The Center of the Universe

St Croix, United States Virgin Islands

MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for March 30th, 2012

Saudi price setting

Posted by WARREN MOSLER on 30th March 2012

Saudi Oil Minister: There’s No Shortage of Supply

By Amena Bakr

March 1 (Reuters) — Top oil exporter Saudi Arabia sought to soothe fears about high oil prices, saying on Tuesday world supplies were well in excess of demand and that $125-a-barrel crude prices were not justified given the anemic state of the world economy.

Cleverly trying disguise their role as swing producer/price setter.

Saudi Oil Minister Ali al-Naimi said the kingdom had satisfied all of its customers’ requests for oil and stood ready to raise output to full capacity of 12.5 million barrels per day (bpd), if needed.

Yes, at their posted prices. That’s how monopoly works. The monopolist sets price and lets quantity demanded adjust.

“I want to assure you that there is no shortage of supply in the market,” Naimi told reporters at a press briefing in Doha, Qatar. “We are ready and willing to put more oil on the market, but you need a buyer.”

As the only nation with said excess capacity, they are necessarily swing producer/price setter.

Oil is trading above $123, just $24 short of an all-time high, as tighter Western sanctions on Iran threaten to slow the country’s exports.

“Oil prices today are unjustifiable on a supply and demand basis,” said Naimi. “We really don’t understand why the prices are behaving the way they are.”

Oh really? How about because that’s where you are setting your prices?

Try lowering your prices by $10 and see what happens?

He said supply of oil was now out-pacing demand by more than 1 million bpd and that customers were not asking for extra crude.

Right, at their posted prices.

“From our point of view, we have had no customer not satisfied. We have satisfied every request for every customer that has come asking,” said Naimi. “We ask the customers, ‘Do you need more?’ and invariably the answer is ‘No thank you.’”

Yes, that’s how monopoly works.

Riyadh is now pumping 9.9 million bpd – the highest in decades – and is willing to produce at full capacity of 12.5 million bpd immediately, should demand warrant, Naimi said. He said he expected output next month to stay at 9.9 million bpd.

Saudi spare production capacity now stands at 2.5 million bpd, he said.

And no one else has any spare capacity to speak of.

“We spent a lot of money building that capacity. We finished building it in 2009, and it is there to be used,” said Naimi.

Yes, they would like more demand at their posted prices.

How hard is this to understand?

The risk now is that WTI converges to Brent when the new pipeline out of Cushing starts flowing, which will be June 1 last I heard.

Storage inside the kingdom was full and Riyadh was holding about 10 million barrels outside of Saudi Arabia in Rotterdam, Sidi Kerir and Okinawa, he said.

“Our inventories both in Saudi Arabia and worldwide are full.”

Posted in Oil | 55 Comments »

NORWAY OIL FUND TO CUT EUROPE BOND HOLDINGS TO 40% FROM 60%

Posted by WARREN MOSLER on 30th March 2012

Rats leaving the sinking ship…

NORWAY OIL FUND TO CUT EUROPE BOND HOLDINGS TO 40% FROM 60%

Posted in Bonds, EU | 2 Comments »

Was Quantitative Easing A Tax?

Posted by WARREN MOSLER on 30th March 2012

Good to see someone telling it like it is!

Was Quantitative Easing a Tax?

By John Carney

March 29 (CNBC) — In the last of his four lectures to students at George Washington University, Ben Bernanke explained how the Fed’s quantitative easing programs worked. As it turns out, they were akin to a tax hike.

This aspect of government asset purchase-and-resale-for-profit programs is not well understood. I explained it in terms of a Treasury program last week.

A tax takes dollars out of the private sector, leaving households and businesses with fewer dollars and the government with more dollars. When the government buys something for $10 and sells it back to the private sector for $12, the net effect is the same as if the government had taxed away those $2.

Bernanke doesn’t come out and call quantitative easing a tax. But he comes close.

“The Fed’s asset purchases are not government spending, because the assets the Fed acquired will ultimately be sold back into the market. Indeed, the Fed has made money on its purchases so far, transferring about $200 billion to the Treasury from 2009 through 2011, money that benefited taxpayers by reducing the federal deficit,” he explains in one of the prepared slides.

Here’s a good rule of thumb. If something reduces the federal deficit, it is either the equivalent of a spending cut or a tax hike.

Posted in Deficit, Fed | 27 Comments »