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Japanese paper says U.S. assents to weaker dollar; 20-30% devaluation speculated
By Doug Casey
www.DailyReckoning.com
Thursday, November 11, 2004
I must admit that on Election Night I was hoping one of
two things would happen: Either no one would turn out
to vote, thereby delegitimizing our rulers in D.C., or,
more realistically, that one party would dominate
Congress while the other took the presidency. The latter
would, ideally, have resulted in gridlock for the next four
years, thereby limiting the damage the government could
do to the country. At least a Democratic sweep would
have put an end to the reign of the neocons. And since
most votes for Kerry were really just votes against Bush,
it wouldn't have given the socialist from Massachusetts
much of a mandate.
But the Republicans won the presidency and increased
their majorities in both houses of Congress.
Unless you attribute the Republican victory to a vote fraud
of unprecedented magnitude, the reality is that Americans
thoroughly endorsed what Baby Bush stands for. So let's
play the cards the way they've been dealt. And, perpetual
optimist that I am, I think the next four years stand to be
among the most profitable of a lifetime for a minority of
properly positioned investors and speculators.
I'm not talking about the average American. Having sown
the wind, Boobus Americanus is going to reap the whirlwind.
As Patriot 2 becomes law, what little is left of civil liberties
and the Bill of Rights is going to disappear. The gigantic
deficits the government will run to fund both the war and
domestic programs (don't forget that Bush is the only
president since the 1820s who never vetoed a bill) will take
interest rates to levels we haven't seen for a generation.
That will crush the current mania in real estate and likely
cause the stock market collapse that began in 2000 to
resume. Unemployment will rise. The dollar will accelerate
its collapse as foreigners from central banks to the man on
the street unload their dollars, causing the price of imports
to skyrocket. The American standard of living will nosedive.
I expect we're looking at what will amount to a much more
severe version of what happened to Americans in the '70s.
And that's only if the current adventure in Iraq doesn't
mutate into World War III.
But, as I said earlier, I prefer to look at the bright side.
Higher levels of inflation won't only drive capital from the
dollar and conventional investments; it will drive capital
into gold. It bears repeating that gold is the only financial
asset that's not simultaneously someone else's liability.
And that's why, as fear and uncertainties increasingly
stalk the world, the world will increasingly turn to gold.
Bush believes that it doesn't matter what foreigners think
about the United States. But he'll find that once countries
start holding their reserves in euros and gold, the dollar
will become a hot potato. It's a minor straw in the wind,
but Cuba is unloading its dollars, in preference for the
euro, simply because most of its tourists -- the mainstay
of what passes for an economy on the island -- come
from euro bloc countries. Could that have been a catalyst
for Bush remarking that a regime change is in store for
Cuba over the next four years? And why was Iraq pricing
oil in euros before the invasion?
The way I see it, the dollar is on the way to reaching its
intrinsic value. This is a catastrophe for the average
American but a boon for those who follow the trend. I
fully expect to see gold trading well over $1,000 before
Bush's term is over.
But the really big gains will be in mining exploration
stocks. The American public is still stock-crazy, not
having figured out that the unprecedented 20-year bull
market is over. They're still looking for the next sector
to get into. When the gold stocks start to move, people
will try to get in -- but it will be like trying to drain the
contents of Hoover Dam through a garden hose, because
the market is too small to absorb any serious buying.
The gold stocks will go into a bull run wilder than
anything we saw with the Internet issues.
There will be an immense transfer of wealth in the years
to come from those who don't own gold, to those who do.
A lot of that is almost guaranteed by Bush's profligate
foreign and domestic policies. Best of all, the gains in
store for us will be subject to the low capital gains taxes
Bush is promising -- one part of his policies I agree with.
What's to be done about the problems in the United
States?
Don't look to Bush for a solution. But you should be able
to insulate yourself from most of them with the money
you make in the incipient gold and commodities bull
market. Use part of your gains to buy a nice condo in
Singapore or Sydney so you can watch the chaos on
your wide-screen TV instead of out your front window
here in the United States.
----
Doug Casey is chairman of Casey Research LLC, an
authority on investing in natural resource stocks, and
editor of the Casey Investment Alert and the International
Speculator.
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