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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: PartyTime who wrote (507723)	12/11/2003 9:34:48 AM
From: Kenneth E. Phillipps	Respond to of 769667

The real worry: the dollar If you've followed all those instructions, it's time to take a look at the real problem -- the value of the dollars themselves. As Americans, we think in dollar terms: shop, spend, save. We only notice the dollar is worth less when we see rising prices. And most prices aren't rising. In fact, many prices are still falling. Computer prices are falling, and so are prices of many technology-related goods and services. There are great deals on cell phones and long-distance services. Plasma TV screens are starting to look like bargains. Low interest rates even make home prices seem like bargains. On the other hand, college costs, medical services and medicines are all showing double-digit price gains. So are real estate taxes if you live in the city of Chicago. But these items don't get much weight in the popular price indexes like the CPI. So it's easy for economists to say "What inflation?" Yet measured against the euro, which once sold for 80 cents and now costs $1.22, the dollar has lost value. A year ago, gold cost $340 an ounce. Now gold costs about $410 an ounce. Perhaps you're thinking you don't need any gold or euros, so their rising prices don't matter. Think again. The United States desperately needs the world to believe the dollar has value. Otherwise, foreigners won't want the dollars we send when we buy imported goods from China and Asia and Europe. If the dollar is losing value, the Chinese central bank, which owns hundreds of billions of dollars -- all invested in Treasury securities -- might just decide to switch to gold or euros. And eventually the only way to get them to hold dollars is to pay them a bribe -- higher interest rates on our Treasury debt they hold. You can figure out how higher interest rates would affect your personal finances -- from mortgage payments to credit card debt. Hedging your dollar bets It's not un-American to hedge your bets against the U.S. dollar. In January 2003 this column explained that Everbank.com offers federally insured certificates of deposit denominated in major world currencies. If you had invested in many of those foreign currency CDs earlier in the year, you would have had a 40 percent or greater return on your money, just from the rising value of those currencies against the dollar. If you believe the dollar will continue to lose value in 2004, you can still buy those FDIC-insured foreign currency CDs at www.Everbank.com. Gold is the historic refuge of people who want to avoid currency devaluations. One year ago, when this column first suggested that gold was glittering, the precious metal was trading at $340 an ounce. Now it's well over $400. Gold stocks and gold mutual funds have turned in sparkling returns for three years in a row. There's no law that says this trend can't continue. Or you can choose to ignore the warnings. But the sensitive, "smart money" indicators tell me that the world is losing faith in the dollar because of U.S. budget deficits. And that's The Savage Truth. suntimes.com