Vigilant Investor

You know, we’re continually amazed as we witness an extremely interesting phenomena. Really amazed. Turn on any evening financial television show and you’ll hear the pundits demagogue on how Treasury Secretary Paulson must defend the Dollar. Bemused, we ask –“with what?” Today, Mr. Paulson accused the Chinese of unfair competition for not letting their currency appreciate. He also intimated that letting the Yuan strengthen would help stave off protectionist sentiment in the U.S.

The Chinese must be shaking in their boots! A debt addicted, debt laden, cheap foreign import dependent U.S. — much of who’s debt is financed by and cheap goods imported from the very same Chinese, effectively threatens said Chinese with protectionism if they don’t let their currency strengthen further. What?!

Common sense tells any rational person that the Chinese hold all the cards – are playing them well – and evidently intend to continue doing so. The Chinese have sat back silently and watched us bleed money (which we’ve had to borrow) — in Iraq. Just yesterday, they announced they will likely follow supermodel Gisele Bundchen – and begin to divest themselves of the rapidly depreciating Dollars they are awash in. Will they buy Gold? Silver? Agriculture? Oil? Corporations? We think all of the above – and more. China dumping Dollars is bad for the U.S. Soon the world will follow – and a nation addicted to debt will have to raise interest rates to continue to borrow. The last thing any person, business, or country severely in debt wants is the cost of their debt service rising.

And if the Yuan does strengthen dramatically, the cost of Chinese imports will rise correspondingly. What do you think that will do to the price of goods at Wal-Mart, Target, et al? How will paycheck-to-paycheck mainstream America handle that? We think not well.

An ancient Chinese curse states, “May you live in interesting times.” Well this is going to be interesting.

Protect yourself accordingly.

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