Meltdown

BachQ · April 25, 2008, 04:08:11 PM

U.N.: Soaring food prices 'global crisis'

U.N. Secretary-General Ban Ki-moon calls for immediate action to quell rising food costs.
Last Updated: April 25, 2008: 10:00 AM EDT

VIENNA, Austria (AP) -- A sharp rise in food prices has developed into a global crisis, U.N. Secretary-General Ban Ki-moon said Friday. Ban said the U.N. and all members of the international community are very concerned, and immediate action is needed. He spoke to reporters at U.N. offices in Austria, where he was meeting with the nation's top leaders for talks on how the United Nations and European Union can forge closer ties.

"This steeply rising price of food - it has developed into a real global crisis," Ban said, adding that the World Food Program has made an urgent appeal for additional $755 million. "The United Nations is very much concerned, as all other members of the international community," Ban said. "We must take immediate action in a concerted way all throughout the international community." Ban urged leaders of the international community to sit down together on an "urgent basis" to discuss how to improve economic distribution systems and the production of agricultural products.

First Published: April 25, 2008: 7:31 AM EDT

BachQ · April 25, 2008, 04:09:33 PM

Why grocery bills are set to soar
PAUL WALDIE
From Friday's Globe and Mail
April 25, 2008 at 4:01 AM EDT

Canada's near-free-ride on food inflation is coming to an end and consumers better brace for some steep increases in their grocery bills. Food prices have been largely flat for months, mainly because of the surging Canadian dollar, which has reduced the cost of importing products from the United States such as fruits and vegetables. But with the dollar stabilizing near parity with the U.S. greenback and oil hitting record levels, "Canada's good luck on food prices is likely to run out in 2009," said Avery Shenfeld, a senior economist at Canadian Imperial Bank of Commerce. Mr. Shenfeld estimates food inflation will jump from zero to 3.5 per cent next year, outpacing the overall inflation rate for the first time in years. Another CIBC report forecast that oil prices will almost double by 2012, sending gasoline to $2.25 a litre.

BachQ · April 25, 2008, 04:10:49 PM

U.S. Economy: Sentiment Sinks to 26-year Low (Update2)
By Bob Willis

April 25 (Bloomberg) -- U.S. consumer confidence fell more than forecast in April to a 26-year low as record fuel prices and rising unemployment threatened to reduce spending. The Reuters/University of Michigan sentiment index decreased to 62.6, from 69.5 the previous month. The measure was down from a preliminary estimate of 63.2 issued on April 11. Consumers are growing increasingly anxious because the economy has lost almost a quarter million jobs so far this year, gasoline is up 17 percent and property values have fallen. Sales of houses and cars have declined as a result, contributing to a slowdown that may bring an end to the six-year expansion.
``Consumers are feeling the pinch, not only from the labor market, but also from prices,'' Aaron Smith, an economist at Moody's Economy.com in West Chester, Pennsylvania, said in a Bloomberg Television interview. ``There's a squeeze on incomes from two sides.''
Economists had forecast the consumer sentiment gauge would fall to 63.2 from 69.5 in March, according to the median of 60 projections in a Bloomberg News survey.
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 53.3 from 60.1 last month.
Stocks fell, pushing the Dow Jones Industrial Average down 56.2 points, or 0.4 percent, to 12,792.8 at 12:28 p.m. in New York.
Current Conditions
A measure of current conditions, which reflects Americans' perceptions of their financial situation and whether it's a good time to make big-ticket purchases like cars, decreased to 77 from 84.2 last month.
Consumers were also more concerned about inflation. Americans thought prices would increase 4.8 percent over the next 12 months, up from a 4.3 percent estimate in March. Longer term, inflation was pegged at 3.2 percent, the highest level since August 2006 and compared with 2.9 percent last month.
The economy lost 80,000 jobs in March, the most in five years, following a 76,000 drop in payrolls in each of the prior two months, according to figures from the Labor Department. The jobless rate rose to 5.1 percent, the highest level in more than two years.
Rising fuel costs have contributed to a drop in auto sales and prompted some shoppers to limit trips to malls. The average price of regular unleaded gasoline rose to a record $3.58 a gallon yesterday, according to data from AAA.
Auto Sales
Cars and light trucks sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998. Some 14.9 million autos will be sold this year, the fewest since 1995, Standard & Poor's forecast this month.
AutoNation Inc., the largest publicly traded U.S. car dealer, yesterday said first-quarter profit fell 35 percent as weak housing markets in states including California hurt demand for new vehicles.
``We expect to continue to see a challenging automotive retail market as long as the current economic difficulties persist,'' Chief Executive Officer Michael Jackson said in a statement.
Only one-third of consumers polled by the University of Michigan said they planned to spend the tax-rebate checks that the Treasury Department is poised to send as part of the Bush administration's economic stimulus plan. The majority of Americans plan to use the money to pay down debt or boost savings, the report said.
Bush Comments
President George W. Bush today said Americans will start getting that tax rebates next week and predicted the money will give the economy a boost.
Economists surveyed by Bloomberg earlier this month forecast consumer spending will rise at a 0.5 percent pace in the first half of the year, the smallest gain since 1991. The economy is unlikely to grow at all through June, the survey also showed.
Those polled put the odds of the economy entering a recession this year at 70 percent, up from 50 percent in the prior month's poll.
The biggest housing slump in a generation is leading the downturn. Home prices nationwide have fallen 10 percent from their peak, according to the S&P Case-Shiller home-price index, and many economists are forecasting values will keep dropping. Falling property prices make Americans feel less wealthy and reduce the amount of equity owners can tap for spending.
Rising foreclosures are also lifting stress levels. Foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as rates on adjustable mortgages increased, Irvine, California-based RealtyTrac Inc., a seller of default data, said last week.

BachQ · April 25, 2008, 04:11:58 PM

Oil jumps past $119 on U.S.-Iran tensions
Fri Apr 25, 2008 1:07pm EDT
By Randy Fabi

LONDON (Reuters) - Oil jumped more than $3 to over $119 a barrel on Friday on Nigerian and North Sea supply disruptions and rising tensions between the United States and Iran. U.S. crude futures surged $3.44 to $119.50 a barrel by 1248 p.m. EDT (1648 GMT), near the all-time peak of $119.90 reached on Tuesday. London Brent crude traded $3.12 higher at $117.46 a barrel, after hitting a new record of $117.56 earlier.

A cargo ship hired by the U.S. military fired warning shots at boats suspected to be Iranian, the U.S. Navy said on Friday, underscoring tension in the Gulf as the Pentagon sharpened its warnings to Tehran.
Iran denied there had been any confrontation between its forces and a U.S. ship in the Gulf, Iranian media reported.

Tensions between Washington and the OPEC nation last year helped send oil to then record highs. Crude prices have surged more than five-fold since 2002 as supplies struggle to keep pace with rising demand in emerging economies such as China. Oil also found support on Friday from Nigerian production lost due to a workers strike and rebel attacks and disruptions caused by a planned refinery strike in Scotland. "You have everything coming together and that's lifting us off again," said Tom Bentz, analyst for BNP Paribas Commodity Futures in New York. A strike by Nigerian workers at Exxon Mobil forced the company to shut down some 200,000 barrels per day of crude oil output, a senior union official said. Nigerian rebels said on Friday they had sabotaged an oil pipeline in the Niger Delta belonging to Royal Dutch Shell late on Thursday. The company had already shut 169,000 bpd of Bonny Light crude oil output after a pipeline attack there a week ago.

"Our candid advice to the oil majors is that they should not waste their time repairing any lines as we will continue to sabotage them," the Movement for the Emancipation of the Niger Delta (MEND) said in an emailed statement. Shell confirmed the Friday attack and said it was trying to assess the extent of the damage to the pipeline. In the North Sea, BP said it had begun shutting down UK's Forties oil pipeline in preparation for a planned two-day strike at a major Scottish refinery this weekend.
The 700,000 barrel-a-day Forties pipeline carries about half of Britain's North Sea oil production.

BachQ · April 25, 2008, 04:15:18 PM

Japan inflation hits 10-yr high; bonds hit hard
Fri Apr 25, 2008 2:58am EDT
By Yoko Nishikawa
TOKYO (Reuters) - Japanese annual inflation hit a decade-high of 1.2 percent in March, helping trigger one of the biggest ever sell-offs in yen bonds as investors realized Japan has no immunity from price pressures facing the rest of the world, and that could eventually lead to a rate hike despite a weak economy. Trading in bond futures on the Tokyo Stock Exchange was halted for a time to allow the market to settle, the first test of a circuit breaker mechanism introduced to the market this year.
Like other central banks, the Bank of Japan faces rising fuel, raw materials and food prices as it ponders what to do with rates, already at a very low 0.5 percent in Japan.

But because the increases in consumer prices in major economies are largely due to climbing costs, rather than strengthening demand, investors have until recently been eyeing more rate cuts, rather than hikes. Gasoline prices rose 19.0 percent in March from a year earlier, while that of heating oil rose 29.2 percent. The so-called "core, core CPI", excluding prices of fresh food and oil products, rose 0.5 percent from a year earlier. "What's happening now is price increases involving elements of deflation," said Takeshi Minami, chief economist at Norinchukin Research Institute, who stuck .

BachQ · April 25, 2008, 04:17:38 PM

The Peak Oil Crisis: The Case for 2008
Written by Tom Whipple
Thursday, 24 April 2008

It is conventional wisdom for most of the people following the peak oil story that we still have a few years to go before the real troubles begin. Some say 2011, others 2015 or later, but in general, among those calculating the depletion vs. new supply balance most have been talking about troubles starting in years rather than months.

Let's ponder for a second the meaning of "peak oil." Ever since the concept was invented some 50 years ago, peak oil has meant the point in time when world oil production increases to a level that never again will be reached. For most of us, however, peak oil will not be a point on a government chart, but will be the day when we drive up to a gas station and find the tanks empty, restrictions on how much we can buy, or more likely a price that makes us realize our lifestyles are going to change. We can no longer afford to use our cars in the manner that we have been doing all our lives.

In recent weeks there have been developments suggesting that the troubles associated with peak oil may be coming faster than many realize. First, it is necessary to recall that world oil production has been essentially flat for the last three years. We did hit a new nominal "peak" a couple of months back, but the increased production was minor as compared to the forces of demand building across the world. With production stagnant, consumption in the rich countries holding about the same, and consumption in China, India, Russia and the Middle Eastern oil producers surging higher, something had to give. The "give" was in those places that could afford $20 a barrel oil, but could not afford it at $120 a barrel. For the last few years, an increasing share of the oil flow going to poor countries has been redirected to those that could pay the price. Outbidding the world's poor is finite, however, so that at some point there simply won't be enough oil going to poorer places for the richer ones to buy up. Then we have the interesting news from the big producers. After ten years of rapid post-Soviet growth, Russian oil production seems to have reached a plateau. As Russian domestic consumption is rising rapidly, there is nowhere for their exports to go but down – and they are. Next the Saudis, who after spending $100 billion or so on new oil wells in recent years, say they will soon have the capacity to produce 12.5 million barrels a day. However, the King of Saudi Arabia announced last week that he has decided to leave some of their oil in the ground for the grandchildren. Somebody passed the word the Saudi production was going down to 9 million barrels a day from 9.2 million -- so much for the hope that the Saudis were going to keep us in our accustomed lifestyles. Then we have Mexican production and exports dropping faster than predicted and Venezuela doing its best to sell its oil to anyone but the U.S. The most important factor, however, may be the Chinese who insist on growing their economy at 10 or 11 percent a year. Chinese oil imports are up 14 percent over last year in the first quarter and by almost 25 percent in March as domestic production stagnates and Beijing prepares for the Olympics. Chinese imports for May are already looking to be above normal.

As could be expected, given flat or dwindling world exports, and stiff competition for the remainder, U.S. imports of crude and petroleum products have not been keeping up during the last few weeks and U.S. stockpiles have been dropping more than normal for the time of year. Some say this is because our economy is slowing and we will need less oil. Others say ordering and refining more oil is about to pick up so that all will be well shortly. The definitive answer to this question is not far away, for this is the time of year when our stockpiles of crude oil, gasoline, and distillates normally build. If the situation stabilizes and stocks start climbing in the next few weeks, we can relax a little for another year. This week's stockpile report shows some improvement with crude inventories up, but gasoline and distillate inventories still falling. Despite the weakening U.S. economy, the Department of Energy still shows U.S. oil and gasoline consumption up by nearly one percent over last year. Thus far in 2008 our crude imports are down 1.7 percent over last year and our net imports of refined products are down by 5.2 percent. If our stockpiles do not start to build more rapidly in the next month or two, then watch out, for in recent years the U.S. has slowly moved towards a just-in-time system for oil and products to lower inventory costs. Keep in mind that much of our "stockpile" is trapped in pipelines, sitting in partially-processed tanks at refineries, and aboard ships and barges where it is no use to the consumer. It was only a couple of years ago that we were hours away from shortages. There are many forces at work in the world's oil markets today. How they will all balance out over the rest of the year is impossible to tell. During the last few months, however, developments suggesting much higher prices and shortages have come to the fore as witnessed by the steadily increasing prices for oil and gasoline. Unless something comes along to reverse these forces in the next few months, we are likely to suffer very serious economic troubles before the year is out.

BachQ · April 25, 2008, 04:18:18 PM

The Four Seasons Of Civilization

Duane Elgin, author of numerous books including Voluntary Simplicity, postulated fifteen years ago that civilizations evolve through specific stages which ironically follow the shape of a bell curve, similar to the Peak Oil curve, in their development and to which Elgin refers as the "four seasons" of growth. This was long before the bell curve of Peak Oil was familiar to many other individuals besides M. King Hubbert, father of the Peak Oil theory, who died four years before Elgin's book was published.

According to Elgin, Stage I of the development of a civilization, "Springtime" is characterized by high growth and an era of faith in future potential. During springtime, there is little bureaucratic complexity, and activities are largely self-regulating. Stage II or "Summer", is an era of reason where social consensus begins to weaken and bureaucratic complexity increases with less self-regulation and more external regulation. "Autumn" follows, ushering in an era of cynicism where consensus weakens considerably, special interest groups surpass the power of a shared social purpose, and bureaucratic complexity mounts faster than the ability to effectively regulate. An era of despair characterizes Stage IV, "Winter", and the collapse of consensus is supplanted by conflicting social purposes. Bureaucratic mechanisms and their complexity become overwhelming, and society begins to break down.

Elgin believes that three possible outcomes are likely to emerge from the breakdown of the system. One outcome is collapse as the biosphere is pushed beyond its limits and can no longer support the burden of humanity. Stagnation is another option, in which members of the system expend energy on simply maintaining the status quo. Revitalization is the most desirable option which results from a "period of intense communication and reconciliation that builds a working consensus around a sustainable pathway into the future."

The author notes that we get collapse by "perpetuating the status quo and running the biosphere into ruin. We get stagnation when citizens are passive and rely on remote bureaucracies and technological solutions to handle a deteriorating local-to-global situation. We get revitalization only when we directly engage our predicament as individuals, families, communities, and nations."

Although Elgin has presented the three options in this particular order, it is clear to me that the current civilization has long since passed through stagnation and is rapidly collapsing. In my opinion, while revitalization may have been possible decades ago when society's elite first learned of Peak Oil, climate change, and numerous renewable energy options, it is now possible only as a consequence of collapse for the simple reason that the progression of collapse has rendered voluntary revitalization extraordinarily problematic, if not impossible.

Richard Heinberg's Peak Everything reveals unequivocally that virtually every resource on earth has reached or passed its peak of availability to the human race. Elgin's 1993 theory, however, offers a larger picture in which the likelihood that civilization itself has peaked and is on the downward side of the bell curve is logically plausible.

The immediate "winter of our disconnect" (and discontent), described above, has been characterized by an astonishingly rapid unraveling of civilization which appears to accelerate with every passing day. The larger winter is not about specific events such as foreclosures, bankruptcies, food rationing in America, or melting glaciers, but rather the final evolutionary stage of civilization and its eventualities in which we now find ourselves embroiled. In other words, particular occurrences of unraveling indicate irrefutably that we have entered Peak Civilization.

It is crucial, in my opinion, to comprehend Peak Civilization so that just as we understand that all of earth's resources have peaked which would prevent us from embracing the chimera of a "return to normalcy", we more astutely grasp the progression of human evolution and its implications in the macrocosm. That is to say that a clear understanding of Peak Oil prevents any rational human being from assuming that a return to cheap and abundant energy is feasible in his/her lifetime. Likewise, recognizing that civilization is in an irreversible trajectory of descent may assist us in conserving our valuable mental, emotional, and spiritual energy so that we do not expend it on phantoms of long-term revitalization.

Past-Peak Elections-You Have No Government

At this point it becomes necessary to distinguish between long-term and short-term revitalization. From my perspective, as stated above, collapse must occur in order for long-term revitalization to become possible, so attempting to prevent collapse also prevents one from honoring the current stage of civilization now unfolding. One example of understanding civilization's "winter" is to grasp that the only thing more futile than addressing energy depletion with ethanol use is the delusion that legitimate presidential elections actually occur in America offering valid choices between two genuinely opposing candidates who represent two distinct political parties and who are beyond domination, contamination, or exploitation by the transnational corporations that in fact manage the United States.

Furthermore, to fully understand Peak Civilization is to understand that the federal government per se does not exist, but rather an elite corporate cartel engaged in the management of citizens-citizens who are now completely on their own in terms of their survival as the pseudo-government continues to implode. Moreover, the cartel's direct intent is the cessation of nation states to be supplanted by corporations and their subsidiaries.

Therefore, the task before us is not to perpetuate the status quo by participating in the ersatz federal election debacle, but to, in the words of John Michael Greer "transition to a Third World lifestyle." I believe that any politician who suggests that we can do otherwise and survive as individuals or as a nation, may be committing a crime against humanity. Politicians and centralized systems are incapable of effecting meaningful change. Or as Greer states, "...getting the Federal government to do something constructive about the situation, for instance - [is] a waste of time. That sort of change isn't going to happen. It's not simply a matter of who's currently in power, although admittedly that doesn't help. The core of the problem is that even proposing changes on a scale that would do any good would be political suicide."

Although nothing could be more unpalatable for the American public, transitioning to a Third-World lifestyle is precisely what it is being forced to do. And as Greer comments:

There's no way to sugar-coat that very unpalatable reality. Fossil fuels made it possible for most people in the industrial world to have a lifestyle that doesn't depend on hard physical labor, and to wallow in a flood of mostly unnecessary consumer goods and services. As fossil fuels deplete, all that will inevitably go away. How many people would be willing to listen to such a suggestion? More to the point, how many people would vote for a politician or a party who proposed to bring on these changes deliberately, now, in order to prevent total disaster later on?

What Peak Civilization Really Looks Like

Peak Civilization by definition means the disappearance of public education, healthcare, government-issued currency, commercial food production, public access to regional water supplies, interstate commerce, the North American energy grid, and the very infrastructure of the United States. Yet one need not succumb to fatalism. While long-term revitalization cannot be realized now, its seeds can be and are being planted by the proliferation of vibrant relocalization movements erupting and evolving around the world, many of which have been spotlighted at the Truth To Power website. As Duane Elgin emphasizes: "A revitalizing society is a decentralizing society, with grassroots organizations that are numerous enough, have arisen soon enough, and are effective enough to provide a genuine alternative to more centralized bureaucracies."

The first headlines of food rationing in America are buzzing across the internet as I write this article. They underscore the unequivocal reality that collapse is going to compel us to feed ourselves or quite simply, we will perish. I believe that food security is the most urgent, the most immediate issue to which we must attend at this moment of Peak Civilization. For months, this website has been informing readers about food storage and preservation and other aspects of preparedness. It is now time, if you have not already done so, to organize groups of citizens in your neighborhood, schools, churches, and community centers to plant and maintain gardens. In addition, collapse is compelling us to rapidly mobilize our neighborhoods and communities to not only accumulate our own supply of stored water but to organize citizens to work with local public water utilities to ensure that they remain public and are not privatized.

Health care professionals reading these words need to consider offering local workshops on a regular basis teaching citizens how to treat injuries and illnesses in the absence of a viable healthcare system. Doctors, nurses, dentists, and all manner of medical personnel are likely to be overwhelmed with patients during and after the full-scale breakdown of the system when hospitals and clinics have closed and almost no one can afford health insurance. A recent CBS News video link emailed to subscribers recently by Truth To Power confirms the imminent, total collapse of America's healthcare system and reveals the extent to which anyone with the slightest bit of training in the field is likely to find her/himself inundated with throngs of sick people desperately seeking care.

BachQ · April 25, 2008, 04:19:40 PM

Here's what happens: as prices rise, oil-exporting countries benefit from an influx of petrodollars. That, in turn, spurs economic expansion, which in turn increases domestic oil consumption. As demand rises, more oil is devoted to meeting that domestic demand, leaving less oil to export.
As exports fall, worldwide prices rise even more.
What Brown finds scarier than $120 oil is the latest projections from the International Energy Agency that forecast a 4.4 percent rise in oil consumption this year from key emerging markets — China, India, Russia and the Middle East.

Outpacing our demand

For the first time, the agency predicts, demand from those regions will outpace ours. In other words, the first steps of the Export Land Theory may be under way. Increases in world supplies have been relatively modest compared to this surging demand. Because exports are essentially the oil that's left after domestic demand is met, exports will decline, Brown said.
Consider what he predicts will happen with Saudi Arabia, the second-largest supplier of oil to the U.S. after Canada: If production remains at about its current level, its rising domestic consumption will claim all of its exports in about 20 years. He believes we'll soon begin seeing declines of about 5 percent annually.

"When you look at the initial two years of decline, it's the scariest thing in the world," Brown said. "The very lifeblood of the Western economy is draining away before our eyes."
China, of course, is often blamed for the increase in global oil demand, given its huge population and emerging economy.

Its consumption will rise almost 5 percent this year, according to the agency. So will India, which by year end will be using more oil than is produced by Venezuela annually. The agency predicts a larger rise — almost 6 percent — in the Middle East, a region that for years produced much of the world's oil, yet consumed little. Newer fields such as Angola are adding to supply, but the increases won't be enough to offset declines already under way from countries such as Mexico, the third-largest U.S. oil supplier, Brown said

bwv 1080 · April 25, 2008, 04:57:05 PM

MONEY & BANKING
The death of equities

The masses long ago switched from stocks to investments having higher
yields and more protection from inflation. Now the pension funds--the
market's last hope--have won permission to quit stocks and bonds for
real estate, futures, gold, and even diamonds. The death of equities
looks like an almost permanent condition--reversable someday, but not
soon.

...Pension fund money can now go not only into listed stocks and
high-grade bonds but also into shares of small companies, real estate,
commodity futures, and even into gold and diamonds...

To millions of people, that ruling could mean a higher return on their
pension fund assets after years in which inflation has nibbled away at
the return from mere traditional investments. On another level, the
Labor Dept. ruling [for pension funds] is just one more in a nearly
endless string of unhealthy things that have happened to the stock
market over the past decade.

At least 7 million shareholders have defected from the stock market
since 1970, leaving equities more than ever the province of giant
institutional investors. And now the institutions have been given the
go-ahead to shift more of their money from stocks--and bonds--into
other investments. If the institutions, who control the bulk of the
nation's wealth, now withdraw billions from both the stock and bond
markets, the implications for the U.S. economy could not be worse
worse. Says Robert S. Salomon Jr., a general partner in Salomon Bros.:
"We are running the risk of immobilizing a substantial portion of the
world's wealth in someone's stamp collection."

Until now, the flight of institutional money from the financial markets
has been merely a trickle. But it could turn into a torrent if this
year's 60% increase in oil prices touches off a deep recession while
pushing inflation sky-high. As it is, the nation's financial markets
and its capital flows have been grossly distorted by 13 years of
inflation. Before inflation took hold in the late 1960s, the total
return on stocks had averaged 9% a year for more than 40 years, while
AAA bonds--infinitely safer--rarely paid more than 4%. Today the
situation has reversed, with bonds yielding up to 11% and stocks
averaging a return of less than 3% throughout the decade.

Further, this "death of equity" can no longer be seen as something a
stock market rally--however strong--will check. It has persisted for
more than 10 years through market rallies, business cycles, recession,
recoveries, and booms.

The problem is not merely that there are 7 million fewer shareholders
than there were in 1970. Younger investors [Baby Boomers?], in
particular, are avoiding stocks. Between 1970 and 1975, the number of
investors declined in every age group but one: individuals 65 and
older. While the number of investors under 65 dropped by about 25%,
the number of investors over 65 jumped by more than 30%. Only the
elderly who have not understood the changes in the nation's financial
markets, or who are unable to adjust to them, are sticking with
stocks.

Even if the economic climate could be made right again for equity
investment, it would take another massive promotional campaign to
bring people back into the market. Yet the range of investment
opportunities is so much wider now than in the 1950s that it is
unlikely that the experience of two decades ago [the 1950s], when the
number of equity investors increased by 250% in 15 years, could be
repeated. Nor is it likely that Wall Street would ever again launch
such a promotional campaign. The end of fixed stock market
commissions has thinned the ranks of firms that sell stocks and
reduced the profit from selling stocks for virtually all firms. Wall
Street has learned that there are more profitable things besides
stocks to sell, among them options, futures, and real estate, that it
did not have in the 1950s. For better or for worse, then, the U.S.
economy probably has to regard the death of equities as a
near-permanent condition--reversible some day, but not soon.

Says Alan B. Coleman, dean of Southern Methodist University's business
school: "We have entered a new financial age. The old rules no longer
apply."

The one rule whose demise did the stock market in could be summed up
thus: By buying stocks, investors could beat inflation. Stocks were a
reasonable hedge when inflation was low. But they proved helpless
against this awesome inflation of the past decade. "People no longer
think of stocks as an inflation hedge, and based on experience, that's
a reasonable conclusion for them to have reached," says Richard Cohn,
an associate professor of finance at the University of Illinois.
Indeed, since 1968, according to a study by Salomon of Salomon Bros.,
stocks have appreciated by a disappointing compound annual rate of
3.1%, while the consumer price index has surged by 6.5%. By contrast,
gold grew by an incredible 19.4%, diamonds by 11.8%, and single-family
housing by 9.6%.

"Given the type of consistent high-level inflation we've been
experiencing, the stock market represents speculation, and some
tangible assets represent the opposite," says Edward R. McMillan,
chief economist for Seattle's Rainier National Bank.

Today, one of the strongest proponents of gold investing is Alaska
Governor Jay Hammond. He plans to resubmit a bill to the legislature
early next year to lift a law, passed in the early 1960s, that
prevents the state's public employee and teachers retirement funds
from investing in gold, foreign securities, or real estate. At least
three other states are also interested in tangibles for their
retirement funds. "The statute was fine for the 1960s, but
unfortunately we're not living under those same economic conditions,"
says Alaska's deputy treasury commissioner, Peter Bushre. "We're
living under double-digit inflation, huge balance-of-trade deficits,
and a serious energy problem. The current action in both the bond
market and equity market bear [pun?] me out."

...For investors, however, low stock prices remain a disincentive to
buy [so much for buying on the dips]. The only stocks that have done
well recently have been hyper-growth stocks such as energy-related,
gambling, high-technology, or fast-growing small companies. A decade
ago, by contrast, the entire equity market was perceived as an
inflation hedge. Then, in the early 1970s, large growth stocks,
especially the so-called "nifty fifty" were in vogue as inflation
fighters--until the 1974 recession dealt them a blow from which they
have yet to recover.

Unfortunately, hyper-growth stocks are not big enough to attract big
institutional money. Private pension funds, for example which control
some $300 billion in assets and are the single most important factor
in the financial markets, put more than 120% of their new cash into
equities in the late 1960s [a sell signal?]. To do so, they even sold
bonds to raise money to buy stocks. Today the amount of new pension
money flowing into equities is a minuscule 13% as the funds have built
up their cash portions or stuffed their portfolios with short-term
securities paying high rates.

In short, the financial markets are so eccentric that for more than 10
years the largest returns have come from taking the fewest risks.
Indeed by constantly rolling over short-term paper, investors have
beaten returns on stocks and bonds...

...In fact, the only reason the mutual fund industry has been able to
survive the death of equities is the dramatic success of such funds,
which invest in T-bills, bank CDs, and other short-term paper. Mutual
fund assets now total some $65 billion, and of this amount, some $22
billion represents assets of money-market funds. And whereas stocks
once made up 80% of mutual fund assets, today that figure has slumped
to less than 50%.

Clearly, money market funds--most of which allow investors to write
checks on their accounts--will prosper until interest rates begin to
ease. But even when rates do fall, the money will not flow back into
the stock market from which it came. Indeed, putting life back into
the U.S. equity market will be a long and difficult process.

Other foreign stock markets such as those in Toronto, Hong Kong, and
London have been doing as well or better [than the U.S. market]. One
reason is the influx of U.S. money that a decade ago would have flowed
into Wall Street. Atlantic Richfield Co., for one, will invest in
foreign stocks for the first time this year. The company will take 3%
of its U.S. equity allocation and put it into shares of companies
based in Japan, Germany, Britain, and France. "The attraction is that
these economies are growing at a rate equal to or better than our own
and have business cycles different from ours," says Howard H.
Ockelmann, the big oil company's investment officer.

Undoubtedly, another reason for the surge of investment in foreign
stocks is the negative attitude toward business in the U.S. "The
Japanese do everything they can to make their strongest and most
competitive companies do well. Americans attack their largest and
most successful companies," says Andrew J. Hutchings, an equity
manager for Royal Trust Co. in Toronto.

Wall Street looks beyond stocks

As investors have fled equities, so Wall Street, to survive, has fled
them, too. Indeed, the flight from equities, combined with the
freeing of fixed brokerage commission rates on May 1, 1975, has
changed the very nature of the securities industry. And while the
industry has markedly fewer firms than it had, and thus should be
sounder financially, the truth is that Wall Street's future still is
very much in doubt. "Anybody who thinks that it will be easy sailing
for Wall Street during the 1980s is dead wrong," says James Balog,
senior executive vice-president of Drexel Burnham Lambert Inc. in New
York. "There still are many problems that we must deal with."

...securities firms will continue to diversify away from equities, all
the while hoping that the stock market will somehow regain some of its
luster and make their task somewhat easier. At the same time,
executives of those firms will be devising and implementing new
long-term strategies, not really knowing whether they or their
organizations will remain in the business long enough to reap the
benefits from some of these plans.

Whatever caused it, the institutionalization of inflation--along with
structural changes in the communications and psychology--have killed
the U.S. equity market for millions of investors. "We are all
thinking shorter term than our fathers and grandfathers did," says
Manuel Alvarez de Toledo of Shearson Loeb Rhoades Inc.'s Hong Kong
office.

Today, the old attitude of buying solid stocks as a cornerstone for
one's life savings and retirement has simply disappeared. Says a
young U.S. executive: "Have you been to an American stockholders'
meeting lately? They're all old fogies. The stock market is just not
where the action's at."

BorisG · April 25, 2008, 07:37:38 PM

Bush says rebates going out Monday will boost economy

Apr 25, 9:41 PM (ET)

By TOM RAUM

WASHINGTON (AP) - President Bush said tax rebates will start going out Monday, earlier than previously announced, and should help Americans cope with rising gasoline and food prices, as well as aid a slumping economy.

Democrats said they were glad the rebate checks were about to go out, but suggested that multinational oil companies were not among the businesses the stimulus package was originally designed to help.

"Starting Monday, the effects of the stimulus will begin to reach millions of households across our country," Bush said Friday in remarks on the South Lawn of the White House.

Those first rebates will be directly deposited into people's bank accounts. The Internal Revenue Service had been saying direct deposits wouldn't start until next Friday. Bush said paper checks would begin going out on May 9, a week earlier than previously announced.

"The money is going to help Americans offset the high prices we're seeing at the gas pump, the grocery store, and also give our economy a boost to help us pull out of this economic slowdown," Bush said.

Bush's emphasis on fuel and food prices differed from other comments he's made since signing the economic stimulus legislation, intended to aid the economy by boosting overall consumer spending - which accounts for roughly two-thirds of the nation's economic activity.

Bush has suggested the rebates could trigger a spending spree. "When the money reaches the American people, we expect they will use it to boost consumer spending," he said last month.

By saying expressly that people could use these one-time checks to pay for such necessities as food and gas, Bush underscored the deepening challenges facing the economy.

Democrats were quick to pick up on the change of focus.

"It's galling to think that taxpayers' stimulus checks will be lining the pockets of OPEC. The sad truth is that the average American family will spend almost their entire stimulus check on higher gas prices this year," said Sen. Charles Schumer, D-N.Y., chairman of the Joint Economic Committee of Congress.

OPEC is the Organization of Petroleum Exporting Countries.

"Unless the administration gets OPEC to increase oil supply, American consumers are going to be in for a scorching summer of $4 gasoline with no relief in sight," Schumer said.

House Speaker Nancy Pelosi, D-Calif., agreed that people "need this rebate to cope with the rising cost of gas and groceries." She said that, while the rebates would help to get the economy moving, there was a need for a second stimulus package "and we have begun some conversation with the administration and Republicans."

As he had earlier in the week, Bush used the word "slowdown" to describe the state of the economy. He has denied that the nation is in a recession, although many economists say it is.

"It's obvious our economy is in a slowdown. But, fortunately, we recognized the signs early and took action," Bush said.

The rebates - up to $600 for an individual, $1,200 for a couple and an additional $300 for each dependent child - are the centerpiece of the government's $168 billion stimulus package, enacted in February. Roughly 130 million households are expected to get them.

Bush made the comments before boarding his helicopter at the start of a day trip to Connecticut.

People must file a tax return for their 2007 income to be eligible for a rebate check.

The IRS now says all checks for those who filed tax returns on time are scheduled to be deposited or mailed by July 11.

The economy - burdened by the collapse of home prices, a financial and credit crisis, and now rising energy and food prices - grew at an anemic 0.6 percent in the final three months of last year and is believed to have gotten even weaker in the first three months of this year.

The government will report on the first quarter's performance next week.

With the economy faltering, the nation's unemployment rate has climbed to 5.1 percent, the highest since September 2005, when it suffered from the devastating blows of the Gulf Coast hurricanes. Job losses in the first three months of this year neared the quarter-million mark.

Foreclosures have surged to record highs and financial companies have taken multibillion losses on mortgage investments that soured. The situation has sent a tremor through Wall Street and has sent the administration, Congress and presidential contenders looking for ways to provide relief.

---

AP Economics Writer Jeannine Aversa contributed to this report.

XB-70 Valkyrie · April 25, 2008, 07:50:08 PM

Food shortages
Oil prices skyrocketing
Habitat destruction
Urban sprawl
Fish stocks on the decline
Housing prices skyrocketing
Deforestation
Desertification
Heavy metal toxicity in all the world's oceans
Longer and longer commutes
Climage change

Maybe if we all think really, really, really hard, we can figure out what may be silently driving all these diverse phenomena!

Oh, what could it be!? What could it be!? I wonder!?

Sean · April 25, 2008, 07:53:45 PM

Dm, good grief, you have some good reading in those last few posts! Who are you!? I like this point below, but the Peak Civilization stuff and the peak oil problems forthcoming in terms of months not years have that plausible ring to them that makes you question and put your life into perspective.

I'm in S.Korea. Their grain stocks are poor, but they have strong communitarian values and self support that might see them through some serious supply problems? (Or maybe it won't- such values didn't do 60m Chinese much good in the Great Leap Forward). The savest places in the world could be what are presently seen as the bottom of the pile- the villages in central Africa who don't know what oil is and aren't even connected by road: they won't even know if the rest of the world folds. I have travel plans to get out there actually, I've been before, and I'm thinking about bringing them forward.

QuoteHere's what happens: as prices rise, oil-exporting countries benefit from an influx of petrodollars. That, in turn, spurs economic expansion, which in turn increases domestic oil consumption. As demand rises, more oil is devoted to meeting that domestic demand, leaving less oil to export.
As exports fall, worldwide prices rise even more.

BorisG · April 25, 2008, 08:01:40 PM

Quote from: Sean on April 25, 2008, 07:53:45 PM
The savest places in the world could be what are presently seen as the bottom of the pile- the villages in central Africa who don't know what oil is and aren't even connected by road: they won't even know if the rest of the world folds. I have travel plans to get out there actually, I've been before, and I'm thinking about bringing them forward.

Congo Cracks Down on 'Penis Theft'

By Bridget Johnson, Reuters, Apr. 22, 2008

If you're of the faint of heart or sensitive to the discussion of certain sensitive body parts, don't read on. If you love the kind of odd news that Reuters dishes out on a daily basis, read on.
So nobody's ever surprised at a story of violence in Congo. This is a place where limbs are lost, people are disemboweled, and few blink an eye. But some Congo residents are furious about a different kind of loss:

"Police in Congo have arrested 13 suspected sorcerers accused of using black magic to steal or shrink men's penises after a wave of panic and attempted lynchings triggered by the alleged witchcraft.
Reports of so-called penis snatching are not uncommon in West Africa, where belief in traditional religions and witchcraft remains widespread, and where ritual killings to obtain blood or body parts still occur.

Rumours of penis theft began circulating last week in Kinshasa, Democratic Republic of Congo's sprawling capital of some 8 million inhabitants. They quickly dominated radio call-in shows, with listeners advised to beware of fellow passengers in communal taxis wearing gold rings.

Purported victims, 14 of whom were also detained by police, claimed that sorcerers simply touched them to make their genitals shrink or disappear, in what some residents said was an attempt to extort cash with the promise of a cure.

'You just have to be accused of that, and people come after you. We've had a number of attempted lynchings. ... You see them covered in marks after being beaten,' Kinshasa's police chief, Jean-Dieudonne Oleko, told Reuters on Tuesday."