Here are three graphs I plot from St. Louis Fed on relationship between Dollar (trade weighted against major currencies) and Fed funds rate, budget deficit and current account deficit. Red is dollar exchange rate. Click to enlarge.

El-Arian of PIMCO thinks to prevent a housing price collapse, either overnment must intervene or the mortgage contracts have to be altered. “There is no better alternative”, he said in a CNBC interview (watch below). Boy, that’s frightening! But I was more frightened by how a capitalist at such high level ditches market-based solutions so easily.

Crude-oil futures surged above their inflation-adjusted high Monday, climbing $2.08 to $103.92 a barrel in New York Mercantile Exchange trading, amid a weakening dollar and indications that OPEC is leaning against an increase in output. The previous high of $103.76, in January dollars, was set in April 1980.

Bob Shiller on NY Times asks the question: why even most experts didn’t recognize the bubble as it was forming.

courtesy of NY Times

Jim Hamilton is worried about a broad based inflation (see chart), “If it were just a few commodities moving, I wouldn’t be concerned, as any of these prices can be quite sensitive to small disruptions in supply. But we are clearly looking at an aggregate phenomenon here, and it seems unreasonable to suppose that the phenomenon has nothing to do with choices by the Fed”.

He is also suspicious about the effectiveness of the Fed’s rate cuts, “In my opinion, there is no such ideal target rate, and the notion that we can address the difficulties with a sagely chosen combination of monetary and fiscal stimulus and regulatory workout is in my mind doing more harm than good.”

Finally, he hopes Bernanke has “checked out the net that’s supposed to catch him if he falls”.

(click to enlarge, each price was normalized at 100 for January 1)