Archive - Oct 6, 2009 - Story

Two formerly confidential memos from the Carter administration highlight the dangers posed by shifting from dollar to SDR denominated oil, to the US economy, and its primary driving force: the US middle class. Arguably the worst president in US history, Jimmy Carter, managed to avoid this transition. The question now is whether the current administration fails where even President Carter succeeded, and what the cost to the US economy, and world trade, ultimately will be as the dollar is sacrificed at the Wall Street altar.

Lots of speculation today about the upcoming death of the U.S. currency, middle class, and by implication, its entire economy, as gold hits all time highs. Max Keiser joins the fray: "This is just another step to the US economy collapsing, and the US, as a major power, collapsing." One thing is certain: Listen, and understand. That Chairman is out there. He can't be bargained with. He can't be reasoned with. He doesn't feel pity, or remorse, or fear. And He absolutely will not stop, ever, until the dollar is dead.

"For years investors laughed at any attempt on my part to draw comparisons between the
inflating bubble in the US and the Japanese experience. For most in the West, Japan might as
well have been on another planet, its post-bubble experience held so little relevance. They’re
not laughing so much now. Yet we hear an increasing chorus that the extreme policy response
will safeguard the West against a repeat of Japan’s lost decade. I remain skeptical." - Albert Edwards

NY Fed President, in prepared remarks to the Fordham Corporate Law Center, presents a surprisingly objective overview of the economy, and highlights the main threats to the economy, from the Fed's point of view:

1. The increasing savings rate and the number of people postponing their retirement

2. The waning of the fiscal stimulus impact

3. Ongoing bank balance sheet deterioration, due primarily to CRE holdings and cap rates increasing from 5% to 8%, as well as CRE debt rollover risk

4. Ongoing and increasing pain for small business borrowers

5. Significant excess resources

• Oil states refute talks of replacing dollar (Reuters, h/t Austrian Filter)
• AUD ripfest as Australia raises interest rate to 3.25% (AP), while America is still at -6% +/-
• National retal group offers weak holiday forecast (AP)
• Chrysler may not make it another year (Mopar Muscle, h/t Patrick)
• Ferguson: There's no such thing as too big to fail in a free market (Telegraph)

• Apartment vacancies in the U.S. rose to 7.8% - a 23-year high.
• Asian stocks rise on US Services Industries data, higher commodities prices.
• Australia raised its cash rate target by 25 bps - first Group 20 to unwind stimulus.
• Dollar weakens as newspaper says Gulf States may drop greenback for oil trades.
• European, asian stocks advance; BHP Billiton, Dexia, Adidas shares climb
• Gartner sees narrower '09 chip revenue fall but cuts '10 forecast.
• Gold inches up towards $1020 on weak dollar