Everyone wants a bailout, it seems. As private promise paper turns out to be worthless, the bagholders want the taxpayer to make good on the private promises. Bill Gross, for example, calls for the taxpayer to subsidize mortgage payments. Others call for the taxpayer to buy worthless mortgages at high prices to bail out the lenders. Governments want to raise taxes as economic activity declines, to fund the promises they have made. And on and on.

The only problem is that homeowners and taxpayers are pretty much the same people, so we’re talking about moving money from one pocket to another. Renters are more likely to be lower income and pay much less tax. How is this going to work?

The Fed’s Kohn spoke today and, in a bout of honesty, said in essence that the Fed did not care about inflation and would do whatever it took to ensure that the economy continued to grow.

This should not be news. Now I don’t expect price inflation to develop into a wage-price spiral, in fact I expect the opposite. But it is worth noting that, over time, the Fed has destroyed the value of the dollar, which it is mandated to protect, by more than 95% since its inception in 1913. One should add that the root cause of this inflation is deficit spending by the Federal Government, but the Fed has monetized the debt and allowed the politicians to spend freely, without consequences. Get rid of the Fed!

His remarks are helping the dollar accelerate on its greased-crowbar descent. CAD is up four or five percent in just the last three or four days.

What Mr Kohn and Mr Bernanke need to understand is that, in the long run, undermining confidence in the currency is far more damaging than a recession. In many ways, the U.S. and the dollar are synonymous. As the dollar wanes, so will U.S. terms of trade worsen and the empire will fall. Just like Britain. Don’t imagine it can happen, the U.S. is so large and powerful? We’ll see. When I was a schoolboy in London, the maps of the world on the wall were still mostly pink, representing the empire over which the sun never set. Those maps were obsolete then, of course, but served to remind us of the rise and fall of empire.

Just checking in from the boat. Dow up to nearly 12,600 with the credit markets still in deep doo-doo, regardless of S&P’s jiggery-pokery with  the monoline insurers.

What are the bulls thinking is going to happen in the coming months? Do they think the economy can avoid recession and return to bubble-land? I guess they must. They are completely nuts.

Hope and pump programs continue to rule the equity markets. The iTraxx crossover index is now over 600 bps. Most ABX indices hit new lows yesterday. The High Yield daily index is at 52-week lows. And so on.

Oil at $100, credit markets continuing to deteriorate, yet stocks continue at astonishingly high levels. Sustained by looking in the rear-view mirror, I guess. Bearish sentiment is pretty high by bull-market standards, and that’s encouraging some technical buying, I think. But it’s a bear market now. Still short after all these years.

Ah well, at least Hillary’s campaign is sputtering. Too early to count her out, I suppose, the insiders have yet to vote.