June 30, 2008
I can’t believe it… we’re getting audited. No, not me personally, or my family. The US Federal Reserve is getting audited by the International Monetary Fund.
Another problem for Mr. Dollar is that it will be several months before his actions take effect. Officials with the International Monetary Fund (IMF) have informed Bernanke about a plan that would have been unheard-of in the past: a general examination of the US financial system. The IMF’s board of directors has ruled that a so-called Financial Sector Assessment Program (FSAP) is to be carried out in the United States. It is nothing less than an X-ray of the entire US financial system.
The article also notes that Bush has denied the IMF access to the US’ financial records until his last year in office, since the official report won’t be released until he’s ridden off into the sunset. By the time 2010 rolls around, any ‘shocking’ tidbits from the report will likely be common knowledge, based on the instability of the US financial markets these days.
HT: Urban Survival
June 30, 2008
More European banks are piling onto the “USA is in serious trouble” bandwagon, similar to the Royal Bank of Scotland warning I posted about earlier this month.
Barclays bank in the UK has stated that “the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall “below zero.” If you’re a consumer of energy or food, you’d agree that prices have hardly been contained this year.
Meanwhile Fortis Bank, the Benelux banking giant, made a re-capitalization move last week spurred by worries that “the US market is on the verge of a meltdown.” More on this one here.
Astute readers will note that there are no predictions of doom coming from any of the US banking concerns. We may not be able to keep the inflation genie in the bottle, but we still are able to control the news enough to keep the sheep from getting spooked. I’m no macroeconomics expert, but when a series of very large, very influential European banks are making moves based on expectations that Wall Street is heading straight for the rocks, I pay attention.
How soon will it become self-evident that we’ve got a major problem on our hands? Before the November elections, or after? I’m sure most pols would prefer ‘after,’ but I don’t know that they’ll be afforded that luxury. The sooner we take a sober look at the overall economic picture and start making mature, rational plans for moving forward, the better. The time for book-keeping tricks and economic sleight-of-hand ruses is coming to an end.
June 30, 2008
‘C’ as in ‘conservation.’ This one must’ve snuck past the business editors… or perhaps the paid censors from the oil industry were on coffee break when it was posted.
Want to help the country save a quick million barrels of oil a day? Drive 5% less. Slow down. Inflate your tires.
Those three steps would reduce U.S. oil consumption by 1.3 million barrels a day immediately, according to the Alliance to Save Energy, a conservation group running an efficiency campaign backed not only by environmental groups but also the auto and oil industries.
That’s nearly twice the estimated daily oil production that could come from drilling in the Alaska’s Arctic National Wildlife Refuge, according to the government’s Energy Information Administration.
Shocking stuff, I tell you. Stating that using less energy, or just using it more wisely, seems contrary to the American way of life.
June 18, 2008
It’s rare that a major institution puts out bad news in such an unvarnished & direct manner…
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
“A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.
A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
The Royal Bank of Scotland is one of the major banks in Scotland, and is definitely part of the mainstream banking industry in the UK. This warning is coming from one of the big players in the global finance market, not some lone voice crying in the wilderness. If you read between the lines, you can also infer that the problems we have been seeing in earnest since last fall are just a warm-up to the real financial pain that may be coming our way.
As the article points out, the normal tools for dealing with such a problem (i.e. massive injections of liquidity a.k.a. inflation) are not as palatable an option as it used to be, since citizens are already seeing notable increases in price of such staples as food & energy. Do you jack up inflation to save the market and hammer average citizens, or do you risk the market falling apart, with major job losses, again hammering average citizens?
A major credit crisis some time in the next three months would have the fecal matter impacting the fan during the thick of the general election race here in the States. Anyone wonder what kind of effect that would have on the outcome?
June 17, 2008
We here in Minnesota have our fair share of political hacks and nutjobs just like any other state. First-term Representative Michelle Bachmann is attempting to jazz her re-election bid by proposing a ‘plan’ to slash gasoline prices back to $2 per gallon.
Her plan? In a nutshell it’s basically to throw open any area of the country for oil drilling, open several new oil refineries, and some incentives to invest in alternative energy. From where I’m sitting, we’ll do number one sooner or later anyway, since it’s too late to gracefully transition away from fossil fuels without doing so. The proposal for more oil refineries doesn’t make a hell of a lot of sense unless she’s planning on setting them up for processing ‘heavy’ crude like oil sands and that nasty sulfurous stuff that Saudi Arabia and elsewhere are billing as wonderful new sources of oil. The alternative energy investments is a nice add-on as well, though there are no specifics.
My main problem is that Rep. Bachmann is touting her plan as a way to ‘push gas prices back to $2 per gallon.’ The only rational response one can have to that idea is something along the lines of ‘put the crack pipe down.’ Bachmann is deluding someone… whether it’s herself or her electorate we can only guess.
I’m all for politicians from both sides acting like mature grown-ups and discussing the crucial issues of the day. Throwing empty rhetoric out such as a pie-in-the-sky promise to return the USA to the golden land of $2 gas is either cynical pandering or a good example of how out-of-touch this candidate is. Having had Bachmann as a state senator for a few years, I’m willing to believe either case.
June 16, 2008
Interesting short news piece on CNN about the sudden resurgence of the ‘New Urbanism’ movement. Amazing how rising gas costs will make American think again about the radical idea of livable, walkable cities & towns.
For what it’s worth, the New Urbanism movement was one of James Howard Kunstler’s main writing topics prior to his jumping on the peak oil bandwagon. He cranked out three non-fiction books dealing with the subject in the 1990′s.
June 13, 2008
For those of you outside the Midwest, we’ve been getting hammered with heavy rains over the last week or so, which have resulted in massive flooding in Southern Minnesota, Iowa, Wisconsin and elsewhere. Matt at FGLB is dealing with some water in the basement right now, as is my boss, who lives in Rochester.
Besides the human tragedy we see playing out around here and regaining respect for the sheer power of nature, there will be at least one other follow-on effect from all this: rising food prices. Estimates are coming in that between 3 and 10 percent of Iowa’s corn crop will be lost for this season. Other states in the region will lose a percent of their crop as well. As a result of this, corn prices have been surging over the last few days, passing $7 per bushel, which is nearly double what it was last year. I heard a news report on this subject on MPR this morning, and an econ professor from the U of M stated that he expected to see prices rise on animal products, since most of the corn that was lost is feed corn. He specifically mentioned beef, pork, poultry, eggs & dairy products… they had risen around 5% in the last year, and he expected them to rise again. He also mentioned that around 38% of the corn crop is going into biofuels right now, which won’t help food prices or support for corn ethanol.
Best wishes to Matt and everyone else trying to stay dry…
June 10, 2008
We had our first political candidate ring our doorbell last night, so the general election season has officially begun. It was actually the wife of a candidate for the state house, but for all intents it’s the same thing. My wife had a short chat with the lady, took a flyer and then went about her business. When I got home from our son’s T-Ball game, she showed me the flyer and mentioned what a nice lady she talked to.
I took one look at the flyer and asked my wife what party the candidate was affiliated with. She had no idea, and a quick scan of the ad revealed nothing. After a few moments, it became obvious to me that the guy was a Republican… the incumbent for this seat is a first term Democrat, and one of the few paragraphs on the flyer that wasn’t feel-good mumbo-jumbo was a blurb regarding how this guy would stand up for allowing people to “make choices about their children’s education” (i.e. private school school vouchers). When I pointed that out to my public school teacher wife, she raised her hackles and looked as if she needed to go take a shower to remove the taint from the GOP flyer.
What is interesting is that at the lower level of politics, the Minnesota GOP has decided (in some districts at least), to try and sell the personality of the candidate rather than specifics about the platform being pushed by the party. It appears to me that the Repubs in this state are worried about getting rolled this November, and quite frankly, after the hash they’ve made of things in D.C. over the last 8 years, they have every right to be. It’s the Dems’ turn to mess things up for a while.
Just an interesting tidbit some of you might find of interest…
June 8, 2008
Interesting math from George Ure of Urban Survial on the weekend edition of his daily news brief:
The run-up of oil prices this week about ensures $6 gas this summer. here’s why:
A barrel of oil is 42 gallons. That means the raw material cost to make gasoline or diesel is $3.33 a gallon. Now, what do you reckon the cracking (distillation) costs are? I would guess a dollar. And transportation and Federal taxes? Another buck, you think? And then what about mark-up for the retailer? 50-cents, maybe? Throw on a heap of state and local taxes and we’re there! Just has to come through the supply chain to you.
Look for war to show up about when gas goes over $6 dollars. The pols & hacks will then blame Iran (or whoever) and the dumber of our countrymen will buy it.
That math looks pretty sound to me, unfortunately. There was a brief lull in retail gas prices around here late last week, as gas prices in my area fell to the relatively reasonable amount of $3.74 per gallon. I was in the office on Friday and saw oil prices starting to surge. My wife called me while she was out running errands, and I told her to fill up the tank on her vehicle, since I expected prices to start heading up. Sure enough, by the time I got home, the local station was back up to $3.89.
few stations in town, including one I drove by yesterday and already advertising $3.99, and I expect we will blow by the $4 mark next week. That’s only the start, I’m afraid. It seems bizarre to think that gasoline prices have risen 100% in about 15 months, but that’s what’s happened. This time, there’s no Goldman Sachs to manipulate commodity prices and trigger a free-fall drop again.
The continued rise in gas will affect everyone from the SUV-commuting suburbanite to the car-free fixed-gear cyclist. Everything we buy from food to clothes to cycling parts is trucked in, and the surge in gas costs will be passed along to the consumer at every step. If you haven’t started thinking how this rise in prices will affect your standard of living, reality will be delivering a two-by-clue to your forehead in coming weeks.
June 6, 2008
Now that Obama has locked up the Democratic nomination, pundits everywhere are starting to give him advice on how to run his administration should he win the general election. Case in point is this column from Washington Post columnist Jim Hoaglund. Pretty standard stuff until you get to this paragraph:
Here’s one example of new thinking he should pursue: The United States should apply to relations with hemispheric neighbors many of the lessons of the European Union and its half-century of economic and political integration. A functioning American Union that pools sovereignty is a goal worth introducing now. But that quest cannot start by tearing down the North American Free Trade Agreement and other hemispheric trade accords. A President Obama has to be willing to sit down with the prime minister of Canada and the president of Mexico without preconditions, such as demands for treaty renegotiations.
By ‘pooling sovereignty,’ I can only assume Mr. Hoagland is promoting the concept of the North American Union that has been floating around for the last few years. As it turns out, Hoagland is a member of the Council on Foreign Relations, which has been pushing the union concept for a number of years now. The “NAU” has been a popular topic among conspiracy theorists & patriot radio types for a while. I’ve read about it, but have more or less left it alone. Now that a pundit in a major newspaper is actively pushing this concept, though, I’m going to follow it more closely. What better thing could a new president do than sign away the sovereignty of his nation without consent of the American people? Oh yeah, that process has already started.
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