Top Gun

The Curious Case of the U.S. Dollar

Dollar index is relative. The other index members are hurt badly. Gold does well in all currencies.

M1/M2 increase without a decrease in the dollar shows just how big M3 had gotten - either M3 collapses or M1/2 grows to fill it with real $ until velocity restarts. If previous administration hadn't stopped publishing M3, I firmly believe all this mess would have been avoided by prudent investors understanding their risks.

Dow Will Equal Gold in 2009

I meant $100's of billions of money supply.

Dow Will Equal Gold in 2009

The dollar remains last safe place to hold reserve wealth as worldiwde assets deflate. Once the deflation stops elsewhere, dollars will be switched back to local currencies, just at the time a bigger supply of $ hits from our absurd deficit.

I'm not convinced the main outcome is massive increase in gold prices, but other commodities should reflate, a good thing if not over done as that ensures planting and harvesting of crops. I'm sure some very smart people in our Treasury have calculated what might happen. Don't forget the last few months have destroyed $100's of millions of money supply that was erroneously deployed to pump up asset prices (houses and ABS's) just so that investment banks/realtors/mortgag... brokers could collect management fees. The bank writedowns mean the $ are no longer available, and the TARP $250B must still be raised (by debt or equity) in order to repay Uncle Sam. I think of this as a stool, where one leg was knocked out and temporarily replaced with government funds - the banks must remake the lost leg and replace it.

There is a small chance things can work out without disaster happening, but now would seem a good time to buy as much of the commodity ETF's as you can as a hedge against rising prices in the stores, and gold as an investment. It's pretty obvious, as stated above, that defaulting on our debt through inflation is the only logical outcome, and we need to convince ourselves to contribute to debt reduction by halting Social Security COLA(remember those from the 80's?) for a while, or reducing like President Reagan wanted.

Economic Anomalies Explained

I agree with all of your analysis.

The FACTS are that we left the Clinton years with a $120B surplus, and now are in disaster. The first treasury sec. wanted to devalue the dollar to help US manufacturing, of which there is none.

This admin allowed the levering of 5 investment banks way beyond what a commercial bank could do. The leverage was used to make bubbles, not produce economic value. Hence we are messed up.

The dollar is high because we sent the rest of the world into a tail spin, no other reason.

At best we will have a long, slow road back, engineered by very good Fed and Treasury secs.

I look today and don't see that the word investment has any meaning at all. Time to look for a small business, I guess.