Author Archives: WARREN MOSLER

Reuters: House rejects selling 10% of SPR

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Just saw that the house just rejected this.

Looks like it was one more reason for technical weakness in crude, along with the vote to limit speculation and the oil storage company’s futures and cash market issues and bankruptcy.

White House threatens veto on bill to sell govt oil

by Tabassum Zakaria

(Reuters) The White House on Thursday threatened to veto legislation that would require the government to sell 10 percent of the oil in the nation’s emergency petroleum stockpile.

The House of Representatives was expected to vote on the bill later on Thursday. Democrats hope the legislation will lower oil prices by putting on the market more of the Strategic Petroleum Reserve’s light, sweet crude that is sought by refiners.

“Drawing down our emergency oil reserve in the absence of a severe energy disruption is counter to the purpose of the SPR, and offers the nation a quick fix instead of much needed long-term, responsible energy solutions,” the White House said in a statement.

The bill would require the government to sell 10 percent of the emergency stockpile’s oil, or 70 million barrels, in the open market. About 40 percent of the stockpile’s oil is light sweet crude.


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2008-07-24 US Economic Releases

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Initial Jobless Claims (Jul 19)

Survey 380K
Actual 406K
Prior 366K
Revised 372K

4 week moving average up a few thousand and drifting higher.

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Initial Jobless Claims – 4 Week Moving Average (Jul 18)

Survey n/a
Actual 382.5
Prior 378.0
Revised n/a

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Continuing Jobless Claims (Jul 12)

Survey 3160K
Actual 3107K
Prior 3122K
Revised 3116K

But these are now coming down some.

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Existing Home Sales (Jun)

Survey 4.94M
Actual 4.86M
Prior 4.99M
Revised n/a

Less than expected, and bumping along the bottom as foreclosures dominate.

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Existing Home Sales MoM (Jun)

Survey -1.0%
Actual -2.6%
Prior 2.0%
Revised n/a

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Existing Home Sales YoY (Jun)

Survey n/a
Actual -15.9%
Prior -17.5%
Revised n/a

Still falling but not quite as fast.

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Existing Home Sales – Median Price (Jun)

Survey n/a
Actual 215.1
Prior 207.9
Revised n/a

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Existing Home Sales – Inventory (Jun)

Survey n/a
Actual 4.490
Prior 4.482
Revised n/a

Foreclosers addind to inventories.

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Existing Home Sales ALLX (Jun)

Median prices up in all regions.

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Existing Home Sales ALLX cont (Jun)


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Buy this book!

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Full Employment Abandoned

Shifting Sands and Policy Failures


by William Mitchell, Professor of Economics, Centre of Full Employment and Equity, University of Newcastle, Australia and Joan Muysken, Professor of Economics, CofFEE-Europe, University of Maastricht, The Netherlands

My review:

There are only 2 books that I know of that are ‘in paradigm’ and the other is Wray’s ‘Understanding Modern Money’ which I also highly recommend.

This new book by Bill Mitchell is also solidly ‘in paradigm’ and for those of you not all that interested in the details of unemployment per se I suggest beginning with ‘Part III’ which does an outstanding job of outlining the imperatives of non convertible currency which will serve you well in analyzing today’s markets. From monetary operations to fiscal measures, the mainstream economists and media continue to get it wrong. Bill lays down the fundamentals that can help you understand where the mainstream goes astray, and hopefully translate into you getting it right.

Regarding unemployment (aka the ‘output gap’ by today’s central bankers), it is readily acknowledge that inflation isn’t all that sensitive to changes in unemployment. In their words, “The good news is that the Phillips curve is flat. And the bad news is that the Phillips curve is flat.” The essence of what Bill proposes is that an employed labor bufferstock is a far superior price anchor than today’s labor bufferstock of unemployed. And this is one of those things that seems obvious and indeed is absolutely correct, yet entirely overlooked as a policy option.

So click and order a copy or two, jump to Part III, and then start at the beginning to get a leg up on where we are, how we got here, and what policy options are open- particularly a form of full employment that further supports output, growth, and price stability.

Then pass it around your office and send copies to your favorite members of Congress, thanks!

Order now: http://www.e-elgar.co.uk/Bookentry_Main.lasso?id=1188
 
 
Warren Mosler
 
 
 
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Publisher’s Spiel:

“This book by William Mitchell and Joan Muysken is both important and timely. It deals with the issue of the abandonment of full employment as an objective of economic policy in the OECD countries. It argues persuasively that macroeconomic policy has been restrictive over the recent, and not so recent past, and has produced substantial open and disguised unemployment. But the authors show how a job guarantee policy can enable workers, who would otherwise be unemployed, to earn a wage and not depend on welfare support. If such a policy is fully supported by appropriate fiscal and monetary programmes, it can create a full employment with price stability, and which the authors label as a
Non-Accelerating-Inflation-Buffer Employment Ratio (NAIBER). This book is essential reading for any one wishing to understand how we can return to full employment as the normal state of affairs.”
-Philip Arestis, University of Cambridge, UK

Contents:

Part I: Full Employment: Changing Views and Policies

  1. The Full Employment Framework and its Demise
  2. Early Views on Unemployment and the Phillips Curve
  3. The Phillips Curve and Shifting Views on Unemployment
  4. The Troublesome NAIRU: The Hoax that Undermined Full Employment

Part II: Full Employment Abandoned: Shifting Sands and Policy Failures

  1. The Shift to Full Employability
  2. Inflation First: The New Mantra of Macroeconomics
  3. The Neglected Role of Aggregate Demand

Part III: The Urgency of Full Employment: Foundations for an Active Policy

  1. A Monetary Framework for Fiscal Policy Activism
  2. Buffer Stocks and Price Stability
  3. Conclusion: The Urgency of Full Employment References Index


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( Commercial Paper + C&I ) * Outstanding

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Summation of Commercial Paper Outstanding AND Combined Commercial and Industrial Loans Outstanding

Combined commercial and industrial loans and commercial paper show a leveling off after the initial drop.

Back in mid 2006, I remember commenting that I thought the government deficit was no longer high enough (given everything else that was going on) to support the credit structure.

The last push up was largely a product of fraudulently obtained sub prime and Alt-A loans.


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Reuters: Lehman cuts oil demand forecast

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Lehman cuts oil demand forecast

by Richard Valdmanis

(Reuters) Investment bank Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) said Wednesday it slashed its forecast for 2008 world oil demand growth due to a steeper-than-expected slowdown in energy consumption in the United States and other OECD countries.

Lehman added it believes the oil market is “approaching a tipping point” with prices expected to decline to an average of $90 a barrel in the first quarter of 2009.

“We now forecast annual oil demand for 2008 at 86.3 million barrels per day, a growth of 790,000 bpd from 2007. The growth has been revised down from projections of 1.5 million bpd in December,” Lehman said in a research note titled ‘Demand Demolition’.

If true, and non-Saudi supply remains about flat, Saudi production might fall to about 9 million bpd and the price would still remain wherever the Saudis set it.

There has been some talk that the Saudis may have agreed to lower prices after the last round of meetings with US officials. Could be, but with their output running within a million or two bpd of their total capacity, it seems doubtful they would do anything to increase demand before they have the excess capacity to meet it. But there could be other factors (including the US 7th fleet and concerns about a united Iran/Iraq threatening them) that might be influencing their decision. Only time and prices will tell. Should be more clear in a week or so.


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2008-07-23 US Economic Releases

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MBA Mortgage Applications (Jul 18)

Survey n/a
Actual -6.2%
Prior 1.7%
Revised n/a

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MBA Purchasing Index (Jul 18)

Survey n/a
Actual 335.6
Prior 359.7
Revised n/a

A zig down and looking soft. Tables below show largest drops are in applications for adjustable rate mortgages, particularly government mortgages.

Also, I recall JPM’s recent earnings report showed a substantial increase in consumer mortgage lending, which could be taking volume from the mortgage bankers surveyed in this report.

Housing may be leveling off and moving up some, but no signs of actual strength yet.

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MBA Refinancing Index (Jul 18)

Survey n/a
Actual 1392.7
Prior 1474.9
Revised n/a

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MBA TABLE 1 (Jul 18)

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MBA TABLE 2 (Jul 18)

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MBA TABLE 3 (Jul 18)

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MBA TABLE 4 (Jul 18)


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Fed Paper: “The Effect of the Term Auction Facility on the London Inter-Bank Offered Rate”

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Hardly need a study to figure that out!

This paper from the NY Fed was just released:

The Effect of the Term Auction Facility on the London Inter-Bank Offered Rate

Summary: This paper examines the effects of the Federal Reserve’s Term Auction

Facility (TAF) on the London Inter-Bank Offered Rate (LIBOR). The particular question investigated is whether the announcements and operations of the TAF are associated with downward shifts of the LIBOR; such an association would provide one indication of the efficacy of the TAF in mitigating liquidity problems in the interbank funding market. The empirical results suggest that the TAF has helped to ease strains in this market.


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2008-07-22 US Economic Releases

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ICSC-UBS Store Sales YoY (Jul 15)

Survey n/a
Actual 2.5%
Prior 2.2%
Revised n/a

Still wiggling their way higher as fiscal kicks in.

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Redbook Weekly YoY (Jul 15)

Survey n/
Actual 2.6%
Prior 2.7%
Revised n/a

Also working its way higher.

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ICSC-UBS and Redbook Comparison TABLE (Jul 15)

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Richmond Fed Manufacturing Index (Jul)

Survey -9
Actual -16
Prior -12
Revised n/a

Big dip puts it back on its downtrend.

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Richmond Fed Manufacturing Index ALLX (Jul)

Big drop in shipments,
interesting up tic in wages.

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OFHEO House Price Index MoM (May)

Survey -0.8%
Actual -0.3%
Prior -0.8%
Revised n/a

Better than expected, still down, but seems to be falling at a slower rate.

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OFHEO House Price Index YoY (May)

Survey n/a
Actual -4.8%
Prior -4.6%
Revised n/a

Rate of decline seems to have diminished some. So far, year over year changes for this price range doesn’t seem that severe.

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OFHEO House Price Index TABLE (May)

Several regions showing gains.

Unless commodities take a very large dive, the Fed needs an output gap in housing to keep a lid on overall prices.

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ABC Consumer Confidence (Jul 20)

Survey -42
Actual -41
Prior -41
Revised n/a

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ABC Consumer Confidence TABLE (Jul 20)


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AMEX/CAT

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Karim writes:

AMEX notes consumer spending slowed in latter part of quarter, suggesting effect of fiscal impulse waning. CAT driven by emerging market strength, states U.S. and Europe are two weakest regions, and expects rate cuts by Fed and ECB by year-end.

AMEX

  • Consumer spending slowed during the latter part of the quarter and credit indicators deteriorated beyond our expectations,” Mr Chenault said. The economic fallout was evident even among American Express’s prime customers.

CAT

  • CATERPILLAR SEES ECB CUTTING RATES AT LEAST 25BP BEFORE YR END
  • CATERPILLAR SEES NO SIGN OF RECOVERY IN NORTH AMERICAN HOUSING
  • CATERPILLAR ASSUMES AT LEAST ONE MORE RATE CUT LATER THIS YR
  • CATERPILLAR SEES ‘DIFFICULT’ FOR ECONOMY TO AVOID A RECESSION
  • CATERPILLAR SEES OIL PRICE AVG ABOUT 16% HIGHER IN LAST HALF
  • CATERPILLAR SAYS 2Q SALES/REVENUE UP 30% OUTSIDE NORTH AMERICA
  • Caterpillar Net Rises 34% as Asia, Mideast Building Lift Sales
  • Caterpillar Reports All-Time Record Quarter Driven by Strong Growth Outside North America

    • Right, weak domestic demand for sure. But note the last few lines that represent the booming exports even though domestic economies around the world are slowing.

    That’s what happens when they spend their accumulated hoard of USD here and spend less at home as they try to get rid of their USD hoards. This doesn’t stop until their holdings of USD fall to desired levels.

    I still see continued domestic weakness with GDP muddling through due to exports and government spending.

    And ever higher prices pouring in through the import/export channel.


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