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…