Any preliminary estimates of how this will affect Q2 GDP? Presumably, this means imports will be more of drag on growth and/or exports less of a boost, but is the effect quantifiable at this stage, even if only imperfectly?
This is likely a silly question, but why do trade deficits matter? Is there a correlation between recessions and increasing (or large) trade deficits? Do countries with trade deficits have worse economies than those without trade deficits?
The DOW is down .25%, SPX .5%, and tech/small cap almost 1%. There was a similar pattern yesterday. I wonder if funds that have to remain fully invested in stocks are cycling into very-large caps, because they see rough times ahead?
On the dollar front, I can't help but believe Bernanke's brave talk is based on a misappreciation of the severity of the situation, or maybe it's just complete BS...
That's not energy related, so how did this 20% jump happen?
b | Homepage | 06.10.08 - 10:14 am | #
The yuan is still semi-pegged, quite weak relative to the dollar... why wouldn't the China deficit continue to expand? Until THAT part rebalances too - it will be a partial success.
All other exporters are losing out because they don't peg as aggressively (except for the Gulf Oil producers who peg because they price in dollars though will accept any currency in payment - just price in dollars).
The Chinese & the US Treasury are playing chicken over the yuan. The Chinese either have to let go or peg to something else - gold, euro, oil - whatever. We can't continue to run these monster CADS... exchanging their resources & hard labor with our MBSs.
We need to consume less oil, consume less Chinese labor OR we have to replace those consumptions with our own production & resources. The price signals & dollar weakness are SCREAMING that to us... we are just deaf because we want to remain deaf. Much more fun to have slaves working for us than work for ourselves.
The markets are filled with 800lb official elephants. So much official intervention, pumping, deliberate jawboning of direction whether currency markets, bond markets, stock markets, gold markets, oil markets...free and fair markets are going the way of the dinosaurs. Fundamental data, other than ammunition for talking points, doesn't matter anymore. Puppet masters (Paulson's and Bernanke's of the world) have declared war on free and fair markets and don't give two shits if the public knows or not. Too much at stake.
Let's get this straight, there isn't a way in heck than the FED will raise rates the next time they meet. This will send the markets that they so dearly want to protect into a tailspin.
IEA said global oil demand will rise by 800,000 barrels per day (bpd) this year, 230,000 bpd less than its previous forecast.
However, The IEA cut its forecast for non-OPEC supply growth to 460,000 bpd, against 680,000 bpd in its previous report. As a result, it raised its expected demand for OPEC oil for the year by 300,000 bpd to 31.6 million bpd.
Boy i sure hope there's no hurricanes in the hurricane season.
Oil still holding at 136, but commodities and gold however is down 14.. so i guess all the FED speak is having an effect, inflation is mitigated.. yay?!
half of our trade imballance is due to the importation of crude oil etc .
we at CR debated the issue of hydrogen as an alternative to gasoline a week ago
i continue to believe hydrogen is the most likely alternative.
i agree with dryfy and others who point out hydrogen is not a source of energy, rather a storage medium
however, remember hydrogen can be generated directly from solar electricity, the transformation efficiency is around 70%.or any other electricity generating source...(nuclear, wind) or chemically from coal although that tech has challenges.
if burned in an internal combustion engine, hydrogen, in a direct port injection system is MORE efficient than gasoline,,,if carburated (injected into a plenum,) then hydrogen is less efficient than gasoline.
BB writes:
Let's get this straight, there isn't a way in heck than the FED will raise rates the next time they meet. This will send the markets that they so dearly want to protect into a tailspin.
Setser had some interesting comments on this a while back also:
The widening deficit makes it difficult to imagine a current account adjustment without a deep recession. The reason is that an export-driven, weak-dollar adjustment merely drives up oil prices. The weaker the dollar, the higher the trade deficit.
There's only one way to reduce our current account deficit, and that's by limiting imports. Usually that happens through recession.
mock - the real answer is consume less energy. That will happen as energy costs soar. BTW hydrogen will NEVER be cheap so it gets us to a lower energy consumption place as well as any 'vehicle'.
That is why I keep saying - the metric to watch going forward is GDP per BTU.
i continue to believe hydrogen is the most likely alternative.
I'd suggest reading The Hype About Hydrogen by Joseph J. Romm. He doesn't appear to have a preconceived agenda against hydrogen; he just found it's so enormously complicated from production to infrastructure to use, etc., that we might as well use electric or hybrid electric/gas.
I think the Chinese will allow the Yuan to rise more quickly. They are going to need to spend some serious $$ for infrastructure because of the earthquake and I'm betting they'll let the low-end exporters suffer some to pay the bill. Then the other Asian countries still pegging will be able to let their currencies rise to relieve their own inflation (much worse than here.)
Did that discussion on hydrogen take into account that pressure it needs to be kept at in order to be effective??
people hardly do any maintenance on vehicles now.....I REALLY want to be driving around when someone in their hydrogen vehicle throws a pressurized line at 5K PSI......
So easily people point out that much of our imports is oil and without oil our trade deficit would be no where near as bad as it is, yet these same folks never ever point out how much agricultural exports contribute to offset energy imports. There is give and take in this commodity boom.
I think it's just another case of saying what they think people want to hear. They do not want to hear that the I-B's are mostly responsible for that as a way to "offset" even poorer decisions with "financial products".....
OT: Big story on WaPo front page details Fannie's and Freddie's huge exposure to subprime MBS. Look at the 5-days for FNM and FRE to see the impact of this.
i agree that right now our best solution is conservation and efficieency...long term i suggest hydrogen needs to be developed...whether it pans out..i dont know but i bet we can.
anonymouse
every major car manufacturer, right now, has operational hydrogen vehicles...some ICE engines, some fuel cell...bmw hs both.
anonymous
i agree containment pressure is a challenge...some manufacturers are going way above 5k psi ...using carbon nano tube containment these problems , and the bigger storage issue, delivery infrastructure (gasoline stations for hydrogen) remain challenges, i agree.
Paulsen is going to look a wee bit embarassed when it is revealed that GS and MS speculation is driving this oil/food runup, using the Fed TAF as their ATM.
Also, our reliance on cheap goods from China may mean that our imbalance with them may actually grow in recessions as people switch to inferior goods.
John M wrote:
"OT: Big story on WaPo front page details Fannie's and Freddie's huge exposure to subprime MBS. Look at the 5-days for FNM and FRE to see the impact of this."
This alone should take the knees out of the dollar. Any holder of GSE debt should be having nightmares over the implications.
way above 5k...yes some are at over 15k...for that reason alone I want no part of anything that resembles a mobile time bomb driving around our city's...I'm shocked that our arab "friends" have not figured this one out....
Imagine the potency of a hydrogen powered car that's rigged......
I hate to say it but with commodities and energy increasing the one variable we are left with is falling home values. If I only have x left to spend on a house because energy increased well that is gonna drive em lower. It will just take a while because homes values are stickier than commodities. It all freaking balances in the end...
There was an interview in Barron's this week with the analyst from GS who's been given a lot of credibility because he's accurately predicted most of the rise. He says that very simply, the price will rise until there's some meaningful demand destruction. He's saying it could go to 150-200, but the high end would be temporary because the demand destruction has already begun.
Reuters: Paulson reiterated he would be prepared to intervene in
currency markets to underpin the dollar.
Paulson's comments send the dollar screaming up by .43. WTF? What do people think Paulson is going to do? Buy US treasuries? What a bunch of morons.
Paulsen is going to look a wee bit embarassed when it is revealed that GS and MS speculation is driving this oil/food runup, using the Fed TAF as their ATM.
No he won't
1) it will likely never be known to the masses
2) nobody who does know this cares anyway, since they're all doing it
3) if anybody does figure it out it won't matter due to American attention spans... hey, what's going on with Brittney and American Idol?
mock:
one thing I don't understand. Why all the obsession with Hydrogen when we can simply use electric/batteries?
all the car companies are working furiously to get a hydrogen car out because Hydrogen cars will need a LOT more maintenance than electric cars will need.
Maintenance=the lifeblood of almost all dealers.
only tangentially OT, but I'd be interested in a ubernerdish take on this:
LATimes: Soaring costs are squeezing gas station owners too Reasonable? or whining? There's a bit in there about the implications of higher use of credit cards that caught my attention but I've no way to judge if it's anywhere near true.
Could anyone share with me the pros and cons of using FHA's Hart Program. is there anything I should know about using this to purchase a condo. Thanks.
Yes I 'm sure he;s embarrassed by all the money he has been collecting while Blankfein keeps his seat warm for him.
If his 11th or 12th bottom call has not embarrassed him.....nothing will.
"Crude is now moving almost reflexively as a sort of "anti-dollar", a currency on steroids with eight times leverage. No matter that the global economy is slowing hard. Bad is good for oil in the topsy-turvy world of commodity funds."
dryfly writes:
By consuming less... seriously. That is what the price signals are screaming. Consume less & prices go down.
I tend to think that there's a fair amount of speculation in commodities. Having said that i think the trend is upwards, reason for this is that while the US consumes or tries to consume less, other emerging countries will pick up the slack.
To validate this theory, let's take oil.. US has consumed less according to the latest reports but China has increased its consumption in tandem. The US may be hell bent on recession and depression but the other countries are growing.
Also i think the huge funds are looking at commodities already for an acceptable rate of return as it definitely isn't happening in bonds and stocks. See PIMCO.
Finally if you study history, we are in a secular commodity cycle which lasts anything from 15-26 years, my guess is we are only halfway through it.
Imagine the potency of a hydrogen powered car that's rigged......
Ciao
MS
Anonymous | 06.10.08 - 11:13 am | #
there are two ways of mitigating this risk (by the way gasoline is highly explosive...throw one gallon on a pile of brush a light a match, throw it and run like hell...we slash burn here in the NW0
nano tube storage tech for slow release,
and carbon fiber containment...would unlikely allow a rapid release.
Yearning to Learn writes:
mock:
one thing I don't understand. Why all the obsession with Hydrogen when we can simply use electric/batteries?
mock back
the cost to produce car batteries, the environmental impact and the longevity issues are not resolved.
what makes hydrogen attractive is that it can be used right now in existing car engines while we move in the more long term directions you, dryfly and others recommend.
the two problems are, as stated, on-board storage, and refueling infrastructure.
Comparing Gasoline (that has to be taken out of a container, placed somewhere and then ignited) to hydrogen fuel cells (that can "ignite" from a simple lack of maintenance) is just laughable....
Did you buy into last year's hype???
Sounds like it.
Basic physics supports what I'm saying...how about you?
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Rupert writes:
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Turns out a weak president isn't such a good thing either. Weak in gets weak out.
I tend to think that there's a fair amount of speculation in commodities.
Spec's surf commodity & forex waves they don't make them... except for a few REAL big boys that can make bit of a wave when they jump into the water - Soros like. But even they need to follow events, let the events break the headwinds so to speak. Heck even CBs have trouble controlling these beasts - mostly they too have to follow but given their reserves & ability to 'focus' - they are the new big boys.
People want a nice easy scapegoat to hang up - like some unnamed faceless 'speculator'. It sure couldn't be because we are all trying to live at speeds beyond than the 'red line' - right? [/sarcasm]
anonymous MS, you asked for data regarding hydrogen and risks for storage
hydrogen is less risky than gasoline:
from the Rutgers U energy policy web stie
Some safety statistics for hydrogen and other fuels
Characteristic \tHydrogen \tNatural Gas \tGasoline
Lower heating value kJ/g \t120 \t50 \t44.5
self-ignition temperature (ºC) \t585 \t540 \t228-501
Flame temperature (ºC) \t2,045 \t1,875 \t2,200
Flammability limits in air (vol%) \t4 – 75 \t5.3 – 15 \t1.0 – 7.6
Minimum ignition energy in air (uJ) \t20 \t290 \t240
Detonability limits in air (vol%) \t18 – 59 \t6.3 – 13.5 \t1.1 – 3.3
Theoretical explosive energy (kg TNT/m3 gas) \t2.02 \t7.03 \t44.22
Diffusion coefficient in air (cm2/s) \t.61 \t.16 \t.05
Rupert writes:
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Rupert | 06.10.08 - 11:48 am | #
Its helping it a TON - if you make something. I see it everywhere I go.
Of course if all you do is consume & speculate - then not so much.
LATimes: Soaring costs are squeezing gas station owners too Reasonable? or whining? There's a bit in there about the implications of higher use of credit cards that caught my attention but I've no way to judge if it's anywhere near true.
Very true. A good friend bought a large station in Temecula as an investment about 8 years ago. Said it was a total nightmare to operate, mostly because the retail margins are non-existent. The gasoline wholesaler (Valero) explained how he should expect to make his profit on cigarette sales, the cigarette wholesaler explained how he should expect to profit on beer sales, etc., etc. Regulation was also a major burden since stations are subject to both state and local inspections and monitoring. One day, the local guy showed up with a sniffer device that he clearly didn't know how to operate, decided he'd a found a leak, and demanded the station be shut down. Took weeks and expensive environmental consulting fees to prove the guy wrong.
My friend sold the place 3 years ago; he's a much happier guy today.
I'm not anti-hydrogen, although I am anti-hydrogen for personal transportation.
although it it currently true that batteries are resource intensive, the battery operated cars have very few moving parts... thus, there is little other waste and little needed to repair.
no air filters, oil changes, or any of that other stuff you find under the hood that needs maintenance and replacement.
just a battery, 4 wheels, some seats, and an XM radio.
I believe the joke is "hydrogen cars are the cars of the future, and always will be"
sure, the car companies have hydrogen cars that cost over $1M a piece.
but full electric cars have been on the road for over a decade.
I feel like hydrogen may have applications elsewhere... perhaps industrial or other larger power applications?
FWIW: I now sht about sht. My goal wasn't to challenge you on hydrogen, only to see what about it makes you love it more than electric.
Likely, we'll have a host of different power sources going forward.
Top Federal Reserve officials hammered home on Tuesday the U.S. central bank's determination not to allow inflation to get out of control, cementing views that interest rates will rise later this year.
Ain't no way in hell these clowns are going to raise rates this year. We'll see more TAF and other such crap and probably more cuts. These guy's are full of BS.
Anonymous writes:
Top Federal Reserve officials hammered home on Tuesday the U.S. central bank's determination not to allow inflation to get out of control, cementing views that interest rates will rise later this year.
Ain't no way in hell these clowns are going to raise rates this year. We'll see more TAF and other such crap and probably more cuts. These guy's are full of BS.
I agree with you 101%, no way are they going to raise, they'll put some weird anti-speculative law in place before they raise rates!
although it feels "good" sometimes to be "right", it's also a little scary.
The house across the street from me went into foreclosure. the owner had tenants last year but they ruined the house. Then it was empty all winter and pipes froze and burst all over. Now it's in foreclosure, and being sold at a 60% discount it looks like (it'll need a lot to get it liveable again).
my neighbors do snow removal and landscaping. They are getting killed. I never thought about it before, but they have lots of big trucks for hauling, but more importantly EVERYTHING they do is gas powered (mow lawns, weed wacker, leaf blower, etc)
they tried to do a fuel pass-through charge but the end users can't afford it, because THEY're suffering as well from increases in energy, and landscaping is discretionary. anyway, it's just no good.
I didn't ask for data....you offered it up in defense that hydrogen was safer than gasoline.
That data does nothing to prevent the lack of maintenance on the vehicle carrying the hydrogen at a pressure that makes ANYTHING powered by gasoline look like a children's picnic. Remember gasoline is not forced through a closed system at over (in some cases much more) 5k PSI
Ignition points are in a controlled environment (at least the data you offered up is)
Tell me how that mitigates the basic problem of driving around the equal of a highly pressurized explosive gas???
This is likely a silly question, but why do trade deficits matter? Is there a correlation between recessions and increasing (or large) trade deficits? Do countries with trade deficits have worse economies than those without trade deficits?
That's not a stupid question. The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes. In the short-term, the trade deficit in and of itself is not a bad thing, especially if the deficits were being used to finance long-term capital investments. However, because our economy is consumer base, the deficits reflect our SUV usage, iPods, etc.
Obviously, the only way for trade deficits to continue without pummeling the dollar would be if (1) our trading partners don't mind accepting the worthless paper that we print ("safety", forex) or (2) foreign capital inflows (current account). Both of are going against us as well. NBER had an article stating 20% of oil was being traded in non-dollar currencies. Gee whiz, isn't it all swell.
People want a nice easy scapegoat to hang up - like some unnamed faceless 'speculator'.
You betcha. Speculators and hoarders -- unAmerican, I say -- let's make 'em pay. How about we start with that little commodities hedgefund monkey in the bowtie who is always running his mouth about how you can't believe the government. Perp walk time for Jimmy . . .
the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes.
hmmm... not sure I agree with this point. unless you qualify the statement with "we have stricter environ. regs than the 3rd world, higher labor costs than the 3rd world, and higher corp taxes than the 3rd world."
it's hard to "compete" with slave labor. that is the dirty little "free trade" secret out there.
we can compete and regain our export economy in a second... all we have to do is
-destroy the value of our dollar (thus, the American peasant labor will be cheaper)
-get rid of worker safety and child labor laws
-get rid of pollution laws.
that's what China and India do... look how roaring their economy is!
That's not a stupid question. The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes.
Labor costs 'yes' - corrected for currency & productivity. The rest is mostly BS.
You don't think the EU has regs & taxes? Even China has them now - very much so, I have friends coming back from there telling me that. The regs & red tape in China re mind numbingly complex - labor savings & currency diff makes the hassle MORE than worth while.
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Agricultural exports (with inventory accumulation) have been the only thing that GDP positive the last 2Q. The question is this: other than agriculture, what the hell do we produce that the world wants?
Maybe if someone figured a way to dissemble and repackage track housing.
You don't think the EU has regs & taxes? Even China has them now - very much so, I have friends coming back from there telling me that.
I was taking more historical perspective, especially during the 1980s; there was just an accumulation of things, (Clean Air Act Amendments, higher higher corporate taxes at the time), that led to destruction of the heavy manufacturing production base.
Agricultural exports (with inventory accumulation) have been the only thing that GDP positive the last 2Q. The question is this: other than agriculture, what the hell do we produce that the world wants?
Equipment - ag & mining equipment are shipping. Deere & Cat are way up over the last couple of years.
I've seen an awful lot of 'substitution' too... companies that USED to import parts to assemble here are now sourcing more of those parts domestically or at least inside NAFTA Zone (US-Mexi-Can). I'd bet that dwarfs export increases but you be hard pressed to find it in the stats.
I was taking more historical perspective, especially during the 1980s; there was just an accumulation of things, (Clean Air Act Amendments, higher higher corporate taxes at the time), that led to destruction of the heavy manufacturing production base.
Ummm - no.
I was a chem engineer during that time - then went into 'discrete mfg'. That blame 'clean air' stuff is right wing boiler plate that needs to be more effectively debunked. It didn't help us keep industry here but was mostly a minor nuisance & not the cause.
Labor cost SURELY drove a lot of that coupled to US maintaining reserve currency while running monster CADs & gov't deficits. If we weren't the reserve currency - our wages relative to currency & productivity would have crashed LONG ago under the burden of the twin deficits - CBs buyin dollars to maintain merchantilistic pegs prevented that.
It also explains why nobody else in the world is in a hurry to take on the mantle of reserve currency - it will hollow out your mfg quite fast if the 'host country' isn't extra-specially disciplined. Needless to say - we aren't/weren't.
Backing up dryfly - countries tend to specialize in what they do best, and the reserve currency country has an enormous advantage in doing finance. Doing well in one field suppresses success in other - e.g. all the big 3rd world resource countries with weak manufacturing/services. It's no coincidence that both of the post-industrial revolution reserve currency countries - England and the US - lost their manufacturing and gained big financial sectors. Theoretically this could work but in practice it's been a bust. Whether we could have continued to manage if our financial sector hadn't been destroyed by the massive fraud and fantasy of the credit bubble is and will probably remain an open question.
I'd say that the US and China are poster children for OVER specialization and the consequences associated with it.
I'm not even going to touch the Middle East. They should be running the taps as hard as possible. I guess they figure that they might as well grab as much $$$ as they can while they can....but the law of diminishing returns is a bitch.
As usual dryfly writes with uncommon sense re: our need to reduce our consumption of energy. How come everybody else focuses on how biofuels/hydrogen/nukes/fusion/renewables... is supposedly going to allow us to continue our profligate energy consumption. Instead of focusing on how Asian countries are subsidizing their energy consumption, why don't we focus on reducing the US subsidies to energy consumption? Cars account for most of our oil consumption, and driving is heavily subsidized, so that increases demand for oil, right? Parking, car insurance, state and local road maintainance, pollution, congestion; all of these are paid for on an average basis, instead of a marginal (actual cost) basis, giving everyone the signal to "drive more" because someone else is paying for most of it. It has been estimated (by Todd Litman at Victoria Transport Policy Institute) that making everyone pay for the actual costs of their own driving would reduce VMT by half. That's the answer to high gas prices, not more costly energy production
i just don't find data so far to support the H2 is riskier than gasoline.>>
Your "data" is from a controlled environment....what part of that are you not understanding?? Flash points (and ignition points) are calculated in a lab.
I do not see too many laboratories driving down the road....Do you??
"Paulson is suggesting that the US economy is about to be crushed out of existence.
He is forecasting a life of poverty for the former US middle class.
It's the developing countries that are going to be in bigger trouble. The Philippines has already had to go begging to the US for emergency rice supplies, as one example.
Because Americans don't want to compromise their way of life too much. Sure, I don't mind driving less, taking elevators, eating less, but it's 100 degrees today and I can't function without air conditioning.
When we have to start using more natural rubber, palm oil, and wood, it'd be interesting to see how fast we f&^k those sources up to maintain our lifestyle.
When we have to start using more natural rubber, palm oil, and wood, it'd be interesting to see how fast we f&^k those sources up to maintain our lifestyle.
ERR.. Rubber and palm oil are up about 300% already , I'd lay off those. It's a secular commodity bull with oil the most visible leader.
rent_to_own;
Thanks for that snippet regarding Japanese companies shifting production back to Japan from the US due to quality issues...that is important to know and rather depressing.
One thing that is enabling Japanese companies to do this is that China has taken over as the trade deficit villain in the MSM, so the Japanese probably aren't too worried about political backlash from these moves.
I've seen that runup; it's scary. I was just wondering how easy the non-energy trade-offs were. I mean, petroleum is in everything. To make all of those tires, are we going to have clear cut entire rain forests? Are we basically trading one dependency for another?
"but it's 100 degrees today and I can't function without air conditioning"
This is the problem that overly cheap energy has produced. we have large cities where we should not, such as Phoenix and Las Vegas, not to mention large swaths of non-coastal Southern California
the end answer: going forward we may have to redistribute our population in different ways.
(that said, energy is the least of Phoenix/LV/SoCals issue... water will be the breaking point IMO)
Am worried about the scarcity of eveything, from oil to food to the air we breathe.
It's all interconnected and interrelated, everyone seems to be chasing depleting resources which may not be able to be replenished at the pace we consume them.
Another cycle of events that has been happening of late, the number of natural disasters and out of whack weather cycles are going to even make some commodities scarcer and i don't even want to factor in bird flu which is making headlines again and geopolitical disruptions.
Ultimately it's good i think, that these prices of commodities go sky high, it will force innovation and conservatism which is greatly needed.
Keeping my fingers crossed for a better future and a livable present.
mock:
thanks for your input. For some reason hydrogen has become the red-headed stepchild of energy policy.
instead of poopooing options we should be actively thinking of all energy options, since it is unlikely that no one intervention will be sufficient. the miracle of oil will not be easy to replace/duplicate.
all of the options have SERIOUS flaws. Wind energy requires wind and a lot of Real Estate. Geothermal energy is high energy intensive to start up, and not appropriate for all locales. Batteries/electricity have storage issues, and also expense issues, and often come from "non clean" sources anyway. Coal is still "dirty". Solar energy requires Sun (not great for cloudy locales) but more important some of the components needed for solar could see massive shortages if we tried to implement worldwide.
my point isn't that wind isn't a great idea, because I think that it is fantastic. I'm only saying that it has serious problems if one is to consider making that the mainstay of our energy policy.
There is no way that wind energy could replace oil in our country. even with oil at $140/barrel wind is only starting to pencil out.
as for space... there is a qualifier.
1 windmill can generate the energy needs of 1,000 families in the UK. UK households use 72% of the energy that US households use. thus 1 windmill could generate the energy needs of 720 US families. UK vs US energy use
Thus, for a metro area like Mpls/St. Paul (3 mill people) you would need 4166 turbines. you can fit 20 turbines into 1 sq km... thus you'd need 200 sq km of land for just the turbines. that's no small amount of land. wind facts
the caveat: the turbines themselves only take up about 1% of that land mass... so you could farm in between the land.
a larger problem with wind energy is that it is not constant. it produces when the wind blows. thus, to have an effective system based on wind one would also have to have some sort of massive battery to store the wind energy as it is produced, and then dispense the energy when people want it (daytime hours).
Pooh writes:
I'm surprised that we can still finance such a huge trade deficit.
Aren't foreign investors worried that the US may not be able to repay all the debt it has racked up?
Pooh | 06.10.08 - 3:12 pm | #
Currently - most of them are more concerned that we will stop buying than they are that we can't repay - they are as addicted to mfg for export to us as we are at importing on easy terms from them. Who blinks first? Somebody has to EVENTUALLY.
Aren't foreign investors worried that the US may not be able to repay all the debt it has racked up?
Pooh | 06.10.08 - 3:12 pm | #
Also... (private) investors might be worrying... but its the foreign central banks (gov't) that are really building up the reserves. What motivates them? Return on investment or additional jobs 'in-country'?
Thus, for a metro area like Mpls/St. Paul (3 mill people) you would need 4166 turbines. you can fit 20 turbines into 1 sq km... thus you'd need 200 sq km of land for just the turbines. that's no small amount of land.
Grow corn under it... double dip. But then you probably knew that since you certainly get out into rural Minnie once in a while, right?
200 sq km is nothing really... what's that, 6 mi by 13 mi? Could drop a dozens of those in W Minnesota, So Dak & No Dak with room to spare.
The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes.
Well how come Germany has such a big trade surplus then? You think the US has a lot of regulations? Try Germany. Oh they have unions too. And 6 week vacations.
Germany doesn't produce any oil either. If the US didn't produce oil it's trade deficit would be way bigger.
Argento said: "The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes"
So, would it be correct to expect to see that countries with trade deficits have the worst economies/standard of living and those with trade surpluses always have healthy economies and high standards of living? Also, if this is true (i.e. that trade deficits represent the destruction of an economy), then shouldn't we be able to see a high correlation between recessions and trade deficits (i.e. trade deficts are worse in recessions)?
Well how come Germany has such a big trade surplus then? You think the US has a lot of regulations? Try Germany. Oh they have unions too. And 6 week vacations.
I don't think one shoe fits all.
Europe has a lot of peculiarities that make offshoring problematic: some of them were once state-owned; others are from legacy families, where the bottom line is not the end all be all; luxury brands that require top flight quality; etc. There are also mitigating circumstances on the import side: higher density, less consumption, brand pride, etc.
"So, would it be correct to expect to see that countries with trade deficits have the worst economies/standard of living and those with trade surpluses always have healthy economies and high standards of living?"
Not Necessarily. The mirror image of the trade deficit is the capital account surplus (roughly). If the capital account surplus is invested in productive investments then the economy can boom and the standard of living can increase. The USA had such a period between 1870 and 1900 when there was a trade deficit accompanied by massive foreign investment in US industry and railroads, and the US economy and standard of living surged.
In contrast, the massive US capital account surplus from 1993-2007 has gone to finance consumer goods, housing, government deficits, acquisition of US companies, etc. We had quite a party, but we don't have productive assets to pay off the debts we incurred.
YTL,
South and southeastern Minnesota is going to have approx 33% capacity factor for its wind farms. So you need to triple the number of turbines and add the appropriate storage technology to smooth the energy delivered.
invisible hand wrote: "The mirror image of the trade deficit is the capital account surplus (roughly). If the capital account surplus is invested in productive investments then the economy can boom and the standard of living can increase."
Interesting. According to this logic it would seem that it's not the ballance of trade that matters (i.e. a deficit or surplus), but WHAT the foreign investment is going into that really counts. If this is so it would seem that all the fuss around "trade deficits" is beside the point, and that what we really need to be watching are which sectors the capital inflows/outlows are occuring in.
According to this logic it would seem that it's not the ballance of trade that matters (i.e. a deficit or surplus), but WHAT the foreign investment is going into that really counts.
I would add that WHO is financing the current account deficit is also important. You can do quite of bit damages screwing around with trillions of USD. Just look at Uncle Ben, and he's not even close to what OPEC and China have.
"...but full electric cars have been on the road for over a decade..."
Full electric cars have been built for the past 120 years. And the technology, especially batteries, hasn't significantly improved in that time. There's a reason electric cars lost out to the new internal combustion engine in the 1890s.
TD to be 66Billion next month...
Great graph, CR. I bet there wasn't a single media outlet that illustrated that relationship so clearly.
Another permabear party ruined by the Yen.
Looks like it may turn into a parabolic spike, a couple of more stimulus checks should just about do it. HAAaaaaaaaaaa
The benchmark S&P 500 should see a climb of 8 percent in the next 12 months, Richard Bernstein, Merrill Lynch chief investment strategist
Merrill's Bernstein backs S&P 500 growth view
| Reuters
These clowns have short me writen all over them.
Any preliminary estimates of how this will affect Q2 GDP? Presumably, this means imports will be more of drag on growth and/or exports less of a boost, but is the effect quantifiable at this stage, even if only imperfectly?
How can this be? I was assured for decades that the "automatic counter-balancing forces of free markets" wouldn't allow this?!
This is likely a silly question, but why do trade deficits matter? Is there a correlation between recessions and increasing (or large) trade deficits? Do countries with trade deficits have worse economies than those without trade deficits?
Bob_in_MA | 06.10.08 - 10:01 am | #
Great graph, CR. I bet there wasn't a single media outlet that illustrated that relationship so clearly.
Oh, I am sure MSM will have a similar graph and it be because they came up with it independently (all those analysts working on the data).
Another permabear party ruined by the Yen.
At least Yen's minding his business over in the corner (even if he's had too much to drink). Gold and silver are trashing the place.
Trade deficit with chine widened by $4 billion ...
That's not energy related, so how did this 20% jump happen?
ac, you short the YEN?
The DOW is down .25%, SPX .5%, and tech/small cap almost 1%. There was a similar pattern yesterday. I wonder if funds that have to remain fully invested in stocks are cycling into very-large caps, because they see rough times ahead?
On the dollar front, I can't help but believe Bernanke's brave talk is based on a misappreciation of the severity of the situation, or maybe it's just complete BS...
That's quite a jump in the trade deficit with China. Was that due to higher imports or lower exports?
Bob, I thought it was in response to Trichet - damage control of a kind. Words in response to words. But what do I know?
That's not energy related, so how did this 20% jump happen?
b | Homepage | 06.10.08 - 10:14 am | #
The yuan is still semi-pegged, quite weak relative to the dollar... why wouldn't the China deficit continue to expand? Until THAT part rebalances too - it will be a partial success.
All other exporters are losing out because they don't peg as aggressively (except for the Gulf Oil producers who peg because they price in dollars though will accept any currency in payment - just price in dollars).
The Chinese & the US Treasury are playing chicken over the yuan. The Chinese either have to let go or peg to something else - gold, euro, oil - whatever. We can't continue to run these monster CADS... exchanging their resources & hard labor with our MBSs.
We need to consume less oil, consume less Chinese labor OR we have to replace those consumptions with our own production & resources. The price signals & dollar weakness are SCREAMING that to us... we are just deaf because we want to remain deaf. Much more fun to have slaves working for us than work for ourselves.
ac, you short the YEN?
No. No positions on the Yen.
I'm more interested in it as an indicator of how leveraged things are.
If anything I'd be tempted to buy some calls on FXY at some point. But I don't have any.
The markets are filled with 800lb official elephants. So much official intervention, pumping, deliberate jawboning of direction whether currency markets, bond markets, stock markets, gold markets, oil markets...free and fair markets are going the way of the dinosaurs. Fundamental data, other than ammunition for talking points, doesn't matter anymore. Puppet masters (Paulson's and Bernanke's of the world) have declared war on free and fair markets and don't give two shits if the public knows or not. Too much at stake.
Let's get this straight, there isn't a way in heck than the FED will raise rates the next time they meet. This will send the markets that they so dearly want to protect into a tailspin.
Reports today include :-
IEA Cuts World Oil Demand Forecast - CNBC
IEA said global oil demand will rise by 800,000 barrels per day (bpd) this year, 230,000 bpd less than its previous forecast.
However, The IEA cut its forecast for non-OPEC supply growth to 460,000 bpd, against 680,000 bpd in its previous report. As a result, it raised its expected demand for OPEC oil for the year by 300,000 bpd to 31.6 million bpd.
Boy i sure hope there's no hurricanes in the hurricane season.
Oil still holding at 136, but commodities and gold however is down 14.. so i guess all the FED speak is having an effect, inflation is mitigated.. yay?!
half of our trade imballance is due to the importation of crude oil etc .
we at CR debated the issue of hydrogen as an alternative to gasoline a week ago
i continue to believe hydrogen is the most likely alternative.
i agree with dryfy and others who point out hydrogen is not a source of energy, rather a storage medium
however, remember hydrogen can be generated directly from solar electricity, the transformation efficiency is around 70%.or any other electricity generating source...(nuclear, wind) or chemically from coal although that tech has challenges.
if burned in an internal combustion engine, hydrogen, in a direct port injection system is MORE efficient than gasoline,,,if carburated (injected into a plenum,) then hydrogen is less efficient than gasoline.
heres some companies that are on the trail
516-Mile Range In A Fuel Cell Vehicle You Can’t Fuel | Autopia | Wired.com
BB writes:
Let's get this straight, there isn't a way in heck than the FED will raise rates the next time they meet. This will send the markets that they so dearly want to protect into a tailspin.
Setser had some interesting comments on this a while back also:
Does Chinese inflation now constrain the Fed?
Setser cites a posting by Tim Duy...
Serious meat in all of this - I'm still digesting, eating tums & hoping not to get sick.
The widening deficit makes it difficult to imagine a current account adjustment without a deep recession. The reason is that an export-driven, weak-dollar adjustment merely drives up oil prices. The weaker the dollar, the higher the trade deficit.
There's only one way to reduce our current account deficit, and that's by limiting imports. Usually that happens through recession.
mock - the real answer is consume less energy. That will happen as energy costs soar. BTW hydrogen will NEVER be cheap so it gets us to a lower energy consumption place as well as any 'vehicle'.
That is why I keep saying - the metric to watch going forward is GDP per BTU.
i continue to believe hydrogen is the most likely alternative.
I'd suggest reading The Hype About Hydrogen by Joseph J. Romm. He doesn't appear to have a preconceived agenda against hydrogen; he just found it's so enormously complicated from production to infrastructure to use, etc., that we might as well use electric or hybrid electric/gas.
Paulson just said a minute ago:
Food and other commodities are not speculation but supply demand.
WOW.
I don't see how prices are going to come down now.
I think the Chinese will allow the Yuan to rise more quickly. They are going to need to spend some serious $$ for infrastructure because of the earthquake and I'm betting they'll let the low-end exporters suffer some to pay the bill. Then the other Asian countries still pegging will be able to let their currencies rise to relieve their own inflation (much worse than here.)
Then we'll see some real import inflation.
Did that discussion on hydrogen take into account that pressure it needs to be kept at in order to be effective??
people hardly do any maintenance on vehicles now.....I REALLY want to be driving around when someone in their hydrogen vehicle throws a pressurized line at 5K PSI......
Hydrogen=not gonna happen.
Ciao
MS
BB writes:
Paulson just said a minute ago:
Food and other commodities are not speculation but supply demand.
WOW.
I don't see how prices are going to come down now.
BB | 06.10.08 - 10:48 am | #
By consuming less... seriously. That is what the price signals are screaming. Consume less & prices go down.
Or produce more of the stuff or produce other valuable things to trade for the stuff. Even Paulson knows you can't manipulate around this forever.
I find it ASTONISHING that otherwise conservative free-ish market types don't GET this economic fundamental.
Blows my mind.
I guess it is the 'I don't want to know what pains me' meme.
It just seems that for a company that cares about the quality of its products, the quality of its workers is a major asset.
Amen. Great post. :>)
So easily people point out that much of our imports is oil and without oil our trade deficit would be no where near as bad as it is, yet these same folks never ever point out how much agricultural exports contribute to offset energy imports. There is give and take in this commodity boom.
"Food and other commodities are not speculation but supply demand."
Said the man who as former CEO of GS made how much in revs. trading said comm.?
He is beyond douchiness.....
Ciao
MS
Paulson just said a minute ago:
Food and other commodities are not speculation but supply demand.
WOW.
I don't see how prices are going to come down now.
See the problem is if that's true then we're basically looking at the end of the world as we know it in America.
If the increase in oil prices is fundamentally driven, then we should expect it to continue upward as it has done in the past year.
Paulson is suggesting that the US economy is about to be crushed out of existence.
He is forecasting a life of poverty for the former US middle class.
sad but true AC.....
I think it's just another case of saying what they think people want to hear. They do not want to hear that the I-B's are mostly responsible for that as a way to "offset" even poorer decisions with "financial products".....
Ciao
MS
OT: Big story on WaPo front page details Fannie's and Freddie's huge exposure to subprime MBS. Look at the 5-days for FNM and FRE to see the impact of this.
How HUD Mortgage Policy Fed The Crisis - washingtonpost.com
dryfly
i agree that right now our best solution is conservation and efficieency...long term i suggest hydrogen needs to be developed...whether it pans out..i dont know but i bet we can.
anonymouse
every major car manufacturer, right now, has operational hydrogen vehicles...some ICE engines, some fuel cell...bmw hs both.
anonymous
i agree containment pressure is a challenge...some manufacturers are going way above 5k psi ...using carbon nano tube containment these problems , and the bigger storage issue, delivery infrastructure (gasoline stations for hydrogen) remain challenges, i agree.
Paulsen is going to look a wee bit embarassed when it is revealed that GS and MS speculation is driving this oil/food runup, using the Fed TAF as their ATM.
Also, our reliance on cheap goods from China may mean that our imbalance with them may actually grow in recessions as people switch to inferior goods.
ac writes:
Another permabear party ruined by the Yen.
ac | 06.10.08 - 10:02 am | #
i view it from a different angle
then beginning of the end of the yen carry trade ???...dollar falling relative to the yen...long overdue
Yen
John M wrote:
"OT: Big story on WaPo front page details Fannie's and Freddie's huge exposure to subprime MBS. Look at the 5-days for FNM and FRE to see the impact of this."
This alone should take the knees out of the dollar. Any holder of GSE debt should be having nightmares over the implications.
so is this the beginning of the USD carry trade?
way above 5k...yes some are at over 15k...for that reason alone I want no part of anything that resembles a mobile time bomb driving around our city's...I'm shocked that our arab "friends" have not figured this one out....
Imagine the potency of a hydrogen powered car that's rigged......
Ciao
MS
Paulson can't blame hedge fund managers--Bush has given them huge tax breaks.
Being a bubble head, can i look at trade deficits as another big bubble?
I hate to say it but with commodities and energy increasing the one variable we are left with is falling home values. If I only have x left to spend on a house because energy increased well that is gonna drive em lower. It will just take a while because homes values are stickier than commodities. It all freaking balances in the end...
Chris
There was an interview in Barron's this week with the analyst from GS who's been given a lot of credibility because he's accurately predicted most of the rise. He says that very simply, the price will rise until there's some meaningful demand destruction. He's saying it could go to 150-200, but the high end would be temporary because the demand destruction has already begun.
Makes perfect sense.
its not a problem!! it looks better now! prospect have strenghten!!
BBC NEWS | Business | Risk of US downturn 'diminishes'
Santa told me!! he isn expert..
Reuters: Paulson reiterated he would be prepared to intervene in
currency markets to underpin the dollar.
Paulson's comments send the dollar screaming up by .43. WTF? What do people think Paulson is going to do? Buy US treasuries? What a bunch of morons.
Paulsen is going to look a wee bit embarassed when it is revealed that GS and MS speculation is driving this oil/food runup, using the Fed TAF as their ATM.
No he won't
1) it will likely never be known to the masses
2) nobody who does know this cares anyway, since they're all doing it
3) if anybody does figure it out it won't matter due to American attention spans... hey, what's going on with Brittney and American Idol?
mock:
one thing I don't understand. Why all the obsession with Hydrogen when we can simply use electric/batteries?
all the car companies are working furiously to get a hydrogen car out because Hydrogen cars will need a LOT more maintenance than electric cars will need.
Maintenance=the lifeblood of almost all dealers.
only tangentially OT, but I'd be interested in a ubernerdish take on this:
LATimes: Soaring costs are squeezing gas station owners too Reasonable? or whining? There's a bit in there about the implications of higher use of credit cards that caught my attention but I've no way to judge if it's anywhere near true.
thanks.
Could anyone share with me the pros and cons of using FHA's Hart Program. is there anything I should know about using this to purchase a condo. Thanks.
"Paulson embarrassed"
Yes I 'm sure he;s embarrassed by all the money he has been collecting while Blankfein keeps his seat warm for him.
If his 11th or 12th bottom call has not embarrassed him.....nothing will.
Ciao
MS
For those who imagine that food is a "bubble:"
tristateobserver.com
anonymouse
yes i will read Romm's book
my understanding is that he makes several assumptions, reasonably grounded, but not necessary, that yield his conclusion.
one such assumption is that hydrogen would be generated by striping natural gas or burning fossil fuels to generate electricity etc.
my assumption are that
hydrogen (short term application only) is burned in conventional internal combustion engines, and
is used primarily in urban and suburban regions where less than 200 mile ranges are not a problem, and
hydrogen is produced via electrolytic- hydrolysis.
i don't argue that the challenges are not huge...so was US putting men on the moo
"Crude is now moving almost reflexively as a sort of "anti-dollar", a currency on steroids with eight times leverage. No matter that the global economy is slowing hard. Bad is good for oil in the topsy-turvy world of commodity funds."
Federal Reserve and ECB are in no mood to save us from the consequences of our debt - Telegraph
dryfly writes:
By consuming less... seriously. That is what the price signals are screaming. Consume less & prices go down.
I tend to think that there's a fair amount of speculation in commodities. Having said that i think the trend is upwards, reason for this is that while the US consumes or tries to consume less, other emerging countries will pick up the slack.
To validate this theory, let's take oil.. US has consumed less according to the latest reports but China has increased its consumption in tandem. The US may be hell bent on recession and depression but the other countries are growing.
Also i think the huge funds are looking at commodities already for an acceptable rate of return as it definitely isn't happening in bonds and stocks. See PIMCO.
Finally if you study history, we are in a secular commodity cycle which lasts anything from 15-26 years, my guess is we are only halfway through it.
Oh and thanks for the link to Setser.
The USD is a trap.
Do not buy into this hot air.
Imagine the potency of a hydrogen powered car that's rigged......
Ciao
MS
Anonymous | 06.10.08 - 11:13 am | #
there are two ways of mitigating this risk (by the way gasoline is highly explosive...throw one gallon on a pile of brush a light a match, throw it and run like hell...we slash burn here in the NW0
nano tube storage tech for slow release,
and carbon fiber containment...would unlikely allow a rapid release.
Yearning to Learn writes:
mock:
one thing I don't understand. Why all the obsession with Hydrogen when we can simply use electric/batteries?
mock back
the cost to produce car batteries, the environmental impact and the longevity issues are not resolved.
what makes hydrogen attractive is that it can be used right now in existing car engines while we move in the more long term directions you, dryfly and others recommend.
the two problems are, as stated, on-board storage, and refueling infrastructure.
Comparing Gasoline (that has to be taken out of a container, placed somewhere and then ignited) to hydrogen fuel cells (that can "ignite" from a simple lack of maintenance) is just laughable....
Did you buy into last year's hype???
Sounds like it.
Basic physics supports what I'm saying...how about you?
Ciao
MS
ha ha ha ha ha
let me get this straight
paulson jawbones how the treasury is goingto "support" the dollar
and
Big ben says that's it for interest rate cuts we are going to fight inflation
AND ALL THAT DOES TO GOLD IS DOWN 2% !!!
a soggy ding dong if ever there was one
UPDATE 5-Gold slips to session lows as dollar firms
| Reuters
Mock: I think gold is a great buying opportunity today, knowing that the FED can't really talk down inflation.
That said, isn't the gold market small and easily manipulated?
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Rupert writes:
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Turns out a weak president isn't such a good thing either. Weak in gets weak out.
I tend to think that there's a fair amount of speculation in commodities.
Spec's surf commodity & forex waves they don't make them... except for a few REAL big boys that can make bit of a wave when they jump into the water - Soros like. But even they need to follow events, let the events break the headwinds so to speak. Heck even CBs have trouble controlling these beasts - mostly they too have to follow but given their reserves & ability to 'focus' - they are the new big boys.
People want a nice easy scapegoat to hang up - like some unnamed faceless 'speculator'. It sure couldn't be because we are all trying to live at speeds beyond than the 'red line' - right? [/sarcasm]
anonymous MS, you asked for data regarding hydrogen and risks for storage
hydrogen is less risky than gasoline:
from the Rutgers U energy policy web stie
Some safety statistics for hydrogen and other fuels
Characteristic \tHydrogen \tNatural Gas \tGasoline
Lower heating value kJ/g \t120 \t50 \t44.5
self-ignition temperature (ºC) \t585 \t540 \t228-501
Flame temperature (ºC) \t2,045 \t1,875 \t2,200
Flammability limits in air (vol%) \t4 – 75 \t5.3 – 15 \t1.0 – 7.6
Minimum ignition energy in air (uJ) \t20 \t290 \t240
Detonability limits in air (vol%) \t18 – 59 \t6.3 – 13.5 \t1.1 – 3.3
Theoretical explosive energy (kg TNT/m3 gas) \t2.02 \t7.03 \t44.22
Diffusion coefficient in air (cm2/s) \t.61 \t.16 \t.05
Rupert writes:
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Rupert | 06.10.08 - 11:48 am | #
Its helping it a TON - if you make something. I see it everywhere I go.
Of course if all you do is consume & speculate - then not so much.
what these numbers mean is tha
hydrogen holds less energy than gasoline
burns cooler, diffuses quicker when released in air, requires a higher self ignition temperature, and holds less explosive power than gasoline
LATimes: Soaring costs are squeezing gas station owners too Reasonable? or whining? There's a bit in there about the implications of higher use of credit cards that caught my attention but I've no way to judge if it's anywhere near true.
Very true. A good friend bought a large station in Temecula as an investment about 8 years ago. Said it was a total nightmare to operate, mostly because the retail margins are non-existent. The gasoline wholesaler (Valero) explained how he should expect to make his profit on cigarette sales, the cigarette wholesaler explained how he should expect to profit on beer sales, etc., etc. Regulation was also a major burden since stations are subject to both state and local inspections and monitoring. One day, the local guy showed up with a sniffer device that he clearly didn't know how to operate, decided he'd a found a leak, and demanded the station be shut down. Took weeks and expensive environmental consulting fees to prove the guy wrong.
My friend sold the place 3 years ago; he's a much happier guy today.
mock:
I'm not anti-hydrogen, although I am anti-hydrogen for personal transportation.
although it it currently true that batteries are resource intensive, the battery operated cars have very few moving parts... thus, there is little other waste and little needed to repair.
no air filters, oil changes, or any of that other stuff you find under the hood that needs maintenance and replacement.
just a battery, 4 wheels, some seats, and an XM radio.
I believe the joke is "hydrogen cars are the cars of the future, and always will be"
sure, the car companies have hydrogen cars that cost over $1M a piece.
but full electric cars have been on the road for over a decade.
I feel like hydrogen may have applications elsewhere... perhaps industrial or other larger power applications?
FWIW: I now sht about sht. My goal wasn't to challenge you on hydrogen, only to see what about it makes you love it more than electric.
Likely, we'll have a host of different power sources going forward.
Top Federal Reserve officials hammered home on Tuesday the U.S. central bank's determination not to allow inflation to get out of control, cementing views that interest rates will rise later this year.
WRAPUP 1-Fed hammers home message against inflation
| Reuters
Ain't no way in hell these clowns are going to raise rates this year. We'll see more TAF and other such crap and probably more cuts. These guy's are full of BS.
Mock: gold is going down ! If it breaks the 850ish support, all bets are off..lol
Let's see if the USD index can break 74.
Looks like BEN is winning the war with Trichet, things are getting interesting.
mock t,
Thanks for all the good info on hydrogen fuel...
Anonymous writes:
Top Federal Reserve officials hammered home on Tuesday the U.S. central bank's determination not to allow inflation to get out of control, cementing views that interest rates will rise later this year.
Page Not Found | Reuters.com
b...036573720080610
Ain't no way in hell these clowns are going to raise rates this year. We'll see more TAF and other such crap and probably more cuts. These guy's are full of BS.
I agree with you 101%, no way are they going to raise, they'll put some weird anti-speculative law in place before they raise rates!
although it feels "good" sometimes to be "right", it's also a little scary.
The house across the street from me went into foreclosure. the owner had tenants last year but they ruined the house. Then it was empty all winter and pipes froze and burst all over. Now it's in foreclosure, and being sold at a 60% discount it looks like (it'll need a lot to get it liveable again).
my neighbors do snow removal and landscaping. They are getting killed. I never thought about it before, but they have lots of big trucks for hauling, but more importantly EVERYTHING they do is gas powered (mow lawns, weed wacker, leaf blower, etc)
they tried to do a fuel pass-through charge but the end users can't afford it, because THEY're suffering as well from increases in energy, and landscaping is discretionary. anyway, it's just no good.
I wonder if I should short CAT?
I didn't ask for data....you offered it up in defense that hydrogen was safer than gasoline.
That data does nothing to prevent the lack of maintenance on the vehicle carrying the hydrogen at a pressure that makes ANYTHING powered by gasoline look like a children's picnic. Remember gasoline is not forced through a closed system at over (in some cases much more) 5k PSI
Ignition points are in a controlled environment (at least the data you offered up is)
Tell me how that mitigates the basic problem of driving around the equal of a highly pressurized explosive gas???
It doesn't..
Ciao
MS
This is likely a silly question, but why do trade deficits matter? Is there a correlation between recessions and increasing (or large) trade deficits? Do countries with trade deficits have worse economies than those without trade deficits?
That's not a stupid question. The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes. In the short-term, the trade deficit in and of itself is not a bad thing, especially if the deficits were being used to finance long-term capital investments. However, because our economy is consumer base, the deficits reflect our SUV usage, iPods, etc.
Obviously, the only way for trade deficits to continue without pummeling the dollar would be if (1) our trading partners don't mind accepting the worthless paper that we print ("safety", forex) or (2) foreign capital inflows (current account). Both of are going against us as well. NBER had an article stating 20% of oil was being traded in non-dollar currencies. Gee whiz, isn't it all swell.
People want a nice easy scapegoat to hang up - like some unnamed faceless 'speculator'.
You betcha. Speculators and hoarders -- unAmerican, I say -- let's make 'em pay. How about we start with that little commodities hedgefund monkey in the bowtie who is always running his mouth about how you can't believe the government. Perp walk time for Jimmy . . .
a good question with multiple possible and highly controversial answers, it goes without saying.
the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes.
hmmm... not sure I agree with this point. unless you qualify the statement with "we have stricter environ. regs than the 3rd world, higher labor costs than the 3rd world, and higher corp taxes than the 3rd world."
it's hard to "compete" with slave labor. that is the dirty little "free trade" secret out there.
we can compete and regain our export economy in a second... all we have to do is
-destroy the value of our dollar (thus, the American peasant labor will be cheaper)
-get rid of worker safety and child labor laws
-get rid of pollution laws.
that's what China and India do... look how roaring their economy is!
"That said, isn't the gold market small and easily manipulated?
BB | 06.10.08 - 11:46 am | #"
Yes!
That's not a stupid question. The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes.
Labor costs 'yes' - corrected for currency & productivity. The rest is mostly BS.
You don't think the EU has regs & taxes? Even China has them now - very much so, I have friends coming back from there telling me that. The regs & red tape in China re mind numbingly complex - labor savings & currency diff makes the hassle MORE than worth while.
but all I need is one example to prove argento's point wrong. I'll give you 2.
Japan and Germany
Both big time exporters
both have very strict environmental rules
both have high taxes
and both have high labor costs.
Where are all those fools who said a weaker dollar will help the economy by increasing exports? Oops, I guess it turns out that a weak dollar isn't such a good thing after all.
Agricultural exports (with inventory accumulation) have been the only thing that GDP positive the last 2Q. The question is this: other than agriculture, what the hell do we produce that the world wants?
Maybe if someone figured a way to dissemble and repackage track housing.
CO2 writes:
what the hell do we produce that the world wants?
Innovation and Intellectual Property.
Make no mistake the US is still the undisputed world leader, whether this remains so, only time will tell.
You don't think the EU has regs & taxes? Even China has them now - very much so, I have friends coming back from there telling me that.
I was taking more historical perspective, especially during the 1980s; there was just an accumulation of things, (Clean Air Act Amendments, higher higher corporate taxes at the time), that led to destruction of the heavy manufacturing production base.
Agricultural exports (with inventory accumulation) have been the only thing that GDP positive the last 2Q. The question is this: other than agriculture, what the hell do we produce that the world wants?
Equipment - ag & mining equipment are shipping. Deere & Cat are way up over the last couple of years.
I've seen an awful lot of 'substitution' too... companies that USED to import parts to assemble here are now sourcing more of those parts domestically or at least inside NAFTA Zone (US-Mexi-Can). I'd bet that dwarfs export increases but you be hard pressed to find it in the stats.
I was taking more historical perspective, especially during the 1980s; there was just an accumulation of things, (Clean Air Act Amendments, higher higher corporate taxes at the time), that led to destruction of the heavy manufacturing production base.
Ummm - no.
I was a chem engineer during that time - then went into 'discrete mfg'. That blame 'clean air' stuff is right wing boiler plate that needs to be more effectively debunked. It didn't help us keep industry here but was mostly a minor nuisance & not the cause.
Labor cost SURELY drove a lot of that coupled to US maintaining reserve currency while running monster CADs & gov't deficits. If we weren't the reserve currency - our wages relative to currency & productivity would have crashed LONG ago under the burden of the twin deficits - CBs buyin dollars to maintain merchantilistic pegs prevented that.
It also explains why nobody else in the world is in a hurry to take on the mantle of reserve currency - it will hollow out your mfg quite fast if the 'host country' isn't extra-specially disciplined. Needless to say - we aren't/weren't.
"Paulson is suggesting that the US economy is about to be crushed out of existence.
He is forecasting a life of poverty for the former US middle class.
ac"
Actually, he is forecasting complete annihilation of his own family and 'owner class', and another American Revolution.
Backing up dryfly - countries tend to specialize in what they do best, and the reserve currency country has an enormous advantage in doing finance. Doing well in one field suppresses success in other - e.g. all the big 3rd world resource countries with weak manufacturing/services. It's no coincidence that both of the post-industrial revolution reserve currency countries - England and the US - lost their manufacturing and gained big financial sectors. Theoretically this could work but in practice it's been a bust. Whether we could have continued to manage if our financial sector hadn't been destroyed by the massive fraud and fantasy of the credit bubble is and will probably remain an open question.
CO2 writes:
what the hell do we produce that the world wants?
F22, warships, missiles...all kinds of stuffs to offset the imports
WTF?
Russia's Gazprom Predicts $250 Oil by 2009 - CNBC
Load up on the commodities!
And buy a farm if at all possible.
I'd say that the US and China are poster children for OVER specialization and the consequences associated with it.
I'm not even going to touch the Middle East. They should be running the taps as hard as possible. I guess they figure that they might as well grab as much $$$ as they can while they can....but the law of diminishing returns is a bitch.
More good news:
Gazprom predicts oil will reach $250
FT.com / Global Economy - Gazprom predicts oil will reach $250
Just go ahead and bypass the middle man.
BigR writes:
More good news:
Gazprom predicts oil will reach $250
http://www.ft.com/cms/s/0/ 239285...00779fd2ac.html
Cool it's in the FT now too, watch for oil to spike tomorrow.
Anonymous wrote at | 06.10.08 - 11:41 am | #
Basic physics supports what I'm saying...how about you?
Ciao
MS
Anonymous (MS) then wrote
I didn't ask for data....you offered it up in defense that hydrogen was safer than gasoline.
mock turtle says
---really, ok lets just skip the data
but really it seems to me your argument seems to be driven by emotion rather than evidence.
yearning to learn
your points about less complexity in plug in electrics and other issues regarding maintenance have validity
your comment about you saying you don't know shit about shit aint true...you raise good points, and
mock turtle is NOT an expert on hydrogen cars, im just reading and sharing a point of view, realizing i may be wrong.
heck anon (MS) may be right about the dangers...i just don't find data so far to support the H2 is riskier than gasoline.
BB
about gold prices...you make a good point
and i cant predict gold trends because i can list many factors that exert an upward pressure, but several that push down.
when i assign values to those vectors i get confused...looks like a wash for now.
As usual dryfly writes with uncommon sense re: our need to reduce our consumption of energy. How come everybody else focuses on how biofuels/hydrogen/nukes/fusion/renewables... is supposedly going to allow us to continue our profligate energy consumption. Instead of focusing on how Asian countries are subsidizing their energy consumption, why don't we focus on reducing the US subsidies to energy consumption? Cars account for most of our oil consumption, and driving is heavily subsidized, so that increases demand for oil, right? Parking, car insurance, state and local road maintainance, pollution, congestion; all of these are paid for on an average basis, instead of a marginal (actual cost) basis, giving everyone the signal to "drive more" because someone else is paying for most of it. It has been estimated (by Todd Litman at Victoria Transport Policy Institute) that making everyone pay for the actual costs of their own driving would reduce VMT by half. That's the answer to high gas prices, not more costly energy production
Happy Trails
Green Marketeer
Your "data" is from a controlled environment....what part of that are you not understanding?? Flash points (and ignition points) are calculated in a lab.
I do not see too many laboratories driving down the road....Do you??
Ciao
MS
"Paulson is suggesting that the US economy is about to be crushed out of existence.
He is forecasting a life of poverty for the former US middle class.
It's the developing countries that are going to be in bigger trouble. The Philippines has already had to go begging to the US for emergency rice supplies, as one example.
Mock:
Have noticed, now more than ever gold prices move inversely with the USD and in tandem with Euro.
Oil is in it's own league now, and i daresay will not impact gold as much.
Lets see if gold holds 850 overnight.
If i were an investor i'd think now would be an opportune time to pick up some as i believe Ben's verbal intervention is just that, verbal!
Green Marketeer:
Because Americans don't want to compromise their way of life too much. Sure, I don't mind driving less, taking elevators, eating less, but it's 100 degrees today and I can't function without air conditioning.
When we have to start using more natural rubber, palm oil, and wood, it'd be interesting to see how fast we f&^k those sources up to maintain our lifestyle.
BigR writes:
When we have to start using more natural rubber, palm oil, and wood, it'd be interesting to see how fast we f&^k those sources up to maintain our lifestyle.
ERR.. Rubber and palm oil are up about 300% already , I'd lay off those. It's a secular commodity bull with oil the most visible leader.
rent_to_own;
Thanks for that snippet regarding Japanese companies shifting production back to Japan from the US due to quality issues...that is important to know and rather depressing.
One thing that is enabling Japanese companies to do this is that China has taken over as the trade deficit villain in the MSM, so the Japanese probably aren't too worried about political backlash from these moves.
I've seen that runup; it's scary. I was just wondering how easy the non-energy trade-offs were. I mean, petroleum is in everything. To make all of those tires, are we going to have clear cut entire rain forests? Are we basically trading one dependency for another?
"but it's 100 degrees today and I can't function without air conditioning"
This is the problem that overly cheap energy has produced. we have large cities where we should not, such as Phoenix and Las Vegas, not to mention large swaths of non-coastal Southern California
the end answer: going forward we may have to redistribute our population in different ways.
(that said, energy is the least of Phoenix/LV/SoCals issue... water will be the breaking point IMO)
BigR,
Am worried about the scarcity of eveything, from oil to food to the air we breathe.
It's all interconnected and interrelated, everyone seems to be chasing depleting resources which may not be able to be replenished at the pace we consume them.
Another cycle of events that has been happening of late, the number of natural disasters and out of whack weather cycles are going to even make some commodities scarcer and i don't even want to factor in bird flu which is making headlines again and geopolitical disruptions.
Ultimately it's good i think, that these prices of commodities go sky high, it will force innovation and conservatism which is greatly needed.
Keeping my fingers crossed for a better future and a livable present.
mock:
thanks for your input. For some reason hydrogen has become the red-headed stepchild of energy policy.
instead of poopooing options we should be actively thinking of all energy options, since it is unlikely that no one intervention will be sufficient. the miracle of oil will not be easy to replace/duplicate.
all of the options have SERIOUS flaws. Wind energy requires wind and a lot of Real Estate. Geothermal energy is high energy intensive to start up, and not appropriate for all locales. Batteries/electricity have storage issues, and also expense issues, and often come from "non clean" sources anyway. Coal is still "dirty". Solar energy requires Sun (not great for cloudy locales) but more important some of the components needed for solar could see massive shortages if we tried to implement worldwide.
somewhat OT:
I went and bought some cocoa bean mulch for my garden today. I typically pay $3 to $3.25 per bag. (I get it cheap at Menards) Today: $5.99/bag.
Yearning to Learn writes:
all of the options have SERIOUS flaws. Wind energy requires wind and a lot of Real Estate.
Boone Pickens would beg to differ.
Boone Pickens buys 667 GE wind turbines
Business, financial, personal finance news - CNNMoney.com
Wind energy requires wind and a lot of Real Estate.
Someone once did a study on the effect of drag on the earth's revolution. I wish I could find it. We're screwing up inter-planetary forces too.
BB:
sorry, I should clarify:
my point isn't that wind isn't a great idea, because I think that it is fantastic. I'm only saying that it has serious problems if one is to consider making that the mainstay of our energy policy.
There is no way that wind energy could replace oil in our country. even with oil at $140/barrel wind is only starting to pencil out.
as for space... there is a qualifier.
1 windmill can generate the energy needs of 1,000 families in the UK. UK households use 72% of the energy that US households use. thus 1 windmill could generate the energy needs of 720 US families.
UK vs US energy use
Thus, for a metro area like Mpls/St. Paul (3 mill people) you would need 4166 turbines. you can fit 20 turbines into 1 sq km... thus you'd need 200 sq km of land for just the turbines. that's no small amount of land.
wind facts
the caveat: the turbines themselves only take up about 1% of that land mass... so you could farm in between the land.
a larger problem with wind energy is that it is not constant. it produces when the wind blows. thus, to have an effective system based on wind one would also have to have some sort of massive battery to store the wind energy as it is produced, and then dispense the energy when people want it (daytime hours).
I'm surprised that we can still finance such a huge trade deficit.
Aren't foreign investors worried that the US may not be able to repay all the debt it has racked up?
Pooh writes:
I'm surprised that we can still finance such a huge trade deficit.
Aren't foreign investors worried that the US may not be able to repay all the debt it has racked up?
Pooh | 06.10.08 - 3:12 pm | #
Currently - most of them are more concerned that we will stop buying than they are that we can't repay - they are as addicted to mfg for export to us as we are at importing on easy terms from them. Who blinks first? Somebody has to EVENTUALLY.
Aren't foreign investors worried that the US may not be able to repay all the debt it has racked up?
Pooh | 06.10.08 - 3:12 pm | #
Also... (private) investors might be worrying... but its the foreign central banks (gov't) that are really building up the reserves. What motivates them? Return on investment or additional jobs 'in-country'?
Thus, for a metro area like Mpls/St. Paul (3 mill people) you would need 4166 turbines. you can fit 20 turbines into 1 sq km... thus you'd need 200 sq km of land for just the turbines. that's no small amount of land.
Grow corn under it... double dip. But then you probably knew that since you certainly get out into rural Minnie once in a while, right?
200 sq km is nothing really... what's that, 6 mi by 13 mi? Could drop a dozens of those in W Minnesota, So Dak & No Dak with room to spare.
The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes.
Well how come Germany has such a big trade surplus then? You think the US has a lot of regulations? Try Germany. Oh they have unions too. And 6 week vacations.
Germany doesn't produce any oil either. If the US didn't produce oil it's trade deficit would be way bigger.
Argento said: "The increasing trade deficits reflect the total destruction of our export economy, because of stricter environmental regulations, higher labor costs, and corporate taxes"
So, would it be correct to expect to see that countries with trade deficits have the worst economies/standard of living and those with trade surpluses always have healthy economies and high standards of living? Also, if this is true (i.e. that trade deficits represent the destruction of an economy), then shouldn't we be able to see a high correlation between recessions and trade deficits (i.e. trade deficts are worse in recessions)?
Well how come Germany has such a big trade surplus then? You think the US has a lot of regulations? Try Germany. Oh they have unions too. And 6 week vacations.
I don't think one shoe fits all.
Europe has a lot of peculiarities that make offshoring problematic: some of them were once state-owned; others are from legacy families, where the bottom line is not the end all be all; luxury brands that require top flight quality; etc. There are also mitigating circumstances on the import side: higher density, less consumption, brand pride, etc.
Yearning to Learn | 06.10.08 - 2:52 pm |
AP1000...3-5 cents kw/hr installed and fueled.
Thats all,
Chris
Sniglet asks:
"So, would it be correct to expect to see that countries with trade deficits have the worst economies/standard of living and those with trade surpluses always have healthy economies and high standards of living?"
Not Necessarily. The mirror image of the trade deficit is the capital account surplus (roughly). If the capital account surplus is invested in productive investments then the economy can boom and the standard of living can increase. The USA had such a period between 1870 and 1900 when there was a trade deficit accompanied by massive foreign investment in US industry and railroads, and the US economy and standard of living surged.
In contrast, the massive US capital account surplus from 1993-2007 has gone to finance consumer goods, housing, government deficits, acquisition of US companies, etc. We had quite a party, but we don't have productive assets to pay off the debts we incurred.
YTL,
South and southeastern Minnesota is going to have approx 33% capacity factor for its wind farms. So you need to triple the number of turbines and add the appropriate storage technology to smooth the energy delivered.
invisible hand wrote: "The mirror image of the trade deficit is the capital account surplus (roughly). If the capital account surplus is invested in productive investments then the economy can boom and the standard of living can increase."
Interesting. According to this logic it would seem that it's not the ballance of trade that matters (i.e. a deficit or surplus), but WHAT the foreign investment is going into that really counts. If this is so it would seem that all the fuss around "trade deficits" is beside the point, and that what we really need to be watching are which sectors the capital inflows/outlows are occuring in.
According to this logic it would seem that it's not the ballance of trade that matters (i.e. a deficit or surplus), but WHAT the foreign investment is going into that really counts.
I would add that WHO is financing the current account deficit is also important. You can do quite of bit damages screwing around with trillions of USD. Just look at Uncle Ben, and he's not even close to what OPEC and China have.
"...but full electric cars have been on the road for over a decade..."
Full electric cars have been built for the past 120 years. And the technology, especially batteries, hasn't significantly improved in that time. There's a reason electric cars lost out to the new internal combustion engine in the 1890s.
Sniglet,
Your conclusion is basicly correct, although we are doing a lot of simplification here of a horrendously complex topic.
The current trade deficit is extraordinary for a number of reasons: