US Dollar decline, stagflation

3/7 Larry Summers Assist Sec Treasury- Mr. Summers ... said federal housing and mortgage policy is "behind the curve." He said the focus on adjustable rate mortgages which are resetting is misplaced; lower interest rates ameliorate that. He estimated 30% of homes with mortgages -- about 15 million in all -- are likely to be worth less than their mortgages. He argued foreclosures are enormously costly and destroy value and thus should be prevented as much as possible. ...He also said estimates that the housing and mortgage bust will reach $400 billion are likely to be "substantially optimistic". (consider the Ultra Short Financials ETF but it is volatile and only buy it low! SKF)

3/6-But as the Bernanke Fed slashes interest rates to stop a slide in the US housing and stock markets, and expands the MZM money supply, at a hyper-inflation rate of +15.7%, it's also simultaneously blowing enormous bubbles in the precious metals and commodities markets. The surge in agricultural and energy prices have led to a +7.5% jump in US producer prices, the biggest 12-month gain in 27-years, and consumer prices are up +4.3%, a 17-year high. See the chart on MZM which is even more inclusive than M3....For now, the ECB wants to see if a steady repo rate at 4% can block gold's advance at 650 euros/oz. But with the Fed determined to slash its federal funds rate in the months ahead, regardless of the inflationary consequences and other foreign central bankers unwilling to tag along, the stage is set for extreme volatility in exchange rates, which in turn can trigger wild gyrations in the commodities markets. (consider ETFs: FXE or UDN if bearish on US Dollar and bullish on Euro)

M3 Money supply data is back http://www.nowandfutures.com/key_stats.html
printed in May 07 but still very informative http://globaleconomicanalysis.blogspot.com/2007/05/real-world-vs-financial-worlf.html

Dr Doom's (Nouriel Roubini) 12 Step Financial Worldwide Collapse scenario-presented at the DAVO Central Bankers conference this February. He predicted the economic recession July 17, 2006.