US DOLLAR

[taylor]

jewelery stores buying precious metals, merchants asking to be paid in coins, stores beginning to accept euro's........hhmm, seems that a lot of people are beginning to wake up -

[queenbee]

I have been saving all of my Confederate money for times like this.

Guess I will have to stock up on bartering items.

[shortcircuit]

Bernanke: Growth, inflation (Stagflation) concerns

Published on Wednesday, February 27, 2008.





Source: CNN Money


WASHINGTON - The economy still faces slower growth prospects but increasing inflation concerns could "complicate" the Federal Reserve's efforts to stimulate the economy, Fed Chairman Ben Bernanke told lawmakers Wednesday.
The central bank chief, in testimony before the House Financial Services Committee, said that the housing and labor market could deteriorate further and warned of tighter credit conditions.

But he added that the recent increases in energy prices and key commodities, as well as a weaker dollar, remain an inflationary risk and could further erode consumer spending.

"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored," Bernanke said.

He warned the Fed may have to pull back on its efforts to stimulate the economy. "In the months ahead, the Federal Reserve will continue to monitor closely inflation and inflation expectations," Bernanke said.

While issuing a warning about inflation, Bernanke also said that the "housing market is expected to continue to weigh on economic activity" in coming months.

To help keep the economy from tipping into a recession, the Fed has steadily cut the federal funds rate, which affects a variety of consumer loans, since September. It slashed interest rates twice by 1.25 percentage points in just under a week last month.

Bernanke's remarks come amid recent warning signs about the economy.

A survey on residential real estate released Tuesday revealed that the decline in home prices picked up at the end of 2007. And consumer confidence fell to its lowest level in five years, the New York-based Conference Board reported, on fears about the job market and slowing business activity.

Right now, the growing consensus is that the Fed will cut interest rates by another half a percentage point when policymakers meet again on March 18.

Less than two weeks ago, Bernanke and Treasury Secretary Henry Paulson warned lawmakers of slower economic growth in the coming year but said they believed the U.S. economy would avoid tipping into a recession, helped in part by the $170 billion economic stimulus package signed by President Bush on Feb. 13 and the most recent interest rate cuts by the Federal Reserve.

[shortcircuit]

Confidence Down, Inflation Up

Published on Tuesday, February 26, 2008.





Source: Associated Press

WASHINGTON (AP) -- In more bad economic news, consumer confidence and home prices posted sharp declines while higher costs for such basics as food, energy and medicine left wholesale inflation rising at a pace unseen since late 1981.
The new reports Tuesday documented the latest in a series of blows to the economy as a prolonged housing downturn has pushed the country close to a recession.

The 1 percent January jump in wholesale prices was led by a surge in the prices of energy, food and prescription drugs and followed a report last week that consumer prices had risen by a bigger-than-expected 0.4 percent because of price pressures in the same areas.

Over the past 12 months, wholesale prices rose by 7.4 percent, the largest yearly gain since late 1981. Analysts warned consumers to brace for more bad inflation news with crude oil prices rising to records above $100 per barrel and with more evidence that the prolonged jump in energy prices is starting to break out into more widespread price problems.

Meanwhile, the New York-based Conference Board reported that its confidence index fell to 75.0 in February, down from a revised January reading of 87.3. The drop was far below what analysts had forecast and put the index at its lowest level since February 2003, a period that reflected anxiety in the leadup to the Iraq war.

A third report showed that home prices, measured by the S&P/Case-Shiller Index, dropped by 8.9 percent in the fourth quarter of last year, compared with the same period in 2006, the steepest decline in the 20-year history of the index.

"Home prices across the nation and in most metro areas are significantly lower than where they were a year ago," said Yale University professor Robert Shiller, one of the index's creators. "Wherever you look, things look bleak."

Analysts said rising inflation, slumping home prices, a turbulent stock market and an economy flirting with a recession were all combining to rattle consumers' nerves.

"There is no evidence that the recent collapse in consumer confidence is going to turn around any time soon," said Brian Bethune, senior economist at Global Insight. He said the drop in confidence will lead to a cutback in consumer spending that will trigger a brief recession in the first half of this year. And he cautioned that "severe negative dynamics" at present could make the forecast of a mild recession too optimistic.

However, Wall Street was able to shake off the spate of bad economic news Tuesday, focusing instead on an announcement by IBM of a $15 billion stock buyback program designed to boost its 2008 earnings. The Dow Jones industrial average rose 114.70 points to close at 12,684.92.

Private economists predicted further declines in housing prices in the months ahead as the two-year housing slump continues with no signs of a turnaround. The demand for homes is being constrained by tighter lending standards imposed by financial institutions suffering multibillion-dollar losses from soaring mortgage foreclosures. Those foreclosures are dumping more homes back onto an already glutted market.

RealtyTrac Inc., based in Irvine, Calif., reported that the number of homes facing foreclosure climbed 57 percent in January from the previous year and more lenders are being forced to take possession of homes they can't unload at auctions.

The Bush administration insisted that the recently passed $168 billion economic stimulus bill, which will provide rebate checks to millions of families and tax breaks to encourage business investment, should stabilize the economy.

White House press secretary Dana Perino said President Bush had been briefed on all the economic figures released Tuesday and was closely following developments.

"We're in a softening period," she said. "And the question is, how soft is it going to be and how steep is the downturn going to be?"

Federal Reserve Chairman Ben Bernanke is scheduled to deliver the central bank's twice-a-year economic report to Congress on Wednesday, testimony that will be closely followed to see whether the uptick in inflation will divert the Fed from what became in January an aggressive rate-cutting campaign to combat a possible recession.

The combination of weak growth and rising inflation raises the threat of a return of "stagflation," the economic curse of the 1970s in which economic growth stagnates at the same time that inflation continues racing ahead. The Fed can't fight both at the same time. It can either cut interest rates to spur growth or raise rates to combat inflation.

Fed Vice Chairman Donald Kohn, in a speech Tuesday, said the Fed remained concerned about the weak economy, signaling the possibility of further rate cuts. While noting recent "disappointing" news on inflation, he said, "I do not expect the recent elevated inflation rates to persist," in part because the slowing economy should ease pressure on wages.

The 1 percent jump in wholesale prices in January followed a 0.3 percent decline in December and a 2.6 percent spike in November.

The wholesale report said energy prices jumped 1.5 percent, as gasoline prices rose by 2.9 percent and the cost of home heating oil soared by 8.5 percent. Food costs jumped by 1.7 percent, the biggest monthly increase in three years.

Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the biggest increase in 11 months and double what analysts had expected. This gain was led by a 1.5 percent spike in the cost of prescription and nonprescription drugs as well as higher costs for books, autos and plastic products.

[shortcircuit]

Russia Quietly Prepares to Switch Some Oil Trading from Dollars to Rubles

Published on Tuesday, February 26, 2008.





Source: International Herald Tribune

MOSCOW: Russia, the world's second-largest oil-exporting nation after Saudi Arabia, has been quietly preparing to switch trading in Russian Ural Blend oil, the country's primary export, from the dollar to the ruble. But the change, if it comes, is still some time off, industry analysts and officials said.
The Russian effort began modestly this month, with trading in refined products for the domestic market.

Still, the effort to squeeze the dollar out of Russian oil sales marks another project with swagger and ambition by the Kremlin, which has already wielded its energy wealth to assert influence in Eastern Europe and in former Soviet states.

"They are serious," said Yaroslav Lissovolik, the chief economist at Deutsche Bank in Moscow. "This is something they are giving priority to."

Oil trading is now nearly always denominated in dollars, the de facto common currency of the petroleum business. When Kuwait sells oil under a futures contract to India, for example, the price is set in dollars.

Similarly, Russia's large trade with Western Europe and the former Soviet states in crude oil and natural gas is conducted in dollar-denominated contracts. Gazprom, the natural gas monopoly, set the price of natural gas in Ukraine at $176 per 1,000 cubic meters in 2007, for example. There are no proposals yet to switch natural gas pricing away from dollars.

As a result, companies and countries that buy petroleum products are encouraged to hold dollar reserves to pay for their supplies, coincidentally helping the American economy support its trade deficit.

Russia would like to change this practice, at least among its customers, as a means to elevate the importance of the ruble, a new source of national pride after gaining 30 percent against the dollar during the current oil boom.

A move away from the dollar, meanwhile, is more glum news for the United States.

During a speech on economic policy this month, Dmitry Medvedev, a deputy prime minister and the likely successor to President Vladimir Putin in elections on March 2, said Russia should seize opportunities created by the weak dollar.

"Today, the global economy is going through uneasy times," he said. "The role of the key reserve currencies is under review. And we must take advantage of it." He asserted that "the ruble will de facto become one of the regional reserve currencies."

Other oil-exporting countries, too, are chafing at dealing in the weakening dollar.

Iran, one of the largest oil-exporting nations, and no friend of the United States, has since 2005 striven to open a commodity exchange to trade oil in currencies other than the dollar. Iran's ambassador to Russia, discussing the two countries' interest in the idea, said Iran might choose rubles to free his country from "dollar slavery."

To be sure, some economists have dismissed the project as improbable, given the exotic nature of a security - oil futures contracts in rubles - that would add a new currency risk to the global oil market.

Ruble-denominated futures contracts for Ural Blend, the main Russian grade, would be an attractive financial instrument only if the dollar continued to depreciate, said Vitaly Yermakov, research director for Russian and Caspian Energy at Cambridge Energy Research Associates.

"There is a big distance between the desire to trade commodities for rubles and the ability to do so," he said.

All this has not stopped the Kremlin from trying.

In a sign of the government's seriousness, a new glass-and-marble home for a ruble-denominated commodity exchange is rising this spring in a prestigious district in St. Petersburg.

The exchange will occupy three floors of the 16-story tower on Vasilevsky Island, one of the islands that make up the historic city center.

Viktor Nikolayev, the director of the St. Petersburg exchange, said during an interview that the intention was to move slowly and gain market acceptance. The government will not strong-arm sellers or buyers onto the exchange, even in an industry dominated by the state, he said.

Web-based trading for refined products like gasoline or diesel is being rolled out in three phases for domestic customers, beginning with government buyers like the Russian navy or municipal bus companies. Government agencies have been ordered to buy 15 percent of petroleum products on the exchange by the end of the year.

Private brokers will be allowed to trade in March; futures contracts will be introduced in April.

Nikolayev said no timeline had been established for trading for export on the exchange, which also handles grain, sugar, mineral fertilizer, cement and esoteric financial products like Russian government quotas for beef and pork imports - all in rubles.

"We are in Russia, and the currency is rubles, not euros, not dollars," he said. "We don't want to depend on the rise or fall of the dollar."

Greenspan comments on oil

Alan Greenspan, the former Federal Reserve chairman, said Monday that high inflation in Gulf states would fall "significantly" if the oil producers drop their dollar pegs, Reuters reported from Jeddah, Saudi Arabia.

The pegs restrict the ability of governments in the Gulf to fight inflation by forcing them to shadow U.S. monetary policy at a time when the Fed is cutting rates to ward off recession, while Gulf economies are surging on a near five-fold jump in oil prices since 2002. The central bank chiefs of Saudi Arabia and the United Arab Emirates spoke Monday in favor of retaining dollar pegs, while Qatar's prime minister advocated regional currency reform to avert possible unilateral revaluations designed to curb inflation.

[shortcircuit]

Inflation Will Stoke Riots And Cause Wars

Published on Friday, May 23, 2008.





Source: Guardian

Riots, protests and political unrest could multiply in the developing world as soaring inflation widens the gap between the "haves" and the "have nots", an investment bank predicted yesterday.
Economists at Merrill Lynch view inflation as an "accident waiting to happen". As prices for food and commodities surge, the bank expects global inflation to rise from 3.5% to 4.9% this year. In emerging markets, the average rate is to be 7.3%.

The cost of food and fuel has already been cited as a factor leading to violence in Haiti, protests by Argentinian farmers and riots in sub-Saharan Africa, including attacks on immigrants in South African townships.

Merrill's chief international economist, Alex Patelis, said this could be the tip of the iceberg, warning of more trouble "between nations and within nations" as people struggle to pay for everyday goods. "Inflation has distributional effects. If everyone's income moved by the same rate, you wouldn't care - but it doesn't," said Patelis. "You have pensioners on fixed pensions. Some people produce rice that triples in price, while others consume it."

A report by Merrill urges governments to crack down on inflation, describing the phenomenon as the primary driver of macroeconomic trends. The problem has emerged from poor food harvests, sluggish supplies of energy and soaring demand in rapidly industrialising countries such as China, where wage inflation has reached 18%.

Unless policymakers take action to dampen prices and wages, Merrill says sudden shortages could become more frequent. The bank cited power cuts in South Africa and a run on rice in Californian supermarkets as recent examples.

"You're going to see tension between nations and within nations," said Patelis.

The UN recently set up a taskforce to examine food shortages and price rises. It has expressed alarm that its world food programme is struggling to pay for food for those most at need.

Last month, the World Bank's president, Robert Zoellick, suggested that 33 countries could erupt in social unrest following a rise of as much as 80% in food prices over three years.

Merrill's report said the credit crunch has contributed to a global re-balancing, drawing to a close an era in which American consumers have been the primary drivers of the world's economy.

In a gloomy set of forecasts, Merrill said it believes the US is in a recession - and that American house prices, which are among the root causes of the downturn, could fall by 15% over the next 18 months.

The bank said Britain's economic outlook is "deteriorating" as consumer confidence weakens. The Office for National Statistics yesterday said that retail sales fell by 0.2% in April compared to March.

Global inflationary pressures have led to higher prices in Britain highlighting the dilemma for the Bank of England's monetary policy committee, which sets interest rates.

The MPC voted by eight to one to keep rates on hold last month in spite of a rapid slowdown in the British economy. The Bank is concerned about food prices that rose by 6.6% over the past year and soaring fuel costs, feeding higher inflation, which is now at 3%.

Alistair Darling, the chancellor, met representatives of supermarkets and farmers yesterday to discuss the threat to the economy from the rising cost of food.

The US Federal Reserve, which has cut interest rates to 2%, is gloomy in its outlook for the US economy because of the combined challenges of slow growth and soaring commodity prices. The Fed is predicting that unemployment and inflation will be higher than expected.

Oil prices are expected to continue rising rapidly after hitting a third record in a row yesterday, as supply continues to outstrip demand.

[sometimeman]

Short,

The supply is there, it is the dollar that keeps going down!

Oil is not in short supply. Bush ask for more the Saudes said we are pumping all that people buy.