THE SITUATION:
Crisis... Debt... Deficit

"Reported in a recent 10Q filing with the SEC: Buffett increases Berkshire Hathaway's bet against the dollar to hold $19 billion in foreign currency contracts on 6/30/04." -- Gold Stock Analyst, Issue 124, September 2004

[The continuing fall of the dollar] "could cause major disruptions in financial markets. There could be unpredictable side effects." -- Warren Buffett, as quoted in Forbes, 1/10/05

"For the first time in his life, this top name in finance is betting against the U.S. dollar. The trend for the dollar is turning, and its outlook is getting increasingly worse. Consequently, it is necessary to diversify out of the dollar, or as Buffett puts it, 'to build an ark.'” -- James Turk, The Gold Report, December 2004

"...Paul Volcker ...has said that unless America changes course, there is a '75 percent' chance of an economic crisis in the next five years." -- U.S. News & World Report, 12/06/04

"I think the problem now is that there isn't a sense of crisis. Sure, you can talk about the budget deficit in America ... and I think it is a big problem...but there is no sense of crisis, so no one wants to listen." -- The Financial Times (London), 10/23/04

"It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur. But when, through what channels, and from what level of the dollar? Regrettably, no answer to those questions is convincing."

"The U.S. current account deficit has risen to more than 5 percent of GDP. Because the deficit is essentially the change in net claims against U.S. residents, the U.S. net international investment position ...must also be declining in dollar terms at an annual pace equivalent to roughly 5 percent of the GDP."

"...net claims against the residents of the United States cannot continue to increase forever in international portfolios at their recent pace...At some point, diversification considerations will slow and possibly limit the desire of investors to add dollar claims to their portfolios."