On Mon, 30 Jun 2008 21:29:08 -0700, "theloneranger100@[EMAIL PROTECTED]
"
<theloneranger10O@[EMAIL PROTECTED]
> wrote:
>Because they want to allure you into believing their goofy
>astrology......What else?
>
>Burp doesn't know how to read Astrology charts nor does he know
>how to read Stock Market charts....
>
>Mark his word, he said "Attacking on Iran" is imminent this July
>2008.
>
>
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Geopolitical Diary: Pressure on the Global System and the Saudi
Release Valve
July 1, 2008
Geopolitical Diary Graphic — FINAL
The Europeans have re****ted that inflation has risen to 4 percent on
an annualized basis. In historical terms (think the 1970s), this isn’t
much. It is, however, the largest increase since the creation of the
European Central Bank (ECB). The ECB has a different mandate that the
U.S. Federal Reserve System. The Fed is charged with managing the
country’s economic well-being across a broad spectrum, including
controlling inflation and facilitating growth. It can use its judgment
as to what it should focus on. The ECB, by contrast, has a single
mandate: controlling inflation. That may change at some point, but
right now, that mandate applies — and that means that the ECB will
fight inflation regardless of the consequence. The general consensus
is thus that the ECB will raise interest rates.
That may help control inflation, but it also will strengthen the euro
and weaken the dollar as money flows into European banks. As the
dollar weakens, the price of commodities — particularly oil — will
continue to rise. A stronger euro may mitigate some of the effects of
that rise. But as the price of oil rises, so will Europe’s and the
rest of the world’s cost of living. As the Fed pursues a policy of
maintaining liquidity to avoid a recession, the ECB will go in the
opposite direction. The result is a dangerous cycle.
The real issue isn’t Fed or ECB policy or synchronizing them. That
isn’t going to happen. The real issue is whether anyone is going to
intervene in this cycle before massive imbalances in the system move
the global economy into massive recession as the Bank of International
Settlements warned Monday. There are so many moving pieces that it is
difficult to conceive of any particular act making a difference, save
for one actor and one action. That would be Saudi Arabia indicating a
commitment to increase oil production dramatically. That announcement
would ****ft the momentum of oil prices and begin to release some of
the pressure on the global system.
On the surface, it might appear the Saudis would want the highest
price possible. But in reality they benefit more from having the
highest sustainable price over the long run. A massive global
recession is going to cut demand for oil. Furthermore, the 1970s
taught that extremely high oil prices generate increased oil
exploration and production. It took years to bring this oil online,
but when it finally did come online in the 1980s and 1990s, the Saudis
fell victim to excruciatingly low prices. The bust lasted longer than
the boom.
The Saudis remember that well. They are in the game for the long haul
— or at least as long as their oil lasts — because they have no other
game to play. They love high oil prices, but it is inimical to their
interests to have oil prices so high that it undermines demand while
energizing investment in competitive supplies and technologies. If the
Saudis learned anything from the last cycle, it is that they shouldn’t
push things too hard.
We focus on the Saudis because no other single actor has the potential
for unilateral action that might lower oil prices, relieving the price
pressure in Europe, allowing the dollar to strengthen and hopefully —
but by no means certainly —stabilizing the international economic
system. We were not impressed by the subprime crisis alone, but the
subprime crisis coupled with extreme commodity prices is another
matter.
The Saudi oil conference that ended June 22 had no effect, and the
Saudis didn’t expect it to. It was a gesture designed to placate
politicians around the world. As oil moves toward $150 a barrel, the
system is creaking under the strain. If it cracks, the Saudis will not
be the winners in the long run. The Americans and Europeans are not
going to manage the crisis and it is not clear that even the Saudis
can. But right now, it is Riyadh’s move. They are not particularly
sensitive to outside pressure, but they do remember the mistakes they
made in the 1970s. If the Saudis make no move, then the Bank of
International Settlement may turn out to be right in its warnings.
© Copyright 2008 Strategic Forecasting Inc. All rights reserved.
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