In one article, I read, they said a bad drop in the dollar could happen as soon as the end of summer.

The market will reflect price much more than value or buying power. I wouldn’t equate any rise in the markets with good news about the economy yet.

If the 10 years it took to get debt under control after it peaked in 1932, then we may face years of an economy that doesn’t get worse, but, doesn’t get better either while at the same time the dollar is falling and the price of everything (including homes) is going up even if value isn’t.

Use this time to prepare for the dollar’s fall. Bernanke basically said in 2007 testimony that we can’t grow or tax out of our fiscal problems and that was before this crisis hit. It was based on what is coming from entitlements that is now morphing with this crisis.

Payroll taxes have fallen so much it has almost wiped out the surplus the Government borrows and that means they have to borrow even more for deficit spending from foreign lenders. All the off budget spending from trust funds will have to move to “on budget spending.” Maybe that is why the Obama budget called for an increase in defense spending. Before we were funding some with off budget spending.

The Fed bought about $7 billion in debt that couldn’t be sold at a rate the FED wants yesterday from what I read in one article. They are being forced to buy the long term bonds being sold and rolled over into short term debt that will have to be rolled over and over and over.

When the FED tries to rein in CPI later this year or next with higher rates, it will mean our interest on debt could easily double as short term rates could rise 100-200-300% easily from where they are (near zero) now. Just a 4% rate could kill the budget with interest expense even if the dollar doesn’t collapse due to a lack of lenders to roll the debt over to.

In order to know why the market is really up, you need to know who is the big buyers and what exactly they are speculating on. Is it future earnings or a collapse in the dollar or both or something else?

I am playing it, hopefully, safer with commodities and dividend paying oil trusts in other countries that when converted to dollars will keep up with any fall in the dollar. But, some good U.S. stocks with international exposure may do well too. I just don’t know enough about which ones are more dependent on foreign operations to stay healthy and thus, am out of the U.S. market.

Related Posts:

• For deflationists, Financial Sense interviewed one of the best in that camp this weekend.
• Tonight on Asian news they were calling for a correction in gold to reach $870 before taking off to $1,200 later this year or next.
• Stimulating infrastructure does a lot to the economy
• Should We Spend More to Delay the Recession?
• Here is another thing about bank closures:

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