Expect $60 oil soon?

clipped from members.forbes.com Here's how Littell sees it. Last year Saudi petrocrats thought demand would slacken at the same time that oil production rose from sources outside the Organization of Petroleum Exporting Nations. They cut back Saudi production from 9.5 million barrels a day in March 2006 to 8.5 million a year later in order to keep supply and demand balanced and crude prices hovering around $60 per barrel. But the Saudis overestimated non-opec production. Check out the relationship between prices and production in the accompanying chart. The Saudis hold the key to long-term oil prices since they are one of the few exporters--Kuwait and Abu Dhabi are the others--with the ability to increase production significantly. How long before we get some relief? Littell expects the impact of all that additional oil to hit U.S. markets in a couple of months or so. The Saudis "didn't plan on $80 oil," he says. "They wanted to keep it around $60 and did the wrong thing."

The real stuff on housing and subprime

Lot's of pictures and charts so you get the picture. Points out delinquencies are worst on loans made at the end of the frenzy.

clipped from krugman.blogs.nytimes.com The new Joint Economic Committee report on subprime is, aside from its policy moral, a great source document for facts about the housing bubble, illustrating some key facts about what happened, where, and when. I thought it might be interesting to readers if I gave you a few highlights, plus some useful pictures from other sources. First, in case you don’t know just how anomalous, how at odds with historical experience, the runup of prices in recent years has been, here are real housing prices over time: The overall rise in prices is, as I tried to explain more than 2 years ago, an average between modest rises in some areas and clearly bubbleicious increases in others: The popping of the bubble has produced a big, big slump: Delinquencies are already soaring to recession-type levels, even though we’re not in a recession (yet?): And the delinquencies are worst on the loans made in the final bubble frenzy:

2007 Christmas Stamp Unveiled

“Madonna of the Carnation” featured on 2007 Christmas Stamp


What:
Unveiling and First Day of Sale of the “Madonna of the Carnation” Postage Stamp

When:
Thursday, October 25, 2007
10:30 am

Where:
National Gallery of Art
West Building, West Garden Court
7th Street & Constitution Ave. NW
Washington DC

Who:
Yverne P. Moore, Postmaster, WDC
Alan Shestack, Deputy Director, National Gallery of Art

Details:
Formerly know as Holiday Traditional stamps, the Christmas stamps adorn millions of letters, greeting cards and packages each year. Since 1978, the theme of these stamps has been the Madonna and Child, and the stamps have attracted a devoted following over the years. The 2007 design features Bernardino Luini’s oil-on-panel, “The Madonna of the Carnation”, which dates to around 1515 and is now part of the collection of the National Gallery of Art in Washington, DC. The stamp art is a detail of the work, as the image was slightly cropped on all four sides to fit the stamp format.

A viewing of the Bernardino Luini’s “The Madonna of the Carnation” oil-on-panel will be part of the stamp unveiling ceremony. Stamps will be available for purchase and a special pictorial postmark will be offered.

# # #

An independent federal agency, the U.S. Postal Service is the only delivery service that visits every address in the nation, 146 million homes and businesses, six days a week. It has 37,000 retail locations and relies on the sale of postage, products, and services to pay for operating expenses, not tax dollars. The Postal Service has annual revenues of $75 billion and delivers nearly half the world’s mail.

Helping the Fed Target Asset Prices

clipped from blogs.wsj.com Joseph Carson, director of global economic research at Alliance Bernstein, thinks he has the answer. He’s created a “broad price index” combining consumer prices, producer prices and asset prices. “The weighting scheme is designed to approximate the relative importance of each sector in the overall economy, with consumer prices given the dominant share, followed by smaller shares allotted to producer, real estate and equity prices,” he says. The index registered strong surges in both 1999-2000 and 2004-2005, a signal that the Fed’s monetary policy was too easy at the time, he says. On the other hand, at present it is growing at about the same rate as core consumer prices, suggesting Fed policy is about right.

Wildfire Pictures Worth a Thousand Words

Words could never convey the true devastation.

clipped from blogs.usatoday.com clipped from www.cnn.com clipped from www.cnn.com clipped from www.cnn.com

It looked like the end of the world

clipped from blogs.usatoday.com "It was nuclear winter. It was like Armageddon. It looked like the end of the world." How many homes did he and his crew see burn? "I lost count," he said. North of San Diego, in Orange County, fire crews are trying desperately to keep the Santiago fire from consuming hundreds, possibly thousands, of homes in Foothill Ranch (photo). The Los Angeles Times has a dramatic photo of a dozen firefighters who were trapped temporarily on a burning ridge. They escaped unharmed. The Department of Forestry and Fire Protection has details, though the site says it is experiencing "technical difficulties."

From the Krugman Blog

clipped from krugman.blogs.nytimes.com Failing to Pass the Laffer Test The revenue boom of the last few years, which mainly depended on booming corporate profits, is over. Here’s a chart from the Congressional Budget Office: And a further slowdown is visible within the fiscal 2007 data: revenue in September was up only 2 percent from the previous year. To put this in perspective, here’s revenue as a percent of GDP since Clinton took office: So everything you’ve heard about how revenues have boomed since the Bush tax cuts is wrong. What really happened was that revenue plunged, as a percent of GDP, in the early Bush years, then staged a partial, but only partial, recovery. And that recovery seems to have run its course.

Greenspan Warns Of Risks With ‘Super SIV’ Fund

clipped from www.emergingmarkets.org Greenspan delivers sharp warning on superfund Former Fed chairman points to more market anguish ahead as US economy teeters on brink of recession Former Federal Reserve chairman Alan Greenspan has warned that plans announced this week to launch a so-called “super fund” – a dramatic attempt by major investment banks to ease the crisis facing credit markets – could have dire repercussions. In an exclusive interview with Emerging Markets, Greenspan said that the $75 billion so-called Master Liquidity Enhancement Conduit (MLEC) – proposed by Citigroup, Bank of America, JPMorgan and Wachovia to take on the assets of troubled investments – runs the risk of further undermining already brittle confidence in besieged markets. More...

Do Politicians Lie?

clipped from online.wsj.com In recent weeks, Ron Paul overstated the U.S. death toll in Iraq and Afghanistan, Rudy Giuliani overstated the impact on national crime rates of declining New York rates during his mayoral tenure, Barack Obama overstated the potential impact of an increase in voter turnout among black voters in the South, and John Edwards chose the higher of two government estimates of the number of Americans without bank accounts to emphasize a point. Those statistical stretches were identified and corrected by a pair of Web sites aiming to keep close tabs on the factual claims of the 2008 candidates. FactCheck.org, a project of the Annenberg Public Policy Center of the University of Pennsylvania, monitored the last presidential race as well. It was joined two weeks ago by PolitiFact, a joint venture of the St. Petersburg Times and the Congressional Quarterly that rates candidates' claims on a so-called Truth-O-Meter, which has six settings ranging from "True" to "Pants on Fire."

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The real economic crisis

All the bad news about the bursting of the US housing bubble and the related meltdown in US share markets has deflected the world's attention from what is arguably an even more fundamental problem facing the US economy: the sharp deceleration in productivity growth since the middle of 2004.

Source Guardian Unlimited

John Schmitt and Dean Baker

For Americans, the long-run implications of this little-discussed slowdown, if sustained, are actually more important to future living standards than any of the other events currently worrying world markets. For Europeans, long-encouraged to see the United States as the flexible economic ideal, the productivity slowdown sounds another note of caution about the US model. Europeans already know that the US economy generates substantial inequality. The last three years of slow productivity growth now suggest that all that inequality apparently doesn't even guarantee faster growth.

Economists define "productivity" as the value of goods and services produced per hour by an economy's average worker, and agree that the growth rate of productivity is the single most important determinant of the long-run prospects for a country's standard of living.

The deceleration in US productivity growth since the second half of 2004 is striking by historical standards. Between 1947 and 1973, the golden age of postwar capitalism, productivity growth averaged about 2.8% per year in the United States. At that pace, the output of the average worker was set to double about every 25 years, allowing roughly comparable increases in national living standards. From 1973 through 1995, however, productivity growth took a nosedive, with the average rate dropping to just 1.4%. At this lower rate, average worker output would take about 50 years to double, implying far slower progress in living standards.

From the mid-1990s on, however, official productivity growth again accelerated rapidly, returning to a 2.9% rate reminiscent of the golden age. Quite suddenly, though, in the second half of 2004, productivity growth dropped sharply. From the third quarter of 2004, productivity growth rate, at 1.3% per year, has not even managed to match the 1.4% growth rate of the productivity bust of 1973-1995.

Some productivity optimists argue that the downturn is a blip. But, this is a blip that just turned three years old - fully one-third the length of the nine-year 1996-2004 boom that the optimists champion.

Other optimists dismiss recent performance as cyclical - related to the downturn in the US economy. Productivity does tend to decline in recessions, but few would argue that the United States, which has grown 8.5% since the second quarter of 2004, has been in a recession all this time. (Of course, plenty of evidence is accumulating to suggest that the United States may be entering a recession now.)

The productivity numbers are likely even worse than they look. The most important reason is that the official productivity figures don't handle the rapid depreciation of new technology very well. Productivity gauges average output per hour worked - including what workers produce simply to replace obsolete machinery. But, the portion of output that workers produce just to replace worn-out machinery does not actually improve our standard of living. If we are interested in the impact of productivity growth on living standards, we're better off adjusting productivity growth to reflect only output that makes us better off.

In the earlier postwar period, when machinery depreciated fairly slowly, ignoring this depreciation effect on productivity growth didn't matter much. The driving force behind the 1996-2004 productivity acceleration, however, was massive investment in computers, software and related high-tech machinery, all of which become obsolete much faster than earlier generations of capital goods. (Try running Windows Vista on the computer you bought just a couple of years ago.) Since 1995, however, the depreciation effect is large - almost 0.2 percentage points per year. After we make this adjustment, productivity growth since the middle of 2004 falls from an already disappointing 1.3% per year to a mere 1.1%, below the similarly adjusted 1.2% rate of the 1973-1995 productivity bust. Such a severe deceleration in productivity growth constitutes a serious long-term threat to US living standards.

Meanwhile, how has Europe been faring? According to internationally comparable data from the Groningen Growth and Development Centre, between 1995 and 2004, the United States outperformed most of Europe, with productivity growing about 2.5% per year in the United States, compared to 1.7% in Germany, 2.0% in France, and 2.2% in the United Kingdom.

Between 2004 and 2006, however, the US lead all but evaporated. The US rate fell to 1.7%, not much different from the rates in Germany (1.7%), France (1.4%), and the United Kingdom (1.4%). If current trends continue, US growth rates may soon be trailing those of Europe (as was the case for almost the entire postwar period before 1995).

Europeans who want their countries to adopt economic policies that are more like those in the United States should consider these data carefully. There is an argument for adopting policies that lead to more inequality and less economic security when the result is more rapid economic growth. There is no obvious argument for more inequality and less security when the result is the same or even slower economic growth.


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