OT: metal content -- gold

The dollar was overvalued before, and now valuations are returning to their senses.

You also have to keep in mind that an overvalued dollar (evidenced by trade deficit) is financed by foreigners willing to lend money to the US, due to simple laws of conservation (trade deficit means that more dollars end up in the hands of foreigners).

So, if said foreigners become less willing to lend money, trade deficit goes down, the demand for dollars goes down, the amount of credit reduces, and interest rates go up.

This is simple economics 101 as I studied it in the University of Chicago as part of my MBA. It was a while ago and I may have forgotten a lot, but this is what I recall.

This is also what I recalled in 2003, at the crest of enthusiasm about the "victory" in Iraq, when my family bought a lot of euros, that we held ever since and added to over the years.

Fighting a losing war with stagflation at home is not exactly fun or prestigious, but not unusual in history.

The "domestic credit tightening" is the other side of the same coin of the "foreign credit tightening" that is occurring and that I described in my first parameter.

What is interesting, here, is what effect do rising interest rates have on the federal budget. The effect is that the interest paid on outstanding federal debt goes up with interest rates, which increases budget deficit. Therefore, demand for credit increases due to added deficit, which further increases interest rates. That is a vicious cycle, that may be limited in effect, but it is important.

All of the above is the reason why I 1) bought euros and 2) took a fixed rate credit for the house and 3) am not paying this credit off ahead of schedule.

Just to clarify, just because I have some money in Euros, does not mean that I am benefiting from the fall of the dollar, the war fiasco, or Republican plundering of the budget. I am not benefiting. I am simply a little bit less hurt than I could be.

After all, most of my assets are dollar denominated, with the exception of Euros and Berkshire Hathaway stock. Berkshire stock is dollar denominated, but a little different, due to its investments in companies that earn a lot of money abroad.

Wes

Jeez, what's *on* topic at alt.penguin-fetish?

It is actually BRK-B for me . :-(

though I am not complaining.

I was buying it at the time when I used cardboard boxes for furniture.

Wes

Ed, I really don't want to know. urp.

Go eat s*it f****ng off-topic crossposting morons.

Thanks Wes. You see, I am a big fan of Warren Buffett and think that he is unusual in more ways than one. I strongly recommend reading all his annual letters to shareholders, available from their website

You can also buy a nicely printed collection. At least it was available at some point.

Yup, and it sure is going UP! $830+ in the last couple days!

We've got a war on, and it is a very expensive one, too. So, we're selling the entire country to the Chinese, so George Bush can continue to not pay his bills when they come due.

Jon