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?"
|
I also gave you 2004 figures...all to debunk your *claim* that wages weren't increasing.
Expressed in 1982 Dollars, that weekly rate had further INCREASED to $279.68 by 2004. http://data.bls.gov/cgi-bin/surveymost
Get it. Your claim. Debunked. Again. There's a pattern here...
Same thing was said about the catastrophe theory people who warned about the statistical risk with the known flaws in the shuttle program design. They predicted a calamity of around 1 in 20 launches. When we go long stretches of success, we mistakenly assumed we are immune to the probabilities. It ain't so, as we learned tragically with Challenger, and Columbia. Same thing with the economy. We have a whole generation of stock managers whose only experience is with markets, and economies, that grow. Hence, they don't understand why we can't allow hemmorhaging at these levels. They don't understand the limits to the underlying industrial economy that underpins the whole thing.
The euro started out at $1.20. It has been hovering around there.
It seems to me the buffets et al are taking advantage of the former weak euro policy. Who is gaming who?
Nope. Get out of the rain. You're soaked.
Yeah, that whole Crash of '87 and Internet Collapse of 2000/2001 was completely missed by today's generation...
< /mocking! >
Yes, inflation is a cruel tax. Most people are blind to the true cause of inflation- the ole printing press. 1913 was a terrible year for Liberty and Capitalism. Bush has to convince Congress for "real" cuts. It would be nice if 20% of all federal desk workers were shown the door and their pensions revoked. Oh, but that will only happen in Fantasyland.
The new Viper looks like a Miata. Feh. Ick.
The new Corvette rocks, on the other hand!
Anyways, the crash coming is a whole order of magnitude beyond. Think exponentially.
Correct, the government contracted the money supply by 1/3 after the 29 crash. Milton Friedman has proved that the government was the cause of the Depression. It is government interference in economic matters that always makes ALL problems worse. I can't remember the book, but he definitely laid out a brilliant expose of government arrogance. I think he said the Depression would have lasted under three years if the government did nothing. Instead we suffered under FDR and the resulting Socialism of Social Security and the Withholding tax.
I remember the panick mongers who wrote stock market panic books. I remember one which was published with 1990 on the cover, then republished with 1995, and then republished with 1999.
I wonder how much of this is facilitating SPECULATION rather than INVESTMENT.
How many times has the public been suckered by such panic stories? If a money "investment" is hitting the MSM then it is already too late to invest.
We agree. The Fed is raising rates at a time when the dollar is weak, unlike 1999/2000 when they were raising rates and the dollar was extremely strong. However, they still run the risk of inverting the yield curve later this year if they keep on the same pace.
Your data stopped at 1997. Since that time, expressed in constant 1982 Dollars, that weekly rate has further INCREASED to $279.68 by 2004. http://data.bls.gov/cgi-bin/surveymost
that is true, it was the contraction in the money supply after the stock market crash that actually caused the depression. I will give greenspan credit for that - he did not allow that to happen this time after the stock market bubble collapse.
alot of theories flying here - I am only sure of one thing - if china floats the yuan, that will ease alot of problems for the US. we must break the chinese currency peg.
Only in your mind. For the rest of the U.S., we'll all still be laughing at you nonsensical doomsayers for decades and decades to come.
You seem to be so ANGRY.
My prescription: Don't take those DNC "talking points" so SERIOUSLY.
I should hope you would recognize that the FED's plan to slowly raise our interest rates is PROOF that they understand that the liquidity injected into our economy to counter reduced monetary "velocity" after 9/11 is no longer needed. And PROOF that they're doing a good job.
Regarding wages: The daughter of a friend of mine has just completed her MBA. Her old job paid $50K. Her new job pays more than $150K. To me, this proves that people who work to aquire useful knowledge will be rewarded in our dynamic economy. As everyone knows: "no pain, no gain."
And regarding "high-priced health-care": THAT problem will be cured when Congress acts to stop our "malpractice lawyers" from scamming our healthcare "system" at OUR expense. That day is coming soon, IMHO.
You seem to be so ANGRY.
My prescription: Don't take those DNC "talking points" so SERIOUSLY.
I should hope you would recognize that the FED's plan to slowly raise our interest rates is PROOF that they understand that the liquidity injected into our economy to counter reduced monetary "velocity" after 9/11 is no longer needed. And PROOF that they're doing a good job.
Regarding wages: The daughter of a friend of mine has just completed her MBA. Her old job paid $50K. Her new job pays more than $150K. To me, this proves that people who work to aquire useful knowledge will be rewarded in our dynamic economy. As everyone knows: "no pain, no gain."
And regarding "high-priced health-care": THAT problem will be cured when Congress acts to stop our "malpractice lawyers" from scamming our healthcare "system" at OUR expense. That day is coming soon, IMHO.
"You don't understand the currency markets. They didn't 'make' money by buying foreign currencies. They simply avoided 'losing' money by selling their dollars. Everyone who has dollars has lost 23% of their money during the last few years."
Thankyou Monday for a rare moment of clarity.
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.