First Bear Stearns, and now the agencies confirm the government is there to ‘write the check’; so, I expect credit spreads to continue to narrow over time.
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Warren B speaks at lunch time during an economic conference.
Completely unedited.
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more inflation.
Prices are up due to short supplies due to biofuels and weather.
And the political response is handing out funds to those in need, even though that doesn’t create more to eat.
As previously discussed, governments have no choice but to step on the inflation pedal.
Whether it be for food support payments or financial sector support.
That’s how ‘democracy’ works.
(And democracy is way better than the second choice!)
World Bank’s Zoellick: Food prices high until 2012
by Alexandra Hudson
World Bank President Robert Zoellick said on Saturday he expected food prices to remain above 2004 levels until at least 2012 and energy prices would also remain high and volatile.
He repeated that with food and fuel prices in a “danger zone” there was a need for $10 billion to provide food and cash handouts for the world’s poorest.
Soaring oil and food prices have fueled inflation across the globe at the same time as economies slow, posing a sharp dilemma for lawmakers.
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Totally misguided regarding public purpose.
For one thing, the shareholders of the agencies are still there for ‘market discipline’ – all that’s been done for them is eliminated liquidity issues, not solvency issues.
At the end of the day a lot of houses were built for a lot of people who live there.
These are real assets and real standards of living that have been supported.
Is anyone arguing it’s a waste of real resources? That’s the real issue.
Also, fiscal policy is all about demand management, not a ‘pretty’ balance sheet by some arbitrary standard.
And, of course, without the fundamental understanding that the funds to pay taxes and buy government securities comes from government spending policy is likely to be suboptimal at best.
Also, note the bias towards ‘inflation’ that’s built into the political process.
This all supports prices and GDP.
There are no supply side constraints on government spending and/or lending with floating fx, unlike the gold standard of 1907/1930, and other fixed fx regimes, past and present.
Time for comrade Paulson to pull the plug on the Fannie and Freddie charade
by Willem Buiter
Are Fannie Mae and Freddie Mac adequately capitalised, as asserted recently by US Treasury Secretary Hank Paulson, Federal Reserve Board Chairman Ben Bernanke and their regulator Office of Federal Housing Enterprise Oversight Director James B. Lockhart III? The answer is: obviously not, if these two government-sponsored enterprises of the US federal government had to make a living on normal private commercial terms. Obviously not if they were subject to the market discipline preached by Paulson and Bernanke, but not practiced when it comes to large financial institutions perceived as systemically important (too large or too interconnected to fail) or too politically sensitive to fail.
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The monetary system will burn up the world’s food supply for fuel until the marginal individual about to starve to death has enough political influence to stop the process.
I’m pretty sure that’s not the millionth one to die of starvation. And probably not the ten millionth.
As more and more acreage goes to biofuels, expect the real price of food to continue to rise.
Lula and Indonesian president pledge biofuel cooperation
by Zulhefi
(AFP) Brazilian President Luiz Inacio Lula da Silva and his Indonesian counterpart pledged cooperation on biofuels during talks here Saturday in a bid to take advantage of surging oil prices.
Lula and President Susilo Bambang Yudhoyono signed off on an agreement to share knowledge on biofuel technology after meeting at Jakarta’s presidential palace.
The Brazilian leader called spiralling global commodity prices a “great opportunity” for developing countries such as Indonesia and Brazil, both of which are major producers of biofuel.
“The developing countries that have the characteristics that Indonesia and Brazil have should not analyse this crisis as only a problem. We have to see this moment as a great opportunity,” Lula said.
“We have land, we have sunlight, we have water resources, we have technology and, thanks to God, the poor of the world have started to eat more, three meals a day, so they will demand more food production.”
The two leaders signed memoranda of understanding that would see the countries exchange experts and students to share knowledge on biofuels. Yudhoyono will also make an official visit to Brazil in November.
“In the energy sector, both countries are cooperating in the field of alternative energy. Brazil has succeeded in developing bio-ethanol and Indonesia can learn from Brazil to develop bio-ethanol,” Yudhoyono said.
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| Survey | -$62.5B |
| Actual | -$59.8B |
| Prior | -$60.9B |
| Revised | -$60.5B |
Seems to be working its way lower, but rising import prices are a moving target.
Without CBs and monetary authorities buying to help their exporters, I don’t think the rest of the world wants to accumulate $60 billion a month of financial assets, which means the USD will continue to fall and US prices will continue higher until the real trade gap falls to desired levels.
| Survey | n/a |
| Actual | -$26.636B |
| Prior | -$25.724B |
| Revised | n/a |
This has come down quite a bit and should continue to fall over time.
| Survey | n/a |
| Actual | 17.8% |
| Prior | 19.6% |
| Revised | n/a |
Booming!
| Survey | n/a |
| Actual | 12.5% |
| Prior | 13.6% |
| Revised | n/a |
Working their way to lower rates of increase, even with energy prices rising.
| Survey | 2.0% |
| Actual | 2.6% |
| Prior | 2.3% |
| Revised | 2.6% |
‘Inflation’ pouring in through the open window.
| Survey | 18.6% |
| Actual | 20.5% |
| Prior | 17.8% |
| Revised | 18.8% |
Inflation pouring in through the open window.
| Survey | 55.5 |
| Actual | 56.6 |
| Prior | 56.4 |
| Revised | – |
Inflation hurting confidence even as current conditions have improved some.
| Survey | n/a |
| Actual | 5.3% |
| Prior | 5.1% |
| Revised | n/a |
Fed considers this reason for alarm.
| Survey | n/a |
| Actual | 3.4% |
| Prior | 3.4% |
| Revised | n/a |
Way too high for the Fed and going the wrong way.
| Survey | $34.0B |
| Actual | $50.7B |
| Prior | $27.5B |
| Revised | n/a |
Haven’t seen the detail. This can be very volatile due to timing issues.
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Warren B speaks at lunch time during an economic conference.
This video is completely unedited and will be released in four parts.
Enjoy!
:)
The world has enough actual issues without tossing in a few contrived ones.
The fact that the ratings agencies will actually do this also testifies negatively to their state of knowledge while there is no threat of solvency, there is a threat of downgrades and secs getting cheaper by a few basis points, as happened in Japan.
And, worse, as the government has the same fears as the ratings agencies that there is risk of counter agenda policy decisions for the wrong reasons.
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| Survey | 395K |
| Actual | 346K |
| Prior | 404K |
| Revised | n/a |
| Survey | 3140K |
| Actual | 3202K |
| Prior | 3116K |
| Revised | 3111K |
Karim writes:
Initial claims down 58k to 346k; number distorted by seasonal adjustments related to expected annual maintenance at auto factories.
Claims number was adjusted to anticipate more seasonal layoffs in autos than occurred. When the expected add back doesn’t occur as expected, claims should return to prior level, all else being equal. Labor department official states the decline ‘a question of timing’,
Yes, it all comes out in the wash, but it takes a while; so, the 4 week moving average is a more useful indicator.
4wk avg drops to 380.5k from 390.5k.
Continuing claims jumps 91k to new cycle high of 3.202 million, highest since 12/03.
Higher continuing claims reflects lack of hiring and is related to longer duration of unemployment (and likely more tepid wage demands from those looking to find a job).
Also, with productivity running higher than GDP growth, by definition that means the growing real output can be accomplished with slightly fewer workers.
Twin themes remain: weakness due to lack of demand and higher prices due to higher costs of fuel/food/imports.
The numbers also show business would rather hire people already working than the unemployed, so the long term trend of more and more persistent long-term unemployment continues.
See ‘Full Employment and Price Stability‘ for ‘the answer’ and also the ‘base case’ for analysis.
| Survey | 3.3% |
| Actual | 4.3% |
| Prior | 3.0% |
| Revised | 2.9% |
Way better than expected. Hard for mainstream economists to believe fiscal policy will do much. They put their faith in interest rates, which never have done much, at least not in the intended direction.
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Small consolation – declining real terms of trade helping insurers.
Progressive Gains as Record Gasoline Curbs Driving
by Erik Holm
Americans are driving less for the first time since 1980, data compiled by the Federal Highway Administration show. The rate of accidents per insured vehicle fell 0.5 percent in the first quarter from a year earlier after increasing in 2007, according to Insurance Services Office Inc. in Jersey City, New Jersey.
“We may be at a very special point where things have changed dramatically,” Progressive Chief Executive Officer Glenn Renwick said at an investor meeting last month.
Americans drove about 20 billion fewer miles during the first four months of 2008, down 2.1 percent from a year earlier, according to the Federal Highway Administration in Washington. Progressive of Mayfield Village, Ohio, was the top performer on the 24-member KBW Insurance Index during the three months through yesterday, gaining 21 percent.
The number of drivers probably fell again in May when gas prices approached $4 a gallon, said Meyer Shields, a Baltimore- based analyst at Stifel Nicolaus & Co.