Purchasing Power

Not just one 25 basis point rate hike, taking a look at that chart, several rate hikes have already been priced into the US Dollar Index.

We need to look at the concept of a reserve currency differently, because it is important. We need to look at it as a privilege and a responsibility and not as a weapon we can use against the rest of the world. If we abolish, or even lessen, legal tender laws and allow the process of price discovery to reveal the best sound money, if we allow our US dollar to become the best money it can - a truly sound money - then the chances of our personal and collective prosperity are greatly enhanced. We all have the same interest. We all want to have the highest standard of living for ourselves and our families. A sound money reserve currency offers us the best chance of achieving our shared goal; therefore, we should rally around every effort to make it so.

We have “early signs of new demand slowing” while “construction pricing is busting budgets beyond feasibility” in a market where “speculation abounds” in land pricing. When framed against a very unfavorable foreign exchange dynamic for the market’s most important buyers, the situation really couldn’t get much more precarious.

"The relationship of U.S. net worth to GDP appears to have reached unsustainable heights," warns NFIB Chief Economist William Dunkelberg, adding that a massive decline in the value of assets is "more likely" than a massive increase in GDP. Logically this seems unavoidable, unless you believe that we are truly wealthier now, even with an economy that is delivering a rather poor performance (historically weak output and sales growth) in real terms. It would seem not to be 'whether' we will adjust but when.

The underlying concept of how Petrodollar recycling, or as some call it, petrocurrency mercantilism works, leaves some confusion. So in order to alleviate that, here courtesy of Cult State, is a quick and simple primer that should hopefully answer all questions.

Although it may be unrealistically optimistic, I believe my paraphrase of a Churchill quote:

“Central Bankers will eventually do the right thing and return to a gold standard after they have exhausted all other alternatives.”

As a frequent contributor to Bloomberg, I would welcome the opportunity to debate this with Barry.
What say you @ritholtz ?  : )

US stock markets reached record highs last week. Question: does that make them riskier, or less risky? We think the former.

Government mandated fiat currency simply does not work in the long run. We have empirical evidence galore – every fiat currency system in history has failed, except the current one, which has not failed yet. The modern fiat money system is more ingeniously designed than its historical predecessors and has a far greater amount of accumulated real wealth to draw sustenance from, so it seems likely that it will be relatively long-lived as far as fiat money systems go. In a truly free market, fiat money would never come into existence though. Greenspan was wrong – government bureaucrats cannot create something “as good as gold” by decree.

Having put Russia on review in mid-January, Moody's has decided (somewhat unsurprisingly) to downgrade Russia's sovereign debt rating to Ba1 (from Baa3) with continuing negative outlook. The reasons:

*MOODY'S SAYS RUSSIA EXPECTED TO HAVE DEEP RECESSION IN '15, CONTINUED CONTRACTION IN '16
*MOODY'S SEE RUSSIA DEBT METRICS LIKELY DETERIORATING COMING YRS

We assume the low external debt, considerable reserves, lack of exposure to US Treasuries, and major gold backing were not considered useful? Moody's concludes the full statement (below) by noting that they are unlikely to raise Russian sovereign debt rating in the near-term.

"The Eurozone chess game has entered its third and final stage. Germany wins in three moves - Euro, deflation and purchase of public debt by the ECB (QE) – and in the last few years it has found a way to maximise its profits and reduce to zero its risks as Europe’s creditor.... If we wait too long before leaving the Euro, then Germany will get checkmate and after cashing in all the benefits of our entry into the Euro, it will also cash in on the benefits of our exit."

The global financial system desperately needs a big, bloody sovereign default - a profoundly disruptive financial event capable of shattering the current rotten regime of bank bailouts and central bank financial repression. Needless to say, Greece is just the ticket: A default on its crushing debt and exit from the Euro would stick a fork in it like no other. But don’t count on the Greeks.

Very few, it seems...