December 12, 2006

Dregs : Dollar slides and Texas leads the nation in foreclosures

  • Bonddad has a fantastic post up regarding the slide in the dollar which is down, yet again. Greenspan thinks it's primarily related to the trade deficit and I'm inclined to agree. However, it should be noted that interest rates are also driving it as the perception remains that the US economy is weakening thus increasing the likelihood of rate decreases in the overnight Fed Funds rate.

    The short term solution is to return fiscal responsibility to Washington. This will have the double benefit of reducing new federal debt issuance and pull money out of the economy that is being used to grow our ever widening trade deficit.

    Of course, some of this will be self correcting in that eventually the dollar will weaken to the point that goods made in the US look cheap to foreign buyers. The only problem is that a lot of manufacturing capacity (both raw materials and finished goods) has been shipped overseas which means we don't make a whole lot that the world needs, other than food.

    The FOMC is meeting tomorrow. If they give guidance toward further tightening we could see a rebound in the dollar and, at some point thereafter, a drop in the value of Treasuries as long term rates begin to climb. At this point, that would be a welcome relief because it's better to accept higher rates now than later. If this drags on too much longer then you're going to see 70's style inflation mixed with early 80's style rates. And yeah, it'll suck.

    Last thing on this subject... everyone has ignored the fact that US companies have close to 1 trillion on their balance sheets. In cash. What are they going to do with it?

  • Texas is number one... in foreclosures.

    In Texas, 3,031 units were foreclosed and put up for sale in November. A total of 9,648 foreclosed units are on the market in the state, the second-highest number in the nation. In Michigan, 2,430 units were foreclosed and put up for sale in November.

    So much for that strong economy 39% was blabbing on about during the campaign.

  • Posted by mcblogger at December 12, 2006 12:38 AM

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