Inflation Fears Sink Stocks

[NNN0LHI]

http://www.newsday.com/business/ny-bzecon213680603feb21,0,7574404.story?coll=ny-business-headlines

Wall Street tried but failed to overcome disappointment over a jump in inflation Friday, closing moderately lower despite assurances by Federal Reserve Chairman Alan Greenspan that the job market will indeed improve. The major indexes all ended the week with losses, and the Nasdaq composite index was down for the fifth straight week.

Stocks started lower after a government report showed a sharp increase in prices for gasoline and other energy products in January, while the cost of other consumer goods remained relatively stable. Greenspan's midday statement, in a speech before the Omaha Chamber of Commerce in Nebraska, revived stocks briefly but the selling continued.

The Dow Jones industrial average finished down 45.70, or 0.4 percent, at 10,619.03. It had lost nearly 80 points earlier in the session.

Broader stock indicators were narrowly lower. The Standard & Poor's 500 index lost 2.95, or 0.3 percent, to 1,144.11, while the Nasdaq composite index was off 8.03, or 0.4 percent, at 2,037.93.

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[Sinistrous]

1. We aint seen nothing yet.

Wait 'til OPEC decides to price oil in Euros.

[lovedems]

2. Wouldn't they have decided to do that in February?

I heard that rumor too. Didn't they meet February 10? To my knowledge that subject wasn't even on the table. I know they meet again in March. Maybe they will be discussing it then.

[Sinistrous]

9. Maybe. But I just read that it is under discussion at a meeting

being held now.

[54anickel]

10. Yes, they did discuss it, and they will probably continue to discuss

it at each meeting. They seemed to have based the dollar price on either the euro or a basket of currencies to maintain their buying power. They will use their ability to set production and prices rather than switch currencies for as long as it makes sense.

Here's a link that touches on the difficulties in making a switch.

http://www.eubusiness.com/afp/040209030947.7x4cldn1

snip>
"We are speaking about negotiating for crude in euros. It is possible that the organization will discuss this and take a decision at a given moment", Silva said.

snip>
Adopting the euro, the currency of 12 of the European Union's 15 current members, would call for a major overhaul in world oil trading, but the idea has been circulating since before its introduction in 2002.

"What's more, Russia, one of OPEC's competitors, has been threatening for several months now to switch its oil market to euros", the source said.

snip>
A trader at the Rothschild bank in London added: "Trading in petrol involves enormous sums of money. If the dollar loses its role as a currency of reference, the United States, the world's largest oil importer, will no longer be able to have outside countries finance its abyssal trade deficit."


World confidence in the greenback is waning. Keeping in mind that the US greenback is the world's reserve currency, a switch to the euro would be a huge hit in the confidence in the buck. That would have a devestating impact on the global economic picture and is not in anyones best interest. There are too many countries buried with greenbacks in their reserves. We are not in a very good economic position, nationally or globally.

Here's another interesting take on it.

http://www.lewrockwell.com/orig4/latulippe6.html

snip>
Last month we nearly set a record for a monthly trade deficit, but it occurred after a long 30% slide in the value of the dollar against a variety of world currencies. Our exports should be booming, and imports should be prohibitively expensive…bringing our deficit to a balance.

Numerous policies can be blamed for the continued hemorrhage. The fact that OPEC continues to accept only dollars for oil purchases is a biggie. If America was any other nation, the recent plunge in the value of our currency would result in a gigantic surge in the price of oil. This alone would short-circuit the recovery and slump the economy back into recession…shutting off our ability to import and thus bringing the trade deficit to balance.

But since the dollar is the medium of oil purchases, OPEC gets hosed when the dollar drops, while we continue to import oil at the same price.

One might ask why OPEC goes along with this charade. In fact, some oil-exporting nations have discussed switching to the Euro, to gold, or to a basket of currencies. But this would undoubtedly raise the ire of some very heavily armed people.

snip>

[West Coast Democrat]

3. The Feds think they can just hold low interest rates forever

and see no repercussions as far as inflation is concerned. The GOP is scared to death at the thought of a rise in interest rates, so they just keep ignoring the obvious signs of inflation we've been experiencing for a while now.

[ochazuke]

5. checkmate

Interest rates can't go any lower, and the only way to stop them from rising is to cut back on the borrow-and-spend binge that we've been on since 1983.

either way, the economy enters a protracted period of slow or negative growth.

[cliss]

4. A rise in gas prices

is only part of the explanation. Inflation is expected to rise. The most important reason, in my opinion, is that the Fed has printed money like crazy. I haven't checked the money supply lately, but I'm assuming it's up. This will drive prices up more than any other factor. "Too many dollars chasing too few goods", as economists like to say. And it spells disaster for an already weakened economy.

People here at the DU have been expecting this for months. This in spite of the fact that millions are still unemployed. Those who are employed have taken low-paying jobs to pay the bills (which are giong up all the time). Many are just scraping by.

The recipe for a perfect storm.

[twilight]

6. probably why I bonds have changed so much

Used to be you could buy I bonds and cash them within 3 mos. of holding them - now it is 1 year.

Clinton came up with the I bond idea. I've got some of them and they are presently paying 6.59% interest.

I have some issued in April 2003 and I have to hold them for a year if I care to dump them. I might ... they have a bottom of 1.6% interest on them.

It used to be you could buy I bonds on-line with a cash back credit card but that is no more as of very recently.

It seems the Treasury is trying everything they can to discourage people from buying I bonds (tax-deferred investment; tax-free if for education).

I seriously wonder how much longer they will even be for sale. You can hold them for 30 years!

????????????

:dem: :kick:

[West Coast Democrat]

7. My boss owns some I-Bonds

At first she was recommending them to others, but she's not anymore. I think she bought them less than a year ago. Have they gone done recently?

[twilight]

8. yes right now they are at 1.1%

and they add in inflation and they have this formula.

The majority of the ones I own were bought in 2001 and have a bottom of 3%.

More info. here on I bonds:

http://www.publicdebt.treas.gov/sav/sbirate2.htm

:kick: