September 11, 2006 –
On July 25th, in my E-Zine Issue #013, I mentioned that I thought the U.S. dollar was going to strengthen and that gold was going to fall. Since then the dollar has rallied for six straight weeks and reached six-week highs on August 8th against most major world currencies, recouping all of its earlier losses against the yen. And back then I specifically mentioned that I believed gold would head below USD $600 an ounce. And yesterday, gold continued sharply retreating since my statement to about $592 an ounce. And I have strong reason to believe that it will possibly challenge the June lows of $570 an ounce and perhaps even head lower before sharply rebounding and heading much higher.
Before I continue as to how I can predict these things with a fair amount of confidence, let me discuss why the dollar hasn’t strengthened against the currency in Thailand even though it has strengthened significantly against most other Asian currencies. In Thailand, though the U.S. dollar has been making a strong run against the major currencies of the world in the last six weeks, it has barely strengthened at all against the Thai baht.
Since the topic of this discussion is the fact that governments consistently lie and can not be trusted, let’s take a quick look at possible reasons why the baht has remained strong against the dollar despite the dollar’s strength against other currencies. The sale of Shin Corp. brought the Shinawatra family 73 billion Baht. My guess is that the Shinawatra family is in the process of greatly diversifying this huge windfall of Baht into other currencies, including Euros and possibly Yen. A weaker Baht would translate into losses of millions of baht in foreign currency exchange transactions for the Shinawatra family.
In the past, Bank of Thailand Governor MR Pridiyathorn Devakula said the baht’s appreciation against the dollar was primarily caused by the inflow of foreign capital for the purchase of Shin shares. He said, “There was a broker [associated with the Shin deal] selling [foreign] currency in the market. I just learned about it today, but I don’t know how much money is involved. I don’t know how many shares they’re going to sell.” If foreign capital inflow to purchase one company’s shares can create significant price movements in a nation’s foreign currency to cause the creation and destruction of billions of dollars nationwide, then something is seriously flawed with this nation’s currency policy. Can you imagine if the sale of General Electric in the United States to a European company caused Americans to lose trillions of U.S. dollars? What is really flawed is the lack of any truth in that above comment. And that’s putting it politely. So the central Bank of Thailand is going to let a broker’s actions dictate the strength or weakness of the Thai Baht? That statement is absolute deceptive junk.
More likely what has kept the Baht high against the dollar is private powerful interests being put ahead of a nation’s interests. These actions happens all over the world, and though I can’t prove it, most likely the fact that the Shinawatra family’s windfall of 73 billion Baht has had an enormous amount of influence on why the Baht has remained strong against the U.S. dollar though most every other major Asian currency has weakened against the dollar. So though people living in Thailand might have thought I was wrong on my call about a bullish run in the dollar continuing, I have been right on this call in virtually all countries but Thailand. And most likely due to the shenanigans of influential politicians.
But that’s not my major topic here, so let’s move on. The point is that governments lie and that their “official” statements cannot be trusted as a major influential component in your investment decisions. I will continue to make significant amounts of money for my clients by not listening to any government anywhere in the world. In a previous e-zine, I discussed how the U.S. government consistently lies about the rate of inflation in their country by removing the energy and food pricing components from their inflation component. The rate of inflation they use in “official” statistics applies more to an imaginary person that never eats and uses energy as opposed to a real live breathing human being. If you go to this website, http://www.fms.treas.gov/fr/index.html , you will find a report entitled the U.S. Financial Report. Inside this report, there are many statistics that contradict the U.S. government’s officially reported statistic of a national debt level of USD $8 trillion.
In fact one of the smarter U.S. Congressman serving the U.S. government today, Jim Cooper, a former Rhodes scholar and Harvard Law School graduate, estimates that the true U.S. deficit using the government’s own numbers is $49 trillion, about six times greater than their “official” statistic. At 6 inches per dollar, 5,280 feet per mile and about 234,000 miles from the earth to the moon, this amount, in one dollar bills placed side by side, would be enough to go from earth to the moon and back over 40 times! Though I haven’t read Mr. Cooper’s full report, knowing the U.S. government’s penchant for distorting and lying about major economic stastics, and assuming that Mr. Cooper, as a former Harvard Law School graduate and Rhodes scholar, is an intelligent man, I think it would safe to assume that the U.S. government is again lying about a major economic statistic.
If we examine the numbers stated in President’s Budget’ issued by the Office of Management and Budget (OMB) and the much lesser known Financial Report of the United States issued by the Department of Treasury, we will find differences even in the U.S. stated deficit for FY2005. The OMB claims that FY2005 national debt grew by $319 billion but the U.S. Department of Treasury states in their report that FY2005 national debt grew by $760 billion. Without getting into boring accounting details, the difference of $441 billion between these two figures is the difference between cash and accrual accounting. Quite simply, the $319 billion is the deficit between the actual cash spent by government agencies and the cash collected from individual taxpayers. The $760 billion deficit is the difference between cash spent and future obligations accrued by the U.S. government during FY 2005 and the cash collected from individual taxpayers.
So back to my point about how I knew with a fair amount of confidence that the price of gold was going to drop shortly and the U.S. dollar was going to rally is because I ignore government and central bank lies and perform my own research to root out the truth in making my investment decisions for myself and my clients. I don’t think, but I KNOW that governments all over the world lie about economic conditions all the time. I have researched many more numbers than just the ones described within this article, and I discover dramatic discrepencies all the time between official federal and bank reports that describe the same economic figure.
I believe that if you truly want to earn significant returns and dramatically outperform the large investment houses, that to dig deep down the rabbit hole to tease apart lies from reality is not an optional choice, but 100% necessary. Put another way that the average investor is sure to understand, when I stopped using any information contained in “official” economic reports released by world governments several years back, and instead used freely publicly available information to come to my own conclusions, this was when I really started earning phenomenal returns.
Very interesting points, J.S. In martial arts, we often use deception or feints to draw the attacker in so we can parry with a deadly strike. But why all the deception on behalf of governments towards its citizens, J.S.? I understand why corporations would to it. But isn’t the role of government to protect the health of a nation? Or are you saying that corporations have invaded government to such a degree that the government no longer serves the interests of the people but rather the interest of big corporations? Until next time. Maholo, KAEHO.