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COMING HOME TO ROOST: Inflation and No Growth beating on Americans’ doors

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Americans have witnessed a confluence of events in recent years as a result of bad decision making, poor business practices, and in many cases, greed.

Swiss America CEO Craig Smith is available for interviews not to commiserate with you listeners or preach doom and gloom. As usual, Smith has some very sound and practical advice in these anxious times.

The steady decline of the dollar is undisputed. Gas prices and food prices continue to rise as a result of the falling U.S. dollar. “It’s not time to panic,” says Smith, “but it is time to take a hard look at our currency and make sound decisions accordingly.”

How to fight back against the incredible shrinking dollar
"Soaring inflation guarantees steep investor losses in 2008, unless..." says Author/CEO
July 15, 2008
Craig Smith

Once upon a time... American economists used to arrogantly say, "The dollar is OUR currency, but it's YOUR problem!" Today the declining dollar is both a global and a domestic problem, as it spurs higher oil and commodity prices -- pushing U.S. inflation to the highest level in over a quarter century.

"Soaring gasoline and food costs pushed wholesale inflation up 1.8% in June, the fastest pace in 27-years. The economy showed the depth of its twin problems, slow growth and rising inflation, as the nation wrestled with a teetering financial system, a slumping dollar and rising prices for food and fuel," reports AP.

“The U.S. almighty dollar has now lost 97% of its buying power since 1915. What's really at risk now is the dollar's role as reserve currency. Unless foreigners continue to buy dollar-denominated assets, the exploding US trade and budget deficits threaten to sink the US dollar,” says Author and Swiss America CEO Craig R. Smith.

Mr. Smith thinks the falling dollar is now entering a new phase, propelled by rising inflation and eroding confidence in the U.S. economy and financial markets. To reverse this mega-trend decisive defensive action must be taken by investors.

“Savers in America are being punished with negative real returns ranging between 2-8%. It is clear that inflation is out of control, and appears set to get worse as the government cranks up the printing presses to provide liquidity for massive bailouts,” says Mr. Smith.

"The almighty dollar is mighty no more. It has been declining steadily for six years against other major currencies, undercutting its role as the leading international banking currency," reports CNN.

“Traditionally real estate offers a safe haven during inflationary times, but today housing prices are still falling, leaving very few alternatives for most Americans. Add to that the growing mortgage, bankruptcy and banking crisis. Millions of investors could witness catastrophic losses this year unless they have a plan to cut their losses and diversify assets into tangible assets like gold and silver,” says Smith.

In Mr. Smith’s newest report, “THE IN-CREDIBLE SHRINKING DOLLAR: HOW TO FIGHT BACK! He covers…
· THE DOMINO EFFECT ~ Investors are voting with their feet to ditch the dollar...
· WEAK DOLLAR HURTS AMERICA ~ Cuts real spending power and income...
· SUBSTANCE VS. SYMBOLISM ~ Gold's surge, a flight to safe, liquid assets...
· GOLD’S NEXT PHASE ~ Destiny of a currency determines destiny of a nation...
· FIGHT THE FALLING BUCK~ How to put yourself on a personal gold standard.

ABOUT CRAIG SMITH…

Craig R. Smith is the president and CEO of Swiss America Trading Corporation, one of the largest and most respected investment-grade U.S. gold and silver coin firms in the nation since 1982. He’s been featured frequently on Fox News Channel, CNBC, MSNBC and CNN.




Bloomberg News Service/ July 15, 2008
Bernanke Abandons Assessment of Lessening Growth Risk

July 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke abandoned his June assessment that the threat of an economic downturn had diminished, telling lawmakers that growth and inflation risks are increasing.

There are ``significant downside risks to the outlook for growth,'' and ``upside risks to the inflation outlook have intensified,'' Bernanke said in semiannual testimony on the economy to the Senate Banking Committee in Washington.

Bernanke's shift reflects renewed turmoil in markets that forced the Treasury and Fed to mount a rescue of Fannie Mae and Freddie Mac this week. He said that stabilizing financial markets remains ``a top priority,''

The Fed chief spoke less than two hours after government figures showed that the economic boost from U.S. tax rebates began to fade in June and inflation pressures increased.

``Clearly, policy is on hold,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut, and a former Fed economist. ``They are relatively concerned about the second half of the year.''

Energy Impact

Bernanke cited higher energy prices, reduced access to credit and a further deepening in the housing recession as dangers to growth. At the same time, he said: ``We must be particularly alert to any indications, such as an erosion of longer-term inflation expectations, that the inflationary impulses from commodity prices are becoming embedded'' in wages and prices.

The Standard & Poor's 500 Index fell 13.39 points or 1.1 percent to 1,214.91 in New York, the lowest close since 2005. The U.S. currency was at 1.5904 per euro at 4:33 p.m. in New York after reaching a record low earlier in the day.

``I am looking for the economy to strengthen next year, and as it does, I think that will support a strong dollar,'' Bernanke told the Senate committee in the question and answer period.

Retail sales rose 0.1 percent from the previous month, the Commerce Department reported today, less than economists forecast. Producer prices jumped 1.8 percent, the most since November, the Labor Department said. From a year ago, prices climbed 9.2 percent, a surge unseen since 1981.

Bernanke's comments today are his first on monetary policy and the economic outlook since the Federal Open Market Committee's June 25 decision to leave the benchmark interest rate unchanged at 2 percent, pausing after seven cuts totaling 3.25 percentage points since September.

`A Top Priority'

``Helping the financial markets return to more normal functioning will continue to be a top priority of the Federal Reserve,'' the Fed chairman said.

The comments come two days after the Treasury and Fed moved to provide a backstop for Fannie Mae and Freddie Mac, which have fallen more than 45 percent in six days.

Bernanke said consumer spending is ``likely to be restrained over coming quarters,'' and businesses are ``likely to be cautious with their spending in the second half of the year.''

Federal tax rebates provided ``timely support'' for strained households, he said. That's helped household spending hold up better than was forecast, he added.

Declines in home prices ``have contributed to the rising tide of foreclosures,'' the Fed chairman said. ``Foreclosures have, in turn, intensified the downward pressure on home prices in some areas.''

New Forecasts

In new forecasts, Fed officials raised their projections for economic growth and inflation for this year, while reiterating their outlook for faster growth in 2009.

Fed governors and district bank presidents now see the economy expanding 1 percent to 1.6 percent this year, up from 0.3 percent to 1.2 percent in their April outlook. Consumer prices will rise 3.8 percent to 4.2 percent this year compared with a projected range of 3.1 percent to 3.4 percent in April. The economy should expand at a 2 percent to 2.8 percent rate in 2009, identical to the April forecasts.

Risks to the economic outlook have risen after the Standard and Poor's Financials Index dropped 17 percent and Fannie Mae and Freddie Mac, the largest sources of U.S. home financing, slumped. Four days ago, the Federal Deposit Insurance Corp. took over IndyMac Bancorp Inc. as the California lender collapsed under soaring losses.

`Downside' Risks

``Most participants viewed the risks to their projections for gross domestic product growth as weighted to the downside,'' the Fed said in a section of its monetary policy report where it describes the forecasts. ``Most participants viewed the risks to their inflation projections as weighted to the upside.''

Uncertainty in the forecasts was ``higher than normal,'' the Fed said, due to the ``duration and effects'' of financial strains on growth and ``the extent of pass-through'' of commodity prices to core inflation. Bernanke said that pass- through so far has been ``limited.''

The economy grew at an annualized rate of 1 percent in the first quarter, capping the weakest six months in five years. Financial turbulence is crimping credit to housing markets and businesses, while a near doubling of oil prices in the past year has pushed consumer expectations of inflation higher.

``The effects of the housing contraction and of the financial headwinds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities, which have sapped household purchasing power,'' Bernanke said.

13-Year High

American households foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey.

``Inflation seems likely to move temporarily higher in the near term,'' Bernanke said.

Bernanke's hearing today will be ``brief'' in order to accommodate a second gathering with him, Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox. Democratic Senator Christopher Dodd of Connecticut, who chairs the committee, set the second hearing yesterday to address financial markets.

Tomorrow, Bernanke appears before the House Financial Services Committee for the second day of his semiannual testimony.

The Federal Open Market Committee next meets Aug. 5 in Washington. Investors expect the central bank to leave the overnight interbank lending rate unchanged at 2 percent again. Traders see a 59 percent chance of an increase to 2.25 percent or higher by the end of the year, based on futures prices.

 
 

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