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Jeffrey Rogers Hummel has written one of the most provocative and insightful essays I have read concerning why the U.S. is more likely to default than attempt to hyperinflate Treasury debt into insignificance.  Click here  to access the essay. Here's an excerpt: "It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government's money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency."

From Theodore Dalrymple, writing in City Journal, an eloquent and insightful essay about how an age of loose money not only destroys savings, but also corrodes character.  Click here   for the full essay. An excerpt: "But asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance."

Stock-chart overlays almost invariably stop working when we have them called to our attention in an e-mail, but it must be conceded that S&P 500 does look to be closely following a trail blazed by the Nikkei 225. If the coincident patterns continue, it would imply that the U.S. bear rally begun in November is just starting to get airborne. Click here  to see the comparison.

Subscriber Peter Montgomery, editor of   Pot o' Gold,  thinks the Fed is paying top dollar for mortgage paper that many investors wouldn't touch: "What I find extremely interesting is the timing of quantitative easing relative to rally this summer. Market commentator Bill King notes that since June, the Fed has only twice purchased Mortgage Backed Securities (MBS). The first time was options expiry week in July for $80 Billion. The second time was the past options expiry week in August for $67 Billion. Arguably, most MBS are trading well below 50 cents on the dollar with some below 10 cents on the dollar. The Federal Reserve will not disclose how much it is paying for MBS and from whom it is buying.  "Bernanke is railing against any kind of audit, which probably means what he is doing is wrong and does not want their actions to see the light of day. My suspicion is they pay full face value. IMO, Wall Street likely uses the freshly printed script to pay off some liabilities but puts the rest to work in equities. The July $80 Billion injection week broke the back of the stock market slump turning it into the rally we see now. Last week's $67 Billion succeeded in pushing the markets to 2009 highs. These two large MBS buys could also be timed to push liquidity into the system to make bond auctions AND the stock markets do well in tandem."

In his latest dispatch, David Rosenberg, chief economist at Gluskin Sheff, says no one should feel guilty taking profits in a market trading at 130x trailing earnings: "Boy, with all that good news - Case-Shiller, housing sales, durable orders, consumer confidence, Bernanke (!) - one would have thought that we could do better than 2.6 points on the S&P 500 in the last two days. It could well be that the buying momentum is subsiding. Indeed, over 50% later, it would make perfect sense for the market, which investors were buying on rumours five months ago, to begin to sell on facts; nothing wrong with taking profits in a market trading at 130x trailing reported earnings. Moreover, sentiment is a clear obstacle here with Investors Intelligence flagging a 51.6% bullish chorus with just 19.8% of respondents in the bear camp - like Tuesday's bull-bear ratio in the August consumer confidence report, we haven't seen market sentiment this smug since the autumn of 2007 (right before the fall). Is that all there is? Despite the good news the S&P 500 is up only 2.6 points "The real enemy for the equity market is Mr. Bond - that pesky Treasury market that just won't sell off and validate the great reflation trade. Indeed, if we were seeing a real asset allocation move on the part of investors, as opposed to massive and ongoing short covering, then the 10-year Treasury note yield would be trading close to 5.0% - especially with these freshly minted Obama debt forecasts. But instead, the 10-year note is now getting perilously close to the July 10 low of 3.32%. Keep in mind that July 10 was the day when Meredith Whitney gave the green light to Goldman, and Roubini declared the recession to be ending, and what a

Reader T.H. McGraw, 70, is also a writer, and old enough to remember some pithy anecdotes about the Great Depression.  In an article he wrote for the History News Network of George Mason University, he recalls an America that had the fortitude to weather hard times with a sanguine spirit.  Read Remembering Past Hard Times, an excerpt from which is appended below, by clicking here. "Someone from 'the thirties' seeing today’s consumerism might initially express surprise, maybe admiration. After seeing its magnitude they might tactfully inquire as to the means for all the affluence. Few of them would easily be aware of the associated dissipation of personal savings, reckless destruction of resources and environmental ravages. That seems to evade even modern comprehension as consumerism is suggested by most as the proper nostrum for current economic problems - using credit if need be. Not that people of the Depression years were unfamiliar with credit buying. We can find Woody Guthrie’s 'Dollar Down and a Dollar a Week' in the pop-song offerings today. Generalizing from our readings, those in the 'hard years' seemed a good deal more circumspect, less entitled, and indeed adept at material self-denial."

Some high-minded discussion of our economic malaise, originally published at LeCafe Americain, can be found at this link  (with thanks to the chat-roomer who posted it earlier.) Here's an excerpt: "The most intractable part of the current financial crisis, and the ongoing problem of the US economy is the huge tax which is levied on the American public by its corporations, primarily in the financial and health care sectors, and a political system based on lobbyists and their campaign contributions."

From our friend Levente Mady, who tracks and recommends bonds for Bob Hoye's Institutional Advisors, here's a tactic you can use to beat the high cost of gasoline. (He is responding to a post in the forum by a concerned reader): "If you are worried about the price of gasoline, you should convert your car to run on propane.  If you look at the price relationship between crude oil and natural gas, it should cost you about 3.5 times less to fill up with propane than with gasoline these days.  In other words, if it costs you $100 to fill up your car with gas, you can get the same amount of mileage for less than $30 of propane.  There is hundreds of years' worth of natural gas supply in North America.  It is dirt cheap!  It is clean!  Why not put it to good use?   "A bit of background in terms of practicality:  the technology is there and it costs $3,000 to $5,000 to convert a larger automobile (SUV or truck) to run on propane.  Obviously, natural gas is the cleaner fuel and there is a massive abundance in North America -- that is why it is so cheap.  As a matter of fact, some states - Arizona, for example - provide tax credits for the conversion expense as well as for running the car on propane instead of gas.  Uunfortunately right now there just does not seem to be much talk about using natural gas as transportation fuel.  Natural gas is supposed to be used more or less exclusively for heating.  The choice fuels for transportation are crude oil derivatives (diesel, gasoline, jet fuel, etc.).  "The silly thing is that there is a ton of money spent on non starters that are decades away from making economic sense

Here's an excerpt from a must-read essay by James Lewis that you can access by following the link at bottom: "[Obamacare] is the result of fanaticism, not balanced thinking. That seems to be President Obama's way. This White House defines a goal like Arab-Israeli Peace in the Middle East, or Health Care for All, and goes hell for leather, damn the torpedoes, full speed ahead -- without ever pausing to think, or to listening to people who have spent decades dealing with these questions -- if they dissent from Obama orthodoxy. Any opposition is interpreted as bad faith rather than reasoned disagreement. Critics must be evil or racist. That is the state of mind of jihadis going on suicide missions. It is not how intelligent policy makers operate." (Here's the link:http://www.americanthinker.com/2009/08/on_being_ruled_by_fanatics.html)