Monday, December 24, 2012
Saturday, December 22, 2012
2013 Is Bernanke's Year: Unlimited QE And Total Control Of The Fed - Forbes
2013 Is Bernanke's Year: Unlimited QE And Total Control Of The Fed - Forbes:
EXCERPTS:
EXCERPTS:
"Bernanke and several of his central bank colleagues around the world have unleashed a new era of monetary policy, marked by zero-bound nominal interest rates coupled with unprecedented and massive balance sheet expansion. In this post-financial crisis world, the Fed has taken a Keynesian edict and turned it on its head: instead of the government stepping in after a crisis to make up for the loss of aggregate demand from the private sector, it has fallen to central banks.
"Through that process, the Federal Reserve has become the most important market participant, flooding markets with liquidity and owning more than a third of the Treasury market by the end of next year, according to Barclays’ economics team. The latest iteration of their asset purchases, or QE4, consists of $40 billion a month in RMBS purchases and $45 billion in unsterilized Treasury purchases, meaning the Fed’s balance sheet will grow at a rate of $85 billion until the Fed sees a substantial improvement in labor markets.
Friday, December 21, 2012
Wisconsin: Looming 'dairy cliff' could double milk prices - TwinCities.com
Wisconsin: Looming 'dairy cliff' could double milk prices - TwinCities.com:
EXCERPTS:
By
Posted: 12/08/2012 12:01:00 AM CST
Updated: 12/08/2012 08:37:27 AM CST
EXCERPTS:
The so-called fiscal cliff isn't the only hazard looming at year's end if Congress doesn't act.
With failure to pass a Farm Bill comes what's been called the "dairy cliff": reversion to a 1949 law that could double the price of milk overnight.
But dairy farmers aren't as happy as you might think.
The current 2008 Farm Bill -- a massive $300 billion piece of legislation covering everything from food stamps to rural economic development -- expired at the end of September. The Senate has passed a 2012 Farm Bill, but the House of Representatives has yet to bring its version to the floor.
Within the farm bill are crop subsidy programs, including the Milk Income Loss Contract, which supported dairy farmers with direct payments when market prices dropped too low. That program, which this year paid more than $83 million to nearly 12,000 Wisconsin farmers, expired with the bill in September.
Under a separate safety net program, the government will buy storable dairy products -- such as cheese -- at a set price, though market prices have been strong enough to render that program unnecessary in recent years, said Chris Galen, spokesman for the National Milk Producers Federation.
When a Farm Bill expires, if it is not replaced, support programs revert to permanent law, in this case the Agriculture Act of 1949, which would set the government purchase price around $40 per hundredweight -- roughly twice the current market price.
With soaring feed prices pushing production costs above bulk milk prices -- meaning conventional dairy farmers lose about $3 for every hundred pounds of milk -- that should come as good news for farmers.
But it's not that simple.
"As a producer, it'd be great to get that $40, but we also have to look at what's going to happen on the consumer side," said Darin Von Ruden, a Westby dairy farmer and president of the Wisconsin Farmers Union. "It would be too much of a price shock for consumers."
Galen likens it to going on a bender -- there may be some immediate pleasure followed by some serious pain.
The long-term result would disrupt the economy, Galen said. And dairy is just the first commodity that would be covered by the law.
Most observers don't see that happening.
Much like the fiscal cliff -- a combination of drastic spending cuts and tax increases set to kick in at the beginning of the year -- the provision is designed to be so onerous that Congress has no choice but to work out a compromise solution.
"Congress will do almost anything to avoid having that happen," Galen said.
His organization, which represents more than 32,000 dairy farmers, supports both the Senate's farm bill and a version approved by the House agriculture committee.
Kara Slaughter, government relations director for the Wisconsin Farmers Union, expects that if Congress doesn't pass a new bill it will extend the current version.
Like the NMPF, the Farmers Union opposes an extension of the current bill, which was more costly than the proposed replacement and which artificially inflated feed prices with crop subsidies.
"In times like this where corn prices are at record highs, it's absurd for government to be giving farmers incentives to grow corn," she said. "They have all the incentive they need to grow corn."
Rep. Ron Kind has called for the Republican House leadership to bring the new farm bill to the floor.
"We can't be going back to 1949 policy," said Kind, a Democrat from La Crosse. "That's ridiculous."
Reporter Elizabeth Dohms of the Chippewa Herald contributed to this story.
Milk Prices Could Double as Farm Bill Stalls - NYTimes.com
Milk Prices Could Double as Farm Bill Stalls - NYTimes.com:
EXCERPTS:
WASHINGTON — Forget the fiscal crisis and the automatic budget cuts. Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a newfarm bill that amends farm policy dating back to the Truman presidency.
WASHINGTON — Forget the fiscal crisis and the automatic budget cuts. Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a newfarm bill that amends farm policy dating back to the Truman presidency.
Lost in the political standoff between the Obama administration and Congressional Republicans over the budget is a virtually forgotten impasse over a farm bill that covers billions of dollars in agriculture programs. Without last-minute Congressional action, the government would have to follow an antiquated 1949 farm law that would force Washington to buy milk at wildly inflated prices, creating higher prices in the dairy case. Milk now costs an average of $3.65 a gallon.
Higher prices would be based on what dairy farm production costs were in 1949, when milk production was almost all done by hand. Because of adjustments for inflation and other technical formulas, the government would be forced by law to buy milk at roughly twice the current market prices to maintain a stable milk market.
But the market would be anything but stable. Farmers, at first, would experience a financial windfall as they rushed to sell dairy products to the government at higher prices than those they would get on the commercial market. Then the prices customers pay at the supermarket would surge as shortages developed and fewer gallons of milk were available for consumers and for manufacturers of products like cheese and butter.
***
“But it would be short-term euphoria followed by a long hangover that would be difficult for us to recover from,” said Mr. Norton, who is president of the New York Farm Bureau. “I don’t think customers and food processors are going to pay double what they are paying now for dairy products.”
The Senate passed a farm bill in July. A House version of the bill made it out of committee, but House leaders have yet to bring its version to the floor.
Under the current program, the government sets a minimum price to cover dairy farmers’ production costs. If the market price drops below that, the government buys dairy products from farmers to buoy prices and increase demand. Since milk prices have remained above that minimum price in recent years, dairy farmers usually do better by selling their products commercially rather than to the government.
But if 1949 rules go into effect, the government would be required to buy dairy products at around $40 per hundredweight — roughly twice the current market price — to drive up the price of milk to cover dairy producers’ cost.
“It would be bad for consumer demand in the long run,” said Chris Galen, a spokesman for the National Milk Producers Federation, which represents more than 32,000 dairy farmers.
Mr. Galen and others in the dairy industry said reverting to 1949 policies could probably force the makers of butter, cheese, yogurt and other dairy products to look for cheaper alternatives, like imported milk from countries like New Zealand.
***
In a conference call with reporters on Thursday, Tom Vilsack, the agriculture secretary, said the department was exploring all its options to deal with the possibility of the 1949 law going into effect.
Among the options: the agriculture secretary could drag his heels on the milk purchases until Congress passes a new farm bill or an extension of the 2008 one that expired in September, said Vincent Smith, a professor of agriculture at Montana State University in Bozeman.
“This is a totally antiquated law that has nothing to do with farming conditions today,” Professor Smith said. “It was put as a poison pill to get Congress to pass a farm bill by scaring lawmakers with the prospect of higher support prices for milk and other agriculture products. Letting it go into effect for even a few months would be particularly disastrous for consumers and food processors. “
Wednesday, December 19, 2012
Should U.S. natural gas be exported?
Let America’s Gas Industry Boom - NYPOST.com:
EXCERPTS:
"In recent years, the nation has seen astonishing technological innovation in the natural-gas sector. Companies have discovered vast, gas-rich shale deposits under US soil. And they’ve developed new, high-tech means of extraction. The estimated reserves of recoverable domestic gas are now over 2.2 trillion cubic feet.
"The expansion in supply has already brought a dramatic drop in natural-gas prices, now at a 10-year low. Other countries, mostly in Asia, are eager to buy some of America’s low-cost gas. So 17 US energy companies have applied to export gas. And two proposals for new gas-export terminals — at Coos Bay and the Port of Astoria, both in Oregon — now await federal approval.
***
"The argument against natural-gas exports is also economically backward.A nation prospers through international trade precisely by exporting those goods and services that it can produce at relatively low cost.
"Indeed, the Energy Department report found that gas exports benefit the economy despite higher domestic prices — in part because they also mean a corresponding fall in the prices that Americans pay for other goods and services that we import. That is, lucrative exports allow our nation to import more of those goods and services that can be produced at home only at relatively high costs.
EXCERPTS:
"In recent years, the nation has seen astonishing technological innovation in the natural-gas sector. Companies have discovered vast, gas-rich shale deposits under US soil. And they’ve developed new, high-tech means of extraction. The estimated reserves of recoverable domestic gas are now over 2.2 trillion cubic feet.
"The expansion in supply has already brought a dramatic drop in natural-gas prices, now at a 10-year low. Other countries, mostly in Asia, are eager to buy some of America’s low-cost gas. So 17 US energy companies have applied to export gas. And two proposals for new gas-export terminals — at Coos Bay and the Port of Astoria, both in Oregon — now await federal approval.
***
"The argument against natural-gas exports is also economically backward.A nation prospers through international trade precisely by exporting those goods and services that it can produce at relatively low cost.
"Indeed, the Energy Department report found that gas exports benefit the economy despite higher domestic prices — in part because they also mean a corresponding fall in the prices that Americans pay for other goods and services that we import. That is, lucrative exports allow our nation to import more of those goods and services that can be produced at home only at relatively high costs.
Friday, December 7, 2012
Margaret Thatcher on what's important - Notable & Quotable - WSJ.com
Notable & Quotable - WSJ.com
"My kind of Tory party would make no secret of its belief in individual freedom and individual prosperity, in the maintenance of law and order, in the wide distribution of private property, in rewards for energy, skill and thrift, in diversity of choice, in the preservation of local rights in local communities.
"Size is not all, any more than economic growth is all. Even efficiency is not enough. People come first—their needs, their hopes, their choice, their values and ideals. We have to understand these first—to be seen to be listening with sympathy and concern. It is important to be able to lead, certainly. But you cannot for long lead people where they do not want to go."
"My kind of Tory party would make no secret of its belief in individual freedom and individual prosperity, in the maintenance of law and order, in the wide distribution of private property, in rewards for energy, skill and thrift, in diversity of choice, in the preservation of local rights in local communities.
"Size is not all, any more than economic growth is all. Even efficiency is not enough. People come first—their needs, their hopes, their choice, their values and ideals. We have to understand these first—to be seen to be listening with sympathy and concern. It is important to be able to lead, certainly. But you cannot for long lead people where they do not want to go."
On relying on experts
Fedophiles
Don Boudreaux writes:
"If we understand, as most of us correctly do, that it’s the height of foolishness to rely upon, say, a centralized monopoly steel board to determine what is the ‘optimal’ supply of steel at any moment – and to rely upon that same cabal of alleged steel ‘experts’ also to bring that supply efficiently to market – why do we not understand that it is at least equally foolish to rely upon a cabal of monopoly-power-invested bureaucrats to make the same determination and to perform the same responsibilities with the supply of money?"
Don Boudreaux writes:
"If we understand, as most of us correctly do, that it’s the height of foolishness to rely upon, say, a centralized monopoly steel board to determine what is the ‘optimal’ supply of steel at any moment – and to rely upon that same cabal of alleged steel ‘experts’ also to bring that supply efficiently to market – why do we not understand that it is at least equally foolish to rely upon a cabal of monopoly-power-invested bureaucrats to make the same determination and to perform the same responsibilities with the supply of money?"
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