The Dollar

January 30, 2009

From Zero Hedge, Whither Hyperinflation.

Our belief is that the worst case outcome is not a fat tail, and is a question not of if but rather when. The ironic situation that the U.S. and the entire Developed world has put itself into is that due to the measures taken at fixing the broken financial system, which one could argue were precipitated by the collapse of Lehman, or alternatively, taking a cue from Soros’ book, began when the massive credit bubble started some time after Bretton Woods, the outcome of the current period of financial instability, will be a world of even greater financial distress marked by hyperinflation in most western countries.

As seems popular lately, his recommendations,

“[H]ard assets” are a safe bet. TIPS, shorting treasuries, purchasing currencies of those countries that are not expected to have huge deficits and/or untenable leverage, commodities (we still like our “risk free” profit idea, although the contango now has collapsed, so if you did it at the time, props to you), others?


New York City

January 30, 2009

From the New York Times, a Pew Research Center Study on what people think about where they live.


City dwellers feel the most mismatched. A majority would rather live in a suburb, small town or rural area.

As for New York City,

The survey found that Denver, San Diego and Seattle top a list of 30 metropolitan areas that people preferred. Detroit, Cleveland and Cincinnati ranked lowest. New York was in the middle, between Washington and Dallas.

The Dollar

January 30, 2009

More of the same.  From today’s New York Times, Global Worries Over U.S. Stimulus Spending.

“The U.S. needs to show some proof they have a plan to get out of the fiscal problem,” said Ernesto Zedillo, the former Mexican president who helped steer his country through a financial crisis in 1994. “We, as developing countries, need to know we won’t be crowded out of the capital markets, which is already happening.”

Mr. Zedillo said that Washington, unlike most other countries, had the option of simply printing more money, because the dollar was a reserve currency for the rest of the world.

Over the long run, that could force long-term interest rates higher and drive down the value of the dollar, undermining the benefits that come with its special status.

Friday Quote

January 30, 2009

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis, [t]he more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

– Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee

(New York Times, New Agency Proposed to Oversee Freddie Mac and Fannie Mae, September 11, 2003)

The Dollar

January 29, 2009

As I work my way through the very timely The Ascent of Money, by Nial Ferguson, I saw this interview he recently gave to Vanity Fair.

When speaking about the proposals to lessen the impact of the current economic downturn,

The reason that won’t work this time, and this is the key point, is that the whole U.S. economy became excessively leveraged in the last ten years. The debt burden, as a proportion of G.D.P., is in the region of 355 percent. So, debt is three and a half times the output of the economy. That’s some kind of historic maximum, and those debts aren’t going away.

What he sees coming along,

In the past, when excessive debt burdens were accumulated by government, they tended to do one of two things:  either they defaulted—this is the Argentine solution—where you say, “Ah, I’m sorry, I’m afraid we’re not going to be able to meet the interest payments this month, and never again will we make the interest payments.”

The other scenario is inflation, where the real debt burden is eroded because the money that it’s denominated in loses value.

I don’t think we’re really going to be out of the woods here until something of that sort happens to the huge debt burdens of the U.S. economy. Either these debts will have to be fundamentally written off in some way, or inflation will have to reduce the real burden.

Read the whole thing.  Then go buy gold.

The Dollar

January 29, 2009

From Bloomberg, Greenlight Founder Takes Grandfather’s Advice on Gold,

Greenlight Capital Inc. founder David Einhorn is finally taking his grandfather’s advice. The $5.1 billion hedge fund is buying gold for the first time amid the threat of inflation from increased government spending.


January 28, 2009

At the risk of being a little wonkish, was doing some research on dividend yields and found a great site that has all the Yahoo! Finance imports for Excel.  From The Dividend Guy.