Conclusions from an astute money manager, Dr. Hussman (http://hussmanfunds.com/)
"There are two ways to force government liabilities into the hands of foreigners (which we will have to do since our domestic savings are insufficient to fund another large expansion in the federal debt). One way is to discount the government liabilities through lower bond prices and higher interest rates. The other is through Dornbusch-type “exchange rate overshooting.” In this event, the value of the U.S. dollar would effectively plunge, setting up expectations for a subsequent appreciation sufficient to encourage demand for U.S. Treasury debt and to absorb the new issuance."
These are long term issues that should not be ignored. In other words, inflation cannot be kept under control with the government subsidizing in such blatant way the housing market with no meaningful reaction from the public. For this reason I am not so sure oil and commodities are in a bear market. I would call it "consolidation". Time will tell.
One thing is sure, this country is changing...rapidly.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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