Michael B. Krause

Is This U.S. Dollar Move the Real Thing?

A weak dollar would create an export driven economy. It is not an export driven economy right now because the dollar has been historically so strong. Send the dollar to 3.00/euro and I guarantee you there would be plenty of demand for everything manufactured in the US.

Is This U.S. Dollar Move the Real Thing?

This isn't an 'enthusiastic endorsement'. I am merely stating the facts that if the Fed is to advocate the current capital holders retain their power position, then inflation is the way to do it. To enable creative destruction (ie Fisher's WSJ interview this weekend) as an alternative, then there will be a power shift within society. Nothing the Fed nor treasury has done supports Fisher's view.

Furthermore, the impact of doing no monetary stimulus on real output is disastrous as well. We will see layoffs and unemployment of epic proportions if we do not both monetarily and fiscally stimulate. Look to early Great Depression for evidence.

On May 23 09:28 PM altaman wrote:

> Your enthusiastic endorsement of quantitative easing and high inflation
> shows your total lack of concern for the disasterous effects these
> insidious policies will have on millions of innocent americans of
> all ages and wealth levels. Have you no shame sir?

Paulson's Plan Fails to Understand the Problem; Madoff Is a Perfect Example

The baby boomers leave the young generation no choice but to (hyper)inflate. By reducing the boomers' debts in real terms, problem solved, banks suddenly are solvent. Unfortunately, the poor retirees who weren't in on the ponzi scheme will be kicking and screaming as their buying power goes to nothing. How sad.

Treasuries and the U.S. Dollar: Twin Bubbles

The direction of monetary velocity is key. If it never recovers, the path is to hyperinflation as we are unable to pay off our debts. It will undoubtedly at some point, as banks feel no more need to hoard. This is probably equal to the point where all downside on homes is properly matched with reserves provided by the fed.

The Fed's Policy May Be Responsible for Interbank Lending Seize-Up

The title isn't mine. The original is 'partially responsible.' The responsibility clearly lies in the originator of the bad loans. My point is that Fed intervention in this prescribed way may be exacerbating the problem, and will most likely have long term effects that may be considered detrimental to some end.

The Bull Market in Credit Default Swaps

I'm actually long 30 yr bond puts. That is my only relevant position.

The Paragraph That Changed the World: Will Treasuries Crash?

Many good points here. Furthermore, I've been doing some reading that suggests the proposed MBS purchase plan is only applicable for new auctions. That isn't nearly as scary.

No mean to fearmonger - just evaluate reality.

Peak Oil, Crude Price and Equity Correlation

I am only suggesting it will take $50 crude for it to be a serious stimulus, rather than braking force to the economy. The bulk of this article is quite bullish oil (long term), buying into peak oil. That is of course until demand destruction occurs at a faster rate than supply shortfall.

Time To Abandon Stocks?

The future of the stock market is entirely dependent on expansionary monetary policy and political stability. When you buy stocks, you are betting on an expanding economy and innovation to occur over whatever time frame you suggest.

All of the evaluation of statistics and precedent will give you false justification for your investment behavior.

Simply put, if the managers of this country do a good job in the next 20 years, stocks will do great. If they goof it all up, you'll lose your money. Its that simple, and thats what you are betting on.

Money for Nothing: Just Buy S&P 500 Puts

yes. the near term visibility is too low. Take a look at this.

scriabinop23.blogspot....

Corporate defaults are still way too low. This is going to take a while to bottom.

U.S. Dollar Paradigm Shift Underway

correction: low interest rates ARE not significantly ramping up money supply.

typed a little too quick.

U.S. Dollar Paradigm Shift Underway

Yes. This 'bail-out' just prevented, as Meredith Whitney of Oppenheimer speculated, a 2.5T forced unwind (imagine the cascade) of credit default swaps.

The err here is that of the masses blindly following the quants in the quest that greed guides. That, by the way, is capitalism. Judge for yourself the errors of capitalism.

As far as John's arguments of money supply: My point is that there has been a gigantic amount of monetary destruction going on. The reigning of credit is monetary destruction. When the reserve base falls (as it has due to these bank losses), the total money outstanding is significantly less. Its just like a multiplier reduction. Now even with a new risk assessment mentality, w/ banks being afraid to even loan to each other, low interest rates is not significantly ramping up money supply. Its just helping reduce a barrier of functionality in the system.

A deflationary environment provides no incentive to run a business. Why invest if your future returns on investment will not pay for your current investment? If you want gold standard, no fractional reserve, etc. then you want a socialist system. Capitalism vs. socialism is another argument for another place.

But certainly, a strong currency with little innovation is fundamentally sound from the point of view of the fact that no progress yields little in the way of health care tech advances. You're right: you won't need to worry about retirement with a gold standard currency because you won't live more than a few years past working age.

U.S. Dollar Paradigm Shift Underway

This is a great provoker ... I was wrong about the depth of the credit crisis. I'll admit that. But if you read further in the same article, I go on to say:

If $90+ oil is here to stay, we're only at the beginning of the food commodities rally. Watch corn go to $6.00/bu, soy to $13.00, and forced out wheat acres will repeat this past season's ascent to an even more ridiculous level. Then comes the more expensive to feed pigs, cattle, and resulting milk.


And to the first writer: The average middle class lives more comfortably (minus the servants) than Rockefeller did at the turn of the century. A move away from gold standard facilitated this.

To the last poster, you say:

" For those of you that say innovation has created economic "booms"...I guess there is a sucker born every day. Booms are created by the FED. "

You are getting it backwards. The flexibility of the money supply helps and does not hinder gigantic productivity and technological increases. It is the fuel to our innovative spirit in the US. Sure it leads to excesses and busts like this, but this cycle is necessary. Greed, fear and risk taking are inherent in capitalist mentality systems; a move to a system that removes the cyclical element takes away the capitalist 'oxygen' so to speak.

On the other hand, I'm in no way condoning the giant 'herd' screwup that subprime became (not just in the US scene, but the world scene). It is a story of collusion between i-bankers, ratings agencies, and blind faith into flawed statistical models. Perhaps the lesson here is everyone in finance should be required to take 4 semesters of statistics and econometrics to not function like the herd and think for themselves.

Market Sentiment: Eye-Poppingly Bearish

Interesting about sentiment. I went to the UTC (near UCSD) mall here in San Diego yesterday. Mall full. Apple shop packed. I didn't expect it. Maybe a holiday weekend anomaly.

But I tell you this: In a real depression/recession, the malls are empty on the weekends. This is not nasty yet. So who knows ...

What's With This Volatility?

Here. Here's the exact same data on S&P since 1950. Its good data.

krausecomputer.com/per... (its in Excel zipped up)