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Some of the brightest financial minds of our time are
warning of a potential
financial reckoning day for the United States.
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“[A]rtificially low
interest rates and rapid credit creation
policies set by Alan Greenspan and the
Federal Reserve caused the bubble in U.S.
stocks of the late '90s.... Now, policies
being pursued at the Fed are making the
bubble worse. They are changing it from a
stock market bubble to a consumption and
housing bubble. And when those bubbles
burst, it's going to be worse than the
stock market bubble.... No one, of course,
wants to hear it. They want to buy the
stock and watch it go up 25% because
that's what happened last year, and that's
what they say on TV.”
- Jim Rogers
Financial expert and
bestselling author
Financial Reckoning Day
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“On this issue of Social
Security, we got coming up in 2008 the
first of 77 million baby boomers hits
early retirement…. For the next 20 years
after that, the major contributors to
Social Security and Medicare become the
major consumers. The real deficit then
will come out of the water like a volcano.
And there is no way it seems to me we are
ever going to have a balanced budget
again, given the forces in Washington and
this perfect storm that’s ahead.”
- Pat Buchanan
Former White House
advisor, author, & NBC analyst
Scarborough Country
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“If we have promised more
than our economy has the ability to
deliver [in Social Security and Medicare
expenses], as I fear we may have, we must
recalibrate our public programs so that
pending retirees have enough time to
adjust through other channels. If we
delay, the adjustments could be abrupt and
painful.”
- Alan Greenspan
Chairman, Federal Reserve
Board
Forbes
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“Buffett
said the transfer of the country's ‘net
worth’ abroad would eventually lead to
‘major trouble.’‘In effect, our country
has been behaving like an extraordinarily
rich family that possesses an immense
farm. In order to consume 4% more than we
produce - that's the trade deficit - we
have, day by day, been both selling pieces
of the farm and increasing the mortgage on
what we still own.'”
- Warren Buffett
CEO, Berkshire Hathaway
& 2nd Wealthiest Person
in the World
Running on Empty
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“We believe such a large
imbalance [of growing indebtedness by the
United States] is a risk not only for the
United States economy, but for the world
economy.”
- Rodrigo de Rato
Managing Director,
International Monetary Fund
New York Times
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“The
outlook for the global economy is the most
uncertain for 20 or 30 years, according to
Bill Gross, the influential chief
investment officer of Pimco, the world\’s
biggest bond fund manager. ‘Too much debt,
geopolitical risk and several bubbles have
created a very unstable environment which
can turn any minute…. With all this
consumer debt, business debt, government
debt, smaller movements in interest rates
have a magnified effect…a small movement
can tip the boat…. The US dollar is being
supported by the kindness of strangers –
Japan and China. It should be 20% lower
than it is.”
- Bill Gross
Chief Investment Officer,
Pimco
Financial Times
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“[D]ue to our never-ending
deficits what we're seeing is a massive
transfer of assets from the U.S. to
creditors probably the greatest transfer
of assets in history. Over time this is
going to mean a lowered standard of living
for my kids and your kids, and if it
happens quickly it will also mean a
lowered standard of living for you and me.
When you build up gigantic debts, somebody
has to pay for those debts. The great
American debt-sponsored party is slowly
coming to an end.”
- Richard Russell
Editor-Publisher, Dow
Theory Letters
Dow Theory Letters
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“Gerald
Corrigan, speaking at a Boston Federal
Reserve Bank conference…warned that an
abrupt reduction of the country’s external
deficit could pose ‘systemic risks’ for
the world financial markets. ‘If nothing
happens in the next two or three years (to
reduce the current account deficit), then
the chances of a financial disruption rise
in an alarming way.’”
- Gerald Corrigan
Former President, Federal
Reserve Bank of New York
Bloomberg
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“But
when the run on the dollar begins, OPEC
will inevitably at some point switch its
pricing to the Euro…. [I]t will be as if
the rest of the world declared war on the
United States of America by launching a
missile, dropping a bomb, or landing an
army at Bethany Beach, Delaware. And,
barring a miracle, the end results will be
exactly the same as from a physical
attack….
Buy physical gold, not paper gold. I am
convinced that we will see gold reach at
least $600 per ounce in 2005. It's a great
way to hedge against a falling dollar.”
- Michael C. Ruppert
Publisher/Editor, From The
Wilderness
From The Wilderness
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“Over
time, there is only one direction for the
dollar to go – lower.”
- Bob McTeer
President, Federal Reserve
Bank of Dallas
Reuters
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“Bob Rubin says we are
confronting 'a day of serious reckoning.'
In referring to our 'fecklessness,' Rubin
warns that 'the traditional immunity of
advanced countries like America to the
third-world-style crisis isn't a
birth-right.' ”
- Bob Rubin
Former United States
Treasury Secretary
Running on Empty
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“Suddenly,
the U.S. economy looks exceedingly
vulnerable. The basic problem [is] that of
a saving-short U.S. economy that is locked
into the destructive spiral of
ever-widening twin deficits. Never before
has the world's dominant economic power
lived this far beyond its means.”
- Steven Roach
Global Chief Economist,
Morgan Stanley
CBS Market Watch
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In describing the U.S.
budget outlook: “Chilling”
- David M. Walker
Comptroller General of the
United States
San Francisco Chronicle
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“To give
you idea how big the problem is, you\'d
have to have an immediate and permanent 78
percent hike in the federal income tax [to
close a $51 trillion fiscal gap]…. The
country\'s absolutely broke, and both Bush
and Kerry are being irresponsible in not
addressing this problem. This
administration and previous
administrations have set us up for a major
financial crisis on the order of what
Argentina experienced a couple of years
ago.”
- Laurence
Kotlikoff
Economics Chairman, Boston
University
San Francisco Chronicle
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“Volcker predicts we face
a 75% chance of crisis within five years.”
-
Paul Volcker
Former Chairman, Federal
Reserve Board
Running on Empty
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“Since
1945...[all downturns in the US economy]
save two were intentional. The first
exception was the downturn of 1973 to
1974.... The second was the slump of 2001.
The most recent slump was...like the
structural, post-bubble depression of the
1930s. The only other structural downturn
in a major economy in the postwar period
can be found in Japan beginning in the
1990s. In the space of 11 years, Japan
went from a budget surplus of roughly 3%
of GDP (1991) to a budget deficit of
nearly 10% of GDP in 2002...bringing its
national debt to a staggering 150% of GDP.
But at least the Japanese could afford it;
domestic savings in Japan were huge.”
- William Bonner with Addison Wiggin
Investment writers and
authors
Financial Reckoning Day
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“The U.S. is now on the
comfortable path to ruin. It is being
driven along a road of ever rising
deficits and debt, both external and
fiscal, that risk destroying the
country\'s credit and the global role of
its currency.”
- Martin Wolf
Associate Editor and Chief
Economics Commentator, Financial Times
Financial Times
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“Forget
for a minute the economic apocalypse our
country will endure when baby boomers push
Social Security, Medicare, and retirement
programs to the brink of bankruptcy.
Instead, focus on what [Congress is]
costing you and your family today. Most
Americans work half the year paying off
taxes, fees, and regulations…. You now
[also pay for Congress’] carelessness
every time you pay your monthly credit
card bill, student loan, car lease, or
home mortgage. Washington’s runaway
deficits are now causing interest rates to
move back up. Steven Rattner…told the NY
Times, ‘The question is not whether
interest rates will continue to go up. But
rather how far and how fast.’”
-
Joe Scarborough
Former US Representative,
author, & MSNBC analyst
Rome wasn\'t burnt in a
day
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“The long-term picture is
pretty bad.”
- Jagadeesh Gokhale
Senior Fellow, Cato
Institute;
& research publisher
for the Federal Reserve Bank of
Cleveland
San Francisco Chronicle
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“All the
official reports, from the Congressional
Budget Office to the Fed to the IMF, keep
returning to the same bottom line: The
longer we put off any sacrifice, the
harder will be the blow to our nation, our
economy, and our lives. With this year's
record federal deficit, we are already
effectively borrowing to fund all our
domestic discretionary programs. By 2020
we will be borrowing to pay for our
defense programs as well, since revenues
by then will cover only benefit checks and
interest on the national debt.”
- Peter G. Peterson
Former Chairman, Federal
Reserve Bank of New York
Running on Empty
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“The
long-term budget projections are just
horrifying. I've got four children and it
really disturbs me. I just think it's
irresponsible what we're doing to them. ”
- Leonard Burman
Co-Director of Tax Policy,
Urban Institute
San Francisco Chronicle
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“The
direction of the dollar is down... The
dollar is declining because of our loose
money policy, our terrible fiscal deficit
and our current-account deficit, all of
which are heading the wrong way. What will
happen at some point is that foreigners
will stop buying our securities or at
least buy less of them...
Given the decline in the dollar and the
dramatic shortfall we see developing, we
expect [gold as an asset class] to be our
highest-return asset class. We look for
gold to appreciate demonstrably from here.
Our near-term target is $500 an ounce, and
our longer term target is $1,000.”
- Richard Arvedlund
Founder, Cypress Capital
Management
Forbes
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“The
world has come to a paradoxical situation
in which the creditor countries are more
concerned with the fate of the dollar than
the U.S. authorities themselves are….
Under these conditions, the growing
interest of investors in real assets, gold
in particular, is more than justified.”
- Oleg V. Mozhaiskov
Former Deputy Chairman,
Central Bank of the Russian Federation
The Daily Reckoning
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As history shows, typically the value of gold rises as
the value of the dollar falls, the following graph of the
past two years highlights this relationship and outlines
the importance of diversifying your portfolio with gold:
Gold And
The US Dollar
Oct. 15, 2002 - Oct. 14, 2004
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