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    Daily Digest 3/4 – Stagnation Or Inequality, Bernanke’s Negative Feedback Loop, The 2011 Oil Shock

    by DailyDigest

    Friday, March 4, 2011, 3:54 PM

  • Economics Focus: Stagnation Or Inequality
  • Utah Pushes To Accept Gold, Silver As Alternative Currency
  • Bernanke’s Unstoppable, Self Reinforcing, Negative-Feedback-Loop
  • Fed and ECB – A World Apart
  • The 2011 Oil Shock
  • Oil Markets And Arab Unrest: The Price Of Fear
  • UN: Food Prices Hit Record High In February
  • In Price of Farmland, Echoes of Another Boom

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Economy

Economics Focus: Stagnation Or Inequality (jdargis)

The book explores the puzzling stagnation in the typical American wage since the 1970s. The prevailing view has been that soggy median wages can be explained by widening income inequality. But Mr Cowen blames lagging pay on a shortfall in growth itself. Output data have been overstated, he reckons, thanks to rising contributions from hard-to-value industries. Worse, economic engines in the rich world are running ever slower as countries exhaust easy sources of rapid growth.

Utah Pushes To Accept Gold, Silver As Alternative Currency (pinecarr)

A month ago we reported that the state of Virginia has established a subcommittee to study alternatives in the case of a terminal “Fed” breakdown, and would propose gold as a sound alternative to the existing fiat currency. Now, the state of Utah has gone a step further and is actually voting, as early as today, on whether to recognize gold and silver coins, issued by the federal government, as legal currency, a move that would send a huge signal to the Marriner Eccles building that Americans have had enough of the Fed’s dollar debasement. “The coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative.

Bernanke’s Unstoppable, Self Reinforcing, Negative-Feedback-Loop (pinecarr)

Wracked up by both parties over many decades our debt has evolved into a yearly deficit that can no longer be serviced with tax revenue and borrowing.

To avoid default Ben Bernanke chose to monetize the un-payable portion of our deficit. Each month about 100 billion dollars are created out of thin air to cover our government’s bills. This has set forth an unstoppable, self reinforcing, negative-feedback-loop.

Fed and ECB – A World Apart (Joe P.)

The U.S. Federal Reserve (Fed) and the European Central Bank (ECB) are divided by a common goal: price stability. Fed Chairman Bernanke has made it clear in his recent testimony and speeches that the Fed would react should food and commodity inflation lead to an increase in core inflation. Let’s spell this out: the Fed is ready to R E A C T. We are not aware of any central bank that is proud of reacting, but rather acting preemptively to mitigate inflationary concerns; naturally, a central bank may often be forced to react, but to do so by design puts the cynical view that central bankers are too far behind the curve into a new light.

Energy

The 2011 Oil Shock (jdargis)

The markets’ reaction has been surprisingly modest. The price of Brent crude jumped 15% as Libya’s violence flared up, reaching $120 a barrel on February 24th. But the promise of more production from Saudi Arabia pushed the price down again. It was $116 on March 2nd—20% higher than the beginning of the year, but well below the peaks of 2008. Most economists are sanguine: global growth might slow by a few tenths of a percentage point, they reckon, but not enough to jeopardise the rich world’s recovery.

Oil Markets And Arab Unrest: The Price Of Fear (jdargis)

The situation in Libya is grim, as the rebels and the forces of Muammar Qaddafi battle for control of the country’s only resource. Brega, the seat of the Sirte Oil Company in the east of the country, has changed hands three times in recent days. Most of the oil workers have fled, and production has fallen by two-thirds. The ports of As Sidra, Brega, Ras Lanuf, Tobruk and Zuetina, which together handle almost 80% of Libya’s oil exports, were all seized by the rebels; two have now been retaken by Colonel Qaddafi’s forces. The rebels remain in control of Africa’s largest oilfield, Sarir, pumping some 400,000 barrels on a normal day. But for how long?

Environment

UN: Food Prices Hit Record High In February (Alfredo E.)

Some experts point to key differences compared to those years: for one, the price of rice, a dominant component of regular diets in many parts of the world, is much lower today. Still, aid group Oxfam called the hike “deeply worrying.”

The Food and Agriculture Organization said in a statement that its food price index was up 2.2 percent last month, the highest level since January 1990 when the agency started monitoring prices.

In Price of Farmland, Echoes of Another Boom (jdargis)

The surge in prices has been dizzying throughout the Midwest, with double-digit percentage increases last year in Illinois, Indiana, Iowa, Kansas, Minnesota and Nebraska. In parts of Iowa, prices for good farmland rose as much as 23 percent last year, according to the Federal Reserve Bank of Chicago.

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