Will the price of gasoline just keep climbing ?

ProzacDeathWish
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Will the price of gasoline just keep climbing ?

I cannot believe how expensive gasoline has become in my part of the States ( ie, north Texas ) Regular unleaded has just recently passed the $4.00 mark and diesel is inching past $4.50.   This is fucking pathetic.

I don't believe in overreacting but for starters I believe we should take the CEO's of the major oil companies and televise their public executions. This should put the remaining shareholders in a mood to negotiate.

America is becoming more fucked up by the minute.

 


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The reason isn't due to the

The reason isn't due to the oil companies pumping profits (no pun intended), but more so because demand is outstripping supply.  India and China are increasing their oil usage exponentially at the moment, non-OPEC countries aren't increasing the amount they're producing so the OPEC countries are having a harder time keeping up with demand.  This pushes the prices higher.  This along with the limited supply of oil, it's bound to happen.

My car died two days before christmas, I have an unregistered motorbike too.  I've given up on the idea of registering it due to the current prices, even its consumption would be more expensive than I'd be willing to pay.  I've taken up bicycle riding again.  That and public transport do me these days.

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thingy wrote:The reason

thingy wrote:

The reason isn't due to the oil companies pumping profits (no pun intended), but more so because demand is outstripping supply.  India and China are increasing their oil usage exponentially at the moment, non-OPEC countries aren't increasing the amount they're producing so the OPEC countries are having a harder time keeping up with demand.  This pushes the prices higher.  This along with the limited supply of oil, it's bound to happen.

My car died two days before christmas, I have an unregistered motorbike too.  I've given up on the idea of registering it due to the current prices, even its consumption would be more expensive than I'd be willing to pay.  I've taken up bike riding again.  That and public transport do me these days.

 

Yeah, I parked my old diesel Mercedes in the driveway and there it sits.  It's just too expensive to fill it up.  I'd like to take up bike riding too but the bike I want has a big air cooled V-twin motor and 18" ape hangers .

ps, but for now I'll have to stick with my Honda Civic.

 

 


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I just realised my post may

I just realised my post may not have been entirely clear, so I've edited it and just posting this reply.  When I said I've taken up bike riding, I meant on a bicycle.  Most of my trips are either to/from the city in which case I can get public transport and all the shops I visit are only a few km's away so the bicycle can get me there quite nicely.  Or at least it will when I get my fitness out of its current state which I'm sure most doctors would call "he shouldn't technically be alive".

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No thingy, I understood your

No thingy, I understood your meaning ( and I agree ) I was just broadening the definition of "bike" to include my interest in motorcycles.  


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ProzacDeathWish wrote:I

ProzacDeathWish wrote:

I cannot believe how expensive gasoline has become in my part of the States ( ie, north Texas ) Regular unleaded has just recently passed the $4.00 mark and diesel is inching past $4.50.   This is fucking pathetic.

The US has been lucky that gas prices have been relatively low.  That's because gas is subsidized through the petrodollar, but now countries like Iran have gone completely off the petrodollar and have been selling oil in Euros and Yen.

Look at the prices of gas in Europe - anywhere from 4-$7 gallon.

Quote:
I don't believe in overreacting but for starters I believe we should take the CEO's of the major oil companies and televise their public executions. This should put the remaining shareholders in a mood to negotiate.

America is becoming more fucked up by the minute.

 

Your anger is placed at the wrong people.  CEOs are part of the problem.  If you want to place the blame, the majority goes to the Fed.  They are the ones destroying the value of the dollar which causes oil prices to go up.  A lot of oil is imported so when the dollar goes down foreigners want to be paid more in the depreciated dollar.

Congress is to blame too.  They give subsidises to oil companies and when they make too much profit they want to tax them.  It's all part of a political charade. 

You need to take a look at the price of commodites.  Now that the dollar is weak, stuff like precious metals, food, and other raw materials are coming up their all time high.

Here are some charts to help illustrate the relationship between a falling dollar and rising commodity prices:

-RR


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Why would oil companies need


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In SA the petrol price is

In SA the petrol price is reaching R10/L,($1.30/L) which is really bad.I have a motorbike,and even though it's vastly preferably to the consumption of my friend's car,I only use it when I have to. Taking the car to our usual hang out costs the same in petrol as the whole nights drinks.

I'm really afraid I'll end up getting some little, slow, super economical bike.

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A possible future for the US economy

If you track the crude spot prices in Euros and dollars, this is the chart that you get:
http://europe.theoildrum.com/node/3753

As you can see, oil in both currencies increased at about the same rate, but eventually the spread between USD and EUR gets wider due to problems with the US dollar.  Oil prices are a function of what the sellers charge the buyers, which tends to be influenced by supply and demand, but not always.

As thingy pointed out, demand is increasing in other countries.  Some of those countries are creating a new middle class, which involves a powerful economic change that stimulates demand.  This alone can cause oil to increase in price, but we also have a major issue with the USD.  Several people I trust for accurate economic views are stating that a hyperinflationary depression for the US is possible (in other words: almost complete depreciation of our currency).
http://www.shadowstats.com/article/292 (I am a subscriber here)
http://www.europac.net/ (I have several accounts with this firm)
I also have several other subscriptions that I keep to stay informed.

Since rising prices are a given, I recommend stocking up on all household goods that you need, since many people's income are not likely to catch up with the raising prices.  So it makes since to stock up while items are "cheaper."  I also recommend keeping as much food on hand, but not longer than its expiration date.  There will probably be a wheat shortage in 2009 since we are not likely to get the harvests this year to supply the demand.  For those that do get wheat, it will be expensive.

I have driven my car only a few times this year because I work next door to where I live and groceries, stores, post office, bank, and many other things I need are within walking distance from where I live.  While only a few people can get this benefit, I do suggest looking at what changes you might have to make to deal with $6.00 gas or more.  And if we do get hyperinflation, gas will likely be unaffordable.  When Germany experienced hyperinflation, many people were able to avoid starvation because they had small gardens for fresh produce.  Many people had these gardens because the regular supply of produce was inferior.  Our current supply of food is managed to reduce inventory levels and has not been significantly tested for large supply disruptions.

Anyway, hyperinflation is a possibility, not a certainty.  Although after a long, hard look at the long and sad history of fiat currency in human history and our current economy along with historic accounts of hyperinflation, I am forced to take hyperinflation in the US seriously.

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


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Mr. XC wrote:If you track

Mr. XC wrote:

If you track the crude spot prices in Euros and dollars, this is the chart that you get:
http://europe.theoildrum.com/node/3753


Just about all currencies are depreciating with respect to gold.  Gold value is relatively stable since you have to mine it and process it compared to fiat currency (not backed by anything).

Gold is the easiest way to protect yourself from inflation.  If you can't buy gold, silver is for smaller budgets and it has greater potential to go up.

Quote:
This alone can cause oil to increase in price, but we also have a major issue with the USD.  Several people I trust for accurate economic views are stating that a hyperinflationary depression for the US is possible (in other words: almost complete depreciation of our currency).

 

I believe this is what is going to happen.  In the late 70s we had high oil prices and high food prices, but the Fed chairman Volcker raised interest rates to 20% to bring on the recession. Back then we didn't borrow from foreign countries, so most of the inflation was contained in the US.  Now China, Japan, the UK, and many other countries own our debt, so when the dollar keeps on going down they will want to get out.  Now the Fed funds rate is 2% which is going depreciate the dollar more.  If the Fed raises rates it will wreak havoc on businesses, so they are likely only to lower rates which will lead to hyperinflation.

Quote:

http://www.europac.net/ (I have several accounts with this firm)

 

Great firm.  I'm a client and have done well with Peter's predictions.  He was right about all the financial bubbles starting from the NASDAQ, up to the housing bubble, and rising commodity prices.  He's had to deal with a lot of crap coming from the panelists that try to shout him down and sell their propaganda that US stocks are a good buy.  If you look at the stock market priced in gold, it's been down since 2001.  You were better off buying gold than investing in the Dow.

Stock Market Crash - Robert Prechter on Bloomberg explains

 

 


Quote:

Since rising prices are a given, I recommend stocking up on all household goods that you need, since many people's income are not likely to catch up with the raising prices.  So it makes since to stock up while items are "cheaper."  I also recommend keeping as much food on hand, but not longer than its expiration date.  There will probably be a wheat shortage in 2009 since we are not likely to get the harvests this year to supply the demand.  For those that do get wheat, it will be expensive.

Yep time to stock on food now before it gets more expensive.  There are food shortages around the world, and when the dollar drops more foreign countries will have more purchasing power to buy up the food.

Here are some of my favorite Youtube videos:

 

 All the panelists are shilling for the housing market while Peter speaks the truth of the credit bubble.  Ben Stein is in this one.

 

 Peter Schiff talks about his book Crash Proof

 

 

 Peter Schiff talks about gold

 

Basic advice:  Get out of the US dollar as much as you can.  Buy precious metals and foreign commodities, and stay close to your friends and family in case of a financial meltdown.

-RR

 


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ProzacDeathWish wrote:I

ProzacDeathWish wrote:

I cannot believe how expensive gasoline has become in my part of the States ( ie, north Texas ) Regular unleaded has just recently passed the $4.00 mark and diesel is inching past $4.50.   This is fucking pathetic.

You know there's a limited amount of light sweet crude, right? So it's inevitable. Should I elaborate?

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HisWillness

HisWillness wrote:

ProzacDeathWish wrote:

I cannot believe how expensive gasoline has become in my part of the States ( ie, north Texas ) Regular unleaded has just recently passed the $4.00 mark and diesel is inching past $4.50.   This is fucking pathetic.

You know there's a limited amount of light sweet crude, right? So it's inevitable. Should I elaborate?

No, but I am not in the same income bracket as Hollywood movie stars or pro athletes so the price of fuel is becoming an intolerable burden for the average wage earner.  The recent price trends are more than a minor inconvenience as almost all modes of transportation are oil dependent, and due to the distances involved in modern day commuting, few alternatives are practical much less affordable, hence my anger.

I've seen the charts and graphs with their explanations of supply and demand and the changing world market, etc but I've yet to see anyone make an attempt to factor in the effect of a very arbitrary cause of high oil prices...human greed.

 


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ProzacDeathWish wrote:I've

ProzacDeathWish wrote:
I've seen the charts and graphs with their explanations of supply and demand and the changing world market, etc but I've yet to see anyone make an attempt to factor in the effect of a very arbitrary cause of high oil prices...human greed.

I don't think anyone was ruling that out of the equation despite all the graphs and explinations, it was just a matter of course in all of them.  However, greed is not the main source of it, just something certain people are taking advantage of as always.

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thingy wrote:ProzacDeathWish

thingy wrote:

ProzacDeathWish wrote:
I've seen the charts and graphs with their explanations of supply and demand and the changing world market, etc but I've yet to see anyone make an attempt to factor in the effect of a very arbitrary cause of high oil prices...human greed.

I don't think anyone was ruling that out of the equation despite all the graphs and explinations, it was just a matter of course in all of them.  However, greed is not the main source of it, just something certain people are taking advantage of as always.

 

Okay.... we have successfully established how the price of fuel is determined...now what ?


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Actually the price of gas

Actually the price of gas has been too low for too long.

When enough people start dying from starvation and freezing, congress (and many other people) will finally pull their head out of their ass (mainly because the voters will demand it) and allow drilling where it is not permitted and start building nuclear power plants.

 

The push is on for windmills.

 

 

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aiia wrote:Actually the

aiia wrote:

Actually the price of gas has been too low for too long.

When enough people start dying from starvation and freezing, congress (and many other people) will finally pull their head out of their ass (mainly because the voters will demand it) and allow drilling where it is not permitted and start building nuclear power plants.

 

The push is on for windmills.

 

 

Those of us who will eventually die of starvation and hypothermia will have to express our gratitude for those windmills in advance. 


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ProzacDeathWish wrote:No,

ProzacDeathWish wrote:

No, but I am not in the same income bracket as Hollywood movie stars or pro athletes so the price of fuel is becoming an intolerable burden for the average wage earner.  The recent price trends are more than a minor inconvenience as almost all modes of transportation are oil dependent, and due to the distances involved in modern day commuting, few alternatives are practical much less affordable, hence my anger.

I've seen the charts and graphs with their explanations of supply and demand and the changing world market, etc but I've yet to see anyone make an attempt to factor in the effect of a very arbitrary cause of high oil prices...human greed.

Okay, except nobody has any way to make the scarcity of a resource change. There can't be any more of it, so greed or not, the price will go up. It's not arbitrary at all. There's less, so you'll get charged more.

You can call it greed if you like, but you'd have to point the finger squarely at us. Our greed for cheap fuel, our greed for cheep far-away food, our greed for cheap Chinese consumer goods, and our greed for suburbia.

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The prices of stuff

The prices of stuff (commodities) will go up due to inflation (increase of the money supply).  Worldwide there is excessive inflation, but the central banks that are doing the right thing are raising rates to tighten the money supply.  Supply/demand has an effect on prices but not as much as inflation.  I don't believe we should have central banks, but since we can't just overthrow them you will have to follow the flow of money to protect yourself.

The government lies about inflation.  The core inflation is calculated by excluding food and energy.  What has gone up the most in the last couple years - food and energy.

I have some food charts as I do financial research and collect charts and graphs:

http://foodcrisis.wordpress.com/


New Economics of Hunger
http://www.washingtonpost.com/wp-dyn/content/story/2008/04/26/ST2008042602333.html?sid=ST2008042602333

 

-RR


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HisWillness wrote:  You

HisWillness wrote:

 

 

You can call it greed if you like, but you'd have to point the finger squarely at us.

No thanks, I prefer living in denial  .

 


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Rev. Real wrote:In the late

Rev. Real wrote:
In the late 70s we had high oil prices and high food prices, but the Fed chairman Volcker raised interest rates to 20% to bring on the recession. Back then we didn't borrow from foreign countries, so most of the inflation was contained in the US.  Now China, Japan, the UK, and many other countries own our debt, so when the dollar keeps on going down they will want to get out.  Now the Fed funds rate is 2% which is going depreciate the dollar more.  If the Fed raises rates it will wreak havoc on businesses, so they are likely only to lower rates which will lead to hyperinflation.

Also, our debt used to be mostly in 30 year bonds.  So if we increased the fed funds rate to 20%, the interest on the national debt would still be affordable if our national debt were long term debt.  Since a large portion of our national debt is much shorter in term, a 20% fed funds rate would likely cause the US to default on its debt.  So doing what it takes to fix the inflation is not going to work this time.

Also, our current 2% fed funds rate is creating more imbalances.  Lets say you want to loan someone money.  Inflation is 2% and you charge someone 6% interest.  That means you have a real return of 4%, since inflation reduced the purchasing power of your money by 2%.  So the formula for real return rate is interest rate minus inflation.  If inflation is 6% and you charge 6% interest, then you are letting someone borrow your money for free, because you have no real return. 

Now lets look at the current situation.  Inflation is probably higher than 6%, but lets use that number anyway.  The fed funds rate is 2%.  The real return rate is the interest rate (2%) minus inflation (6%), which is -4%.  So effectively, creditors are loosing money.  No business would want to operate like this unless it wants to go out of business.  But a country can get away with it as long as it can influence the money supply and create more inflation.  But we are dependent on foreign countries to accept a negative rate of return on their savings.  If they sell off their short term debt, it will likely put the US into hyperinflation.

Gold does very well when real interest rates are negative.  Part of the above insight is due to me reading Christopher Laird's paid subscription at prudentsquirrel.com.  He tends to be good at looking at near term issues, but I trust Peter Schiff for a more accurate long term view.  I will probably be experimenting with a small garden this summer, mainly for learning purposes.  If I need that skill, then at least I will have some practice, and potentially help others.
 

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


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Like many people, I

Like many people, I understand that the price of a barrel of oil and a gallon of gasoline is affected to some extent by supply and demand.

That said, I'm pretty sure that the decrease in supply and increase in demand are nowhere near high enough to justify the price of oil jumping over $100 per barrel in under 10 years. We're talking an entire order of magnitude increase in price because of speculation - futures traders buying oil at a high price for no other reason than to sell it at a HIGHER price three months down the line.

Gas is also up for this reason - if it costs more to buy the raw materials to make the finished product, the finished product will cost more to the end user. Gas used to cost $1.20 a gallon. Now you're lucky if you can find anybody still selling it for under $4/gal. It was about $3.50 only about a month ago, and at the pace it's going, it'll probably reach $5/gal by the end of June, definitely by the end of July.

The plummeting value of the U.S. Peso Dollar isn't helping, either.

Good night, funny man, and thanks for the laughter.


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Oil, USD, and the CRB Index

This might help:
WTIC, USD, CRB
From http://stockcharts.com/h-sc/ui?s=$WTIC&p=W&yr=3&mn=0&dy=0&id=p41488110776

The dashed line is light crude oil.  The line going up along with it is the Reuters/Jefferies-CRB Index.  The line going down is the USD.  The CRB index contains oil, but oil and natural gas only account for 18% of the entire index.  Other components of the CRB index include grains, industrials (copper and cotton), livestock, precious metals, and softs (cocoa, coffee, orange juice, and sugar).

So, how much of the increase is exclusively supply/demand for just oil (and not other stuff), or is demand for everything going up, or is inflation driving all of this?  I suspect the last two items.  There are many economies outside of the US that are growing at a fast rate.  This increases demand.  The falling USD is compounding our problem.

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


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ProzacDeathWish wrote:No

ProzacDeathWish wrote:

No thanks, I prefer living in denial  .

Hehe. Awesome.


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Mr. XC wrote:Gold does very

Mr. XC wrote:


Gold does very well when real interest rates are negative.  Part of the above insight is due to me reading Christopher Laird's paid subscription at prudentsquirrel.com.  He tends to be good at looking at near term issues, but I trust Peter Schiff for a more accurate long term view.  I will probably be experimenting with a small garden this summer, mainly for learning purposes.  If I need that skill, then at least I will have some practice, and potentially help others.


I agree with what you are saying.  I listen to a wide variety of experts, and the ones that understand central banking, interest rates, money supply tend to come up with the same conclusions.  Peter Schiff says if we have a collapse here the rest of the world will suffer as well, but the asian economies will rebound relatively quickly.  I have no hope for America in the long term.  That is if I want to accept a lower standard of living.  It looks like the big government candidates Obama/Clinton/McCain will take the presidency and on with that will come higher taxation on top of the burden of more inflation.

I see this as part of a bigger picture.  The bankers want to eventually destroy the US dollar so that they can have a North American Union and a new currency called the Amero.  The plans are already on their way with a NAFTA superhighway and more bureaucratic managed trade.  To make this plan work the powers that be will have to orchestrate it after the people have been significantly weakened that they can't fight back.  I'm a believer in the New World Order conspiracy.

Jim Rogers the billionaire investor has gotten out of the dollar and moved his family to Singapore.  He predicted the commodities rally in the 70s where he made most of his money, and now he's doing the same with asian investments.  I'd like to invest in the chinese market if I have enough before going broke.

Marc Faber, Jim Tice, Doug Casey, Jim Puplava are some of the other experts I listen to.  Puplava's free weekly podcast at Financial Sense Newshour is the best overview to understand what's going on in the global economy.

I don't know where the best place to live would be that would have a comparable standard of living that o the US.  Eventually I would want to get out.  I see it like Peter Schiff does - the american economy is like the Titanic sinking, get out while you can.


-RR
 

 


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right now is a good time to

right now is a good time to start thinking 'alternatives', (hydrogen, maybe compressed air or even garbage). the gov't has the technology, i just know it.

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thingy wrote:The reason

thingy wrote:

The reason isn't due to the oil companies pumping profits (no pun intended), but more so because demand is outstripping supply.  India and China are increasing their oil usage exponentially at the moment, non-OPEC countries aren't increasing the amount they're producing so the OPEC countries are having a harder time keeping up with demand.  This pushes the prices higher.  This along with the limited supply of oil, it's bound to happen.

My car died two days before christmas, I have an unregistered motorbike too.  I've given up on the idea of registering it due to the current prices, even its consumption would be more expensive than I'd be willing to pay.  I've taken up bicycle riding again.  That and public transport do me these days.

Using public transportation in a rural county is really hard.  My car may die at any second and I'm not looking forward to the tough choices I may have to make.

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Jiggles Vibe wrote:right now

Jiggles Vibe wrote:

right now is a good time to start thinking 'alternatives', (hydrogen, maybe compressed air or even garbage). the gov't has the technology, i just know it.

I'm not sure why they'd be hiding it so well, then. The math on this one is a bit dismal: oil accounts for the majority of north american energy consumption. That's not including the products made of plastic (from oil) and the fertilizer for food (natural gas). We're kind of in a bind.

The closest thing we'd have would be more efficient vehicles (electric, lighter bodies, etc). But automotive manufacturers are being very slow on the draw since they'd have to re-fit factories and re-train employees. That's a huge undertaking that it seems they'd rather not start any time soon.

There are definitely ways to make it work (check out the papers by the Rocky Mountain Institute), but nobody seems to be working on it hard enough for it to be ready soon. But there are ways.

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Mr. XC wrote:Also, our debt

Mr. XC wrote:

Also, our debt used to be mostly in 30 year bonds.  So if we increased the fed funds rate to 20%, the interest on the national debt would still be affordable if our national debt were long term debt.  Since a large portion of our national debt is much shorter in term, a 20% fed funds rate would likely cause the US to default on its debt.  So doing what it takes to fix the inflation is not going to work this time.

That, right there, is the scariest part economically speaking. It's like the sword of Damocles hanging over all the guys worried about their exotic derivatives. Of all the things, it would be the most mundane of bonds that would really cause the shit to start flying.

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HisWillness wrote:Mr. XC

HisWillness wrote:

Mr. XC wrote:

Also, our debt used to be mostly in 30 year bonds.  So if we increased the fed funds rate to 20%, the interest on the national debt would still be affordable if our national debt were long term debt.  Since a large portion of our national debt is much shorter in term, a 20% fed funds rate would likely cause the US to default on its debt.  So doing what it takes to fix the inflation is not going to work this time.

That, right there, is the scariest part economically speaking. It's like the sword of Damocles hanging over all the guys worried about their exotic derivatives. Of all the things, it would be the most mundane of bonds that would really cause the shit to start flying.

Everyone says this is scary. I don't understand why.

'National Debt' I've always just considered. basically, a sort of 'psuedo-debt'. It seems like a country can accrue as much as they want and just yawn about it, since there isn't anyone they really have to pay back or a deadline for the debt to be settled by. I'm ignorant of the topic here:

What does a country's debt actually mean? I presume it's money they borrowed from other countries? If so, what's the worry? Can someone just 'call' the loan? If so, I mean, what can they actually do to claim the money? It's not like America can go to 'jail' if they don't cough-up the dough.

Quote:
"Natasha has just come up to the window from the courtyard and opened it wider so that the air may enter more freely into my room. I can see the bright green strip of grass beneath the wall, and the clear blue sky above the wall, and sunlight everywhere. Life is beautiful. Let the future generations cleanse it of all evil, oppression and violence, and enjoy it to the full."

- Leon Trotsky, Last Will & Testament
February 27, 1940


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If it makes you feel any

If it makes you feel any better the prices in Australia are 1.50 per litre for petroleum and 1.70 per litre for diesel - 1 gallon ≈ 3.8 Litres so with the Greenback and the AusD being virtually equal these days we pay approximately 40 cents more per litre or $1.60 more per gallon.

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Kevin R Brown wrote:What

Kevin R Brown wrote:

What does a country's debt actually mean? I presume it's money they borrowed from other countries? If so, what's the worry? Can someone just 'call' the loan? If so, I mean, what can they actually do to claim the money? It's not like America can go to 'jail' if they don't cough-up the dough.

To a certain extent, you're right - a country's debt has an artificial side to it. On the other hand, without getting into the mechanics, the current state of affairs is very much like the conditions before the great depression, with the added interesting dimension that the US dollar is no longer bound to physical gold. That could be a help or a hinderance, depending on what school of economic thought you espouse.

The thing with the bonds is that they're a great indicator of how confident people are in a country's future. Finances in general are purely psychological, as much as people like to make the numbers seem real. When people get less confident, they spend at a slower rate, slowing the economy. If things get really tight, the economy slows enough to be a serious problem (thus depression). That's obviously a huge simplification, but that's what I find scary about the bonds. Not that they mean anything in and of themselves, but the effect that they'll have upon people's behaviour.

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World Oil Imbalance

I found this data helpful:

World Oil Balance, 2006-2007


From "World Oil Balance - Most Recent Quarters and Years" at "Other International Petroleum (Oil) Data" http://www.eia.doe.gov/emeu/international/oilother.html

I heard from one source that the current imbalance was as high as supply: 85 million barrels per day, demand: 87 million barrels per day.

So in addition to currency problems, we have to factor in the very influential supply/demand part of the equation.  So the only way to keep gas prices from climbing is to significantly reduce consumption, and/or increase production.

I have been thinking about possible solutions over the past few days.  Here is what I think will keep gas prices under control:

Short term fix - Reduce Demand:
Give tax incentives to companies that allow employees to work from home.  Give federal tax breaks to tax payers that work from home.  This will not curb the increase in demand from  the rest of the world, especially in growing economies where the cost of oil is heavily subsidized.  This is why we need to a long term solution and a medium term solution to go with it since the long term solution will not be ready in time.

Medium term fix - Increase Supply:
More domestic oil production: Offshore oil drilling in California, Gulf of Mexico, outer continental shelf, and others.  We can lease offshore oil drilling rigs to accomplish this soon.  Building them will take longer.  Even if we do not refine the oil domestically, selling the oil to the rest of the world will keep the supply/demand issue from increasing prices significantly.  Brazil has shown that offshore oil drilling poses few environmental risks.

Long term fix - Reduce Oil Dependence
:
Tax incentives for homeowners and companies that install solar panels with grid tie inverters.  Grid tie inverters feed excess solar power back into the local power grid, reducing power load on the grid when demand is high.  SolarSave Roofing Tiles from Open Energy Corporation allow for a natural look, so solar does not have to be ruled out because it is "ugly."

Construct nuclear power plants.  Already, more than 75% of the power consumed in France comes from nuclear power plants.  The US is still thinking about nuclear power.

Impose a tax on all passenger vehicles that get less than 40 mpg on a 40 mile trip and are unable to supply more than 20% of power from the batteries of the first 40 miles in a trip.  These cars should also allow themselves to be charged by plugging into any household outlet.  There are many hybrids that can get above 40 mpg today.  We just need to work on integrating batteries that are able to store more power.  If the power grid still has not improved at this point, we can use technology to allow a portion of the power stored in cars to be put back into the power grid if it becomes overburdened and when the power grid has the capacity, charge the cars again.  Thus, cars that sit at home unused can serve as a reserve for the power grid.  I am looking forward to the Chevy Volt.  Hopefully, other vehicles will be using similar technology in the near future.

I know that some people have objections over the medium term solution.  The side effect to not implementing the medium term solution would be that the long term solution will be painfully obvious and will make economic sense.  And I do mean painfully, in the lower standard of living sense.

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


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Mr. XC wrote:I heard from

Mr. XC wrote:

I heard from one source that the current imbalance was as high as supply: 85 million barrels per day, demand: 87 million barrels per day.

I heard the same estimate.  I was listening to the Financial Sense News Hour May 31st 3rd hour and they are predicting higher oil prices. In 2000, a 40 foot container shipped from China to the west coast was $3000; today it is $8000. 

Great program if you have the time to listen to it.

Quote:

I have been thinking about possible solutions over the past few days.  Here is what I think will keep gas prices under control:

I say we have to endure the pain for there to be a change.  The silver lining is that once the price becomes unbearable there might a period of civil unrest and then people will find alternatives.

-RR

 


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I'm a bit amused about

I'm a bit amused about suggestions of investing in gold, its value is ultimately subjective, since I think the amount actually required to actually produce useful goods is not very high.

Food would make more sense, since it is an absolute necessity, except it is much more perishable.

Probably investing in companies that are seriously trying to develop alternatives to oil for energy is agreat long term approach, broadly spread since we can't be quite sure which approaches are going to work out well in the long term.

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Rev. Real wrote:
I say we have to endure the pain for there to be a change.  The silver lining is that once the price becomes unbearable there might a period of civil unrest and then people will find alternatives.

Yes, individually, I think we have to prepare for these issues to not be addressed soon enough.  The time line for addressing these items is short and will require aggressive action to provide any real effect.  From the way things are being handled in the political arena, I do not think our government has the intelligence to do the right thing soon enough.  Another silver lining is that if we get into a very deep depression, solar and renewable sources will make more sense than oil, and we will have more oil to sell to other countries if we ever get around to tapping it.

BobSpence1 wrote:
I'm a bit amused about suggestions of investing in gold, its value is ultimately subjective, since I think the amount actually required to actually produce useful goods is not very high.

Gold is the most convenient money (example: less bulky than iron) that has kept its value for recorded human history.  Ralph T. Foster sells a book called "Fiat Paper Money, History & Evolution of our Currency."  In it, you see the long, sad history of fiat currency, and where we are today.  We are in a decade where the world is transitioning from cheap, plentiful commodities to expensive, scarce  commodities due to raising middle classes in developing countries around the world.  This will put more stress on fiat currencies.  With the way the US dollar is going, trust/complacency in currencies is going to be reconsidered (it already is being reconsidered by many people who are closely watching the value of the USD and the US economy).  In this situation, investing in commodities is a good alternative to currencies, but gold ownership worldwide is at a record lows in terms of percentage per person.  If gold ownership doubled per person, then the price of gold would probably quadruple or more.  Central banks also have record low inventories of gold.  I agree that the value of gold will be affected by how valuable people perceive it to be, but the same is true of fiat currency.  The difference is that fiat currency needs to be trusted to retain value.  Gold does not need trust as much because it is scarce, which is a good protection against its debasement.

BobSpence1 wrote:
Food would make more sense, since it is an absolute necessity, except it is much more perishable.

Food does make more sense, and since gold is too scarce among the population, food may be more useful for trade if we experience a currency crisis.  A currency crisis in the US is not a certainty, but since it is a possibility, and I do greatly value my ability to feed myself, I am looking into how to garden.  If we do not get a currency crisis, then at least I know how to reduce my grocery bills.

BobSpence1 wrote:
Probably investing in companies that are seriously trying to develop alternatives to oil for energy is agreat long term approach, broadly spread since we can't be quite sure which approaches are going to work out well in the long term.

I agree that investing in alternative energy companies does make a lot of sense and that not every alternative is going to work.  I think we are going to use several alternative sources, but I think solar is almost a given.  I know someone who is building a house soon and will be installing solar panels with ether roofing tiles or some kind of solar laminate.  I am not sure if it will be grid tie or battery based, but I am sure it could be converted from one to the other if the need is there.
 

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


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Gold is certainly better

Gold is certainly better than 'currency' as a standard of 'value', since it is doesn't corrode or degrade, is a compact solid, and is available in almost sufficient quantity to be used fairly widely, rather than being so easily obtainable from the environment as to be useless as a medium of exchange.

Its actual value is still an artefact of its common appeal to human beings throughout history, due to its visual appeal and relative ease of working with, plus now  an accumulation of custom in using it as a 'standard' of value. The fact is its value has actually fluctuated wildly over history, just orders of magnitude less than some currencies.

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BobSpence1 wrote:
Its actual value is still an artefact of its common appeal to human beings throughout history, due to its visual appeal and relative ease of working with, plus now  an accumulation of custom in using it as a 'standard' of value.

I think its main value is based on its scarcity.  That is what you want in a currency.

BobSpence1 wrote:
The fact is its value has actually fluctuated wildly over history, just orders of magnitude less than some currencies.

True, but it has never gone to zero.  Also, be careful when comparing the value of gold to fiat currencies, because inflation may make the value of gold look like it is fluctuating, when it is the currency itself that is fluctuating.  A better way to track the value of gold is looking at its purchasing power.  Perhaps look at how many oz of gold it take to build a small home, buy a month's worth of food, or some product/service.   I can give you a very long list of fiat currencies that have ended with approximately zero value.  They tend to end in hyperinflation, and gold is a very good store of wealth during hyperinflation, assuming the government does not make it illegal to own or use as currency.

One sign of a currency's demise is the coin's melt value worth more than the face value and a national debt that is growing to an unmanageable size.  This means that the government is not being responsible with its monetary policy, and frequently, monetary policies tend to degrade more than improve.  Eventually, trust in the currency is lost and then it ends in hyperinflation.  Take a look at http://www.coinflation.com/  A "Metal % of Denomination" greater than 100% means that the melt value is worth more than the face value.

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


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Value of gold cannot be much

Value of gold cannot be much to do with its scarcity, certainly not that alone, since there are plenty of metals that are way scarcer than gold, such as  many used in modern electronics. and even platinum I think is scarcer than gold. Interestingly all these are actually much more useful than gold. I still think its gold's aesthetic appeal is why we are hung up on it as a standard of value. If it was too scarce there would not be enough of it to use as a practical standard, and if it had more real utility the demand from industry would conflict with accumulating it pointlessly in 'reserves'. 

EDIT:

Economic activity and structures are fundamentally irrational IMHO, based as they are on mass human behaviour and desires.

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BobSpence1 wrote:I'm a bit

BobSpence1 wrote:
I'm a bit amused about suggestions of investing in gold, its value is ultimately subjective, since I think the amount actually required to actually produce useful goods is not very high.

The value of everything is determined irrationally anyway. Of course, the economic astrologers will have you believe everything from chart patterns to "fundamentals" that drive prices, but it's just us.

BobSpence1 wrote:
Probably investing in companies that are seriously trying to develop alternatives to oil for energy is agreat long term approach, broadly spread since we can't be quite sure which approaches are going to work out well in the long term.

That would be an incredibly risky endeavour. No current technology shows the promise of addressing even a third of the energy requirements that oil does, so existing companies are very unlikely to survive the coming crunch. If you were to bet the farm on 20 companies, and two made it out alive, you would have bet 5% on each, and so gained maybe 130% on the win, and lost around 95% on losses. 35% isn't bad, but for that level of risk, it's terrible. If only one of them makes it, you're down 30%.

(Sorry if I'm getting boring - trading is my job/obsession)

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Mr. XC wrote:BobSpence1

Mr. XC wrote:

BobSpence1 wrote:
Food would make more sense, since it is an absolute necessity, except it is much more perishable.

Food does make more sense, and since gold is too scarce among the population, food may be more useful for trade if we experience a currency crisis.  A currency crisis in the US is not a certainty, but since it is a possibility, and I do greatly value my ability to feed myself, I am looking into how to garden.  If we do not get a currency crisis, then at least I know how to reduce my grocery bills.

You can always bet on agricultural futures. Corn has been one of the easiest trades around for the last little while.

A currency "crisis" is unlikely with fiat currencies. Relative valuation means that if the world slumps, the Swiss Franc (CHF) and gold might see a jump in value, but at this point we're all on the same boat. The hyperinflation of pre-WWII Germany is unlikely in an interconnected currency system like we have now.

That said, it's fairly likely that the USD will experience more drawdown, as gold gives a good indication that it's suffering.

Saint Will: no gyration without funkstification.
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HisWillness wrote:
You can always bet on agricultural futures. Corn has been one of the easiest trades around for the last little while.

I own a little bit of CF, DBA, GLD, DGP, SKF, and BEARX.

HisWillness wrote:
A currency "crisis" is unlikely with fiat currencies. Relative valuation means that if the world slumps, the Swiss Franc (CHF) and gold might see a jump in value, but at this point we're all on the same boat. The hyperinflation of pre-WWII Germany is unlikely in an interconnected currency system like we have now.

That said, it's fairly likely that the USD will experience more drawdown, as gold gives a good indication that it's suffering.

They are interconnected, but what happens if investors, and eventually governments, choose to favor certain currencies?  A possible scenario that I see is people dumping currencies of debtor nations in favor of the currencies of creditor nations.  If things get too bad, a new currency with hard asset backing could develop.

EDIT: Part of the interconnected behavior is due to currencies being pegged to the USD.  Those pegs may be dropped if governments do not like their domestic inflation.  That would reduce the interconnected behavior.

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


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U.S. Dollar LIU: All right,

U.S. Dollar

LIU: All right, Jim. And I’ve got to turn to the dollar very quickly. What do you make of the comments by Bernanke earlier this week, noting the dollar slide, you have been very, very critical of Bernanke on this.

ROGERS: It is astonishing. Now, this is a man that under oath in Congress said, “If the price of the dollar goes down, it doesn’t affect ordinary - it doesn’t affect most Americans.” So, I almost fell out of my chair when I saw him say that. We know the man doesn’t know about markets, we know he doesn’t know about the currencies. Now, we know he doesn’t even understand civil economics, simple economics. So, I was astonished to see him, what, two or three days -

LIU: Right.

ROGERS: - suddenly said, “Well, if the dollar goes down, it affects us all.” It’s called inflation. So, somebody’s been teaching him economics. It’s about time, he should go back and take Economics 101.

Oil

LIU:All right. Jim, also talk to us about oil. You know, you’ve been very bullish on oil. We’ve had a lot of people talk about, you and I had a debate about whether or not there’s speculation in oil markets right now. You say no, others say yes, like Soros, he says it’s going to bubble. What do you know that others don’t about the oil market?

ROGERS: Look, look, Betty, there are always speculators in every market. Look at the New York Stock Exchange right now. You think there aren’t any speculators down there on the floor of the stock exchange? There are always speculators. That’s what business is all about. I submit to you that most of the people and - I don’t know about most of the people, I shouldn’t say that, but we know that the IEA, the definitive authority on oil has said that the world has an oil problem. The Saudis have told Bush that we have an oil problem. Betty, if there is lot of oil, please, would somebody tell us where it is, so we can all invest in it? The world has a serious oil problem. Now, Betty, that does not mean that oil cannot go down 50 percent. During this bull market since 1999, oil has gone down twice by 50 percent, going down by 50 percent in 2001 and again, in 2000 whatever it was, ‘05 or ‘06. So sure, you can have big reaction in any bull market. But that’s not the end of the bull market. There is no supply of oil unless you - somebody can tell us where the oil is, the bull market in oil has years to go despite new corrections which may or may not come.

LIU: Well, but you know, and I know you always hate having me ask you about - about limits or caps and all of that. But, given the supply/demand situation that you’re talking about, how high can oil go?

ROGERS: Betty, I know you - how you’re paid to ask questions like that, but I don’t know the answer. I’m not smart enough. I know that unless somebody discovers a lot of oil, the price of oil can go to $150, $200. You pick the number.

 

Part 1:

 

 

 

Part 2:

 

 

Transcript

-RR

 

 


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 Jim knows his shit. The

 Jim knows his shit. The first clue is when asked, "how long do you think the bear market will last?" he says, "oh, I'm not that smart." While I'm not sure that zinger was directed at Jim Cramer, it makes me smile to think it was.

You can forgive the man the comb-over and the bowtie. He knows what he's talking about, and he can pull the trigger.

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So can Peter Schiff.  He's

So can Peter Schiff.  He's been saying the same thing about commodities since the bursting of the NASDAQ bubble.  Rogers just had predicted it earlier and still has US denominated assets (shorting US stocks).  Schiff recommends to get 100% out of the USD as much as possible.

 

 

 

-RR


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Straight talk from Ron

Straight talk from Ron Paul:

Rising Energy Prices and the Falling Dollar

Oil prices are on the minds of many Americans as gas hits $4 a gallon, and continues to surge.  How high can prices go?  How can we solve these problems?  What, or who, is to blame?

 

Part of the answer lies in understanding bubbles and monetary inflation, but especially the Federal Reserve System.  The Federal Reserve is charged with controlling inflation through interest rate manipulation, however, many fail to realize that creating money, and therefore inflation, is really its only tool.  When the Federal Reserve inflates the dollar as drastically as it has in the past few decades, the first users of the newly created money go in search of investments for their dollars.  They must invest this money quickly and aggressively before it loses value.  This causes certain sectors to expand beyond what would naturally occur in the free market.  Eventually the sector overheats and the bubble bursts.  Overinvestment in dotcoms eventually led to a collapse of the NASDAQ.  Next we had the housing bubble, and now we are seeing the price of oil being bid up in the creation of another new bubble.  Investors are now looking to commodities like oil, for stability and growth as they pull capital out of real estate.  This increased demand for investment vehicles related to oil contributes to driving up the price of the actual product.

 

If the Fed continues with its bubble blowing policies of the past, the new commodities bubble will continue to grow, gas prices will continue to go up, as the value of your dollars go down.  We will see an overinvestment in these commodities as solutions are desperately sought for a supply shortage, which is only part of the problem.  Make no mistake, though, this is not the free market at work.  Government manipulations have added levels of complication and unintended consequences to the marketplace.

 

This is not the time for members of Congress to take political potshots at each other, or to imagine that the free market is somehow to blame.  This is the time to understand and fix problems.  That begins with making sure the decision makers have a firm grasp on the causes of the problems and possible effects of their decisions.  This is absolutely crucial if we want to get it right this time.  That is why I am in the process of calling for hearings on Capitol Hill on how the falling value of the dollar affects energy prices.

 

Governments need to get out of the way and let the people get back to work so that we can get our economy back on stable footing.  Our destructive regulatory environment, confiscatory tax policies, and managed, rather than free trade have chased many businesses overseas.  The bottom line is average Americans are being seriously hurt by these flawed policies, and they are not getting good information about the true dynamics at work.  The important thing now is to get the diagnosis absolutely correct so we can administer the appropriate treatment and move on to a healthier economic future. To do this it is absolutely necessary to address the subjects of central banking and fiat money.

 

***

 

Sad to see that even though he has identified the problem and has the solutions for change for the better the majority of Americans can't see that he's the best man for our country.  But wait...he's a creationist (sigh).

 

I rather have a creationist that knows his shit about a sound economy than a evolutionist that fucks up the economy with more regulation, taxation, and inflation.  We're going to get that with Obama/Clinton/McCain.

 

-RR

 


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Interesting topic

Interesting topic hmm...should I build a vault deep in mountains or it is already to late ?

There is one thing I will always regret. I will never see next generations reaching stars or ( if odds will show up a little different ) preaching to ruins of The Statue of Liberty.

Ecrasez l'infame!


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Start stocking up on food

Start stocking up on food and stuff now because it will be more expensive a few months from now.  Stay close to friends and family...this shit is gonna hit the fan or Ben Bernanke will crank start the printing presses and drop money outta a helicopter.

Marc Faber knows his shit too.  He squarely blames the effects of oil and inflation on Alan Greenspan/Ben Bernanke.  Ron Paul's been saying the same thing all along.  When will the masses wake up?

 

 

 

Ron Paul schools Ben Bernanke:  Inflation is the increase in the money supply which debases the currency.  Inflation is NOT rising prices (although it is the result of inflation)

 

 

-RR


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FOREX don't fail me now!

FOREX don't fail me now! *Insert cartoon skedaddle sound here, followed by glass shattering and a man yelling as he falls to his doom.*


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My prediction was that the

My prediction was that the Fed would keep interest rates at 2% or lower until the election.

Here's the latest B.S from the Fed:

Release Date: June 25, 2008

For immediate release

 

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.

Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending.  However, labor markets have softened further and financial markets remain under considerable stress.  Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.

The Committee expects inflation to moderate later this year and next year.  However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.

The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time.  Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.  The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.  Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.

 

The Fed are professional liars.  They use words like "inflation to moderate"...what does that mean?  They along with the majority of mainstream media will blame rising prices on anything else except the creation of new dollars and credit.  For more of their lies see a history at: The Mess that Greenspan Made

If you follow the business news, the MSM is reporting on speculators driving the price of oil on the futures market.  Jim Rogers debunked that notion soundly in the previous post here.

Ron Paul on Federal Reserve and Inflation 6/25/2008

 

 

 

Ron Paul is the only politician that is talking straight about the Fed actions.  Meanwhile the masses get fed a bunch of lies.

The Fed stopped publishing the M3 report (best report on the money supply).  By inference of M2, the true inflation rate is around 16%.

Lies, lies, lies...

-RR

 

 


Mr. XC
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"Speculators"

I found an interesting article that deals with the stupidity of congress and some news sources spouting the nonsense of "speculators making oil more expensive:"

http://money.cnn.com/2008/06/27/news/economy/birger_oil_speculation.fortune/index.htm

Quote:
Futures trading also discourages hoarding in an otherwise tight market. Without speculators willing to take the other side of so many futures contracts, oil refiners and other end-users might be inclined to ramp up their spot-market purchases and store more oil as a hedge against further price increases.

Quote:
A more basic misconception in Washington involves what these so-called speculators are really buying. They're not buying oil, they're buying futures, and this is a crucial distinction. A futures contract is an agreement between a buyer and a seller to deliver a set amount of oil - typically 1,000 barrels - at a specific price on a specific date. The value of that contract rises and falls, depending upon market conditions, right up until the date of delivery.

Thing is, the pension funds, index funds, hedge funds and other so-called speculators almost never take delivery of any oil. The typical investment fund will buy, say, the August oil future and then sell it days before it comes due - typically rolling over the proceeds into the next month's contract.

"For speculators to be propping up the price of oil, they somehow have to be taking physical oil off the market," says energy markets expert Craig Pirrong, a finance professor at the University of Houston's Bauer College of Business.

Quote:
There's something else politicians conveniently overlook: futures trading requires two to tango. For every investor who is betting oil prices will go up, there also needs to be an investor willing to take the opposite side of that bet.

"Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them; and no man ever had a distinct idea of the trinity. ..." -- Thomas Jefferson


HisWillness
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Mr. XC wrote:I found an

Mr. XC wrote:

I found an interesting article that deals with the stupidity of congress and some news sources spouting the nonsense of "speculators making oil more expensive:"

Oh, thank you! Telling people I'm in "futures ... that's commodities ... like gold ... yes, oil, too" has become worse than telling people I'm an atheist. Of course, recently I've had bad losses, so people can feel good about my failure - that's always nice. 

Mr. XC wrote:
"For speculators to be propping up the price of oil, they somehow have to be taking physical oil off the market," says energy markets expert Craig Pirrong, a finance professor at the University of Houston's Bauer College of Business.

Exactly. Speculators also provide liquidity, which allows "legitimate" traders (like corn farmers trading corn futures - that's always a quaint example) the ability to buy and sell much more conveniently than they could in a smaller market.

In short, greed is good.

Saint Will: no gyration without funkstification.
fabulae! nil satis firmi video quam ob rem accipere hunc mi expediat metum. - Terence