Bankers, Big Government, Currency War, Economy, Recession '08, Sovereign Wealth, World War 3.0 Comments (0)
Treasury Secretary Henry Paulson says the administration intends to keep pursuing a policy of “robust engagement” with China that will include filing unfair trade cases as needed and pressuring the Chinese to move more quickly to revalue their currency.Paulson, delivering a speech outlining the goals of a high-level meeting the two countries will hold next week, said it was important for both nations to resist calls for erecting protectionist barriers.
“It is clear that our strategy for robust engagement with China — intensive dialogue but with resort to WTO dispute settlement and WTO-sanctioned trade remedies if needed — is more productive than protectionist policies or legislation,” Paulson said in his prepared remarks.
June 10, 2008
Bail-Outs, Bankers, Civil War 2.0, Currency War, Debt, Economy, Energy & Fuel, Gulags, Higher Rates, Inflation, Middle-Class, Peak Oil, Recession '08 Comments (0)
So the employment data merely confirmed what should have been obvious –
the US economy was in very bad shape. They did not provide conclusive evidence on the key questions of the depth and severity of the downturn. The reaction owed much to complacency.
The truly bad news came from the record rise in the oil price. Oil and the dollar traded in line all last week, with oil prices juddering downwards as Ben Bernanke, Federal Reserve chairman, talked up the dollar on Tuesday, and rising after the dollar fell on the European Central Bank’s words on rate rises on Thursday, and again after the payroll figures.
Many factors are pushing oil but, in the short-term, currency is the most important.
If the US is indeed avoiding a bad recession, this is because the weak dollar has helped exports. But a dollar this weak brings an oil price that neither US consumers nor central bankers can bear. If oil prices do not correct soon there is no way out for the US economy – a good reason for equities to sell off.
June 10, 2008
Bankers, Currency War, Economy, Energy & Fuel, Higher Rates, Inflation, Middle-Class, Real Estate, Recession '08 Comments (0)
The Federal Reserve is starting to talk tough about inflation. But is there any substance backing up these words?
Bernanke hinted that the Fed’s rate-cutting campaign has come to a close.
Bernanke said “the latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations.” He added that the Fed “will strongly resist an erosion of longer-term inflation expectations.”
All that suggests that the Fed may be starting to consider interest rate hikes later this year. That would help support the dollar and contain inflation. But some think that the sooner the Fed acts the better and that the Fed needs to do more than just talk.
The Fed’s benchmark federal funds rate is now 2%. By way of comparison, the European Central Bank’s main interest rate has held steady at 4% since last June.
As long as U.S. interest rates are relatively low, some believe that the dollar will just continue to weaken against the euro and that oil prices will keep climbing.
“It is a problem having Europe’s rates high and our rates low. It puts a lot of pressure on the dollar,” said Alan Skrainka, chief market strategist with Edward Jones. “Enough is enough. I don’t want to second guess the chairman of the Federal Reserve but they’ve cut rates enough. It would be problematic if they cut rates more.”However, there is a small, but growing, school of Fed watchers who think the Fed should shock the markets and raise rates at its next meeting.But with crude oil hovering around $136 a barrel, maybe a big shock is exactly the right medicine.
June 10, 2008
Big Government, Commodities, Currency War, Economy, Energy & Fuel, Fuel Shortage, Gulags, Higher Rates, Inflation, Peak Oil, Stupidity, World War 3.0 Comments (0)
Traders say many speculators bet early last week on falling oil prices through short sales – in which they sell the commodity in the hope of buying it back later at a lower level.
They were gambling that prices could drop below the critical $120 a barrel level on further signs of demand erosion in the US and the partial removal of fuel subsidies in some Asian countries.
Data from the US Commodity Futures Trading Commission shows that for the week to June 3, speculators were getting out of the crude oil market. If you include futures and options, then speculators sold a net 4,500 contracts through the liquidation of some previous long positions – bets on higher oil prices – and the establishment of fresh short positions.
By Wednesday last week, it had started to become clear that the bet might not work. US oil inventories, instead of moving higher because of lower demand, fell sharply. Some traders started to unwind their bearish positions.
Oil prices then failed to fall below $120 a barrel – a critical support. If that had been broken, it could have triggered further sales.
As the US dollar weakened 2.4 per cent in two days, some investors panicked and tried to buy back their short oil positions. Mr Serio says that the rapidity and strength of the rebound suggested it was largely due to “a large short covering of the short positions”.
A trader with a US hedge fund adds: “It was a massive short-covering.”
But the situation got even worse for the speculators on Friday: as trading started in London, the market reacted to comments by the Israeli transport minister – and a former chief of the Israeli military – who said an attack on Iran was “unavoidable”. Then, as New York opened, Morgan Stanley, the investment bank, warned that prices could jump to $150 a barrel in two weeks.
The Israeli threat plus the Morgan Stanley forecast triggered fresh buying of spot contracts – rather than long-term ones – in turn further undermining the short-sellers. By mid-afternoon in New York, traders say, they were forced to throw in the towel and cover their positions, sending oil prices rocketing more than $11 at one point.
June 10, 2008
