Run ON the Dollar or Run TO the Dollar?

Spectacular day today here in Massachusetts. Over 80 degrees and no humidity. It is going to cool off a bit the next couple of days, but I will take it.

Overwhelming Majority of Voters Oppose State Bailouts; Too Bad For Them
The well regarded polling company Rasmussen Reports got ahead of the game and asked the following question:

Do you favor federal bailout funds for states like California that are encountering “serious financial problems.”

The results came in as you would expect with 59% of voters are opposed to helping any state in particular, and 66% opposed to helping California specifically. Full write up can be seen here.

While I appreciate both Rassmussen and the voters who gave answers for their effort, they both could have saved their time. The states are going to get bailed out no matter what public opinion is. We have seen this show before.

But wait, did I not hear the words of Treasury head Tim Geithner in which he stated that help for California is not feasible? I read his remarks, and you have to see what he really said. Mr. Geithner said explicitly that the LAW as it stands does not allow for state support by TARP or other Treasury programs. The LAW he said.

Certainly we have seen that the LAW has little bearing on the actions of the FED or Treasury. Also, the LAW could change in 10 minutes after a rushed vote by a panicked congress eager to make sure their state gets their fair share of aid. I can predict with 100% confidence that a state bailout program will be put in place either overtly through cash handouts, or behind the back through bond guarantees and loan backstops.

Run ON the Dollar or Run TO the Dollar?
In yesterdays post I highlighted a bunch of sovereign debt and/or banking debt downgrades from all over the world. With countries like the UK getting hit, how long until the USA gets the same marks? Today all across TV and the media the prospect of a lowered credit rating for the US was the top story.

If serious doubts about the dollar were taking root we would expect to see symptoms of a move away from US debt (through treasuries):
-A lower dollar (it has weakened as of late)
-Higher yields on treasuries (they have spiked up even in the face of quantitative easing)
-Higher Gold (it has moved up)
-Decreased purchases of US debt or outright sales by foreign countries

While the first 3 criteria have been met to varying degrees, the last point has not occurred at all. In fact treasury purchases have been at ALL TIME highs over the past few weeks! I know, it makes no sense, but Housing Doom crunches the numbers for us here. Some key data sets:



There is much more information at the Housing Doom site.

So what gives?

Foreign central banks are adding their treasury holding like they are gold or something! Notice the number 2, 9 and 10 largest weekly purchases all happened in the month of MAY of this year! Over the past 2 weeks over 50 Billion dollars in treasury debt was added by foreign banks, an unprecedented amount according to Housing Doom who follows this data religiously.

Perhaps along the lines of "if a bank places a secondary offering that dilutes shareholders by 20% then that stock is worth 30% more!" logic central banks feel that holding as much debt about to be downgraded as possible is just the ticket. Good luck with that.

Friday Night Entertainment
It is once again Friday night, and a long holiday weekend at that, so let's try to have some extended Friday night fun!

Too Much Time ON Their Hands
When I have too much free time I tend to start projects I cannot finish or get into other mischief. Some people have so much time on their hands, they start doing crazy things to their hands. Geekologie has some fine examples of this phenomenon:
Elephant Hand

Flying Eagle Hands

There are more animal hands at the Geekologie post.

Sci-Fi Short Story Read
I had mentioned this story last year, but I just re-read it this week and I really love it!
Try to find a copy (online or in print) of Harry Turtledove's great short story "The Road Not Taken". Great science fiction with an ending you will not believe. You could Wiki the tale here, but that would spoil all the fun!

Film Clips
I love chess, and thus I ,oved the film "Searching for Bobby Fischer" based on the life of young Josh Waitzkin. The entire film is wonderful with great acting and a good story. The ending scene is amazing and it results in a rare chess ending where white's queen is skwewered to end the match:


I have always loved the film "Joe Versus the Volcano" and I think it was missed by many for it's deep insight and helpful look at ourselves. No matter, take a glimps at the scene where Joe (Tom Hanks) quits his job after he finds out he has about 6 months to live, classic:


Rock Blogging
We need some inspiration for the long weekend, so we shall have an offering of quality tunes to lead the way.

Loyal reader Kevin requested a tune that was a surprising pick, but I most certainly know the song and in fact I like it very much! Enjoy Ace of Base and "The Sign":


The next selection I heard in the store today and I love the vocals and the old school music, so enjoy this classic from the Beatles.....HAHAHA sorry suckers!
Enjoy Bobby Darin and "Dream Lover":


As a hair band lover, one of the best was Motley Crue. Almost any song is a winner, but for a softer side try out "Home Sweet Home":


Loyal reader Watchtower realys that the only rap music he likes is from the Beastie Boys and I could not agree more. My favorite is "So Whatcha Want" but here at Economic Disconnect we do requests, so enjoy "Sabotage" complete with hilariois 70's cop show style video:


For some haunting vocals, lyrics, and acoustic guitar let me point you to Staind with "Outside":


A little more rocking to end the night. I bought the Metallica album "And Justice for All" after I saw the video for the tune "One". the first song on the album is still one of my favorite songs to get riled up listening to. Get excited for "Blackened":


Have a good night.