$this->bbcode_second_pass_quote('', '[')b]DantesPeak wrote
Let’s first take a look at the US dollar – which actually is the Federal Reserve dollar, since the Treasury doesn’t issue dollars anymore.
As of April 16, in the last Federal Reserve weekly balance sheet report, when adding up various Fed programs instituted in recent months, the Federal Reserve dollar is now only 40% backed by US Treasuries and 60% by a combination of mortgage backed securities, loans to the financial institutions, and an unknown amount of derivative securities - which may or may not have any value at all.
It was reported today that some Bear Stearns derivatives, guaranteed by AMBAC, were only worth 18% of their face value. So it’s reasonable to conclude that the $29 billion of BS assets the Fed guarantees are worth considerably less than face value.
Under these conditions, it's somewhat surprising that the dollar maintains any kind of stability. With an unstable dollar, the price of oil can fluctuate wildly.
The recent hyperinflationary rate of increases so far in 2008 in the price of energy and food, although mostly due to scarcity, may soon push the US down the road to general hyperinflation. That’s because that the Fed may monetize, that is increase the money supply, to match the additional energy costs. Unpleasant things happen at the end of that road.
The only way we may avoid accelerated inflation is if the economic collapse accelerates downward rather soon. My best guess is that the economy probably will accelerate downward only later in the third quarter, so I don’t look for any great relief in energy prices. However due to volatility of prices, it would not be very surprising if prices fluctuated up to 20% up or down from some average level over a few months or so.
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Re: Another Oil price Record
Re: Another Record ($119.22)
by Forney2008 » Thu 24 Apr 2008, 01:29:02
Then how can people like Karl Denninger at Tickerforum.org believe that everyone will buy up dollars even though treasuries are now strongly backed by worthless paper such as from Bear Stearns? Why would any foreigner buy such treasuries when they are so tainted? Is this extreme nationalism that he evokes when he says the rest of the world has it worse then us economic wise? He also believes that with our 2000 nukes we have an economic advantage and can thus bully other countries around and get what we want. I find all this hard to believe considering the soaring debt costs and rampant fraud in our financial system. Also why would the Federal government want deflation? Wouldn't that make the federal budget deficit even worse in real terms? And don't those nice little military weapons and nukes cost money? Does Karl not realize where our government gets this money? A lot of it comes from countries that hate what we are doing now money wise such like China, Japan, Europe, etc.
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Re: Another Record ($119.22)
by sjn » Thu 24 Apr 2008, 07:51:20
$this->bbcode_second_pass_quote('Forney2008', '')$this->bbcode_second_pass_quote('', '[')b]DantesPeak wrote
Let’s first take a look at the US dollar – which actually is the Federal Reserve dollar, since the Treasury doesn’t issue dollars anymore.
As of April 16, in the last Federal Reserve weekly balance sheet report, when adding up various Fed programs instituted in recent months, the Federal Reserve dollar is now only 40% backed by US Treasuries and 60% by a combination of mortgage backed securities, loans to the financial institutions, and an unknown amount of derivative securities - which may or may not have any value at all.
It was reported today that some Bear Stearns derivatives, guaranteed by AMBAC, were only worth 18% of their face value. So it’s reasonable to conclude that the $29 billion of BS assets the Fed guarantees are worth considerably less than face value.
Under these conditions, it's somewhat surprising that the dollar maintains any kind of stability. With an unstable dollar, the price of oil can fluctuate wildly.
The recent hyperinflationary rate of increases so far in 2008 in the price of energy and food, although mostly due to scarcity, may soon push the US down the road to general hyperinflation. That’s because that the Fed may monetize, that is increase the money supply, to match the additional energy costs. Unpleasant things happen at the end of that road.
The only way we may avoid accelerated inflation is if the economic collapse accelerates downward rather soon. My best guess is that the economy probably will accelerate downward only later in the third quarter, so I don’t look for any great relief in energy prices. However due to volatility of prices, it would not be very surprising if prices fluctuated up to 20% up or down from some average level over a few months or so.
Let’s first take a look at the US dollar – which actually is the Federal Reserve dollar, since the Treasury doesn’t issue dollars anymore.
As of April 16, in the last Federal Reserve weekly balance sheet report, when adding up various Fed programs instituted in recent months, the Federal Reserve dollar is now only 40% backed by US Treasuries and 60% by a combination of mortgage backed securities, loans to the financial institutions, and an unknown amount of derivative securities - which may or may not have any value at all.
It was reported today that some Bear Stearns derivatives, guaranteed by AMBAC, were only worth 18% of their face value. So it’s reasonable to conclude that the $29 billion of BS assets the Fed guarantees are worth considerably less than face value.
Under these conditions, it's somewhat surprising that the dollar maintains any kind of stability. With an unstable dollar, the price of oil can fluctuate wildly.
The recent hyperinflationary rate of increases so far in 2008 in the price of energy and food, although mostly due to scarcity, may soon push the US down the road to general hyperinflation. That’s because that the Fed may monetize, that is increase the money supply, to match the additional energy costs. Unpleasant things happen at the end of that road.
The only way we may avoid accelerated inflation is if the economic collapse accelerates downward rather soon. My best guess is that the economy probably will accelerate downward only later in the third quarter, so I don’t look for any great relief in energy prices. However due to volatility of prices, it would not be very surprising if prices fluctuated up to 20% up or down from some average level over a few months or so.
Then how can people like Karl Denninger at Tickerforum.org believe that everyone will buy up dollars even though treasuries are now strongly backed by worthless paper such as from Bear Stearns? Why would any foreigner buy such treasuries when they are so tainted? Is this extreme nationalism that he evokes when he says the rest of the world has it worse then us economic wise? He also believes that with our 2000 nukes we have an economic advantage and can thus bully other countries around and get what we want. I find all this hard to believe considering the soaring debt costs and rampant fraud in our financial system. Also why would the Federal government want deflation? Wouldn't that make the federal budget deficit even worse in real terms? And don't those nice little military weapons and nukes cost money? Does Karl not realize where our government gets this money? A lot of it comes from countries that hate what we are doing now money wise such like China, Japan, Europe, etc.
One more thing; monetary expansion is part of a feedback loop in currency devaluation analogous to CO2 levels being driven by temperature rises. It is oversimplistic to simply blame inflation on the expansion of the money supply (or conversly claim inflation won't happen because the money/credit system won't be expanded due to the debasing affect it will have on the currency), but it is also wrong to deny the need to print while faith is lost in the currency. It is a self re-enforcing feedback mechanism.
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Re: Another Record ($119.22)
by GoghGoner » Fri 25 Apr 2008, 13:58:46
119.50
New record. Currently (delayed by 10 minutes or so) at 119.32 so it may shoot higher yet today.
New record. Currently (delayed by 10 minutes or so) at 119.32 so it may shoot higher yet today.
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Re: Another Record ($119.22)
by dblk » Fri 25 Apr 2008, 14:05:39
$this->bbcode_second_pass_quote('GoghGoner', '1')19.50
New record.
New record.
Nah. Oil was already at 119.90 last tuesday or wednesday.
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