Fwd: Economics

'We have of late received a real-life crash course in basic economics, with the lessons imparted at the highest levels of the global economy. We are all seeing the laws of supply and demand in action, with their manifold implications, and we are learning that it is impossible to circumvent those laws without paying a high price. Wherever we look, the attempts of the state to outsmart markets are showing their limits, and more often than not ending in utter fiasco.

Let us begin with a look at the free-falling oil market. Oil-producing countries would of course like to reverse the current trend. Some would curtail production to push prices up, but the rest have learned from experience that collective restrictions only benefit the countries that do not comply. Like it or not, intergovernmental decisions won't alter the factors underlying the fall in the price of oil. One key element is the global deceleration of economic growth, particularly in China, a large energy consumer. Add to this the entry of fracking into the oil game, notably in the United States - just one factor expanding the global supply of energy.

These joint developments substantially push down the demand for, and consequently the price of, oil - so much so that financial economist Anatole Kaletsky asserts that $50 for a barrel may well become a price ceiling rather than a floor...

The same inability to bypass market laws is at work in China. There, the problem stemmed from a centralized frenzy to promote investment without due consideration of expected returns. Thus, Chinese economists estimate that "ineffective investment" reached the astronomical figure of $6.8 trillion between 2009 and 2013.

http://www.realclearworld.com/articles/2015/01/22/a_global_lesson_in_basic_economics_110924.html

Fwd: Oil well

'OPEC has had its foot on the throat of the oil market for months, but the chief of the cartel thinks a rebound might now be at hand, according to news reports.

"Now the prices are around $45-$55, and I think maybe they reached the bottom and will see some rebound very soon," OPEC Secretary-General Abdulla al-Badri said on Monday, according to Reuters.

If that wasn't enough to put oil bears on the back foot, at least temporarily, Badri also said it would be possible to see crude climb to $200 a barrel or higher "if you don't invest in oil and gas," Bloomberg reported.

That is an interesting scenario, since shale production is seen as relatively resilient, with firms able to ramp production up in relatively short order as prices rise.

It also stands in contrast to remarks by Prince al-Waleed bin Talal, the billionaire Saudi businessman, who earlier this month predicted oil would never again trade north of $100 a barrel'

http://www.marketwatch.com/story/opec-chief-sees-chance-of-oil-zooming-to-200-a-barrel-2015-01-26?link=MW_latest_news

 

 

Fwd: Subprime

Any serious effort to understand the crisis would have asked at this point why government agencies held so many subprime and other risky mortgages, and that inquiry would have turned up the affordable housing goals, adopted by Congress in 1992. These required Fannie and Freddie, when they bought mortgages from banks and other originators, to meet a quota: 30 percent of those mortgages had to be made to borrowers at or below the median income in the communities where they lived. Data from HUD, which administered the goals, would have shown the administration and Congress, had they been curious, that HUD had gradually increased the quota to 50 percent in 2000 and to 56 percent in 2008.

http://www.realclearmarkets.com/articles/2015/01/14/the_illegitimate_dodd-frank_law_has_nothing_to_do_with_the_financial_crisis_101482.html