A Modest Proposal to Fix the Debt Ceiling: Strategic Default

Jul 13, 2011, 12:01 am EDT
A Modest Proposal to Fix the Debt Ceiling: Strategic Default

It is a sad situation when hard-working CEOs and money managers who make this country great must watch a bloated federal budget waste our hard-earned money.

Millions of Americans claim they are old, sick or laid off – and, instead of working for an honest livelihood, employ all their time begging for a government handout. They drive up the national debt with their dependence, and are responsible for the current budget mess we are in.

I think it is agreed by all parties that this prodigious spending is deplorable. So amid the current debate over the debt ceiling, I feel compelled to offer my modest proposal to fix our free-spending ways: a strategic default on our debt. It’s a strategy employed by many homeowners underwater on their five-bedroom homes in Las Vegas, and it’s one we should put to use on a national scale. It’s time we put an end to criticism for our past behavior and not allow ourselves to be held hostage by creditors. Read 

Distracted Investors Could Miss Out on Summer Gains

Jul 5, 2011, 6:20 pm EDT

The stock market has seen a lot of distractions lately, with Greek riots being the biggest “hit” on TV last week. Since the Greek crisis has been “solved” for now, I expect TV producers will turn their attention to the United States, where we may see protests against cuts in various state and federal programs, made necessary by the fast-approaching deficit ceiling. Amid all this drama, it is important to remember that stocks will be more influenced by upcoming quarterly earnings reports than by placard-carrying protestors. Greek-Style Riots May Come to America This Summer

In Greece, the street protestors failed to oust Prime Minister George Papandreou, who survived a pivotal confidence vote in Parliament on Wednesday, 155 to 143. But the cost was steep: In order to fund high (up to 30%) interest payments, some of Greece’s “crown jewels” will go on sale — including the postal bank, the national railway, the national lottery, Greek Telecom, major ports and other prime real estate.

On Thursday, a team of European Union (EU) and International Monetary Fund (IMF) inspectors reached a deal to provide 12 billion euros ($17 billion) in aid to Greece in exchange for even more budget cuts, plus a broadening of the income tax threshold for people that make as little as 8,000 euros ($11,400). These painful cuts and tax increases are expected to be approved by the Greek Parliament early this week. Read 

Tim Geithner and Treasury Have Some Explaining to Do

Jun 27, 2011, 12:08 pm EDT

If you could ask one question to Treasury Secretary Timothy Geithner, or any other member of the U.S. Treasury Department, what would it be?

InvestorPlace.com wants to know – because thanks to a generous offer from the White House, I will be given access to top Treasury officials and will have the opportunity to ask a few questions. Any topic relating to the Treasury Department is fair game – the automaker bailouts, the debt ceiling, bond auctions and all things in between.

So if you want give the Treasury a piece of your mind, this is your chance. Read 

What $15 Draft Beer Has to Do With the Economy

Jun 22, 2011, 11:04 am EDT
What $15 Draft Beer Has to Do With the Economy

Who in the world would pay $15 for a draft beer? Well the question is more, where would one pay such an astronomical price and why? The who is me. The where is Paris. And the why is the destruction of the purchasing power of the U.S. dollar courtesy of the Fed and the profligate folk in Washington.

When the Fed artificially lowers interest rates (see zero Fed funds rate), investors and savers lose their appetite for dollar-denominated holdings. And when the Fed guns the money printing presses, creating an excess of banking liquidity, international investors tend to flee the dollar. As such, a one-two punch is delivered, sending the dollar down versus hard currencies, like the Swiss franc, and trading currencies, like the euro. The Great Money Flood

In France, a bistro bill is calculated in euros, and Americans must convert their dollars for euros. At an exchange rate of $1.44, an American is going to pay $14.40 for every 10 euros. That is quite a premium, is it not? I have come to think of a French draft Kronenbourg 1664 as a Bernanke beer. OK then, I am accusing the Fed of cheapening the dollar by depressing U.S. interest rates and flooding the American banking system with excess liquidity. You’ll know I am right when you see a pickup in the monetary base (high-powered money) and excess bank reserves. My charts indicate that these exact conditions exist. Read 

What the U.K. Can Teach Debt-Riddled Washington

Jun 22, 2011, 8:42 am EDT
What the U.K. Can Teach Debt-Riddled Washington

Last year, the U.K. took the first painful steps on the path of fiscal austerity that the U.S. has so far avoided.And the iShares MSCI United Kingdom ETF Fund (NYSE: EWU) has outperformed the major American stock market indices. The EWU U.K. ETF is up 20% in the last 12 months, compared to about 16% for the broader U.S. market.

Of course, The iShares United Kingdom ETF fund doesn’t tell the whole story. The 40 billion pound “unavoidable budget” of emergency tax increases, public sector job cuts and government spending cuts in Great Britain was incredibly unpopular with the public regardless of how the British ETF performed.

Some experts argue that Prime Minister David Cameron is trying to do too much too fast. The Conservative government, though, has its fans. Pimco fund manager  Saumil H. Parikh recently argued that the U.K.’s economic policy could be could be a model for the U.S. to follow.  Moody’s Investor Service recently reaffirmed the government’s AAA rating on its sovereign debt with the not surprising warning that it would be in danger if the government slacked off on its austerity policy. Read 

The Country That May be Able to Achieve Energy Independence

Jun 20, 2011, 11:19 am EDT

Could the United States ditch its dependence on foreign oil by 2020?

No way, not with the leadership we have, and the never-ending, me-first haggling of both major parties. Hubris, self interest, reelection posturing and financial self-interest all enter in. It is enough to make one sick.

If not America, where then? The answer is Sweden, which is one of a number of reasons I have been advising purchase of the Swedish krona through CurrencyShares Swedish Krona Trust (NYSE: FXS). I have taken a substantial position in this exchange-traded fund (ETF) myself, and will continue to add to my holdings. Read 

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