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Tuesday, August 12, 2008

Live It Up, the Dollar Is Dead?

In this piece I argue that you shouldn't pay down your credit cards. Am I pulling a Paulson? On the contrary, I am giving very unpatriotic advice.

5 comments:

  1. So are you saying that lots of people are (very stupidly) underpricing interest rates right now? That is, credit card companies who are easy on the "temporary 0%" deals, and everyone who buys Treasuries who extends car loans?

    I've felt this way for a long time, but I don't understand what's causing it, or how I can be the only one who thinks this.

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  2. Silas,

    I hadn't thought of it like that, but yeah you're right. Think of it this way: If millions of people followed my advice, that would not only push up gold prices and hurt the dollar on the foreign exchanges, but would also raise US interest rates as more people tried to borrow dollars.

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  3. BTW Silas, I'm not saying the loan-making organizations are doing anything dumb. I think part of what is happening is that people are afraid to take on more debt, and so when the Fed shovels money into one end of the banking system, the rates have to be held pretty low to get people to expand their obligations on the other end. But if the Fed is giving you money on great terms, you're not necessarily dumb for loaning it out at low rates yourself.

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  4. Well, I'll say it for you then: the folks who set risk-free interest rates (i.e. marginal buyers of government securities) are idiots. They won't even demand interest rates sufficient to cover the true inflation rate!

    The foreigners who need a safe place, the insurers that are obligated to buy government securities, the banks that make loans ... okay, you guys are in the clear. But the folks with an actual choice, but act as if inflation is going to drop soon (or a if they won't be taxed) and the US will NEVER debase the currency in any notable way in the next 30 years? What the heck is wrong with you guys?

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  5. English Bob8:30 AM

    Silas: I guess this is why Peter Schiff thinks 30-year treasuries is where the real bubble is.

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