Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (12366)	9/28/2004 9:26:35 AM
From: Roebear	Read Replies (1) \| Respond to of 116555

zonder, The writer, university professor at Columbia University, was awarded the 2001 Nobel prize in economics and chaired President Bill Clinton’s council of economic advisers Thank goodness, he must be impartial then and absolutely none of that corporate malfeasance had started on Mr Stiglitz's watch! ggg, Roebear

To: zonder who wrote (12366)	9/28/2004 11:09:57 AM
From: mishedlo	Respond to of 116555

Stagflation lite Higher oil prices will slow U.S. economy: economists Tuesday, September 28, 2004 2:02:20 PM WASHINGTON (AFX) -- With crude-oil prices breaking above $50 a barrel for the first time, economists say higher energy prices will hold back the U.S. economy but not brake it. "It's a drag," said David Wyss, chief economist for Standard & Poor's. "But it's a bearable drag." Few economists see signs of a repeat of the 1970s, when soaring oil prices lead to two recessions and a surge of inflation The economy is better prepared now, economists say, since it requires less energy now to produce a $1 worth of output. And, the Federal Reserve is committed to keeping inflation low Still, higher energy prices will have a significant impact. "I call it 'stagflation light,' " said Rajeev Dhawan, director of the Georgia State Economic Forecasting Center. Dhawan said higher energy prices will slow growth and accelerate inflation, but not nearly to the same extent as in the late 1970s' oil crisis, when inflation was raging at double-digit rates and growth stagnated In the early 1980s, crude oil cost the equivalent of more than $60 a barrel in 2004 dollars "When it gets to $75, I'll start getting queasy," Wyss said "I don't think it's as big a drag as some think," said Maury Harris, chief U.S. economist for UBS. Harris figures that each $10 rise in crude prices subtracts about 0.4 of a percentage point from gross domestic product over a two-year period Harris is still optimistic that energy prices won't lead to a major slowdown or recession. "Better job growth should offset some of the negativity," he said. So, instead of 4 percent GDP growth, we'll get 3.5 percent, in his view The impact on inflation rates will be similarly noticeable. Energy goods and services represent about 7 percent of the consumer price index, tracking inflation at the retail level. Higher energy prices show up directly in the CPI but not in the so-called core rate, which excludes both food and energy prices Fed fallout Whether higher crude prices also show up in the core CPI depends on what Fed policymakers do about U.S. interest rates. If the Fed accommodates the higher prices in an effort to boost growth, an inflationary spiral could be established, Wyss warned. But he doesn't expect the Fed to do that Wyss figures that each additional $10 for a barrel of crude adds about 0.1 of a percentage point to core inflation rates. "It's not a big deal," Wyss said Growth has slowed slightly since spring and inflation rates have inched higher, but so far, the economy has been shielded from the full impact of higher petroleum prices Retail gasoline prices peaked in May and were falling for much of the summer even as crude oil prices were rising Heating oil customers, on the other hand, are already feeling the pinch, said Jason Schenker, an economist for Wachovia. Heating oil prices were at historic highs even before the winter heating season began Schenker believes $60 a barrel for crude oil is in the cards. "The run-up in the price of oil is far from over," he said. fxstreet.com

To: zonder who wrote (12366)	9/28/2004 11:25:10 AM
From: mishedlo	Respond to of 116555

ECB´s Issing says ECB will react favourably to helpful fiscal policies ECB's Issing says ECB will react favourably to helpful fiscal policies UPDATE (updating with comments on opposition to some aspects of stability pact reform) BRUSSELS (AFX) - European Central Bank chief economist Otmar Issing said the ECB will react "favourably" when setting interest rates if governments cut their fiscal deficits The ECB will also react positively if wage bargainers help contain inflation by agreeing moderate wage increases, he said "Monetary policy will respond favourably to appropriate fiscal policies and wage settlements which help to maintain price stability over the medium term," Issing told a conference Issing reaffirmed that the EU's stability and growth pact, which sets rules for euro zone governments' fiscal policies, is "appropriate in its present form" But he said there is scope for improvement in the implementation of the pact The EU Commission has proposed to reform the pact by relaxing the limit on government deficits at times of slow growth Issing said he can see some scope for common ground between the ECB, the Commission and EU member states on the reform of the pact in general, but he said there are key aspects of the proposed reform to which he is opposed In particular, he expressed doubts about the proposal to extend the definition of the "exceptional circumstances" permitting a country to breach the pact's 3 pct of GDP deficit limit to include a period of slow growth Such a definition of exceptional circumstances would not work when applied in practice because it could not be applied objectively, he said He said the specific conditions applying in each case "will finally ruin any approach that can be applied on an objective basis" He said he is also against a switch to assessing each country's deficit position separately in a case by case examination, rather than always applying the same rules to each country "It's very difficult or almost impossible to observe a principle of equal treatment (with such an approach)," he said