"We stand on the precipice of an unprecedented monetary collapse, and as a result many people have begun to look for alternatives to the dollar."

- Ron Paul

Issue #143: Wednesday, March 05, 2008

The New Ron Paul
"Adopt an Alternative Currency" Bill Sits with Congress

Today's commentary is by Sean Hyman, our Currency Director and editor of The Money Trader.

Good Day Currency Traders!

In many other countries, you can choose to hold your savings account in a foreign currency.

For example, in Switzerland, you could call your banker and ask to convert your Swiss franc account to euros, yen, or even a basket of different currencies, if you want. In fact, foreigners do that all the time.

Unfortunately, in America, we don't really have that choice. If you, as an American, want to hold your cash in another currency, generally you have to open up a foreign bank account and convert the dollars into pounds, Aussie dollars, etc. Or you'd have to bank with a highly specialized U.S. bank like EverBank.

Other than EverBank in Florida, I don't know of anyone else who has really had the pioneering spirit to offer savings accounts in foreign currencies.

I have a friend right now who's switching her cash in foreign savings account out of euros and into the Japanese yen. She's doing this through her foreign bank account.

However, wouldn't it be nice if you could do the same thing at your boring U.S. bank and not "have" to use the ailing U.S. buck? I think so...and evidently Ron Paul thinks so too.

Ron Paul Takes Action for Americans!

In December of 2007, he drew up a bill that he submitted to Congress on this issue. Here's an excerpt below from Ron's proposed bill:

Due to nearly a century of inflationary monetary policy on the part of the Federal Reserve, the US dollar stands at historically low levels. Investors around the world are shunning the dollar, and millions of Americans see their salaries, savings accounts and pensions eroded away by rising inflation.

As a proponent of competition in currencies, I believe that the American people should be free to choose the type of currency they prefer to use. The ability of consumers to adopt alternative currencies can help to keep the government and the Federal Reserve honest, as the threat that further inflation will cause more and more people to opt out of using the dollar may restrain the government from debasing the currency."

A bill like this could give Americans the flexibility that Europeans and others have had for quite some time now. This concept is not new...it's just new to America.

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The Empowerment Americans
Need to Boost Returns

If this bill passes, it could give Americans many different options. Could you imagine if your savings grew by 14% just because you had your savings in euros this past year instead of dollars? Then that paltry 2% that you earned in interest might not be so bad if your euros appreciated against the greenback. That would have been a 16% return in a savings account.

What if you could have had a euro-based CD where you could have earned 4%+ on your money instead of 2% in the savings account? See how much more control it gives you over your "financial destiny?" That way, you wouldn't just have to "happen" to live in just the right spot in order to benefit.

If this happened, it's possible the buck would fall further due to so many Americans dropping their dollars for stronger currencies. However, the U.S. dollar wouldn't have to be the main "medium of exchange" anymore either.

In fact, it seems it's already happening. It's not just American rappers and models sporting euros these days. Hyundai evidently is shunning payments in U.S. dollars. set up an "exchange" that trades oil in Iranian rials, instead of the U.S. dollar. Shops in New York City are starting to accept euros and pounds.

Whatever America Loses Goes Directly to China

Who would have thought we'd see things like this in our lifetime? Yet it is happening. America is repeating the path of the United Kingdom. The U.S. dollar will eventually lose its top spot as "superpower of the world" and will also lose its "world's reserve currency" status as well. It's only a matter of time.

Who will take America's spot? More than likely...China. They have the fastest growing military in the world and their yuan is growing steadily right now. Both of those will only continue.

In this "transition period" for the buck, it would be good if we could have some choices so that inflation and the falling buck don't erode away our IRAs, 401ks, savings accounts and our purchasing power.

SEAN HYMAN, Currency Director

P.S. Our friends at EverBank have been on the frontlines fighting for Americans' rights to diversify into stronger currencies for quite some time. Right now, they already offer several CDs including two Sovereign Society CDs that let you diversify at least a portion of your wealth away from the ailing dollar and straight into stronger currencies like the Chinese yuan, Japanese yen, Swissie, Aussie dollar and more.

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Fed Up with Your Pathetic Dollars? Trade Them in for Stronger Currencies…Just Like China Does

Making 'Cents' of the Headlines

From Currency Director: Sean Hyman

What Happened:

The Institute for Supply Management manufacturing number came out on Monday and boy was it a disappointment. The number sank to 48.3 from the 50.7 number last month.

What I Say:

There have been pockets of manufacturing across the country over the last week or so that's been reporting a contraction (which is a number below 50). Now we see that overall the whole U.S. manufacturing sector just officially went into a contraction.

Manufacturing has really slumped on all fronts. New orders decreased. Production dropped. Supplier deliveries fell.

Inventories fell. What does all of this tell us? Businesses aren't expecting sales to pick up any time soon. Otherwise, they'd request more products to be made, shipped, stocked, etc.

So now we've got both, a manufacturing recession and a housing recession. Think we'll get an overall recession? Yep, and I say we're already in it.

Construction spending came out the same day and it is still heading lower. That means more construction jobs will be lost. So expect higher unemployment in the months to come.

The collapse in the housing market is causing a ripple effect. Why make improvements on your house when it's dropping in value? It's not exactly the best time to add on that new porch, when your house will be worth thousands less by this time next year. This has really hurt companies like Home Depot and Lowes because Americans are buying fewer appliances, less furniture, doing less remodeling, etc.

Not only are we seeing a weakness in manufacturing and housing but automobile sales are slowing to a crawl also. Hey, if you think it's hard to get credit for a long term appreciating asset like a house...try financing a depreciating asset like a car right now.

The environment right now is just not conducive to "spending." You've got higher food costs, higher energy costs, lower house prices, lower stock prices. Plus, would-be consumers are hearing about all of the layoffs on the nightly news. You can't help but wonder if your "neck" will be the next one on the "chopping block," when unemployment is on the rise.So when you combine all of this together, it equals the consumer slamming their wallet shut.

Rather than buying big-ticket items, consumers are starting to "wise up" in their spending. They're shopping at the "discounters" more for their "needed" goods and their food at places like Wal-Mart. They are not going to the movies as much (which could cost an average family US$40+ dollars) and they're renting them from those machines outside of Wal-Mart for a buck or two instead.

Plus, this summer, you can expect gas prices to soar to US$4.00 a gallon. Gas is already hitting all-time highs in a time when it should be in a seasonal slump. This will be one of the things that hits the consumer the hardest as they go on vacations. You can count on Americans staying closer to home and spending less this upcoming vacation season than in previous years.

So you can bet...in light of all of the latest data, that Bernanke will cut interest rates once more this month. He has to do so. There's just no other way around it.