Archive for the ‘euro’ Category

Economy Hammered by Toxic Blend of Ailments

March 14, 2008
Almost everything seems to be going wrong for the American economy at once. People are buying less, but most things are costing more. Mortgage rates are rising, the dollar is falling and prices of key commodities like oil are leaping from one record high to the next.
.On Thursday, the dollar plumbed new lows against the Japanese yen and several other major currencies; the price of an ounce of gold jumped above $1,000 for the first time; and lenders raised home loan rates once again. Government figures showed retail sales fell in February as consumers cut back on cars, furniture and electronics.

Stocks fell sharply after the retail sales report was released early in the day, and a large investment fund said it was nearing collapse. The volatility that has defined the market lately continued unabated.

The Standard & Poor’s 500-stock index fell 2 percent in the morning, then rebounded partly in reaction to a report that said banks were nearing the end of subprime mortgage losses. It was up nearly 1 percent in the afternoon before paring that gain to close up 0.5 percent, to 1,315.48 points. The Dow Jones industrial average closed up 35.5 points, to 12,145.74 points.

A toxic blend of economic and financial developments is testing policy makers and lawmakers who are struggling to contain the slump brought on by the collapse of the mortgage market, a downturn that now looks sure to push the economy into a recession. Though current conditions are a far cry from the 1970s, resurgent inflation is raising the threat of stagflation — a condition in which unemployment and the price of goods and services both rise.

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Dollar’s clout sinks worldwide

March 13, 2008
By ALAN CLENDENNING, AP Business Writer 

SAO PAULO, Brazil – Antique store owners in lower Manhattan, ticket vendors at India‘s Taj Mahal and Brazilian business executives heading to China all have one thing in common these days: They don’t want U.S. dollars.

These handout images provided by the Bureau of Engraving and ... 
The new Five Dollar note.  But is it only worth $4.30 today?
Image from the Bureau of Engraving and Printing for illustration

Hit by a free fall with no end in sight, the once mighty U.S. dollar is no longer just crashing on currency markets and making life more expensive for American tourists and business people abroad; its clout is evaporating worldwide as foreign businesses and individuals turn to other currencies.

A man looks out from a currency exchange office in Brasilia, ...
A man looks out from a currency exchange office in Brasilia, Feb. 28, 2008. From antique stores in lower Manhattan to the gates of India’s Taj Mahal, euros and British pounds are now more welcome than the U.S. dollar, as the greenback continues weakening with no apparent end in sight.
(AP Photo/Eraldo Peres)

Experts say the bleak U.S. economic forecast means it will take years for the greenback to recover its value and prestige.

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U.S. Economy In Recession (Or Very Close)

March 12, 2008

By John E. Carey
Peace and Freedom
The United States is in a recession and economic storm clouds loom in Asia. 

U.S. homeowners have more debt than ownership (equity) causing many to “bail out” on their mortgages.  Banks now own more and more houses.  To make it easier to buy, the Federal Reserve has lowered interest rates over and over again.  The Fed may lower rates again next week.

The dollar is way down compared to the euro — and just about all other reputable currency — and oil prices are up because of this, high world-wide demand and limited refining capacity.

A US banknote is reflected on a euro coin. The dollar found ...

A US banknote is reflected on a euro coin. The dollar found some support Monday, gaining ground on the euro on warnings against excessive exchange rate volatility from European Central Bank head Jean-Claude Trichet.(AFP/File/Joel Saget)
In China, where banks hold over a trillion dollars in foreign exchange reserves, a sell-off of dollars could also depress the dollar further.  Fear of such an action alone is enough to make economists wary of pressuring China.

Farmers in the Midwest of America are delighted by high corn prices – much attributable to demand for corn-made ethanol.  But the high price of corn is a burden to those trying to feed livestock.

The good news is that it is so expensive to feed cattle right now that the farmers are slaughtering beef at a better than average rate.  Beef is cheep just now (but watch out next year).

The price of wheat per bushel has doubled in the last few months.  This means bread, pizza and bagels are going up in price.  Beer too!

Because of the low dollar, screwy farm prices and high gasoline prices, pretty much everything in the grocery store is costing more.

Retail sales are way down and applications for unemployment are way up.

But recession has a real definition and this, plus politics, has prevented the White House from using “The ‘R’ Word” much.

In macroeconomics, a recession is a decline in a country’s gross domestic product gross domestic (GDP), or negative real economic growth, for two or more successive quarters of a year.

For the U.S., the judgment of the business-cycle dating committee of the National Bureau of Economic Research regarding the exact dating of recessions is generally accepted. The NBER has a more general framework for judging recessions:
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
So, we at Peace and Freedom believe we Americans are in a recession and we see dark economic clouds world-wide, especially in Asia.

China’s high January and February readings for inflation have increased the pressure on the government to take action to counter price rises.  In China, annual consumer inflation jumped to 8.7 percent in February after hitting 7.1 percent in January, the worst in more than 11 years.

But much of the current economic turbulence in China, the communist government says, is attributable to the largest winter snowfall in 100 years.  China says their economy will quickly rebound.

A staff counts Chinese Renminbi currency at a bank in Baokang, ... 

Confidence among Australian consumers weakened sharply in March to its lowest level since 1993, according to data released Wednesday, sparking economists’ predictions that the central bank is unlikely to continue a run of interest rate hikes.

The International Monetary Fund has warned Vietnam that its fast-growing economy is overheating. It has advised Hanoi to adopt a more flexible exchange rate regime and to tackle imprudent lending practices by commercial banks, in order to help control inflation.
Vietnam’s Communist authorities are battling to curb inflation, which, driven by higher food and energy prices, hit 15.7 per cent in February and has fuelled labor unrest, especially among factory workers who say they cannot make ends meet.

Japan’s economy has so far shown resiliency, but experts on the world’s second largest economy worry that Japan’s export-led recovery could stall if US economic troubles deepen.

At the U.S. Department of the Treasury, the leadership has confidence that the U.S. economy will rebound in the next quarter.

The U.S. economy is going through a rough patch but, thanks to a government fiscal package worth some $150 billion, should start recovering as soon as the second quarter, a senior Treasury official said on Tuesday.

“The booster shot that’s been given to the U.S. economy is going to boost consumer spending, is going to boost business investment — that will lead to both higher growth and higher job creation,” Robert Kimmitt, Deputy Treasury Secretary told Sky News in the UK.

“Many economists predict, and we agree, that we will see that upturn in the second quarter,” he said.

We’ll have to wait and see.

Our advice is to pay off your credit card debt, reduce spending and hunker down.

The U.S. Treasury building designed by Ammi Burnham Young
The U.S. Treasury building

A Few Ways I Can Tell We Are In A Recession
(These may or may not apply to your neighborhood….)

1.  The AA clubhouse starts charging for matches and coffee — and is considering a ‘no smoking’ policy just so the gang can save money.
2.  The church no longer supplies a pen near the pile of the collection envelops.
3.  People actually born in America are eating at the Peruvian Pollo Chicken restaurant.
4.  The neighborhood restaurant no longer has music.  Now you do karaoke.
5.  You no longer know the pizza man’s name.
6.  You’re going to have to use our IRS refund for gas instead of a vacation.
7. A resident of the shelter is wearing a tie and a lapel pin from a bank.
8. A bunch of realtors joined the prayer group.
9. The number of Spanish speaking illegals standing on your street looking for work has doubled.
10.  You’re looking for a lock for your gas cap….

Report: China wants strong dollar

November 22, 2007

BEIJING – The head of China‘s central bank says Beijing wants a strong dollar, a government news agency said Thursday.

Zhou Xiaochuan, governor of the People’s Bank of China, made the comment to U.S. Treasury Secretary Henry Paulson at a conference in South Africa, the Xinhua News Agency said.

“Zhou said he told Paulson China hopes to see a strong dollar,” Xinhua reported. It said Zhou was responding to Paulson’s prediction of a long-term recovery of the weakening dollar, which fell to another record low against the euro Thursday.

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U.S. Economy: Storm Warning

November 21, 2007

By John E. Carey
Peace and Freedom
November 21, 2007

We see definite storm warnings ahead for the U.S. economy. Nobody wants to say the “R” word (HUSH: recession) or the “I” word (inflation), but there are at least five major interrelated factors at play that negatively impact the real or perceived strength of the U.S. economy in the near term.

Gas prices: They are going up and this impacts everyone. Filling the tank for commuting, job hunting or hauling sheet rock; it doesn’t matter the reason; is costing us all more with no end in sight. And everything you buy and touch from the groceries to the new microwave take part of their journey by truck. World-wide demand is up with China showing an unquenchable thirst for oil. Any chance that OPEC will increase production to bring down the price? If you were an Emir, would you?

Loss of value in the dollar: This is no time to hold dollars. During the last week of October, the dollar hit long-term lows against the euro, the British pound and the Canadian dollar. Fears that overseas investors and countries, especially China which holds over a trillion dollars in foreign exchange reserves, could sell or convert their dollar holdings have depressed the dollar.

Suddenly the euro is hot.

Even Supermodel Gisele Bündchen, the 27 year old Brazilian bombshell who made $30 million last year, decided apparently that she’d rather be paid in euros from now on.

Ms. Bündchen appears to be the “girlfriend” of New England Patriots star quarterback Tom Brady. Now if HE elects to be paid in euros, I am moving to Canada. Or maybe Brazil if my wife lets me!

Housing, credit and construction: Slower economic growth, largely driven by a lingering housing slump and a related credit squeeze; is already putting thousands of workers out of work. We expect fewer new home starts for the foreseeable future. The trickle down impact of this? Lost jobs in all the building trades from the carpenter to the master electrician. Fewer new refrigerator sales. Fewer new sofas sold. Sobbing realtors. Just as the cost of oil impacts the cost of your groceries and microwave, so too is a slowdown in new home starts likely put many home decorators, carpet stores and furniture outlets on the skids.

Inflation in China: China’s consumer prices shot up 6.5% in October vs. a year earlier. August levels were at a ten year high. Food prices in China are skyrocketing. This is putting pressure on employers to pay more. Higher worker pay will drive up the prices of China’s notoriously inexpensive goods. Inflation in China will mean increased cost for those low cost Chinese goodies you buy. What goodies do we mean? Just about every product you shop for in the Target, WalMart, Sears and elsewhere. We’re talking about higher prices for clothing, toys, steel and other products China exports. If China’s exports get pricier, that would feed into U.S. inflation through a hike in the cost of imported goods.

For the U.S. and other countries, China’s inflation bears watching. That’s because China has played a big role in easing global inflation by manufacturing low-cost goods.

American jobs: We sometimes wonder if the American job scene of 1960 was better or worse than the job outlook today. Fewer highly paid union jobs with full benefits and medical coverage exist today. Ask any automotive worker. The service industry is burgeoning: but these jobs are low paying. The average clerk at Sears gets paid $8-$10 an hour. Building security personnel, without a firearm, earn about $10 an hour. In a 40 hour week, these folks earn about $400, with little or no benefits and no medical coverage. Cleaners, sweepers and the like may earn less. And, in an insidious use of legal procedure, many employers only let employees work for 38 hours per week. By stopping the employee short of a 40 hour week, the employer has no legal requirement to pay any benefits. So we expect pressure will build to raise worker pay and increase benefits, especially medical care.

Loss of U.S. influence and prestige: The wars in Iraq and Afghanistan have meant a diminished stature for the U.S. worldwide. This has emboldened China, Russia, North Korea and others. Currently, President General Musharraf seems in defiance of the U.S. Even Venezuela’s Hugo Chavez is emboldened by this factor, real or imagined, and has declared his own war of defiance against the U.S.

The Washington Post’s columnist Anne Applebaum wrote in “Collateral Damage,” on November 20, 2007, “the collateral damage inflicted by the war on America’s relationships with the rest of the world is a lot deeper and broader than most Americans have realized. It isn’t just that the Iraq war invigorated the anti-Americanism that has always been latent pretty much everywhere. What’s worse is the fact that — however it all comes out in the end, however successful Iraqi democracy is a decade from now — our conduct of the war has disillusioned our natural friends and supporters and thrown a lasting shadow over our military and political competence. However it all comes out, the price we’ve paid is too high.”

And the price in prestige and respect impacts the cost of the dollar.

While we always think the glass is half full; and we fully ascribe to Abraham Lincoln’s optimism just before the first officially decreed Thanksgiving in 1863, we do believe that there are some dark clouds building on the horizon for the U.S. economy.

Oil prices rise to new record in Asia

Ailing dollar falls to historic low against euro

November 21, 2007

NEW YORK (AFP) – The ailing US dollar tumbled to a historic low against the euro Tuesday as concerns mounted about US economic growth after the Federal Reserve trimmed back its growth projections, traders said.

Fears of slower economic growth, largely driven by a lingering housing slump and a related credit squeeze, have weighed heavily on the dollar in recent weeks.

Fears that overseas investors and countries, especially China which holds over a trillion dollars in foreign exchange reserves, could sell or convert their dollar holdings have also depressed the dollar.

The euro, which has rocketed in value against the dollar this year, soared as high as 1.4853 dollar. It was at 1.4836 dollars at 2200 GMT, compared with 1.4665 dollars late Monday.

The euro hits its highest level against the dollar since the single currency’s creation in 1999.

“When concerns over the economy grow, you turn to stable currencies — for example the dollar, but ultimately the dollar is going down so now you would buy the euro,” said Neil Mellor, a currency strategist at Bank of New York.

Falling interest rates have also depressed the dollar, the Fed cut borrowing costs in September and October in a bid to underpin economic momentum, as investors generally prefer to invest in countries where rates are rising or higher.

The central bank slashed its outlook for 2008 US economic growth Tuesday, citing weakness in housing and tighter credit conditions, and suggested policymakers are unsure about future interest rate cuts.

The central bank projected growth next year in a range of 1.8 to 2.5 percent down from a prior forecast of 2.5 to 2.75 percent.

“The US dollar posted its largest single-day loss in over a year, as speculation for future US Federal Reserve interest rate cut doomed the greenback to further drops,” said David Rodriguez, a currency analyst at Forex Capital Markets.

“Continued speculation that key oil producing countries may drop the dollar as their primary reserve currency has clearly hurt the dollar, while increasingly pessimistic forecasts for US economic growth and interest rates has likewise hurt confidence in the dollar,” Rodriguez said.

The dollar’s demise was hotly debated at an OPEC meeting this past weekend in Saudia Arabia as the oil producing cartel currently prices oil in dollars.

Fed chairman Ben Bernanke has said US growth is likely to cool in future months and economists say the housing downturn is unlikely to improve any time soon.

A government report showed a rebound in new home construction for October, but analysts said it home building will likely decline in future months, particularly as demand for building permits dropped last month.

The pound was quoted at 2.0669 dollars compared with 2.0497 late Monday.

In late US trade, the dollar stood at 1.1058 Swiss francs from 1.1149. The dollar edged up to 109.88 yen, against 109.74 yen a day earlier.

European finance ministers take aim at China’s yuan

October 9, 2007


LUXEMBOURG: Irked by the relentless ascent of their currency, euro zone finance ministers have decided to target China’s yuan as the chief culprit in a quest for fair play on global exchange rates and trade.

They made the point after talks on Monday to agree a common stand for a meeting of the G7 industrialised powers — the United States, Japan, Canada, Britain and euro-zoners Germany, France and Italy — on Oct. 19, a meeting at which China will be absent.

In a statement issued overnight, the euro zone ministers reiterated pleas to financial markets …

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