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February 25, 2005
Not Enough Time...
Not enough time to do more than cut, paste, and post:
John Berry at Bloomberg: "The dogged debate among Federal Reserve officials these days is not over whether to raise their target for the overnight lending rate again next month. They will, for the seventh meeting in a row, by a unanimous vote. Rather, the issue that has more or less split the policy makers down the middle is whether the Federal Open Market Committee should set an explicit inflation target, either a single number or a range."
Brad Setser: "The Saudis indicated that they really don't mind $50 a barrel oil. Shocking, I know. The Saudis do want the world to eventually buy all their oil, and thus don't want too rapid a move to alternative fuel sources. Consequently, they sometimes do start to worry if rising oil prices lead to a fall in demand for oil. This time around, though, high oil prices have not triggered much of a reduction in demand. Asian economies (huge oil importers: most Asian economies have higher oil imports as a share of GDP than the US) have generally resisted letting gasoline prices rise in line with rising oil prices. Remember, China is still a communist country. The state oil companies seem to have been told to keep retail prices low. That is one way to contain inflation."
The New York Times > Opinion > Editorial: Warning From the Markets: "Tuesday's sell-off of dollars did not precipitate a meltdown. But it sure gave a taste of one. The dollar suffered its worst single-day decline in two months against the yen and the euro. Stock markets in New York, London, Paris and Frankfurt dropped, and gold and oil prices, which tend to go up when the dollar goes down, spiked.... Tuesday's market episode has its roots in American structural imbalances that will be corrected only by new policies, not more of the same tax-cut-and-weak-dollar deficit-bloating ploys. If Mr. Bush were half the capitalist he claims he is, he would listen to what the markets are telling him."
Bob Herbert: "In the fall of 2002 Mr. Arar... attempting to change planes at Kennedy Airport... was seized by American authorities, interrogated and thrown into jail. He was not charged with anything, and he never would be charged with anything.... Mr. Arar was surreptitiously flown out of the United States to Jordan and then driven to Syria, where he was kept like a nocturnal animal in an unlit, underground, rat-infested cell that was the size of a grave. From time to time he was tortured. He wept. He begged not to be beaten anymore. He signed whatever confessions he was told to sign. He prayed. Among the worst moments, he said, were the times he could hear babies crying in a nearby cell where women were imprisoned. He recalled hearing one woman pleading with a guard for several days for milk for her child. He could hear other prisoners screaming as they were tortured.... The Justice Department has alleged, without disclosing any evidence whatsoever, that Mr. Arar is a member of, or somehow linked to, Al Qaeda. If that's so, how can the administration possibly allow him to roam free? The Syrians, who tortured him, have concluded that Mr. Arar is not linked in any way to terrorism. And the Royal Canadian Mounted Police, a sometimes-clownish outfit that seems to have helped set this entire fiasco in motion by forwarding bad information to American authorities, is being criticized heavily in Canada for failing to follow its own rules on the handling and dissemination of raw classified information.... One former Canadian official, commenting on the Arar case, was quoted in a local newspaper as saying 'accidents will happen' in the war on terror."
Chris Giles | Financial Times: "Remember these names. Toshihiko Fukui. Zhou Xiaochuan. Perng Fai-Nan. Park Seung. Joseph Yam. And Yaga Venugopal Reddy. They are the central bank governors of Japan, China, Taiwan, South Korea, Hong Kong and India respectively. They are also arguably more important for US monetary policy than Alan Greenspan.... When a Bank of Korea spokesman implied on Monday that Korea wanted gradually to shift its reserves away from the dollar... the Dow plunged by 174 points and the US dollar fell 1.4 per cent against the euro... if the mere hint that South Korea might stop buying US dollar assets can move edgy markets more than Mr Greenspan's most trenchant comments to date on US deficits, it signifies how far the balance of power in the global economy has changed.... The US must attract roughly $2bn capital a day to finance its current account deficit. This has to come either from private investors or foreign governments.... In the past two years, the reliance on official purchases of US assets from Asian central banks has been enormous.... Japan's official exchange reserves now exceed $800bn; China holds more than $600bn; Taiwan and South Korea each holds more than $200bn; and Hong Kong and India are not far behind."
The Washington Monthly: "AMERICAN STYLE....Via Ezra Klein, this is pretty funny. Apparently George Bush had planned an 'American style townhall meeting' as the centerpiece of his current trip to Germany, but it's been quietly dropped from the schedule. Why? Because his idea of 'American style' meant a scripted event in which all the questions were screened and approved in advance. As Ezra says, 'American style, in some ways, is a lot like Cuban style. Or North Korean style. It shares some threads with Russian and Iranian style too.'"
Jason Vest | Dumb intelligence: "Negroponte’s position on the list of preferred candidates may reflect a harsher reality. According to both political and intelligence-community sources familiar with the DNI search, Negroponte was approximately eighth on the White House’s list of candidates... Robert M. Gates... Sam Nunn... William P. Barr... Tommy Franks.. John McMahon... Bobby Ray Inman... William Studeman and William Odom.... [T]he prospective candidates were... true IC veterans... people who have publicly and privately made some of the most thoughtful and potentially useful recommendations on intelligence reform.... [I]t doesn’t seem unreasonable to think that any of those guys would welcome the once-in-a-lifetime chance to serve as the nation’s first intelligence czar.... So why take a pass?... '[R]eform' of the intelligence community... has created a dedicated DNI... that could make the hapless Department of Homeland Security look like a model of efficacy by comparison...
Posted by DeLong at February 25, 2005 03:39 PM
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Comments
Great post.
The Saudis aren't dumb. The price of oil goes up and the demand still goes up. Why would they want to reduce the price? The oil prices are something we will have to get used to.
Posted by: Unstable Isotope at February 25, 2005 06:49 PM
The competition for gasoline is methanol.
Methanol is made in large chemical plants.
Steel is the largest cost for these plants.
The price of steel has doubled in five years.
The price of gasoline has doubled in five years.
What is going to happen to the price of oil?
Posted by: walter willis at February 25, 2005 06:55 PM
Good thing that President Bush does not read the newspapers--stories like these might shake his resolve--and Dick and Karl would then have to put him back in the trunk where they found him.
Posted by: MTC at February 25, 2005 07:37 PM
I think its too late for Bush to start paying attention to the market fundamentals. Even if he was allowed to meet with a real economist. The dollar may not crash in the next few years, but there is no way to prevent one now.
Posted by: Frank at February 25, 2005 10:48 PM
Shorter cut and paste?: Half the Fed thinks the Administration may try to INFLATE its way out of its mess, the world's financiers are becoming sure of it, and the Saudis are getting antsy at selling their oil for a mountain of depreciating dollars to China and the Tigers; while the U.S. sends innocent people to be TORTURED by a country that it is also threatening to invade, nobody in his right mind will be the head of U.S. intelligence, and the President is still not talking to the public, because, like, somebody might ask him to EXPLAIN HIMSELF.
Posted by: Lee A. Arnold at February 25, 2005 11:09 PM
This would all be pretty funny, if you were reading it on the back of a Cracker Jacks box.
Did anyone notice the huge backpedaling and
bogus economic coverup following the Dow drop?
"Everything is beautiful. Drink your Kool Aid."
In a way, they may be right. I listened to a
very intelligent economist explain why it is
always better to have a US trade deficit, since
then they're holding our worthless fiat paper,
while we're holding their toxic black plastic.
That's gotta be worth something!
This guy also explained that a US budget deficit
is great if the fiat currency is failing, since
you can borrow money now while it's worth more,
then pay it back with voodoo and chicken bones,
when it's become largely worthless as a result.
I think that's called a Ponzi scheme.
Or like truly great Trumpsters, use one credit line to pay off the next, ad infinitum, until the whole stack of cards collapses, and then they have to extend forgiveness and hope they at least get 10c back on their credit investment.
Hard ball for Bumsengehirn's in Georgetown.
Remember that old gramma with the wheelbarrow full of Deutschmarks trying to buy a loaf of bread!? I almost fell off my barstool laughing!
Posted by: tante aime at February 25, 2005 11:31 PM
Reichsmarks, I think. Deutsche Marks were created in 1947/8....and were a very different beast.
Posted by: Alex at February 26, 2005 05:27 AM
I'm surprised I've actually heard so little about what happened when South Korea made their announcement. Was there any real coverage of this event and its implications in the WSJ, BusinessWeek, the Economist or any other large general business publications?
Posted by: Jim S at February 26, 2005 08:35 AM
..."The price of oil goes up and the demand still goes up..."
Does a change in product price result in a change in demand or a change in the amount demanded? Or does it make any difference? Just asking.
Posted by: bncthor at February 26, 2005 08:38 AM
Said it before and I'll say it again. The time will come, and that right soon, when one or more of the Tigers' governments will want something (almost certainly political action, or perhaps ^in^action) from Dumbya - and unless he complies, that pop on the chin that the dollar took last week is going to look like a minor hiccup by comparison.
Posted by: Uncle Jeffy at February 26, 2005 09:56 AM
If Alan Greenspan were not a ward-heeler, Republican Party hack, he would back tax revenue increases to close the deficit. The economy could easily accommodate this. But he will not do this, because he is not truly a responsible public official, too afraid of the Rove/Club for Growth/Cato crazies.
Posted by: Bob H at February 26, 2005 02:22 PM
1) if the mere hint that South Korea might stop buying US dollar assets
.
.
.
3) didn't they change their minds the next day...
What might number 2 be? Hmmm...
How about this:
2) the mere hint that the US might move ALL their military forces out of South Korea
Posted by: ritchie at February 26, 2005 05:33 PM
Tante,
My college history prof would tell us of his experiences in Austria where he ran a flour mill, or something. He was paid in cash and had to take a suitcase to carry it home in. The other story that sticks in my mind was the one he told of about a trip to Berlin, the big city of eastern europe and the fashion capital. He was walking down one of the main shopping streets looking for a tie and spotted one in a window. Prince 1M Marks. Thinking He might spot a better one down the street, he keep shopping. Finding that he prefered the 1st tie he went back to the store - prince now 5M Marks.
Are we going there?
Posted by: dilbert dogbert at February 26, 2005 05:41 PM
"Brad Setser: "The Saudis indicated that they really don't mind $50 a barrel oil."
And neither do oil producers in the US.
It costs less to extract oil in SA than in the US. But at $50 a barrel people are making money in both countries. And if the price stays that high then our neighbors to the Great White North are one day going to be making a S**TLOAD of money!
http://www.kuro5hin.org/story/2003/4/20/201246/566
Posted by: ritchie at February 26, 2005 05:45 PM
Bob H wrote, "But he will not do this, because he is not truly a responsible public official, too afraid of the Rove/Club for Growth/Cato crazies."
*Too afraid*? Nonsense. He's in cahoots with them.
Posted by: liberal at February 27, 2005 08:42 AM