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Top 10 at 10 past 2: Fed starts exit strategy; Gen Xer rants; US pension debacle; Dilbert
Others considered the discount rate hike as part of the broader "exit strategy" from exceptional measures, which are likely to precede an eventual tightening in monetary policy after months of near-zero interest rates. "The Fed can talk all day about how the discount rate hike is technical and not a policy move, but the market sees it as a shot across the bow," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi. The dollar gained ground over other major currencies after the announcement, with the euro down 0.5 per cent below $1.36. "Today they raised the discount rate, and not tomorrow or the next day, but soon, they will be lifting the Fed funds rate target as well as the economy is starting to regain momentum and the fears of a W-shaped recovery are increasingly falling to the wayside," Mr Rupkey added.
3. Pensions debacle coming - A new survey in the United States has found a US$1 trillion shortfall in pension funds operated by the states. Let's face it. America is bankrupt. HT Troy Barsten via email.
States may be forced to reduce benefits, raise taxes or slash government services to address a $1 trillion funding shortfall in public sector retirement benefits, according to a new study that warns of even more debilitating costs if immediate action isn't taken. The Pew Center on the States released a survey Thursday of state-administered pension plans, retiree health care and other post-employment benefits in all 50 states that blamed a decade's worth of policy decisions for leaving them shortchanged. The result for some states will be "high annual costs that come with significant unfunded liabilities, lower bond ratings, less money available for services, higher taxes and the specter of worsening problems in the future," the study said. The cost of the trillion-dollar shortfall, which will be paid over the coming decades, is about $8,800 for each American household. The study did not include many city, county and municipal pension plans, which are thought to have similar underfunding.
4. Just how exposed are we? - Zerohedge has an interesting piece on those nations in Europe that have individual banks with large asset bases that are worth much more than the GDPs of their host nations. UBS, for example, has assets worth 376% of Swiss GDP. Our big four banks here have assets worth about 200% of NZ GDP. We're not exposed to the euro crisis and our economy is stronger. But it's worth thinking about. HT Troy Barsten via email.
With the threat of sovereign default and contagion now pervasive within the Eurozone periphery, it is relevant to quantify the relative exposure of various banking centers' assets as a percentage of host countries' total GDP. The reason for this is that in Europe for many countries a sovereign default would not have as great an impact, as a risk-flaring contagion impacting these countries' primary financial entities, whose assets account in some cases for multiples of host GDP. For example in Switzerland, the assets of the top two banks, UBS and Credit Suisse, alone account for nearly 600% of the country's GDP. And while Switzerland is relatively isolated from the budget and deficit crises in the PIIGS and STUPIDs, other countries such as Italy, Belgium and ultimately France, Germany and the UK, are much more exposed. The question which pundits should be focusing on is once the Greek crisis flares up and takes down several peripheral non-hosted banks, just what the interplay of a "falling domino" scenario will be not only on neighboring European countries, but also on the holdings of their domestic banks. Because it is inevitable that the same kind of bank run witness in Greece, will become a pervasive phenomenon and impact Portugal, Spain, Italy, etc, which would be the precursor to a global bank run.
5. It's broken - Jeffrey D Sachs explains in the Scientific American what's wrong with the policy-making process in Washington in this succinct piece. HT Murray Grimwood via email
The breakdown of the Washington policy process has four manifestations. First is a chronic inability to focus beyond the next election. "Shovel-ready" projects squeeze out attention to vital longer-term strategies that may require a decade or more. Second, most key decisions are made in congressional backrooms through negotiations with lobbyists, who simultaneously fund the congressional campaigns. Third, technical expertise is largely ignored or bypassed, while expert communities such as climate scientists are falsely and recklessly derided by the Wall Street Journal as a conspiratorial interest group chasing federal grants. Fourth, there is little way for the public to track and comment on complex policy proposals working their way through Congress or federal agencies.
6. Nice young rant - Here's a blog post from a Generation Xer who likes to swear a lot about babyboomers. It is pure polemic, but captures the mood nicely. He finishes on a poignant note, essentially saying he will nurse his parents as they die, despite their decisions to bankrupt the young by piling up mountains of financial, environmental and social debt onto younger generations to fund their baby boomer lifestyles through the 2000s. He's a tad angry.
Related Topics
In the end, when you look to me and my generation to cast off your own blame and help right your foundering state-of-the-art lifeboat, I promise I will be there. I will never abandon you so long as there is breath in this angry body.
7. Here's another post from the same Gen Xer who calls himself Freedom Guerilla. This one is about how he will donate gold to Haiti rather than cash, because cash can't be trusted any more... HT Craig Gerritsen via email. 
I believe not only People but the whole Earth suffers because of the obligation of debt and where that obligation resides in the human brain. Think hard enough and you will realize there are fantastic things that have been accomplished by borrowing resources from others and cooperating as a community "” life has been nurtured and revered, and harmony has been created. But the American dollar is not a resource nor an energy source. When did we stop being humans and start being "consumers?" If you think you may have a role in targeting and destroying the obligation of debt, then I encourage you to join "Operation Reverse Leverage." The idea is simple: I want to see how much of the world's debt an ounce of gold can eliminate. I want to see what a community can do once they have decided to take action and change the source code of the Economic Matrix, and I want to witness how lives do change and what potential humans actually have.
8. Digging deeper into debt - Britain borrowed an extra 4.3 billion pounds in January when economists had expected it to repay 2.8 billion pounds. Will Britain become the next Greece? Some people are whispering this quietly. Luckily for Britain it is not in the Eurozone and can allow a depreciation to help it out...or have a quiet chat to the IMF. However, Gordon Brown is unconcerned a few months ahead of an election... HT Emma via Googlechat
A sharp rise in government spending and a drop in tax receipts from businesses hit by the deepest recession in decades meant that Britain was unable to post the usual surplus enjoyed in a January, a month when income tax and corporation tax revenues typically pick up. In fact, by the government's preferred measure of the public coffers, there was a deficit last month "“ the first January when the government was forced to borrow since records began in 1993. Britain's own relatively high deficit, its slow growth rate and high inflation have prompted some to speculate it could be the next country to alarm global markets. The pound weakened against the dollar and the euro and British government bond prices fell as January's borrowing shock fuelled worries about Britain's fiscal position. But a Treasury spokesman was quick to stress that the government would meet or even beat chancellor Alistair Darling's borrowing forecasts for the full year. "These figures keep us on track to meet our pre-budget report forecast. With only two months remaining, borrowing including financial sector interventions is at £122.4bn against a full year forecast of £170.4bn," he said.
9. Debt-tastrophe - The New York Post has collated some comments together from Fed rebel Thomas Hoenig into this piece. It doesn't take long for him to start talking about the Weimar Republic's penchant for printing. HT Gertraud via email.
Growing demands on the federal government have invited a massive buildup of government debt now and over the next several years. US fiscal policy must focus on reducing this debt buildup and its consequences. History holds many examples of severe fiscal strains leading to major inflation. It seems inevitable that a government turns to its central bank to bridge budget shortfalls -- with the result being too-rapid money creation and eventually, not immediately, high inflation. German hyperinflation is one classic and often-cited example, and with good reason. When I was named president of the Federal Reserve Bank of Kansas City in 1991, my 85-year old neighbor gave me a German 500,000 Mark note.
10. Just a figment of everybody's imagination - The Onion is strangely on the money on the topic of money. Apparently (wink, wink) Ben Bernanke has realised money is just a symbolic, mutually shared illusion.
What began as a routine report before the Senate Finance Committee Tuesday ended with Bernanke passionately disavowing the entire concept of currency, and negating in an instant the very foundation of the world's largest economy. "Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we"¦if we"¦" said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. "You know what? It doesn't matter. None of this"”this so-called 'money'"”really matters at all." "It's just an illusion," a wide-eyed Bernanke added as he removed bills from his wallet and slowly spread them out before him. "Just look at it: Meaningless pieces of paper with numbers printed on them. Worthless."
Totally irrelevant video - John Stewart has the low-down on Iran's plans to take over the world with a mouse operated rocket.
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Fallout Boy | ||||
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32 Comments
Barclays and Bank of America
Barclays and Bank of America see oil prices above $100 as peakoil starts to bite:
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7266837...
Meanwhile our glorious leaders slavishly prostrate themselves before focus groups and pollster meetings to make sure they don't offend any section of the electorate by playing musical chairs with our taxation system.........
Seems the IMF TINAs are
Seems the IMF TINAs are turning into TARAs and catching up, NZMEA press release:
IMF Report Champions Reality Over Rhetoric - 19 February
The International Monetary Fund (IMF) has released a report called Rethinking Macroeconomic Policy which has challenged assertions that inflation targeting was the best option for world economies, admitting that in light of the economic crisis this policy was wrong. The New Zealand Manufacturers and Exporters Association (NZMEA) say that this report further reinforces the need for New Zealand to move away from the one target one tool approach to monetary policy that has been so devastating to our tradeable sector.
NZMEA Chief Executive John Walley says, "The IMF has admitted what has been clear for some time, that inflation targeting has had appalling consequences particularly for those countries that applied it most vigorously. The countries that have grown most quickly over recent times have been those, such as China and Singapore, who have rejected the monetary policy consensus."
The report also pointed out that smaller countries tended to pay close attention to the exchange rate rather than simply using it to address their inflation target. It noted that, "Their actions were more sensible than their rhetoric. Large fluctuations in exchange rates, due to sharp shifts in capital flows (as we saw during this crisis) or other factors, can create large disruptions in activity."
"Unfortunately under the guise of "˜best practice' New Zealand has embraced the rhetoric and macroeconomic management has been less than sensible," says Mr. Walley. "Little attention has been paid to wild exchange rate fluctuations leading to long term damage to the real economy, growth and jobs."
"Hopefully this report will send a clear message to the Government and the Reserve Bank that "˜best practice' rhetoric needs to be tempered by experience."
http://www.interest.co.nz/ratesblog/index.php/2010/02/18/english-queried...
@ Andy Be careful $100/brl
@ Andy
Be careful $100/brl in 2010 money is no where near the same as $100/brl in 2000. You have to include both the DXY devaluation of 25% and inflation. Three significant figures isn't an indicator of peak oil as much as it is an indicator of fractional reserve oil market manipulation. Until traders are forced to take delivery, price will never be a true indicator of scarcity. Palladium is up over 150% in one year. Does the mean we have reached peak palladium? We need a proper frame of reference.
Be carful that big banks when they use green language to manipulate commodity prices to line their pockets.
John W. most professionals understand
John W. most professionals understand and agree with your issues and concerns, but the problem is, the parties involved in decision making are not sitting at the same table.
Therefore I think the pursuance and achievement of political and economic unity within a nation is a great vision in it selves "“ the best and most important start to deal with the current severe crisis.
Walter
..of many reasons most western
..of many reasons most western societies have to learn to bring back or start a manufacturing culture.
#8 - UK Budget Hole
#8 - UK Budget Hole
That 180 billion pound annual deficit equates to the government spending 500 million pounds (over a billion NZD) per day in excess of what they take in. Day in day out with no end in sight.
These crazy numbers make a mockery of much of the news items/discussions that have taken place over the preceding years. A couple of years back it was front page news when the people building the Olympic village out in Stratford were 50 million or 100 million over budget. There were huge arguments as to who was going to pay (local or national governments) and who was going to be held accountable. It's all chump change and a joke now - Seb Coe can breath easy no matter what the cost over runs between now and the games.
A 500,000 Mark note, pfft!
A 500,000 Mark note, pfft! I have a 100,000,000,000,000 Dollar note framed on my wall. Zimbabwe rocks. :-)
@Troy - I do not
@Troy - I do not base my views on peakoil on what bankers may or may not say - I base it on 10 years research on the subject. However when bankers and industrialists such as Branson (and indeed the UK task force: http://peakoiltaskforce.net/) start waving the red flag it does at least provide an entry point for those who feel the need to have establishment figures on the side of an arguement before they will consider it.
The case for an imminent (next few years) crunch has now become clear - in the abscence of course of a continued recessionary plunge which curtails demand further.
1. The IEA now admit our existing fields are declining at 6.7% per year (http://www.independent.co.uk/news/science/warning-oil-supplies-are-runni...).
2. A 6.7% decline rate means new fields have to come on line every year which are capable of producing around 4- 4.5million barrels of oil per year. This is just so that we can maintain total oil production whre it is now (approx 85million barrels oil and oil equivalents). Thats 4-4.5million barrels of NEW oil each and every year just to keep production constant at what the world consumes now - thats against the backdrop of the continuing global population surge (200 million more people every 6 years) and the hyper expansion of the Chinese economy.
3. Oil projects, particularly the big ones (the so-called megaprojects, which account for the vast majority of total production), have long lead in times (several years). As a result it is possible to estimate fairly accurately how much new oil is coming on stream every year. Oil companies regularly announce this new data.
4. That data is collated here: http://en.wikipedia.org/wiki/Oil_megaprojects
From 2010 onwards the new oil coming on stream falls below that necessary to replace the 4-4.5million barrels needed to maintain global production at 85million barrels per day; by 700,000bpd in 2010, 900,000bpd in 2011 and by nearly 2 million bpd by 2012.
If that isn't an oil crunch I don't know what is.........
Having a bit of trouble
Having a bit of trouble with your figures AH. At 85m bbd that is 31 billion barrels used each year. If we want to maintain current reserves, then surely 31 billion in new discoveries is what we need. Or is the 4-4.5million barrels you talk about per-day production?
Sorry I wasn't clearer: it
Sorry I wasn't clearer: it is production equivalent to 4-4.5million barrels per day extra to make up for the 6.7% decline that the IEA now admit.
In 2010 the megaprojects database lists only 3.2m barrels per day of new production and only 3.1m bpd in 2011. Even allowing for new non-mega field production it therefor becomes increasingly difficult to maintain production at 85mbpd let alone increase it.
AH: I totally agree with
AH: I totally agree with what you are saying. It amazes me that NZ buries its head in the sand so much over peak oil For instance, when the Nats put up the cost of car rego recently, they kept it the same for all vehicles. ie, the same for gas-guzzling SUVs that tow boats off to Lake Taupo as for fuel-sipping 800 cc cars used for shopping trips around town. So no message is sent to the consumer. Europeans who visit us here find that totally amazing.
My 3.1 turbo diesel uses
My 3.1 turbo diesel uses less than my son's 2.0 petrol. However, the argument about resources is moot - we are training each weekend with bows, dogs and bushcraft. What was yours is mine. Your paunch will soon disappear up your economic theory.
Zimbabwe...wage... http://annoyinglycool.files.wordpress.com/200
Zimbabwe...wage...
http://annoyinglycool.files.wordpress.com/2008/12/zimbabwe-cash-inflatio...
"Our big four banks here
"Our big four banks here have assets worth about 200% of NZ GDP"
You make it sound like the 4 banks are twice the size of the NZ economy. NZ's assets are far more than it's GDP. It would be more logical to compare the Banks' revenues to GDP.
Joseph Stiglitz on Obama’s Stimulus
Joseph Stiglitz on Obama's Stimulus Plan, Debt, Climate Change, and "Freefall: America, Free Markets, and the Sinking of the World Economy"
http://www.democracynow.org/2010/2/18/nobel_economist_joseph_stiglitz_on...
Some intelligent comments from Stiglitz,
Some intelligent comments from Stiglitz, IMO, but still can't/wont acknowledge that debt is the problem NOW - it's always sometime in the future. Does he seriously believe that government "investment" in waste money schemes and bridges to nowhere is going to bring any sort of economic return?
Total credit market debt in the US is heading for 400% of GDP, debt servicing at 7% would require 28% of every dollar earned! Total debt to GDP declined from 1934 to 1950, was increasing gently to 1980 and has since exploded.
Until Stiglitz can explain how debt to GDP can be bought down without plunging the world into depression or hyperinflation and chaos his "solution" of more debt should be seen for what it is - complete nonsense.
This graph says it all, horrendous.
http://1.bp.blogspot.com/_iP2-ePwdHM4/SNfo53x4cHI/AAAAAAAAAVI/gpAC-NyMpp...
Finally, an establishment economist that
Finally, an establishment economist that knows what the hell he's talking about:
Albert Edwards from Societe Generale
"My own view on this is that obviously we should never have got into this wholly avoidable mess in the first place. But having got here, there really is no way out that does not trigger a major market-moving upheaval.
"Ultimately economic prosperity over the past decade has been a sham: a totally unsustainable Ponzi scheme built on a mountain of private sector debt. GDP has simply been brought forward from the future and now it's payback time. The trouble is that, as the private sector debt unwinds, there is no political appetite to allow GDP to decline to its 'correct' level as this would involve a depression. So burgeoning public sector deficits and Quantitative Easing are required to maintain the fig-leaf of continued prosperity"
After enduring the sickening, childish, green with envy nonsense from John Key and Don Brash, a little digging around has revealed that the Aussie "economic miracle" is just a bloody great ponzi scheme.
Result; they're now saddled with the highest private debt to GDP in the world outside Iceland!
Now you can't tell me that they don't know this or what a rise of that magnitude over the decades will do to stimulate the economy. So what's all this catching up with Australia BS about then?
We know Don Brash would like to see the minimum wage reduced to below subsistence levels as one of the measures to increase our prosperity, yes you read that right. What's the next step; complete debt peonage and foreign ownership and control by his banker mates?
I think the emergent popularity
I think the emergent popularity of economic literacy is a very very good thing. I'm 43 which makes me in fact a GenXer. I was lucky enough to slip through the boomer created economic worm hole collapse on the coat tails of the last boomers which could arguably make me in effect a boomer by default. However I deliberately downsized and eliminated my mortgage due to a state of bewilderment about the inexplicable increase in house prices and the associated madness. Since then I have read and read and read everything from Money Whence it Came and Where it Went by John Kenneth Galbraith to Wealth of Nations by Adam Smith. All the while enjoying many of the Blogs frequently referenced here. All in an attempt to understand the hidden forces that rule our lives.
My heart goes out to those of my generation who did not slip through the worm hole and find themselves saddled with student debt, low career prospects and an environment of low wages and elevated prices. Don't give up I say. Wait, save, prepare. Find a way to keep your life on track even if it necessarily excludes many of the things the Boomers took for granted. Keep reading and learning. Keep you eyes open for opportunity. It will come.
Well posted David and Simon.
Well posted David and Simon.
Societe Generale have an excellent in-house 'independent' economic analysis team, and have been trumpeting the message for over a year now ( see example linked below). Given that the disaster of Jerome Kerviel in January 2008 put them into the poo earlier than most, it gave them chance to prepare the best.
http://www.telegraph.co.uk/finance/economics/6599281/Societe-Generale-te...
Excellent David, So refreshing to
Excellent David,
So refreshing to read from people with their heads in 'reality' instead of the shit the majority hear everynnight on their giant TV on the wall saying "all is well" "growth, growth, growth" "worst is over" lets get out there and spend more money we don't have that's been pulled from the FED's bottomless pit.
I can deal with ANY crisis, I just can't deal with ignorance and delusion and there's plenty of it still going around. Some just don't quantify the gravity of the situation. The financial world as knew it is history. Capitalism is dead UNTIL these 'debt' issues are dealt with and MAN is it going to hurt.
@troy: $100 in 2000 or
@troy: $100 in 2000 or $100 in 2011 makes no odds, the key number is what that "$100" means in terms of a % of GDP, US GDP is way down so $100 is likely to send the US economy into another hard recession...ie in today's terms anything above $80US a barrel is a risk to recovery...
In terms of speculators they can only make money where a resource is scare...
http://www.businessinsider.com/a-close-look-at-opec-strategy-reveals-tha...
"Then, in 2003-04, the escalating oil demand of China and India gave OPEC its opportunity, and they took advantage of it. What about speculation? In the diagram, in the background to the price movements from 1991 to the beginning of the new century, there was plenty of speculation, with smart speculators registering excellent incomes and bonuses; but from 2003 speculators - or traders as they prefer to be called - did not have to be particularly smart. What they had to do to make serious money was to recognize that demand was outrunning supply, and one of the reasons for this is OPEC and its agenda becoming the determining factor on the supply side of the oil market, which they still are!
Unlike the situation when I wrote my oil book, the futures market now occupies a pivotal role in the pricing of oil (for reasons that cannot be discussed in this short note), but if the actions of speculators or /traders or dealers in physical oil have not been validated by fundamentals, a price movement of the steepness shown in the diagram could not possibly have happened! "
@andy hamilton: Does the megaproject
@andy hamilton:
Does the megaproject incl Iraq? I dont think it doe.....yet....however that probably still means a bit of s hole 2012~2105 before Iraq's production starts to seriously ramp up...even then seeing 8mbpd let alone the 12 they claim seems a bit OTT...
A bit of a hole then a plateau isnt that bad....some nice shocks to focus ppl that we need to move to alternatives and then get some time to do so is hopeful....
regards
"Even allowing for new non-mega
"Even allowing for new non-mega field production it therefor becomes increasingly difficult to maintain production at 85mbpd let alone increase it."
Which makes me wonder why some of the so called experts see 95 or even 105mbpd....a 12~20% increase from somewhere....within 2 years....like no way.
regards
"on their giant TV" Another
"on their giant TV"
Another good reason not to get one....
I wonder on the day when the voter finally realises the growth to prosperity lie told to them my successive Govns is what it is, a ponzi scheme while their mates get rich....
At that point the so called super rich could find their so called riches severly impacted by a new Govn's retrubution....and no I dont think the so called super rich will just go elsewhere because a) it will be a global phenominum and b) its pointless being rich if you cant spend/flaunt it....so 16 Ferraris on say the Cayman Islands or some other third world enclave with a tax free status doesnt cut it when you cant get petrol or much else...So running away isnt going to do them much good....
regards
NB I should add this isnt what I want but what I see happening...at least in the extreme....
Les Rudd - Walley is
Les Rudd - Walley is well named. Another growth exponent.
Troy- Palladium? That's what we're funding on the never-never in Dunedin. A cross between a palace and a stadium, right?
Philly - if you 'get' the peak oil thing, how come you don't get the physics of where we have to go, presuming no global war?
Energy per capita will clearly be some (reducing) fraction of what we currently enjoy. I just had a reasonable crack at seeing what was possible, without dropping out of society altogether. I guess you should add in the 10kw from my wet-back, though....
Couple of good articles in the SST, Findlay McDonald and Rod Oram. Both are what J.T.Paul would have called 'humanist', so they skirt the truth with optimism somewhat...
Great pic of Brownlee though - says it all. You could say he exemplifies the last blast of a bankrupt ideology, but 'idea' is probably giving it too much cred....
@Pete: "Then surely 31 billion
@Pete: "Then surely 31 billion in new discoveries is what we need." You cant get 100% of the oil out.......so needed per day is "NET"....so roughly 62Billion per year every year....look up when that much per year was found....
regards
lunch at fleur,s wednesday?
lunch at fleur,s wednesday?
The cod's heads are awesome.....
The cod's heads are awesome.....
But don't quota me :)
it,s all good no drama
it,s all good no drama
Just keep practicing those scales????
Just keep practicing those scales????
bit of the small world
bit of the small world going on here--i grew up in your neck on the woods in a village to the north that has a state forest named after it-- i still have family there .i left in the early 80s
cheers
I know a few fishermen
I know a few fishermen who call for 'Herbert' when it gets a roll on.