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To: Les H who wrote (94776)	11/15/2007 11:50:17 AM
From: Les H	Respond to of 306849

Fannie Mae's Fuzzy Math money.cnn.com Dollar peg leads to 8% loss in GDP The fixed exchange parity of the dollar to GCC currencies has led to a loss of 8% in the Gulf region’s nominal GDP growth despite explosion in oil revenues in the last five years, according to a study. Moreover, surging price levels in the GCC was not just a “homegrown” problem but increasingly related to imported inflation, which is likely to stay “too high”, said the study by GaveKal, a UK-based research firm. “The past five years alone have witnessed an explosion in oil revenues, but the impact of pegging to the dollar shaved off over 8% of nominal GDP growth,” it said, adding the peg remained a big loss opportunity for the GCC in terms of currency appreciation. It said inflation in the GCC is not simply a domestic problem but is increasingly due to the imported cost-push inflation, which in turn, is a result of the weak greenback and the currency pegs. “There is little evidence that the GCC’s inflation is purely domestic, or likely to abate any time soon,” the study said. With negative real rates, exploding money growth and interest rates in the US likely to stay low for the foreseeable future, the study said, inflation, gulf-times.com 'Inflation is now the number one problem for GCC economies and currency revaluation is a curb to imported inflation,' said Maratheftis whose arrival in the region might suggest that the bank thinks his expertise in foreign exchange may soon be needed by the central banks. 'If the Fed continues to cut US interest rates, which are inappropriate for the high levels of monetary growth in the GCC and therefore inflationary, then we see an increased chance of individual countries revaluing their currencies, and in time moving to a basket of currencies.' ameinfo.com Marc Faber Cash unsafe Simply put, whereas in the past cash could be perceived as 'reasonably' safe, today cash may, courtesy of modern central banking under the auspices of the US Fed, actually have become quite a dangerous asset class due to its depreciation not only against asset prices but also against consumer prices, if these were measured properly by government agencies. In short, the problem an investor is facing is the following: In the past, savers who wanted to avoid the problem of taking investment decisions and allocating their funds to different asset classes could keep their money in short term deposits. But in today's new monetary regime - characterized by massive monetary and debt growth and central banks that seem to be perfectly happy at 'printing money', which leads to a loss of money's purchasing power - savers are almost forced to invest into 'something' in order not to end up as 'penniless billionaires.' ameinfo.com