Posted on 10/21/2009 1:17:12 PM PDT by your local physicist
LONDON (MarketWatch) -- Europe's single currency traded above the $1.50 level versus the U.S. dollar for the first time in 14 months on Wednesday, breaking through an important psychological barrier that will create added heartburn for euro-zone officials worried the strengthening currency will crimp opportunities for an export-led economic recovery.
The euro touched $1.5001 versus the dollar just before 10 a.m. Eastern before temporarily retreating. It resumed its upward march later in the session, eventually notching a high at $1.5022. In recent action, the euro changed hands at $1.5002. See Currencies.
(Excerpt) Read more at marketwatch.com ...
We need major fiscal restraint, something like the Gramm/Rudman legislation, to rein in uncontrolled entitlement spending and pork barrel spending by the democrat-controlled congress. Unfortunately, Pelosi, Reid, and the WH appear to have no interest in spending restraint and instead want to impose new middle-class sales taxes and a new value-added tax (essentially just a fancy name for a sales tax.) All federal spending has to be paid for through three forms of taxation: 1) direct taxes, including sales and VAT taxes, 2) higher interest rates, and 3) higher inflation. I’m expecting all three forms of taxation to increase in the next few years until we get rid of this dreadful administration in 2012. True prosperity will be put on hold for most Americans until then, as taxes, interest rates, and inflation all increase. Income taxes on the middle class may not increase, but Pelosi & Reid will very likely push for new “hidden” taxes on the middle class through sales taxes and a new value-added tax.
Until we get entitlement spending under control, there will be massive pressure on the Fed to continue buying mortgage debt and other low-quality debt to create dollars that can be used by institutional investors to buy treasury debt. This is the indirect way that the Fed is now monetizing the federal deficit and creating future inflation. That inflation is effectively a tax on income and financial assets to pay for uncontrolled entitlement spending. I’ve been buying stock in companies that produce hard assets, such as oil, natural gas, precious metals, and base metals, and also buying a few commodity ETFs. That’s one way to protect your hard-earned financial assets from the ravages of uncontrolled liberal spending programs. The GOP also needs to support spending restraint and stop attacking the democrats for political gain any time a democrat suggests reductions in the growth of entitlement spending. We need bipartisan responsibility right now and a summit meeting among congressional leaders to develop a plan to dramatically slow the growth of entitlement spending in the next decade.
Thanks Barry.
Also remember that the Euro is falling against other world currencies besides the Dollar.
I remember when i could get FOUR 1/4 German marks for a dollar..great time in Germany in the sixties!
...which means the dollar is falling even faster than the euro against other world currencies.
This is absolutely killing European economies, according to their dailies. The high Euro is nuking their exporters as they struggle to get out of the recession.
Let me throw a conversational monkey wrench in your gears for a moment, and get your reaction to what you think will be the result...
“January 14, 2010
Israel launched a pre-emptive series of military strikes this morning against alleged nuclear enrichment facilities in Iran. The attacks continue at this hour while the United States has called an emergency meeting of the UN Security Council to discuss the situation...”
“”SCHNIPP”
“January 15, 2010
Iran fired three surface to surface missiles at a Panamanian flagged oil tanker in the Straits of Hormuz today, leaving the vessel on fire from ened to end and adrift, 1 hour after announcing that the Straits were closed to all shipping. Lloyds of London has issued an emergency communique to all Agents canceling all insurance policies for commercial bulk carriers that transit within 1000 miles of the Persian Gulf.
Oil futures on World Markets shot up to over $400 per barrel when Lloyd’s went public with their announcement...
**SCHNIPP**
I realize that “experts” argue that closing the Straits of Hormuz would hurt Iran more than us, but it would also hurt a lot of other Countries that would then pressure the US.
The point is that the scenario you present holds up as long as nothing happens to shock the system, like a probable attack by Israel on Iran.
Or, what happens if the US Dollar collapses and is replaced by the Chinese Yuan?
What happens when the Treasury has a bond auction and the Federal Reserve ends up “buying” the bonds instead of China, Japan, Taiwan, South Korea, etc...??
Thins are just too unstable in too many ways for me to place any bets on what’s going to happen next summer...
That’s fine. Simply devise another Ponzi scheme (like the mcmansion/derivatives thing) with dollars borrowed from our leaders’ masters in the PLA. LOL! We, the peasant rabble, will continue to avoid unnecessary purchases...except for plenty of popcorn. ...watching the spectacles to come from the outside.
Unquestionably, oil prices are very difficult to predict. Back in March I thought December oil would only be trading around $65 here in October. Byron Wien called it early this year when he predicted $80 oil before the end of the year, and he made it with two months to spare! Byron Wien and Barton Biggs are two old time Wall Street insiders who are worth listening to.
Where can I buy futures on commodity popcorn? That’s not a bad investment idea.
Hmmm. I don’t know which futures are for popcorn. ...might build another off-grid greenhouse for growing popcorn, though (snowing today here, in this basin on the Rockies). ;-) We are preparing to produce a few useful things for when declining revenues remove some obstacles (local anti-manufacturing/anti-competition ordinances).
If you are a physicist, you might enjoy glancing at a couple of things that we’re building. ...will send links by way of Freepmail.
Check your Freepmail. We are a family of low-techs. We also play with Unix systems, other wacky projects, and the like. ...kids want to be engineers and to pay their own way.
You might find this to be interesting:
Air secret ingredient in new heavy-oil extraction method
Article about a new process for producing oil from oil sands--a very clever process where they actually light a slow underground fire that heats the oil and separates it from the embedded sand. I'm watching this company (Petrobank) to see if they can license this THAI process to other oil companies. Potentially it could be used all over the world on oil sands and heavy oil to lower production costs dramatically.
Thanks! That method could also help the oil sands producers to get around the environmentalist/anti-competition opposition from California and Ontario.
365 Yen to the dollar when I was there.
HUH?
My math and yen is not that great.ha.
You are only half joking. BTW One of the old London trading housing in gold is Montague. Check out SLW and CDE silver mining
Samuel Montagu
http://info.goldavenue.com/info_site/in_mark/in_ma_lond_ofb.htm
So far the major process is to burn natural gas to liquefy and extract the oil which is loony
But the economics work out in Canada because the natural gas is cheap enough to get away with it
It kills EU export to the US.
China, Brasil, India, Russia - these import / exportrelations have become more important recently - so the US is still very important to export to - but especially germany has only 9% of it’s exports directed to the US (will be less in a view month).
Also a low dollar (60% disount since 2002) makes the US a cheap loan country - so some production sites will be shifted from the EU to the US (that have not allready be shifted to Asia and that are giving the benefit of producing close to the customer) until there’s effects of saturation (for example demand is steeply dropping in the US as also sound rated loans get foul).
But the EU - and especially germany - needs to become more self contained - as the US can’t push the trade gap forever we can’t keep our exports that high - we simply will not be allowed to.
In the end the dollar drops because there is to much consumption (in comparison to productivity) in the US and to much production in the EU (in comparison to consumption) - that is about to change.
Also because of the price sensitivity of raw materials there will be an overall slow down of global growth.
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