Money Morning posted:

The plethora of bank and corporate bailouts, stimulus plans and interest-rate cuts that the U.S. government has produced over the last three months can only lead to one outcome: The U.S. dollar has to decline.

During the crisis so far, the dollar in general, and U.S. Treasury bonds in particular, have been regarded as a “safe haven,” making the dollar strong and pushing long-term U.S. Treasury rates downward. In the New Year, however, this is likely to change – the weight of the added supply of dollars in circulation will be too great for the greenback to shrug off.

Back in November 2007, when I wrote about the U.S. dollar becoming the “Bernanke peso,” I suggested that the dollar – then trading at $1.50 to the euro – would get weaker. Alas, I was wrong: It is currently trading at $1.29 to the euro, although it did reach $1.60 in May. However, I recommended buying not euros, but yen. The chaos of 2008 has reversed the decline in the dollar against the euro, but not against the yen, which has reached Yen 92.8 = $1 compared to a rate of Yen 114.8 = $1 when I wrote the piece. A gain of 24% against the dollar is not bad, and indeed I defy you to find a stock market that has done as well over that period.

The fundamentals tending to weaken the dollar remain. The U.S. trade deficit was $57.2 billion in October, which annualizes to $700.3 billion – down but a little from the 2006 peak of $758 billion. Although the recession and recent sharp decline in the value of U.S. oil imports will reduce the U.S. trade deficit further – perhaps to $500 billion annually – there is still no reason why foreigners should continue to so highly rate the currency of a country that is running a $500 billion balance-of-payments deficit, and a $1 trillion budget deficit.

After a pause during the summer, the U.S. money supply has begun rising again rapidly. The excess money has flowed into Treasury bonds, sending the yield on the 10-year bond down to a recent 2.71%. The distortion in the market can be shown by the yield on the 10-year Treasury Inflated Protected Securities (TIPS), which was 2.44%; that combination of prices said that investors expect U.S. inflation to average a mere 0.27% annually over the next 10 years.

Clearly that’s nonsense; the explanation is that yields on long-term Treasury bonds have been driven far below their economically appropriate level. In other words, U.S. Treasury bonds are currently benefiting from a bubble, and like the bubbles that we’ve seen in Japanese stocks, real estate, U.S. tech stocks, the American housing market and global commodities, this bubble, too, will ultimately burst.

The budget deficit in the 12 months through to September was $455 billion, but that’s expected to expand to close to $1 trillion in the year to September 2009 – and that’s even before President-elect Barack Obama’s stimulus plan, which is expected to cost at least $500 billion, and could possibly cost that much a year over several years.

If that’s surprising, consider this: The U.S. budget deficit was $237.2 billion in October 2008, a record monthly figure. That puts a huge strain on the U.S. Treasury Department’s financing capacity, and will probably result in the U.S. Federal Reserve printing yet more money, since the alternative would be for the huge amounts going into Treasuries to choke off demand for private investment – not the desired objective. With more money being printed, inflation is likely to soar and the dollar to weaken.

Net foreign purchases of long-term U.S. securities declined to $793 billion in the 12 months to September 2008, from $1.03 trillion in the previous year. Of those purchases, Treasury bonds and notes represented $385 billion, up from $192 billion in the previous year, while purchased corporate bonds shrank from $447 billion to $168 billion. Thus, the “flight to quality” has so far been enormously helpful in enabling the U.S. Treasury to finance its growing budget deficit; in October and November it will doubtless have been even more so.

Once the inflow into U.S. Treasuries slows, or the huge volume of Treasuries issued simply overwhelms it, the dollar will weaken and Treasury yields will rise. At that point, there is likely to be a stampede for the exits from the Treasury bond market, which will be self-reinforcing. As a wise investor, you could prepare for this stampede in four ways:

First, you could have a modest holding of the Rydex Juno Fund (RYJCX), the price of which is inversely linked to T-bond prices (the fund shorts Treasury bond futures.). The fund has had a poor record since its inception in 2001, and it probably makes little sense to put too much money in it. However, given the scenario we’ve sketched out here, the fund will do a lot better in 2009.

Second, you should have bond, cash and stock holdings in foreign currencies, particularly the euro and the yen (but not British pounds sterling; with a housing bubble and a bloated financial sector, Britain has many of the same problems as the United States). Aside from foreign-currency-denominated stocks and bonds, you may want to consider a foreign-currency-deposit account through EverBank, which offers foreign-currency certificates of deposit (CDs), albeit at low interest rates, at present – only 1% on a 12-month Euro CD for example. [Editor’s Note: EverBank also offers a product called the EverBank Asian Currency Portfolio. Readers can find out about all the bank’s products by contacting the folks at EverBank’s World Currency desk at (800) 926-4922. Be sure to mention product ID #12534. We should also mention that Money Morning has a marketing relationship with Everbank, but that’s only because we believe in its products.]

Third, you should hold some gold, which is likely to profit from a dollar collapse – for example through the SPDR Gold Trust fund (GLD), which has ample liquidity, with $17.6 billion outstanding, and which tracks the gold price directly.

Fourth, you may make a modest (no more than 1% to 2% of your portfolio) speculation in currency options, which are traded on the Philadelphia Stock Exchange. Since the yen has already enjoyed a considerable run against the dollar, the best speculation might be to purchase out-of-the-money euro call options, which will rise in price once the dollar starts falling against the euro. Personally, I prefer to buy the longest possible options available, to give the market time to move in my direction. So, I would go for the September 140s (PHLX: XDEIH), giving nine months to maturity at a strike price about 8% out of the money (the euro being currently at $1.29). Currently these are trading at $4.55 offered, so you would have to pay $455 for each 10,000 euros on which you purchased an option. Your break-even would thus be $1.4450. If the euro is trading above that level next September, you would gain, so if it matched its May peak of $1.60, you would make $2,000 per contract. If it was below $1.40, you would lose your investment of $455 per contract.

Max Lloyd posted:

United States silver dollars have long been prized by coin collectors, but they also have a background that’s valued information for lovers of American history.

Thomas Jefferson first proposed minting a silver dollar coin in 1785 and when Treasury Secretary, Alexander Hamilton, projected a monetary system for the emerging United States of America, they began producing the coins, including the Flowing Hair silver dollar in 1794.

Silver dollars were minted in varying degrees of silver content until silver became scarce. When the incredible riches of Nevada’s Comstock Lode were discovered in the late 1850s, silver prices plummeted and the Treasury Department was required by Congress to begin producing silver coins. The Trade Dollar was minted in Philadelphia, Pennsylvania specifically to improve trade with the Orient – mainly China.

The Morgan silver dollar was designed by George T. Morgan and minted from 1878 until 1904, then ceased because of the huge amount of dollars in circulation and silver bullion again became scarce. Then, in 1921, the Morgan silver dollar was minted again, but only for the year. Silver prices skyrocketed after 1921, and Morgan dollars were melted for their content of silver bullion.

Carson City Morgan dollars were discovered at the Carson City Mint where they were produced in the 1800s. They were ultimately sold by the federal government to coin collectors in the 1970s and are some of the most prized in coin collecting.

The history of silver dollars in America is fascinating and has produced a huge following of collectors.

United States silver dollars continue to be one of the most valued silver coins collectible worldwide.

Among silver dollars, Carson City Morgan dollars are most valued dollars, and here is why.

Carson City Morgans (CC Silver Dollars) demand an indomitable place in American history. After massive quantities of silver were discovered in the 1850s in Carson City, Nevada, the town built and maintained a mintage that produced what became known as the CC Morgans.

The Carson City silver dollars look the same as the Morgan dollars, with the face of Liberty and an eagle on the reverse side, but also display the double C mint mark on the reverse side. This fact makes it extremely valuable to collectors.

Millions of Carson City silver dollars were minted during certain years, but in other years only a few thousands were minted. As a result, Carson City silver dollars total less than one per cent of the total number of American silver dollars that were minted before and after them.

All Carson City Morgans are considered very collectible, but among the most valuable of these is the 1885 Morgan CC. During this year, very few of these silver dollars were minted. The Carson City mint was officially closed in 1893.

Meanwhile, the numismatic hobby was growing by leaps and bounds. Then, in the late 1930s a few coin dealers discovered that there were uncirculated Carson City silver dollars worth $5.00 each in Washington D.C.’s Treasury Department. Naturally, the dealers began to take advantage of the opportunity.

New interest in Carson City Morgans began in 1972 when the General Services Administration began to distribute them in mail-bids. This continued until1980, when the entire cache of CC dollars was gone.

Fire Your Boss Now

Muna wa Wanjiru posted:

While many coins are desired by coin collectors there is a group of people who concentrate on collecting silver dollars. As these silver dollars are not that plentiful the choices that are made should be ones where the coin is known to increase in value with the passage of time. Unlike other coins silver dollar values can be found on the internet as well as from coin dealers.

Since there are not many of these silver dollars to be found you may want to research the ones that are known to give good value for money. You can choose the ones like the Morgan silver dollars or the Peace silver dollar as being silver dollars that you should think about adding to your collection. The silver dollar values for these are currently known and documented on the internet.

For example the Morgan silver dollar values are shown to increase for all of the versions. These types of silver dollars are considered by coin collectors to be investments for the future. Therefore the wise coin collector will look to see the silver dollar values for each of these to see which ones they want to buy.

As was stated earlier the other silver dollar that many coin collectors are interested in is that of the Peace silver dollar. This silver dollar came into production after 1918. This time was right after the World War I ended. As not many of these Peace silver dollars were minted they are considered as being rare. Therefore you can expect the silver dollar values for these coins to be expensive.

Out of the Peace silver dollars the ones that were minted at the Philadelphia mint are considered to be even more valuable than the other Peace dollars. The Peace silver dollar values for the 1928 coin are significantly higher in price. To gain a clear idea of the various values that are given for silver dollars you should look for information that deals with this issue. The information will help you when you take your silver coins to be appraised at coin dealers.

These silver dollar values can rise and fall without much warning, therefore if you are thinking of selling your silver dollars you should first choose a period of time when the values are known to be steadily climbing. With the few silver dollars out in the market you will need to choose the ones that will give you a good investment if you are looking to have your coin collection increase in value.

Vikram Kumar posted:

Are you a citizen of the United States? As a United States citizen it is your responsibility to know where to find US dollar information. There are times in an individual’s life when they will need to travel to another country. When traveling to another country you’ll need to understand that the country you are traveling to will be using a different form of currency. Knowing the US dollar information will allow you to convert the US dollar into currencies that are used in other parts of the world.

Most of the people living in the United States will not know the up to date US dollar information.  Thankfully, there are plenty of resources open to us out there that allow us to look up this information with ease. That’s means that we really don’t have to know the US dollar information by heart. We can look it up whenever we need it. There are plenty of websites on the internet that will provide up to date US dollar information as well as other currency information. There is one website in particular which provides information solely on the US dollar.

The All American Dollar websites provides all the US dollar information that you could ever need. Once you have visited the website you will notice that it is based around the US dollar and not some other currency although it does provide information about other currencies as well. At the top of the page there is a currency converter. This is a very handy tool that can be used with the US dollar or any other currency for that matter. The currency converter will convert a specific amount in one currency to the amount it would be worth in another currency. The tool is extremely easy to use.

There are four steps to using the currency converter. Start by inserting an amount into the top box. For instance, if you wanted to consider five hundred dollars you would enter 500 or 500.00 into the top box. The bottom two drop down boxes are pretty much self explanatory. The top drop down box is the currency that you are starting out with such as the US dollar or USD. So click the down arrow on the drop down box and select USD or US dollar. The bottom drop down box is the currency that you are converting into. This will depend on which country you are visiting and what type of currency they use in that country.

After you have determined which currency you are converting to you will want to select the arrow on the bottom drop down box. From there select the abbreviation for the currency that you are converting to. After you have done this the forth and final step is to hit the convert bottom at the bottom. At the bottom of the tool you will see your results. It will tell you exactly how much your money would be worth after converted to a different currency.

Zachary Sorg posted:

The U.S. economy is struggling with the failure of insurance firms, the housing market going into a downward spiral, and the job market being cut due to revenue losses. There just aren’t enough funds to keep the economy in check with such a high demand of jobs and not enough provided causing the U.S. unemployment rate to climb to just over 8 percent which is the highest since 1983. Well, what does all of this mean to the U.S. dollar compared to the rest of the world? The rest of the world is in the same boat as us except for a much selected few like China. The U.S. dollar actually is doing 2nd best to China in value; we are actually in good shape even though it feels like the world is coming to an end.

A writer from Yahoo Finance, Aaron Task, said the U.S. was the best looking horse in the glue factory. I think that really describes how this world is doing according to economies and money values. Now, he also made another good point is saying that the U.S. cannot export its way out of this ordeal because everyone else is facing economic downfall and turmoil. This is a big problem for the U.S. because our exports aren’t what they used to be and with the current job cuts and the U.S. won’t be producing products at a speedy rate. This unemployment crisis will continue to do damage on the U.S. economy and won’t let up until there is a break in job cuts. Now, I know your thinking, well the stimulus package will help bail out the economy, but with all the jobs being lost, it will hurt the stimulus package and not put it to full use. With this problem, we can expect that the value of the green back will continue to plunge and drag a lot more countries down will it.

The countries being affected by the U.S. dollar are in serious danger of losing large sums of money and felling a bigger hammer on their economy. Let’s take our neighbors to the south, Mexico, because their economy is tumbling more then ours to the north. They are beginning to feel how much effect the U.S. dollar has on their economy because as of March 3, the Mexican peso is running close to $15.50 to 1 U.S. dollar which is the worst since changes were made in 1990. The Mexican economy has been crumbling since August when their dollar was worth about 10 cents on the U.S. dollar to a little more then 7 cents on the dollar in March. The peso has plunged 33% over the past 6 months which is the worst performance of any currency in the world over those months, according to Bloomberg. The Mexican economy is falling faster then you can say recession and the U.S dollar is all to blame in the downfall of Mexico’s economy. This is also affecting the Mexican stock market which is down 24% from the 1st of January which is only a bit worse then the S&P 500 which is down 22% since the beginning of the year. The worst part is in dollar terms, the Mexican stock market is down 32%.

One of the big questions today is does the falling dollar prices in the U.S. effect the crude oil being sold all over the world. The answer is YES and NO because we saw in the summer of last year, 2008, the oil prices spiked with the weak dollar and the high demand in crude oil. Now, as the dollar continues to plummet, investors are gobbling up the shares of crude oil allowing the prices to decline a little. Buyers from Europe who use the Euro and China are getting rich and we are breathing a sigh of relief as crude oil prices dropped to the lowest they have been since the late 90’s. The only problem we have to worry about, says Keith Johnson of the Environmental Capitol was if the dollar sinks, along with the U.S. economy and demand for oil, then pressure will only build on OPEC to try to shore up crude prices with another hefty cut of production.

The U.S. dollar has many important roles in the world we live in today and we must trust that it will regain value and our economy will come out of the gutter and be strong one day like it has been in the past. We must also trust that it will keep the country in check with what it was built upon; hard work and the will to never give up. We are still one of the top financial countries in the world, but we must recheck with reality and try to pull our head above water and realize that our country isn’t invincible.

Gavin Conway asked:

ice per ounce was a constant at $20.65 when the gold standard was put in place and only edged away from that position by $0.01 in all the years between 1833 until 1890. Meaning that for 57 years, when the Dollar was hinged to the gold standard, it moved with it by that $0.01 only. This was the original plan, written into the constitution by the founding fathers.

The constitution states that the currency of the country is to remain that way to maintain the Dollar and protect against what is exactly happening to the currency today.

From the years between 1891 and 1930, the price of gold per ounce remained relatively stable. The lowest it went was $20.58 and the greatest it reached was per ounce $21.32 and so, for a total of ninety seven years between 1833 and 1930, the price of gold only moved $.74 cents from high to low.

The gold price reached an all time low at the time of the great depression in 1931 and since then the government gradually removed the Dollar currency away from the gold standard until August 15th 1871; President Nixon announced that the US government would no longer redeem US currency for gold. This was the last step in departing from the gold standard. The demise of the Dollar can be seen since it was removed for the gold standard.

Keep in mind that the Dollar has historical value and therefore is extremely consistent, even though it looks as though the gold price is rising; it is really the Dollar that is falling. It has been as high as $1,030 per ounce, down to $830 per ounce.

So interestingly, if you wanted to buy a new car that cost $55,000 in 2008 and in gold, that would cost you roughly 60 ounces of gold at the spot price of $930 per ounce. So, if the Dollar was never removed from the gold standard and all the inflation that has occurred because of the removal from the gold standard, that same car today would only cost you $1,200. Remove the $1,200 from $55,000 and you get $53,800 which is how much inflation this $1,200 item has risen by over the last one hundred years.

The original Dollar value is roughly $.02 cents in today’s money. It’s astounding to realise how much the Dollar has dropped in value. I will try to explain further. In 1964, $.25 would just about get you a gallon of gas at the pumps because in 1964 a quarter was made from 10% copper but 90% silver. Silver costing $17.20 per ounce makes the quarters value $3.11 and that quarter of 1964 can still give you a gallon of gas today. This shows that the value of gold and silver has hardly changed and that it’s the currencies that are not tied to gold and silver that are fluctuating drastically.

This was the warning of the founding fathers and why they tied the Dollar to the gold and silver standard at the founding of the constitution. The over creating by the Federal Reserve of Dollars at their own behest is in reality another tax upon the American Citizens, it strips the dollar of what little value it has left in your pocket and in the long run continues to do so. While the prices of services and good rise and rise, you on the other hand are still being paid roughly the same, its the Dollars value or any other currencies for that matter, thats detachment from the gold standard is why their value is dropping. I hope that I have made it clear to you that you need to make a move on this problem, be it investing your money as soon as you can into precious metals or by even taking a stand against the governments position on a detached Dollar from the gold standard.

Kathy Lien posted:

At a time when the US housing market is contracting, the job market is deteriorating and consumer spending is at risk, the US economy needs a weaker dollar. This is the primary reason why we do not expect the US government and the Federal Reserve to stand in the way of further dollar weakness.

Benefits of a Weaker Dollar

1) Increased Exports – One of the biggest reasons why a weaker dollar will help the US economy is because it increases the competitiveness of US goods. It boosts foreign demand while keeping US consumer demand domestic. Over the medium term, this benefits the sales of US corporations which will eventually translate into more jobs and consumer spending. It also helps to reduce the trade deficit, one of the most criticized aspects of the US economy.

2) Foreign Investment – There are three different ways that foreign investment can help the US economy and the US dollar. Over the past few years, foreigners have been big buyers of US real estate. According to a study by the National Association of Realtors, about one in five American real estate agents sold a second home in the year ending April 2007 to a foreign buyer. A third of these buyers come from Europe, a quarter from Asia and 16 percent from Latin America. As the US dollar continues to fall in lockstep with house prices, foreign buyers could provide the support that the US housing market needs to avoid a major crash. The second support would be in the form of value hunting in the US equity markets. If the dollar continues to fall, foreign investors may begin to load up on companies with sound fundamentals that are also less vulnerable to a US economic slowdown. Both of these factors are contingent upon the US dollar showing signs of stabilization. Foreign investors will only swoop in with size when they believe that dollar weakness is nearing an end. The third factor is less contingent upon the outlook for the US dollar. A weaker dollar also makes US corporations more attractive buyout targets. Sovereign wealth funds of countries like China and Dubai are flush with cash and are on the lookout for good investment opportunities.

3) Increased Tourism – Tourism represents a big part of the US economy. It supports employment for over 5.4 million workers and generates over $550 billion in annual revenue. Canadians represent the biggest group of travelers into the US. We expect their share to rise even further now that the Canadian dollar is trading at parity with the US dollar. In the beginning of this year, a USD$250 hotel room cost CAD$295, now it only costs CAD$250, which represent savings of over 15 percent. Although the savings for Europeans are not as large, they too will see anywhere between a 5 to 10 percent discount in travel costs. More tourism is always good for an economy.

Disadvantages of a Weaker Dollar

1) Higher Costs for Foreign Goods – The most immediate disadvantage of a weaker dollar is the increased costs for foreign goods. With a trade deficit of $59.2 billion, US consumers import far more than they export. The number one country that the US imports from is Canada, which is why the recent strength of the Canadian dollar is so important. Canadian drugs for example may not be as much of a bargain as they use to be. The same is true for European handbags and other luxury items.

2) Tighter Monetary Policy – Higher costs for foreign goods imports inflation which is why a weaker currency in general is inflationary. With oil prices hovering around $80 a barrel and the dollar falling through the floor, inflation is sure to pick up in the coming months. Martin Wolf of the Financial Times makes a fantastic point when he said that “The resolution of each crisis lays the seeds of the next.” In order to get out of a crisis, the Federal Reserve will usually lower interest rates aggressively. We saw this after the Asian and Russian crises of 1997 and 1998. This eventually led to bubbles in the financial market, forcing the Fed to hike interest rates. Although inflation is not a huge problem at the moment, the threat of inflationary pressures could prevent the Fed from lowering rates as much as they would have otherwise wanted or needed.

3) Foreign Travel Becomes More Expensive – From a consumer level, the weakness of the US dollar makes foreign travel more expensive, particularly to countries like Europe and Australia. Since the beginning of the year, the Australian dollar has appreciated more than 10 percent against the US dollar. Because of nothing other than currency fluctuations, travel to Australia has become 10 percent more expensive. The same is true for travel to Europe except for the fact that the move is smaller on a percentage basis.

Can the US Dollar Fall Further?

The answer is yes. A trend in the currency market can last far longer than many people would otherwise expect. We have seen one way directional moves last for months and in some cases, even years. Interest rate outlooks play a major role in the future direction of currencies so with the market pricing in another 125bp of easing by the end of next year, the US dollar could easily fall to 1.50 against the Euro. This is especially true if the ECB remains nonchalant about the Euro’s move. At some point, the benefits of a weaker dollar such as increased exports and foreign investment will help to turn the US economy around, at which point the dollar will begin to rise once again.

What Does This Mean for Your Investments?

Regardless of whether you are actively involved in the currency market or monitor it at all, the value of the US dollar or currencies does matter. Companies that do a lot of foreign sales will benefit the most because their foreign currency revenue will be higher when repatriated not because they sold more goods, but because their earnings from currency conversion will be larger. The industries with the greatest foreign sales exposure are energy, technology and consumer staples. Companies that produce commodities usually also benefit from dollar weakness while the companies that will be hurt the most are big importers. If you have a view on where the US dollar is headed or want to hedge against some of your stock market exposure, the purest way to do so would be through trading or investing in the US dollar directly in the currency market.

Fire Your Boss Now

Gavin Conway posted:

he premier monetary and chaos hedging asset of the world. During times of geopolitical tension, times of war, financial turmoil and global uncertainty it has a direct response. In the future gold will go much higher because globally and within the US there is too much spending, the Federal Reserve and the banks are printing too much money. Rising global inflation, a weak US Dollar, international tension like whats going on in the Middle East and India’s and China’s explosive economies are other factors that have a direct effect.

If you watch the markets then you will see that gold, silver, oil, commodities and other tangible assets tend to rise together, they’re contra-cyclical to paper financial assets for 2/3 of a cycle. When stocks are doing well, then gold prices don’t move and when stocks are flat to negative on their rate of return in other asset classes, gold performs very well. People tend to step back from other financial assets and say, until the risk reward relationship is fair and even, I’d rather protect than speculate. That’s why, for 2/3 of the business cycle it is contra-cyclical.

Gold rose roughly 158% in the last six years, silver went up about 246% and while the Dollar fell 32%, up went gold stock by 300%. Compair the the Dollar today to the Dollar in 1870 and it is only worth 1cent and compaired to the Dollar in 1919 it is only worth 2cent and the largest drop in the Dollar, since it has been unhinged from gold, has been since the 1970’s. There has been a long term decline of the Dollar since the birth of the Federal Reserve in 1913, ending over 100 years of Dollar price stability. The US is now running a total annual budget and trade deficits exceeding $1.5trillion Dollars and the Federal Reserve is creating annually $1-2 trillion Dollar liquidity out of nothing which has a massive effect on things like the DOW JONES INDUSTRIAL AVERAGE, the DOWN JONES TRANSPORTATION AVERAGE and the DOW JONES UTILITY AVERAGE which have all been moving well since 2001 -2002 however, when you divide their price performance by the gold price, which I beieve is real money, you have downward trends in all three averages of the DOW JONES.

So here we have it, US debt has grown 5.5 times, roughly, since 1980 from $8 trillion to $44 trillion which is the biggest debt explosion in world history.

How do we deal with this massive debt? One way to pay it off is to raise taxes. WE have seen that before and we will see it in the years to come. They can print money as in Weimar Republic Germany after World War II. They could sell off by privatizing National assets such as telecommunications, transport, water systems or real estate. Just as Russia rejected $110 billion, so could they reject the debt. Finally, they could simply resort to plunder by launching wars to acquire wealth such as the Roman Empire did, the Spanish Empire did, the ***** did and the Japanese.

Large Dollar holders are now beginning to exit the Dollar since the latest decline. The Dollar became the world’s reserve currency in 1944, everything had to be related to Dollars, most international transactions were denominated by the US Dollar for the next 62 years giving America huge financial power economically and politically. The United Arab Emirates announced that it would cut its Dollar holding in half in October 2006 and Japanese life insurers with $1.6 trillion in managed assets announced they were to diversify out of their Dollar holdings. Central banks all across Asia (South Korea, China, Japan, Taiwan and Hong Kong) have all started to diversify out of Dollars. China with $1trillion in foreign currency reserves has begun to diversify out of its $700billion and to cut back on its purchases of U.S. Treasuries. Russia too has cut its Dollar holdings from 70% to 40%; Sweden cut its Dollor reserves from 37% to 20% and Italy cut theirs by 21%. China is pushing the world to rely less upon the Dollar for world trade.

If foreign banks holding roughly $2.94trillion of U.S. Dollars were to diversify even 10% of their assets, you’d see $294 billion dumped into the market. 20% diversification would make $588 billion thrown out there which has a very negative effect on the Dollars value and of course interest rates would rise.

Foreign commercial institutions like insurance companies, banks, hedge and pension funds hold between $7-8 trillion in U.S. Dollars. Again any diversification away from the Dollar will have the same effect of rising interest rates and inflation through the roof. The Euro is now taking the place of the Dollar, many of the world’s oil transactions have begun to be made in Euros. In mid 2006, the IMF director for the Middle East and Central Asia urged Persian Gulf countries to peg their currencies to the Euro instead of the Dollar. Worldwide the Euro is in greater circulation than the Dollar and so it is large enough to enable it to become the reserve currency of the world. Foreign Dollar holders are now switching to Euros, British pounds, Swiss Francs and other strong currencies, into gold and other commodities such as oil and minerals.

So as the Dollar collapses, gold has risen. They tend to move in the opposite direction if they aren’t attached. Over the last 36years, the US Dollar has declined 80%, while gold has risen 1900%. Today it takes five times more of the Dollar to buy the same amount of goods or services than in 1971.

In the end we can see that against a depreciating Dollar, gold is the perfect hedge.

Low Cost Bargain

Gareth Bray states:

Silver dollars, which are the first dollar coin issue, were minted since 1794. The United States of America have been minting dollar coins in gold, silver, and base metal varieties. A silver dollar values at one dollar.

The term silver dollar can be misleading. While the metal silver is used, the whole term actually generally refers to any large white metal coin, with a face value of one dollar, issued by the United States of America. Several purists have expressed their concern about and protest against the term, insisting that a dollar should not be called silver unless it really contains some, if not all, of the metal in question. Still, the term silver dollar lives on to pertain to coins with one-dollar values.

Beginning the twentieth century, dollar coins or silver dollars have found a significant decrease in popular acceptance in circulation in the United States of America. Since 1971, there have been many attempts to revive the silver dollars place as legal tender, with suggestions to phase in a coin to replace the one dollar bill, but all have proved futile. Other developed countries, on the other hand, still have denominations of like value exist only in coin. For example, there are the British 50 pence coin, the Canadian loonie and toonie, the 1 and 2 Australian dollar coins, the 50 New Taiwan dollar coin, the 1 and 2 Euro coins, and the 100 and 500 Japanese yen coin, to name a few; the silver dollar values still exist in these countries.

Before dollar coins or silver dollars were born, paper currency was first tried out by a then fledgling United States. However, this form of money did not last long and in 1776, the Continental Congress approved and carried out plans for the production of silver coins to replace the quickly failing Continental, which is what the fledgling country called its paper currency. Unfortunately, silver coins were never actually produced at the time, owing to the Revolutionary War which was taking place. Thomas Jefferson, influenced by the failure of the Continental and the overall distrust in paper currency that was widespread during the period, wrote letters indicating his desire for the United States to mint coins that have similar value with and worth to contemporary foreign coins. Indeed, such is the clamor for coins and silver dollar values.

The United States Mint, officially authorized by the Coinage Act of 1792 to produce dollar coins from silver, produced silver dollar coins from the year 1794 continuously until 1803, when the robust silver dollar production were stopped until 1836. Mint Director David Rittenhouse, distributed the first silver dollars, which were 1,758 all in all, as souvenirs to the dignitaries at that time. Today, coin collectors from around the world highly prized original silver dollars made during the said period, including the Flowing Hair (1794-1795) and the Draped Bust (1795-1804), of which there are two varieties, namely the small eagle (1795-1798) and the heraldic eagle (1798-1804). Some of these silver dollar values are extremely rare and exceptionally valuable, especially because they are the earliest examples of massively circulated coins ever struck by the United States Mint, thus bearing an incomparable mystique for serious coin collectors worldwide.