March 5, 2005

Posted 1:00 AM Eastern
NewsWithViews.com

Economists and precious metals experts throughout the country who track market indicators and money trends worldwide, are wondering why the American people continue to ignore what they call "hard facts" that America's "recovering" economy is nothing more than a smokescreen to cover up the continued "borrowing to spend" practices of Congress. These experts warn that when the bubble finally bursts, it will make 1929 look like a walk in the park.

Last week saw jittery investors as the euro hit $1.32 and the dollar tumbled - again. The U.S. currency continues to fall in dangerous levels against rival currencies throughout the world. Asian banks have traditionally held their reserves in U.S. dollar denominated U.S. Treasury securities.

The U.S. dollar's weakness up against the euro pushed up gold last week to around $431 a troy ounce. Oil has once again jumped over the $51.00 per barrel mark. Crude is expected to remain in the $45-$50 dollar range throughout 2005.

Last week, billionaire investor, George Soros, who spent tens of millions of dollars to unseat George Bush, Jr., in the last election, warned at a recent conference in Saudi Arabia that if Middle East oil exporters and Russia would switch some of their revenues from dollars to euros, it could push the U.S. to a "tipping point." Billionaires like Warren Buffett have been buying up gold at a rate that most Americans can't even relate to, but those in the industry say Americans should pay attention when someone like Buffett is giving up the paper for gold.

Tension in currency and stock markets last week were prompted over Sir Alan Greenspan's testimony in front of Congress and worries that a rise in inflation could promopt the nation's bank, the Federal Reserve to step up interest rate increases.

In his recent column, 'Four Fed Hikes and a Funeral,' Ron Kirby had this to say about one of the government's largest debt obligations:

"The myth of the social security trust fund died last week. The lack of candor not withstanding, on the part of his eminence – Easy Al Greenspan; enough layers of the onion were peeled back that it was revealed for once and for all – more rotten onion. Actually, for those who could still bear to watch and listen without crying, they learned that the system is, in fact, worse than broke. Admittedly, a heck of a lot of folks still don’t get it. This fact is pointedly articulated by Jim Puplava in his Financial Sense Newshour [Feb 19 -1st hr] and his take on Alan Greenspan’s semi annual testimony to law makers up on Capitol Hill last week. Listening to the Big Easy explain the state of solvency [or lack thereof] to the esteemed Congresswoman-D, N.Y., Carolyn Maloney last week provided us all [as if it was needed] with conclusive evidence as to the lengths he will go to – to twist, pervert and otherwise obfuscate our reality. I use the term “our reality” only because I know, in my heart of hearts, the man really knows better."

Bob Chapman, known for his uncanny accuracy in predicting the markets and the financial pulse of America's economy, had this to say in his International Forecaster newsletter:

"Over the past decade, productivity growth on average has been about 2-1/2%, which is historically normal. It has not been 4-5% as described by government statistics and Sir Alan Greenspan. This is simply another lie in the process of psychological warfare, which is used to brainwash the American public. There has been no productivity miracle, but there has been a budget and current account balance disaster. Real rates of return on investment have not come from productivity but from the use of third world slave labor. It is similar to profits of the opium trade between India and China, which British and American families engaged in during the 19th century. This is how the great American fortunes were begun and how the British Royal Family became enormously rich.

"This exodus of manufacturing capabilities over these ten years has caused US exports to drop from 24% of GDP to 13% of GDP. As this transpired, deficits continued to grow and naturally the dollar began its decent. That decent was not allowed to occur until five years ago, because prior to that the Clinton administration via Treasury Secretary Robert Rubin artificially increased or stabilized the dollar. That was accomplished via the working Group on Financial Markets and the Federal Reserve’s monetary policy, the use of the repo pool and the suppression of gold prices. This false dollar value caused imports to exceed exports by some 50%.

"Cheap foreign goods become even cheaper and that excited the Fed because it suppressed inflation. There was an assist as well as exporters began to accumulate large dollar balances, which they in turn used to buy US Treasuries and agencies, which continued to allow the profligate spending of the American consumer. The result was a relentlessly rising trade and current account deficit. This easy money and credit underwritten by foreigners and the Federal Reserve exacerbated the situation by allowing spending to exceed income as real wages fell under the pressure of outsourcing and illegal immigration. In order to maintain their lifestyle, consumers have fallen deeper and deeper into debt. The Bureau of Labor Statistics tells us that hedonically our inflation is 3.3%, when in fact it is considerably higher. That phantom inflation has bitten deeply into consumer purchasing power.

"Under free trade and globalization, the more we import the less we produce. We can never compete with third world wages. That is why we always had tariffs, duties and imports. Had we not had them, America would have never prospered over the last 225 years. America’s economy would have always been inundated with cheap foreign goods and our standard of living would be that of a third world country.

"When we import goods our purchasing power falls and no real wealth is built within our country, and as you well know our jobs are shipped to the third world. Furthermore, we do not need cheap goods. We did just fine before those cheap goods were allowed to arrive in such numbers. If we do not stop free trade and the machinations of WTO and NATA or CAFTA and FTAA, were they to become law, we would be doomed. Generally, both political parties back these treaties and amnesty. Our elected representatives know in most cases over 60% of their constituents are opposed to these issues, yet they continually vote for them."

Not everyone is enamored of the privately owned Federal Reserve Banking system. Several years ago, the Von Mises Institute at Auburn Univeristy commented, "Today the Fed attempts to coordinate world-wide inflation as the major banks once attempted to coordinate nationwide inflation. The major banks once agreed among themselves to bail out bankrupt banks to prop up the domestic financial system; now the Fed bails out central banks of other countries to prop up the entire international financial system. The logical end of this monetary interventionism is a single world-wide central bank with unlimited, coordinated inflation: in short, the dream of John Maynard Keynes. "But why would anyone desire this, especially after a century of Fed-caused inflation, business cycles, world wars, welfarism, statism, financial insecurity, and cultural collapse? Government and its connected interests do, but for everyone else, it would be a disaster, no matter what Alan Greenspan says." It would appear that the same conditions exist today and that not much "recovery" has been made, but in fact, the debt load continues to stagger even long time market investors and econonomists.

Pros say their position is right on the mark and the worst is yet to come. Before the crash in 1929, the premier economists of the time who supported the monetary policies of the day, reassured the American people that all was well at Wall & Broad. History shows they were dead wrong. While most Americans believe the 1929 stock market crash caused the Great Depression of the '30s, others point to the actual cause being the Federal Reserve's manipulating the money supply during the 1920s and 1930s.