NothingistabooanymoredeclaredSwissNationalBankPresident,JeanPierreRoth.Everythingispossible thesedays,andcentralbankshavealmostunlimitedpossibilitiestoactinthemarkets.Thoughtheself congratulatoryringofMonsieurRothscommentsishardtomistake,weatHaydel,BielandAssociates(HBA)find thistobeexactlytheproblem.Nothingistabooanymore. Anyofourfoundingfathersandnotafewclassicaleconomistswouldrecoilinhorroratourmodernexperiment withlegaltender.But,aswestateinourcurrentNewsletter,ConfessionsofaMonetarySinner(Q2 2009),itreallydoesntrequireanEcon101class(letaloneaPhD!)torealizethat[w]eallliveinanupsidedown world:Aworldwhererichnationsborrowfrompoornations;Wherethesepoornationsmustlecturetherich nationsonthedutiesofanhonestdebtor;Wheremoney(literally)growsontrees;Wherethestudentsofthese poornationslaughinopencontemptoftherichnationsemissaries[4];Wherewehave,withoutdebate,adopted thefifthplankofKarlMarxsCommunistManifesto[5];Aworldwherethedominantthinkingisthatmarketsoften failbutgovernmentsneverdo;and,ofcourse,wheretheproblemoftoomuchdebtwillbesolvedwithevenmore debt.

Iftheseseemingparadoxestroubleyou,youarenotalone.Bywayofpreview,wefeelthatthecurrentmonetary improvisationswillendintears.Wetherefore,areconstantlystrivingtoprotectourclientsfromthis(eventual) catastrophe.WhilethereiscertainlyachorusthatwehaveavertedDepression2.0inBernankeswords,we arentconvinced.Eachsuccessivecrisisbringswithitevermorestimulus.BywayofexampleinSeptember, October&Novemberof1998,inreactiontotheMidAugustRussianfinancialcrisisanddefault,theFedcutrates threetimes(to4.75%)andorchestratedanowpiddling$3.6Billionbailout.Tenyearson,theFedhascutratesto 0%(andistryingtogolower),andthestimulussofarisalmost$30Billionnearlyeighttimesaslarge.Whatifit works?Howmuchstimuluswillbeneededforthenextfinancialcrisis?

ConfessionsofaMonetarySinner(Q22009)istheproductofresearchandruminationsbyChristopherJ. HaydelandRickyE.Biel.Thankgoodness,wedontgoitalone.Wetherefore,havemanyintellectuallygenerous andwellinformedfriendswhohavehelpedinitscreation,andtowhomweareeternallygrateful.The informationpresentedinthisnewslettershouldinnowaybeconsideredtheofficialopinionofAmeriprise FinancialServices,Inc.oranyofitsaffiliates.PleasecontactAmeriprisedirectlyorvisitthemat www.ameriprise.comtolearnoftheiropinionsonthemarketsandeconomy. SpecialthanksforsomeofthethoughtsandgraphsinthisnewslettergoouttoJamesBianco,Dr.MarcFaber (www.gloomboomdoom.com),RonGriess(www.thechartstore.com),JamesGrant(www.grantspub.com), OutstandingInvestorsDigest(www.oid.com),Dr.CharlesKindleberger,JeremyGrantham(www.gmo.com),Steve Malanga(www.realclearmarkets.com),andFredHickeyoftheHighTechStrategist (thehightechstrategist@yahoo.com).Ofcourse,anyerrorsareoursentirely.

SourcesofInformation:Theinformationcontainedhereiniscollectedfromsourcesbelievedtobereliable,however,the accuracyandcompletenessoftheinformationarenotguaranteedasitisacompilationfromvariousfinancialsources(mutual funds,directparticipationprograms,correspondentbrokers,othernewsletters&newssources,aswellasotherresearch departments,etc.).Intheeventofanydiscrepancyyoushouldalwaysrelyonyourstatementsormailingsreceiveddirectly fromproductsponsors.ForAmeripriseFinancialServicesaccounts,refertoyourofficialAmeripriseFinancialServices statements.FornonAmeripriseFinancialServicesaccounts,obtainofficialstatementsdirectlyfromtheappropriatefinancial serviceproviders.Ifyouhaveanyquestionsregardingyourreport,pleascontactyouradvisor.Securitiesorinvestments referencedintheenclosedmaterialdonotconstituteanofferorrecommendationstobuythesesecurities,nordoessucha referenceconstituteanendorsementofthesesecuritiesbyAmeripriseFinancialServices,Inc.oranyaffiliatedcompanies. Pleaseconsulttheprospectusbeforemakinganyinvestment. AccountSummary/Valuesifapplicable:Anyaccountvaluesorsummariescontainedhereinareinadditiontoanyandall statementsthatyoureceivefromAmeripriseFinancialServicesand/oranynonproprietarycompanies.Anysummaryof accountvaluescontainedhereinhasbeenprovidedtoyoubyyouradvisorsChristopherJ.Haydel&RickyE.Biel.

*Adapted from Where Are the Customers Yachts, by Fred Schwed, Jr.

Contents:

I.ConfessionsofaMonetarySinnner:TheconversionofaformerbelieverinSoundMoneywhois
attemptingtograsptheimplicationsofthewholesalecoversionofseeminglyalltheworldscentralbankersand mainstreameconomiststotheGospelofInflation.Believingthatinflationisamonetaryphenomenon,wehave alwayslaidtheblameforitscreationatthefeetoftheCentralBankers,but,whereastheyusedtodeny responsibilitytheynowcheerinflationaryoutcomesandconfuseinflationwithsuccessfulmonetarypolicy.

II.ThatOldTimeReligion: TheClassicalideasofsoundmoneyandwhatthecultureofinflationhasdone
tooursociety.

III.LookingAhead;APreviewoftheNextCrisis: [T]hepowertodepressthemonetaryunitof
value,isnot,toourmindsalastingsolutiontothiscrisis.Wewillcertainlyhaveupturnsinbusinessactivity,buta lastingsolutionwillnotbeachieveduntilwehavewrittendownallbaddebts(notpostponedthedayof reckoning),repairedourbalancesheetsandreturntoproduction,thriftandsavings.

IV:Strategy:ByobservingwhatCentralBankersandpolicymakersdo,ratherthanwhattheysay,weareclear
thattheUSDollarstrajectoryisdownward.Dittoforalltheworldscentrallyplannedandmanagedcurrencies. Alltheworldsfiatcurrencieswilldeclineinpurchasingpoweragainstfiniteassetssuchasnaturalresources,and inparticular,againstgold,whichalsoservesasastoreofvalue.Fiatcurrenciesdonot. Inaddition,therecentrunupinthestockmarketaverageshasleftusfeelingthatstockpricesmayhaverisentoo fartoofast;butwithsuchmassivestimulusthesepricescouldremainafloatforsometime.Wecontinuetolook forsafe&cheapinvestmentsandhavefoundthem:inJapan.UShighqualitystocksalsoseemcheapatleast relativetootherareasofourstockmarket;Finally,shorttermbondfundsthatinvestaportionoftheirportfolios informerlytoxicmortgagestructures,insomecases,representcompellinginvestmentvalues.

ConfessionsofAMonetarySinner

Q22009,July30,2009

I've been condemned by traditional economists who said that printing money is responsible for inflation. Out of the necessity to exist, to ensure my people survive, I had to find myself printing money. I found myself doing extraordinary things that aren't in the textbooks. Then the IMF asked the U.S. to please print money. I began to see the whole world now in a mode of practicing what they have been saying I should not. I decided that God had been on my side and had come to vindicate me

Dr. Gideon Gono, President of the Reserve Bank of Zimbabwe, to

Newsweek January 24, 2009

How could I have been so blind? I confess to you, my brothers & sisters, that I have been living in sin. Begging your forgiveness, I humbly submit that I was spiritually miseducated. Even more troubling is that by my example, I may have influenced others to sin as well. My heart limps along in the hope that the merciful Almighty will shelter me from the storm raging in the depths of my soul. You see, for far too many years I have found myself on the wrong side of the heavenly realm. I didnt know it. I was lost. The invocation of Dr. Gono, above, was only the beginning of my spiritual reform. You see, I was a monetary heretic. My apostasy included the deeply-held belief that money should be sound [1] that it should represent a store of genuine value. It seems crazy now, I know... but I truly believed that this aside from being honest and ethicalwould encourage thrift and savings. It might even make such sound money a sought-after brand which could improve trade, and therefore, our relationship, with our neighbors. Wandering in the darkness, I thought that nothing was more vital to capitalism than capital. I foolishly believed that savings, which leads to capital formationthe building of plant, equipment, factories, etc.was the organic and sustainable way to economic growth and prosperity. In my confused state, I used to look with envy on the natural-born savers of the world: Germany and China for example, with their savings AND their factories AND their jobs. Looking at this, I would turn an unflattering shade of green and wonder, what ever happened to Americas savings? (see: FIGURE 4) I used to do this silly little thought experiment: What would happen, I openly wondered, if the money supply were literally fixed? (if the monetary veil was really transparent?) Its a bit embarrassing to think about it now, but the answers would come pouring forth, for example, ...As production became more efficient, and less costly

(productivity increases) prices would fall, wouldnt they? and ...naturally, the purchasing-power of money would increase over time. And the kicker, savings would be rewarded with higher (not lower) purchasing power, thus a built-in return mechanism and incentive to save would exist. You may even have some things to add to this list. These answers even seemed to be confirmed by history. For almost all of the 19th Centurysave an interlude with legal tender during the Civil Warthe US dollar was backed by gold. The supply of gold is not literally fixed, as in my thought experiment above. But with annual increases in supply of between 1-2% per year, it is the closest weve yet come to a fixed money supply. And what happened to the price level during that tumultuous century (Figure 1)? Why, prices fell! With the natural exception of the Civil War period, they declined by an average of 0.45% per year! A 19th Century saver would have earned a better return, even with a 0% interest rate, (purchasing power increasing by 0.45% = 0.45% return all else being the same) than one could get today on most 6 month CDs! My sins of the past are now clear to me. Embracing the idea that falling prices may represent progress (and therefore a good thing!) is quite blasphemous, I know. But in my defense, this was before my conversion to the Gospel of Inflation. Now I have seen the light! Dr. Gono and the expanding band of evangelical economists have revealed to me that Monetary Debasement is doing the Lords work! They cite chapter & verse that falling prices are unequivocally deflation! Now, there can be no greater sin against the Gospel of Inflation than its perceived opposite. So this evil must be smitten! To even contemplate a falling price, whether of an asset, like real estate or stocks, or of consumer staples, is to contemplate the face of evil. And even though falling prices might just be a boon to those suddenly out of work, or to the retailer groaning under the crush of unsold inventory, we all must resist these temptations of this deflationary devil if we are to find our eternal reward. Hey, no one said it would be easy. So we should all rejoice that our own Dr. Bernanke, his choir of Central bankers, angelic finance ministers, and saintly world leaders have acheived a truly unique meeting of the minds. That these policy makers, among whom such perfect agreement is so rare, have come to a global policy consensus to save us all from damnation, must surely be a sign of divine intervention. And tho this religion goes by many names, Inflation Targeting and Quantitative Easing, to pick just two, it is the same gospel! Who needs savings , jobs, security, investment, capital and growth? We can all follow Zimbabwes path to salvation!

Saints & Sinners:

It only follows that if such monetary destruction is, indeed, the Lords work, Dr. Gideon Gono is a candidate for sainthood. The Vatican (to cite just one example) states that For the beatification (a step in the process toward canonization/sainthood) of a confessor a miracle attributed to the Servant of God, verified after his death, is necessary. Begging Dr. Gonos pardon (for I think he is still alive and Cholera-free), I submit the Zimbabwean One Hundred Trillion Dollar Bill (above) into evidence. It is truly miraculous that so-large a number (15 zeros!) has been made to represent so microscopic a claim on anything!

But while Dr. Gono may have a comfortable lead in this race to the promised land, other prophets of inflation are closing in fast. Who would be the Patron Saint of Central Banking? The list contains some well-known names and some surprises. Even when the names seem elusive, like Dr. Gonos, their deeds will hopefully be remembered for generations to come. One such surprise entry is the Governor of the Riksbank (Sweden) Stefan Ingves. In the closing months of 2008 alone, Dr. Ingves, who naturally holds a PhD in economics, tripled the size of the Riksbanks balance sheet. Here at home, and in spite of truly heroic efforts, the Bank of Bernankes balance sheet only grew by 152% over the same time frame. If youre reading this and youre a proud American, then youll certainly agree that it would be a national disgrace for our leading central banker to fall behind the likes of Zimbabwe and Sweden! Do your part: Fall down on your knees and pray! You can probably find succor from those whoif not saints in their own rightcertainly must have earned the rank of Guardian Angel. Arthur Burns (Chairman of the Federal Reserve 1970-78), could certainly be counted on for some divine inspiration. For those who might be, say, spiritually-challenged, we can take a more pragmatic course. Like Nobel Laureate Paul Krugman, we can ask that the Fed do more. Now, considering that the Fed has already conjured into existence over $3.9 Trillion of newly minted bills (or the equivalent of approximately 28.9% of GDP) in just over 9 months, its not exactly clear to me how much more the Fed can do. For comparison, President Herbert Hoover pumped out 8.3% of GDP in his attempt to restore ballast to the badly listing economic ship in 1932-33[2]. But being just a recent convert to the gospel, I thought it best to seek out a more seasoned evangelist. Well, it didnt take long for me to find just the right high priest. This saintly being operates his ministry cloaked in the robes of respectability conferred upon him by none other than Harvard University. His name is Gregory Mankiw and you should know him. Perhaps he needs no introduction. One of his greatest declarations came on February 1, 2000 in the pages of the Wall Street Journal. Just 38 days before the Nasdaq collapse he proclaimed that when you look at the mistakes of the 1920s & 1930s, they were clearly amateurish. It is hard to imagine
that happening againwe understand the business cycle much better.

Professor Mankiw has recently expressed his desire to expand the canon of this gospel. His thoughts, expressed in the Wall Street Journal of April 19, 2009, (see It May be Time for the Fed to Go Negative ) succinctly reflect the mindset of the Federal Reserve and of quite a large number of mainstream economists. According to Mankiw:
With unemployment rising and with the economy in shambles, its hard not to feel negative about the economy right now. The answer to our problems, however, could well be negativity. But Im not talking about attitude, Im talking about numbers[he

means the interest rate, Ed. Note]... What is the best

way for an economy to escape a recession? Until recently most economists relied on monetary policy. Recessions result from an

interest rates. Lower interest rates encourage households and businesses to borrow and spend. More spending means more demand for goods and services, which leads to greater employment for workers to meet that demand. [our
emphasis- Ed.] The problem today, it seems, is that the Federal Reserve has done just about as much interest rate cutting as it can. Its target for the Federal Funds rate is about zero, so it has turned to other tools, such as buying longer-term debt securities, to get the economy going again. But the efficacy of those tools is

uncertain, and there are risks associated with them. ..So why shouldnt the Fed just keep cutting interest rates? Why not lower the target interest rate to, say, negative 3%? At that interest rate you could borrow and spend $100 and repay $97 next year. This opportunity would surely generate more borrowing and aggregate demand. The problem with negative interest rates, however, is quickly apparent. Nobody would lend on those terms. Rather than give your money to a borrower who promises a negative return, it would be better to stick the cash in your mattress. Because holding money promises a return of exactly zero, lenders cannot offer less. Unless, that is, we

insufficient demand for goods and servicesand so, the thinking goes, our central bank can remedy this deficiency by cutting

can find a way to make holding money less attractive. And at one of my recent Harvard seminars, a graduate student [no doubt on his way to being an ordained minister himself! ed. Note] proposed a clever scheme to do exactly that. Imagine that the Fed were to announce that, a year from today, it would pick a digit from 0 to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return on holding currency would be negative 10%. [S]uch a move would free the Fed to cut interst rates below zero. People would be delighted to lend money at negative 3%, since losing 3% is better than losing 10%. Of course, some people might decide that at those rates, they would rather spend the moneyfor example, by

buying a new car. But because expanding aggregate demand is precisely the goal of the interest rate cut, such an incentive isnt a flaw, it is a benefit. The idea of making money earn a negative return is not th entirely new. In the late 19 Century, the German [3] economist Silvio Gesell argued for a tax on holding money. He [Gesell] was concerned that during times of financial stress, poeple hoard money rather than lend it. John Maynard Keynes approvingly cited the idea of a carrying tax on money. With banks now holding substantial excess reserves, Gesells concern about cash hoarding suddenly seems very modern. If all of this seems too outlandish (his words, not mine- Ed note!) there is a more prosaic way of obtaining negative interest rates:

through inflation. Suppose that, looking ahead, the Fed commits itself to producing significant inflation. Int this case, while nominal interest rates could remain at zero, real interest ratesmeasured in purchasing powercould become negative. If people were confident that they could repay their zero-interest loans in devalued dollars, they would have significant incentive to borrow and spend... Ben S. Bernanke, Fed chairman, is the perfect person to make this commintment to higher inflation. Mr. Bernanke has long been an advocate of inflation targeting. In the past, advocates of inflation targeting have stressed the need to keep inflation from getting out of hand. But in the current environment, the goal could be to produce enough inflation to ensure that the real interest rate is sufficiently negative....

That Old Time Religion:

Now, the casual reader of these comments could be forgiven for thinking that they were lifted from the pages of a satirical newspaper like The Onion. But no. They actually appeared in the Wall Street Journal, the of-record newspaper for American business. I assure you that I was also not trying to induce a MEGO moment (first used by William Safire for My Eyes Glaze Over). I did so because I think youll find that there is no better discourse on the deplorable state of economic thinking today than that espoused by Prof. Mankiw. There certainly may be reasons to preach the gospel of inflation, but reason (or sound economic theory) isnt one of them. The words of Prof. Mankiw, in their near-entirety (and full outlandish-ness), should, by themselves, convince any reader that our world is not quite right. In fact, the reader with NO economic training at all could come to this conclusion. After all we live in an upsidedown world: A world where richnations borrow from poor nations; Where these poor nations must lecture the rich nations on the duties of an honest debtor; Where money (literally) grows on trees; Where the students of these poor nations laugh in open contempt of the rich nations emissaries[4]; Where we have, without debate, adopted the fifth plank of Karl Marxs Communist Manifesto [5]; A world where the dominant thinking is that markets often fail but governments never do; and, of course, where the problem of too much debt will be solved with even more debt. Many of the inflationists sacred cows are offered up in Professor Mankiws ruminations. There is the very necessary reference to John Maynard Keynes, without which he would certainly lack street cred. He also channels the thinking of a long-dead socialist in Gesell. Most clearly, he makes an attempt to (or maybe he succeeds) provide a dignified veneer to the very undignified counterfeiting process of the Fed.

Economist Marc Faber tackles these very preposterous ideas head-on by declaring [I] have a far simpler solution for creating inflation (for which I should obtain a Nobel prize in economics) than the half-baked measures proposed by Gesell, Mankiw, and his students. In order to create more demand for goods and services, which leads to greater employment for workers to meet that demand. The government could issue to each US man, woman and child free vouchers for different goods and services, which would have a three or six months expiry date. There are 310 million Americans. The government could issue 310 million vouchers to be exchanged for a $500,000 home, a billion vouchers for visits to an amusement park, a trillion vouchers each for Prozac and attendance at a sporting event, and so on. AIG and Citigroup would be in charge of making a market in these vouchers, so if somebody didnt wish to buy a car, he could exchange the car voucher for a cigarette voucher. But since these vouchers would have an expiry date they would unleash as huge consumption boom, which would temporarily lift the prices of everything.[6] The discerning reader will certainly recognize that this is a far more elegant solution than those devised by Prof Mankiw, but will also naturally wonder what will happen when the vouchers, and the burst of activity theyve engendered, expire together. The answer to us is just as clear: when the stimulus wears off, just as occurred in 2007, demand will collapseall over again. Racking our brains at HBA, weve come up with a follow-on solution that we think is also simple and elegant: Have Goldman Sachs hire everyone! In stark contrast to the modern thinking of mainstream economists is that old-time religion. Its gospel is very well expressed by Daniel Manning, former Secretary of the Treasury (under Grover Cleveland), who wrote in 1885 : The power to raise or depress the monetary unit of value is a power to destroy mens faith in the honor of a Government
and its laws... Their sense of betrayal, and their perception of the fact, are expressed by the non-equivalence in exchange often disclosed between the undebased coin and the debased coin; between the coin and the promise to pay converted into legal tender. No Executive and no Legislature is fit to be trusted with the control it involves over the earnings and savings of the people. No earthly sovereign or servant is capable of a just exercise of such authority to impair and pervert

the obligation of contracts.( Our Emphasis- Ed.) Just try telling that to Ben S. Bernanke. Or the President. Or Congress. Fighting through this nightmare of mainstream economic thinking, there dawned us, a plausible reason why apparently knowlegeable people could become inflation evangelists. In a very interesting essay by Steve Malanga, editor of Real Clear Markets (www.realclearmarkets.com), entitled Can Free Markets Survive In a Secularized World? [7], he reminds us that:
The 18th Century English cleric and theologian John Wesley was troubled by a paradox that emerged as his teaching spread. He, like other Protestant thinkers stretching back to Calvin, taught that one could honor God through hard work and thrift. The subsequent burst of industry and frugality generated by Wesleys message improved the lot of many of his workingclass followers and helped advance capitalism in England. But, wherever riches have increased, the essence of religion has decreased in the same proportion, Wesley observed, and subsequently pride and greed are growing more common, he complained. The emergence of what Max Weber described as the Protestant ethic represented an important point in the evolution of capitalism because it combined a reverence for hard work with an emphasis on thrift and forthrightness in ones dealings with others. Where those virtues were most ardently practiced, markets advanced and societies prospered. And, as Wesley foresaw, what slowly followed was a rise in materialism and a reverence of wealth for its own sake. Today, we seem to be living out Wesleys most feared version of the pursuit of affluence unencumbered by virtue. Scam artists perpetrate giant Ponzi schemes against their friends and associates. Executives arrange compensation packages that pay themselves handily for failure. Ordinary people by the hundreds of thousands seek a shortcut to riches by lying on mortgage applications. Heartless phony bailout schemes take the last dollar of people already in distress. To survive all of this, it seems capitalism needs a new dose of restraint. But absent a vast religious revival in the West, which seems unlikely, where will a renewal of the virtues of the work ethic come from? That question becomes ever more difficult to consider because as religious practice fades and our institutions reject traditional values, so too does the memory of the role that these elements played in the rise of capitalism.

In the Church of the Middle Ages, work was something the faithful performed to survive, not something that had a value of its own. The most important occupations were not determined by the market, but by church leaders: the monastic life first, followed by farming and then crafts. Although the Church saved what was left of Europes culture and economy after the fall of Rome, the continents standard of living barely changed for 1,000 years under a worldview that was suspicious of all but commerce on the smallest scale. Calvin undermined that view by placing work in a new religious context. Work was something that God willed us to do--even the rich. The worldly success that one achieved through hard work was a sign that one was perhaps a member of the elect. But the fruits of hard labor werent meant to be spent lavishly on oneself. The Protestant reformers preached that the faithful should reinvest the profits of hard work in new ventures rather than squander them because it seemed unlikely that people who were profligate were saved...[...]By the early 19th Century de Tocqueville could marvel that Americas preachers seemed as interested in promoting prosperity in this world through industriousness as eternal felicity in the next. Our public schools reinforced this message, not because it was religious but because it became the American way.

But Wesleys paradox has been a part of this landscape of work and prosperity, too. Secularism rose in the U.S. in the late 19th century and peaked in the Roaring Twenties, another age of materialism. Then the Great Depression and the Second World War brought a revival of religious observance, which continued during the boom years of the 1950s, before another decline began in the 1960s and continues through today. Perhaps most pointedly, the values of the Protestant ethic also began to disappear from our larger society, especially from our schools, whose principals and instructors, largely schooled in American university education departments that have abandoned the idea that there is a common set of American cultural values... The gradual disappearance of the Protestant ethic has shifted the emphasis in our economy from work and production to work and consumptionbut most of all to consumption (see Figure 4; ed.). A culture of thrift has become a culture of debt, and in the process many people have blurred the line between the legitimate competitive activity that is so essential to capitalism and criminality. When Franklin wrote that the bailiff does not visit the working mans house because industry pays debts, he probably wasnt thinking of the no-doc, no down-payment, interest-only adjustable rate mortgage with a balloon payment given to someone who conspired with his

mortgage broker to obtain a loan for which he isnt qualified.

The meltdown of the financial markets in the last few months has left us grappling with how we can keep markets free and principled at the same time. The only debate so far is between those who want more government regulation--"who want to impose from the outside via the regulators eye the restraint that our institutions once tried to instill in us--and those who think that more government will only undermine our prosperity. Neither side seems to be winning the public debate because most Americans are probably equally as appalled by the shortcomings of the markets as they are by the prospect of more government control of them. (our emphasis ed.
Note) People instinctively know something is missing, just not what. A religious revival in America seems unlikely. Is it equally as unlikely that our institutions, most especially our schools, would once again promote the virtues that made capitalism thrive and Western societies prosper--not just hard work, but thrift and integrity, or what we once called the Protestant ethic?

Steve Malangas article makes a number of interesting points. Perhaps none come across more strongly than the distance that we have strayed from the very principles which bred our success. Its truly remarkable. Perhaps knowing this, the prophets of inflation, seek a return to the old time religion after all. The reason to promote the gospel of inflation is that it will ultimately lead to work, thrift and production again after a detour to (and it is hoped, through) impoverishment.

I apologize if this cynical and over-written screed has injured anyones religous sensibilities. There are, indeed many differences between the modern economics of inflation and true religious observance. Yet should we take on blind faith and faith alonethat the machinations of our monetary high priests will bring us to to bliss? And if so, why havent they been doing this for centuries? Whether youre a believer or not, be clear: this thinking runs counter to all of human historical experience. Paper money and experiments with inflation have always ended in tears. What makes us different? Where the Blame Truly Lies
At length corruption, like a general flood, Did deluge all; and avarice creeping on, Spread, like a lowe-born mist, and hid the sun. Statesmen and patriots plied alike the stocks Peeress and butler shared alike the box; And judges jobbed, and bishoips bit the town, And mighty dukes packed cards for half-a-crown Britain was sunk in lucres sordid charms.

--Pope

Yes, its true. We are naturally obstreperous, contrarian scolds when it comes to the capricious exercise of authority--even more when it is so flagrantly wasteful. But it will possibly surprise you that we do harbor sympathies for those in political life. After all, they have been hired to exert leadership and to be (or appear) decisive. And as a society weve elected them (or sustained them). Following Mr. Malagas article to its natural conclusion, we can also also clearly see that the real problem is us. WE are to blame. Not individually, of course. Yet who among us hasnt dreamed of wealth without work? Its allure is so powerful that it is the meat & potatoes of any advertising diet. It is surely a classic case of selling the sizzle, not the steak (you know: I made $60,000 per year working from home only 4 hours per week!). We at HBA take special issue with the inflationists because their gospel feeds into this thinking, promoting lucres sordid charms, in Popes words. Weve begun to think that maybe this process is unstoppable. It just may be that in a democracy, to paraphrase Toqueville, we are inevitably bribed with our own money. And as a nation of debtors (FIGURE4) we all vote for inflation. While assets are inflating (take your pick, commercial real estate, houses, stocks ) we all feel richer. Were more flush and confident. We borrow more against those asset values and we spend more. Most importantly, however, we begin to trade assets rather than produce things that other people want or need. Rather than perform the hard work of production (or improving production), more and more are seduced by the allure of trading assetsand general productivity declines. Soon enough, there are far too many traders, and far too few producers (Big fleas have little fleas/That come in swarms to bite em/ And little fleas have littler fleas/ And so ad infinitum). This, in short, is how financial servicesoriginally created to serve the capital needs of the real economyhas instead become its demented master.

Now, an asset is only worth the cash flow it generates for its owners. This is central to our philosophy at HBA and its as close to an iron law of economics as there is (No Free Lunch being the iron-est of economic laws). Yet in an economy increasingly dominated by trading (and fueled by cheap credit), there inevitably comes a point where the assets of the society have been bid-up & inflated to a point where the cash flow that the asset generates can not support the debt service incurred in its purchase. The price level of the assets (read: Value) must be recalibrated to accord with reality. This necessary process and the falling assset/commodity prices that accompany it has been interrupted time and again by the inflationists. But whether this re-calibration happens quickly or slowly, it happens. Inexorably. Figure 5 may even serve as a kind of Economists Rorschach Test. What do you see? Our vision at HBA may, at times, be called into question, but we clearly see the natural tendency for weightless paper money to be ground to dust. But we also see during credit contractions, as occurred in 1920-22 and especially from 1929-33the tendency for the currencys purchasing power to increase (i.e. for prices to fall). These sometimes very dramatic increases in the purchasing power of money must surely have been a welcome stimulus to the 25% of workers who lost their jobs in the first stages of the Depression. Just as certainly, though, it made the real value of debts & the costs of servicing that debtmuch harder. In that way it must have also forced the rapid liquidation of unsupportable debts. Ah, but beauty truly is in the eye of the beholder! Todays mainstream economists would certainly welcome the long-term success of inflation-targeting (that grinding-to-dust-thing that we despise), but would, no doubt, recoil in horror at the rising value of money oh, sorrythe deflation during credit busts. Interestingly, they must also ignore the economic truth that credit busts follow credit boomsits the inflation that sets up the deflation. See for yourself. Jeremy Grantham, of investment management firm GMO (www.GMO.com), reminds us that at year end 2007:
[the] National Private Asset Base (to coin a phrase) of $50 trillion supported about $25 trillion of private debt, corporate and individual. Given that almost half of us have small or no mortgages, this 50% ratio seems dangerously high. But now the asset values have fallen back to $30 trillion, whereas the debt remains at $25 trillion, give or take the miserly $1 trillion we have written down so far. If we would like the same asset coverage of 50% that we had a year ago, we could support only $15 trillion or so of total debt. The remaining $10 trillion of debt would have been stranded as the tide went out! What is worse is that credit standards have of course tightened, so newly conservative lenders now assume the obvious: that 50% was too high, and that 40% loan to collateral value or even less wouldbe more appropriate. As always, now that its raining, bankers want back the umbrellas they lent us. At 40% of $30 trillion, ideal debt levels would be $12 trillion or so, almost exactly half of where they actually are today! [8]

Given this state of economic affairs, there are only three ways, Mr. Grantham suggests, by which we can exit this downturn and begin to grow sustainably again: 1) We can bite the bullet and drastically write-down our nonperforming debts (he also recognizes this as politically unpalatable); (2) We can do ...[w]hat Japan did: let the very long passage of time wear down debt levels as we save more and restore our consumer balance sheets [8]; or (3) We can inflate, inflate, inflate and by doing so, reduce the real (inflation-adjusted) value of our debt (Figure 5).

Now in the interest of full disclosure, we at HBA also think that there is a fourth possible way (heaven forbid!): To somehow inflate a new asset class or re-inflate the now-falling assets way back above their fair value again. (Grantham dryly concedes this fourth way when he acknowledges that After the tech bubble of 2000, Greenspan found a second major asset class ready and waiting real estate on which to work his wicked ways. [8]) The unanimity of opinion on monetary policy, which is the most vexing aspect of the current policy debate to our minds at HBA, is that we must avoid a repeat of the Japanese experience of the 1990s. At HBA, we (surprise!) have a slightly different take on things. We think that we would be decidedly LUCKY to do as WELL as the Japanese did. Just how well did the Japanese economy fare in the 1990s? To be sure, the 1990s in Japan are not called the lost decade for nothing. Japans boom-cum-bust was a much bigger affair relative to the size of the Japanese economy than the recent US experience. Japanese asset values (their National Asset Base), collapsed by a truly devastating 3x GDP(!), as compared to our recent write-down of asset values by almost 1 x GDP (from US $50 Trillion to approx. $30 Trillion = $20 Trillion/$14.264 Trillion 2008 US GDP). Further, after some delay, their policy response was almost exactly the same as ours. Given these facts we feel that Japan was quite fortunate to have only misplaced a decade. For reference note also that during the Great Depression, US assets were written down by approximately of one years GDP. So thank heaven that our experience is not as challenging as Japans was, but is also, sadly, a greater loss of perceived value than our Great Depressions. Looking Ahead: A Preview of the Next Crisis? Havent you heard? The recession is over! Dr. Bernanke has, through his masterful steering of the economy, avoided Depression 2.0(his phrase). Nobel Laureate Paul Krugman has joined the choir; indeed, he never left it. However, Mr. Krugman also warns us that this may be a jobless recovery for awhile.

So, now that the self-congratulatory headlines have been printed and the recession is over, we at HBA thought it might be timely to engage in one of our familiar sports: the throwing of ice-water on the ticker-tape parade. It isnt so much that we like to do it (really, we love a party as much as the next person), as much as the warm water we have keeps going cold. Nothing in our minds can match the spinechilling effect that the cover of TIME Magazine 15 February 1999 (pictured here) provides. Look closely. These are the heroes that Saved the World. They should be very familiar. After a full decade, ten long years, of reaping what The Committe to Save the World has sown, they are ALL STILL HERE! (or in Greenspans casehis intellectual heirs...maybe its Groundhog Day?) Ten years on, though, it seems that our salvation was really damnation. Mr. Obama, is this really the change we can believe in? Now our financial and monetary leadership clearly meet the definition of insanitydoing the same thing, with the same cast of characters to boot! No doubt TIME will soon be going to press with a glowing piece on The Committe to Save the World 2.0 and the crew of Dr. Bernanke (maybe it will include Bob Rubin and his appointee, Larry Summers with his appointee Timothy Geithnerif anything, these guys are exceedingly loyal!), which tells a modern tale of near disaster, all but averted through the courageous, forward thinking and unorthodox actions of the Fed captain. Here at home we do believe that the combination of massive stimulusnearly $4 Trillion of itmust have some effect! Hey, we are desperately searching for signs of a sustainable recovery, too. And it is quite possible that some form of mild recovery takes hold certainly from the deadsilence that befell the cash registers of America last fall. Yet we cant escape the creepy feeling that all thats happened is that asset prices are rising again; The Fourth Way is kicking in! Who cares about jobs, the stock market is up! the mainstream press seems to shout. But is this the beginning of a sustainable recovery or is it just asset inflation all over again? And what will happen when the stimulus wears out? Crisis 3.0? Hopefully, well know before another decade lapses. At HBA we are clear that if its trite its right, and one such hackneyed phrase reminds us that People who use a crystal ball often wind up eating ground glass. And, its been true that, at times, ground glass has come close to being a fifth major food group here. So our caution at venturing an opinion is, perhaps, understandable. While it was to-be-expected that a genuinely heart-pounding ascent (the sharpest upward move since 1938) would occur in the stock market given their recent heart-stopping lows, where this rally really distinguishes itself is in its speculative nature (Figure 6). And this rally wins the Race of the Junkiest by a long shot. We, however, cant be as cavalier as to dismiss it entirely, either. On the positive side weve thought for a while that given the deluge of stimulus combined with the runoff of a melting credit market, many boats could be lifted. And while we have a hard time escaping the idea that the tide will recede, but we also recognize that the tide may remain high for some time.

Most importantly, perhaps, is the fact that the stock market has very often presaged an upturn in the general economy with an upturn of its own- often 6-9 months before signs of recovery are recognized. We also feel that some signs of a recovery should be evident by Q2 2010. So, could this be the real deal? Clearly, we have been treated to a return of speculation and risk-taking like never before. Perhaps underlying this is the belief that someone (the Fed, the US Treasury, Mr. Obama, Committee 2.0?) will be there to pick up the pieces if growth disappoints. In addition to marvelling at how far the markets have come from the ides of March (when there was no savior to be found!) we are clear that a colossal dose of moral hazard has been re-introduced into the markets. This run in the market has made some things very clear. First, that it is the nature of the markets to keep us humble. How many investors, professional and amateur alike, had just become convinced that their pile of beloved cash was the safest place to be? When conviction is the highest, the markets seemingly do the opposite. Now investors many who may have partially or totally missed this rally have a new psychological battle: A vested interest-turned-belief that there will surely be another leg down in the markets, and with it, another opportunity to invest at a low cost. At HBA we assign about a 40% probability to this happening. More likely to our thinking anywayis that the market slogs along at higher nominal prices as inflation makes stocks cheaper in real terms over time. Long suffering readers may know that we have long been suspicious of the stock market valuationsas Jeremy Grantham recently lamented that After almost 20 years of more or less permanent overpricing of the S&P, we get 5 months of underpricing! There is no justice in life!. Well, Jeremy, we at HBA are in agreement with you & GMO. Like you, we prefer to invest and accumulate shares when they are cheap. All of which means that we, like the investors who were not fully invested in the rally, are somewhat psychologically hobbled, looking (hoping?) for cheaper prices. But as mentioned above, we are certainly willing to concede that we may not get them. Perhaps the massive inflationary jolt er, stimulushas more or less permanently lifted stock prices. We may see a new inflation-adjusted low price on the S&P, but still have higher nominal share prices.

Strategy:
NIPPON, INC. One area where we have found such cheap pricing, however is in Japan. It is true that we have been on the Japan Bandwagon for some time. The equity markets of Japan have been cheap on a relative basis for awhile (i.e. compared to other developed markets like the US and Europe). Now they are cheap in an absolute sense (though, like everything else, less cheap than in March). Still the major Japanese stock market index trades at approximately 1X book value (vs. US 2 X and Europe 1.5X). But most importantly, to say that Japanese companies trade at book value is quite meaningful because book value in Japan generally consists of cash & depreciated plant and equipment. Not much in the way of goodwill or other intangibles is evident, and the companies themselves have very low levels of debt (some are entirely debt-free!). At HBA we are currenly exploring the best way to capture this opportunity. First Eagle Global (SGENX) and First Eagle Overseas (SGOVX) are two funds which have strong weightings toward Japan. We know Jean-Marie Eveillard, the Senior Advisor to these funds, and more importantly understand and agree with his investment method & philosophy. Other funds which may provide the desired Japan exposure include the Japan Equity Fund (JEQ) and the Japan Smaller Cap Fund (JOF). Many investors have learned to ignore Japan, with a 20 year bear market and a deleveraging cycle, which has only just begun here in the West. Further, Wall Street coverage of Japanese stocks has been severely curtailed with the recent sale of NikkoCordial, formerly owned by banking cripple Citigroup. This has had the effect of leaving Japanese stocks unloved, underfollowed and in the bargain basement. Let it not be said that we at HBA are callous; we want to spread the love back to Japan! Gold: Given the downward trajectory of the US Dollar, and of all the worlds paper currencies, we still favor significant exposure to gold. This belief finds its expression in most client portfolios in both bullionthe physical ownership of goldand investments in gold mining firms. For exposure to physical gold we have chosen the SPDR Gold Trust (GLD), (where each share is representative of 1/10 oz of gold), and the Central Fund of Canada (CEF). There is a tax reason for holding two different funds which are meant to accomplish the same thing: GLD

is technically considered a holding of bullion, which is considered under the Internal Revenue Code, as a collectible (like baseball cards, etc). Any gains on the holding of collectibles are NOT eligible for the lower capital gains tax rates, but are, instead, taxed as ordinary income (just as short-term capital gains are). Therefore, in non-retirement accounts, we prefer to use CEF, which is technically a fund holding (and thus eligible for the lower capital gains tax rates), rather than GLD. For retirement (or qualified accounts, as we call them) where there is no capital gains treatment anyway, GLD serves as an appropriate holding vehicle for bullion. To gain exposure to the gold mining sector, we have holdings in the Market Vectors Gold Miners ETF (GDX). This fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the AMEX Gold Miners index. The fund normally invests at least 80% of its total assets in common stocks and American depositary receipts (ADRs) of companies involved in the gold mining industry. In addition, we have some concentration in Agnico Eagle Mines (AEM) because, almost uniquely among gold mining firms, they have successfully been adding to reserves. AEMs new mine in Finland has been bedeviled by start-up metallurgical issues in the Q1 2009, but seems to have improved in Q2. While recovery rates have doubled, they are still below the original feasibility plan. We view this as a positive sign. An additional positive, as we see it, is that the markets are just about to exit the seasonally weak period for gold prices (Spring/early Summer), and will soon be entering the seasonally strong period for gold prices (Fall/Winter). The Templeton Global Bond Fund (TPINX), has been as close to a portfolio mainstay as weve had (excepting gold & silver, of course). TPINX is a fund which invests in foreign sovereign debt. These foreign government bonds form one of the three legs of our anti-inflation stool (the other two being commodities led by gold/precious metals, and Treasury Inflation-Protected Bonds or TIPs). Led by portfolio manager Michael Hasenstab, the fund has performed well, even in the face of last years challenges. We agree with Mr. Hasenstab that the flight to quality (read: US Treasuries) was overdone and no small measure of his great YTD performance of 8.08% (as of 06/30/09) is due to his purchase early this year of low-cost emerging market debt from South Korea, Mexico, and New Zealand. In these countries, he seems to feel that the possibility of further interest-rate cuts and deeply undervalued currencies make their bonds attractive to own for multiple reasons. It has helped this fund in no small measure that the US dollar has fallenfairly consistentlyrelative to other currencies. Here though, we are beginning to entertain some doubts. Recently Allan Bollard, Governor of the Reserve Bank of New Zealand, said what has been the modus operandi of central bankers everywhere, but hes gone the extra step of sharing that exclusive fraternitys secret handshake with the world: [w]hat is needed, he said out loud, is for the New Zealand dollar to be persistently weak over the coming years.... The kiwis risen from 49 to 66 cents on the US dollar. While we (and Hasenstab, no doubt) thank our lucky stars for this, we, at least, are skeptical of an encore. More than this, we worry that since ALL central banks are participants in this race to the bottom, we will ultimately lose ground to other assets/investments that are far better at holding value in times of inflation. Gold and commodities come to mind. As do low-priced equities, generally. At the present moment we feel that we are being fairly compensated here as the US Dollar continues to weaken on a relative basis (i.e. relative to other currencies). Another closed-end fund that was also employed last fall to give us non-dollar bond exposure is JGG, the Nuveen Global Government Enhanced Income Fund. We are watching and waiting, but may find more suitable alternatives soon. Emerging Markets: Here at HBA we are still of the mind that the lesser-developed (read: lesser-indebted) nations of the world will most likely spring back from this downturn with more vigor and enthusiasm. Not weighed-down by debt, these economies, Brazil, India, Vietnam, Singapore, Taiwan, South Korea and to a lesser extent China, Russia, Indonesiashould find their way out of the dark labrynth sooner. But as paid worriers, we have to understand the risk that one country, namely China, poses to the growth picture. Indeed, the IMF estimates that China accounts for approximately 74% of the growth in worldwide GDP in the

three years to 2010. In addition, since 2005, China has been the source of 73% of the global growth in oil consumption and 77% of the growth in coal consumption. Michael Pettis (www.mpettis.com) shares with us that Dan Rosen, of the Rhodium Group, has a very illuminating July 17 report that shows the composition of Chinese growth in the past decade. He shows that for the past five years net exports accounted for about 10% to 15% of Chinese GDP growth, before collapsing to minus 41% in 2009 YTD[9]. The response to this collapse has been that the Chinese government has set higher lending quotas for banks forcing more credit down the throat of the gorged economy. Through the June 30 period according to Michael Pettis blog, Chinas banks will have lent Rmb 7 Trillion (about $1 Trillion USD) in the first half of 2009, as compared to Rmb 4.9 Trillion in all of 2008, and Rmb 3.2 Trillion in 2007. Most private reports show that significant overcapacities exist across a full spectrum of Chinese industries. At HBA, were just as unsure of the value of more empty office towers as we are of the sustainability of this lending burst. But we are sure that when it endsand it willthe global economy will feel it. How long can a mercantilist, command-and-control economy hide current NPLs (nonperforming loans) while heaping new ones on top of the unharvested crop of old ones? We have no idea, but are open to suggestions; Operators are standing by! This is a big risk as we see it, and are working to square our general bullishness on most emerging markets, with our bearishness on China. In fact, the outlook for China provides a shade of bearish coloring to our outlook on commodities as well. Suffice it to say, wed feel more comfortable investing AFTER the wheels come off the cart of Chinese bank lending...but have no idea when that will happen. When it does, it will also likely further reduce Chinas lending to America (FIGURE 7), which itself is likely to further depress the US dollar and raise borrowing costs (interest rates). These are the biggest themes that we see developing. We have maintained our holdings of some Canadian Royalty Trusts, which are oil and gas producers/transporters, that are structured much like US Real Estate Investment Trusts (REITs), in that they are required by law to pass through 90% of FFO (Funds from Operations) as a dividend. Some of the names include Penn West Energy Trust (PWE), Pengrowth Energy Trust (PGH), Harvest Energy Trust (HTE), Baytex Energy Trust (BTE) and Enerplus Resources (ERF). The Canadian Trusts, unlike their US counterparts, however, can continue to explore for new reserves to replace lost reserves; The US Energy Trusts (SJT, BPT) will eventually become little more than dry holes. Many of these trusts (especially HTE) were nonetheless clobbered last year as oil prices tanked, but have recovered modestly. And while the dividends in almost all have been cut, they are still paying out at a reasonable clip. We have also invested more successfully in some other pipeline companies for the dividends they pay and, what we felt was the relative security of assets. Atlas Pipeline Holdings (APL) and Linn Energy (LINE) were two such names. With the recent rise in their share prices, however, we felt it was time to take some money off of the table, that is to sell these holdings. Yet, we continue to believe that our friendly neighbor to the north will supply much more of our energy needs than currently and many of these companies, some with 30-50 (or more) years of reserveswill experience some value enhancement. Though we maintain positions in higher-dividend stock, we have chosen to put most of the new money received into the Metropolitan West Low Duration Bond Fund (MWLDX). The fund now yields a healthy 6.46%, but has recently experienced a rise in the underlying share price of 5% as well. Last fall and early this spring the managers of the fund decided to purchase in some of the toxic mortgage structures (CDOs, CMOs, and MBS), and were able to do so at a significant discount (we estimate 60-65 cents-on-the-dollar from our reading of the prospectus). We think the fallSeptember through November periodwill produce some surprising opportunities for us and think MWLDX a great holding place for assets in the short term. Overall, we are convinced that the stimulus has and may continue to provided some near-term relief. However the longer-term future is far more fragile. The Obama administrations planned deficits mean that the US Government debt to GDP ratio will rise from approximately 45% at the start of this crisis to over 100% in less than 4 years. At that point (assuming a 5-6% cost of funds) 5-6% of ALL future US GDP must go servicing the debt of the government. This forceful headwind will certainly slow the cruising speed of the overall economy. We should probably get used to a new normal US GDP growth rate of 1-2% vs. the old 3-4% we had become accustomed to warns Bill Gross of PIMCO funds; and we agree. This is one reason why we are searching overseas for greener growth pastures. To our minds this may turn out to be the stimulus-fuelled last hurrah, with some (seven biblical?) lean years to follow.

To all clients and friends of Haydel, Biel & Associates, we would like to thank you for your business and support of our practice. With that in mind, we also invite your comments or questions regarding this newsletter. Please feel free to contact us by phone at 626-449-8347, or email christopher.j.haydel@ampf.com. Thanks (in advance) also for any ideas you might share about how we can improve upon our service.

Warmest Regards,

Christopher Haydel
Footnotes: [1] Sound Money was perhaps best defined by former Comptroller of the Currency A Barton Hepburn to mean [...]money made of (or unquestionably redeemable in) a commodity which has a stable value in the marketso f the world independent of fiat. Sound money as applied to coin means money wherein the commercial value of the bullion equals its coinage value. Sound money as applied to papwer or token noney of any kind means that which is redeemable in money wherein the commercial value of its bullion equals its coinage value. -A History of Currency in the United States (1915). [2] James Grant , Sold To You, Uncle Sam, Grants Interest Rate Observer April 3, 2009 [3]Sylvio Gesell (1862-1930 ) was the author of Die Reformation des Munzwesens als Brucke zum Sozialen Staat (The Reformation of the nonetary System as a Bridge to a Social State). This socialist tract earned Gesell, who was a rather obscure economist during his lifetime, a cult following for his rather extreme ideas around land nationalization and socialism generally. [3] Judy Sheldon Loose Money and the Roots of the Crisis, Wall Street Jornal Op-Ed September, 30, 2008 [4] We believe in a strong dollar.. read Timothy Geithner, from a prepared text delivered to the studends of Peking University on Monday June 1, 2009. He went on Chinese assets [in the US] are very safe, and were going to make sure that we repair and reform the financial system so that we sustain confidence. This comment drew loud laughter from the audience of students in attendance. [5] The Manifestos demands: (1) Abolition of property in land and application of all rents of land to public purposes; (2) A heavy and progressive tax; (3) Abolition of all rights of inheritance; (4) Confiscation of the property of all emigrants and rebels; (5) Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly; (6) Centralization of the means of communication and transport in the hands of the state.; (7) Estension of factories and instruments of producitoin owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan; (8) Equal obligation of all to work. Establishment of industrial armies, especially for agriculture; (9) Combination of agriculture with manufacturing industries and the gradual abolitoin of all distinctions between town and country by a more equable distribution of the populace over the country; (10) Free education of all children in public schools. Abolition of childrens factory labor in its present form. Combination of educationwith industrial production. [6] Dr. Marc Faber , Where is the Light at the End of this Tunnel, Gloom, Boom & Doom Report, March 2009 (www.gbd.com) [7] Steve Malanga ,Can Free Markets Survive In a Secularized World?, RealClearMarkets, January 28, 2009 (http://www.realclearmarkets.com/articles/2009/01/can_free_markets_survive_in_a.html) [8] Jeremy Grantham,Obama and the Teflon Men, and Other Stories pp 2-3, January 2009 (www.gmo.com)
[9] See Squeezing out the exporters, July 29th, 2009 by Michael Pettis (www.michaelpettis.com)