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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (16067)	1/5/2007 12:39:33 PM
From: DuckTapeSunroof	Respond to of 71588

True.

To: Peter Dierks who wrote (16067)	1/6/2007 11:45:33 AM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 71588

Who's Dumping Dollars Now? January 5, 2007 sovereignsociety.com Dumping U.S. Dollars: The New International Pastime Today's comment is by Eric Roseman, Investment Director for The Sovereign Society and editor of both Commodity Trend Alert and Global Mutual Fund Investor. Dear A-Letter Reader, Add the United Arab Emirates (UAE) to the growing list of foreign central banks shedding their U.S. dollar reserves. Since 2002, more than a dozen central banks worldwide have accelerated their dollar sales as the buck continues to slide. Since the advent of the euro in January 1999, central banks have been gradually increasing their holdings of the single European currency. But with the dollar dropping a cumulative 44% since peaking in January 2002, the selling has accelerated. In 2006, the dollar declined 11.3% versus the euro. Last week, the Emirates announced that their relatively small foreign-exchange reserves, only US$25 billion dollars, would be pared in favor of the euro. The UAE holds 98% of its reserves in U.S. dollars. That US$25 billion might be a puny number compared to the grand scale of total dollar reserves held by other central banks, but it's definitely a bad sign for the United States. The other Arab Gulf states, including Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman collectively have over $220 billion dollars in trade surpluses -- that cash must be invested in international markets. Increasingly, they'll also be looking for reduce their dollar-based holdings in favor of foreign currencies. Over the last four years, central banks in China, Argentina, Russia, South Africa, Cuba, Iran, and several Gulf Arab states have cut their U.S. dollar reserves in favor of the euro and other foreign currencies. Unless the United States addresses its massive twin deficits, the selling will continue. At some point over the next several years, the Federal Reserve will have no choice but to raise interest rates to attract foreign creditors. Deficit spending remains a major drag in Washington because military expenses in particular have mushroomed since 2002. The previous bout of military spending in the late 1960s and early 1970s (Vietnam) led to President Nixon breaking the gold standard. And that sent inflation into orbit and crushed the U.S. dollar up until 1982. At some point, the United States must fix its balance-sheet, or foreign creditors will do the job for them. And what about Europe? Don't get too excited about the Europeans protecting your purchasing power longer term. Over the last 18 months, gold prices have far exceeded the euro's appreciation versus the dollar. Since June 2005, the dollar has shed 9% against the euro while gold prices have soared 41% in euro terms. In a bull market, gold is rising against all major currencies since last year. It's real money, no one else's liability and still the ultimate in purchasing power protection. ERIC ROSEMAN, Investment Director on behalf of The Sovereign Society