This from Money Morning:

The leaders of 20 of the world’s most developed nations, the G20, will convene in Washington D.C. on Nov. 15 for an emergency financial summit considered by many to be the 21st century version of the Bretton Woods initiative of 1944. This will be the first chance for European leaders – many of whom blame the current financial contagion on U.S. free market capitalism run – to press for an overhaul of a global financial system the United States has dominated for more than 60 years.

The summit will “seek agreement on principles of reform needed to avoid a repetition of the problems and assure global prosperity in the future,” U.S. President George W. Bush, European Commission President Jose Manuel Barroso and French President Nicolas Sarkozy said in a joint statement.

However, Barroso was more explicit – and less diplomatic – earlier this week when he said that  “we need a new global financial order.”

President Sarkozy has also expressed his desire for a more dramatic remaking of the current financial system, which he says “has distanced itself from the most fundamental values of capitalism.” It was the French president who earlier this week pressed President Bush to call a summit of the G8 and include the developing nations of India and China.

Sarkozy, over the past week, outlined some of the broad principles of reform he hopes to achieve. Specifically he argued that “no bank that works with government money should be allowed to work with tax havens” such as the Cayman Islands. He also raised the issue of curbing executive pay.

“No financial institution should escape regulation,” the French president said, referring to hedge funds and private equity firms. And the world’s most prominent credit agencies – dominated by such U.S. institutions as Moody’s Corp. (MCO), Fitch Ratings Inc., and Standard & Poor’s – should have their role in the global credit market reduced after their “scandalous” behavior.

Sarkozy isn’t alone either. The European Union (EU) is also on board with tougher regulations on hedge funds, limits on executive pay, and new rules for credit rating agencies. And British Prime Minister Gordon Brown, who has been instrumental in pushing for reform, has called for 30 cross-border “colleges of supervisors” to be established by the end of the year to monitor the activities of the world’s 30 biggest banks.

Indeed, the recent rash of criticism from leading politicians is indicative of the prevailing sentiment in Europe that the failure of U.S.-style free market capitalism is most to blame for the credit crisis that has put the world economy at risk of a recession. For Sarkozy, Brown and others, reform will not end with increased oversight of financial institutions but extend to the fabric of the global financial system, as well as the U.S. dominance that lies at its heart.

“Europe wants it. Europe demands it. Europe will get it,” Sarkozy said in reference to global financial reform last Saturday.

And while President Bush has insisted that the United States will seek to preserve the foundations of democratic capitalism – a commitment to free markets, free enterprise, and free trade,” Sarkozy has branded the lax regulation that has become the hallmark of the U.S. economic philosophy as a “betrayal of the spirit of capitalism.”

To Europe, the capital excess that is behind the global financial meltdown epitomizes the behavior of an America that has essentially squandered its role as the standard bearer of global finance.

“We cannot continue accepting the increasing deficit of the world power,” Sarkozy said. “Americans for three decades have been living over their limits.”

Bretton Woods – Then and Now

In 1944, the United Nations Monetary and Financial Conference – a collection of 740 delegates from 44 Allied nations – convened in Bretton Woods, N.H. The goals were to prevent a repeat of the Great Depression and facilitate the reconstruction of Europe following World War II.

After three weeks of deliberation, delegates agreed to a number of principles that established the rules for commercial relations among the world’s major industrial states and served as the foundation for today’s financial system. To this day, that complex plan is known as the “Bretton Woods system of monetary management.”

The nations participating agreed to fix their exchange rates to the dollar. The dollar was, in turn, fixed to gold at a value of $35 per ounce of gold bullion.  The conference also led to the formation of the Bank for Reconstruction and Development, the General Agreement on Tariffs and Trade, and the International Monetary Fund (IMF).

The Bretton Woods system met its demise in 1971 when U.S. President Richard M. Nixon severed the link between the dollar and gold. Most major world economies now float their currencies. However, such Bretton Woods institutions as the Bank for Reconstruction and Development and the General Agreement on Tariffs and Trade (GATT) live on in the form of the World Bank and the World Trade Organization (WTO), respectively. The IMF, meanwhile, is currently negotiating broad-based bailouts for Iceland, Ukraine, Hungary, and Pakistan.

And analysts aren’t confident that the upcoming round of dialogue will produce the “very large and very radical changes,” that British Prime Minister Gordon Brown has called for and Sarkozy has seconded.

The original Bretton Woods conference took years of coordination and planning. It was also a three-week gathering of the world’s foremost economists, including John Maynard Keynes – not an impromptu political salon for world leaders to pontificate on the obvious shortcomings of the current financial system. And as the IMF’s continued intervention in many struggling world economies illustrates, many of the old Bretton Woods Institutions still have value.

“Things like this that produce real results for the world are planned years in advance,” Edwin M. Truman, who was an assistant secretary of the Treasury under U.S. President Bill Clinton, told The New York Times. “The notion that you’re going to have something come out of this in three months is probably naïve.”

The timing of the conference is also precarious, as it will come just 11 days after a new U.S. president is elected and just a few days before President Bush takes his last official trip abroad. The U.S. president will be joining an annual summit of Asian-Pacific leaders in Peru.

The meeting is being planned in such haste that the White House was not yet certain where it will actually be held. And with so many nations participating – not to mention a lame duck U.S. president – it unlikely the November summit will achieve anything substantive.

Still, there remains the hope that at least a framework of discussion – and perhaps even an outline for reform – can be established.

Instead the leaders who attend will be challenged to “agree on a common set of principles for reform,” White House Press Secretary Dana Perino told The Times. It will then be up to financial experts “to put meat on the bones when it comes to fleshing out the principles.”

Source: Will Calls for a “New Global Financial Order” Result in a Second Bretton Woods and the End of U.S. Dominance?

But the Fed and Treasury have engineered a strategy to pay off the debt with weaker and weaker dollars. And guess what? So far, so good. Since November 2002, the dollar has fallen against the euro more than 50 percent since its high in October 2000. Of course, this is not the first time we’ve gone through a managed devaluation of the currency. In the 34-year period since Nixon slammed the gold window shut and subsequently ended the Bretton Woods exchange rate mechanism, we’ve had only five major currency trends:

1. Weak dollar 1972–1978 (7 years)
2. Strong dollar 1979–1985 (7 years)
3. Weak dollar 1986–1995 (10 years)
4. Strong dollar 1996–2001 (6 years)
5. Weak dollar 2002– (? years)

The most notable period spanned the 10 years from 1986 through 1995. Then as now, the United States was fighting a historic current account deficit through managed debasement of its currency. But because the present bear market only began in February 2002, the current cycle looks like it still has a number of years to run.

In the best-case scenario, if the current bear market follows the trajectory set by the 1986 — 1995 slump, we could see a weakening dollar for up to 10 years. This presents an opportunity for selling the dollar in one of four ways: direct and indirect speculations, using short- and long-term options for each. These plays will help you safely position your money outside the dollar bear market. And you stand to make a fair amount of money, too.

*************************************

Using the “Off Switch” to Shut Down Alzheimer’s and Huntington’s Diseases, Too

It turns out the “off switch” discovery could have lots of uses beyond radically improving a patient’s chances of beating cancer.

For instance, take Alzheimer’s. Right now, there’s no cure.

But imagine the implications — for both victims and medical investors — if this same breakthrough could be used to reverse Alzheimer’s symptoms in just weeks.

Check it out here…

*************************************

But there is great danger ahead. Since the trade deficit passed the $759 billion mark — 6.3 percent of GDP — foreigners now must shell out about $1.5 billion a day just to keep the dollar afloat. And even during the managed dollar decline of 2003, the trade imbalance continued to grow. In 2005, Stephen Roach, Morgan Stanley’s chief global strategist, predicted that the current account deficit at the time was on course to reach $710 billion — 6.5 percent of GDP. He was short by only a few billion.

Herein lies the drama. The Bank of Japan spent the equivalent of $187 billion in 2003 — and $67 billion in January 2004 alone — in a bid to prevent its strengthening currency from choking off the country’s export-led recovery. In dollar terms, the Bank of Japan is now spending more than $1.5 billion every day trying to keep the yen from strengthening against the greenback.

Over a four-week period in the fall of 2003, combined foreign central bank purchases of U.S. securities topped $40 billion, more than $2 billion every trading day. Yet these central bank billions managed merely to limit the greenback’s decline to just 2.3 percent over the same period. Can you imagine what would have happened if the banks hadn’t pumped that money into the Fed’s reserves? One former currency trader has asked, “If $40 billion cannot bring about even a minor rally, just how weak and despised is the once — almighty dollar?”

We have relied on the kindness of strangers for too long. “We’re like the untrustworthy brother-in-law who keeps borrowing money, promising to pay it back, but can never seem to get out of debt,” Jim Rogers writes. “Eventually, people cut that guy off.”

There is no way the United States can possibly pay off its creditors should they decide to cash in their IOUs. Right now, the United States holds only about $70 billion in reserves against its obligations — much less than 2005’s $87 billion. That would last about three minutes should creditors begin to sell the dollar, rather than trying to support it.

It’s hard to imagine, isn’t it? The world’s reserve currency spiraling downward, out of control. But then, that’s what the British must have thought in 1992 when they attempted to manage a devaluation of the pound. Despite the Bank of England’s best efforts, sterling got away from them; the currency collapsed and Britain was kicked out of the Exchange Rate Mechanism (ERM) established to pave the way for the euro. On that day, known as Black Wednesday in Britain, currency speculator George Soros is rumored to have made as much as $2 billion. Don’t be surprised if more fortunes emerge in the future as the dollar slips dangerously close to free fall.

By flooding the system with liquidity, the Fed cannot control the value of the U.S. dollar against foreign currencies; nor can they control its purchasing power — at least not indefinitely. The Fed’s current policies can “give the majority of investors the illusion of wealth as asset markets appreciate,” wrote Marc Faber in November 2003, “while the loss of the currency’s purchasing power is hardly noticed. This is particularly true of a society that has a very large domestic market, where 90 percent of the people don’t have a passport and therefore know little about what is going on outside their own continent. And where the import prices of manufactured goods are in continuous decline because of the entry of China, as a huge new supplier of products with an extremely low cost structure, into the global market economy.” If that’s the case, you should look at any declines in the dollar as an opportunity to make some money.

The dollar is the single biggest element of risk in the world of finance today. Rearrange the current system of world finance ever so slightly, let confidence in the greenback falter, and the mighty dollar could go up in flames. There are many ways to hedge against this risk. Better still, there are many ways to profit from the likelihood the dollar will fall. Some methods are direct, some indirect. Some are leveraged, some unleveraged. There is a methodology for every taste, but before explaining the specifics, we ask: What ails the dollar?

The dollar is a victim of its own success. It is America’s most successful export ever — more successful than chewing gum, Levi’s, Coca-Cola, or even Elvis Presley, Britney Spears, and Madonna put together. Trillions of dollars flow through the global financial markets every week, and they are readily accepted at large and small — and clandestine — business establishments from Kiev to Karachi.

Today, there are simply too many dollars in circulation for the currency’s own good. Why? Americans have been living beyond their means for more than two decades. The U.S. dollar’s problems stem from a single cause. “If there’s a bubble,” wrote David Rosenberg, chief economist at Merrill Lynch,” it’s in this four-letter word: debt. The U.S. economy is just awash in it.”

You’ve seen it firsthand: John Q. Public now holds more credit cards and outstanding loans — with a higher and higher total debt load — than ever before. Outstanding consumer credit, including mortgage and other debt, reached $9.3 trillion in April 2003 — a significant increase from its $7 trillion total in January 2000 — but by the third quarter of 2007, debt had nearly doubled since 2000, to $13.7 trillion. With consumer spending alone responsible for approximately 70 percent of U.S. GDP, that’s quite a hefty personal debt load.

The corporate debt picture is no better. American companies have never depended so much on sales of their corporate bonds. Between 2002-2007, investment-grade corporate bond sales increased nearly 60 percent, growing from $598 billion to $951 billion. But junk bond sales for that same period broke the bank, surging from $57 billion to $133 billion.

The third leg of the debt problem, following consumer and business debt, is Uncle Sam. Government debt as of November 7, 2007, officially passed $9,000,000,000,000. That’s about $30,000 for every man, woman, and child in the country. This total includes debt owned by many types of investors, from individuals to corporations to Federal Reserve banks and especially to foreign interests. (By 2004, foreign central banks had stockpiled more than $1.3 trillion worth of dollar-denominated Treasury bonds and agency bonds at the Federal Reserve. By 2007, foreign debt had nearly doubled, to $2.033 trillion.)

What the $7.8 trillion figure does not account for are items like the gap between the government’s Social Security and Medicare commitments and the money put aside to pay for them. If these items are factored in, the government debt burden for every American rises to well over $175,000. In 2005, the Methuselah of investment mavens, Sir John Templeton, then 93, said you should get out of U.S. stocks, the U.S. dollar, and excess residential real estate. Templeton believed the dollar would fall 40 percent against other major currencies, and that this would lead the nation’s major creditors — notably Japan and China — to dump their U.S. bonds, which would cause interest rates to run up, thus beginning a long period of stagflation. He was right.

*****************************************

The Slow-Motion “Black Monday” Ahead

Here’s a picture for you: If the market today falls as fast and as far as it did in 1987, you’ll see more than 3,000 points erased from the Dow alone. In a single day.

Could it happen?

Banks hold the same blue chip shares you’ll find parked in your retirement fund. When the “level three” losses get declared, those same banks might have to start dumping those shares to raise cash. And that could send these blue chips…along with most of the rest of the stock market…into full-scale collapse.

I urge you to take the seven steps outlined for you in your free Strategic Financial Survival Library. Click here to reserve yours…

*****************************************

Don’t let his age fool you — Templeton was still sharp in 1999 when the financial industry hacks in Florida were urging their customers to buy more tech stocks. Templeton warned that the bubble would soon burst. He was right; they were wrong. Of course, he was only 87 back then. He is almost certainly right again. Other great investors, too, are getting out of the dollar. For the first time in his life, Warren Buffett is investing in foreign currencies.

George Soros, who made a fortune selling sterling in the 1992 ERM crisis, warns that the U.S. system could “blow up” at any time. Richard Russell, the influential editor of the Dow Theory letters, speaking at the New Orleans Investment Conference, warned: “If ever there was a crisis that could shake the global economy — this is it.” Jim Rogers is teaching his daughter to speak Chinese. When old-timers nod their heads in agreement — especially when they happen to be the most successful investors in the world — their advice may be worth listening to.

American consumers, companies, the U.S. government, and the country as a whole owe more dollars to more people than ever before. But perhaps the greatest threat to the U.S. economy is its foreign creditors. There is — or should be — a limit to the number of dollars foreigners are willing to buy and hold and thus a limit to their willingness to service our credit habit. Why? Because the United States, while still the world’s number — one economic power, is showing itself to be an unreliable steward of its own currency.

Regards,
Addison Wiggin

Source: How to Sell the Dollar

Before 1971, in the Bretton Woods monetary era, major economies used the dollar as a reference of value. The greenback was a North Star – helping businessmen and investors find their way. The U.S. dollar was reliable because it was tied to gold, which the U.S. Treasury promised to deliver to any country at a rate fixed at $42 an ounce. Then, on August 15, 1971, the U.S. Treasury reneged. Egged on by modern economists, the last link with gold was cut. Governments, investors and businessmen could still look to the dollar as a point of reference, but good luck to them. This disgraceful mischief caused even the stars to wobble.

…To make a long story short, a bubbly supply of cash and credit led to bubbly markets. The U.S. and major foreign stocks market bubbled up to all-time highs in January 2000; then they headed down. In inflation adjusted terms, most never recovered. Then, in 2003, it was housing’s turn… followed by emerging markets… and lately, oil and commodities.

Sure, the capitalists are greedy. And sure, many of them make mistakes. But with feds rearranging the heavens, it’s a wonder they didn’t wash up more often.

But it’s not just the US, inflation rates are up worldwide, in both emerging and mature markets, says Money Morning’s Jason Simpkins:

Consumer prices in Mexico jumped nearly 5% in May from a year earlier, the biggest jump since 2004, according to Bloomberg News. The government has issued a price freeze on tortillas, cooking oils, beans and roughly 150 other items this year to ensure its population is adequately fed.

The decision surprised many analysts as it flouted the country’s president, Felipe Calderon, who has hinted that borrowing costs are already too high. Still, inflation demanded Mexico’s attention as soaring food and energy costs have resulted in what has fast become a worldwide inflation epidemic.

Soaring fuel prices pushed India’s inflation rate to a 13-year high in early June, adding to speculation the central bank may accelerate its own monetary tightenting initiative, Financial Times reported. Inflation reached 11.05% in the 12 months ended June 7, up from 8.75% the previous week, and well above the 9.82% median forecast in a Reuters poll of analysts, the paper reported on its Web site.

Earlier this month, the Reserve Bank of India announced a surprise rate increase of its own, pushing its key lending rate up 25 basis points to a full 8%. The bank also raised its cash reserve ratio – the amount of cash banks must keep on hand – by 25 basis points to 8.25% as recently as April 29.

In China, consumer prices rose 7.7% in May after inflation reached a 12-year high of 8.7% in February. China’s producer price index rose 8.2% in May, the highest in more than three years.

The problem isn’t any better in mature markets either. Eurozone inflation hit a 16-year high in May, as costs pushed inflation up 0.6% to an annualized rate of 3.7%. High commodity costs fueled the increase, as food costs jumped 6.4% in May up from 6% in April. Energy prices soared 13.7% year-over-year on the back of record high oil, up from a 10.8% increase the month prior.

“And, in the age where we don’t have oil, industry, or military might, ask Alan Greenspan what stands behind the dollar now.”

In an age when the US lacks energy, industry or military might… What stands behind the dollar now?

I have long tried to imagine the discussion at Bretton Woods in July 1944. US, British & Canadian troops had just landed in France. Germany was bleeding white on the Russian Front. The Japanese Empire was dying in the Pacific. Everyone knew that there was hard fighting ahead. But everyone also knew that the Axis was going to be defeated, and the Allied nations would win the war.

So 730 delegates from 44 Allied nations gathered in New Hampshire to chart the future course of the world monetary system.

There are, of course, reports and summaries of what people said for the record. But what did the US delegates REALLY say at Bretton Woods? Let’s just imagine…………

“OK, everyone. Nice to see you all. Hey, did you see the invasion force at Normandy last month? Can you do that? No? Oh. Well, we did that. And we can do it again.

“How about that industrial base back home, eh? Those Rosie the Riveter girls sure can knock out the old landing craft. How’s your industrial base? Oh. Well, that’s OK.

“And it’s a good thing we had all those bombers in the 8th Air Force in England, huh? Yep. Those bombers just turn the sky black, don’t they? And how about that steel rain when the bombs come whistling down? You want area bombing? We have area bombing. On a good day, we can do precision bombing too. Can you do precision bombing? No? Oh.

“And we have 200 submarines in the Pacific. Do you have 200 submarines? No? Oh, gee.

“Overall, we have a 2,000 ship navy, with over 100 aircraft carriers. Do you have a 2,000 ship navy, with over 100 aircraft carriers? No? Oh. That’s OK. Not everyone can have a 2,000 ship navy. Or 100 aircraft carriers.

“And have you heard about the B-29? It’s an intercontinental bomber. Yep. Takes off from the US, and bombs another continent. We’re going to build a lot of those B-29s. Do you have B-29s? No? Oh.

“And I can’t get into details, but the US has this really big program to develop the next generation of weapons. It’s all classified, so I can’t talk about it. But we have all the best physicists and chemists and mathematicians working on it. Really, there are so many brilliant minds working on it that you just can’t find a decent physicist or chemist or mathematician any more. Do you have one of those programs? No? Oh.

“And how about all that gold in the US government vaults. Back in 1933 President Roosevelt collected all the gold from every person in the US. All of it. The whole national treasure. It’s all under our control now. The Supreme Court said it was OK, so it’s even legal. Now we have just thousands of tons of gold. Do you have thousands of tons of gold? No? Oh.

“OK everyone, let’s get down to work. I propose that we make the US dollar the world’s reserve currency. Any questions? No? Oh.”

Until we meet again,

Byron King

Source: What Stands Behind the Dollar?

At the time, our debt stood at $7 trillion, with interest payments in fiscal 2003 totaling $318 billion. But now the U.S. national debt stands above $ 9 trillion, with interest payments in fiscal 2007 adding $ 1.4 billion a day.

But the Fed and Treasury have engineered a strategy to pay off the debt with weaker and weaker dollars. And guess what? So far, so good. Since November 2002, the dollar has fallen against the euro more than 50 percent since its high in October 2000. Of course, this is not the first time we’ve gone through a managed devaluation of the currency. In the 34 – year period since Nixon slammed the gold window shut and subsequently ended the Bretton Woods exchange rate mechanism, we’ve had only five major currency trends:

1. Weak dollar 1972 – 1978 (7 years)
2. Strong dollar 1979 – 1985 (7 years)
3. Weak dollar 1986 – 1995 (10 years)
4. Strong dollar 1996 – 2001 (6 years)
5. Weak dollar 2002 – (? years)

The most notable period spanned the 10 years from 1986 through 1995. Then as now, the United States was fighting a historic current account deficit through managed debasement of its currency. But because the present bear market only began in February of 2002, the current cycle looks like it still has a number of years to run.

In the best-case scenario, if the current bear market follows the trajectory set by the 1986 – 1995 slump, we could see a weakening dollar for up to 10 years. This presents an opportunity for selling the dollar in one of four ways: direct and indirect speculations, using short- and long-term options for each. These plays will help you safely position your money outside the dollar bear market. And you stand to make a fair amount of money, too.

But there is great danger ahead. Since the trade deficit passed the $ 759 billion mark – 6.3 percent of GDP – foreigners now must shell out about $ 1.5 billion a day just to keep the dollar afloat. And even during the managed dollar decline of 2003, the trade imbalance continued to grow. In 2005, Stephen Roach, Morgan Stanley’s chief global strategist, predicted that the current account deficit at the time was on course to reach $ 710 billion – 6.5 percent of GDP. He was short by only a few billion.

Herein lies the drama. The Bank of Japan spent the equivalent of $187 billion in 2003 – and $67 billion in January 2004 alone – in a bid to prevent its strengthening currency from choking off the country’s export-led recovery. In dollar terms, the Bank of Japan is now spending more than $ 1.5 billion every day trying to keep the yen from strengthening against the greenback.

Over a four-week period in the fall of 2003, combined foreign central bank purchases of U.S. securities topped $ 40 billion, more than $ 2 billion every trading day. Yet these central bank billions managed merely to limit the greenback’s decline to just 2.3 percent over the same period. Can you imagine what would have happened if the banks hadn’t pumped that money into the Fed’s reserves? One former currency trader has asked, “If $40 billion cannot bring about even a minor rally, just how weak and despised is the once – almighty dollar?”

We have relied on the kindness of strangers for too long. “We’re like the untrustworthy brother – in – law who keeps borrowing money, promising to pay it back, but can never seem to get out of debt,” Jim Rogers writes. “Eventually, people cut that guy off.”

There is no way the United States can possibly pay off its creditors should they decide to cash in their IOUs. Right now, the United States holds only about $ 70 billion in reserves against its obligations – much less than 2005’s $ 87 billion. That would last about three minutes should creditors begin to sell the dollar, rather than trying to support it.

It’s hard to imagine, isn’t it? The world’s reserve currency spiraling downward, out of control. But then, that’s what the British must have thought in 1992 when they attempted to manage a devaluation of the pound. Despite the Bank of England’s best efforts, sterling got away from them; the currency collapsed and Britain was kicked out of the Exchange Rate Mechanism (ERM) established to pave the way for the euro. On that day, known as Black Wednesday in Britain, currency speculator George Soros is rumored to have made as much as $ 2 billion. Don’t be surprised if more fortunes emerge in the future as the dollar slips dangerously close to free fall.

By flooding the system with liquidity, the Fed cannot control the value of the U.S. dollar against foreign currencies; nor can they control its purchasing power – at least not indefinitely. The Fed’s current policies can “give the majority of investors the illusion of wealth as asset markets appreciate, ” wrote Marc Faber in November 2003, “while the loss of the currency’s purchasing power is hardly noticed. This is particularly true of a society that has a very large domestic market, where 90 percent of the people don’t have a passport and therefore know little about what is going on outside their own continent. And where the import prices of manufactured goods are in continuous decline because of the entry of China, as a huge new supplier of products with an extremely low cost structure, into the global market economy.” If that’s the case, you should look at any declines in the dollar as an opportunity to make some money.

The dollar is the single biggest element of risk in the world of finance today. Rearrange the current system of world finance ever so slightly, let confidence in the greenback falter, and the mighty dollar could go up in flames. There are many ways to hedge against this risk. Better still, there are many ways to profit from the likelihood the dollar will fall. Some methods are direct, some indirect. Some are leveraged, some unleveraged. There is a methodology for every taste, but before explaining the specifics, we ask: What ails the dollar?

The dollar is a victim of its own success. It is America’s most successful export ever – more successful than chewing gum, Levi’s, Coca – Cola, or even Elvis Presley, Britney Spears, and Madonna put together. Trillions of dollars flow through the global financial markets every week, and they are readily accepted at large and small – and clandestine – business establishments from Kiev to Karachi.

Today, there are simply too many dollars in circulation for the currency’s own good. Why? Americans have been living beyond their means for more than two decades. The U.S. dollar’s problems stem from a single cause. “If there’s a bubble,” wrote David Rosenberg, chief economist at Merrill Lynch, ” it’s in this four – letter word: debt. The U.S. economy is just awash in it. “

You’ve seen it firsthand: John Q. Public now holds more credit cards and outstanding loans – with a higher and higher total debt load – than ever before. Outstanding consumer credit, including mortgage and other debt, reached $ 9.3 trillion in April 2003 – a significant increase from its $ 7 trillion total in January 2000 – but by the third quarter of 2007, debt had nearly doubled since 2000, to $ 13.7 trillion. With consumer spending alone responsible for approximately 70 percent of U.S. GDP, that’s quite a hefty personal debt load.

The corporate debt picture is no better. American companies have never depended so much on sales of their corporate bonds. Between 2002-2007, investment – grade corporate bond sales increased nearly 60 percent, growing from $598 billion to $951 billion. But junk bond sales for that same period broke the bank, surging from $57 billion to $133 billion.

The third leg of the debt problem, following consumer and business debt, is Uncle Sam. Government debt as of November 7, 2007, officially passed $ 9,000,000,000,000. That’s about $ 30,000 for every man, woman, and child in the country. This total includes debt owned by many types of investors, from individuals to corporations to Federal Reserve banks and especially to foreign interests. (By 2004, foreign central banks had stockpiled more than $ 1.3 trillion worth of dollar – denominated Treasury bonds and agency bonds at the Federal Reserve. By 2007, foreign debt had nearly doubled, to $ 2.033 trillion.)