Doomsday For The Dow?

The Daily Reckoning
Weekend Edition
July 7-8, 2001
Paris, France
By Addison Wiggin

MARKET REVIEW: Doomsday For The Dow?

Gone are the days when stocks were the subject of every
polite dinner table discussion... gone, too, are the gains
from this spring's"surprise" rally.

For month's Wall Street has been expecting weak earnings,
but this week the mood has changed... warnings have been
coming from an array of unexpected sectors - rather than
just tech - and joblessness is beginning to weigh on
consumer consciousness.

Friday, the Dept. of much Labored Statistics said the
nation's unemployment rate has risen to 4.5%. Significantly
demand for workers in"service industries" - often cited as
the savior of the new US economy - dropped to its lowest
level in 10 months.

The Dow fell 227 Friday, ending the truncated trading week
at 10,252. The Nasdaq lost 75, down for the fourth straight
day, ending the week at 2004... The S&P 500 also lost
ground for the third straight session - down 28 to 1190...

"Is it finally doomsday for the Dow?" asks the DR Blue
Team's Dan Denning in this week's Blue Weekly Update -
"...by inter-market calculations... the Dow is headed to
9400 by July 18th. That would mean a drop of almost 850
points - and our Dow futures options would go to the
moon..."


ADD'L PRICES FOR THE WEEK: Dollar up... yen down...

Gold: $266.60
Crude Oil: $28.21
Natural Gas: $3.21
CRB Index: 207
Dollar Index: 120
The Euro:.84
British Pound: 1.40
Japanese Yen:.79


FLOTSAM AND JETSAM: Remembering America's Unsung Heroes

- from the 4th of July Daily Reckoning

"God, who hath given the world to men in common," said
John Locke, Jefferson's philosopher, and spiritual
leader behind the Declaration of Independence,"hath
also given them reason to make use of it to the best
advantage of life and convenience."

Reason, it is believed by many, empowers man to remake
the world to his advantage. At the Daily Reckoning, we
often take a more skeptical view. In fact, on this 4th
of July, 2001, it might be worth a look at what reason
hath also wrought: The Creature From Jeckyll Island.

In a book of the same title, Edward Griffin, notes the
basic plan for today's Federal Reserve was drafted at a
secret meeting held in November of 1910 at the private
resort of J.P. Morgan on Jeckyll Island off the coast of
Georgia. It was the brainchild of Paul Warburg, a
partner in Kuhn, Loeb & Company, representing the
Rothschilds and Warburgs in their European holdings.

The purpose? According to Griffin,"a primary objective
[of the meeting] was to involve the federal government
as an agent for shifting the inevitable losses from the
owners of those banks [being represented] to the
taxpayers."

Griffin quotes Paul Warburg:"Picture a party of the
nation's greatest bankers stealing out of New York on a
private railroad car under the cover of darkness,
stealthily hieing hundreds of miles South, embarking on
a mysterious launch and sneaking on to an island
deserted by all but a few servants, living there for a
full week under such rigid secrecy that the names of not
one of them was once mentioned lest the servants learn
the identity and disclose to the world this strangest,
most secret expedition in the history of American
finance."

"I am not romancing," Warburg claimed in 1930."I am
giving the world, for the first time, the real story of
how the famous Aldrich report, the foundation of our new
currency system, was written."

"The composition of the Jekyll Island meeting was a
classic example of a cartel structure," says Griffin."A
cartel is a group of independent businesses which join
together to coordinate the production, pricing, or
marketing of their members. The purpose of the cartel is
to reduce competition and thereby increase
profitability. This is accomplished through a shared
monopoly over the industry which forces the public to
pay higher prices for their goods or services than would
otherwise be required under free-enterprise
competition."

At the risk of appearing too simplistic, I submit, the
cartel achieved as much - and more. In 1913, the Federal
Reserve act became law. At that time you could have
purchased a simple pair of men's shoes for $5.50. By
1938, when Hitler was just beginning the Anschluss of
Austria and Czechloslovakia, the same pair of shoes
would have cost you $7.38; in 1969, when Armstrong was
taking large leaps for mankind in his own moonboots,
they would have cost you $20.39... and today, on July
4th, 2001, while George W. exhorts us in his
Presidential Statement On Independence Day to"remember
the achievements of our great statesmen, social
reformers, inventors and artists," that $5.50 pair of
shoes will set you back $100.

In 1910,"Wall Street was still the biggest kid on the
block," writes historian and former assistant managing
editor of The Washington Post, William Greider, of the
founding of the Fed."This trend was a crucial fact of
history, a misunderstood reality that completely alters
the political meaning of the reform legislation that
created the Fed. At the time, the conventional wisdom in
Congress, widely shared and sincerely espoused
Progressive reformers, was that a government institution
would finally harness the 'money trust,' disarm its
powers and establish broad democratic control over money
and credit... the results were nearly the opposite."

Unbeknownst to the"reformers" of the time, the world's
most wily capitalists had harnessed the machinations of
government and the popular will to serve their own ends.

"Paul Warburg," wrote his biographer Harold Kellock,"is
probably the mildest-mannered man that ever conducted a
revolution. It was a bloodless revolution: he did not
attempt to rouse the populace to arms. He stepped forth
armed with a simple idea. And he conquered. That's the
amazing thing. A shy, sensitive man, he imposed his idea
on a nation of a hundred million people."

And yet, today, as a nation, we celebrate the spirit of
Independence from tyranny of the few over the many.
"...Men enter into society," wrote Locke, for"the
preservation of their property; and the end, while they
choose and authorize a legislative, is that there may be
laws made and rules set as guards the properties of all
society, to limit the power...of every part and member
of that society.

"Whensoever...the legislative shall transgress this
fundamental rule of society, and either by ambition,
fear, folly, or corruption, endeavor to grasp
themselves, or put in the hands of any other, an
absolute power over the lives, liberties, and estates of
others by this breach of trust, they forfeit the power
of the people...and it devolves the people, who have a
right to resume their original liberty, and by the
establishment of a new legislative, provide for their
own safety and security..." Who in America feels as
strongly today

As you"celebrate with pomp and parade...guns, bells and
bonfires," the revolutionaries who've long since past,
don't forget the unsung among them, who have also given
us our nation... and our currency.

Addison Wiggin,
The Daily Reckoning



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