Remarkably in this environment , core inflation has remained quite muted. Nevertheless the Bank of Canada , resumed its expected tightening moves in the last years. Overnight rates may be hiked more than once in the next coming months.
Labour markets are tight and tight to the point that labor shortages may become evident in many sectors - especially in the booming Alberta and British Columbia economies. Wage inflation may well follow suit with surging energy and petroleum commodity prices and pricing.
Economic data continues to be strong. This is largely reflective of the recent trend and trend lines in energy as well as metal and raw material commodity prices. This has narrowed investment income deficits , which when coupled with continual strong trade surpluses especially in regards to oil - bode for a very strong underpinning of the Canadian dollar currency and currencies. In addition bond yields will continue to be strong despite the continued rise in short term interest rates. Long term interest rates will continue to be quite muted and demand for long term duration fixed income products by pensions and coming pensioners will remain more than strong in the financial and financial markets. Even the mildly inverted yield curve ( tow year bonds yields exceed 10 year bond yields by around 6 basis points) an outlook of solid growth and solid profits , low domestic inflation, rising incomes and strong trade balances appear to be in the offing.
High Petroleum Prices - Foreign Currencies Effects - Petrodollars - Biofuels Influences on in Future
0As the Organization of Petroleum Exporting Countries, OPEC keeps oil supply steady, it has been revealed that the injection of bio-fuel through Corn and Sugar cane could jerk up oil production capacity to three million a barrel on daily basis.
This is coming just as oil prices set fresh record of $118 a dollar yesterday.
OPEC’s crude oil supply to the global market has been projected to rise from 30 million barrels to 50 million barrels by 2030.
Mr. Scot Newman, Vice-President of Exxon mobil Corporation disclosed that world energy demand is expected to hit 325 million barrels of oil within this year.
According to the ExxonMobil Chief, condensate produced by OPEC member nations like Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi-Arabia, United Arab Emirates (UAE) and Venezuela is expected to grow from one million barrels to over 3million within the period under review.
He revealed that hydrocarbons produced from fossil fuel world remain relevant and significant as a major source of energy on the future.
Speaking on the use of electricity to energize economic growth and development, he revealed that the United States topped the chart, followed by Asia-Pacific countries in the club of the Organisation of Economic Corporation and Development (OECD) that clinched the second position slot.
European countries occupy the third position while African countries occupied the bottom spot in the data, adding that electricity usage in the non-OECD countries with higher populations is expected to rise above 70 per cent within the period.
According to him, coal would assume a dominant role in the generation of electricity in the developing countries because it is cheaper and affordable.
He noted that the nuclear source of power generation which has raised concerns in the developing world would become one of the major sources of electricity generation in the developed countries.
According to him, the world now has over 435 nuclear reactors generating electricity and other civilian goods and services.
He said that proper disposal of radioactive wastes would remain a major issue for the oil and gas sector and the governments in the future.
He further said that economic growth would remain a strong drive for energy demand over a long period.
Yesterday, US light, sweet crude hit a record high of $117.40 a barrel, while of Brent crude peaked at $114.65 a barrel.
The impending closure of a large oil refinery in Scotland, ahead of strike by workers, and its potential impact on North Sea supplies worried traders.
The International Energy Agency (IEA) reiterated that prices were too high.
A range of factors including the uncertain situation at Grangemouth - one of the largest refineries in the UK - and fresh attacks by militants on pipelines in Nigeria spurred prices on.
If oil-producing countries were to maintain their current level of production, inventories would be replenished
A Nigerian militant group claimed it had carried out two attacks on oil pipelines in the south of the country.
Royal Dutch Shell said yesterday that previous attacks on a pipeline in Nigeria last week would lead to a drop in production of about 169,000 barrels per day for shipments in April and May.
Tratfor - Strategic Intelligence
Ethanol blended gas and petroleum products may appear good for farmers and agriculture. Yet are the financial subsidizes to those industries a good thing - either overall for the economy, for the consumers or even for those financial sectors? Is the financial emphasis a good idea in terms of economics?
Not so - not from a financial or even an automotive or consumer effectiveness standpoints.
Financial subsidizes may be given to the agricultural industry - both direct financial costs , and give rise to both increased profits and futures prices in those industries. However not only do food stocks and food unit prices increase but also the ultimate consumer pays more both for food and reduced miles per gallon fuel efficiency - leading to increased costs overall for both. True futures prices on the markets may increase - but is this good thing overall - in the global picture.
The growing use of ethanol is making energy content more of an issue — particularly as record fuel prices crimp consumers.
The Energy Information Administration is keeping track of how ethanol is affecting average fuel economy in the
Moreover, the ethanol impact is expected to increase because the federal government approved an energy bill last year that encourages a sharp increase in ethanol production.
In
Ronald Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association, said the energy content of ethanol was a “policy issue for others to decide.” His association helped get the law changed from how it was originally proposed so that ethanol-blended fuels would not have to be sold if their wholesale price was more than conventional fuel.
In
Some motorists say they are already seeing the effect of ethanol on gas mileage
Manitoba Hotel Travel Theme Rooms
Sphere: Related ContentThe third of three episodes in a major natural experiment in monetary policy that started more than 80 years ago is just now coming to an end. The experiment consists in observing the effect on the economy and the stock market of the monetary policies followed during, and after, three very similar periods of rapid economic growth in response to rapid technological change: to wit, the booms of the 1920s in the U.S., the ’80s in Japan, and the ’90s in the U.S.
The prosperous ’20s in the U.S. were followed by the most severe economic contraction in its history. In our “Monetary History” (1963), Anna Schwartz and I attributed the severity of the contraction to a monetary policy that permitted the quantity of money to decline by one-third from 1929 to 1933. Since 1963, two episodes have occurred that are almost mirror images of the U.S. economy in the ’20s: the ’80s in Japan, and the ’90s in the U.S. All three episodes were marked by a long period of rapid economic growth, sparked by rapid technological change and the emergence of new industries, and accompanied by a stock market boom that terminated in a crash. Monetary policy played a role in these booms, but only a supporting role. Technological change appears to have been the major player.
These three episodes provide the equivalent of a controlled experiment to test our hypothesis about what we termed the Great Contraction. In this experiment, the quantity of money is the counterpart of the experimenter’s input. The performance of the economy and the level of the stock market are the counterpart of the experimenter’s output, i.e., the variables whose relation to input the experimenter is seeking to determine. The three boom episodes all occurred in developed private enterprise market economies, involved in international finance and trade, and with similar monetary systems, including a central bank with power to control the quantity of money. This is the counterpart of the controlled conditions of the experimenter’s laboratory.
The Money Supply: In addition, history has provided a close counterpart to the kind of variation in input that our hypothetical experimenter might have deliberately chosen. As Fig. 1 shows, monetary policy, as measured by the behavior of the quantity of money, was very similar in the three boom periods, and very different in the three post boom periods, with settings that might be described as low, medium, high.
To measure the quantity of money, I use M2 in the U.S. and the conceptually equivalent M2 plus certificates of deposit in Japan. To express the data for the two countries and the widely separated periods in comparable units, I use as an index of the money stock the ratio of the quantity of money to its average value for the six years prior to the cycle peak. The peak quarter of the relevant business cycle is the third quarter of 1929 (29.3) for the earlier U.S. episode; the first quarter of 1992 (92.1) for Japan; and the first quarter of 2001 (01.1) for the second U.S. episode (see Table 1). Finally, the data are plotted to align the dates at the cycle peak.
Fig. 1 shows a striking contrast between the period before the cycle peak and the period after the cycle peak. There are some differences before the peak — money growth is slowest on the average for the earlier U.S. episode, fastest for Japan — but the differences are small and there is reasonably steady money growth in all three episodes. The contrast with the period after the cycle peak could hardly be greater. Money supply declines sharply after the cycle peak in the first episode, goes from stable to rising mildly in the second, and rises steadily and sharply in the third. Our hypothetical experimenter planned his experiment well.
The GDP: The results of the third episode of this natural experiment are now all in. Fig. 2 shows how GDP in nominal terms (dollars or yen in current prices) behaved during the boom and post boom periods. I use nominal GDP rather than real GDP because M2 is also a nominal magnitude. How changes in nominal GDP are divided between prices and output is an important question but one that is not directly relevant to this experiment. One further preliminary comment: I believe the erratic behavior of nominal GNP during the ’20s and ’30s is largely a statistical artifact. The data for that period are scarce and of poor quality.
As in Fig. 1, there is a striking contrast between the boom and the post-boom periods: roughly similar growth during the booms, widely variable growth during the post-boom. Both before and after the cycle peak, nominal GDP growth paralleled monetary growth. During the boom, money and nominal GDP grew most rapidly in Japan, most slowly in the first U.S. episode, and at an intermediate rate in the second U.S. episode. Table 2 shows the ratio of the money stock at the cycle peak to its value six years earlier (the initial date in the figures) and the corresponding ratio for GDP. In the first two rows of the table, the ratios are highest for Japan, lowest for the U.S. 1920s.
After the cycle peak, money fell sharply in the first episode and so did nominal GDP; money growth stagnated in the second episode and so did GDP; money grew at a rapid rate in the third episode and, after a brief lag (corresponding to the mild 2001 recession) so did GDP. Table 3 shows the ratio of the money stock at the terminal date plotted to its value at the cyclical peak and the corresponding ratio for GDP. Both ratios are decidedly lowest for the U.S. 1920s, and decidedly highest for the U.S. 1990s.
The Stock Market: The peak of the stock market, as measured by S&P’s index, coincided with the cycle peak in the first episode, both occurring in the third quarter of 1929 (29.3). However, that was not the case in the later episodes. In Japan, stock prices as measured by the Nikkei peaked in the fourth quarter of 1989 (89.4), nine quarters before the cycle peak. In the second U.S. episode, stock prices as measured by S&P 500 peaked in the third quarter of 2000 (00.3), two quarters prior to the cycle peak. Accordingly, Fig. 3 plots the data to align the series at the stock market peak.
The near identity of the three stock market series during the boom is truly remarkable. Yet even the minor deviations that exist reflect to some extent the differences in monetary growth, as Table 2 makes clear. Money growth was highest in Japan, and the Nikkei shows the largest rise in the stock market. The other two do not conform: Money rose more in the ’90s than in the ’20s, while stock prices rose slightly less, as shown by the ratio of peak to initial value in Table 2.
Of more interest for our purpose is what happened after the peak. For a year after, the three stock-price series fell in tandem, responding to the inner dynamics of a collapsing bubble. Then, the differences in monetary policy began to have an effect. Beginning in late 1930, the S&P index started falling away from the others under the influence of a collapsing money stock. For another year and a half, the other two indexes move in tandem. Then the much more expansive policy of the Fed in the ’90s than of the Bank of Japan in the ’80s takes effect and pulls the S&P 500 away from the Nikkei, which stabilizes in response to the passive monetary policy of the Bank of Japan (as shown by Table 3).
The results of this natural experiment are clear, at least for major ups and downs: What happens to the quantity of money has a determinative effect on what happens to national income and to stock prices. The results strongly support Anna Schwartz’s and my 1963 conjecture about the role of monetary policy in the Great Contraction. They also support the view that monetary policy deserves much credit for the mildness of the recession that followed the collapse of the U.S. boom in late 2000.
Mr. Friedman, who died yesterday, was the 1976 Nobel Laureate in economics. He was a senior research fellow at the Hoover Institution and professor emeritus at the University of Chicago.
Forex Forex Currency Economics
There are major differences between trading stocks and trading futures. While stories of fortunes made or lost overnight on the futures markets are largely untrue, the futures trader, if using a sound trading system, can usually make more money on the futures market and make it much faster. However, if that trading system is not sound the trader can have greater losses. This is because futures contracts are highly leveraged. Margins (the deposit required) on futures contracts are much less than for stocks, as low as 3% on some futures contracts compared with up to 50% for stocks. As well, futures investors are not charged interest on the difference between the margin and the full contract value. The margins for futures contracts act more as a performance bond or good faith deposit whereas the margin for stocks is more of a loan. Although the margin on futures contracts is quite small, it rides the full value of the underlying contract as that contract rises or falls, thus providing the leverage mentioned earlier. Commissions charged by futures brokerages are normally much less than brokerage commissions for other investments. Futures markets use the open outcry (auction type) method of trading ensuring very public, fair, and efficient markets. Plus, it is much harder to trade on inside information as so many variables affect the markets. Also, futures markets are very liquid. Transactions can be completed quickly, which lowers the risk of adverse market moves if you own stocks you are an owner of the company. This allows you to share in the company so profits, and losses, through dividends, and increases or decreases in the stock so value. It also gives you certain voting rights with the company. However, a company can go bankrupt, leaving you holding worthless stock. When you buy and sell futures you are only entering into a contract and don to really own anything. What you have is an agreement to buy a commodity or financial instrument (wheat or Treasury Bonds for example) at a specified price at a certain date in the future. The person on the other side of the transaction has agreed to sell you that commodity or financial instrument at that specified price by the specified date. If you sell a futures contract prior to that date you have offset your position and have either a profit or loss on the trade. The stock you bought 3 years ago is the same stock you can buy today. Futures contracts, on the other hand, have very limited lives. They are traded in a regular series of contract months referred to as delivery months. Futures contracts have expiration dates after which no further trading for that month can take place. The September corn contract you traded last year is not the September corn contract you are trading this year. In fact last September so corn contract no longer exists. Many futures contract months of the same commodity trade simultaneously on the market, sometimes even years into the future. The current contract is called the front month and the other contracts are called the back months. They are called back months even though they are for future months. For example, corn trades for the months of January, March, May, July, September, November and December. Suppose today so date is August 4, 2000. The current contract month for corn would be September 2000 and so is called the front month. The months of November and December 2000, January 2001, March 2001, May 2001 and July 2001 are back months even though they are in the future and even flow into the next year. (This may sound confusing but it’s not …really) All of these months can be traded at the same time although most of the trading activity takes place in the front month. When the current month expires the next contract month becomes the front month and so on.
Unlike options contracts that give the buyer the rights ( or the option) to purchase or sell a stock. bond currency or amount of gold futures contracts commit the buyer, who owns the financial contract, to take actual physical delivery of the commodities or financial instruments for a specified price, at some future date . While few investors actually take physical delivery. The game plans for futures players is to keep an alert eye on the price of the commodity involved - treasury bills and the like, and if the price climbs thus boosting the value of the contract - to unload the contract at a profit. However if the price falls, the investor on the other hand can suffer a financial loss.
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European should brace themselves for further food price rises as Europe’s agriculture commissionaires have said. High cereal prices have increased animal feeds costs and farmers will soon have to pass on these increased costs to the ultimate consumers. What can the consequences be regarding wheat and wheat prices and pricings ? It is more than obvious that especially for poultry products - which is the most cereal heavy production stream and methods - that prices should be on the way up. Poultry is rated at one third more expensive than a short time period before. Wheat has risen 80 % ytd, maize 50 % which will soon affect pork and beef prices over the next immediate time frames.
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Once up and running however world wide global power plants have a distinct advantage of those which run on coal or natural gas , they need comparatively little fuel to operate . Areva, a French nuclear company with international global sales is building even more powerful plants worldwide through the worldwide marketing reach. Its first reactor , which began operating 1n 1977 , was rated at only 900 megawatts ; its latest model the revolutionary evolutionary power reactor (EFR) , is a 1600 megawatt design , with worldwide sales potentials. Both the EPR and APr1000 along with GE’s design, are among the plants under major considerations by American utilities. Were there to be another disaster, like Chernobl ( of USSE / Russian /Eastern European / Ukraine ) etc or a successful terrorist attack on a nuclear power plant, all bets would be off.
Sphere: Related ContentAt the moment 439 nuclear reactors in 31 countries supply 15 % of the world’s electricity. Even without a price on carbon, the worldwide generating capacity of nuclear power will probably increase from 370 megawatts today to 550 megawatts in 2035. But if there were a price on carbon dioxide CO2 it will grow even more rapidly.
After the oil crisis of 1973, France decided to pursue the goal of fossil fuel independence. With few energy resources of its own, pursuing nuclear energy seemed to be the best thing. Today the country has 59 nuclear reactors supplying 78 % of its electricity. Nuclear has worked well in France because it has been accepted by the general public and politicians alike , so there are few delays due to protests or planning problems. Elsewhere these have lengthened the construction period and and greatly increased costs - which often have to be paid in vital , limited foreign currencies
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Over the next few decades global electricity consumption is expected to at least double. At the same time , many power plants in rich countries , built in the 1960’s and 1970’s are nearing the end of their projected lifespans/ Meanwhile concern is swelling both about global warming, and about the Western World’s increasing dependence on a shrinking number of hostile or unstable countries for imports of oil and gas. The solution to this commundrum , in the eyes of many governments is nuclear power and energy. Both China and India are in the process of building several reactors and intend to increase their nuclear generating capacities several times over the next 15 years. Some countries such as Turkey and Vietnam , are considering starting nuclear power programs, and others including Argentina and South Africa plan to expand their existing ones.
The “Rich” world is also reexamining the case for nuclear. America is expecting a rush of new applications to build new reactors in the coming years - the first in almost thirty years.
Britain’s Prime Minister has affirmed his support for a new generation of nuclear power plants. Construction of a new plant in Finland - Western Europe’s first in 15 years began in 2005; work is underway on a similar one - this time in France. Other European countries that had frozen or decided to scrap their nuclear programs are rethinking their plans.
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