STOCK MARKET WATCH, Tuesday 10 February (#1)

[ozymandius]

Tuesday February 10, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 349
REICH-WING RUBBERSTAMP-Congress = DAY...
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 60 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 112 DAYS
WHERE ARE SADDAM'S WMD? - DAY 324
DAYS SINCE ENRON COLLAPSE = 808
Number of Enron Execs in handcuffs = 17
ENRON EXECS CONVICTED = 2
Other Arrests of Execs = 53

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES




AT THE CLOSING BELL ON February 9, 2004

Dow... 10,579.03 -14.00 (-0.13%)
Nasdaq... 2,060.57 -3.44 (-0.17%)
S&P 500... 1,139.81 -2.95 (-0.26%)
10-Yr Bond... 4.07% -0.02 (-0.59%)
Gold future... 407.40 +3.20 (+0.79%)

DOW..........................NASDAQ.......................S&P

||


GOLD, EURO, YEN and Dollars


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

[ozymandius]

1. WrapUp by Jim Puplava - Looking For The Next Bubble

Inflation is Everywhere

<cut>
On Main Street the average Joe is finding it harder and harder to maintain his current standard of living. More Americans are going deeper into debt each month to pay their bills. They are making use of extraordinary low interest rates on home mortgages to extract equity out of their homes to make ends meet. Households are also using credit cards to supplement spending each month as personal income and job growth has not kept pace with the rise in prices. The public is told that inflation rates are extremely low, but each month they must reconcile the difference between what they are told and the higher billing statements they receive each month.

<cut>
What Causes Inflation?

Ask the average person on the street or query financial professionals and you’ll find very little understanding of where inflation comes from or where it originates. Most individuals define inflation as rising prices. They speak about symptoms rather than cause. If inflation is simply rising prices, then what causes it? You’ll find that inflation is attributed to many sources--none of which are accurate. The common misperceptions by policymakers and the public is that inflation has three principal causes:

Let's Get This Straight

Definition
However, there is irrefutable evidence that government is the source of all inflation. An undue increase in the quantity of money is what stands behind a rise in prices. The source of all money or credit is government. Thinking of inflation only in terms of rising prices is similar to looking at the symptoms of a disease rather than the disease itself. A more exact definition of inflation would be an increase in the quantity of money and credit relative to available goods resulting in a substantial and continuing rise in the general price level, an increase in the quantity of money caused by government.

What We Can Expect

[UpInArms]

6. I am so glad that someone finally put this information out

Grocery prices at the supermarkets are up over 50% over the last three years. Service costs from the local dentist and the family doctor to the local plumber are all up double digits. Medical premiums are starting to skyrocket again and the cost of sending junior to college requires more equity extraction and second mortgages to pay for tuition. On a day-to-day basis, the cost of just about everything the family needs keeps going up. Yet, Washington and Wall Street keep telling households that inflation rates remain low. They are low because government statisticians have removed price increases from the cost of most goods by counting quality improvements as price reductions.

This "no inflation" line has been bothering me for a long time.

[Frodo]

8. Why is "the government the source of all credit"?

I didn't realize I was getting government permission every time I made a loan.

[UpInArms]

10. that "permission" comes in the form of

interest rates.

[Frodo]

11. Ahhh. I see. A bit of hyperbole there.

They can affect (but not dictate) the "price" of our product and therefore some of the demand for the product. Presumably this affects the supply.


That isn't quite the same thing.

[UpInArms]

12. no -

the "supply" comes in the form of printed money - easily accessed by banks -

the treasury notes and bonds that are sold with 2 - 5 - 10 and now 20 years "redemption" periods.

you are borrowing and the government is printing and it is "selling" its bonds (with the BoJ intervening and "buying") and China buying (keeping the reminbi tied to the dollar -

so that's where the money is "printed" and you go and "borrow" by using your credit cards or taking out "home improvement" loans or other vehicles.

As long as you borrow and "spend" the borrowed money (buying imported products) those treasury notes keep getting printed and the money supply expands -

see:

http://money.cnn.com/2004/01/27/commentary/bidask/bidask/

But it also has something to do with supply. Washington passed a big fiscal stimulus package last year which still hasn't worked its way entirely through the system. More important, the Fed has brought the fed funds rate to a 40-year low and has given no indication that it's going to lift it anytime soon. Certainly not at its meeting this week.

It's an incredibly inflationary monetary policy, one that seeks to put as many dollars in the economy as possible. Other countries, loathe to see their currencies rise too much, have taken to printing enough money to absorb this supply. The result is that they've ended up with the same easy-money policy as the United States. Whether that policy is really what their economies need is an open question.

I thought you worked at a bank - do you not understand where they "get" their money?

[Frodo]

13. Sorry, that isn't quite right.

"Printed money" is a tiny portion of the money supply. Most money is "created" right here at your local bank.

Let's put it this way:

If the government passes a law saying all cars must have built-in NBC protection at a cost of $20,000 per car they would dry up a whole bunch of demand for cars (and destroy the fuel efficiency standards at the same time).

What they would NOT be.... would be "the source of all automobiles"

And if they got rid of all regulation and let manufacturers build really really cheap cars without airbags or crumple zones or fuel efficiency? The "price" (in dollars if not in lives) would go way down and sales would go way up. And they would still not be the "source" of all automobiles.

The ability to regulate a thing... or change the price of a thing... is not the same thing as "creating" a thing. The government IS occasionally in the credit business, but almost always on the borrowing end.

[UpInArms]

16. let's try this again

banks are given a "credit" ability based on the amount of assets that are in their portfolios -

loans are assets
checking and savings accounts are "liabilities"

when housing prices increase - loans are in greater denominations - making the assets greater

when interest rates are low (set by fed), saving is discouraged

when interest rates are low, borrowing is encouraged

so lower balances in checking and savings reduces the "liabilities" of a bank

borrowing increases the loan portfolio (assets) of a bank

so then the more "assets" a bank has, the more money that the fed makes available to that bank for "loaning" once again - this creates a bubble of debt - increases the money supply

this works as long as people keep spending (borrowing) and that works as long as people keep paying (at least the minimum monthly payment) on those bank "assets" -

the bubble bursts when those assets are foreclosed (en masse) and they become the item that secures the loan (i.e. real estate) because real estate owned by banks is not an asset - it is a liability - it is not a loan and requires maintenance and taxes paid (all outgo) and does not have the ability to make money (interest) and is subject to taxes (more liability)

[Frodo]

20. A few corrections

Banks have a maximum lending authority to any one customer based on the asset size of the bank. BUT, they don't have a total "credit" ability based on assets (that's circular since, as you pointed out, the loans ARE the assets), but based on deposits - either ours or deposits borrowed from someone else.

so then the more "assets" a bank has, the more money that the fed makes available to that bank for "loaning" once again

And again, the Fed does not make money available for us... it makes CASH available for us (and we pay for it). Not quite the same thing. The government doesn't GIVE us money to lend out... YOU do.

because real estate owned by banks is not an asset - it is a liability -

It's a "liability" in the sense that we don't want it and are not in the business of selling it and can't expect to get full value for it... but it is NOT a "liability" on the balance sheet. It's still a asset.


Your example sounds more like the relationship mortgage companies have with Fannie Mae (though still incompletely, since Fannie doesn't create money and banks do).

If what you are speculating is that a massive devaluation of collateral occuring at the same time there is a massive national default on credit... would be a bad thing for banks? This is news? but there ahs been no sign of that happening or hints of it on the horizon.

[UpInArms]

23. how banks "create" money

through the Federal Reserve:

http://money.howstuffworks.com/fed3.htm

[Frodo]

24. A little simplistic, but it looks about right. So tell me...

... what in there do you think disagrees with what I said?



BTW - I love the image of the bank sucking up all the money.

[UpInArms]

31. Why is "the government the source of all credit"?

http://www.businessweek.com/magazine/content/01_41/b3752707.htm

When Federal Reserve Chairman Alan Greenspan gathers his colleagues in the central bank's stately boardroom on Oct. 2, there's no doubt about what they'll do: cut interest rates. The widely expected cut would be the second in two weeks and would lower short-term rates below 3% for the first time since the 1960s. Even more important, it would cut real rates, after adjusting for inflation, to zero. In the world of economics, that's equivalent to free money.

http://www.newyorkfed.org/aboutthefed/fedpoint/fed45.html

Reserve Requirements and Monetary Policy
Reserve requirements, the discount rate (the interest rate that Federal Reserve Banks charge depository institutions for short-term loans), and open market operations (the buying and selling of government securities) are the Fed's three main tools of monetary policy. There is a continual flow of reserves among banks, representing the ever-changing supply and demand for these reserves at individual banks. When the Fed engages in open market operations, it adds to or subtracts from the supply of reserves. The effectiveness of the Fed's actions result from the reasonably predictable demand for reserves that is created by reserve requirements.

http://www.321gold.com/fed/temp_bank_res.html

(shows daily intervention through the selling of "securities")

so where is this all going, you ask?



The National Debt has continued to increase an average of $1.77 billion per day since September 30, 2003

[Frodo]

34. Sounds to me like they do a great job...

... of credit DEBT. Not credit.

When the government spends more than it brings in it borrows money (created debt). When it issues treasuries it is doing the same thing (ok it IS the same thing).

The people who loan the money (who BUY the treasuries) - you perhaps? THEY are the ones who granted credit.

[UpInArms]

35. who's buying treasuries?

http://www.forbes.com/business/newswire/2004/02/10/rtr1253556.html

Traders cheapen US Treasuries for three-year sale

http://www.forbes.com/business/newswire/2004/02/10/rtr1253556.html

02.10.04, 9:19 AM ET

NEW YORK (Reuters) - Treasury prices drifted lower Tuesday as traders prepared for the first leg of the U.S. government's $56 billion quarterly borrowing binge.

Treasury sells $24 billion of new three-year notes at 1.00 p.m.. Typically traders will try to cheapen prices ahead of the refunding to attract customer demand.

On this occasion, it has proved difficult to push prices down too far since one or more Asian central banks have been persistent buyers of U.S. Treasury debt, using dollars bought through currency intervention.

The Bank of Japan in particular has intervened massively in recent weeks, buying over $60 billion in January alone, and expectations are high that some of this cash will find its way into this week's refunding.

"The talk is the BOJ is standing in the market right now holding dollar/ yen up," said one trader at a U.S. primary dealer. The dollar fell broadly after the weekend meeting of G7 ministers produced no concrete agreement on restraining the currency's decline.

...more...

[54anickel]

90. "The government doesn't GIVE us money to lend out... YOU do"

I am confused by that statement. What did you mean by "securitize" it in this previous post?


http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=102&topic_id=338433#338735

Most of the additional debt you're bemoaning (incorrectly from a economic standpoint but VERY correct from a personal finance standpoint) is financed by the Mortgage industry (which doesn't lend out deposited dollars - they securitize it) and the credit card industry (which does securitze some and finance with deposits some), but it's an increasingly specialized part of the banking industry.

[Frodo]

92. I think that was re: a couple credit card companies.

Fannie Mae and Freddie Mac don't actually take in deposits and loan money out the way a bank does. They package groups of similar mortgages into bunches and sell them just like bonds/treasuries. They tend to act very similarly to a 10-yr treasury security in terms of payout over time (people don't usually hold 30yr mortgages for 30 years.)

Of course there is more risk associated with mortgage securites than treasuries (default risk of the underlying mortgages to the extent collateral value exceeds real market value at foreclosure - but that's why these loans are never for more than 80% of a home's value, it would take a massive crash to destroy more than 20% overall), so they pay a higher return.

A couple credit card companies have started to do the same thing. They are no longer "banks" in the sense that they loan out deposits. They "securitize" bundles of credit card assets into something very like a bond. They essentially borrow the money to loan out to the credit card customers. Some people find this attractive because of the much higher rates they pay, but (as I suspect you would guess), the default rate on credit cards is MUCH higher and MUCH more variable... so these securities are much riskier. There is some measure of protection in that the rates are also much higher and they can absorb a pretty hefty loss ratio and still pay out the expected income.

It effectively shoves part of the risk involved in credit card lending out to the investors (while giving income investors another -higher paying - option) and takes it off the back of the "bank".

The practice is not acceptable in my mind. But I don't get to make the rules.

[54anickel]

93. So who and how is the you in YOU do in your response to UIA?

I am trying to understand, since banks no longer lend out my savings (according to that earlier thread) who's the YOU?

[Frodo]

97. I'm sorry. There's some confusion.

In the case of a handful of credit card companies it isn't "your money" that is being lent out (though you or people like you probably own those securities directly or indirectly - it isn't the same thing).

I don't personally consider there handful of specialized lenders to be "banks" in any real sense. There just isn't a financial-services category for them yet.

BUT, in the case of "real" banks, it's still your deposits that fund the loan portfolio. (Keeping in mind that some banks do things differently - there is some latitude in A/L management).

[54anickel]

99. Thanks for that clarification. I was confused as I thought the earlier

post was saying banks did not loan out my money on deposit.

[54anickel]

32. Yep, the Monetarist/Neo-classical theory. Where the supply and

velocity of money drives the economy and interest rates. Uncle Milty's theory. Only works if all the players use the same rules. Now that we are a "Global" economy, it's not working as well. The EU doesn't buy the idea. Part of why they have a more strict policy of deficits. Back in '99 they were hoping Shrub would be the saviour and join with them and the UN to work on a Bretton Woods II, where the value of money would be determined by a basket of commodities.

We are attempting to force the world to play by our rules as it is the only way the dollar can continue in it's role as the world's reserve currency. The idea of BW II was pretty much tossed out by Bush-co. I do believe that the threat of a change was one of the reasons he continually played the irrelevance of the UN. Funny how the first major meeting for discussions was set for the fall of 2001.

JMHO

[Frodo]

37. You get upset at me every time I draw a parallel between ...

... your posts and a certain other poster - so I won't get in to "world's reserve currency" etc except to say that your beginning summary is almost backwards to my belief.


But I will ask you this question:


Now that we are a "Global" economy, it's not working as well. The EU doesn't buy the idea. Part of why they have a more strict policy of deficits.

Please compare the current state of the US economy to that of Europe?

[54anickel]

38. Deficit limits.

[Frodo]

39. Sorry, I meant "compare the current state of"... oh wait...

That IS what I said. :-)

Deficits (how are France & Germany doing with those limits?), Unemployment (I thought that was THE issue), GDP growth, etc. etc. etc.

[UpInArms]

41. no - the question was

where does the money supply come from

http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

[Frodo]

43. No, The question was

Why is the government "the source of all credit". You can't redefine the terms so that the question makes your point for you.

And the more immediate question he dodged was a comparison between the economies in Europe that were implied to do be doing something right and the US economy.

If they are the model we should follow, surely they are having better results, right?

[aneerkoinos]

50. better results

of course depend on the measure used and thus is also a matter of taste.

Economy does not mean only material wealth any more than actual standard of living is about GDP/capita. Generally, IMHO, European economies produce better standard of living, but as said, that is a matter of taste.

US is showing better numbers, but what to think of them since US numbers are mostly bogus (inflation, unimployment etc) and very uninformative conserning the real state of matters (whatever that is). I don't think euro numbers are as bogus as US numbers, but don't ask me to give evidence.

Even if the numbers have a relevant meaning, they are short term numbers and tell nothing about the long term risk of global financial meltdown US economic policies are producing. In this sense Europe's fixation on such foolish ideas as "stability", as in controlling the real inflation and less intervention in the financial markets than the Fed's "no risk and sugar on top" PPT-policy, IMHO, are having better results.

[54anickel]

57. Hi Aneerkoinos,

:hi: Glad to see you stopping by. Always like to see your take on what's happening in Europe. You always seem to have a grasp on what's going on over there. Is that where you are from?

[aneerkoinos]

63. Yup,

Finland. In economics total diletant, most education from reading the this daily thread :D.

[Frodo]

58. Your third paragraph makes quite a bit of sense.

(Though the difference in deficits is not all that substantial.)

The first two paragraphs break down semantically to:

"I FEEL like they are doing a better job. No data supports this, but I feel it anyway."

Awfully tough to argue with that. Though UpInArms has valuable insight for you on post#40. :-)

[54anickel]

60. That was one of the scariest statements, to me anyway, that old Ben

could have made.
IMHO it showed complete arrogance on the Treasuries part. While it may be true, it can also been seen as abuse of our status as the World's reserve currency.
I think he ticked off a few nations with that remark. Even more so with Bush-cos appearance of wanting "Empire" status.

[54anickel]

45. France and Germany are not doing well with their deficit limits.

That was part of the point. The limits were set based upon their beliefs, theories, etc. But they are being sucked in, with the rest of the world to continue on the same path, as for the time being it is the only path. Naturally, their GDP, UE, etc will be similar since they are still following the same monetary ideology as the US and the rest of the world.

I was not attempting to state that their ideas were better, rather that there is now a difference of opinion on how monetary policy should be addressed by different areas of the world. The ME and Asia have their own beliefs as well. There is no longer consensus.

Europe is having it's own social issues as they fight immigration, they have a growing aging population in proportion to the working population, more social programs, etc.

There is disagreement that the US way is the correct way and only way. This is how things begin to change and evolve. That was the point.

Look at the history of monetary policy, it does change. If the current theory no longer works, it will evolve as it has in the past. The differences of beliefs and opinions are the first steps. There is less confidence in the current system. Should it fail or be perceived to be failing it will change.

[Frodo]

46. Ok.

Sorry. Guess I missed you point.

[aneerkoinos]

55. Stability packt

True, France and Germany are not in their deficit limits, but the real problem is not their deficits, which while problematic, are under controll and the actual numbers are not far from what the Commission says they should be under stability packt. The real problem is who is The Boss in Europe, Commission and little fiscally more responsible countries or Counsil, the big countries and fiscally more irresponsible countries. Counsil won the first round, but Commission is suing and putting up a real fight, which I think is a fun thing. Go EU, down member state govenements! :D

[54anickel]

62. It is facinating to watch, but hard to understand from the outside.

I cheer for the more fiscally responsible, but that is just based on my "feelings" and beliefs. It is hard for me to get a grasp of what's happening "on the streets" from the outside. My understanding of what's really happening is limited to what gets reported. Don't get that insiders view.

[aneerkoinos]

56. stability pact

True, France and Germany are not in their deficit limits, but the real problem is not their deficits, which while problematic, are under controll and the actual numbers are not far from what the Commission says they should be under stability packt. The real problem is who is The Boss in Europe, Commission and little fiscally more responsible countries or Counsil, the big countries and fiscally more irresponsible countries. Counsil won the first round, but Commission is suing and putting up a real fight, which I think is a fun thing. Go EU, down member state govenements! :D

[UpInArms]

40. are you aware

that just because you "believe" something, that "belief" does not necessarily equate with "truth" -

belief systems are merely tools that your mind or emotional state require to give an illusion or reality of safety - they do not necessarily reflect a nature of truth or even a nature of falsehood.

If you look really deeply within yourself, you may find that there are many things that people have "believed" that have, when given facts, failed to hold up -

remember when the common knowledge was that the earth was flat?

almost backwards to my belief

[Frodo]

42. Whoa....."way deep" dude!

"belief systems are merely tools that your mind or emotional state require to give an illusion or reality of safety "

Pass the pipe around the rest of the room.

Ok, I'd accept most of that as axiomatic. Are you trying to imply that YOUR beliefs are "reality" while mine are "illusion"?



Is there a connection between your post and my question?

My point was that you misstated my position (not a big deal since I had not GIVEN my position on some of those issues involved).

[UpInArms]

44. your "position"

seemed to state that the government did not "produce" or "manufacture" money -

The implication was that only a "good" or "service" manufactured "money".

Reality is not quite like that. It is a wonderful assumption, but it is not "true".

I have not suggested that I "believe" anything - I have always said that I am merely a witness to the events.

You used the word "belief" in regard to the monetary system.

It is a "fact" that fiat money is valued only in "faith and good will" - when that fails, what will be its value?

On a side note - I have no pipe (fact) and do not use any substance that would alter my mental capacity - so cannot "pass the pipe around" - am sorry that you feel a need to have something that would give you such a sense of detactment from reality.

[Frodo]

48. I didn't mean anything by the pipe comment.

I was merely commenting on the "all we are is dust in the wind" feel to the post. It reminded me too much of intro Philosophy classes.

[UpInArms]

51. glad to have that cleared up

and since you have now implied that you have at least the rudimentary philosophy 101 under you belt, perhaps we can return to discussing monetary issues that affect everyone's lives instead of delving into your psyche.

[Frodo]

54. I doubt it

:-)

[54anickel]

49. Production is simply used as an input when "guessing" whether to

increase or decrease the money supply. If the money supply grows faster than production, you have inflation. If it grows slower than production, you have inflation. At least according to Say's law, one of the principal theories of supply-side economics.

Based on our reports of "low inflation", Mr Greenspin must have it just right. :eyes:

[UpInArms]

52. yes, the briefing.com cheerleaders

did say that the other day with the "goldilocks" comment - how everything that Greenspin did was "just right" - and I guess since the Snowjob is not concerned about our falling dollar, we should go back to watching Janet's boob, Scott's trial and get out and pick up the new Sports Illustrated Swimsuit Issue!

[54anickel]

53. Yep. Pay no attention to that man behind the curtain.

The "Wizard of Oz" was written as a parody of the monetary policy of it's day. Perhaps a new fictional story of today's policies is in order.

[54anickel]

85. Doh! Too late to edit - clarification

If the money supply grows faster than production, you have inflation. If it grows slower than production, you have deflation.

(Oops, that attention deficit thingy again)

[Frodo]

86. Thank goodness!

I'm sitting here thinking "wasn't that the Baptist fellow?" and trying to wonder WHAT I had missed that implied you caused inflation either way you fell off of GDP vs. money supply.

[54anickel]

88. No, that was Friedman's belief.

"Inflation is always and everywhere a monetary phenomenon"

[Frodo]

91. Friedman, I take it...

...has never visited Japan?

[54anickel]

94. Got no idea. But if he did, he would have told them to inflate their

way out. That is what some economists feel that Greenspin is doing right now.
Theory being that deflation feeds upon itself and spirals ever downward. It is better to run the risk of inflation and deal with that as the theory of deflation has never been put to the real world in the US and US monetary policy.
The mystery of deflation and the lack of a roadmap to deal with it was part of the speech by Ben Bernanke that UIA posted somewhere in this thread earlier today.

[Frodo]

98. They tried as hard as they could.

Their central bank lowered their discount rates to ZERO. They were giving it away for free.

It didn't work.

[54anickel]

100. But they were not expanding their money supply then (inflating) they

are now, and spending those freshly minted yen to buy dollars as they continue their currency market interventions.
That's why Snow gave them that "pat on the head" last week. They are now playing by "our rules". Borrow, borrow, borrow, spend, spend, spend - "fiat" currency and ever increasing deficit.

[mbperrin]

15. Surely your bank is regulated by the authorities, is forced to be

a member of the Federal Reserve, is forced to be a member of the FDIC, is subject to legal reserve requirements, the Fair Credit and Reporting Act and a host of others?

Quit doing those things and see how long you're making loans.

Yes, you operate at the sufferance of the federal government.

[JNelson6563]

19. Exactly!

One would think a "banker" would know this....

Julie

[Frodo]

22. Reply to both of you. DUUUHHH!!!

Just as any regulated company survives as the whim of the regulators. The government could put GM out of business tomorrow by requiring them to only build tanks, or bicycles. But let's talk reality.


The regulations we operate under are all there for the public good and almost every one of them works quite well (though not all banks have to be members of the federal reserve as stated, they do fall under almost all applicable regulations anyway).

My point is not how wonderful banks are (though we ARE :-) )
It was merely a response to the idea that the government is the source of credit. See my example above (for cars) - regulating a thing does not make you the creator of the thing.

[54anickel]

25. "Gov't could put GM out of businesss...."

Funny, that's exactly what they did to Waukesha Engine during the war. Made them one of the largest and most viable company and employer in the state. And talk about pent up demand for their original products as the demand for tanks went down.

[Frodo]

28. Aren't you clever...

Yes, if the government forces somebody to build something actually in demand they are bound to make money at it. My point was that they can ALSO require them to do something stupid (like requiring all banks to charge at least 50% on loans and pay 0% on deposits.) They CAN drive them right out of business. Government DOESN'T do that, because it isn't stupid (current resident excluded).

[mbperrin]

26. Right! The regulator is not the creator. Banks are ALLOWED to

create a government good- fiat money; this works because the government has declared which money is acceptable and which not and has set up strict guidelines for the production of their good by the private contractors who do it for them.

Banks are subcontractors to the government money machine. Money is created by the government. Try this: issue bills or loans in the name of the First National Bank of Wherever Note rather than Federal Reserve Notes or US dollars.

This should clear up the confusion.

[Frodo]

29. Ok, call it whatever you like.

I only objected to the idea that the government is the source of credit. It isn't. Even money isn't REALLY created by the government, because just printing money leads to inflation that causes the money that is out there to be worth less (or "worthless"). The money has to actually be associated with some production or there isn't really anything "new" created - just split more ways. But if I loan you money to buy a car that you would not buy without the loan? THEN we're "creating" money because production has gone up in step with the increase in the money supply.

BTW - I get your point, but remember that banks used to issue their own currency all the time - it worked just fine. It just isn't effective in an economy this size.

And you can slam the currency as if "fiat" is a horrible thing... but I hate to break it to you... ALL currency is "fiat money". There is no such thing as the "real money" the gold bugs are always touting. ANYTHING used as currency is worth what people agree it is worth. Gold's inherent value is no different from any other commodity... it's value as "money" is no greater than what people would trade for it.

ALL money has always been a fiction. It's just a useful fiction.

[mbperrin]

33. I never criticized fiat money. Money is just that - a creation of

will; certainly it's not connected to production; it's connected to the Federal Reserve and thier judgment of what money is needed to accomplish the twin goals of containing inflation and creating jobs, which was delegated to them by Congress to fulfill its duties to create and maintain a money system by the Constitution.

Bank notes actually didn't work well - that is why we have the system we have today.

And please don't "whatever" me - I had 17 years in bank operations and a degree in economics, which I currently teach, including money and banking.

Thanks.

[Frodo]

36. Not connected to production? Uh oh!

certainly it's not connected to production

It had better be! To the extent the supply of money grows or shrinks out of whack with the production of goods and services - you've got problems.

I didn't mean "whatever" as a snub. (Sounds like our resume's are quite similar btw). I was just saying you had moved on to correct statements that were tangential to the conversation. Sure the government ALLOWS banks to create money. That doesn't change the fact that the bank IS creating it.


And there wouldn't be a problem issuing loans in other currencies. It would just involve a type of risk banks (US banks at least) are not equiped to handle (and one I credit for a big part of the fall of the japanese economy).


What part of the country were you in and who do you teach for now?

[mbperrin]

59. I'm in Texas.

I teach in a brick high school and a click college.

All those other currencies also exist because of the governments there. I was speaking of the bank actually creating its own.

I must reiterate that the Fed makes their decisions based on fighting inflation and creating jobs - that is their charter; they can use any basis they like, and I would submit that production is not the largest. After lunch, I'll get some links for that.

Good. Thanks. See yall later.

[mbperrin]

64. Here's the latest from the FOMC:

http://www.federalreserve.gov/boarddocs/press/monetary/2004/20040128/default.htm

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 1 percent.

The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period confirms that output is expanding briskly. Although new hiring remains subdued, other indicators suggest an improvement in the labor market. Increases in core consumer prices are muted and expected to remain low.

The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. With inflation quite low and resource use slack, the Committee believes that it can be patient in removing its policy accommodation.

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.

2004 Monetary policy

<Inflation and employment, as mandated.>

[UpInArms]

65. without an increase in rates,

the dollar will continue slip sliding away

current dollar index (courtesy of the BoJ's morning intervention):

Last trade 85.86 Change -0.14 (-0.16%)

[KoKo]

47. I have Pimco Funds in 401-k, I imagine some others here do also. Reading

the article linked from Puplova's own article sent me into a panic. I hope I'm wrong because wading through any article talking about high risk investments (futures, etc.) and bonds, etc., etc. always gives me a headache. I understand stocks and have not had problems in investing in them but have always had a terrible problem with bonds and bond trading.

Anyway, I got the impression that Gross is saying his PIMCO funds might just one day decide not to purchase any more debt. Now if our own American Bond Funds stop purchasing and the BOJ stops purchasing it seems that maybe being in ANY bond funds at all is NOT a good place to be in the coming years.

Wondered if anyone here had some experienced insight on bailing out of bond funds because they may be very risky. If I understood Gross's article that seemed to be a point he was making very carefully, but cautioning, nevertheless. When the most sucessful Bond Fund in the US (Pimco) is cautioning it's investor's then I've got to believe there's something I need to do about this since I will need my 401-K investments to live on at some time in the future.

Maybe I just misread it?

[UpInArms]

61. I know nothing about bonds

but this is what I received from the Daily Reckoning on January 22, 2004

- Should bond investors sell the rally?... "Yes," says the
"Bond Man," Bill Gross of PIMCO.


- "Bill Gross is paid more than $40 million a year to
manage the world's biggest bond mutual fund," explains
colleague Steve Sjuggerud, editor of True Wealth. "Gross is
ultimately responsible for $350 billion in bonds. (That's
billion with a 'b'.) They call him 'The Bond Man' and 'The
Warren Buffett of Bonds.' For good reason... Gross has
beaten 95 percent of his peers since his PIMCO Total Return
Fund started in 1987. Funny then, that Bill has sold a
chunk of his own retirement money out of his famous bond
fund."

You can make whatever of that you can - Julie is much better with the bond markets - maybe she will check in later and answer your question.

[KoKo]

68. Thanks for passing that along. It does seem dire if Gross is bailing out.

I hope Julie will stop by. :-)'s

[54anickel]

73. JULIE!!! STOP BY OVER HERE!

Hey KoKo and UIA,
Sorry to butt in, but thought this might help catching Julie's attention on her return.
:evilgrin:

:hi: Hi Julie, didn't mean to scare you with that shout or anything.
:9

[54anickel]

74. Oops, Never Mind - already did.

:P

[JNelson6563]

78. haha! I found you!!

:hi:

[54anickel]

82. Sure am glad these threads are mapped out at the top!

Helps to navigate the many conversations taking place in here today.

:hi: Right back at you. Or is it Tag, You're It!

[KoKo]

87. Well, 54 that "Hollar"....did the trick. Now I will check out what

Julie says. Thanks! :hi: It is a little confusing here today with all the threads.

[JNelson6563]

70. Supply & Demand, like always

Look at the regular Treasury auctions. They are pretty regular and raise a lot of $$. The governement needs lots and lots of it so I foresee no slow-downs in the near future.

If BOJ and institutional investors quit buying all that debt, well there will be a serious glut on the market. Like anything when supply is large and demand is small, value decreases.

If you are invested in Treasuries you will want to keep a close ear to the tracks on this. I'd watch the BOJ like a hawk and articles like you are refering to are worth seeking out.

In their favor, Treasuries generally represent a safe port in a storm when there is a flight to quality. If things go awry on the Street, could be good for Treasuries.

Like I said, I'd just watch closely. I'll also add, no need to panic. Stay as current as possible though so you'll know when it is time to panic. ;-)

Julie

[KoKo]

89. Thanks Julie. Question though......When are "treasuries not safe?"

If the debt is so great that US is borrowing just to pay interest on it then how in the world could US Treasuries be safe if our Government becomes unsound due to Bush & Co's totally irresponsibility. If Japan bailed out, wouldn't our treasuries be worthless? Because who would buy them at what price? And, how would the government pay the owners of the funds that bought them back with interest on their investment if they are worthless for lack of buyers. Wouldn't they be just worthless pieces of paper or maybe the Govt. could force a cut in rates meaning that just to get any of one's money back out of the bonds one would have to take a big loss? That's what worries me. A partial default on paying back what the bond owner is entitled to. I can see Bush doing this. Heck if it get's that bad with the mess left by this admin., I can see a Dem President having to do this.

I guess it all depends on how much confidence one in the US Govt. at this point....and with Bush....it's nil for me that he has a clue about what his policies are doing to the financial health of our country.

[JNelson6563]

96. I'd just watch closely

much depends on variables. Japan is a biggie of course. It'll depend entirely on how inticing other investments are. If things begin looking grim on the stock front Treasuries could benefit. I think, and mind you this is opinion only, the REAL money, as in the top 1%, will seek fortune expansion abroad if it gets too hot in America.

If you are invested in Treasuries I'd watch them closely. I share your level of confidence in this government. :toast:

Julie

[UpInArms]

2. daily dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 85.50 Change -0.50 (-0.58%)

related articles

http://www.forbes.com/markets/newswire/2004/02/09/rtr1252996.html

Dollar struggles, market acts on lack of G7 help

TOKYO, Feb 10 (Reuters) - The dollar hit an 11-year low against the pound on Tuesday as the market acted on the G7's failure to agree coordinated action to stem its decline.

The pound spiked to a new 11-year high of $1.8635 while the euro edged up about 0.4 percent to around $1.2735 It hit a two-week high of $1.2765 on Monday on a perception that the Group of Seven nations are unlikely to make any joint efforts to curb the dollar's fall against the euro.

<snip>

"Some people are considering the chance of European intervention," said Kimura of Shinkin Bank. "So they are buying the British pound and the Australian dollar instead."

Others think the dollar will continue to fall given the huge U.S. current account deficit and the prospect of continued low interest rates in the United States.

"The G7 didn't provide any clear direction. In other words, the gradual decline in the dollar is likely to continue," said Kenji Kobayashi, a senior manager at the foreign exchange and treasury division at Bank of Tokyo-Mitsubishi.

...more...

and

http://www.forbes.com/home_asia/newswire/2004/02/10/rtr1253367.html

Dollar sees broad slide as markets shrug off G7

LONDON, Feb 10 (Reuters) - The dollar slipped to one-month lows against the euro and multi-year lows versus the pound and Australian dollar on Tuesday as markets continued to shrug off a Group of Seven warning against excess currency volatility.

Investors doubted the Group of Seven (G7) nations would intervene collectively in foreign exchanges to address concerns about "disorderly movements in exchange rates" they expressed at the weekend.

Low U.S. interest rates and long running concerns about the U.S. current account deficit remained good reasons to sell greenbacks for the Aussie and British pound, which offer much more attractive yields, while the euro gained almost by default.

<snip>

"What the market is focusing on in terms of the U.S. recovery is jobs growth, which hasn't been seen yet, and also the prospect for interest rate rises from the Federal Reserve," said Gothard at Brown Brothers Harriman.

...more...

It appears that now we are watching to see if Greenspin does raise the interest rates. Yeah, right. Election years for the GOP don't have rate hikes; they have rate cuts. With nowhere to run and nowhere to hide, Greenspin will just find some gobbledee gook speak that means nothing and the markets with go "oooooo aaaaaaa oooooooo" like it's the 4th of July - while the dollar plummets and Snowjob wanks off.

Great 'toon, Ozy! I hope that the shifting sands of rationale become the quicksand of this mal-administration.

Have a Great Day Marketeers!

[ozymandius]

4. Good morning UIA and everyone!

:donut: :donut: :donut: :donut: :donut: :donut:

Nice tandem posting with you about the dollar. I saw this story last night at the NYT and knew that it was ripe for discussion here. What do you think this will do to Wal-Mart's dominance should all their Chinese imports suddenly jump in price. We all know how paranoid they are about paying more for the goods they sell.

[UpInArms]

7. since the

value of the dollar means absolutely dooda to this mal-administration, our fed will probably give them a few billion dollar bail-out (courtesy of the US taxpayer) because they are "struggling".

Isn't that what we do here in the Corporate States of Amerika?

After all, we just can't sit idly by and let the "premier shopping forum for stupid people" take a loss on operations, can we?

Oh my, the hand wringing that we shall watch will be devasting!

[ozymandius]

3. China Is Said to Consider Revaluing Its Currency

BEIJING, Feb. 9 - A report in an influential Chinese financial newspaper has fueled speculation among bankers and economists that the Chinese government is considering revaluing its currency over the next few months.

The report, which appeared in the weekly China Business Post over the weekend, quoted unnamed Chinese central bank officials as saying the government may allow the currency, the yuan, to rise by as much as 5 percent in value against the dollar as soon as March.

<cut>
The official Xinhua News Agency reported on Monday that China might tie its exchange rate to a set of 10 currencies, weighted to reflect their respective importance in China's trade and investment inflows.

story

[54anickel]

14. Wow, as soon as March? I was guessing mid-year from earlier reports

When they speak of a 5% band, does that mean 2.5% in either direction? That's how I've been taking the .03% they have now, as the current changes have been pretty negligible.

When they do begin to allow a bit more float, will that make our deficit rise? 120 billion up to 123 billion at 2.5%? Or as the dollar falls, doesn't it take more dollars to pay the deficit?

I know the mantra is a lower dollar makes our exports less expensive so we sell more, the thing is what have we got left to sell compared to what we buy? The big export that helped last month was aircraft, what else have we got left to sell that could make a dent in the deficit?

The Treasury wants them to float the yuan (along with most other currencies that peg to the dollar). But by making imports more expensive and exports and domestic goods cheaper, who really pays besides the middle class that buys housewares? I only see it creating higher prices for consumers at this point.
:shrug:

[JNelson6563]

5. Mornin' Marketeers!

haha! Great Toon Ozy! <snarf> You always find good ones.

So it looks like the dollar is taking a severe beating. Ouch! Seems to me Team Bush is leading us right over a cliff.

Snowing here like crazy and I have a meeting shortly. Overthrowing the government is very time consuming. ;-)

Will check back later.

Julie

[Maeve]

9. Jobs, Jobs, Jobs

Wanted to make sure the Marketeers saw Krugman's column today:

Last Friday the Bureau of Labor Statistics delivered yet another disappointing employment report.

Since there's a lot of confusion on this subject, let's talk about the numbers. The bureau actually produces two estimates of employment, one based on a survey that asks each employer in a random sample how many workers are on its payroll, the other on a survey that asks each household in a random sample how many of its members are employed. Most experts regard the employer survey as more reliable; even in the midst of the recovery, that survey has contained nothing but bad news. The household numbers look better, but not particularly good.
more

[ozymandius]

17. Dr. Krugman deserves to be more than a columnist and educator.

Or perhaps he is. I do hope that people instrumental to the formulation of national policy pay attention to him. His method of extrapolating the lines of Bush fiscal policy to their final convergence is indeed frightening. I would rather policy makers err on the side of restraint and responsible economic policy than the current popular path.

[JNelson6563]

72. It would be cool if they made him one

of the people who formulate policy.

Julie

[JNelson6563]

18. Good to see you Maeve!

Ah yes, the dreaded job front. Ugly business.

7 minutes in, which way will the Street go?

DOW 10,565.85 -13.18 (-0.12%)
Nasdaq 2,062.53 +1.96 (+0.10%)
S&P 500 1,139.59 -0.22 (-0.02%)
10-Yr Bond 4.079% +0.014

Julie

[ozymandius]

21. 9:58 numbers and blather

Dow 10,578.66 -0.37 (0.00%)
Nasdaq 2,064.85 +4.28 (+0.21%)
S&P 500 1,140.98 +1.17 (+0.10%)
10-Yr Bond 4.073% +0.008

Stocks Open Flat Ahead of Greenspan

NEW YORK (Reuters) - U.S. stocks opened near the unchanged mark on Tuesday as investors examined a report from Viacom (NYSE:VIAB - news) that it plans to spin off its stake in Blockbuster Inc. (NYSE:BBI - news) and looked for direction in the market.

Investors are waiting for Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites)'s planned testimony before Congress on monetary policy and the economy on Wednesday.

very short

[ozymandius]

27. 10:41 numbers 'Zzzzzzzzzz'

Dow 10,573.33 -5.70 (-0.05%)
Nasdaq 2,065.89 +5.32 (+0.26%)
S&P 500 1,140.78 +0.97 (+0.09%)
10-Yr Bond 4.096% +0.031

[Frodo]

30. When do we expect a wakeup call?

Will the G7 be making any statements? Or will it be a whisper?

[54anickel]

66. Numbers at 2:10

As this thread is named Stock Market Watch, thought maybe we'd best take a peek.

Dow 10,612.74 +33.71 (+0.32%)
Nasdaq 2,072.51 +11.94 (+0.58%)
S&P 500 1,146.02 +6.21 (+0.54%)
10-Yr Bond 4.106% +0.041

And blather:

2:00PM: If today's market action were a prize-fight, it would be in danger of being called on account of boredom as the indices have held in tight ranges for most of the afternoon... Accordingly, you may have picked up on the fact that today's comments are a bit on the redundant side...
We aplogize for that, but it is a function of the market being handcuffed by the Greenspan testimony and a general lack of market-moving news items outside of OPEC's surprise decision to cut its production quotas by 1.0 mln barrels per day beginning April 1 (i.e. April Fool's Day, which seems only fitting given OPEC's propensity to cheat)... Crude futures currently up $0.71 at $33.54...NYSE Adv/Dec 1978/1232, Nasdaq Adv/Dec 1790/1331

[aneerkoinos]

67. Opec to cut production

"ALGIERS (Reuters) - OPEC on Tuesday agreed a surprise cut in supplies from April, propelling world oil prices higher and drawing a caution from the United States not to hurt economic growth.

The deal slices four percent from production limits for the group that controls half the world's oil trade to 23.5 million barrels a day, effective April 1.

Ministers said the Organization of the Petroleum Exporting Countries would also immediately eliminate 1.5 million barrels a day of leakage being pumped above existing supply quotas.

Oil prices rose on the pact, a repeat of last September's unexpected supply reduction.

U.S. crude by 1700 GMT (noon EST) was up 59 cents at $33.45 a barrel, valuing OPEC's reference basket well above the group's preferred $22-$28 target range. "

SNIP

"``It is our hope that producers do not take actions that undermine the American economy ... and American consumers,'' said a spokesman for the White House."

more...
http://news.moneycentral.msn.com/breaking/breakingnewsarticle.asp?feed=OBR&Date=20040210&ID=3377938

Why is it called surprise cut? Because the oil consumers wished they wouldn't and habitually present wishfull thinking as insider rumours and news?

[54anickel]

69. Yep, pretty much. The pundits were calling for no change.

Wishful thinking doesn't make it so.

http://www.dailystar.com.lb/business/07_02_04_d.asp

snip>
“With few expecting any outright support for the dollar, we could see renewed weakness in the greenback come Monday, which in turn could provide strength to the commodity complex in general,” said Edward Meir of Man Financial.
Average oil prices, based on US light crude futures, stand at $34.15 a barrel so far in 2004, prompting protests from the International Energy Agency (IEA), the energy watchdog for Western industrialized nations. Last year’s average crude price was the highest in two decades.
“I don’t think OPEC have any interest in prices like this,” IEA Deputy Executive Director William Ramsay said. “From the IEA’s point of view stocks are too low and prices are too high,” he told reporters.
Analysts believe the low stocks are one reason why the seasonal second quarter drop may not occur this year or will not be as pronounced as usual. The US Department of Energy warned that gasoline in particular could be in short supply this year as high prices were continuing to hamper stock building.
The United States consumes a major part of the world’s gasoline in summer but stockbuilding typically starts in the early part of the year. Gasoline stocks are 5.8 million barrels lower than year-ago levels.
“With US gasoline stocks looking perilously low, this market looks likely to move higher still over coming weeks,” Barclays Capital said, adding that refinery problems in the US and changes to gasoline regulations, were likely to add to the tightness.
“Gasoline is attracting longs seeking positioning in a contract at the beginning of its seasonal upswing,” Man’s Meir said.
Torn between containing high oil prices and adjusting production for the end of winter in the northern hemisphere, OPEC is carefully weighing changes to output quotas ahead of its meeting next week in Algiers.

snip>
But the oil cartel is unlikely to increase production because it would push down prices that earn OPEC members less than it might seem they are billed in US dollars that have fallen in value against currencies like the euro and yen.
Oil producers are also already pumping at maximum output levels, Khelil said.
They attribute the high prices more to geopolitical instability than a lack of crude on the markets.
As a result, analysts expect no output change when OPEC meets Tuesday in the Algerian capital, with no move seen before its next gathering in Vienna on March 31.

snip>
“The continued high prices are not due to fundamentals but political reasons,” he said, adding “prices should be lower.”
Analysts prefer prudence despite such signals, even though they echo comments by OPEC’s leader, Saudi Oil Minister Ali al-Nuaimi at the World Economic Forum in Davos, Switzerland.
Many market players were stung by a surprise OPEC production cut in September.

snip>
“We still have no comments from OPEC although we are looking for ‘unchanged’ on Tuesday. But people are pretty worried that OPEC ministers will come out in the next few days and mention the idea of cutting production,” he added.

snip>
The cartel last year argued that the weak dollar, the currency of international oil markets, justified a higher price. Analysts say the issue has not gone away because investment funds faced with a weak dollar are likely to continue shoveling their money toward commodities and oil.

[aneerkoinos]

71. Opec to US: blame yourselves

From the opening address http://www.nytimes.com/2004/02/10/business/10OPEC-TEXT.html

"Crude oil prices have remained high since our last meeting on 4 December, and there have been calls for OPEC to raise its output ceiling to help bring prices down.

OPEC is sensitive to such calls, especially when they come from other responsible members of the global energy community. Indeed, our own day-to-day monitoring of oil market movements itself picks up the same signals. We take these situations very seriously, because we know that, if oil prices pass certain threshold levels — either upper or lower levels — they can have an adverse impact in a broader economic and political realm, which may ultimately rebound on the petroleum industry.

Why, therefore, have we not taken action on price levels which have consistently exceeded the top end of our price band of US $22–28 a barrel for OPEC’s Reference Basket since our December meeting?

The principal reason is our judgement that the oil market is already well-supplied with crude. However, the benefits of this are being mitigated by low crude oil inventory levels in the USA, excessive speculation and continued geopolitical tensions.

In particular, prices are being affected by US crude oil stocks falling beneath the perceived lower minimum operating levels in a regime of just-in-time inventory policies and the high level of non-commercial speculation. These destabilising forces are, to a great extent, treatable, but they are beyond the reach of OPEC."

Emphasis mine. The way I read this, OPEC is saying FU to US with extremely little diplomatic veiling

[54anickel]

75. He-he, seems nearly everyone wants to say that to the US these days. n/t

[NoKingGeorge]

77. Help ,please. Doesn't this help the Administration?

If nations around the world are now forced to pay more for a reduced
supply ,would they not hoard more dollars to pay for it. IE the oil users will be forced to soak up more dollars thus propping up the dollar.
Could the gold dive around the same time as this news broke, be related? sell gold to buy dollars.?

[aneerkoinos]

79. dollar

is the one commodity I don't think the world has a shortage of, given the US deficits... IMHO it's more likely US will try to inflate even more so it can pay it's energy and other bills. So expect dollar to keep droppin.

[54anickel]

84. Snarf!

Yes, I am sure they all have buckets full of dollars. Japan has plenty of "fishwrapper" bucks these days. Buying 'em faster and cheaper than ever.
:evilgrin:

[54anickel]

80. I don't believe so, but someone will come along and correct me if I am

mistaken. Oil is priced in dollars. But Europe will pay in Euros, Japan in Yen, China in Yaun, etc.

I don't believe they have to physically convert to US dollars, they just pay the equivalent in their own currency. That's why it is actually beneficial to those that pay in Euros right now. Doesn't take as many to make a buck as it used to.

When OPEC was talking about changing to pricing in Euros or a basket of currencies, it would make it even more expensive for the US to buy.

[ozymandius]

81. Hi folks. Did I miss anything? A word about oil prices-

If you wonder how an April decision to cut oil production is going to impact pricing, here are two perspectives that are not incongruous with one another:

(1) Oil futures (suffice to say, projected prices according to anticipated supply and pricing) are reflected at the pump no less than 90 days and as distant as six months from any alteration in supply and pricing. This tells me that the 1 April slowdown in production will impact the summer travel season and the prices at the pump will remain high through November. Just in time for an election of sorts.

(2) I can see this having a cooling effect on the amount of money Japan can pump inito our bond market as well as a force to prop up the dollar. While the US is heavily dependent on Middle East oil, Japan's economy is perched very precariously on the stuff. A slowdown in supply, precipitating a spike in pricing will hurt Japan's economy (as well as other Asian nations) more than ours - at first.

As the Asian central banks have been willing to subsidize the dollar so as to make it easier for the US to buy their products, I somehow doubt that they will be willing to subsidize a struggling American economy while theirs needs tending -AND- in view of the fact that Europe represents a much more populus customer base. In effect, I believe that Asian banks will be willing to go short on the US and long on the EU.

[54anickel]

83. Ewwww. That makes sense and is not very good news. But, it should

make Snow happy as he will definitely see his precious buck find it's true market value. A bit quicker than he'd like, but hey, you can't have it all, can you?
What's that old saying, careful what you wish for?

[JNelson6563]

76. Update 2:40

Afternoon everybody. Thought I'd check in and catch up on the latest in the financial world. Fascinating discussion as usual.

So, here's where we are right now:

Dow 10,588.51 +9.48 (+0.09%)
Nasdaq 2,065.72 +5.15 (+0.25%)
S&P 500 1,142.79 +2.98 (+0.26%)
10-Yr Bond 4.102% +0.037

Street and Treasuries relatively flat. *yawn*

I should think after that press conference with Scotty repeating his talking points anxiously the markets would be plummeting. It's obvious the WH is a bunch of lying morons and no one should have any faith in our current government. I take comfort from reading that the R's in Congress and at the grass-roots level are getting upset with the boy king. Perhaps there's hope....

Julie

[54anickel]

95. Closing numbers

Dow 10,613.85 +34.82 (+0.33%)
Nasdaq 2,075.33 +14.76 (+0.72%)
S&P 500 1,145.54 +5.73 (+0.50%)
10-Yr Bond 4.102% +0.037


And the blather:

Close: A seemingly quiet day that produced broad-based, modest gains, reflecting little concern over Federal Reserve Chairman Greenspan's testimony on monetary policy to the House Financial Services Committee tomorrow...the indices opened near unchanged, but showed a bias to the up side through the day...there was little corporate news to drive the broad market...Verizon (VZ 37.60 +0.65) was higher after a Wall Street Journal article suggested Vodafone might seek to acquire it...
oil stocks jumped on news that OPEC would act to reduce excess production immediately, and that the group quota would be lowered by 1 million barrels on April 1...the broader market shrugged off that news...3M (MMM 81.25 +1.86) got a boost after it announced a 9.1% increase in its quarterly dividend...fellow Dow 30 stock Alcoa (AA 35.54 +0.60) rose after JP Morgan raised earnings estimates...Juniper Networks (JNPR 27.36 +1.18) rebounded after getting hit yesterday...advancers led decliners by a solid margin, reflecting broad gains while volume was light...there were no real sector leaders, but almost every sector was higher, reflecting the theme for today...NYSE Adv/Dec 2090/1182, Nasdaq Adv/Dec 1953/1263

Have a great evening :hi: