Right now we are working hard at adding useful new content to our main web site, BrokeSucks.com. The site is intendend to provide both a practical and realistic view of money and business.

The first is an article, Exchange Rates Impact Small Business and Expats. The article explains why currencies fluctuate and some possible strategies to protect oneself.

The second item is the True Cost of Money Calculator. As with the first article, very basic stuff. Obviously it does not take in to account the effect of taxes or inflation. This is a good tool to show young people in their teens up and early twenties.

A story on the AP wire reports that Moscow is now the most expensive city in the world to live in. Here is the part that stuck out when I read this article: “What’s so interesting now is that we do see, year to year, more fluctuation in these rankings than we used to,” Powers said. “The investment and flow of capital and businesses into developing countries has made them a bit more expensive.” The article also points out how currency plays a big role; for example, a weaker yen pushed Tokyo down to third.

I have a feeling this story is going to be all over the news. It turns out that a bunch of insurance companies including AllState, Nationwide Mutual Insurance Co, and MetLife are either pulling home insurance are cranking up the requirements due to hurricanes. The punch line to this story is that its on the eastern half of Long Island New York, not Florida or Louisiana.

The story on the AP today quotes the chairman of Allstate “Homes in Long Island (N.Y.) have gone up in the last five years between 60 and 70 percent. Believe me, our rates have not gone up by 60 or 70 percent ..You look at our exposure and you say ‘We want to have enough capital to protect and care for all our 17 million households across the country.’ To do that, you may have to reduce your exposure in a small way in other areas..”

Is the government the solution? No, its the problem. This is simply a side effect of the Fed’s easy money policies starting in 2001 which have resulted in asset price inflation.

I am reading The Coming Generational Storm by Laurence Kotlikoff and Scott Burns right now.

Wow, I’m changing my mind about the potential for the US government going in to default. The government’s own actuaries and economists have put together numbers on the US’s liabilities which go in to the tens of trillians of dollars. On top of that, those liabilities go up every year that nothing is done to address them thanks to compound interest. These numbers which are now above $60 trillion could easily surpass $100 trillion!

My gut tells me that these numbers will simply be absorbed by a substantially lower standard of living thanks to a weakening US dollar.

The main point the authors bring out is something called intergenerational accounting. What that means is that when the government says its cutting taxes or fixing its financial problems it just shifts the cost between the young and the old.

Most people thing we’ll just push things back and some one else will have to deal with it. Even the current retiring baby boomers think they are dodging a bullet that their children and grandchildren will take. I think they are wrong. One thing I have not yet seen the authors point out is that the markets adjust for this stuff ahead of time.

Is the fed going to raise interest rates? Is the GDP going lto meet its estimates? Is unemployment going to rise? The market rewards those who correctly predict the future. Every day we get closer to a day when the US government’s massive liabilities reach the point of causing bankruptcy.

Suddenly the dollar isn’t looking so attractive anymore. The dot com stock bubble did not burst because the stocks sucked, it burst because investors started deciding they sucked and it was best to sell. Get it, its a pyramid scheme, and so is the US government’s debt.

It is a really ugly picture that escapes both political parties. One of the next presidents, may be not the next one, but perhaps the one after that will have to deal with a very ugly reality that their entire party has ignored. That reality will never be tackled head on. Rather, the markets will force the issue to the table with a brutal urgancy. The sad thing is that president will get all of the blame when the blame belongs to a very long list of people dating back to the first years of social security.

Or may be it will never happen.

I just happened to turn on CNBC yesterday interested in what they were saying about the stock market drop. They had guys on babbeling on about the GDP and other inflation numbers. I was about to flip it off when they announced George Soros was up next.

What did Soros have to say? First, the market down turn was largely due to Japan’s rising interest rates unwinding the carry trade. I was suprised, I haven’t heard anyone mention this beyond semi-obscure online investment newsletters. Next he said precious metals such and gold got carried away by speculators; that was obvious. Where should you put your money right now? Cash, preferably not in US dollars.

Whether or not you agree with Soros’ political views it is clear that he has a damn good understanding of the global financial markets.

Today I ran into an ad on a political webpage for a company selling Iraqi dinars ( IQD ). The copy touted betting on Iraq that the country was turning around and those holding the currency would benfit greatly. An article on one of my favorite currency sites, XE.com explains why this falls just short of being a scam:

The Central Bank of Iraq’s stated objective is not to promote the free trade of IQD, as is the case in a true free market economy, but rather to keep the value of the IQD stable. The only way the Bank can ensure the semblance of stability is by tightly controlling the exchange of IQD on the market, and by ensuring that the currency cannot freely trade on the open market. They evidently fear that open trading of the IQD would lead to a rout in which the value of the IQD would sink to practically nothing.

I realised early on in this recent real estate boom that people were buying homes not on their price, but on their monthly payments. Somehow housing speculators were confusing this with the true value of the real estate, explaining that prices were just catching up to what they should be at (which, to some extent is true, except anyone who noticed interest rates could go no lower should have been able to put two and two together.)

What is happening now as interest rates rise is that a one or two percent difference is taken out gigantic chunks of the home’s value. For those that bought on margin, that hurts big. Think the fed will ease up and pull interest rates back a little bit? Unfortunately the US is very dependant on foreign buyers to hold up the value of the US dollar.. that means Bernanke may not have nearly as much choice as he’d like.

Here is a news article that reports that for 2005 about one in sixty households filed for bankruptcy, for around 2 million total. Most of these filings were for low-income households who would not have been affected by the 2005 bankruptcy law anyways.