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Tag Archives: US Dollar
There Are No Free Markets
“Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” – Ben S. Bernanke, U.S. Federal Reserve Governor, November 2002 The debate has raged for at least four years over whether the US Government’s 21st Century regulatory structure was too weak, misguided, or non-existent with respect to the banking portion of the financial services industry, causing (or not causing) the Great … Continue reading
Posted in White Papers
Tagged Ben Bernanke, Euro Zone, Free Markets, The FED, US Dollar
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The Lesson of Rome: Fiddling Leads to Disaster
In our special November Bulletin last year, we were skeptical to the extreme that President Obama, or either of the Congressional political parties, would give more than a casual look at the [then pending] December 1st recommendations of the National Commission on Fiscal Responsibility and Reform (commonly called the Commission on Debt and Deficits). Created by Mr. Obama in early 2010, the commission was composed of 18 current and former members of Congress and it was given a narrow mandate: Develop a plan for the US to balance its annual budgets (before interest payments) by 2015. The commission accomplished its … Continue reading
Deficits Create BIG Implications for US Dollar
“If we didn’t have the US dollar as the de facto reserve currency of the world, we’d be Greece. We are broke, bankrupt. REALLY bankrupt.” James Baker III, former US Treasury Secretary and Secretary of State, 4/10/11 The foregoing comment made to Fareed Zakaria on CNN and, hence, heard literally round the world, speaks for itself. As brash as this statement is, Jim Baker was a soft-spoken superstar in both the Reagan and elder-Bush administrations. His appraisal of the current situation reflects his powerful knack for sizing up, clarifying and condensing the complexities of government, while avoiding partisan filters, a … Continue reading
Posted in White Papers
Tagged Budget Deficits, GDP, Reserve Currency, US Dollar, US Treasury
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Does fiat money drive inflation?
China’s disturbing, but logical role The Peoples Republic of China has become, by far the single biggest thorn in the bleeding side of Treasury Secretary Geithner. Despite years of cajoling and shadow-boxing from the US, China has barely responded to the pressure for up-valuing the Chinese yuan against the US dollar, opting instead to keep the yuan closely pegged, while plowing nearly a trillion of those constant-valued dollars back into US Treasury debt securities. Part of the heat generated by the declining dollar’s purchasing power for world-priced commodities shows up as de-facto de-valuation of the yuan’s purchasing power. Given China’s … Continue reading
Likely Scenario for US Stocks and Dollar in 2011
Likely Scenario for US Stocks Beginning in August 2010, we began to inform clients that our outlook for the near future of common stocks was decidedly positive. We continue to hold that view, for several primary macro-reasons which, in no particular order are: (1) Stimulative Federal Reserve policy is virtually promised for an extended period. This will eventually become a major problem, but for now, the markets will likely respond favorably. Whenever the debt market ultimately reacts to all of this, it will likely cause downward re-valuation of equities, as traders and investors alike adjust their earnings discount rate. (2) … Continue reading
Posted in White Papers
Tagged Economic Stimulus, US Congress, US Dollar, US Stock Market
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Bonds: A Good Place Not to Invest Now
When the US stock market hit its initial 21st Century trauma phase in 2002, Merrill Lynch sought to boost its tanking retail business by blitzing television sets with a simple tag-line: “Buy bonds”, they said. Although at the time that campaign seemed to be more aimed at Merrill’s revenue than investment advice, it proved sound for both purposes. Through September 2010, the Barclays US Long Treasury Index had returned an annualized 8.2% for the past ten years. That figure trounced all popular US and world stock indexes (except emerging markets) by a significant margin. The more generalized Barclays US Aggregate … Continue reading
Posted in White Papers
Tagged Bond Market, Interest Rates, Quantitative Easing, The FED, US Dollar
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Financing the Past with Future Dollars
Strong Dollar Policy One hallmark of all US Treasury Secretaries in the 21st Century has been their public claims to unflagging support for “a strong dollar policy”; this, in contrast to the fact that each of their tenures oversaw, and is overseeing new record levels of deficits, relative to overall US economic activity. The process has resembled images of the Global Warming Movement’s “poster-glacier”, shearing off massive chunks of ice into the ocean. In brief, what has long been the world’s greatest economy has recently been steaming ahead with an open vein…. Its currency has long been the only world-class … Continue reading
An Upside Down Interest Market?
All eyes (should be) on US bonds in 2006 As 2005 came to a close, the bond-trading world was scratching its collective head about the current interest rate relationship-anomaly between long- and short-maturity investment paper. Where’s this bus going in 2006? As shown in the chart below, it is clear that: (a) the 10-year Treasury rate has been on a collision course with money market rates and (b) 30-year mortgage rates have (as usual) moved in lock-step with 10-year Treasuries. An upside-down interest market? This scenario is very unlikely to persist, because, if bondholders are not compensated for the very … Continue reading