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Is Inflation a Clear and Present Danger? No Way
Short run variations in velocity, M2 growth, output and prices will be washed out by using a 10 year CAGR series.
Bill Gross To 'President' Obama: Double The Deficit
I-S+G-T=0
From the national income identities it must be that an increase in G will cause I (investment) to decline or S (savings) to rise.
If one assumes that output depends on labour and capital and capital increases with I then a decline in I will cause future output to fall. Is this the solution the author had in mind?
On the other hand a decrease in taxes must increase I and/or decrease savings. This follows from the National Income identities.
The Author should be careful when using national income identities to justify his arguments.
Offshoring Is a Dubious Policy When the Question is Oil Drilling
Secondly, oil is "not" a non renewable resource contrary to popular opinion and the implicit belief of the author. Unless the author is prepared to disprove the 2nd law of thermodynamics he should reverse his argument.
An article published in the journal Proceedings of the National Academy of Sciences in August 2002 called
"The Evolution of Multicomponent Systems at High Pressures: VI.
The Thermodynamic Stability of the Hydrogen-Carbon System:
The Genesis of Hydrocarbons and the Origin of Petroleum."
makes a myth of the theory of the biological source of Hydrocarbons
www.gasresources.net/i...
Who Ends Up With the Oil? We Do.
Who Ends Up With the Oil? We Do.
As long as the value of your assets and income rises to cover the debt and debt service you can borrow forever.
That is the point of America. It's investment opportunities provide for higher rates of return that lead to higher income growth. The European countries, such as Germany, that are running surpluses have poor investment opportunities and low income growth.
That is why a deregulatory environment with low capital and income taxes is critical for improving investment opportunities in the US that lead to higher GDP growth.
Who Ends Up With the Oil? We Do.
An increase in the price of oil (imported goods) relative to the price of domestic products (export goods) causes a change in relative income of US citizens vis a vis citizens of oil exporters and the rest of the world. This is what has happened in America today. The relative income of Americans has fallen.
Since America is the biggest consumer of oil, its price increase has had the largest effect on the relative incomes of Americans relative to ROW. This decline in relative income has caused the depreciation of the US currency with one of the biggest moves coming against the largest exporter of oil to the US, Canada. Not surprising some of the biggest devaluations has come against commodity exporting countries.
If one wants to check the trade figures the US has run a trade deficit since 1976. During this time the US dollar has appreciated and depreciated. The trade deficit has not caused the dollar to depreciate. In fact the trade deficit is governed by aggregate US savings behavior and investment opportunities that result in higher expected future incomes relative to the rest of the world.
Trade: Realities and Fallout
All the balance of trade deficit shows is that the US borrows from the rest of the world. And Why? Because Americans expect future incomes to rise faster than the debt on the borrowing. The European countries that run trade surpluses have all had low rates of economic growth. Therefore, they have to save to improve future incomes.
Faster economic growth and superior investment opportunities in the US have lead to trade deficits with the rest of the world.
The US trade and current accounts are determined by aggregate savings behaviour.
www.census.gov/foreign...
10 Winning Stock Themes in an Obama Administration
2) The discount retailers will definitely benefit from falling after tax incomes and the higher end retailers and teen retailers will be hurt.
3) Increased educational subsidies to educational companies will obviously improve returns.
4) Increased government spending on roads and bridges will clearly help construction companies.
5) The democrats in congress want to control spending on drugs by reducing reimbursements. That is a negative for all drug making companies. More importantly for biotechs the democrats want to make it easier for generics to copy their drugs. One of the great features of biotechs is their difficulty to replicate and the costs of testing before introduction. The democrats want to make it easier, quicker and cheaper to bring generics to market. How the democrats are positive for biotechs is difficult to imagine.
6) Higher tax rates on capital and income will reduce the savings of the wealthy and cause a decline in demand for muni bonds. This will have a negative effect on the muni bond market.
7) Not clear how higher taxes on REITS will help them.
8) The sectors in decline from foreign competition will not obviously benefit from protectionist policies. Switching GM production to the US from Canada or Mexico is not necessarily going to make GM more profitable.
9) With lower after tax incomes individuals will prefer to save money by completing their own tax forms.
10) Higher tax rates on capital gains and income will reduce after tax incomes and hence reduce savings for retirement. This is a negative for asset management firms. Higher capital gains taxes means that asset accumulation will be lower. As individuals will have to cash out to pay higher taxes.
Affiliated Computer Services: A Cheap Stock Ready to Make New Highs
Oil's Gains Are Due to Fundamentals, Not Speculation
Technolgy improvements are extending well life and making shale discoveries economic. Plus with the increase in oil prices deep water drilling becomes economic. That is two thirds of the globe that can be drilled. Brazil has found a huge reservoir and Canada has had productive wells drilled into the Atlantic Ocean for years. If America also drilled the Continental shelf major oil resevoirs would be discovered.
As Malthus population growth theory was proved incorrect due to technological advancements so shall Hubberts peak oil theory.
Economics of Oil Futures Trading, Part I
hsgac.senate.gov/publi...
His argument is that the managed funds allocate a percentage of their portfolios to commodity futures indexes. This increases future prices and by arbitrage spot prices. To quote Masters
"There is a crucial distinction between Traditional Speculators and Index Speculators: Traditional Speculators provide liquidity by both buying and selling futures. Index Speculators buy futures and then roll their positions by buying calendar spreads. They never sell. Therefore, they consume liquidity and provide zero benefit to the futures markets.
It is easy to see now that traditional policy measures will not work to correct the problem created by Index Speculators, whose allocation decisions are made with little regard for the supply and demand fundamentals in the physical commodity markets. If OPEC supplies the markets with more oil, it will have little affect on Index Speculator demand for oil futures. If Americans reduce their demand through conservation measures like carpooling and using public transportation, it will have little affect on Institutional Investor demand for commodities futures.
Index Speculators’ trading strategies amount to virtual hoarding via the commodities futures markets. Institutional Investors are buying up essential items that exist in limited quantities for the sole purpose of reaping speculative profits. "
Index speculators maintain the dollar value of their positions, rolling over at expiry, without regard to expectations about future prices. That means they can take unlimited losses if future prices fall.
Futures investing without expectations of future prices appears to be a recipe for disaster since other market participants (traditional speculators and risk hedgers) will take positions based on price expectations. So if supply is increased or demand decreases hedgers and traditional speculators can inflict huge losses on the indexers by short selling. How long will that last before the index speculators are done?
Another problem with the Masters argument is that their is no physical delivery of the product to index speculators. They are not buying up scare resources for profit. If they were they would have to store it or sell it into the market to recoup their costs.
Economics of Oil Futures Trading, Part II
One note: Under excessive speculation with a huge run up in future prices one would expect that current supply would be dragged into the future by an increase in inventories.
Economics of Oil Futures Trading, Part I
Assume the storage cost is $1 over two years. This results in a futures price of $117 for a barrel of oil two years in the future.
Suppose that the actual future price is $114 then the arbitrageur will borrow a barrel of oil and sell at the spot price of $100 (short sale) and buy a barrel of oil in the future at $114. In two years the arbitrageur pays $114 for a barrel of oil and returns it to the lender plus $16 interest and $1 storage. Which results in a riskless profit of $3.00. Buying spot short and long future will continue until riskless profits are zero.
Suppose that the actual future price is $120 then the arbitrageur will buy a barrel of oil at the spot price of $100 and sell a barrel in the future at $120. In two years the arbitragur delivers the barrel of oil to fulfil the future contract. The riskless profit after paying $16 interest and $1 storage is $3.00. Buying spot long and short future will continue until riskless profits are zero.
Drilling in ANWR: What's Not to Like?
2) An expected increase in future supplies will reduce future prices and arbitrage will cause current spot prices of oil to fall.
3) Burning Anwar oil will have no different effect on greenhouse gas emissions than burning Mideast Oil of the same quality
4) There is still alot of oil reserves. Canadian oil sands holds more reserves than Saudi. Plus there is still offshore drilling. Brazil has found huge new fields in the Atlantic ocean. Canada has found fields in the Atlantic. Time for America to join the world and allow offshore drilling in the oceans. Using wind and solar to power vehicles is not feasible at this time.
5) Currently FPL proposes a solar project that costs $60,000 to power a houshold ... pre construction cost. That is not stimulative. All the proposed regulation and taxes on the economy will stifle American ingenuity and innovation as it has done in Europe.
Wall Street Breakfast: Must-Know News
Not to mention the cloud cover in Florida gives this project the look of a disaster in the making.
At these electricity costs $4.00 a gallon looks cheap.