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Good Questions - Tough Answers

The Daily Reckoning - Weekend Edition
April 28-29, 2007
Los Angeles, California
by Kate "Short Fuse" Incontrera

VIEWS FROM THE FUSE: GOOD QUESTIONS - TOUGH ANSWERS

Your editor has recently packed up her belongings and headed to the 'Left
Coast' to work on our still-untitled documentary. Since we have taken a
breather from doing interviews right now, this is the perfect opportunity
to flush out our ideas and themes and start piecing this film together.

A theme that keeps coming up when we talk about important points in the
documentary is the U.S. dollar and its position in not only the everyday
lives of Americans, but in the world. Obviously, our floundering currency
will play an integral role in the movie - after all, it is the underlying
thread that ties many other topics - debt, deficits, the American consumer
- together.

And this past week, the dollar continued to prove itself as a major
issue...not just in our documentary, but worldwide. The U.S. currency is
at near record lows against the euro, the British pound, the Australian
dollar and the Chinese yuan.

A number of factors have played into the reserve currency of the world
taking this significant hit: weak U.S. economic growth, the concerns
raised by the crumbling housing market and the possibility of an interest
rate cut by the Fed later this year.

But the larger question remains: is the greenback's status as reserve
currency threatened - and what will the impact be on America? We recently
posed this exact query to former U.S. Treasury Secretary Robert Rubin in
an interview for the documentary - and here's what he had to say:

"It's a good question, I understand the question, but it's a complicated
question...and I'm supposed to be saying this in a way that people
watching this documentary are going to understand? Good luck," he began,
settling into his chair in the conference room at the Citigroup building
in New York.

"At the present time, the United States has significant fiscal deficits
and they'll fluctuate depending on short-term circumstances, but in the
long-term sense, we have significant deficits, they get substantially
worse over time because of entitlement, and at the same time, we have very
large trade deficits.

"At some point, these become a deep threat to our economy and to the
global economy -and at some point, our political system is going to have
to address this predominantly through putting in place a sound, long-term
fiscal regime. One of the risks, and there are many risks in this
combination of imbalances, we also have a very low national savings
rate...[and] at some point people can lose confidence in the dollar. And
if the global community lost confidence in the dollar, it's conceivable
that we would no longer be a favored reserve currency.

"That's a very technical matter, but it could have enormous significance
for our country. I don't believe that it will happen for a while host of
reasons. I believe we'll remain reserve currency and I believe at some
point, our political system is simply going to have to address these
long-term fiscal issues. But it's going to be very difficult to do it and
it's enormously in the interest of the American people that our political
system address these issues before they're a substantial difficulty rather
than a response to substantial difficulty, but our political system has a
tendency to respond more in response to difficulty than in anticipation of
difficulty.

"Let me just add one more thought: the United States has many great
strengths which put us in the position to thrive over time economically,
but in order to thrive we have to address these issues, and if we don't,
then I think we could have serious difficulties."

Let's just keep our fingers crossed that the presidential hopefuls are
paying attention...

Short Fuse
The Daily Reckoning

P.S. We still haven't settled on a title for the documentary. Any ideas?
If so, send them to kincontrera@dailyreckoning.com

--- The Daily Reckoning Book of the Week ---

A Maniac Commodity Trader's Guide to Making a Fortune
by Kevin Kerr

In A Maniac Commodity Trader's Guide to Making a Fortune, Kerr dispels the
common myths and misconceptions about these markets, offering an insider's
view of what he calls "the last bastion of pure capitalism on Earth."
Whether you're a novice or an experienced trader, Kerr's down-to-earth,
clear-cut guidance will make you more savvy, more confident, and more able
to jump right in and grab those profit opportunities that are waiting for
you.

Kerr shares the pitfalls and successes of his long career, showing you how
to take huge profits from movements in markets you've only heard of, but
were afraid to trade, and succeed beyond your wildest dreams. Kerr-proudly
known to many as "The Maniac Trader"-demystifies the language and ritual
of the commodity markets, shows the basics of fundamental analysis,
explains how market makers create pricing, and much more. Read this book
and you'll agree that adding commodities to your portfolio is a sure way
to capitalize on some of the most rewarding, exciting investment
opportunities available today.

To purchase your copy, see here:

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http://www.agorabookpublishing.com/bin/o/v/dr.html

---------------------

THIS WEEK in THE DAILY RECKONING: Excess and the American obsession with
it revealed itself as a theme in the past five days of The Daily
Reckoning. Read all about it, below...

Those Irresistible Hearts of Darkness 04/27/07
by Bill Bonner

"The world is currently reveling in excess. From China to Las Vegas, the
constant exchange of money is getting more and more outrageous. Bill
Bonner explains why investors may be setting themselves up for failure by
entering into the ever-darkening hearts of some very volatile markets.
Read on..."
http://www.dailyreckoning.com/Issues/2007/DR042707.html

Overcoming the Fear Factor 04/26/07
by Kevin Kerr

"It's human nature to avoid or dismiss things that you don't understand -
tasks that you find daunting or subjects that you just can't wrap your
head around. Options trading, for example, made even our Maniac Trader's
knees knock together at one time...read on to see how he wrestled that
fear and has since made options the most profitable part of his trading
strategy..."
http://www.dailyreckoning.com/Issues/2007/DR042607.html

The Modern 1930's 04/25/07
by Tom Au

"It has become generally accepted that the bursting housing bubble will
have its consequences - but do we fully understand the effect it will have
on the average cash-strapped American consumer? Tom Au shows how the
nation's latest Ponzi scheme could bring about pullback in living
standards not seen since the Great Depression. Read on..."
http://www.dailyreckoning.com/Issues/2007/DR042507.html

The Fine Art of Living 04/24/07
by Dr. Mark Skousen

"If you're too busy in your work, you don't have time to learn new ideas,
to discover new truths, to enjoy life's little pleasures, or perhaps to
pick a winning stock! Beating the market requires you to look in
untrodden paths, and you need the free time to do it. Mark Skousen
explores..."
http://www.dailyreckoning.com/Issues/2007/DR042407.html

Fed in the Land of Excess 04/23/07
by The Mogambo Guru

"The Fed doesn't know how to do anything small - and the Mogambo never
lets them do it without giving them a piece of his mind. See why this
week, he wants to drag them down to The Mogambo Secret Kangaroo Court Of
Vengeance (TMSKCOV). Read on..."
http://www.dailyreckoning.com/Issues/2007/DR042307.html

---------------------

FLOTSAM AND JETSAM: While former Treasury Secretary Robert Rubin feels
that the dollar may be able to pull itself up by its bootstraps if the
proper measures are taken, GoldMoney.com's James Turk thinks that the
greenback may be doomed to fail. Read on...

The Dollar in Freefall
by James Turk

It has been a bad couple of weeks for the dollar. From its recent high of
83.10 on April 9th, the US Dollar Index has fallen to 81.53, a 1.9%
decline. That may not sound like much, but it works out to a 32.7% decline
on an annualized basis. Given that one presently earns only about 5% per
annum in interest income on their dollars, the loss in purchasing power is
obvious.

What's more, the US Dollar Index is now trading at a 2-year low. It is
only 3.9% away from its all-time record low of 78.33, made on September
1st, 1992.

The dollar is in a precarious position. It is in a freefall, which in
itself is not new. This time, though, there is a difference.

It is important to note that the US Dollar Index is rapidly approaching
its all-time low. That fact suggests the length and severity of the
present freefall decline could exceed all previous examples. One must
therefore ask, has the long anticipated final collapse of the dollar
begun?

A collapse of the fiat dollar is inevitable. It is the principal theme
that John Rubino and I put forward in our book, The Coming Collapse of the
Dollar. The dollar is being mismanaged, just like all other fiat
currencies before it. These currencies inevitably collapsed, so why should
the outcome for the dollar be any different?

In my view there is no logical reason to suggest that the fate of the
dollar will be anything but a collapse. Whether it will be like the
Argentine peso several years ago or the Reichsmark in Weimar Germany or
the collapse of dozens of other fiat currencies, it's just a matter of
timing, which is the only uncertainty. In other words, no one can predict
when the collapse will occur. It may yet be years away, but then again, it
is possible that the final collapse of the fiat dollar has already begun.

Meanwhile, gold and silver have both fallen back into support. Both of the
precious metals remain in uptrends. Most importantly, both look ready to
break above their multi-decade high set one year ago. So in the coming
weeks I expect to see gold and silver exceed their May 2006 high.


Editor's Note: James Turk has specialized in international banking,
finance and investments since graduating in 1969 from George Washington
University with a B.A. degree in International Economics.

He is the author of two books and several monographs and articles on money
and banking. He is the co-author of "The Coming Collapse of the Dollar"
(Doubleday, December 2004).

In addition, James Turk is the Founder and Chairman of GoldMoney.com.
Since 2001, thousands of individuals and companies have used GoldMoney(r)
to buy gold to protect their wealth from today's financial uncertainties.
Many of them have also found GoldMoney's patented process of digital gold
currency payments to be an ideal payment solution for online commerce.

Learn more about GoldMoney(r).
http://goldmoney.com/?gmrefcode=dailyrec






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