Dollar Dying Slow Death As Switch To Yen and Euro Begins

The long slow decline of the American economy as the driver of international business has begun. Bernanke has been printing money like a drunken college student with Daddy’s credit card, and now the price is being paid for the binge.

Massive inflation to follow.

Dollar loses reserve status to yen & euro.

Ben Bernanke’s dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency.

Over the last three months, banks put 63 percent of their new cash into euros and yen — not the greenbacks — a nearly complete reversal of the dollar’s onetime dominance for reserves, according to Barclays Capital. The dollar’s share of new cash in the central banks was down to 37 percent — compared with two-thirds a decade ago.

Currently, dollars account for about 62 percent of the currency reserve at central banks — the lowest on record, said the International Monetary Fund.

Bernanke could go down in economic history as the man who killed the greenback on the operating table.

Dear Mr. President . . . Read Your Kipling!!

Dear Mr. President . . . Read Your Kipling

P. J. O’Rourke 

 

I  have bad news for you. You’re an imperialist.
I realize that for a man like you, educated in the highest circles of modern academia, what I’ve said is a grave insult. While I’m at it, let me offend you completely.
Your foreign policy is an attempt “To veil the threat of terror / And check the show of pride.” You’ve vowed to “Send forth the best ye breed—Go bind your sons to exile / To serve your captives’ need.” The result of all this will be to—I’ll bet you a second term—“Watch Sloth and heathen Folly / Bring all your hope to naught.”

The poem I’ve been quoting is by Rudyard Kipling (British, 1865­­–1936).
I doubt they teach much Kipling in the highest circles of academia these days. And I doubt they teach much about imperialism except that it’s an epithet.
To learn about the slur you can’t escape you’ll have to go back to premodern academia, before it got high and started going in circles. In the 1940s, Hans Kohn, the Sydenham Clark Parsons Professor of History at Smith College, wrote that “the concept of imperialism carried various connotations in the different periods of history.”
According to Kohn, among these connotations is a “liberal” one. We owe it to Alexander the Great. And it has been recurring intermittently for 24 centuries: “a world state, a cosmopolis, in which all the inhabitants would live in complete equality, in intermarriage and commercial exchange, on the basis of one common civilization.” Professor Kohn argued that what nineteenth-century British imperialism connoted was an attempt “to bring the occidental concepts of political liberty and human dignity to oriental nations.” Professor Kohn further argued that “as a result of its ethical basis, liberal imperialism carried its self-annulment with it.” He was wrong on this last point. Because here are the British—and us along with them—“somewheres east of Suez” again, bringing more occidental concepts to eastern nations whose previous supply seems to be used up.

There is an irony to this, which brings us back to Kipling.
He was fond of irony.
And he was considered to be the poet laureate of imperialism when imperialism was still considered to be worthy of laurels.
Mr. President, undo some of the damage from the hours you wasted as an undergraduate reading Frantz Fanon and Edward Said and brush up on your Kipling.

P. J. O’Rourke is a political satirist, author, and correspondent for the Atlantic Monthly. 

 

 

Is the Sky Falling for OCW?

In this just released article in The Chronicle of Higher Education writer Marc Parry laments that open courses at universities such as MIT and Yale may soon be a thing of the past due to economics.

Colleges, too, are grappling with the limits of this global online movement. Enthusiasts think open courses have the potential to uplift a nation of Zieglers by helping them piece together cheaper degrees from multiple institutions. But some worry that universities’ projects may stall, because the recession and disappearing grant money are forcing colleges to confront a difficult question: What business model can support the high cost of giving away your “free” content?

Parry later goes on to quote David Wiley and his blogged prediction of the future:

The education oracle [Wiley] offers another prophecy for open courseware. ‘Every OCW initiative at a university that does not offer distance courses for credit,’ he has blogged, ‘will be dead by the end of calendar 2012.’

As a fledgling in the open education movement, even I have wondered how this movement could be sustained:

…while it may be a wonderfully Utopian idea to provide free access to all knowledge, the producers of said knowledge (i.e. book writers, course creators, instructors, researchers, etc.,) all also need to eat and pay bills – how does the “business” survive, if they give the “product” away for free?

Is open education dead even as it becomes  mainstream?  Will it become a different entity altogether, perhaps a far cry from the one its early forefather’s imagined, but something that still provides learning to the masses – freely?  How will the international open education movement shape the US policy and vice versa?

I’d love to know your opinions.

First woman wins Nobel Prize for economics

CNN) — Americans Elinor Ostrom and Oliver Williamson won the Nobel Prize for economics for work on how community institutions can prevent conflict, the Nobel Committee announced Monday.

Ostrom becomes the first woman to win the prize in its 40-year history.

The award was a “great surprise… I’m still a little bit in shock,” she said by phone at the news conference announcing the prize.

Ostrom, a professor of political science at Indiana University, was praised “for her analysis of economic governance, especially the commons.”

Click on the link to continue reading.

The Week Ahead: 10/12 - 10/16

Monday, October 12

Tuesday, October 13

• Tentative: Federal Budget Balance for Sept.

Wednesday, October 14

• 8:30 AM – Import and Export Prices for Sept.
• 8:30 AM – Retail Sales for Sept.
• 10:00 AM – Business Inventories for Aug.
• ~2:00 PM – FOMC Minutes from Sept. 23 Meeting

Thursday, October 15

• 8:30 AM – Initial Jobless Claims for week ending 10/10
• 8:30 AM – Continuing Jobless Claims for week ending 10/3
• 8:30 AM – CPI and Core CPI for Sept.
• 8:30 AM – Empire State Manufacturing Index for Oct.
• 10:00 AM – Philadelphia Fed Business Outlook Survey for Oct.
• 10:30 AM – Natural Gas Storage for week ending 10/9
• 1:00 PM – Crude Inventories for week ending 10/9

Friday, October 16

• 9:00 AM – Net Long-Term TIC Flows for Aug.
• 9:15 AM – Capacity Utilization and Industrial Production for Sept.
• 9:55 AM – Prelimimary Michigan Consumer Sentiment Index for Oct.
• 9:55 AM – Preliminary Michigan Inflation Expectations for Oct.

My Take

We get off to a slow start this week with a holiday, but have some very important data released in the latter half of the week. Thursday morning is the highlight of the week as either the jobless data or CPI could have a huge impact on all markets.

Things will get very interesting if we get a huge jump in CPI and the inflation concerns start growing at the Fed. The number one question right now in the U.S. economy is deflation or inflation. We’ll be one data point closer to answering that question after this week. Bond market action at the end of last week shows that inflation is a growing concern.

In the equity markets, we get earnings reports this week from Intel, Johnson & Johnson, JPMorgan Chase, Goldman Sachs, IBM, Bank of America, and GE. Obviously a lot of attention will be paid to the bank earnings and I don’t expect any bad news from them since they have been given every opportunity to turn risk-free profits for the past 12 months.

Obama Pushes His Plan for Financial Agency

WASHINGTON (AP) — President Obama urged Congress on Friday to create a new consumer agency to protect Americans against financial abuses.

In making his comments, Mr. Obama was trying to counter a strong lobbying campaign against the idea. He said the proposed Consumer Financial Protection Agency would have one mission, “to look out for the financial interests of ordinary Americans.”

With an increasingly complicated financial system, Obama said consumers needed a watchdog agency to set clear rules for consumers and banks, and enforce those rules.

“We have already seen and lived the consequences of what happens when there is too little accountability on Wall Street and too little protection for Main Street,” Mr. Obama said, “and I will not allow this country to go back there. It is time to move forward.”

The president first asked Congress to create the agency in June, but the proposal has been met with resistance from the banking industry and some lawmakers.

Mr. Obama said opponents of the agency were spending millions of dollars to spread misinformation about its intentions.

Obama Pushes His Plan for Financial Agency

Oligopoly in Alaska's wholesale gasoline market

Michael Giberson

Last year, as crude oil and gasoline prices went on their wild ride, gasoline prices in Alaska took a somewhat different path than prices in the lower 48 states.  For years, average prices in Alaska were about the same as the U.S. average price.  Higher costs of delivery in Alaska were mostly offset by the nation’s lowest gasoline tax, just 8 cents a gallon, and the result was a price that more or less tracked the U.S. average price.

That pattern changed beginning in June 2008.  Prices had been marching up everywhere, but the price march stalled in the lower 48, while in Alaska (and Hawaii) prices continued to rise for another month.  Prices fell sharply throughout the country from July through December – excepting a short pause during the late hurricane season in the lower 48 – but Alaska’s prices now seemed to track the higher prices of Hawaii rather than returning to the U.S. average. (See this chart at www.alaskagasprices.com.)

Last fall the State of Alaska initiated an investigation, and in January 2009 they concluded that oligopoly was to blame.  No illegal acts were discovered, but the report suggested that with relatively few players involved competitive pressures can be weak and prices above the competitive level can be sustained for some time.

Explanation from the report, 2008 ALASKA GASOLINE PRICING INVESTIGATION:

The fewer the number of sellers in a market, the easier it is for each to observe the other and develop expectations as to the way in which each will likely react to the other’s decisions regarding output and prices. In these markets, each seller will naturally take into account the potential impact of its own actions on market prices, including the potential responses that its actions might elicit from other sellers. This type of “competitive” behavior is often referred to as oligopolistic pricing or “oligopolistic interdependence” because the decisions that each make are “dependent” in part on the expected actions (or reactions) of other sellers. In this environment, it is easier for sellers to develop a “live and let live” attitude toward their rivals that would not be possible to maintain in competitively structured markets with more sellers. As a result, oligopolistic or interdependent behavior can result in prices that are above competitive levels over extended periods of time.

Interdependent behavior on the part of sellers is not generally regarded as a violation of antitrust law as long as firms develop and implement their pricing and output decisions independently.

… Alaska’s gasoline markets can fairly be characterized as oligopolies at the wholesale level. Oligopoly markets can produce a wide range of prices, high or low, without there ever being any illegal behavior or collusion by sellers. …. [The ability to keep prices high] is dependent on the existence of some sort of entry barrier that prevents non-incumbent suppliers from entering the market and taking advantage of the higher profit opportunities. As discussed above, these entry barriers exist in parts of Alaska, limiting competition from outside suppliers, particularly during short-term periods or periods such as the second half of 2008 characterized by extreme market volatility and uncertainty.