Fed Euthanises The Dollar

[Guardsman Bass]

For the first time in years, the EIA's International Petroleum Monthly report has been delayed, almost as if they had to double-check the numbers.

The results aren't good. Production for June 2007 (CO&LC) was at 72.8 mbpd, or the lowest since around the same time in 2004. We have also, yet again, not broken the peak production limit set in summer of 2005 (1.8% off the peak value).

OPEC reckons this price range can't last, yet it already seems to have a floor of $82 even as we hit the October contract and lose a couple of bucks, it will make up for it tomorrow as trading starts I expect.

I think the realisation is definitely dawning on people now that production isn't going up and demand is.

Didn't OPEC say they were boosting production by 500,000 barrels a day? How will that affect these estimates?

[J]

It remains to be seen whether they can actually make the claimed production boosts. The general feeling is they can make a short-term surge lasting a few months at most, after which their oil fields must be "rested" and production will drop to below current levels.

[Admiral Valdemar]

Actually, I thought it would be a hoot if OPEC dropped their actual output, since they were already something like 1.8 mbpd over their stated quota, so raising it by 500 kbpd would be a net decrease.

If, and it's a big if, OPEC can raise it, then as J said, it's a pretty minor thing. That will be a few months less heated buying and selling on the markets, but the power of demand can not be broken.

[J]

Actually, I thought it would be a hoot if OPEC dropped their actual output, since they were already something like 1.8 mbpd over their stated quota, so raising it by 500 kbpd would be a net decrease.

That would be most hilarious, and as I recall, OPEC's statement on raising their output was rather ambiguous. I don't think anyone is really sure if they're referring to their quotas, their actual production, or something else entirely.

[Admiral Valdemar]

I recall reading, somewhere, that they acknowledged they have a raving hard on for the almighty dollar and so absorbed their overproduction as part of their stated quota, with the new increase going beyond that.

Not that this seems to be anything major anyway, given only KSA and possibly Kuwait can bring any new production on-stream, and even that is sketchy at best given everyone was pumping flat out, fingers up at the quota restriction.

[Dominus Atheos]

I had a thought that I wanted confirmation or denial of. From what I understand, what this decision does is put off the crash, but makes it worse when it does happen.

Now, everyone knows that Bush wants to leave behind a "legacy," and will do anything to accomplish that. My question is, could the Bush Administration have told the Fed to do this in order to keep the crash from happening until after Bush leaves office? In other words, could Bush have deliberately screwed over the country just so he doesn't get blamed for it?

[Illuminatus Primus]

POTUS does not have that kind of political clout or control in any way over the Federal Reserve System in general or over the decisions of its Board of Governors; especially a lame-duck POTUS like Bush who will not be able to influence their membership much. Rather, its a much more mundane close relationship with Big Business and Big Finance who wanted a short-term bailout and a general double-standard of neoliberal economics in general.

[Fingolfin_Noldor]

POTUS does not have that kind of political clout or control in any way over the Federal Reserve System in general or over the decisions of its Board of Governors; especially a lame-duck POTUS like Bush who will not be able to influence their membership much. Rather, its a much more mundane close relationship with Big Business and Big Finance who wanted a short-term bailout and a general double-standard of neoliberal economics in general.

Does this merely prolong the inevitable and we have yet to really feel the thunderbolt or?

[Illuminatus Primus]

Who knows? Even the most alarmist don't have x-ray vision into underground reservoirs nor a perfect ability to predict failure and outcomes across such a huge industry. And considering the variables I just couldn't account for, and the narrowness of your question regarding something as chaotic as the economy - I might as well hold up chicken entrails. No one really knows what is going to happen, only its probably not boding well, there are vested interests in suppressing mitigation, there are cultural barriers to mitigation, and just in general everyone's head is up their collective ass.

But to that level of certainty? The panic could come tomorrow; it might hold out for five or ten years. Who knows.

[Darth Wong]

Somebody once likened this to a game of musical chairs. As long as the music keeps going and everybody's happy, nobody really acts as if there are less chairs than people. But the instant the music stops, even for an instant, everybody panics because they always knew that there weren't enough chairs, and now it's clench time.

Therefore, some smart guys figured out that the way to prevent a disastrous panic is to keep cranking up the volume on the music every time people get jittery and notice that there are fewer and fewer chairs all the time. Eventually, though, something has to give. The problem is that nobody knows exactly when that will be or how everyone will react, other than "it will probably be bad".

[Admiral Valdemar]

That's an analogy I've heard before and a very good one. The point is, no one can predict what will happen tomorrow, let alone several years from now given what drives the economy is many individuals with only a few vested interests and a lot of greed.

As far as everyone is concerned, they're making big money until they see others panic and it only takes one minor hiccup in the system to cause a global disease of chaos that really is disturbingly beautiful in its simplicity and destructive potential. This is why the energy crisis is likely still off the cards, because I expect when the reality finally dawns on these traders, you'll see a totally different world form overnight. The Fed changing the rates last week saw oil shoot up to records in hours. Imagine how they'll react when they call time on the cheap black stuff and fully realise the concept of finite resources.

[J]

I'd like to direct your attention towards the following exchange chart, current as of 15:40 EST today.

[aerius]

I'd like to direct your attention towards the following exchange chart, current as of 15:40 EST today.

Either I've missed a couple months, or you've discovered the secret to time travel...

Last time I checked we're still on daylight saving time, so that would be EDT.


Back on topic, Mail Order Madness time!!

[Dartzap]

*blinks* The GBP has gone back to One quid = two dollars? Bloody hell.

Might be a good time to order a few things, heh.

[SirNitram]

*blinks* The GBP has gone back to One quid = two dollars? Bloody hell.

Might be a good time to order a few things, heh.

And it had to happen when I need to try and get to England to see my Grandparents.

[Siege]

When I visited NYC back in May $100 still cost about €75 IIRC, and we were already counting our blessings back then. Now it's only €70. Now, I'm no economist but that sounds like a pretty steep drop to me, and I'm sort of wondering what rock bottom will be. Is there any way to tell how far the dollar could conceivably drop?

[Admiral Valdemar]

When I visited NYC back in May $100 still cost about €75 IIRC, and we were already counting our blessings back then. Now it's only €70. Now, I'm no economist but that sounds like a pretty steep drop to me, and I'm sort of wondering what rock bottom will be. Is there any way to tell how far the dollar could conceivably drop?

No, and there's frankly no limit if the Fed keeps the presses churning them out. While people may laugh at the idea of a US take on Weimar, the threat of some serious inflation potentially leading to hyperinflationary pressure in the future is there. With the price of gold as it is and the other currencies such as the sterling, euro and yen doing so well, the dollar is not a good place to invest in.

[aerius]

Look on the bright side, at least the USD is still worth more than the Mexican Peso.

[Spin Echo]

Yikes. The USD is now down to 5.39 against the Norwegian krone. At this rate, I'll be able to pay off my student debt in less than two months once I get a real job.

And it had to happen when I need to try and get to England to see my Grandparents.

Know that feeling. My family will be visiting Norway this summer. The place is expensive enough as it is without the dollar down the drain.

[Broomstick]

When was the last time the Canadian dollar was worth more than the US? Wasn't it early 1970's?

[Masami von Weizegger]

When was the last time the Canadian dollar was worth more than the US? Wasn't it early 1970's?

November 1976, I think.

[septesix]

given the seriosness of this topic, I feel some humor is needed.

Chuck Norris's Tears Might Solve Credit Crunch

[Illuminatus Primus]

When I visited NYC back in May $100 still cost about €75 IIRC, and we were already counting our blessings back then. Now it's only €70. Now, I'm no economist but that sounds like a pretty steep drop to me, and I'm sort of wondering what rock bottom will be. Is there any way to tell how far the dollar could conceivably drop?

It all depends on how soft and undisciplined our monetary policy is and remains.

[NeoGoomba]

So would a nice basket including Copper and Platinum be a wise investiment over any sort of index fund for the short-term? This only makes me think that the bottom of the market itself is going to fall out soon, too soon to make me want to invest anymore in public companies.

[aerius]

Feds are due to make a decision on rates today, consensus guess so far is another 0.25% drop, with 0.5% as a distinct possibility. Canadian dollar currently worth more than $1.05 US. This could get fun.