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Dr. Martin Weiss Discusses Housing Bust and Mortgage Meltdown in Latest...

Martin Weiss, Ph.D. examines the real estate bust in the U.S. and discusses the major reasons behind it. Dr. Weiss takes a closer look at the relationship between the housing market and rising foreign currencies.

The housing bust is causing a mortgage meltdown, which is creating an acute, nationwide credit crunch that is so bad it's beginning to impact the economy.

In contrast, Brazil is in the first phase of an economic renaissance: Real estate prices are rising steadily and once huge foreign debts have been paid off.

Brazil is also leading the worldwide ethanol revolution. Many people in North America don't understand, or don't believe in, the ethanol revolution.

America's ethanol, made from corn, takes too much energy to produce. It drives up the price of food and feed and requires never-ending government subsidies.

Brazil's ethanol, made from sugar cane, is another matter entirely. It's clean. It's cheap. And it has reduced Brazil's dependence on imported oil to zero.

At the same time Japan is now enjoying its most enduring growth since World War II. And Japan's trade and investments with China are booming. Japan's real estate values are moving higher, with land prices surging 8.6% last year alone, five times more than in 2005. And, its economic expansion, now in its 66th month, is the country's longest in sixty years. Unlike the late 1980s, when Japan's economic boom created one of the greatest bubbles

of all time, this time around the growth is steady, healthy, and building a solid base.

Most important, especially for Japanese youth, is the fact that their many hard years

dedication to education are finally paying off: Japan's jobless rate just fell to its lowest level in more than nine years, and major companies are snatching up young recruits well before they finish college.

Japan's coming out of 11 years of start-and-stop recession and Brazil is emerging from decades of doldrums. Both have built a solid platform for expansion precisely the opposite of what is being seen in the United States, where individuals are just beginning to suffer the consequences of one of the greatest speculative bubbles of all time.

One of the main reasons why this is happening is foreign currencies, like the Brazilian Real and the Japanese Yen have been rising but the U.S. dollar has been plunging.

So far this year, the Brazilian real has been the strongest among the 16 widely traded currencies tracked by Bloomberg.

The Australian dollar has also been moving sharply higher, easily surpassing the euro, despite the euro's all-time highs reached last month.

The Japanese yen started the year with a decline, but its slide was mostly contrived. The Japanese government was anxious to keep its exports cheap and did everything in its power to keep the yen down. But now, with more confirmation of Japan's robust economy, the Bank of Japan has little choice but to let the Japanese yen rise. And very soon, it may have to raise its short-term interest rates, giving the yen an even bigger boost. When that happens, it could be like ripping the lid off a pressure cooker, unleashing an explosion in the yen.

The yen has been forcefully depressed for so long, it will have to surge by leaps and bounds just to catch up with the rising euro, not to mention catching up with other major currencies like the Australian dollar or the Brazilian real, both which have been going up even faster.

This is no trivial matter. Nor is it a sideshow to the drama unfolding in the U.S. credit markets. Quite to the contrary, it's of vital importance, and it must not be underestimated.

The day of reckoning is here, the housing bubble nurtured by foreign money has burst. The cheap and easy credit, largely financed by foreign money, is disappearing and the foreign money is not coming any more or it's actually leaving.

Now, the Fed's major trade-weighted index of the dollar has plunged to its lowest level in its history and foreign currencies are surging to their highest levels in decades. Corporate bond prices are tumbling, even on higher quality issues. And the S&P 500 Index has begun to break down, sinking through a key trendline in its chart with the August 3rd 39-point plunge.

"It's too soon to say what the final outcome will be. But it's safe to say flatly that the consequences of complacency could be catastrophic. Look for every opportunity to move money from investments that are most vulnerable to the mortgage meltdown to those that are most likely to benefit from continuing global growth," advises Dr. Weiss.

For more information and to read the full article, visit this link:

www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit

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