A Secure Future- Jul 29th news...

* Economic growth slows in Q2, Stocks fall -CNN
* World's fair that follows the money -SFChr
* Yuan Change Seen Spurring Inflation -BL
* Glistening gold tipped for gains into 2006 -Reuters
* Greenspan Era Fuels Spending Spree, Less Saving -BL

* Immigration Reform Act of '05: A Great Start! -CRS
* Immigration reform that works -Sen. John Cornyn
* Why I support the ILLEGAL ALIEN SWEEPS -Lupita Gutierrez
* Why Did China Revalue, Really? By Alex Wallenwein
* Blast from the Past ... RMP headlines one year ago

"[A] good moral character is the first essential in a man, and that the habits contracted at your age are generally indelible, and your conduct here may stamp your character through life. It is therefore highly important that you should endeavor not only to be learned but virtuous."

-George Washington

MARKET NEWS DIGEST

Economic growth slows in Q2, Stocks fall -CNN
July 29, 2005

NEW YORK (CNN/Money) - The pace of economic growth slowed a bit more than expected in the second quarter, but inflationary pressures remained well in check.

Gross domestic product, the broadest measure of the nation's economy, grew at an annual rate of 3.4 percent in the second quarter, the Commerce Department reported, down from a 3.8 percent growth rate in the first quarter.

Economists surveyed by Briefing.com had a consensus forecast for 3.5 percent growth in the most recent period.

The chain deflator, a measure of prices closely watched by the Federal Reserve and economists, rose at an annual 2.4 percent pace in the quarter, less than a revised 3.1 percent rise in the first quarter and also less than the 2.6 percent increase forecast by economists.

U.S. stocks were lower Friday afternoon, pressured by investor disappointment with the pace of second-quarter economic growth and a sharp rise in the price of oil.

The Dow Jones Industrial Average was down 36.06 points, or 0.3%, at 10,669. The Nasdaq composite was down 10.51 points, or 0.4%, at 2,187, and the S&P 500 down 5.24 points, or 0.4%, at 1,238.

http://www.cnnmoney.com

World's fair that follows the money -SFC
Tom Abate, San Fransisco Chronicle Staff Writer
July 27, 2005

[Image: Fair spokesman Donn Pearlman holds a sheet of 12 U.S. $100,000 bills.]

Bay Area residents can see legal tender taken to a whole new level this week, as coin and currency collectors from around the globe gather at San Francisco's Moscone Center for the World's Fair of Money.

The event, which opens today and runs through Sunday, is the annual convention of the American Numismatic Association, which bills itself as the world's largest organization for collectors of coins, paper money and other valuable memorabilia.

And the best part is that admission to the two floors of exhibits that feature, among other things, three U.S. Treasury Notes worth $1.1 billion, is absolutely free.

"Where else can you see a billion dollars and not spend a penny," quipped conference spokesman Donn Pearlman.

The real action for currency aficionados will occur on the first-floor trading room where serious numismatists will swap or sell the rare coins, bills, medals and documents that are their stock in trade.

FULL STORY

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Stocks zig-zag as housing sizzles -MW
Earnings, mergers news to dominate the market
By Leslie Wines, MarketWatch
July 25, 2005

NEW YORK (MarketWatch) - U.S. stocks reversed course to trade slightly higher Monday morning, as investors showed caution ahead of earnings news from American Express and Texas Instruments and monitored the latest merger news.

The Dow Jones Industrial Average, which has changed direction several times since the opening, last was up 12 points at 10,663.

The S&P 500 was up 0.93 points at 1,234, and the Nasdaq composite up 1.54 points at 2,181.28.

The major averages on Friday managed to close higher for the day and week, despite several tense sessions during which investors reacted to the revaluation of China's yuan and renewed violence in the London underground.

Market sentiment remained on the edgy side Monday, as investors waited for more earnings reports. Later in the session American Express will report, while Texas Instruments is scheduled to release its earnings news after the close of trade.

Peter Cardillo, chief market analyst at S.W. Bach, said "I suspect that barring any terrorist violence - such as the recent attacks in London and Egypt - that would negatively impact economic recovery, the market will continue its rally, with some narrow pullbacks."

Existing home sales rose 2.7% in June, reaching a record level of 7.33 million, with the median price rising 14.7% year-on-year. A red-hot housing sector has been one of the drivers of economic growth in recent years.

The benchmark 10-year Treasury note was down 2/32 at 99-7/32 with a yield of 4.224% after the news that the housing market remained buoyant last month.

Later in the session there will be an announcement on two-year notes from the U.S. Treasury.

The dollar was up 0.3% at 111.63 yen, continuing to make back the losses it suffered last week in the wake of the yuan revaluation news. The euro was up 0.02% at $1.2077.

Crude futures last were down 80 cents at $57.85, while gold for August delivery rose 80 cents to $425.80 in early trade.

http://www.marketwatch.com

Yuan Change Seen Spurring Inflation -BL

July 25 (Bloomberg) -- U.S. 10-year Treasury notes may fall for a second day in three on speculation China's decision last week to allow its currency to rise will reduce the country's purchases of U.S. assets and spur inflation.

The securities have fallen for four straight weeks, pushing yields above 4.20 percent for the first time since May. Next week, the U.S. government will announce its quarterly borrowing needs. Inflation erodes the value of a bond's fixed payments.

``We probably get to 4.7 percent in the next few months, maybe by the end of the year,'' said Janet Engels, director of private client research at brokerage firm RBC Dain Rauscher corp. in New York.

The yield on the 10-year note was little changed at 4.21 percent as of 10:29 a.m. in New York. The yield is up from 3.90 percent a month ago. The price of the benchmark 4 1/8 percent note due in May 2015 was 99 9/32, according to bond broker Cantor Fitzgerald LP.

China ended its fixed exchange rate to the dollar on July 21, allowing it to rise and possibly leading to higher prices for goods imported from the country. China has kept the yuan from appreciating by buying U.S. dollar-denominated debt. China held $243.5 billion of Treasury securities in May, up from $72.5 billion five years earlier, according to U.S. government data.

``The market is still mulling the implications of the Chinese yuan revaluation,'' said Nick Stamenkovic, a bond strategist at RIA Capital Markets Ltd. in Edinburgh, Scotland. ``It could lead to some import price rises and will lessen demand for Treasuries.''

He said the yield may reach 4.5 percent in three months.

Trade Gap

The U.S. trade gap with China, the difference between exports and imports, rose to a record $162 billion last year. Prices of goods imported to the U.S. increased at the fastest in three months in June, rising 1 percent.

China won't make its currency fully convertible for at least five years because it worries hedge funds may force the yuan to plunge, much as happened to the Korean won and Thai baht during the 1997 Asian financial crisis, Li Deshui, a member of the central bank's monetary committee, said in an interview.

``We don't know the pace of the revaluation or what China's intent is in terms of the government market,'' said David Ader, managing director of government bond strategy for RBS Greenwich Capital Inc. in Greenwich, Connecticut. ``Its not their intention to critically weaken the dollar, or to unload U.S. securities. It's not a bullish story for Treasuries, but is it as bearish as the market took it initially? I think not.''

http://www.bloomberg.com

Glistening gold tipped for gains into 2006 -Reuters
Jul 18, 2005
By Veronica Brown

LONDON (Reuters) - Gold prices will rise this year and next on renewed dollar weakness, strong investment and global security jitters that will confirm its status as a haven for money, a Reuters poll showed on Monday.

The global poll of 30 analysts and senior traders arrived at a median average gold price of $433.25 per troy ounce in 2005, up 0.75 percent on a similar poll conducted in January and up 4.8 percent on 2004's average bid price of $413.56.

The rising trend was seen spilling into 2006, with analysts predicting an average of $450.00, a sharp reversal from the January poll, which saw prices falling back to $413.00. The highest forecast for next year came in at $500.

"Under our broader economic scenario of slowing growth, the dollar is likely to come under renewed pressure in the second half of this year and that should lead to gold surprising on the upside," HSBC metals analyst Alan Williamson said.

Platinum group metals (PGMs) were tipped as the weakest performers this year, with platinum prices seen up just 1.5 percent, while palladium was expected to drop a hefty 11.9 percent from 2004.

Silver was seen as the star performer among precious metals, with forecasts revised up more than seven percent from January to an average of $7.00.

http://www.reuters.com

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Greenspan Era Fuels Spending Spree, Less Saving -BL

July 25 (Bloomberg) -- Economic prosperity under Federal Reserve Chairman Alan Greenspan has changed the way Americans handle their finances.

Encouraged by rising home and stock prices, they have taken on more debt and saved less. Managing risks from that legacy may be one of the toughest tasks for whoever eventually replaces Greenspan when his term expires Jan. 31 after more than 18 years at the Fed.

``The American economy is in a very precarious position,'' Joseph Stiglitz, a professor at Columbia University in New York and winner of the 2001 Nobel Prize in economics, said in an interview. ``We have a very high legacy of debt. That is what his successor is going to have to deal with.''

As leader of the world's most influential central bank, Greenspan presided over the longest expansion in U.S. history, from 1991 to 2001. Consumers have come to expect long periods of prosperity and the soaring asset prices that accompany them. The result of this unbridled optimism ranges from house prices that have risen 50 percent since 2000 to the lowest savings rate in more than 70 years.

Fed officials including Greenspan already are stepping up warnings that households and the markets financing them may have been lulled into a false belief that asset gains and moderate business cycles are guaranteed.

``Long periods of relative stability often engender unrealistic expectations of its permanence,'' Greenspan said in his written semi-annual testimony before Congress last week. That can lead to ``financial excess and economic stress.''

Successes

The investor and consumer attitudes that Greenspan frets about are in some ways the result of his own success.

Fed policies wrenched down inflation, leading companies to compete on efficiency gains. Incomes rose, unemployment fell and the central bank's rate cuts kept two recessions to just eight months each. The government may report July 29 that the economy expanded at a 3.5 percent annual pace from April through June, based on the median forecast of 57 economists in a Bloomberg News survey; that would be the ninth quarter in a row with growth of 3 percent or more. Household wealth boomed as long expansions pushed stock indexes to records, and the low interest rates of the past three years accelerated purchases of durable goods.

``The precautionary motive to save has been reduced,'' says Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

Consumer spending accounted for more than 70 percent of the economy every year starting in 2002, the most since the end of World War II. Household saving fell to just 1.3 percent of income in 2004, the lowest since 1934, and below the averages of 5.1 percent in the 1990s and 9.5 percent in the 1980s.

An Ever-Larger Burden

Debt is becoming an ever-larger burden. A Fed measure of estimated payments of mortgage and consumer debt stood at 13.4 percent of household disposable income in the first quarter, the highest since records began in 1980.

Behind it all are buoyant asset prices that raise perceptions of wealth. Household net worth, a measure that subtracts debt from assets including real estate and stock portfolios, averaged 5.57 times personal disposable income for the decade ended 2004 compared with 4.41 times for the 10 years ended 1994.

``People have gotten used to the Greenspan era,'' says Paul Kasriel, director of economic research at Northern Trust Securities in Chicago. ``They are going to miss him'' because his policies spurred gains from investment in stocks, bonds and other assets.

Marvels

For Greenspan, 79, and Fed governors such as Donald Kohn, 62, the mortgage and home-equity loan boom was one of the marvels of an efficient financial system, which translated the Fed's low interest-rate policies into accessible credit, according to their speeches in 2003.

Both men have turned cautious this year. ``Capital gains do not finance capital investment,'' Greenspan said in testimony to the House Financial Services Committee last week, noting that a rise in net worth doesn't substitute for saving. ``Clearly, our savings rate is inadequate and we must address that over the long run,'' he said.

Greenspan has pointed this year to ``unsustainable'' house prices and to signs of ``froth'' in some local real-estate markets.

``A sustained rate of saving of less than 2 percent is too low for households to accumulate enough wealth to maintain their standard of living,'' Kohn said in an April 22 speech entirely devoted to economic imbalances. ``Unless, of course, those households are lucky enough to receive outsized capital gains on their homes and other assets.'' Such gains are ``not likely,'' he added.

`Irrational Exuberance'

Such verbal warnings from the Fed have had little effect on asset prices in the past. Greenspan's ``irrational exuberance'' comment about the stock market in December 1996 was followed by a 98 percent gain in the Standard and Poor's 500 stock index over the next three years.

Average U.S. home prices rose 12.5 percent during the first quarter of 2005 from a year earlier, the fourth consecutive quarter that gains exceeded 10 percent, according to the Office of Federal Housing Enterprise Oversight in Washington. Over the past year, 24 U.S. states recorded home-price gains of more than 10 percent, ranging from 10.5 percent in Montana to 31.2 percent in Nevada.

Economists say consumers may be acting rationally, using tax- favored mortgage debt to stock up on property where returns in most markets exceed stocks, money funds and other assets. What's worrisome is that the trend is far from balanced and has implications for economic growth.

Tangible Assets

Starting in 1999, increases in household debt to buy tangible assets such as homes and cars exceeded purchases of more liquid financial instruments such as mutual funds, which channel cash to American corporations and help them grow. That swung what Fed statisticians call the net financial investment position of households into negative territory in 1999 for the first time since 1946.

At a minimum, economists say, it raises questions about the long-term productivity of the U.S. economy because too much capital is being spent on housing and not enough on research, development and business investment.

``If it's corporations that weren't saving, I would be more encouraged because they invest in plants and equipment,'' says Kasriel. ``As a national economy, we are throwing beer and pizza parties every afternoon. We are investing in more and bigger houses, sports utility vehicles, and federal programs.''

The trend is also showing up in the banking system. Home and commercial property mortgages accounted for 54.4 percent of total bank loans at the end of the first quarter, a post-World War II record, according to Fed data.

Large investments in housing ``don't provide more productivity for anyone,'' says Nouriel Roubini, an economist at New York University and previously a senior economist for international affairs at the White House Council of Economic Advisers from 1998 to 1999. ``There are financial imbalances,'' and Greenspan's successor will face ``a delicate transition.''

http://www.bloomberg.com

COMMENTARY

Immigration Reform Act of '05: A Great Start!
Amnesty vs. Accountability: A Crucible of Public Debate Ahead
By Craig R. Smith
Worldnetdaily.com
July 25, 2005

"I oppose amnesty, placing undocumented workers on the automatic path to citizenship. Granting amnesty encourages violation of our laws and perpetuates illegal immigration. America is a welcoming country, but citizenship must not be the automatic reward for violating the laws of America."

-PRESIDENT GW BUSH, Jan. 7, 2004

Illegal immigration across the U.S. southern border is out of control - no surprise there.

U.S. intelligence now informs us that terrorist organizations have used the lax U.S.-Mexico border security to smuggle sleeper agents into this country for the purpose of killing Americans, destroying the U.S. economy and winning their war against the West.

Five million undocumented immigrants resided in the United States back in October 1996. Today, in less than a decade -- that number has doubled. So, whatever the government has done so far is not working very well, to say the least.

Has the federal government refused to accept its responsibility to enforce immigration laws and border security already on the books? Yes, often for political reasons.

The problem is twofold; Border Security: (enforcement, identification) and Immigration Accountability (a pragmatic solution to the 11 million illegal immigrants now here).

The movement for illegal amnesty, instead of accountability, has wide support among Politicians, but Senators Jon Kyl (R-AZ) and John Cornyn (R-TX) laid a different kind of proposal on the table last week, The Enforcement and Immigration Reform Act of 2005.

The first reason we should give this unique plan careful consideration is to look at the growing list of those condemning it -- which now includes; The Wall Street Journal, the National Council of La Raza, the American Immigration Lawyers Association, Sen. Edward Kennedy (D-Ma) and (no surprise) The Arizona Republic.

"Ours is not a step one, step three kind of thing," Sen. Kyl told The Washington Times last week. "We begin implementing the enforcement at the border, the interior and the work site immediately. Also immediately, we begin a temporary worker program."

The Senators' bill allows foreigners to work two years before returning home for a third year, when they can apply again. It gives current illegal aliens five years to leave the United States, but they could apply for the work program from their home countries.

Senators John McCain, (R-Az), and Edward Kennedy, (D-Ma) - also have a bill that would allow those here illegally to join a guest worker program and eventually be on a path to U.S. citizenship. Essentially allowing amnesty for illegal immigrants rather than accountability.

Supporters of lax immigration control are fighting this bill because of its commitment to strict enforcement of the law. Nearly two decades after Congress prohibited the employment of illegal aliens, Kyl-Cornyn would finally require employers to electronically verify all new hires' eligibility to work - an essential step to cut off unlawful employment opportunities for illegals.

The Enforcement and Immigration Reform Act of 2005 would also empower U.S. Interior immigration enforcement by;
· Adding personnel and detention space
· Mandating tamper-resistant social security cards
· Clarifying the existing authority of State and local police to enforce federal immigration law
· Instructing the IRS and Social Security to stop accepting fake Social Security numbers

Senator Kyl acknowledged his plan is based on the premise that 11 million illegal entrants already in this country will opt to come forward voluntarily. He said that's not an unreasonable assumption.

"First of all, surveys show that they'd rather work in a legal system," the Senator said. He also said those same surveys show "that they are willing to stay for awhile and go home" if there's a temporary worker program available for them that gives them some reasonable expectation of being able to return.

Critics of the plan consider the notion of illegal aliens volunteering to admit their illegal status "far fetched," yet facing the alternative of mandatory deportation, a $2,000 fine and a 10-year ineligibility penalty could prove to be a very powerful motivator.

The Kyl-Cornyn proposal is a serious attempt to put more teeth into both immigration enforcement, (the stick) and freedom with accountability (the carrot). We should all applaud Sen. Kyl, in particular, who has distinguished himself as a leader in Congress on issues of defense and counterterrorism.

Welcome to the crucible of public debate over amnesty versus accountability for illegals. Let's call upon our leaders to join America in the fight to restore border safety, economic sanity and societal accountability. Supporting the Enforcement and Immigration Reform Act is a great way to start.

Read more about The Enforcement and Immigration Reform Act of 2005

Related Story:
Controlling the Border... by Restoring Respect -U.S. Sen. Jon Kyl -PHX NEWS ... Last week, along with my colleague John Cornyn of Texas, I introduced comprehensive legislation designed to secure America's borders and deal with the fact that more than 10 million people are living illegally in the United States...We don't claim our bill is perfect, and we're ready to listen to other ideas. But there is a growing consensus in Washington that this problem needs to be dealt with, and we believe the sooner the better.

Immigration reform that works -Sen. John Cornyn
No preferences to those who cheat
HoustonChronicle.com
July 25, 2005

U.S. Sen. Jon Kyl, R-Ariz., and I have introduced the Comprehensive Enforcement and Immigration Reform Act of 2005. This bill strengthens our border enforcement and comprehensively reforms our immigration system.

The need for reform is clear. There are approximately 10 million to 12 million illegal aliens in the United States, and approximately 1,300 people enter the country illegally each day.

Our comprehensive bill is based on the rule of law and equal treatment of all immigrants. It requires undocumented workers to depart the United States, in a nondisruptive and humane fashion, and then allows them to re-enter in any legal status. It does not strand immigrants outside of this country; all it requires is that they return through the normal process and without cutting in line. And, of course, they can then go on to become American citizens in the same manner as everyone else.

Research shows that the vast majority of economic migrants want to participate in a temporary worker program.

A Pew Hispanic Center survey shows that, by a 4-to-1 margin (71 percent vs. 18 percent), migrant workers will participate in a temporary worker program that would allow them to work in the United States on the condition that they return home.

Our bill creates a new temporary worker program with a sufficient number of visas, and allows undocumented workers in the United States access to that program after departing this country. But if an undocumented worker wants to return on a green card and is eligible, that option is also available.

Despite that statistic, critics of the bill argue that not enough undocumented workers will be willing to depart the United States and return through the legal process. That is not a reason to dismiss our proposal as one that is unworkable. If other obstacles exist that would discourage an undocumented worker from participating, I am committed to surmounting them.

We will need to address the shortage of green cards available to workers; right now, there are only 5,000 visas for low-skilled workers. We will need to address family visa backlogs, which separate family members for up to 20 years. We will need to address processing delays, so that government inefficiencies do not result in immigrants being stranded outside of the country. And we will need to discuss whether there should be exceptions to the rule where humanitarian interests may outweigh the requirement that a participant return home as part of the legal process.

In contrast, some argue that immigration reform must allow illegal aliens to obtain green cards without leaving the country and without going through the legal process that all other immigrants must go through. Proponents of this model argue that it would be successful because more undocumented immigrants would come forward to participate.

Of course, any model that only requires people to continue what they are already doing — in this case, living and working in the United States — will have full participation. If the Senate were to evaluate reform proposals solely on the likelihood of illegal aliens coming forward to participate, such a proposal would likely pass.

There is cause for concern with any proposal that creates a new — and easier — path to permanent residence and citizenship for undocumented workers.

First and foremost, Americans want a system that is fair. If a person steals something from a store, we don't fine them and then allow them to keep the stolen item. They must first return the item, and then they can purchase it like everyone else.

Likewise, history demonstrates that similar proposals have failed. If reform treats the current illegal population more generously than those who are waiting patiently outside the country, it creates an incentive for other immigrants to enter the country illegally.

The immigration system is broken and must be fixed. I am confident that the Senate will reach a consensus in the coming year. But we must first decide whether the foundation upon which we will reform our immigration laws will be based on the principles of the rule of law and fair treatment of all immigrants.

Cornyn, a Republican, is Texas' junior senator and chairman of the Immigration, Border Security and Citizenship Subcommittee in the U.S. Senate.

Chron.com

Why I support the ILLEGAL ALIEN SWEEPS -Lupita Gutierrez
July 22, 2004

I am an American-Mexican, 36 year old, conservative female.

I support the SWEEPS of ILLEGALS that occurred in California (June 2004)

Both Representative Joe Baca (D-CA) and Vincente Fox are both so outraged.

THIS IS A NATIONAL SECURITY ISSUE, NOT A RACIAL ONE.

Remember September 11th? Remember the Recall of Gray Davis? As a nation, our security is of the utmost importance. As a state, our economy was bankrupt. WE, the PEOPLE want to continue to protect ourselves and the economy of OUR COUNTRY. We do not want outsiders to obtain drivers licenses or OUR RIGHT to vote.

What privilege is there to be born in this country if they are given away to others who walk right into it ILLEGALLY?

It is such a slap in the face to those IMMIGRANTS that do stand in line, fill out the paperwork and study American history to pass the Citizenship Test. And it is they who learn English; the language of America, not Spanish.

It is a matter of NATIONAL SECURITY, not racism. It is a matter of our state's economy, not racism.

Lupita (Lupi) Gutierrez
Pacifica CA
Lupitaloopd@aol.com

Related Story:
TWO GROUPS OF MIDDLE-EASTERN INVADERS CAUGHT IN COCHISE COUNTY IN PAST SIX WEEKS
Tombstone Tumbleweed -- July 22, 2004 -- The Tumbleweed has verified information that a flood of middle-eastern males have been caught entering the country illegally east of Douglas, Arizona.

Why Did China Revalue? By Alex Wallenwein
Editor, Publisher
The EURO vs DOLLAR MONITOR
July 25, 2005

Not because of US or even EU pressure, that much is for certain.

Not because it is afraid of world opinion turning negative on China. They don't care - and it's actually turning into their favor..

Instead, China revalued for two main reasons: (1) The Chinese economy keeps chugging and chugging despite central bureaucrat measures to try and slow it; it is growing far faster than they are comfortable with and needs to be slowed at all costs, and (2) it makes it cheaper for them to buy needed imports - like oil.

As a side note, a word to the wise: I hope you didn't speculate on the revaluation with large sums of your assets. If you did, they are now tied up and it has become clear that the slow tempo of revaluation will squeeze even the last hopes of windfall profits by their necks.

Letting the yuan rise in forex value makes "China" more expensive, thereby reducing demand for Chinese goods. Good times can only last so long, and the faster the economy rises, the sooner it will reach its limit. Even Chicoms are afraid that the limit is only all too near. So, the monster train needs to be slowed down.

Ordinary restrictive monetary policy is a waste of time in China. In an environment where borrowed money is free (because few people care about paying it back, knowing they can always get more because of a financial system that have never been "in control" and so can never go "out of control") nobody cares whether the interest rate goes up or not. But making foreigners demand less Chinese goods via yuan revaluation just might do the trick.

It also makes oil (and other imported natural resources) cheaper for them, so hey - why not?

This "slow-the-monster" policy can be observed in action by looking at China's refusal to impede wage growth any longer. It used to be Chicom policy to not tolerate wage-price rises because they can make stuff more expensive and so let on how bad inflation really is in the country. It also would have deterred foreign investment by outsourcing US companies.

But, now that the Chinese have already had their chance to swipe all of our technology by snooping it up from outsourced production plants (and the White House making sure that military use technology is just as easily available to them), and now that the Chinese economic monster needs to be slowed somewhat - why not? Why not let wages rise?

It makes things Chinese more expensive in relative terms and slows foreign demand somewhat. At the same time it improves internal consumption by improving workers' disposable income - a problem the Chinese have been wrestling with for a while now.

But Chinese employers haven't woken up to smell the coffee, yet. They still think they can get away with offering too little pay, or at least less than workers demand, according to this China Daily.com article. Now, Chinese workers aren't willing to work for "too little" anymore - and the government is no longer stepping in to change that, as it. has before.

The really interesting part of this whole revaluation carnival is the automatic adjustment mechanism the Chicoms have built into it. Every day, the yuan can trade in a 0.3% band, up or down. The following day's opening price will be the middle of that prior day's range. This means that - potentially at least - the yuan can rise (or fall) 0.15 percent per day, or up to roughly 55 percent per year!

Either case is unlikely to happen, of course, but this potential is indeed significant.

Next, true to their form of keeping the world guessing and hanging onto their moving (lying?) lips, they have yet to announce the exact composition and weighting of the currency basket they say they are now fixing the yuan to. The dollar is likely to play a major role in that basket, of course, but there is no hard and fast rule that says the Chinese must peg their yuan according to actual trade weights in the basket.

The Dollar Basket-Case

What is rather clear, though, and what hasn't been discussed in the press so far, is that the demand for dollars will not just decrease by 2 percent or so. That was just their initial adjustment relative to the dollar. In future, the "basket" will take over as the value standard.

Trade with the US makes up only one third of China's total trade volume. So if trade-weighting is what they have in mind in constructing their currency basket - or anything even close to trade weighting - then whatever current demand for dollars they still have will be cut by two thirds - and that's just over the course of the next year, alone!

Since this article is unlikely to penetrate the thick cranial walls of corporate America, it will be interesting to observe the shock and disbelief with which future TIC data will be received and examined by the mainstream financial press.

In summary, China's journey from revolution to revaluation is far from finished. It hasn't even begun, yet. As the world stares, mesmerized, eager to trade with China and prop it up to be the next world superpower, eager to turn its back on America and welcome a future communist superpower in order to "balance" the still tremendous influence of the United States, China is gearing up to do just that. And the American corporate and political governance crowd does everything in its power to help this process along - freedom and US national security be damned.

Revaluation is just one more step in the Chinese game plan, and that game plan is a direct extension of Mao's revolution - except that the new revolutionaries are wearing Western business suits and drive Mercedes and Lexi.

The really scary thing, however, is that the entire world has been turned away from gold as a viable store of value - only the Chinese are being encouraged by their government to buy and stock up physical gold as a currency hedge.

It is apparent why the Chinese Leaders want to do that. It ensures their national survival in the face of all economic challenges. What is less apparent is why all other governments effectively discourage their own subjects from owning gold. Is somebody stacking the deck in favor of China?

Full Story:
CHINA: From Revolution to Revaluation

Related Story: 7-22-05 -- An Awesome Move by China -Stephen Roach, Morgan Stanley ...China’s long-awaited currency adjustment is unambiguously positive for the global economy. Yes, it is a first step -- and a tiny one at that. But it qualifies China as an active participant in the global adjustment process.

7-23-05 -- China's yuan revaluation starts another stage of US dollar demise worldwide 07/23/2005 ... Other Asian states will gradually reduce the purchase of American dollars after the start of the yuan-revaluating process."

-> MARKET REVIEW: INTO THE VALLEY OF DEATH -Eric Fry, DR
-> 9/11 Panel Suggests Intelligence Overhaul -AP
-> C.I.A. Sends Terror Experts to Small Towns -NYT
-> Greenspan Warns Inflation May Derail Rate Increases -NYT
-> Gold May Rise as Dollar Falls, Oil Price Rallies, Survey Says
-> Social Security Reform Legislation Introduced -CATO
-> Hourly Pay Not Keeping Pace With Price Rises -NYT
-> 60% USE INTERNET FOR RELIGIOUS PURPOSES, REPORT SAYS

-> IF THE FOUNDATIONS ARE DESTROYED -Craig R. Smith
-> 9/11 COMMISSION IS A GIANT WHITEWASH -Michael Savage
-> Why I support the ILLEGAL ALIEN SWEEPS -Lupita Gutierrez
-> ECONOMIC WHIPLASH -Alex Wallenwein, A-1 Gold Inv.
-> Social Security assessments clash -St. P. Times
-> Q&A with 'Anonymous' -USA Today
-> Saying 'Yes' To Terror -Peter Brookes, Townhall

Welcome to the 21st century paradigm shift
-- from a "stock-driven era" to a new "commodity-driven era."
In "Economic Solutions for the 21st Century" you'll discover ...
* SOCIAL SECURITY REFORM ... A plan to unify America
* WHY YOU MUST OWN assets that offset a DECLINING DOLLAR
* WSJ SAYS: "You don't have to be rich to invest in COINS."
* WHY SILVER could rise to $50, $75 or even $100 per ounce.
* "ATOMIC IRAN" spells the beginning of a new U.S. "Dirty War"

David M. Bradshaw is Editor of REAL MONEY PERSPECTIVES, a new, syndicated daily financial/cultural news digest. In 2001, he published REDISCOVERING GOLD IN THE 21ST CENTURY: The Complete Guide to the Next Gold Rush and has been an economic commentator since 1987, when he produced the World Economic Perspectives radio show. In 2004, he produced "A CITIZEN'S GUIDE TO COUNTER-TERRORISM" a free-to-the-public educational resource on DVD and CD. In 2005, he released a new CD, "WHAT'S YOUR WORLDVIEW?" a one-hour CD sample from his 24-hour series, "THE BIG PICTURE: The Shape of Things to Come" discussing geopolitical, economic and spiritual trends in the 21st Century. MORE ... PERSONAL NOTE: Youngest daughter Braida Zoe (age 17 mo.) is now feeding herself, running, climbing and floating & swimming. Shown with her mom (and loving wife) Micki.