Posted on 02/03/2005 8:40:47 AM PST by Paul Ross
Thursday, February 3, 2005
Gates, Buffett, China Posted: February 3, 2005 1:00 a.m. Eastern
© 2005 WorldNetDaily.com Decisions by the world's two wealthiest men to bet on a further weakening of the U.S. dollar, coupled with China's lack of confidence in American currency should grab the attention of every working person, says Craig Smith, CEO of Swiss America Trading.
Microsoft Chairman Bill Gates is following the example of Berkshire Hathaway Chairman Warren Buffett, who made a pretax gain of $412 million in the fourth quarter of 2004 by buying foreign currencies. Citing widening U.S. trade and budget deficits and a federal debt of $7.62 trillion, Gates said in a TV interview at the World Economic Forum in Switzerland last weekend he expects the dollar to extend its three-year decline. "I'm short the dollar," Gates said, according to Bloomberg News. "The ol' dollar, it's gonna go down."
Smith, whose company specializes in tangible assets, told WorldNetDaily he can't believe this news is not the big headline across the nation. "When I saw this quote, literally I had to catch my breath," Smith said. "This is a clear-cut signal that the people who know money are running -- they are not walking -- in my opinion, they are running from the dollar." Smith said the actions of Buffett, worth more than $42.9 billion, and Gates, $46.6 billion, are significant in light of the lack of confidence recently expressed by leaders of the world's fastest growing economy, China, which has its currency pegged to the dollar. Fan Gang, director of the National Economic Research Institute in Beijing, said last week at the World Economic Forum that "the U.S. dollar is no longer -- in our opinion -- a stable currency and is devaluing all the time." Chinese Central Bank adviser Yu Yongding also has chastised U.S. policy makers, saying, "The U.S. should take the lead in putting its own house in order."
Hedging your bet Since the beginning of 2002, the dollar has dropped 26 percent against a basket of six major currencies, and the trade deficit grew to a record $609 billion. In addition, the Bush administration expects the budget deficit this year to hit an all-time high of $427 billion.
Smith notes that big investors such as Buffett, Gates and the Bank of China can hedge their portfolios by shorting the dollar -- making a profit off of its decline -- but the average person must turn to tangible assets such as gold. "That's why this [news] is music to our business," he said. Dollar-denominated investments such as retirement, 401K, college and savings accounts are in jeopardy with the currency's slide, Smith said. "An average American has to ask himself this question, 'If the two richest men in the world are abandoning the dollar, why should I stay in it?'" Stephen Moore, senior fellow in economics at the Cato Institute in Washington, told WorldNetDaily, he still believes it's anybody's guess which way the dollar will head. "These guys have been famously wrong in the past," Moore said, referring to Gates and Buffett, who are partners in investment deals. "I don't think there are any gurus who know what is going to happen." Moore says he has faith in the Bush administration and Federal Reserve Chairman Alan Greenspan, whose announcement today of a quarter-percent interest-rate hike led to a rise in the dollar. "I think the dollar has fallen about as much as it should," Moore said, "and the fact that the White House and Greenspan have made it clear that the dollar's decline is not good for the consumer makes it more likely it will be addressed." Smith points out, however, that when the dollar began sliding in 2000, then-Treasury Secretary John O'Neill said the Bush administration would maintain a strong dollar policy. When O'Neill was replaced with John Snow, the new secretary said the same thing. "It still kept falling," Smith said. "We can't depend on the dollar, with the debt, the twin deficits and the trade gap." Smith points out the silver lining that usually accompanies a drop in the dollar -- an increase in exports because U.S. products become cheaper for foreigners -- has not materialized. In fact, the November report was predicted to show a trade deficit of some $50 billion, but instead turned out to be $60.3 billion. Losing our place? Greenspan has expressed concern that the deficits poses the risk that investors may stop buying U.S. assets, propelling the dollar even lower. In that situation, Smith said, interest rates will have to rise in order to encourage people to hold on to the dollar. But consequently, he warns, the "stock market goes in the toilet." Smith said his big concern is that ultimately the U.S. may lose its place as the reserve currency of the world. He speculates that this possibility may be behind the investment strategies of Gates and Buffet. "We are first world reserve currency issued by a debtor nation," Smith said. "How long will the rest of the world accept that?"
|
If they are truly running from the dollar, then they ought to stop outsourcing their employees to foreign countries, where they will have to pay them more since they must pay in foreign currencies.
So let's start calling in our debts from WWII, and all the relief efforts we've provided aid in since. How about that?
Then why don't you float the Yuan Mr. Yu?
Since the Federal Reserve has complete control over the vaue of a dollar, this expectation means that Fan Gang believes the Federal Reserve will make big mistakes in monetary policy.
I don't think the Fed will make mistakes.
There. Sort of blows up their whole fantasy doomsday scenario whenever you point out that your house, stocks, guns, and cattle all go up in value when the Dollar declines...
It's government spending. The largest deficits in history. It won't be long before inflation takes off in the US and unemployment starts heading higher. These, as well as increased exports, always lag currency devaluations but are certain to follow.
Figures.
These three men, all Democrats, are abandoning their country's currency in time of need.
If they want to make money in currency trading, fine. They should just keep their mouths shut and stop denigrating the very currency which enables them to be millionaires in the first place.
NRST will fix this very quickly.
"There. Sort of blows up their whole fantasy doomsday scenario whenever you point out that your house, stocks, guns, and cattle all go up in value when the Dollar declines..."
Wrong. Their value stays the same while the dollar declines. The problem with this is you still have to pay capital gains taxes on the (apparent) increase when you sell these assets even though their overall absolute value has stayed the same.
Inflation is just another way for the government to steal our money. It is especially bad for people who have large savings.
DEFICITS
RECKLESS SPENDING
TRADE DEFICITS
DEFICITS
RECKLESS SPENDING
TRADE DEFICITS
I believe you are quite mistaken. They have some levers to pull, but hardly anywhere approaching "complete control". The trade imbalance represents a financial Tsunami wiping away U.S. capital assets and reserves. Changing traffic lights on the streets won't stop, let alone change the direction of, the rushing waters.
Yes. And the much preferred level for the dollar when it happens is at or near its historical low.
No, Dear Child. The very definition of "inflation" is that things cost more...that means that things have a higher price...things like your home, guns, stocks, and cattle.
And there is no problem with paying capital gains taxes...such taxes are typically *less* than your income taxes, in fact. Moreover, paying a 20% capital gains tax on a 50% gain with 25% devalued Dollars is hardly going to keep prices static or lose anyone money.
Your problem is that you don't want to adapt. Animals that don't adapt become extinct.
So if you insist on keeping your wealth in the form of cash (which we all know is going to decline in value), then it is your savings that will become extinct.
In contrast, if you invest in assets like stocks and homes, then your wealth will increase instead.
Using money to "store" your wealth is a bad idea. Money is meant for trading, not wealth storage. At least not in the modern era.
Store your wealth in assets. Be smart. Thrive.
Wrong. Government spending has virtually nothing to do with the trade deficit, except when we do stupid things, like use our hard-earned taxpayer dollars to buy foreign-made weapons. Putting our own industry out of business... The Death-Spiral continues, because we are still cursed by having Cato-Hags riding our backs in the U.S. government and media.
Hmmmmmm..............
......A coming creation of an Americas',...."NAFTA" Central Bank and a "NAFTA-Currency".....for all NAFTA Countries?
naw
/Sovereignty and freedom of speech-think?
Can you elaborate on this, this sounds interesting...and slightly Bush-esque.
Call me for a loan when the Euro-weenies suffocate on the socialist sock their choking on..
OHHHH NOOOOO!!!
WE"RE DOOMED!!!
HOW CAN WE SURVIVE PRIME RATES OF 18%?
MORTGAGE RATES OF 16%?
INFLATION OF 14%?
Oh?
What's that?
The Prime Rate is just 5.50%? 30-year mortgages are just 5.19%? Inflation is just 3%?
Never mind....
PS: "Foxey-Loxey" Alert: Mr. Smith seems to want to "help us out" by selling us some of his "gold". LOL
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.