Wall Street Blues
Barry Smith commented many times that the powerful US dollar
would weaken, making way for a global super currency, most likely the Eurodollar
en route to a cashless society -– the official financial system of the New
World Order. Even months ago such a scenario appeared unlikely, but recent
developments reveal just how precarious the US financial markets really are, and
how quickly the 'mighty US dollar can be toppled'.
"...There were other signs last week of a major turning
point in the markets. The dollar hit a seventeen month low against the Euro. Its
recent fall is intimately bound up with the gathering unease about equity
prospects. After all, with its huge current account deficit, America needs to
persuade the worlds' investors to provide it with an extra $400 billion every
year..." Sunday Telegraph, 16 June 2002.
American investors have been unsettled by a series of
corporate scandals, the ongoing threat of terrorism as well as dismal
performances by US corporations. Confidence is most certainly lacking as a shot
of 'US debt-reality' has emerged. The Daily Telegraph on 21 June 2002
reported: "...There is some concern about the US current account imbalance,
which needs to be financed somehow. But people just don't seem to want to buy
American assets at the moment..."
Furthermore, the happenings of September 11 hit the global
economy like a sledgehammer, prompting many to suggest that the US would be
plunged into recession. Hit hardest were airline companies and manufacturers as
consumers halted spending. The more recent terror threats of suicide bombers in
the USA, plotting to detonate highly toxic 'dirty bombs' of mass destruction
have pushed the Dow Jones all over the place. Terror has affected the global
economy -– and it's not about to stop.
As it transpired after September 11, the US and British
economies actually picked up again, recovering (apparently) very quickly,
surging forward with employment rising and positive growth in consumer spending.
That was until the first week of June 2002 when 'reality' struck.
An article in The London Times on 17 June 2002
entitled 'Europe's financial future also shredded' revealed why confidence
in large US companies is waning -– hugely affecting other Nations as well.
"...Despite the benign economic outlook, shares in Britain
and America are falling sharply. Last week was the worst for equities since
September 11 and traders are in no mood to buy shares...
The reason for this loss of confidence in the stock market is
simple. US investors no longer believe in the financial statement issued by
their country's biggest companies.
What they do believe is that most executives lie about their
company's true financial position and they believe the auditors collude with
executives in publishing accounts that are misleading..."
The collapse of mega company Enron, and the ensuing court
case of accountant David Duncan clearly illustrates the issue.
The London Times continues, "...A Houston court has
found Andersen, the accountancy firm where Duncan worked, guilty of shredding
documents that would have revealed the true extent of the financial
irregularities at Enron. Since Enron collapsed, dozens of US companies have been
found to be manipulating their accounts to mislead the stock market.
Wall Street may struggle for many months, possibly even years
to rebuild its reputation..."
So where can we turn for security? Perhaps the old standard
of gold will come to the rescue. Some commentators like to think so. "Governments
lie; bankers lie; even auditors lie: gold tells the truth" (this author
would question the final part of this statement) according to William
Ree-Mogg of the London Times, 17 June 2002.
"...Last week the stock markets looked dreadful,
particularly in London.
There are two ways of describing this movement of the gold
price. One can say that gold has risen in terms of the dollar, but one can
equally well say that the dollar has fallen in terms of gold. The dollar is the
dominant world currency. Gold may be useful as a measure of dollar values, but
it is the dollar values themselves which are huge..."
Ree-Mogg also made reference to the less than honest
activities of Corporate Executives and others in the US. "...In a disastrous
way, dishonesty in the US Administration which wanted the boom to last out
Clinton's term, weakness in the Fed, near fraudulent fee-snatching on Wall
Street, greed of already overpaid executives, and betrayal of sound principles
by professional analysts, have damaged confidence in the US financial system.
What damages trust in the US, damages the whole world ...
Many honest businesses and banks have been damaged by this
loss of reputation...
When the US has a deficit of $400 billion, the rest of the
world must have a surplus of the same order and magnitude. The statistics are
tricky, but that is broadly true. Other central banks are, therefore, still
accumulating dollars, whether they want to or not. As Asia does most of the
world's saving, the Asian central banks are the big accumulators; they are
awash with dollars...
Gold is an alternative investment to the dollar for these
central banks. China and Taiwan have, in fact, been buying gold, despite the
sales by Britain. So have private investors in Japan and India, the Japanese
worrying about their own banks, the Indians worrying about Pakistan terrorism
and the war. That is why the dollar has been falling against gold, as well as
against other currencies. The orthodox central bank view is that the world
economy is near the end of a healthy correction...
My view is more pessimistic... Neither stock markets, nor the
prospect for earnings, nor house prices in the US or UK, nor the US deficit
suggest to me that the global correction has been completed. The price rise in
gold is telling us the truth, not about gold, but about the dollar. The US
external deficit has to be reduced. That means the dollar has to fall further.
There is no early prospect of a return to confidence in the US stock markets...
Gold will continue to outperform stock markets, as it has for
the last two years...
We may well find that the decline of the dollar is the most
important global movement of the decade." (emphasis added)
So, US investor confidence is looking extremely flimsy, and
as one European equity strategist has stated "Until confidence returns in
the US, the European markets are not going anywhere on their own".
Gold is outperforming stock markets and to make matters
worse, dramatic falls in share prices are collectively costing billions -– not
just in America.
In Britain, the downturn in the stock market has hugely
affected pensioner schemes as well as creating further misery for many leading
An article in the London Times, 17 June 2002 reads:
"The Guide Dogs for the Blind Association has been forced to close down some
of its operations as a result of falls in the stock market. Plunging share
prices last year wiped £3 billion off the combined value of UK charities...
Perhaps the most staggering blow was dealt to the Wellcome
Trust, the research funding charity, which lost £2.5 billion...
Finance Director Andrew Herbert (of The Guide Dogs for the
Blind Association) said the 2001 accounts to be released next month, would
show the association lost £19.7 million on the stock market...
The children's charity Barnardo's has also had a rough
ride on the stock market, losing £6.8 million in the year to March 2001 and
£1.3 million last year...
The Church Commissioners fund, worth about £4 billion, does
not invest in arms or pornography or in any company whose main business is 'gambling,
alcohol, tobacco, or newspaper'. It does however invest in telecommunications,
and recently lost about £80 million on its Vodaphone shares..."
Some of the smartest minds in the world of economics are
striving to save a sinking ship. We should be reminded at this point that the
only true security in this life is not found in economic systems OR commodities
like gold and silver. Focusing our energies toward work of the Kingdom of God
will prove to be the only long term (eternal) inflation/deflation-proof
Stop Press: A CNN report tonight (23.07.02 @ 12.30am) has
just announced the latest collapse of a major US Company, "World Com". The
reason given -– "Cooked books". Congress is holding emergency meetings in
an effort to write legislation to halt the corporate scandals which have had a
'disastrous' affect on US and world economies. The last two months have been
one of the most volatile periods in US stock-market history. Wiping $US150
billion off UK insurance alone... panic has set in as the word is 'Sell, sell,