Is the Death of the Dollar Upon Us?

Physician's Money Digest, May 2007, Volume 14, Issue 5

The world's strongest currency,the US dollar, is ona collision course withdisaster, falling 10.2% invalue in just the past yearalone. I believe this is only the firststage of a violent, near-death wipeoutof our national currency.

The course has been set, and this economicnightmare may be inescapable.The signs are there, but virtually everyonein Washington is refusing to seethe danger. The good news is this: Itcreates one whopper of a profit opportunityfor investors.

National Debt Still Climbing

Government debt is skyrocketing tostaggering new heights, currently at$8.7 trillion. Your personal share ofthe debt is now over $29,000—andgrows every day. Since the governmentproduces nothing on its own, it canonly repay debt from the taxes we pay.This means if you have a family offour, you owe—and will eventuallyhave to pay—over $116,000. And thenumber balloons every single day,despite the taxes you pay daily fromyour paycheck, at the gas pump, andother places.

We're plunging further into debt byabout $1.53 billion every day. Unfortunately,it's clear at this point thatpoliticians are helpless to stop themselves.Nothing short of financial disasterwill alter their behavior. That disasterwill include the wild, violentdeath-throes of our currency. There'san unanswered question here, though:Who is lending Washington all of thismoney? The American people have littlesavings, so it's not coming from us.

Foreigners now own a net $6 trillionof US financial assets. As recentlyas 22 years ago, America was a netcreditor nation. Foreigners owed usmore than we owed them. That's nolonger true. Foreign ownership of USassets has now reached 45.4% of ourgross domestic product. Put anotherway, if we wanted to buy it all backnext year, we'd have to pay 100% ofnational production from January 1 toJune 14. There's a proverb that says,"The borrower is slave to the lender."We're seeing this unfold right in frontof us, as we mortgage our children'sfutures.

Foreigners now own almost half ofall US Treasury debt—over $2 trillion.This is the death knell for the dollar.We've turned over control of our currencyto foreigners: people and nations whodon't necessarily have our best interestsat heart. For example, China (the second-largest holder of US Treasury bills)recently attacked our military satelliteswith ground-based lasers, and has militaryleaders who openly muse aboutnuking American cities.

If you're a hostile nation, don'tattack the United States militarily; justaccumulate a nice big stack of US dollarsand bonds—and then sell them allat once. This would be devastating tothe United States. All nations thatinvested in dollars for their foreignreserves would see their assets plungein value. And no one wants to hold aninvestment as it goes into a freefall,triggering a massive sell-off.

One way or another, our dollar isgoing to end its life by being hyperinflatedinto worthlessness. When acurrency's value evaporates, prices ofalmost everything shoot skyward.Some assets tend to appreciate fasterthan currency depreciates and will gainvalue relative to the currency. The bestof these is gold. Historically, the yellowmetal has not only been the best wayto survive a hyperinflation, but to takemassive profits as well. Gold's valuerises not only because the currency it'spriced in is falling, but also becauseeverybody flees to it as a safe haven intimes of crisis.

I'm wildly bullish on gold longterm.How high will it go? Well,gold's price record is $850 per ounce,set in January 1980. According tothe Bureau ofLabor Statistics' inflation calculator,$850in 1980 is thesame as $2079.61today. Thus, even ifgold only returns to itsold highs, it will be over$2000 per ounce.

Two Ways to Buy Gold

Gorgeous 1-ounce 2006 Buffalocoins (gem uncirculated MS70 condition,graded and certified by theNumismatic Guaranty Corporation[NGC]) are one of the top ways toinvest in gold. These flawless, perfectgold coins can easily be the cornerstoneof any gold investor's portfolio.

For those of you who want to startwith gold in a smaller way, I recommendthe 1988-W $5 Olympic goldcommemorative coins. This particular$5 Olympic gold coin was designedby Elizabeth Jones, chiefsculptor and engraver for the USMint. These coins (if graded gemuncirculated MS70 by NGC) eachcontain 0.2687 of a troy ounce ofgold. The $5 Olympic gold coinswere struck at the West Point Mintand are currently listed in trends (ie,the value/price price listing that ismost popularly used by collectorsand investors; atthe purchase price of $925.

James DiGeorgia is editor and publisher ofthe Gold and Energy Advisor Newsletter( and theauthor of the popular books The New BullMarket in Gold and The Global War for Oil.

PMD University

Troy ounce: The traditional unit of weight for gold thought to be named after a weightsystem used in Troyes, France, during the Middle Ages. Despite the gradual conversion tothe metric system, the troy ounce remains a traditional fixture of the gold trade and themost important basis for expressing quotations on a majority of the leading gold markets.One troy ounce is equal to 31.1034807 grams.