What's in YOUR Portfolio? ... Shrinking ... Dollars?

Dec 3, 2004


MARKET NEWS DIGEST
-> Craig Smith tells CNN he expects $500 gold -IFN
-> Investors Flock to Coins Amid Rising Metal Prices -WSJ
-> Dollar Drops After U.S. Jobs Report Disappoints -Bl
-> Stocks rise despite job concern -CBSMW
-> Gold closes higher as euro scales record peak -Reuters
-> Oil Falls as Supply Rises, Speculators Reverse Bets -Bl
-> Social Security reform 'could worsen deficit' -FT
-> SS FIX: "Increase National Savings" Says Greenspan
-> For many retailers, holiday sales tepid -AP
COMMENTARY
-> INFLATION: EXPECTING THE INEVITABLE -Craig R. Smith, SATC
-> GOLD ETFs ... Where's the BEEF? -Dr. Fred Goldstein, SATC
-> FIFTEEN REASONS TO OWN GOLD -John Embry, Mises.org
-> Why the World Needs a Weaker Dollar -Stephen Roach, Morgan Stanley
-> GOLD-BULL JITTERS: Where will it all end?, Alex Wallenwein
-> WHEN THE DOLLAR FINALLY HITS THE PAVEMENT - Bill Bonner, DR
-> NEEDED: A Long-Term Strategy in a Short-Term World -Dennis Peacocke
-> BIBLE STUDY WITH A TERRORIST -FridayFax
-> * SPECIAL: GIFTS THAT WILL APPRECIATE OVER TIME!
FOUNDERS QUOTE OF THE WEEK

"The happiest moments of my life have been the few which I have past at home in the bosom of my family."

-Thomas Jefferson


WATCH! CNN rediscovers gold w/ Mr. Smith Watch Craig R. Smith live on CNNfn Market Call LIVE Thurs., Dec 2nd for an overview of the 21st century "Gold Rush."

CNNfn "Market Call w/ Susan Lisovicz" on Gold Rush, Program Transcript

CNN: Gold is up 73% since 2001 and shows no sign of pulling back. How do you explain golds’ rocket higher?

CRS: A lot of it has to do with the drop value of the U.S. dollar, and a lot of it has to do with the fact that for the first time in many years the world is returning to something that throughout the millennia has been a common denominator amongst nations (GOLD). Everybody agrees that gold is money. It has been sought after for thousands of years by various civilizations and now when we live in the age where currencies are fluctuating, there is so much uncertainty gold has become very attractive again.

CNN: Its like back to the future. Are you saying that basically, investors only in recent years have rediscovered the value of gold?

CRS: It’s interesting that you say that, because I believe that this is the case -- that’s why I wrote the book “Rediscovering Gold in the 21st Century.” On my website, swissamerica.com , I go into depth talking about how investors are looking for alternatives when interest rates went to 2 and 3 percent and you couldn’t get returns. Where was the best place to put your money and diversify? Investors have, obviously, most of their money in the stock market, but maybe a little of your money in gold and in a tangible that is increasing in value would make sense. Investors are starting to go back that way. There was a big article in the Wall Street Journal yesterday, discussing that many people are starting to look at gold again as a small alternative to diversify their portfolio -- maybe 5 or 10 percent. There is going to be a big temptation, if you will, for people to put too much money into gold because it has been doing so well, as it relates to return. I would say 5,10, maybe 15 percent diversification into gold and then the rest in traditional stocks, bonds, treasury bills, money markets, etc.

CNN: So 75-80% of the average portfolio should be: stocks, bonds, t-bills -- that kind of thing, and then some in gold. Would you say that investors who suddenly get into bullion have missed the big moves higher?

CRS: That is a great question, and I don’t think they have this time. There are many people suggesting that gold could go to $1,000 an ounce We have to keep in mind the last time gold had this type of run…

CNN: And it’s about $450.00 now?

CRS: It’s $456.00 this morning, another sixteen year high. We saw the last time…

CNN: When would you see a thousand? In a year, two years?

CRS: Well I hate to predict because you know how that works. Many people say $1,000 gold is in the future. I think $500.00 by the end of the year is a very realistic number. I know we are only a few weeks from that, but $1,000.00 is a very legitimate number. Because, if you remember, the last time it went up it hit $850.00. I would caution your viewers though there are many ways to own gold, and, unless you do it the right way you could be asking for trouble.

CNN: Can you quickly outline some of the ways you can own gold? I mean there is something as simple as owning just physical possession of coins right? That’s one way.

CRS: Sure and we believe that is actually the best way. Also, gold exchange traded funds now on the stock market under the symbol GLD that’s actually a representation of the price movements of gold, but you really don’t own the gold, but it’s another way to go. Gold shares have been doing incredibly well if your in the stock market.

CNN: Mining is that what you’re talking about?

CRS: Sure, Newmont, Barrick, I don’t want to give anyone a particular endorsement.

CNN: Do you own any of the stocks?

CRS: No I do not own any of them. But I do own the personal, physical gold, and I must tell you if I look at my portfolio, my real estate and my gold over the last three years has done nothing short of explode. I think you’re going to see that trend for sometime to come.

CNN: That’s interesting real estate and gold -- two very tangible things – right! Thank you, Craig Smith, CEO of Swiss America, author of Rediscovering Gold in the 21st Century.

ORDER FREE DVD "CNN REDISCOVERS GOLD"

CNN Archives on Gold Rush, 2003, 2002 and 2000

Related Story:
12-2-04 -- New wave of gold rush hits China -ChinaNewsBEIJING, Dec. 2 (Xinhuanet) -- The gold rush is reaching a feverish pitch in major cities across China, China Daily reported Thursday. In a Beijing store, 300 kilograms of gold bars minted by the China Gold Coin Inc to commemorate the Year of the Rooster, going for a retail price of 125 yuan (US $15.60) a gram, were sold out within seven hours on November 19.


MARKET NEWS DIGEST


Investors Flock to Coins Amid Rising Metal Prices -WSJ
By JEFF D. OPDYKE
Staff Reporter of THE WALL STREET JOURNAL
December 1, 2004; Page D1

Rare coins are starting to attract investors more at home with stock brokers than coin dealers.

The interest in coins comes as sophisticated investors are increasingly looking for assets outside of the U.S. stock market, which many market observers expect to post only modest gains during the coming year. In buying rare coins, individuals not only acquire a collectible asset, but they are also getting exposure to precious metals. The prices of gold and silver, from which many popular U.S. coins are made, are both rising smartly.

The Internet and coin-grading services are playing a part in drawing a new breed of coin investors. The Internet allows collectors to buy and sell rare coins at locations other than their local coin shops. The grading services authenticate coins and grade them based upon how closely they resemble a freshly minted coin, making it easier to certify that the coins being traded are investment grade. And electronic registry services that have sprung up on the Internet during the past few years let investors register their collections online and compete against others in building the highest graded, most valuable sets.

All this has helped make investment-grade coins nearly as liquid as the stock market. The coin market even has its own index -- the CU3000 Rare Coin Index. During the past year, that index of the 3000 most-actively traded coins, has gained about 7.5%, while the Standard & Poor's 500-stock index is up about 11.5%. In the past three years, the coin index has gained more than 18%, far outpacing the S&P, though coins are off by about two-thirds from their high in 1989.

The coin market presents risks. Novice collectors often get burned, despite the Internet and grading services. Moreover, many smaller shops are popular but can undercut sellers and overcharge buyers, some dealers and collectors say. And the precious-metals market is notoriously volatile.

Also, coin prices have moved substantially, meaning investors aren't buying at bargain levels any more. Still, coin experts say, coins are about two years into a bull-market that, if it mimics history, will last four or five years.

"There is a lot of smart money going into coins right now because the wealthy individuals see very attractive valuations," says Mark Salzberg, chairman of Sarasota, Fla.,-based Numismatic Guaranty Corp. of America, or NGC, a firm that grades and certifies the authenticity of coins. These are individuals "who have the money to come in and buy the ultra-rarities."

In addition to the lackluster outlook for stocks, the weak U.S. currency is also driving people to hard assets that aren't tied to the dollar. "The dollar is decaying right before our eyes and people want to own those assets not directly tied to the dollar, hard assets," says Geoffrey Hodes, a vice president at Monex, a Newport Beach, Calif., precious-metals trading firm.

And while gold and silver bullion are less expensive per ounce than coins, "bullion is not beautiful or sexy to look at and there's no story behind," he adds. "Rare coins have all that. It's like collecting art."

An ultra-rare 1933 Saint-Gaudens-type gold coin -- one of only a few that still exist since most were melted down after President Franklin D. Roosevelt outlawed the hoarding of gold -- sold for nearly $7.6 million, including fees, at auction two years ago. And in August, at the American Numismatic Association's annual World's Fair of Money, a rare, 1792 copper cent -- found in an old tobacco tin -- was valued at $400,000 and is expected to fetch more at auction.

Wealthy investors are gravitating toward the most popular and liquid investment coins: the $20 Double Eagles and Saint-Gaudens, each comprising nearly an ounce of gold; Morgan and Peace dollars pressed from slightly more than three-quarters of an ounce of silver; and Liberty Walking half-dollars that hold about a third of an ounce of silver.

Those coins, depending on preservation, rarity and other factors, range from a few hundred dollars to hundreds of thousands of dollars. In general, investors are building high-quality, investment-grade portfolios of various gold and silver coins for between $2,000 and $10,000 per coin -- up from just several hundred to a few thousand dollars a couple years ago. Unlike gold and silver, which investors often own only in paper form, investors hold coins directly, if only to be able to appreciate them as artwork-caliber engravings.

At auction firm Spectrum Numismatics, a unit of Greg Manning Auctions Inc. in West Caldwell, N.J., wealthy retail investors are making up a larger portion of the business these days. Through various subsidiaries, Spectrum holds upward of 130 auctions a year -- from high-end affairs hawking coins that fetch $250,000 or more, to low-end Internet auctions where coins sell for a few hundred dollars.

"People buying these days often have the intent to sell some day," says Greg Roberts, president and chief executive officer. To them, he says, "coins have become an alternative hard asset."

The discovery last year of the S.S. Republic also is piquing investor interest. The Civil War-era steamer, carrying $400,000 in gold and silver coins, sunk in a hurricane off the coast of Georgia on its way to New Orleans, and numerous high-grade coins being pulled from that wreckage are selling for tens of thousands of dollars.

Coin dealers are mainly guiding deep-pocketed investors interested in collecting. Established dealers not only locate worthwhile coins around the country, but also they can help build investment-caliber collections and design profitable exit strategies for selling off the collection. To find a dealer, the American Numismatic Association's Web site, www.money.org, has links to what it considers to be reputable ones.

Investors generally demand coins be graded independently to ensure authenticity and to determine a coin's mint state, or how closely it resembles a freshly minted coin. Coins are graded on a scale of one to 70, with 70 being perfect. Investment-grade coins typically start at MS65 (MS stands for "mint state"), though with some particularly rare or historically significant coins, lower grades are acceptable. Graded coins are locked in sealed, tamper-resistant plastic holders, what the industry refers to as "slabs."

Not all slabbed coins are equal, though. Grading services vary in their quality, and "that's where new investors typically get burned," says Barry Stuppler, a rare-coin dealer and president of the California Coin and Bullion Merchants Association. Investors looking for bargains often jump at seemingly high-grade coins graded by low-tier firms. But they end up overpaying for what turns out to be an inferior coin, Mr. Stuppler says.

The most subtle scratch or flaw can drop a coin into a lower grade and result in a big difference in value. With an 1891 Morgan silver dollar minted in Carson City, Nev., for instance, a very narrow grade shift of MS67 to MS66 changes the value of that coin by about $25,000, according to Professional Coin Grading Service, or PCGS, in Newport Beach, Calif.

PCGS and NGC are widely praised, and coins graded and slabbed by these two grading services routinely trade just on the basis of their reputations. Independent Coin Grading Co., or ICG, and ANACS are gaining respect but still lack wide acceptance. The other services, according to coin-dealer surveys, collectors and independent industry experts, are widely dismissed as too liberal with their standards, and the coins they grade are generally deeply discounted to account for grade inflation.

Of course, you don't have to be rich to invest in coins. In fact, the lower end of the market is booming, too. For instance, Jefferson nickels minted in Denver in 1938 -- the first year the U.S. Mint released that series -- have been hot for the past year, and today the most immaculate examples of those five-cent pieces fetch upward of $2,000 each, according to PCGS, which also produces a much-watched price guide for collectible coins.

http://www.wsj.com

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Oil Falls as Supply Rises, Speculators Reverse Bets -Bloomberg

Dec. 2 (Bloomberg) -- Crude oil fell for a third day, reaching an 11-week low, as rising U.S. inventories caused speculators to place bets on falling prices.

Higher OPEC output and warm weather in much of the U.S. may boost fuel stockpiles in the weeks ahead. Heating-oil supplies rose 2.2 percent last week, the biggest gain in two months, a government report showed. Traders who forecast a market's direction by analyzing patterns in prior price and volume data started selling futures when support levels were breached.

``It's amazing how quickly sentiment changed,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``U.S. crude-oil inventories and OPEC production have been pointing to lower prices. The only thing the bulls were holding on to was the heating-oil concern and now that is gone.''

Crude oil for January delivery fell $1.39, or 3.1 percent, to $44.10 a barrel at 10:21 a.m. on the New York Mercantile Exchange. Prices fell to $43.95, the lowest since Sept. 17. Oil has declined 21 percent from a record of $55.67 on Oct. 25. Futures are 44 percent higher than a year ago.

In London, the January Brent crude-oil futures contract fell $1.61, or 3.8 percent, to $40.70 a barrel on the International Petroleum Exchange. Brent futures have declined 22 percent since reaching $51.95 on Oct. 27, the highest since the contract began in 1988.

More Selling

``Breaking below $45.25, which was the low on Nov. 15, was key,'' said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. ``Getting past $45 also triggered more selling.''

Oil in New York plunged $3.64 yesterday, the biggest decline since a drop of $3.96 on Sept. 24, 2001, when prices plunged because of terrorist attacks in the U.S.

``The next target is $40. We could easily see another day like yesterday,'' Silliere said. ``An avalanche doesn't stop half- way down the mountain.''

In the period from Dec. 3 through Dec. 9, heating demand in the U.S. Northeast will be 15 percent below normal, according to forecaster Weather Derivatives Inc. of Belton, Missouri. The Northeast is responsible for about 80 percent of residential heating-oil consumption in the U.S.

Stockpiles of distillate fuels, which include heating oil and diesel, climbed 2 percent to 117.9 million barrels last week, the biggest gain in four months, according to an Energy Department report yesterday. Distillate inventories fell for nine-straight weeks following Sept. 10 because of the closure of refineries and reduced imports caused by Hurricane Ivan.

``We're supposed to have warm weather in the Northeast,'' Mueller said. ``From a fundamental standpoint there is no reason why we can't fall further.''

Heating oil for January delivery fell 4.63 cents, or 3.5 percent, to $1.283 a gallon in New York. Gasoline for January delivery fell 2.92 cents, or 2.4 percent, to $1.172 a gallon.

OPEC Meeting

The Organization of Petroleum Exporting Countries will meet in Cairo Dec. 10 to discuss its self-imposed production quotas and target prices. Delegates from Indonesia and Nigeria said today they expect the group to keep its limit on output at 27 million barrels a day excluding Iraq, which has no quota.

Production by all 11 OPEC members reached 30.61 million barrels a day in October, according to a Bloomberg survey of oil companies, producers and analysts. It was the most oil OPEC has pumped since November 1979, U.S. Energy Department figures show.

http://www.bloomberg.com


Stocks rise despite job report concern -CBSMW
By Mark Cotton, CBS.MarketWatch.com
Dec. 3, 2004

NEW YORK (CBS.MW) - U.S. stocks traded higher but off their best levels Friday as a raised fourth quarter sales forecast from Intel failed to dispel concern about the strength of the U.S. economy after a weaker-than-expected November employment report.

U.S. non-farm payrolls increased a disappointing 112,000 in November while the unemployment rate dipped to 5.4 percent, the Labor Department estimated.

Economists were looking for stronger growth of about 204,000 in November, according to a survey conducted by CBS MarketWatch. None of the 42 economists surveyed forecast a figure as low as 112,000. See full story.

The Dow Jones Industrial Average was last up 29 points, at 10,614, off an intraday high of 10,643.05.

Within the benchmark index, Intel climbed more than 6 percent on its revised fourth quarter sales outlook.

IBM rose 1.8 percent on a report it is planning to sell its personal computer business.

Wal-Mart edged up 0.4 percent after brokerage Smith Barney said it preferred the world's largest retailer over Target.

The Nasdaq Composite Index hit a new intraday high for the year before paring gains, and was last trading up 10 points, at 2,153.

The tech-rich index rose as high as 2,164, surpassing the previous intraday high of 2,153 hit on January 26 as Intel's upbeat sales outlook sparked a broad-based rally in technology led by the chip sector.

The Philadelphia Semiconductor Index jumped 2.6 percent in midday trading.

The S&P 500 Index edged up 3.34 points, at 1,193.67.

Stocks came off their early highs because investors are beginning to realize the full implications of this morning's disappointing job numbers, according to Michael Metz, chief investment strategist, at Oppenheimer & Co.

"People are having second thoughts about what these job figures mean," said Metz. "They raise questions about how self-sustaining the economy is."

Metz pointed to Wednesday's personal income and spending data for October which showed that spending was outpacing wage rises.

"People are not saving anything and that's absolutely unsustainable and this figure indicates that unless we get more rapid job creation, the economy is just not going to maintain its momentum."

http://www.cbs.marketwatch.com


Dollar Drops After U.S. Jobs Report Disappoints -Bloomberg

Dec. 3 (Bloomberg) -- The dollar fell against the euro, approaching a record low, after hiring by U.S. employers slowed in November. The figures damped confidence in the economy and expectations for Federal Reserve interest-rate boosts.

Signs of slower labor-market growth magnify pessimism about the U.S. currency, which declined 8 percent in the past six months against the euro on concern bulging U.S. trade and budget deficits have left the nation vulnerable to a pullback in foreign investment.

``This is about as bad as it gets,'' said T.J. Marta, a currency strategist in New York at RBC Capital Markets. ``This is just one more excuse to sell the dollar.''

Against the euro, the dollar dropped to $1.3339 at 9:02 a.m. in New York from $1.3269 late yesterday, when it reached an all- time low of $1.3385, according to EBS, an electronic currency- trading system. The U.S. currency fell to 102.77 yen from 103.25, after earlier this week reaching the lowest since January 2000.

Demand for the U.S. currency fell after the Labor Department said the economy added 112,000 non-farm jobs last month, compared with a revised gain of 303,000 in October. Expectations were for 200,000 jobs, based on the median estimate of 75 economists surveyed by Bloomberg News. The dollar may fall to $1.35 per euro by the end of the first quarter, Marta said.

``This does raise doubts as to whether we will see interest-rate hikes at every meeting from the Fed, so it does undermine the dollar,'' said David Mann, a currency strategist at Standard Chartered Plc in London.

Rate Expectations

All 22 primary U.S. government securities dealers, firms that trade with the Fed's New York branch, predict the central bank will raise its benchmark overnight bank-lending rate a quarter-percentage point on Dec. 14, to 2.25 percent. The European Central Bank left its benchmark rate at 2 percent yesterday.

In a Bloomberg News survey of primary dealers last month, predictions for the Fed rate at the end of next year were as high as 4.25 percent. A rate increase next week would be the Fed's fifth this year.

Rate increases add to the appeal of U.S. yields relative to European yields. At 4.40 percent before today's labor report, the 10-year U.S. Treasury note yield was about 0.57 percentage point above that on German government debt of the same maturity, the most in four years.

`Setting the Tone'

The U.S. currency has lost about 7 percent against the yen in the past six months as some investors bet the Bush administration would tolerate a weaker currency to help trim the current-account deficit.

The shortfall in the U.S. current account, a measure of trade, services, tourism and some investments, rose to a record $166.2 billion in the second quarter, equivalent to 5.7 percent of the economy, up from 5.1 percent in the first quarter.

The deficit means the U.S. needs to attract $1.8 billion in foreign investment per day to keep the dollar from weakening. The U.S. federal budget deficit also reached a record in the year through September.

``I see this number setting the tone for the rest of the year,'' driving the dollar to $1.35 per euro, said Chris Melendez, president of currency hedge fund Tempest Asset Management in Newport Beach, California, referring to the labor report.

The dollar failed to get a boost last month from a surge in U.S. job growth. It fell 0.7 percent against the euro on Nov. 5, touching a then-record low, and lost 0.4 percent against the yen, the day the government reported job growth of 337,000 in October, the most since March. The government revised that figure lower today.

Record Deficit

The U.S. current account, the broadest measure of international trade, reached a record $166.2 billion in the second quarter. A wider gap means more dollars need to be converted to other currencies to pay for imports. Hafeez said the dollar needs to trade at about $1.45 per euro to $1.50 for one or two years for the deficit to narrow.

Greenspan said on Nov. 19 at the European Banking Congress in Frankfurt that overseas investors may diversify into assets denominated in other currencies. ``A diminished appetite for adding to dollar balances must occur at some point,'' he said.

http://www.bloomberg.com

Related Story:
THE IN-CREDIBLE SHRINKING DOLLAR -- 11-26-04 - By Craig R. Smith, SATC -- The U.S. dollar has lost over 40% of it's buying power since 2001 -- and that's under Bush's "strong dollar" policy! Can you image what's ahead over the next four years for the heavily indebted dollar? I can: "Trouble!" A surging cost of living! 'We the People' are the ultimate victims of the shrinking dollar. Get ready for Phase II of the gold bull market!


Gold closes higher as euro scales record peak -Reuters
Dec 3, 2004

NEW YORK, Dec 3 (Reuters) - U.S. gold futures rallied in afternoon trading on Friday, closing just shy of Thursday's 16-year high, as the market tracked the euro's jump to a record high against the dollar, traders and analysts said.

The euro hit an all-time high at $1.3458, extending the dollar's slip after a surprisingly soft U.S. payrolls report in the morning, in a broad sell-off driven partly by stop-loss sell orders.

Some traders said the euro was also spurred by a report in a German newspaper citing a high-ranking U.S. Treasury official as saying the United States would intervene to support the dollar only if the euro/dollar rate reached $1.45.

"People took the opportunity to sell more dollars and as they sold dollars gold goes higher," said Leonard Kaplan, president of Prospector Asset Management.

"Things look quite good for gold. We are basically almost at the target of $460, and I would think that $465-$480 is very possible."

In other precious metals, silver ended above $8 an ounce, in line with gold's rise, but platinum slipped from its prior eight-month peak.

Benchmark February delivery gold on the New York Mercantile Exchange's COMEX division settled at $457.80 an ounce, up $5.50, after zigzagging from $450.10 to $458.20, and just missing the 16-year high reached Thursday at $458.70.

After the close, the exchange introduced its first Friday afternoon ACCESS electronic trading session, which it said was aimed at accommodating a growing marketplace for metals products. COMEX gold and silver firmed slightly.

The new trading session runs on Fridays from 2 p.m. to 4:30 p.m. EST (1900 to 2130 GMT).

Gold briefly slumped lower in the morning but held above support at $450. Analysts had been expecting a technical correction after new highs almost daily in the past two weeks in a rally sparked by concerns about the falling dollar.

The dollar accelerated its slide Friday morning after a surprisingly soft 112,000 new U.S. jobs were created in November, the Labor Department said -- the weakest figure since July and well below Wall Street expectations of 180,000.

http://www.reuters.com

Related Stories:
Craig Smith tells CNN he expects $500 gold -IFN
12-1-04 -- Gold prices on rise -Robert Manor, Chicago Tribune -- Gold is becoming a more precious metal, with global forces raising prices to the highest in a generation. But in a gift to consumers, jewelry is largely spared from the run-up.
12-1-04 - Read "$500 in '05!" -CBS/Adens


Social Security reform 'could worsen deficit' -FT
By Christopher Swann in Washington, Financial Times
November 29 2004

Joshua Bolten, director of the White House's Office of Management and Budget, has said government finances may have to sink deeper into the red to fund the president's overhaul of Social Security.

Although the White House has not yet made detailed proposals for reforming the system - which provides retirement and disability benefits - the president is in favour of diverting a portion of payroll taxes into personal accounts. This would mean less tax revenue to fund the benefits of those already at or close to retirement.

The transitional cost is forecast at about $1,000bn over the first decade, depending on what proportion of taxes are siphoned off into the new accounts. This could be financed by a combination of reduced benefits, higher taxes or extra government borrowing.

Mr Bolten said: "The administration hasn't settled on any particular Social Security reform plan. The president does support personal accounts, which need not add over all to the cost of the programme, but could in the short run require additional borrowing to finance the transition."

He defended the long term merits of the reform, saying: "I believe there is a strong case that this approach not only makes sense as a matter of savings policy but is also fiscally prudent."

Any dramatic increase in government borrowing may be resisted by fiscal conservatives in Congress, who are worried by the ballooning deficit and fear this may undermine Republicans' claim to fiscal responsibility.

The deficit for the 2004 fiscal year was a record $413bn, or 3.6 per cent of GDP. Earlier this month Congress raised the borrowing limit to $8,180bn, an $800bn rise.

There will be extra pressures on the deficit over the new few years.

Lawmakers and the president are determined to prevent the Alternative Minimum Tax encroaching on middle income families. Originally meant to prevent high earners escaping tax altogether, it now threatens more modest earners because the income levels at which the tax kicks in were not adjusted for inflation. Fixing the problem is expected to cost about $500bn over the next decade.

But that may not be all. Charles Grassley, head of the Chair of the Senate Finance Committee, has said benefit cuts and tax increases also have to be considered. "Anybody who thinks borrowing money for the transition to personal accounts is going to solve the problem of the long-term solvency of Social Security doesn't understand the size of the problem," he said.

http://www.ft.com


Bush Social Security Plan Would Increase Deficit -Bloomberg
"The most important fix: to increase national savings" -Greenspan
By John M. Berry

Nov. 30 (Bloomberg) -- President George W. Bush and his congressional allies are plunging ahead with a plan to privatize part of Social Security that would pose a risk to the U.S. economy by adding hundreds of billions of dollars to federal budget deficits.

Adopting such a plan would ``greatly aggravate the budget problem,'' likely further reduce national savings and worsen the large U.S. current account deficit, Federal Reserve Governor Edward M. Gramlich said Nov. 17 in a speech at Hartwick College in Oneonta, New York.

``This is not trivial. This is big stuff,'' said Gramlich, a former acting director of the Congressional Budget Office who headed an advisory council that studied Social Security in the mid-1990s.

Indeed it is. The likely plan would divert a portion of the current payroll tax revenue flowing into the Social Security trust fund to finance private accounts for individuals. That would leave an additional $105 billion hole in the budget in the first year and almost double that amount 10 years out. The ultimate transition cost is estimated at about $2 trillion, Gramlich said.

Fed Chairman Alan Greenspan has also warned repeatedly, including in recent speeches in Europe, that the U.S. government needs to reduce its large budget deficits to increase national saving and gradually trim the large current account deficit.

Budget Deficit More Urgent

Fixing the federal budget deficit is a far more urgent task than fixing Social Security, which is estimated to have enough resources to pay full benefits for almost four more decades. What appears to be behind the drive to change Social Security now, even at the cost of significantly higher budget deficits, is a desire to shift the program in the direction of Bush's vaunted ownership society.

The difficulty for the president, and Congress, is that fixing the budget involves serious immediate political risks. Doing so would require cutting someone's favorite programs and raising someone's taxes. Certainly Bush isn't about to do the latter, and there is no indication he plans to do much of the former either.

The real Social Security problem is where to find the money to redeem the $1.67 trillion of government securities in the Social Security and Disability trust funds when they might be needed to pay benefits. That money has been spent on other government programs, and its availability in the future has been put more in doubt by the large tax cuts of recent years.

Prepaying `Mortgage'

Bush's Social Security ``reform'' plan simply makes the unified budget outlook worse -- no one wants to admit that. Instead, the transition cost, the impact on the budget and the need for still more U.S. borrowing abroad to finance the burgeoning current account deficit apparently all are to be ignored.

Both the White House and some members of Congress are saying that money flowing into private accounts is investment and so shouldn't count as part of the budget deficit. A commission appointed by Bush to recommend how to incorporate private accounts into the Social Security mix backed that approach three years ago.

R. Glenn Hubbard, dean of the Columbia University Business School in New York and chairman of Bush's Council of Economic Advisers when the commission's work was in progress, wrote in a recent issue of Business Week, ``The diversion of a portion of payroll taxes to personal accounts is akin to prepaying a mortgage. If the transition costs are borrowed, the resulting higher explicit federal debt in the near term is offset by lower implicit debt (Social Security obligations) in the longer run.''

Other Fixes

Let's see. Borrowing more money now, when the federal budget is deeply in deficit, to prepay a ``mortgage'' that won't fall due for many years. Does that make sense?

Conceivably, if the nation weren't so short of savings it wouldn't need to borrow about $650 billion from abroad to finance its investments. For all the economic analysis about the present value of future government liabilities, it seems doubtful that investors really equate the two.

Of course, the ``mortgage'' in this case is that long-term projections show that Social Security resources won't be adequate to pay for currently promised benefits. The reality is that there are other ways to fix Social Security's long-term shortfall.

``There is no shortage of measures that could bring the (Social Security) system into balance'' without resorting to partial privatization with its large transition cost, Gramlich said in his speech.

Hard Part

The report of the Social Security advisory council headed by Gramlich didn't produce a set of unanimous recommendations about how this could be done. It did make clear there were lots of ways the system could be made solvent in the long run.

``The hard part is not the imagination,'' Gramlich said. ``The hard part is the politics.''

Among the numerous steps favored by Gramlich would be tying the age at which workers can get full Social Security benefits to the gradual increase in longevity. And he would speed up increases under current law in the age at which full benefits are available.

Last year that age moved up to 65 years and two months from 65 where it had been since the program's inception. It will continue to increase by two months a year until it reaches 66 in 2009. After an 11-year hiatus, it will begin to rise again in 2021 and eventually reach 67 in 2027. Benefits will continue to be available at age 62, though at increasingly reduced levels as the full benefits age rises.

National Savings

Greenspan and Gramlich are insistent that the most important fix of all would be to increase national savings.

Gramlich believes that many workers would see the money accumulating in their private accounts and reduce their other saving accordingly. In addition, pressure would mount to allow individuals to use money in the accounts for other needs, such as education, rather than preserve it for retirement. In either case, national savings could fall.

After all, as Bush keeps stressing, it would be ``their'' money, wouldn't it?

Greenspan, in testimony in 1999, said, ``The crucial retirement funding issues center on how to increase our national savings and how to allocate physical resources between workers and retirees in the future. We must endeavor to increase the real resources available to retirees without blunting the growth in living standards among our working population.''

Simply borrowing more money to pay current Social Security benefits while diverting a portion of payroll taxes to buy private-sector assets and put them in individual accounts does not, by itself, increase national savings and could reduce it.

On the other hand, cutting some types of federal spending, or raising more revenue and buying those same assets probably would. Unfortunately, those options are not part of this year's debate.

http://www.bloomberg.com Related Stories:
12-2-04 -- Social Security reform now -WashTimes
11-25-04 -- Social Security reforms on the way? CNN/Money
SOCIAL INSECURITY: The Problem & Solutions - Special Report


For many retailers, holiday sales tepid -AP
Friday's big tally yields to 'modest' 2-day performance
Andy Alfaro /AP
Nov. 29, 2004

NEW YORK - The holiday shopping season began with a surge in spending but consumers faded by the long Thanksgiving weekend's close and many retailers were facing decent but hardly impressive sales.

Big chains including J.C. Penney Co. Inc. and Sears, Roebuck and Co. were pleased with their sales. But Wal-Mart Stores Inc. was less fortunate -- the industry leader said its sales in the seven days that ended Friday were disappointing, and the company lowered its sales forecasts for November. The holiday shopping season traditonally begins the day after Thanksgiving.

"Friday overall was strong, but Saturday was weak and disappointing, so together it was only a modest two-day performance," said Michael P. Niemira, chief economist at International Council of Shopping Centers. "Still, I continue to believe that this is not a bellwether for how the season will end up."

Wally Brewster, spokesman at Chicago-based General Growth Properties, which operates 224 malls in 44 states, said sales and traffic were strong on Friday, but "stabilized" the rest of the weekend. As a result, he expects sales for the weekend to increase in the low single digits, in line with modest expectations.

http://www.ap.org


COMMENTARY


INFLATION: EXPECTING THE INEVITABLE -Craig R. Smith, CEO SATC
Aug 2001 (From Chapter 6, Rediscovering Gold in the 21st Century)

"Inflation becomes a merry-go-round driven by too much money. The longer it turns, the faster it goes. On this merry-go-round are three horses - rising costs, distortions and expectations. There are no free rides. Worse yet, each ride is more expensive." --Federal Reserve Bank of New York pub., The Story of Inflation

Inflationary pressures are rapidly changing. Some investments will soar, while many more plunge. And anyone who bets on a continually rising market in which everybody profits, is destined for failure.

Inflation is the one wild card that can whip investment markets into a frenzy, cut your true wealth by half in just a few years and completely derail an otherwise sound investment strategy.

In the late '60s inflationary surprises ripped through the stock market, dropping the Dow some 35 percent. In the 1970s stocks suffered through a tortuous two-year bear market as inflation spiraled. In the '80s Paul Volcker nearly plunged the U.S. into a 1920s-style depression when he miscalculated the effect of runaway inflationť

Now after years of relative calm on the inflation front, the risk of grievous error is just as strong as at any point in history.

USA Today (6/11/01) reported that "Inflation could outpace savings for the first time in seven years" They went on to say that holders of CDs and Money Market funds yielding 3.5 to 4 percent are now facing a guaranteed loss due to rising inflation.

People who know me know that doom and gloom has never been my style. However, I do feel compelled to warn you about the risks looming ahead of you. Inflation poses an immediate danger, but also a long-term threat - especially as you reflect back on how easily you could have been protected by taking a few simple steps now.

Why do most investors overlook inflationary trends? Until recently productivity has rocketed ahead on the back of revolutionary technology that lets one worker do the job of 10. And billions of eager new capitalists have turned the bustling economies of Asia, Eastern Europe and Latin America into a competitive force like never before. But in 2001 it appears that inflation could skyrocket. Why?

Greenspan is Cornered

Faced with the onset of a business slowdown, falling stock prices, and the possibility of a recession, starting in January 2001 the Fed did just what everyone expected - they reduced the price of money. In fact, it did so more aggressively than any other time in history - dropping rates from 6.5 percent to 4 percent.

Chris Low, chief economist at First Tennessee Capital Markets confirms the inflationary implications: "Greenspan has become completely reactive. Either we'll have a recession, and he'll get blamed for being slow to ease, or he'll engineer a recovery, which will be accompanied by an inflation problem. Take your pick. Steering a middle course would be a miracle."

Caught between inflation and recession - there is no doubt about which way Mr. Greenspan will steer the economy. He would rather risk the whirlpool of escalating prices than risk being eaten alive by recession.

"The Fed chairman has few tools in his workshop. He can regulate the quantity of money, or its price," says International Speculator's Jim Grant, "but not both at once. For the past 20 years, the Fed has chosen to regulate the price, i.e., the federal funds rate. The quantity, i.e., the monetary base, is what it doesn't control."

The Fed is doing what it said it would not do, easing policy in the teeth of rising inflation rates. Why? Because they believed inflation would not be a problem due to increased productivity.

Rising levels of productivity - providing more and more goods and services per unit of input - were supposed to offset increases in the supply of money. But what if U.S. productivity continues dropping, as it has for the last three quarters?

Productivity has been a key factor in the economy's last 10 years of growth - the longest expansion in U.S. history. As workers produce more per hour, companies can sell more, helping profits while keeping workers' wages in check and limiting inflation pressures.

Many economists have credited productivity gains in large part to businesses' investments in computers and other technology, but some fear that the productivity boom is over, at least for now.

Slowing productivity and rising labor costs raise the specter of inflation. Clearly inflationary pressure is building and lower interest rates offer Americans no guarantee that the money supply will not explode in the days ahead - causing double-digit inflation to crush any rally in the stock and bond markets.

Good Times = Bad Loans ... MORE ...

Gold's 16-year high prompts new urgency for investors -WND
(
Order the book!)

Read more about "The In-credible Shrinking Dollar" and how gold counter-balances the rising cost of living.


GOLD ETFs ... Where's the BEEF? -Dr. Fred Goldstein, SATC
Nov 29, 2004

Remember the old WENDYS commercial? An elderly woman askes: "Where's The Beef? I think todays' investor in StreetTracks, the World Gold Councils' new ETF should be asking "Where's the gold?!"

This equity (which trades on the NYSE as GLD) has a share price of 1/10 of an ounce of gold. I believe the public has been misled as most investors believe they are actually buying the physical metal.

Most recently, James Turk editor of the Free Market Gold and Money Report and proprietor of goldmoney.com has questioned the procedure in auditing the supposed gold of this new ETF as well as it's explanation in it's bylaws.

According to Turk, the prospectus describes this as a "gold tracking" equity with no viable way to audit the physical bullion. This appears to violate security laws as mutual funds must show that they own the securities they purport to sell, or otherwise unscrupulous funds could just scam the public.Each and every investor should question the SEC as well as their broker to get the real story on this gold fund.

A bird in the hand most definetly applies to this fund. I believe an investor is much better off with real gold bullion or numismatic gold coins in his hand than this questionable fund.

For five years GATA.org has tried to get the real gold story out to the public. Other than a few token articles in the US press the UNTOLD Story of Gold continues to be covered up. Getting the real, hard facts on this current gold market is most important in making smart investment decisions.

We are committed at Swiss America to help all investors learn the truth about gold as we enter an exciting new phase in this opportunistic gold bull market.

Read more by Dr. Fred ...


Fifteen Reasons to Own Gold -John Embry, Mises.org
Sep 2003 (Republished 11-29-04 by LewRockwell.com)

1. Global Currency Debasement:

The US dollar is fundamentally & technically very weak and should fall dramatically. However, other countries are very reluctant to see their currencies appreciate and are resisting the fall of the US dollar. Thus, we are in the early stages of a massive global currency debasement which will see tangibles, and most particularly gold, rise significantly in price.

2. Investment Demand for Gold is Accelerating:

When the crowd recognizes what is unfolding, they will seek an alternative to paper currencies and financial assets and this will create an enormous investment demand for gold. To facilitate this demand, a number of new vehicles like Central Gold Trust and gold Exchange Traded Funds (Elf's) are being created.

3. Alarming Financial Deterioration in the US:

In the space of two years, the federal government budget surplus has been transformed into a yawning deficit, which will persist as far as the eye can see. At the same time, the current account deficit has reached levels which have portended currency collapse in virtually every other instance in history.

4. Negative Real Interest Rates in Reserve Currency (US dollar):

To combat the deteriorating financial conditions in the US, interest rates have been dropped to rock bottom levels, real interest rates are now negative and, according to statements from the Fed spokesmen, are expected to remain so for some time. There has been a very strong historical relationship between negative real interest rates and stronger gold prices.

5. Dramatic Increases in Money Supply in the US and Other Nations:

US authorities are terrified about the prospects for deflation given the unprecedented debt burden at all levels of society in the US. Fed Governor Ben Bernanke is on record as saying the Fed has a printing press and will use it to combat deflation if necessary. Other nations are following in the US's footsteps and global money supply is accelerating. This is very gold friendly.

6. Existence of a Huge and Growing Gap between Mine Supply and Traditional Demand:

Gold mine supply is roughly 2500 tonnes per annum and traditional demand (jewelry, industrial users, etc.) has exceeded this by a considerable margin for a number of years. Some of this gap has been filled by recycled scrap but central bank gold has been the primary source of above-ground supply.

7. Mine Supply is Anticipated to Decline in the next Three to Four Years:

Even if traditional demand continues to erode due to ongoing worldwide economic weakness, the supply-demand imbalance is expected to persist due to a decline in mine supply. Mine supply will contract in the next several years, irrespective of gold prices, due to a dearth of exploration in the post Bre-X era, a shift away from high grading which was necessary for survival in the sub-economic gold price environment of the past five years and the natural exhaustion of existing mines.

8. Large Short Positions:

To fill the gap between mine supply and demand, central bank gold has been mobilized primarily through the leasing mechanism, which facilitated producer hedging and financial speculation. Strong evidence suggests that between 10,000 and 16,000 tonnes (30-50% of all central bank gold) is currently in the market. This is owed to the central banks by the bullion banks, which are the counter party in the transactions.

9. Low Interest Rates Discourage Hedging:

Rates are low and falling. With low rates, there isn't sufficient contango to create higher prices in the out years. Thus there is little incentive to hedge, and gold producers are not only not hedging, they are reducing their existing hedge positions, thus removing gold from the market.

10. Rising Gold Prices and Low Interest Rates Discourage Financial Speculation on the Short Side:

When gold prices were continuously falling and financial speculators could access central bank gold at a minimal leasing rate (0.5-1% per annum), sell it and reinvest the proceeds in a high yielding bond or Treasury bill, the trade was viewed as a lay up. Everyone did it and now there are numerous stale short positions. However, these trades now make no sense with a rising gold price and declining interest rates.

11. The Central Banks are Nearing an Inflection Point when they will be Reluctant to Provide more Gold to the Market:

The central banks have supplied too much already via the leasing mechanism. In addition, Far Eastern central banks who are accumulating enormous quantities of US dollars are rumored to be buyers of gold to diversify away from the US dollar.

12. Gold is Increasing in Popularity:

Gold is seen in a much more positive light in countries beginning to come to the forefront on the world scene. Prominent developing countries such as China, India and Russia have been accumulating gold. In fact, China with its 1.3 billion people recently established a National Gold Exchange and relaxed control over the asset. Demand in China is expected to rise sharply and could reach 500 tonnes in the next few years.

13. Gold as Money is Gaining Credence:

Islamic nations are investigating a currency backed by gold (the Gold Dinar), the new President of Argentina proposed, during his campaign, a gold backed peso as an antidote for the financial catastrophe which his country has experienced and Russia is talking about a fully convertible currency with gold backing.

14. Rising Geopolitical Tensions:

The deteriorating conditions in the Middle East, the US occupation of Iraq, the nuclear ambitions of North Korea and the growing conflict between the US and China due to China's refusal to allow its currency to appreciate against the US dollar headline the geopolitical issues, which could explode at anytime. A fearful public has a tendency to gravitate towards gold.

15. Limited Size of the Total Gold Market Provides Tremendous Leverage:

All the physical gold in existence is worth somewhat more than $1 trillion US dollars while the value of all the publicly traded gold companies in the world is less than $100 billion US dollars. When the fundamentals ultimately encourage a strong flow of capital towards gold and gold equities, the trillions upon trillions worth of paper money could propel both to unfathomably high levels.

Full Story by Gary North at LewRockwell.com

More by John Embry...


Why the World Needs a Weaker Dollar -Stephen Roach, Morgan Stanley
Nov 19, 2004

A $40 trillion world economy is dangerously out of balance and seriously in need of a fix. A decline in the dollar is not a cure-all for all that ails the world, but it should go a long way in sparking a sorely needed rebalancing. That adjustment may now be under way.

Global imbalances are a shared responsibility that requires a joint resolution. America is guilty of excess consumption, whereas the rest of the world suffers from under-consumption. Growth in US consumer demand averaged 4% annually (in real terms) over the 1995 to 2003 period, nearly double the 2.2% gains elsewhere in the industrial world.

America's consumption binge has not been supported by internally-generated income growth. Instead, US consumers have borrowed against the future by squeezing saving to rock-bottom levels. The personal saving rate stood at just 0.2% of disposable personal income in September 2004 -- down from 7.7% as recently as 1992. Moreover, large federal budget deficits have taken the government's saving rate sharply into negative territory — pushing the overall national saving rate of consumers, businesses, and the government sector to historical lows.

America's saving shortfall has major consequences for the rest of the world. Lacking in domestic saving, the US imports saving from abroad in order to fund the ongoing growth of its economy. And it must run massive current-account and trade deficits to attract such capital from overseas. The United States balance-of-payments deficit hit an annualized $665 billion in mid-2004, or a record 5.7% of GDP.

The flip-side of America's consumption binge is an overhang of excess saving elsewhere in the world. This shows up mainly in the form of sluggish consumption growth and current-account surpluses in Asia (especially Japan, China, and Korea), Europe, and the Middle East. For now, America draws freely on this reservoir -- currently absorbing about 80% of the world's surplus saving by attracting an average of about $2.6 billion of capital inflows from abroad per working day. Not only has the United States turned increasingly to offshore production platforms and labor markets in recent years, it is now outsourcing its saving, as well.

This is a highly unstable arrangement. For starters, America's current-account deficit seems set to widen further over the next few years, moving into the 6.5% to 7.0% vicinity by late 2005 or early 2006. As such, the US will be asking more and more of its global financiers to fund budget deficits and excess consumption. That may be asking too much. Private overseas investors have already turned skittish in providing capital to the US, leaving overseas central banks to fill the void. Over the 12 months ending September 2004, foreign monetary authorities have accounted for 28% of total net foreign purchases of long-term US securities -- nearly double the 15% share of the prior 12-month period.

The day will come when foreign investors simply say "no" to this arrangement — refusing to fund America's consumption binge without getting a meaningful concession on the terms of financing. That's when the dollar collapses, US interest rates soar, and the stock market plunges. Under such a crisis scenario, a US recession would be all but inevitable. And a US-centric global economy would undoubtedly be quick to follow. Unfortunately, with America's current-account deficit now in the danger zone, that day of reckoning could well come sooner rather than later.

The only way to avoid this wrenching endgame is for the world's major central banks to move preemptively on the dollar, carefully managing a gradual but significant depreciation over the next several years. There are several advantages of such an approach.

FULL STORY


GOLD-BULL JITTERS: Where will it all end?, Alex Wallenwein
Nov 28, 2004

As the dollar continues its breathtaking descent, gold-bulls are getting a case of the jitters - because the metal isn't moving up as fast as they might expect - or may have hoped for. There have been days last week when the dollar dropped, but gold did not make a commensurate up-move.

At the same time, "the shares" (gold mining shares) are lagging sorely behind the already somewhat underperforming gold-bull.

On the other hand, the dollar keeps dropping and dropping, breaking through every single "floor" or pivot point out there in machine-gun fire fashion. Ratatat! Ratatatat!! And nobody in global officialdom seems willing to do anything about it. The Europeans are griping, but that's all they do so far.

What's going on?

Is there cause for concern, or is it "full steam ahead" for gold investors?

It's an eerie, somehow foreboding feeling to see the entire world elite agree that the dollar must go lower. Not that I don't agree with them. I do. What's so unnerving, so utterly suspicious, is that THEY agree!

Suddenly, since about the end of October, every single financial reporter sounds like an old-time gold bug, flailing away at the dollar, the number one representative of the establishment's financial order. What's so incredible about this is that it's the establishment folks and their media-henchmen that are now flailing harder than anyone else, it seems..

So, what is going on?

What was the last time you remember seeing mainstream investment analysts, financial reporters, and even highly-placed political appointees and central bankers all agree, without exception, that the dollar must go lower, and lower still? The only concern expressed is concern about the speed of the process, not the process itself. Compare that to what we saw during this long, boring summer, when everything was portrayed as being "just hunkidori."

It's not like the current account deficit wasn't there during this summer. In fact, it peaked in August on a month-to-month basis. It's not like it wasn't just as big as it is now. But suddenly, it is being cited in every single news report, even by Fed officials, as "worrisome."

Why all of this apparent coordination, all of a sudden?

* Is it all just a trick, a brief letting-go of the rope in a tug-of-war between the fiat-powers and the pro-gold forces? Is "fiat" seeking to upset the balance of "gold" and make it lose its footing - so that gold investors are dealt one final, devastating blow?

* Are the world's top money powers in agreement because they have "the next" reserve currency already waiting in the wings, just waiting to impose it as a "solution" when the general pain-level has risen to the point that people as a whole begin screaming for somebody to "do something"? (The latter, as you know, is always a precursor to power-mongers' taking away even more of your freedom, privacy, and property rights.)

* Is it that the fiat crowd has finally lost all control so that they feel constrained to drift where the winds of the real market blow them - and pretend that they want it that way just so the public doesn't realize how helpless they are?

* Or is it that the world's central bankers other than the US Fed have found enough of a footing economically to make them feel safe enough to co-engineer their final dollar-exit, an exit that is sure to bring the US superpower to "heel" (sort of a pay- back for the US going it alone in Iraq)?

The questions are endless, and so are the possible answers. But common sense and logic, and knowing how power-grabbers think and operate can probably guide us a pretty good ways in the right direction.

All of the "what ifs" of the world aren't going to help without a foundation to go on, and that foundation had better be the correct one, rather than one made up of fears and speculation alone.

So, what do we know?

FULL STORY


WHEN THE DOLLAR FINALLY HITS THE PAVEMENT - Bill Bonner, DR
Nov 29, 2004

Today's headlines look much those of last week.

You'll recall, dear reader, that nothing much happened between April and October. We waited and waited... and nothing happened.

But things are beginning to happen now. The dollar is falling.

What is amazing is not that the dollar is falling - everyone knew it would - but that everyone is so calm about it. It is as if a man had just jumped off the 23rd floor; a crowd has gathered to watch... but no one bothers to bring over a net!

For the moment, the dollar has barely passed the 17th floor. Everything is okay so far.

Of course, if it keeps falling like this the world's financial system will be wrecked... the stock and bond markets will collapse... there will be a crash in China... and millions of American families will go bankrupt. Already, today's paper - the Sydney Morning Herald - tells us that central banks are becoming reluctant to take dollars.

But in America, no one worries. The holiday shopping season got off with a bang, according to Bloomberg, with 133 million shoppers who bought an average of $265 worth of merchandise. Their incomes had not risen. They had no savings. But that didn't stop them. According to Visa and MasterCard, credit card sales are running more than 9% ahead of last year's sales. This year's 4-day spree totaled more than $22 billion in sales.

Mr. Greenspan's great feat has been to make Americans think they have more money to spend than they really have. Consumers' great achievement was to spend the money they didn't have on things they didn't need and without which they probably would have been better off anyway. This year's hot item, say the papers, is the DVD player. As near as we can tell, this device enables teenagers to learn bad words and pick up bad attitudes and bad manners without ever leaving their bedrooms.

At least, when the dollar finally hits the pavement, people will have less money to spend, which will probably be a blessing.

http://www.dailyreckoning.com


Needed: A Long-Term Strategy in a Short-Term World -Dennis Peacocke, GoStrategic.org
Nov 2004

Recently I read an article critiquing Mr. Bush's apparent thinking regarding the war in Iraq. No news here. The article insightfully dissected a variety of issues surrounding the topic and concluded that in order to achieve the goals currently on the table regarding the democratization of the Middle East, it would take possibly sixty years. Clearly no American President would ask any current electorate to embrace such a long-term strategy in such a short-term political world.

Nearly twenty years ago, amidst the pains and uncertainty of the so-called "Cold War," I began a search within the Washington, D.C. establishment to see if any serious group in those administrations had any long-term strategy to overcome the communist world. It was not an academic exercise for me because my own children's fate in this world was very much at stake for me in the quest.

As some would expect, I found no such long term strategy. I was assured, by someone who likely would know, that only "military contingencies" existed. No serious politicians thought the other way, they said. Yes, a few "think tank" organizations played with such long-term strategizing, but beyond that, there really was nobody home. My disillusionment was profound as I cried and pondered living in this fragile reality in my D.C. hotel room, four years into the search. I only could conclude that God alone among the "powerful people" thinks like that.

I am not saying that Mr. Bush has embarked on a sixty year strategic exercise. The author of the article only was saying that the President's policies carried with them the possibilities of a very long sustained journey, if indeed the goal was to carry the Middle-Eastern Muslim world into a free and democratic society of cultural liberty. What I am saying is that I profoundly doubt the possibility of any major American politician ever suggesting such a line of thinking. Why? For two reasons: One, Americans are short-term thinkers because the spirit of Americans is profoundly pragmatic and short-term; and Two, because our four year electoral system does not permit a climate of long-term strategic thinking that transcends political parties and builds upon sustained applications of long-term goals. Our hope is the "new," coming out of our origins as, "The New World."

Since human beings are flawed, it may be a gift that such long-term policy applications don't exist. Maybe God is the only one permitted such luxuries. Certainly He is the only one who can control them. But I nevertheless wonder sometimes about China or Japan. Certainly China thinks very long-term and with a profound sense of historical continuity. We'll see.

While the western world plays, the eastern world waits. If Christianity is truly moving eastward, as the pundits say, so is the future. The future always has belonged to the ones preparing for it, and that is... THE BOTTOM LINE.

http://www.gostrategic.org

[Ed. Note: Recommended listening: Strategic Thinking by Dennis Peacocke
Recommended Reading/Listening: "The Big Picture" featuring Dennis Peacocke.]


BIBLE STUDY WITH A TERRORIST- FridayFax
CAUGHT IN THE MID-EAST CROSSFIRE
Dec 3, 2004

GAZA: HOW WELL DID ARAFAT KNOW JESUS?
Arafat is dead. He died on 11th November 2004. Where is he now? Did he know the Gospel of Christ? "I regularly had the opportunity to meet with Arafat and explain the Gospel to him," says Brother Andrew, famous Bible smuggler, evangelist and founder of the missions agency Open Doors. Andrew gave Arafat a Bible on his daughter's first birthday, and was given permission to open a Bible store on Palestinian territory. Hundreds of Muslim fundamentalists who now know Brother Andrew personally, particularly from the militant group Hamas, have collected a Bible or the Jesus Film from the store. How did this happen?

JESUS LOVES TERRORISTS
In his latest book, "Light Force: A Stirring Account of the Church Caught in the Middle East Crossfire," which he wrote together with Al Janssen, Brother Andrew details how God opened the doors for him all the way to Arafat. Janssen and Brother Andrew emphasise that with Jesus' love, it is possible to reach every person, including Hamas terrorists. "I sometimes doubt that we Christians really believe that," says Janssen. "We say that God loves the whole world, but when we hear that some terrorist group commits a crime, we say 'They deserve the death penalty!' We picture some nameless enemy instead of a human being perhaps desperately seeking answers."

BIBLE STUDY WITH A TERRORIST
"It really opened my eyes to speak with the man who brought us into contact with Islamic Jihad," Janssen recalls. "He said 'I have spent 15 years in jail, and read the Koran and the Bible. Then I decided to become a devout Muslim.' He had some very specific questions about the Old Testament, such as the destruction of the Jews in Zachariah. He was asking questions about prophecy, and I suddenly thought 'Wait a moment! I'm sitting here with a member of Islamic Jihad, studying the Bible, discussing Zachariah, which half of the Christians I know have not even read.' Then I realised that God was at work in this man's life. Brother Andrew gave him an Arab version of 'God's Smuggler', his life story. The next day, the man had already read half of it, and asked 'Do you have any more books? Bring me everything you can!'"

GOING WHERE NO ONE ELSE WILL
"If nobody goes to tell terrorists the Gospel, how will they ever hear it?" Brother Andrew, who has always liked to go where no one else does, says of himself "If I, a simple Dutchman without even a proper schooling, can have such a ministry, then anyone can!" In 1992, 415 Hamas members were deported from Israel, and interned in a camp on the side of a mountain in southern Lebanon. Andrew visited them to find out how they were. "They were people like anyone else. Through our visit, we built relationships with them, and I was able to speak with hundreds of Hamas terrorists about the Gospel." He was perhaps the only Evangelical Christian ever to speak about Christianity at the Islamic University in Gaza - at the invitation of the Hamas leader. "We are not responsible for how these people respond to our message, but they had the opportunity to hear the Gospel. Today, the Palestinian Bible Society and the Bible Society of Israel are doing a great work among Palestinians," says Janssen.

7,000 ISRAELI CHRISTIANS, 70,000 PALESTINIAN
Janssen summarizes the facts influencing Christianity in the Middle East: "Christianity has existed in the Holy Land for 2,000 years. At the time Israel was founded in 1948, some 15% of the Arab population were Christians. Many of them were business leaders, and as times grew harder, they had more opportunity to flee to Europe or the USA. The number of Christians declined, and is now less than 2% of the Palestinian population." "I estimate that there are some 7,000 Christians in Israel, and around 70,000 Christian Palestinians - ten times as many. That may surprise many Christians in the West, because they do not realise how many Palestinians are Christians," says Brother Andrew. "Christians are a minority in both populations, caught up in the midst of the conflict. With our book, we want to point out to the worldwide Body of Christ how this part of the Body is doing."

Source: Open Doors, www.opendoors.org
The Friday Fax is a FREE newsletter sent only to subscribers. To subscribe or unsubscribe, please visit www.bufton.net/fridayfax


ARCHIVES ...
(2004 news/views weekly summary


ABOUT THE EDITOR

David M. Bradshaw is Editor of Real Money Perspectives, publisher of Rediscovering Gold in the 21st Century: The Complete Guide to the Next Gold Rush (7/01) and has been an economic commentator since 1987, when he produced the World Economic Perspectives radio show. In 1997, he produced a one-hour TV documentary, "Preparing Wisely for the Next Millennium," which was distributed free of charge at Blockbuster Video nationally. In 1999, he produced a one-hour radio special, "The Big Picture: The Shape of Things to Come" discussing geopolitical, economic and spiritual trends in the 21st Century. MORE ... NOTE: Youngest daughter Braida Zoe (9 months) is now standing, clapping, waiving ... and even kissing her Dr. after her 9-mo shots!


DISCLAIMER: All of the information in this story is believed to be true, however errors are possible. Past performance is no guarantee of future performance. All investments have risk.

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Gold$1295.10
Silver$19.65
Platinum$1413.00

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