In a VoxEU post, Guillermo Calvo argues forcefully that rising commodity prices are the result of excess liquidity rather than supply and demand. From VoxEU: Here, one of the world’s leading macroeconomists argues that the explosion of commodity prices is the result of a very real global financial storm associated with excess liquidity in several […]
Read more...China had said it would increase fuel prices, which are heavily subsidized, in a statement last month, but had not given any timetable for its actions. Most observers had assumed any change would take place after the Olympics. In a surprise move, perhaps impelled by inflation concerns, the Chinese announced a price hike effective tomorrow. […]
Read more...Faithful readers, I hope you don’t mind if I am less chatty than usual today, since I had some competing obligations, plus some of the material on offer stands on its own. In the “pets.com redux” category, a reader pointed out this Wall Street Journal story: Excitement over oil is surging in Brazil…. After creating […]
Read more...The Financial Times reports today that refiners are paying prices higher than those indicated by the futures market for the lightest, meaning best, grades of crude oil. This points to an issue raised in an earlier post, namely, that to the extent oil supplies are tight, it’s due to demand for sweet crude, which has […]
Read more...Whether it comes to fruition is to be determined, but taken at face value, Connecticut senator Joseph Lieberman’s proposal to bar institutional investors such as pension and index funds from investing in commodities is a Nixon-goes-to-China moment, a significant indicator of Wall Street’s fallen standing. Lieberman has been a staunch defender of the securities industry […]
Read more...Illustrating the impact that higher fuel prices can have on consumption, the International Energy Agency reported that motor fuel consumption had dropped as much as 20% in Britain. The fall in usage is greater than in other countries, in part due to larger hikes (20% versus 14% on the Continent) and the prevalence of mass […]
Read more...Forgive me if you’ve heard this one before, but a classic Wall Street joke illustrates an important concept. On a slow day in the markets, trader A decided to open bidding on a can of sardines. He offered it at $1. It was snapped up by B at $2, who sold it to C at […]
Read more...Oil has eased over $2so far today from Friday’s stunning $139 level. As told in Bloomberg, some see it as a reaction to the Saudi argument (consistent with the comments of oil industry executives) that current prices are not warranted by supply and demand, while others see it as a simple pullback: “The increase in […]
Read more...Bloomberg reports (hat tip Calculated Risk) that the US, Japan, China, India, and South Korea agreed on the need to cut energy subsidies and take other measures: The U.S. and the four Asian nations, together accounting for half the world’s energy consumption, said today wider use of alternative fuels such as clean coal, nuclear power, […]
Read more...This chart, courtesy Menzie Chinn at Econbrowser, says a lot: SDR is Special Drawing Rights,. Note the dollar is 44% of an SDR.
Read more...We have discussed the role of fuel subsidies in distorting demand for oil and therefore adding to price pressures. We’ve also noted that as oil prices have spiked, the cost of these subsidies in some countries is becoming untenable. Both Indonesia and Malaysia have raised end user gas prices. One of the largest countries giving […]
Read more...The New York Times describes how some big-money players are skipping the commodities market and going directly to being hard asset players by buying farmland and grain elevators. This is hardly new (I know of one global macro fund that was making ag related investments two years ago) but the Times piece gives the impression […]
Read more...David Lukken, the acting chief of the CFTC, said today that while his agency is set up to detect market manipulation, it is less well equipped to gauge the impact of a flood of new speculative money into the commodities markets. However, he said the agency intends to get to the bottom of the question. […]
Read more...A reader forwarded me a Morgan Stanley fixed income research report wrap, which included a discussion of the role of gasoline and oil price subsidies in certain developing countries. The price gives an good overview of the role these defacto consumer price discounts have played, and argues that they will have to be cut back […]
Read more...A quick recap of Soros’s prepared remarks at the Senate hearings on energy market manipulation, which I watched just now. The billionaire said that he had a view of bubbles that departed from conventional wisdom about financial markets. They start with a trend but the dymamic becomes self reinforcing and increasingly disconnected from reality. For […]
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