Americans Should Be First
Current financial events are highly significant to the savings of most Americans. In a previous article, entitled "We Are All Shareholders," I made the case that by holding dollar based accounts we were acting as defacto shareholders of the Federal Reserve; every dollar you hold is in essence a share in the Federal Reserve System. When a corporation needs more capital, it issues more shares. The more shares that it issues the less each share is worth.
The U.S. dollar has fallen 5% or more this year. That is primarily the result of simple excess creation. The total spending level of the Federal Government, coupled with all of the private equity deals, suggests that this trend will continue. Moreover, the trend towards a reduction in the dollar's status as a reserve currency is in expansion. Add the United Arab Emirates to the list of those divesting dollars and moving into euros.
Not too long ago, Treasury Secretary Paulson took a trip to China in an attempt to engineer a Yuan appreciation – which is in effect a dollar devaluation. Upon his return, the Chinese announced that they had purchased a stake in the private equity group called Blackstone. Blackstone has been buying up U.S. equities and real estate as if there were a shortage. The looming swarm of real asset inflation is obvious to those in the know. In the interim, gold rose through the $630 level and settled at $638.00 per ounce. It will slowly creep up until it breaks $700 ,then $800, and so on.
This slow and steady rise is almost equivalent to the fall of the dollar. Consider the agricultural commodity, industrial metals, and energy complex price levels over the past year. Inflation is quietly raging. Tangible assets are appreciating in price even in the face of the sub prime contagion. Agricultural commodities are starting to show their pent up price levels, a situation which will only be exacerbated by their role as a surrogate for petroleum and petroleum products.
Farmers in the Midwest are eschewing food based agribusiness in favor of this new ethanol craze. Global demand for all of these resources continues unabated. We will find ourselves amid restricted supplies and limited exploration in the western world due to environmental concerns. This decrease in supply can only mean even higher prices. News on the demand side is no better. The Chinese economy expects a growth rate of around 10% next year. The Euro community is experiencing a field day in result of the cheaper dollar. It seems that the European family is seeing its money go a lot further than its American counterpart.
Consider what the ultra rich are doing – do not be a shareholder.
If you hold the largest portion of your accumulated wealth in Federal Reserve "shares" you are commiting your financial future to rampant devaluation. As the supply of shares increases over the next decade, the average American family will see a tremendous loss of their purchasing power.