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Table of Contents
The Real Inconvenient Truth .............................................................................................4 Chapter 1: The Cause of the Decline of the Dollar ...........................................................5 Chapter 2: Why Traditional Investment Strategies Don’t Work ......................................11 Chapter 3: The Risk of Inflation ......................................................................................13 Chapter 4: Summary ......................................................................................................19 Appendix ........................................................................................................................22

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The Real Inconvenient Truth: It’s the dollar that’s melting, and your retirement funds along with it!
Get FREE Special Report from www.TheFinancial FreedomFoundation.org
Traditional investment strategies judge their returns relative to the performance of “the market” (the S&P 500). If the market looses 50%, and they only lose you 45%, they actually think they performed well! In addition, they do not adjust for inflation, or for the declining value of the dollar. Did you know that since 2001 the US Dollar If you find this report interesting, please Forward it to a Friend has lost about 40% of its value? This means that dollar for dollar, your dollar based assets have likewise lost 40% of their value, in real terms. That is called wealth destruction, but it is stealth, because most people do not realize what is going on.

Absolute returns investors want to make money, regardless of the performance of “the market” and the value of the dollar. They learn how to protect themselves against the destruction of the dollar, how to create wealth no matter what happens in the stock market, and how to prosper in times of inflation. At The Financial Freedom Foundation, we teach people how to do just that.

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Chapter 1: The Cause of the Decline of the Dollar
Similar to how a share of stock is a measure of the value of a company, the value of the US dollar relative to other currencies is a measure of the economic strength of the United States and its Government’s ability to repay Federal loans by taxing its citizens. Our Federal Government currently uses tax revenue to pay about 60% of its expenses, the other 40% of its expenses are covered using money borrowed from foreign creditors, and this is a major cause for the decline of the dollar. The US economic growth over the past decade has been due primarily to credit expansion, for when you pour water into a bucket, all the toys float. Credit expansion has the effect of further weakening the domestic currency. When credit expansion slows down or stops, and real economic growth does not fill in the gap, then the domestic currency collapses.

Fact: In 2002 the US Dollar entered into a long-term downward trend. The primary cause of this trend was that the US posted a 4.5% deficit to GDP ratio, which historically meant that the country posting such a deficit would experience a currency crisis. The Congressional Budget Office (CBO) stated that the best case scenario, the US deficit is going to average 4.5% of gross domestic product (GDP) for the next 10 years. In fact, the Office of Management and Budget projects massive deficits for the next 70 years!

Fact: Not one penny of US government debt has been repaid since 1971. It has simply been rolled over when it comes due (refinanced), and new deficit spending has been borrowed as well. The United States is now running monthly deficits the size of what

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used to be yearly deficits! Some economists say that deficits don’t matter, but if that were really the case, then there would be no need for taxes.

Fact: The Federal Budget Deficit for the month of February 2010 was a record breaking $221 Billion dollars (The Deficit is the amount of money the Federal Government has to borrow each year to pay their bills, aka “living beyond their means”).

Perspective: As of Jan 2010, the entire combined net worth of two of the wealthiest men in the world, Bill Gates and Warren Buffet, was only $100 Billion.

Fact: The 2009 US Deficit was $1.4 Trillion. According to the Congressional Budget Office, the current economic and social policies will lead to deficits averaging nearly $1 Trillion for the next 10 years.

Perspective: If you earned $10 per second, it would take you 3,169 years to earn $1 Trillion dollars. If you were to spend $1 Million dollars every single day since the birth of Christ, you still would not have spent $1 Trillion dollars by now.

Fact: The two main accounting methods are “cash” accounting and “accrual” accounting. Accrual accounting requires following the Generally Accepted Accounting Principles (GAAP). The CBO calculates the official Federal Deficit using “cash” accounting. While the formal cash-based 2009 US Deficit was $1.4 Trillion, the GAAPbased 2009 US Deficit, based on numbers from the US Treasury, was actually $4.3 Trillion, when government bailout programs, the Fannie Mae and Freddie Mac guarantees, FDIC liabilities, and increases in obligations for programs like Social Security, Medicaid, etc are included.

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Fact: Government spending creates only an “illusion” of economic growth, but in reality NO WEALTH was actually created, because the government’s only source of income is what it takes by force from current and future taxpayers, through taxation and borrowing. According to the Bureau of Economic Analysis, about 37.5% of the official US GDP comes from Government Spending. Whatever the government spends today, it must take from you today or borrow from others, with the promise that your children will repay it tomorrow.

Fact: In 2010, the U.S. Federal Government alone is projected to issue almost as much new debt as the rest of the governments of the entire world combined!

Perspective: The key to economic growth is capital reinvestment into the most productive resources. However, the government is an inefficient allocator of resources. Government removes capital from the most productive resources and re-allocates it to unproductive resources or to elite capitalists who help the reigning politicians get re-elected.

Fact: As of May 20, 2010, the Federal Government’s cumulative debt (US National Debt) is already $12.98 Trillion (www.usdebtclock.org ).

Perspective: This means that if you’re a tax payer, the government has already spent $116,262 of your money that it hasn’t even collected it from you yet!!

Fact: Freddie Mac & Fannie Mae have about $6 Trillion of debt on their books. Since they were nationalized, that debt was taken on by the US Government, making the current US National Debt almost $19 Trillion dollars in actuality!

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Fact: The most conservative measures of US National Debt already totals about 90% of our gross domestic product.

Fact: Total debt in the United States, including government, corporate, and personal debt, has reached 360% of GDP.

Fact: On February 1, 2010, the President proposed a $3.8 Trillion dollar budget for 2011, which projects that this year’s deficit will shoot up to a record $1.6 Trillion! That is 10.6% of our GDP, the highest record deficit since WWII, and the 4th highest of all economically developed nations.

Speculation: The 2010 budget release also suggests that the US Deficit could grow to $18.5 Trillion by 2020. Debt interest payments alone would reach $912 Billion per year by 2020, which is over $5,000 for every working person in America.

Perspective: In fiscal year 2008, the spending for interest on the debt was $249 Billion (21.7% of all tax revenues), which was more than the federal government spent on energy, education, environment, veterans benefits, and agriculture, combined.

Speculation: By the year 2017, due to baby boomers retiring, the expenses related to Social Security, Medicare and Medicaid will have grown so much that taxes won’t even cover those costs alone.

Speculation: As of January 2010, the sum total of all “unfunded government obligations”, the government’s future expenses for entitlement programs like Social Security and Medicare, is estimated to total $106 Trillion dollars, or $344,000 per

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citizen. This is roughly 750% more than the National Debt.

Perspective: Our nation’s total assets equal only $74 Trillion, or $240,000 per citizen. In other words, even if the government were to take, by force, every single penny of wealth from every single private citizen of the US, our nation would still be bankrupt, by Trillions and Trillions dollars! When unfunded obligations are taken into account, our nation is completely broke and is living off of borrowed money. The only question is, “Will foreign creditors continue to lend to us indefinitely?” When corporations behave like this, their bonds become “junk bonds.” When an individual borrows 100% of their credit limit, creditors simply stop lending to them.

Perspective: California is in such bad shape that for 2009 tax returns, it had to send people IOUs instead of cash. California comprises roughly 11% of the US economy. In comparison, Greece, which is causing such headache for the European Union (the EU), is only 2% of the EU economy. New York, Michigan, Illinois and Arizona are not much better off than California, due to their deficits and debt loads. There could be massive side effects if a state the size of California had trouble paying its debts.

Fact: In 2009, 140 US banks failed, the highest number of failures since the Savings & Loan crisis in 1992. The FDIC Deposit Insurance Fund has slipped into the red for the first time since 1991. At the end of 2009, the value of the fund was $20.9 Billion in the hole.

Fact: In the first month and a half of 2010, the FDIC and state regulators closed 20 banks. The recent closure of Coral Gables Bank, costing $4.9 Billion, was the 2nd costliest bank failure in FDIC history.

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Perspective: In the entire year of 2007, the FDIC and state regulators only closed 3 banks.

Fact: As of February 2010, there are 702 more US banks still on the FDIC “watch list” for having failed the grading system.

Perspective: The FDIC already ran out of money once, assessed its members $5.6 billion more in funds, and is currently scrambling for ways to get more money for its insurance fund, so that it can liquidate more banks.

Conclusion #1: For these fundamental economic reasons, the US dollar has dropped in value and will continue to drop. The long-term decline in the value of the US dollar affects your real wealth. However, with the proper actions, this knowledge can be used to create wealth instead of destroying it. As depressing as the facts are, you can actually prosper in this economic environment. The Financial Freedom Foundation shows you how!

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Chapter 2: Why Traditional Investment Strategies Don’t Work
The traditional investment strategy is to “buy and hold” stocks and bonds. This strategy represents “conventional wisdom.” This strategy puts you at maximum risk to the whims of the market in return for a very limited potential upside. Conventional wisdom is not always the wisest choice.

The traditional investment approach is based on equity, fixed income, and asset allocation models. Most people have about 20-25 years of wealth creation before they need their funds for retirement income. The March 9, 2009 DALBAR Quantitative Analysis of Investor Behavior found that for the 20 years ending December 31, 2008, equity, fixed income, and asset allocation fund investors had average annual returns of 1.87%, 0.77%, and 1.57%, respectively. The inflation rate averaged 2.89% over that same period. In real terms, each of these traditional investments approaches actually resulted in wealth destruction, rather than wealth creation, even before the loss of purchasing power due to the weaker dollar was taken into account.

Fact: The S&P 500 Index is a collection of the stock values of the 500 largest companies in America and is considered to be “the market.” On March 9, 2000 the S&P 500 closed at 1,401. Ten years later, on March 9, 2010, the S&P 500 closed at 1,140. Investing in “the market” (buying and holding the S&P 500) for the last 10 years would have resulted in an 18.6% loss of value in nominal terms.

Fact: The US Dollar Index in March 2000 was 119.599 and the US Dollar Index on

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March 10, 2010 was 80.433, which is a 32.7% loss in the value of the dollar, in tradeweighted terms.

Perspective: For moneys invested 10 years ago, that is a combined loss, in real terms, of 51.3% from following the traditional “buy and hold the market” strategy. No wonder why people who only follow traditional investment strategies never seem to get ahead!

Fact: The US 10-Year Treasury note, priced in Gold, already shows a decline in value of 50% below its 1995 value, in real terms. US Treasuries are supposed to be a “safe” investment.

Conclusion #2: Traditional “buy and hold” investment strategies don’t make or preserve wealth. The Financial Freedom Foundation shows you how to create wealth outside of the traditional “buy and hold” investment strategies.

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Chapter 3: The Risk of Inflation
The Federal Reserve’s mandate is two fold: 1) maintain price stability [control inflation] and 2) maintain full employment [control unemployment rates]. Its main tool to control inflation and job growth is by raising and lowering interest rates. To create jobs through economic growth, they lower the interest rates. When interest rates are too low for too long, inflation occurs. To combat inflation, the Federal Reserve raises interest rates in order to slow down the economy, which has the nasty side effect of causing more unemployment. When massive unemployment is of greater concern, then the risk of inflation does not get properly addressed.

Fact: Official Unemployment in the U.S. is 10.2%, as of October 2009. The Underemployment Rate, which includes people with part-time jobs who would like to work full time, is 17.5%, the highest it’s been since the Great Depression. The number of the Actual Unemployed (known as U-6) is over 26.5 million people, all scrambling to make ends meet.

Fact: On January 20, 2010, the Brookings Institution came out with a warning stating that 30% of the nation was either in poverty already or headed to it. The report stated, “The US is becoming like a ‘developing nation,’ with 39.1 million people living in poverty. Many cities have already reached the 30% poverty rate - including Cleveland, Detroit, Youngstown, Buffalo, Syracuse, Dayton and Hartford, Connecticut. But poverty is increasing fastest in the suburbs.”

Fact: About 40 million Americans are also living on food stamps. This is a new record.

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Fact: In February, 2010, there were 5.5 unemployed Americans for every job opening.

Fact: Over 40% of those fortunate to be employed are now working in low-wage service jobs.

Fact: The Employee Benefit Research Institute found that just last year, 24% of Americans have decided to postpone their planned retirement age, due to lack of retirement funds.

Fact: Janet Yellen, the new Vice-Chairman at the Federal Reserve. She has stated, on record, that she is more worried about high unemployment than about rising inflation.

In order to borrow money, the Federal Government issues IOUs in the form of US Treasuries. The largest purchasers of these IOUs are foreign central banks. If our government needs more money than these foreign central banks are willing to lend us, then the Federal Reserve essentially prints money for our government to spend, through a process called monetizing the debt. When money is printed, inflation occurs. When too much money is printed, hyper inflation occurs.

Fact: Investors have already demonstrated that they think that the debt of certain corporations is a safer investment than the Federal Government’s debt. Berkshire Hathaway’s March 2010 issue of 2 year notes yielded 3.5 basis points less than the 2 yr US Treasury notes. Bonds issued by Proctor & Gamble, Johnson & Johnson, and Lowe’s are also being treated by investors as being better credit risks than our Federal Government, because their bonds are trading at lower yields than US Treasuries! This is a very rare occurrence indeed, for US Treasuries usually form the base of the yield

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curve, serving as the “risk free” benchmark above which the risk of all other debt investments is measured.

Fact: In early August 2009, the Fed auctioned $28 Billion in 7-year Treasuries. $10 Billion was quietly bought back by the Fed, otherwise this would have been a failed auction

Fact: The 4 biggest pools of dollars are held by China, Japan, Russia, and India, as part of their central bank’s foreign reserves. China’s central bank owns $800 Billion in US Treasury notes. Russia has $430 Billion US Treasuries in its foreign currency reserves. Both China and Russia have been actively calling for the creation of a new world reserve currency. All of China, Russia, India and Japan are currently diversifying away from US$ in their foreign currency reserves.

Fact: China has quietly shifted its reserves out of long-dated treasuries with 10 and 30 year maturities, and moved them to treasuries with an average 3 year maturity.

Fact: From September 2009 – January 2010, China became a net seller of US Treasuries, over $45 Billion dollars worth. According to Alan Rusking, the Chief Strategist of RBS Securities, Inc., this was “a long enough period to hint strongly at a trend.” Much of China’s selling has been in short-dated Treasury bills, but China has not indicated that instead it will buy longer maturity U.S. government notes and bonds. “That is the bad news for the U.S. dollar and the Treasury market.”

Fact: About $5.1 Trillion of the outstanding marketable US Treasuries will mature by 2015, meaning that $5.1 Trillion will have to be re-financed in addition to new debt being issued.

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Perspective: Joseph Stiglitz is a Nobel Prize winning economist and Columbia University Professor. “The dollar’s role as a good store of value is questionable and the currency has a high degree of risk,” Stiglitz said at a conference on August 21, 2009, “There is a need for a global reserve system. The currency reserve system is in the process of fraying. The dollar is not a good store of value.” Dollar denominated assets loose value when the dollar looses value.

Fact: Central banks currently hold 62% of their currency reserves in US$. Only 37% of new reserves are being placed into US$ (through the purchase of US Treasuries), and 67% into Euros and Yen. This puts downward pressure on the dollar and upward pressure on the Euro and Yen.

Speculation: The Fed has stated that it intends to continue to increase money supply by monetizing the debt at an aggressive pace: as much as $1.25 trillion of mortgagebacked securities, $200 billion of federal agency debt, and $300 billion of Treasuries. They are making these purchases in an attempt to keep interest rates at below market levels to fabricate a refinancing boom. While they have been somewhat successful in keeping rates lower than they would be under normal market conditions, these purchases are extremely inflationary and won’t be easily reversed. This also creates the illusion of growth.

Fact: A stock’s Price-to-Earnings (P/E) Ratio is the most common measure for how expensive a stock is. In September 2009, based on earnings from the previous 12 months, the P/E ratio of the S&P 500 were a record 500% higher that what we saw during the peak of the dot com bubble a decade ago. The recent gains in the stock market are not a reflection of improvement in company performance, but rather more

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money chasing these assets. Instead of having improving fundamentals causing sustainable growth, the temporary current rise in the stock market is due to the increase in money supply finding its way into risk assets. This is not sustainable.

Speculation: The German government’s 5-person council of economic advisers issued a report that said, “After the massive global increase in U.S. dollar reserves in the past years, an ‘uncontrolled exit’ from the U.S. dollar as a reserve currency, especially in emerging economies, is a possible trigger of instability in currency markets.” They went on to say... “Countries holding ‘high’ dollar reserves should consider committing to selling their dollar holdings in a coordinated way over a longer period of time.”

Speculation: Consumer Inflation, as reported by the Government in March, shows Year over Year inflation at 2.3%. The group Shadow Stats, who uses the pre-Clinton era methodology, shows the real inflation number to be well over 5%.

Conclusion #3: The US is issuing more debt and investors are buying less of it. The new money supply is growing quickly, which could directly lead to greater inflation. Inflation is inevitable and is a form of indirect taxation. Inflation requires you to pay more dollars to buy the same goods. It can either break you or it can make you, depending on how you prepare for it. The Financial Freedom Foundation shows you how to make money, even when there is high inflation.

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Chapter 4: Summary
Problem: If you are a U.S. citizen with all of your wealth in dollar based assets, then your real wealth is droping as the dollar declines in relative value, and as domestic inflation increases, especially if you only use traditional stock market investment strategies. Granted, there might be short-term dollar rallies, as we had for 10 months in 2005, and for the 6 months from August 2008 – Feb 2009. However, the long-term trend is for a decidedly weaker dollar, based on current fundamentals, and the shortterm rallies always give way to the underlying weak long term trend.

Solution: To know how to protect yourself from the destruction of the dollar, how to create wealth no matter what happens to the stock market, and how to prosper in the face of inflation, visit us at www.TheFinancialFreedomFoundation.org.

At The Financial Freedom Foundation.org we share with you, in a FREE REPORT, the financial concepts and investment strategy necessary to create high double-digit absolute returns in any economic scenario, regardless of the direction of the market or the value of the dollar. Access the financial benefits of a Wharton MBA plus 10 yrs experience in Non-Traditional Investments by joining our Core Group at The Financial Freedom Foundation.org.

Here’s is what comes with joining our “Core Group” at The Financial Freedom Foundation:

1. One-on-one strategy session culminating in a customized blue-print to generate

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$100K passive income, with the knowledge of how to generate $1M+ within 5 to 10 years.

2. Personalized coaching at the level that other “gurus” charge $25,000 for.

3. Access to a private rolodex of professionals for each component of the investment approach, enabling you to put the pieces in place correctly and let them work for you perpetually, so that you no longer have to trade your time for money.

4. Get introductions to the top 1% of the strongest performing professional traders we have found.

5. Get introductions to the brokerage firms who are already familiar with the traders’ methodologies and already have systems in place to do auto-trades.

6. Guidance on questions to ask and how to perform due diligence.

7. Hand-holding guidance on how to set up the accounts.

8. Open door for quarterly progress reviews, for making fine-tuning adjustments.

9. Receive an ingenious Personal Money Management System that provides for disciplined application of wealth creation principles on a daily basis.

10. Access our Members Only Website that provides updated information on more

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nuanced topics, such as advanced asset protection strategies and tax planning strategies.

11. 60 Day Full Satisfaction Money Back Guarantee

Get your FREE REPORT at: www.TheFinancial FreedomFoundation.org, then read the details page, then fill out a Membership Application Form to join our “Core Group.”

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Appendix
Potential Worst Case Scenario Quote from Ludwig von Mises: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Many countries have been devastated by unexpected debt crises, resulting in sudden economic catastrophes. The US Government could be driving our country down this path by borrowing trillions of dollars from foreign governments who do not have our best interests at heart. This gives them control over us, if they choose to stop buying our IOUs, or if they decide to suddenly sell a large percentage of the IOUs they already own, either out of spite or out of necessity. What will happen if another $1 trillion of mortgages blow up in 2010, or when $1 trillion of commercial mortgages come due in 2011, or if GE can’t refinance in 2012, or when China stops buying US treasuries?

We hope that something like this never happens to the United States. For planning purposes, it is important to consider the potential ramifications of today’s economic decisions. In the 16 years from 1975 to 1991, Argentina’s government printed money in order to pay for its debts. The eventual inflation was so great that if it had happened in America, Bill Gate’s fortune would be worth only 60 cents. In the 1990s, the Federal Government in Thailand had accumulated so much foreign debt that by 1997, the government could no longer protect the value of its currency and within a few months, the currency lost 40% of its value, resulting in at 75% drop in the stock market and 1.5

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million people lost their jobs, in a country of just 65 million people. In Zimbabwe, the government printed money to pay its obligations which resulted in inflation at a rate that prices doubled every 1.3 days!

Articles to Read: 1. The Coming Deficit Disaster 2. An Empire At Risk

This quote from the former budget director of the CBO and fellow at the Manhattan Institute, Mr. Holtz-Eakin, in his recent WSJ article titled “The Coming Deficit Disaster,” sums it up pretty well:

“The planned deficits will have destructive consequences for both fairness and economic growth. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China. The time to worry about the deficit is not next year, but now.”

From Chuck Butler, President of EverBank World Markets,

“An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money. Let’s look at the prospects for each individually - and in combination.

The current account deficit - dollars that we force-feed to the rest of the world and

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that must then be invested - will be $400 billion or so this year. Assume, in a relatively benign scenario, that all of this is directed by the recipients - China leads the list – to purchases of United States debt. Never mind that this all-Treasuries allocation is no sure thing: some countries may decide that purchasing American stocks, real estate or entire companies makes more sense than soaking up dollar-denominated bonds. Rumblings to that effect have recently increased.

Then take the second element of the scenario - borrowing from our own citizens. Assume that Americans save $500 billion, far above what they’ve saved recently but perhaps consistent with the changing national mood. Finally, assume that these citizens opt to put all their savings into United States Treasuries (partly through intermediaries like banks).

Even with these heroic assumptions, the Treasury will be obliged to find another $900 billion to finance the remainder of the $1.8 trillion of debt it is issuing. Washington’s printing presses will need to work overtime. Slowing them down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.

The deficits, if unchecked, will ultimately lead the government to put the printing presses in overdrive and we will attempt to inflate our way out of debt. This will cause the value of the US$ to drop. Buffet recently wrote a piece with the following line: ‘Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.’ ”

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