ought to recognize that these firms are insolvent, that it
is allowing these firms to continue to exist as bastions of privilege,
financed by the taxpayer,'' Poole said in the interview with
We've been complaining about overprices real estate in London and
elsewhere for ten years now. It appears that with a housing crash
looming on the horizon, we will finally, regrettably, be vindicated
with our dire overpriced housing price prediction worldwide.
What have the effects been?
The value of the dollar plays an absolutely central role in the global
Oddly perhaps, the US suffers least of all. Although its rampant
consumers will find it harder to slake their thirst for imports, its
companies will become far more competitive, reaping profits and
Meanwhile exporters in Europe and Asia have found it harder to sell
their products into the US market.
American tourists, the free-spending mainstay of many a European or
Asian resort, may stay at home.
International companies will suffer uncertainty and complicated
And because commodities such as metals and crops are traded in
dollars, their prices may have to rise; gold and oil have both boomed
as the dollar fell.
The decline in the U.S. dollar is having a ripple affect on the
Caribbean causing islands to suffer a loss in remittances, the money
sent home by Caribbean immigrants working in the United States.
"The U.S. dollar dominates everything which causes a rippling effect.
In comparison to the US, prices have gone up and the cost of living is
high. The money that we receive from family [in the U.S.] helps, but
with prices sky rocketing it is quickly used up," says Trinidadian
Joycelyn Wilshire, recently visiting family in New York. She says
that prices have increased up to 120 percent.
In places like Trinidad and Guyana, the cost of living has increased
so much that people are encouraged to grow food in their back yards to
help each other out.
The current state of the U.S. economy is strenuous to most of its
citizens, especially those who work extra hours just to send enough
money back to loved ones abroad. Last year, U.S. immigrant workers
sent $42 billion dollars abroad, the most from any country, according
to the BBC.
Portfolio Manager Steve Chapman says:
"I feel most people still don't understand the far-reaching
consequences of the dollar's decline.
And I get the distinct impression that some even go so far as to
welcome the dollar's decline as a quick-and-easy fix to the nation's
bulging trade deficit - short-term possibly, long-term, no way. They
figure it's like declaring a store-wide sale on everything made in
America. And they hope that will make it easier for the U.S. to sell
its goods overseas.
That's the theory. The actual practice, however, is another matter
entirely: The U.S. dollar has been sliding virtually nonstop for five
years. But during that same period, the U.S. trade deficit has grown
by leaps and bounds. That tells me the
ignore-the-dollar-to-fix-the-deficit tactic just isn't working.
Meanwhile, the impact on Americans - already reeling from the housing
mess and already pinched by rising fuel costs - is growing by the day:
First, we face the imminent prospect of surging prices for everything
Years ago, that might not have made much of a difference. But when
you go shopping today - for big-ticket items or just everyday stuff -
it's actually getting hard to find products that are not imported or
are not made from imported components and materials. That includes"
- Almost every gallon of gasoline.
- Nearly every automobile.
- Virtually all computers, electronics and home appliances.
- Even many of the other products that you use in your everyday life.
Second, when foreign savers and investors lose confidence in the U.S.
dollar, we could lose access to the money they lend us as creditors.
Why is that such a big deal?
Simple: For the past generation or more, while foreign investors have
been busily pinching pennies and saving every dime they possibly
could, millions of Americans have been merrily borrowing and spending.
Problem: This borrow-and-spend-foreign-money binge has become a
national pastime at all levels: Millions of homeowners. Big banks and
mortgage lenders. And biggest of all, the U.S. Treasury Department
In the 1980s, it was the Japanese that lent us most of the money. In
the 1990s, the Germans took the lead. And now, the Chinese have
emerged as big lenders to the U.S. 3 But regardless of nationality, I
think virtually all would say
"As long as the dollar's decline is gradual, OK. We can cover the
loss by charging a higher rate of interest. But once the dollar
starts sinking uncontrollably, we need to cut back, back off, or even
And unfortunately, that's the risk we now face."
Kenneth Froot, a Harvard university professor and former consultant to
the US Federal Reserve, warned: "Part of the depreciation [of the
dollar] is permanent. There is no doubt that the dollar must sink
against periphery currencies to reflect their increase in
competitiveness and productivity."
A very interesting read on the declining dollar is:"It's the Iraq War that's Killing the Economy, Stupid!"
How To Protect Yourself before It's Too Late!!!
To Be Continued In Our Next Issue!
See you next issue
"The people never give up their liberties but under some delusion."
- Edmund Burke, 1784
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