Mike Stathis

U.S. Monetary Policy: Defending the Status Quo

Well Done John. You are obviously a man with much wisdom. I'd like to add a few things. As 'm sure you are aware, Clinton didn't leave with a real surplus. Off-balance financing created that illusion. but still, your case is well-taken - let me phrase it more boldly - Bush has been a financial nightmare.

I was never a supporter of Clinton, as I am way off from being liberal. However, it's funny how perspective can change things. I think Bush has caused many formerly anti-Clintonites to appreciate the job Bill did. Of course Bill was in office during a booming economy and Bush senior straightened out the budget recked by Reagan. This really set Clinton up for an easier task dealing with the budget.

The other pint I want to make is that the Fed continues to tell Americans it supports a strong dollar policy, yet when Bernanke goes to other countries, he states he favors a weak dollar!

I have many other views on this current situation, some which can be found on my first post "Stay Clear of Traditional Asset Classes."

Time To Go Long The Dollar?

That's a credible take on alternative currency positions. However, in my opinion, it is better to stick with strength against the dollar rather than currencies that might show weakness. It's a numbers game. There are many more currencies that will continue to outperform the dollar rather than underperform it. I think your strategy might be more suitable for experienced currency traders.

To forgive any remaining principal for those facing the potential threat of foreclosure would be an assualt on our free market system; a system that is already broken for many industries (eg. oil and healthcare). Such a move would cause further damage. How can one justify bailing out those who can't make payments on homes while neglecting others who have borrowed funds from relatives, savings, and made other concessions?

It makes no sense to reward the most financially irresponsible while punishing those who tightened up their belts. Certainly, the mortgage industry along with Wall Street is to blame for this mess. But everyone must be treated fairly. Otherwise, homeowners might stop making payments on their mortgage in order to get a writedown on principal, causing even more problems.

As far as the Fed loosening the capitalization requirements of Freddie and Fannie, that is simply irresponsible. Already they have been undercapitalized and this will serve to increase the risk of further devastation. The Fed will keep printing money causing even more devaluation of the dollar. Either way you slice it, there is no way out of this mess. Trying to avoid the pain will only make the devastation worse, maybe not now but most certainly down the road.

Greenspan tried to mitigate the effects of the Internet bubble by collapsing rates, and that led to the current real estate and banking crisis. What crisis will Bernanke create? I do not know what it will be but if he keeps acting in this irresponsible manner, we could be looking at a problem even worse than we face now in a few years.