Comments on: Fannie and Freddie in a Free Market Economy http://www.dailyreckoning.com.au/fannie-and-freddie-in-a-free-market-economy/2008/08/01/ An independent perspective on the Australian and global investment markets Sun, 21 Mar 2010 08:37:19 +0000 http://wordpress.org/?v=2.8 hourly 1 By: Stropp http://www.dailyreckoning.com.au/fannie-and-freddie-in-a-free-market-economy/2008/08/01/comment-page-1/#comment-32997 Stropp Fri, 01 Aug 2008 08:52:18 +0000 http://www.dailyreckoning.com.au/?p=3151#comment-32997 What you say here reminds me of that old movie, The Picture of Dorian Gray. In that movie, as you probably know, the portrait of Dorian Gray takes on all the attributes of the protaganist leaving him the picture of health and youth. Mind you, he is still corrupt and diseased, but that is hidden away. Until one day he looks at the picture... What you say here reminds me of that old movie, The Picture of Dorian Gray. In that movie, as you probably know, the portrait of Dorian Gray takes on all the attributes of the protaganist leaving him the picture of health and youth. Mind you, he is still corrupt and diseased, but that is hidden away. Until one day he looks at the picture...

]]> By: Wills http://www.dailyreckoning.com.au/fannie-and-freddie-in-a-free-market-economy/2008/08/01/comment-page-1/#comment-32972 Wills Fri, 01 Aug 2008 06:03:31 +0000 http://www.dailyreckoning.com.au/?p=3151#comment-32972 I believe the Chinese have a huge trade surplus (over $100 billion) a year with the US. What can they do? Tell the Americans we don't want US dollars for our T shirts - we want gold or Euros? There's only 7,000 tonnes of gold mined a year - even at US$1,000 an ounce, the mined gold is only worth US$225 billion. Similarly there are not enough Euros floating around. The US also import about $2 billion of oil a DAY. What can the Saudis expect except more US$. The US can virtually tell the Chinese and the Saudis that "we can keep your economy going if we accept your products BUT you must accept US dollars." Sure, the chickens are coming home to roost but no one is prepared to make the first move. In 1995 the Japanese had about US$500 billion in TBonds - a staggering sum in those days when the Kobe earthquake struck. There was some fear elsewhere that the Jap may want their money back to rebuild - instead they BORROWED their own money back to do it. Sounds crazy to a careful individual investor, but that's what governments do - they prop up each other's house of cards because the consequences of one of these houses collapsing these days is unthinkable. DR, you're doing a great job of outlining to your readers for the need for monetary and fiscal restraint and I hope most will take it to heart. However, don't expect our governments to do that. They are there, in their wishy washy ways to ensure that the great American/European/Australian dream totters on albeit with a few potholes along the way. FIRE UP AND LET THE (MONEY) PRINTING PRESSES ROLL! I believe the Chinese have a huge trade surplus (over $100 billion) a year with the US. What can they do? Tell the Americans we don't want US dollars for our T shirts - we want gold or Euros? There's only 7,000 tonnes of gold mined a year - even at US$1,000 an ounce, the mined gold is only worth US$225 billion. Similarly there are not enough Euros floating around. The US also import about $2 billion of oil a DAY. What can the Saudis expect except more US$.

The US can virtually tell the Chinese and the Saudis that "we can keep your economy going if we accept your products BUT you must accept US dollars." Sure, the chickens are coming home to roost but no one is prepared to make the first move.

In 1995 the Japanese had about US$500 billion in TBonds - a staggering sum in those days when the Kobe earthquake struck. There was some fear elsewhere that the Jap may want their money back to rebuild - instead they BORROWED their own money back to do it. Sounds crazy to a careful individual investor, but that's what governments do - they prop up each other's house of cards because the consequences of one of these houses collapsing these days is unthinkable.

DR, you're doing a great job of outlining to your readers for the need for monetary and fiscal restraint and I hope most will take it to heart. However, don't expect our governments to do that. They are there, in their wishy washy ways to ensure that the great American/European/Australian dream totters on albeit with a few potholes along the way.

FIRE UP AND LET THE (MONEY) PRINTING PRESSES ROLL!

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