The price of insuring corporate bonds has skyrocketed in the last few weeks making it more difficult for businesses to get the funding they need to expand or continue present operations. Much of this has to do with the growing uncertainty about the reliability of credit default swaps, a $45 trillion dollar market which remains virtually unregulated. Credit-default swaps are a type of financial instrument that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower fails to adhere to its debt agreements. When the price of CDSs increases, it means that there is greater doubt about the quality of the bond. Prices are presently soaring because the entire structured finance market – and anything connected to it – is under withering attack from the meltdown in subprime mortgages. As foreclosures continue to rise, the securities that were fashioned from subprime loans will continue to unwind, destroying trillions of dollars of virtual-capital in the secondary market.

Google the words Boskin Commission. You will get your explanation.

Could you expand on this a bit? I was under the impression that CPI is biased upward…. What part of its design are you referring to?

Thanks,
Marc

Welcome to the New World Paradigm

One, prices for many items have not risen, such as electronics, while others like clothing remain cheap due to low import prices dictated by cheap labor. Mark up margins have made such imports highly profitable. Pressure to raise these prices will very likely not show up. Note also that many retail stores have been competing by discounting prices. Thus, examples of reduced and non-inflating prices abound.

Last: commodities have been and still do remain underpriced when factoring in the cost of externalities. Take oil for example. As you well know, if factors such as health consequences were somehow priced in, and adding to this the environmental costs, prices would be much higher. The same could be said for a list of hard commodities.

While in relative terms we are seeing inflation in commodities, in absolute terms this is much less the case.

Food, as your suggest, is another thing entirely.

The idea that telomere length can indicate age is still being debated and an experiment is needed to determine a cause. (nature.com)

*** Back on Topic: Klaus Baader, Merrill’s London-based chief European economist, said he doesn’t expect Trichet to lower borrowing costs this year. His view, shared by economists at Goldman Sachs Group Inc., ABN Amro Holding NV and Morgan Stanley, conflicts with the opinion of most investors and economists that the bank will reduce its key rate from 4 percent.

“The gap between market expectations and the ECB’s thinking is unusually wide,” said Baader, who two years ago bucked the consensus by forecasting accurately that Trichet would keep increasing borrowing costs. “The inflation outlook is too strong for rate cuts.” http://www.bloomberg.com/apps/news?pid=20601109&sid=aRtuwxb2ZcT8&refer=home

Re: if I could hoard milk, I would

Don’t do it man! Don’t waste your money on milk! Keep your powder dry!

Re: The lack of enzymes in the final pasteurised milk product renders the milk indigestible for many people. For example, the “lactase” enzyme is required for the digestion of the milk sugar “lactose”. Similarly, the “phosphatase” enzyme is vital for the absorption of calcium. Without these enzymes, the calcium is not well absorbed and the lactose is difficult to tolerate (hence the condition ‘lactose intolerance’).