FLG1159

U.S. Dollar: The Best of Times, The Worst of Times

China is evidently going to start a huge new infrastructure program. It would make sense at some point for them to dump Treasuries and start buying hard assets-miners, steel & cement companies, etc. Bad news for the dollar if that happens.

Wall Street's Worst Invention Ever: Credit Default Swaps

It's insane that naked CDS contracts haven't yet been banned. True CDS's are insurance contracts and should be regulated as such.

SEC Exploring Remedies for Short-Selling Manipulation

This is a very good idea. SEC should also outlaw leveraged ETF's. Return to the basics of investing. It's hopeless trying to enter these markets alongside supercomputers that run sectors up one week and attack them the next. It's worse than a casino.

Two Painful Proposals to Reduce Our Excess Debt

You're correct. There are only two alternatives to deal with the debt.

The second suggestion is the most preferable. It is much faster and less expensive in the long run. Bondholders and shareholders (like me) will be lose, but our equity has already been wiped out as the banks are insolvent.

If banks have to take the hit, it should make future bankers more careful, as they won't be so sure of a govt. bailout next time.

It lessens the problem of how to turn off the money spigot when inflation takes hold. I don't trust politicians to manage that any better than they ever did.

Please keep pushing this idea. It is not the choice the government has chosen so far. That's probably because Paulson and Geithner were put in place by the big financial institutions and are expected to do their bidding. Also, Congress doesn't want to harm the goose that has been laying golden eggs around DC for decades. They have chosen to destroy wealth rather than debt. It's a long shot, but just maybe, this time they can be convinced to act in the interests of the country instead of themselves.

Jeremy Grantham: We Need to Halve Private Debt

I believe Grantham is correct. Debt destruction makes more sense than credit expansion. It's going to happen anyway. The govt. throwing 2 trillion against 25 trillion of debt isn't going to make much difference. It will take a long time to notice any effect, and probably won't work. Seems it would faster and simpler for Congress to force the write-offs by law. If house values are falling 30%, reduce mortgage balances by 30%. Do the same in varying percentages for credit card balances, auto loans, etc.
Other than breach-of-contract issues, I'm not smart enough to foresee all the other consequences. However, there is already talk of forcing cramdowns, having courts modify loans, etc. so I think it could be done, and it would be a lot less messy.
Until the debt is cleared away, the country can't begin recovery.