outtafavr

Fannie and Freddie: When the GSEs Go, So Goes the Dollar

To the author, I would just state that lower bond prices/higher interest rates will attract capital to the US, boosting the dollar. The credit crisis is about a shortage of capital in our markets at prevailing interest rates. Adjusted for risk, returns are negative, resulting in the flight of capital, a weaker dollar due to exchange imbalances. When rates rise to levels that adequately compensate for risk, capital will flow into this country once again, credit markets will be functional again, and the dollar will be strong again. The problem is that a substantial adjustment to our rates will be necessary, the sooner the better. The government's only strategy is to delay the inevitable.

BS Detector, you need to study pyramids, ponzies, and multilevel marketing schemes. The collateral you have so much faith in has an inflated value because of the $5 trillion FNM and FRE threw at it over decades past. That money is gone. The base of the pyramid just gets bigger and bigger. Another $10 trillion will be needed to keep the triangle intact. Where will that money come from? New issuance of agency/treasury(same thing?) debt? Please see my first paragraph above. Without dirt cheap interest, low/no down payment mortgage loans available from FNM/FRE/Uncle Sam, how much will all those precious US dwellings be worth?

islandcreek, so much for your experience and perspective. This time it is indeed very different. For your sake, I hope you are one of the very very few Americans with some money in the bank.

Scoping the Mortgage Crisis

The article addresses consequences of lending past. The larger issue is future lending. Will lenders continue to compound mistakes of the past? How will the mighty US consumer borrow to fund conspicuous consumption next year?

Priceline.com's Price Is Right

I was a long time investor in PCLN. I sold recently to pursue other alternatives, and also to reduce my exposure to long investment positions. A longer term issue I currently have with PCLN involves airline carriers. PCLN depends on travel being a volumn business, which is the current unsustainable business model of the carriers. How long can airlines continue to lose billions? Airline business models must be overhauled. The future of air travel (and possibly all travel) is higher prices/less competition, less congestion, and only affordable to aristocrats. Energy prices say the masses can no longer afford air travel.

Treasury Yields and the Dollar

Does the fed determine interest rates? Historically, they have. The high interest rates suggested in this article would fly in the face of history. In light of weakness and potential disaster in the U.S. economy, will Uncle Sam's lenders be satisfied with miniscule returns? It may depend on investment alternatives to U.S. bonds at the time. It may also depend on Uncle Sam's appetite for borrowed cash. If there's one thing we know about America and Americans, they love to borrow and spend other people's money. My guess is that America's appetite for borrowed money in the future will exceed foreigner's willingness to lend. That means higher interest rates. The fed will sit and watch. Their "target" rate will be laughable! Higher interest rates would give much needed support to the dollar. Is now the time for this new beginning? Those charts above say it could well be!