Three Years Behind The Curve Too Late Federal Open Market Committee (FOMC) Increases Target Federal Funds Rate to .75-1.0% — Financial Repression of Savers Slowly Continues — Videos

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Yellen Calms Fears Fed’s Policy Trigger Finger Is Getting Itchy

March 15, 2017, 1:00 PM CDT March 15, 2017, 5:02 PM CDT
  • Policy makers still project three total rate hikes for 2017
  • FOMC sticks with ‘gradual’ plan for removing accommodation

Fed Raises Benchmark Lending Rate a Quarter Point

Federal Reserve Chair Janet Yellen sought to reassure investors that the central bank’s latest interest-rate increase wasn’t a paradigm shift to a trigger-happy policy driven by fears of faster inflation.

Speaking to reporters after the Fed’s quarter percentage-point move on Wednesday, Yellen said the central bank was willing to tolerate inflation temporarily overshootingits 2 percent goal and that it intended to keep its policy accommodative for “some time.”

“The simple message is the economy’s doing well. We have confidence in the robustness of the economy and its resilience to shocks,” she said.

As a result, the Fed is sticking with its policy of gradually raising interest rates, Yellen said. In their first forecasts in three months, Fed policy makers penciled in two more quarter-point rate increases this year and three in 2018, unchanged from their projections in December.

Today’s decision “does not represent a reassessment of the economic outlook or of the appropriate course for monetary policy,” the Fed chief said.

Speculation of a more aggressive Fed had mounted in recent days after a host of central bank officials, including Yellen herself, went out of their way to telegraph to financial markets that a rate hike was imminent. The expectations were further fueled by news of rising inflation.

Stocks Advance

Stocks rose and bond yields fell as investors viewed the statement from the Federal Open Market Committee and Yellen’s remarks afterward as a sign that the Fed isn’t in a hurry to remove monetary stimulus. The FOMC raised the target range for the federal funds rate to 0.75 percent to 1 percent, as expected, but Yellen’s lack of urgency to snuff out inflation was a surprise.

R.J. Gallo, a fixed-income investment manager at Federated Investors in Pittsburgh, said the chorus of Fed speakers before this meeting led investors to expect a move up in the number of projected rate hikes this year, and even upgrades by Fed officials in the levels of inflation and growth they anticipated.

None of that materialized.

“You didn’t get any of those things,” Gallo said, which explains why Treasury yields quickly dropped after the Fed released the FOMC statement and a new set of economic projections. “The expectation that Fed was getting more hawkish had to come out of the market.”

The U.S. economy has mostly met the central bank’s goals of full employment and stable prices, and may get further support if President Donald Trump delivers promised fiscal stimulus. Investor and business confidence has soared since Trump won the presidency in November, buoyed by his vows to cut taxes, lift infrastructure spending and ease regulations.

Still, the data don’t show an economy that’s heating up rapidly — a point Yellen herself made after the third rate hike since the 2007-2009 recession ended. In fact, the economy may have “more room to run,” she said.

Stronger business and consumer confidence hasn’t yet translated into increased investment and spending, said Yellen.

“It’s uncertain just how much sentiment actually impacts spending decisions, and I wouldn’t say at this point that I have seen hard evidence of any change in spending decisions,” said the Fed Chair. “Most of the business people that we’ve talked to also have a wait-and-see attitude.”

Retail sales in February grew at the slowest pace since August, a government report showed earlier Wednesday. The Atlanta Fed’s model for GDP predicts an expansion of 0.9 percent in the first quarter, less than a third the pace Trump is aiming for.

Fiscal Stimulus

Asked about the potential for a fiscal boost, Yellen made clear the Fed is still waiting for more concrete policy plans to emerge from the Trump administration before adapting monetary policy in reaction.

“There is great uncertainty about the timing, the size and the character of policy changes that may be put in place,” Yellen said. “I don’t think that’s a decision or set of decisions that we need to make until we know more about what policy changes will go into effect.”

Yellen disputed suggestions that the Fed was on a collision course with the Trump administration over its plans to foster faster economic growth through tax cuts and deregulation. “We would welcome stronger economic growth in the context of price stability,” she said.

She said she had met Trump briefly and had gotten together a couple of times with Treasury Secretary Steven Mnuchin to discuss the economy and financial regulation.

Further underscoring their lack of urgency, Fed officials repeated a commitment to maintain their balance-sheet reinvestment policy until rate increases were well under way. Yellen said officials had discussed the process of reducing the balance sheet gradually, but had made no decisions and would continue to debate the topic.

Policy makers forecast inflation will reach 1.9 percent in the fourth quarter this year, and 2 percent in both 2018 and 2019, according to quarterly median estimates released with the FOMC statement. The Fed’s preferred measure of inflation rose 1.9 percent in the 12 months through January, just shy of its target.

Yellen pointed out, though, that core inflation continues to run somewhat further below 2 percent. That rate, which strips out food and energy costs, stood at 1.7 percent in January. The Fed’s new forecast for the core rate at the end of this year edged up to 1.9 percent, from 1.8 percent in December.

“The committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal,” the Fed said. Discussing the word symmetric in the statement, Yellen said during her press conference that the Fed was not shooting to push inflation over 2 percent but recognized that it could temporarily go above it. Two percent is a target, she reiterated, not a ceiling.

https://www.bloomberg.com/news/articles/2017-03-15/fed-raises-benchmark-rate-as-inflation-approaches-2-target

Changes in the federal funds rate will always affect the U.S. dollar. When the Federal Reserve increases the federal funds rate, it normally reduces inflationary pressure and works to appreciate the dollar.

Since June 2006, however, the Fed has maintained a federal funds rate of close to 0%. In the wake of the 2008 financial crisis, the federal funds rate fluctuated between 0-0.25%, and is now 0.75%.

The Fed used this monetary policy to help achieve maximum employment and stable prices. Now that the 2008 financial crisis has largely subsided, the Fed will look to increase interest rates to continue to achieve employment and to stabilize prices.

Inflation of the U.S. Dollar

The best way to achieve full employment and stable prices is to set the inflation rate of the dollar at 2%. In 2011, the Fed officially adopted a 2% annual increase in the price index for personal consumption expenditures as its target. When the economy is weak, inflation naturally falls; when the economy is strong, rising wages increase inflation. Keeping inflation at a growth rate of 2% helps the economy grow at a healthy rate.

Adjustments to the federal funds rate can also affect inflation in the United States. The Fed controls the economy by increasing interest rates when the economy is growing too fast. This encourages people to save more and spend less, reducing inflationary pressure. Conversely, when the economy is in a recession or growing too slowly, the Fed reduces interest rates to stimulate spending, which increases inflation.

During the 2008 financial crisis, the low federal funds rate should have increased inflation. Over this period, the federal funds rate was set near 0%, which encouraged spending and would normally increase inflation.

However, inflation is still well below the 2% target, which is contrary to the normal effects of low interest rates. The Fed cites one-off factors, such as falling oil prices and the strengthening dollar, as the reasons why inflation has remained low in a low interest environment.

The Fed believes that these factors will eventually fade and that inflation will increase above the target 2%. To prevent this eventual increase in inflation, hiking the federal funds rate reduces inflationary pressure and cause inflation of the dollar to remain around 2%.

Appreciation of the U.S. Dollar

Increases in the federal funds rate also result in a strengthening of the U.S. dollar. Other ways that the dollar can appreciate include increases in average wages and increases in overall consumption. However, although jobs are being created, wage rates are stagnant.

Without an increase in wage rates to go along with a strengthening job market, consumption won’t increase enough to sustain economic growth. Additionally, consumption remains subdued due to the fact that the labor force participation rate was close to its 35-year low in 2015. The Fed has kept interest rates low because a lower federal funds rate supports business expansions, which leads to more jobs and higher consumption. This has all worked to keep appreciation of the U.S. dollar low.

However, the U.S. is ahead of the other developed markets in terms of its economic recovery. Although the Fed raises rates cautiously, the U.S. could see higher interest rates before the other developed economies.

Overall, under normal economic conditions, increases in the federal funds rate reduce inflation and increase the appreciation of the U.S. dollar.

http://www.investopedia.com/articles/investing/101215/how-fed-fund-rate-hikes-affect-us-dollar.asp

Financial repression

From Wikipedia, the free encyclopedia
Not to be confused with economic repression, a type of political repression.

Financial repression refers to “policies that result in savers earning returns below the rate of inflation” in order to allow banks to “provide cheap loans to companies and governments, reducing the burden of repayments”.[1] It can be particularly effective at liquidating government debt denominated in domestic currency.[2] It can also lead to a large expansions in debt “to levels evoking comparisons with the excesses that generated Japan’s lost decade and the Asian financial crisis” in 1997.[1]

The term was introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon[3][4] in order to “disparage growth-inhibiting policies in emerging markets“.

Mechanism

Financial repression consists of the following:[5]

  1. Explicit or indirect capping of interest rates, such as on government debt and deposit rates (e.g., Regulation Q).
  2. Government ownership or control of domestic banks and financial institutions with barriers that limit other institutions from entering the market.
  3. High reserve requirements.
  4. Creation or maintenance of a captive domestic market for government debt, achieved by requiring banks to hold government debt via capital requirements, or by prohibiting or disincentivising alternatives.
  5. Government restrictions on the transfer of assets abroad through the imposition of capital controls.

These measures allow governments to issue debt at lower interest rates. A low nominal interest rate can reduce debt servicing costs, while negative real interest rates erodes the real value of government debt.[5] Thus, financial repression is most successful in liquidating debts when accompanied by inflation and can be considered a form of taxation,[6] or alternatively a form of debasement.[7]

The size of the financial repression tax for 24 emerging markets from 1974 to 1987. Their results showed that financial repression exceeded 2% of GDP for seven countries, and greater than 3% for five countries. For five countries (India, Mexico, Pakistan, Sri Lanka, and Zimbabwe) it represented approximately 20% of tax revenue. In the case of Mexico financial repression was 6% of GDP, or 40% of tax revenue.[8]

Financial repression is categorized as “macroprudential regulation“—i.e., government efforts to “ensure the health of an entire financial system.[2]

Examples

After World War II

Financial repression “played an important role in reducing debt-to-GDP ratios after World War II” by keeping real interest rates for government debt below 1% for two-thirds of the time between 1945 and 1980, the United States was able to “inflate away” the large debt (122% of GDP) left over from the Great Depression and World War II.[2] In the UK, government debt declined from 216% of GDP in 1945 to 138% ten years later in 1955.[9]

China

China‘s economic growth has been attributed to financial repression thanks to “low returns on savings and the cheap loans that it makes possible”. This has allowed China to rely on savings-financed investments for economic growth. However, because low returns also dampens consumer spending, household expenditures account for “a smaller share of GDP in China than in any other major economy”.[1] However, as of December 2014, the People’s Bank of China “started to undo decades of financial repression” and the government now allows Chinese savers to collect up to a 3.3% return on one-year deposits. At China’s 1.6% inflation rate, this is a “high real-interest rate compared to other major economies”.[1]

After the 2008 economic recession

In a 2011 NBER working paper, Carmen Reinhart and Maria Belen Sbrancia speculate on a possible return by governments to this form of debt reduction in order to deal with high debt levels following the 2008 economic crisis.[5]

“To get access to capital, Austria has restricted capital flows to foreign subsidiaries in central and eastern Europe. Select pension funds have also been transferred to governments in France, Portugal, Ireland and Hungary, enabling them to re-allocate toward sovereign bonds.”[10]

Criticism

Critics[who?] argue that if this view was true, investors (i.e., capital-seeking parties) would be inclined to demand capital in large quantities and would be buying capital goods from this capital. This high demand for capital goods would certainly lead to inflation and thus the central banks would be forced to raise interest rates again. As a boom pepped by low interest rates fails to appear these days in industrialized countries, this is a sign that the low interest rates seem to be necessary to ensure an equilibrium on the capital market, thus to balance capital-supply—i.e., savers—on one side and capital-demand—i.e., investors and the government—on the other. This view argues that interest rates would be even lower if it were not for the high government debt ratio (i.e., capital demand from the government).

Free-market economists argue that financial repression crowds out private-sector investment, thus undermining growth. On the other hand, “postwar politicians clearly decided this was a price worth paying to cut debt and avoid outright default or draconian spending cuts. And the longer the gridlock over fiscal reform rumbles on, the greater the chance that ‘repression’ comes to be seen as the least of all evils”.[11]

Also, financial repression has been called a “stealth tax” that “rewards debtors and punishes savers—especially retirees” because their investments will no longer generate the expected return, which is income for retirees.[10][12] “One of the main goals of financial repression is to keep nominal interest rates lower than they would be in more competitive markets. Other things equal, this reduces the government’s interest expenses for a given stock of debt and contributes to deficit reduction. However, when financial repression produces negative real interest rates (nominal rates below the inflation rate), it reduces or liquidates existing debts and becomes the equivalent of a tax—a transfer from creditors (savers) to borrowers, including the government.”[2]

See also

Reform:

General:

References

  1. ^ Jump up to:a b c d “China Savers Prioritized Over Banks by PBOC”. Bloomberg. November 25, 2014.
  2. ^ Jump up to:a b c d Carmen M. Reinhart, Jacob F. Kirkegaard, and M. Belen Sbrancia, “Financial Repression Redux”, IMF Finance and Development, June 2011, p. 22-26
  3. Jump up^ Shaw, Edward S. Financial Deepening in Economic Development. New York: Oxford University Press, 1973
  4. Jump up^ McKinnon, Ronald I. Money and Capital in Economic Development. Washington, D.C.: Brookings Institution, 1973
  5. ^ Jump up to:a b c Carmen M. Reinhart and M. Belen Sbrancia, “The Liquidation of Government Debt”, IMF, 2011, p. 19
  6. Jump up^ Reinhart, Carmen M. and Rogoff, Kenneth S., This Time is Different: Eight Centuries of Financial Folly. Princeton and Oxford: Princeton University Press, 2008, p. 143
  7. Jump up^ Bill Gross, “The Caine Mutiny Part 2”, PIMCO
  8. Jump up^ Giovannini, Alberto and de Melo, Martha, “Government Revenue from Financial Repression”, The American Economic Review, Vol. 83, No. 4 Sep. 1993 (pp. 953-963)
  9. Jump up^ “The great repression”. The Economist. 16 June 2011.
  10. ^ Jump up to:a b “Financial Repression 101”. Allianz Global Investors. Retrieved 2 December 2014.
  11. Jump up^ Gillian Tett, “Policymakers learn a new and alarming catchphrase”, Financial Times, May 9, 2011
  12. Jump up^ Amerman, Daniel (September 12, 2011). “The 2nd Edge of Modern Financial Repression: Manipulating Inflation Indexes to Steal from Retirees & Public Wor

https://en.wikipedia.org/wiki/Financial_repression

Federal funds rate

From Wikipedia, the free encyclopedia

10 year treasury compared to the Federal Funds Rate

Federal funds rate and capacity utilization in manufacturing.

In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. Reserve balances are amounts held at the Federal Reserve to maintain depository institutions’ reserve requirements. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. The federal funds rate is an important benchmark in financial markets.[1][2]

The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

The federal funds target rate is determined by a meeting of the members of the Federal Open Market Committee which normally occurs eight times a year about seven weeks apart. The committee may also hold additional meetings and implement target rate changes outside of its normal schedule.

The Federal Reserve uses open market operations to influence the supply of money in the U.S. economy[3] to make the federal funds effective rate follow the federal funds target rate.

Mechanism

Financial Institutions are obligated by law to maintain certain levels of reserves, either as reserves with the Fed or as vault cash. The level of these reserves is determined by the outstanding assets and liabilities of each depository institution, as well as by the Fed itself, but is typically 10%[4] of the total value of the bank’s demand accounts (depending on bank size). In the range of $9.3 million to $43.9 million, for transaction deposits (checking accounts, NOWs, and other deposits that can be used to make payments) the reserve requirement in 2007-2008 was 3 percent of the end-of-the-day daily average amount held over a two-week period. Transaction deposits over $43.9 million held at the same depository institution carried a 10 percent reserve requirement.

For example, assume a particular U.S. depository institution, in the normal course of business, issues a loan. This dispenses money and decreases the ratio of bank reserves to money loaned. If its reserve ratio drops below the legally required minimum, it must add to its reserves to remain compliant with Federal Reserve regulations. The bank can borrow the requisite funds from another bank that has a surplus in its account with the Fed. The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

The nominal rate is a target set by the governors of the Federal Reserve, which they enforce by open market operations and adjusting the interest paid on required and excess reserve balances. That nominal rate is almost always what is meant by the media referring to the Federal Reserve “changing interest rates.” The actual federal funds rate generally lies within a range of that target rate, as the Federal Reserve cannot set an exact value through open market operations.

Another way banks can borrow funds to keep up their required reserves is by taking a loan from the Federal Reserve itself at the discount window. These loans are subject to audit by the Fed, and the discount rate is usually higher than the federal funds rate. Confusion between these two kinds of loans often leads to confusion between the federal funds rate and the discount rate. Another difference is that while the Fed cannot set an exact federal funds rate, it does set the specific discount rate.

The federal funds rate target is decided by the governors at Federal Open Market Committee (FOMC) meetings. The FOMC members will either increase, decrease, or leave the rate unchanged depending on the meeting’s agenda and the economic conditions of the U.S. It is possible to infer the market expectations of the FOMC decisions at future meetings from the Chicago Board of Trade (CBOT) Fed Funds futures contracts, and these probabilities are widely reported in the financial media.

Applications

Interbank borrowing is essentially a way for banks to quickly raise money. For example, a bank may want to finance a major industrial effort but may not have the time to wait for deposits or interest (on loan payments) to come in. In such cases the bank will quickly raise this amount from other banks at an interest rate equal to or higher than the Federal funds rate.

Raising the federal funds rate will dissuade banks from taking out such inter-bank loans, which in turn will make cash that much harder to procure. Conversely, dropping the interest rates will encourage banks to borrow money and therefore invest more freely.[5] This interest rate is used as a regulatory tool to control how freely the U.S. economy operates.

By setting a higher discount rate the Federal Bank discourages banks from requisitioning funds from the Federal Bank, yet positions itself as a lender of last resort.

Comparison with LIBOR

Though the London Interbank Offered Rate (LIBOR) and the federal funds rate are concerned with the same action, i.e. interbank loans, they are distinct from one another, as follows:

  • The target federal funds rate is a target interest rate that is set by the FOMC for implementing U.S. monetary policies.
  • The (effective) federal funds rate is achieved through open market operations at the Domestic Trading Desk at the Federal Reserve Bank of New York which deals primarily in domestic securities (U.S. Treasury and federal agencies’ securities).[6]
  • LIBOR is based on a questionnaire where a selection of banks guess the rates at which they could borrow money from other banks.
  • LIBOR may or may not be used to derive business terms. It is not fixed beforehand and is not meant to have macroeconomic ramifications.[7]

Predictions by the market

Considering the wide impact a change in the federal funds rate can have on the value of the dollar and the amount of lending going to new economic activity, the Federal Reserve is closely watched by the market. The prices of Option contracts on fed funds futures (traded on the Chicago Board of Trade) can be used to infer the market’s expectations of future Fed policy changes. Based on CME Group 30-Day Fed Fund futures prices, which have long been used to express the market’s views on the likelihood of changes in U.S. monetary policy, the CME Group FedWatch tool allows market participants to view the probability of an upcoming Fed Rate hike. One set of such implied probabilities is published by the Cleveland Fed.

Historical rates

As of December 16, 2008, the most recent change the FOMC has made to the funds target rate is a 75 to 100 basis point cut from 1.0% to a range of zero to 0.25%. According to Jack A. Ablin, chief investment officer at Harris Private Bank, one reason for this unprecedented move of having a range, rather than a specific rate, was because a rate of 0% could have had problematic implications for money market funds, whose fees could then outpace yields.[8] This followed the 50 basis point cut on October 29, 2008, and the unusually large 75 basis point cut made during a special January 22, 2008 meeting, as well as a 50 basis point cut on January 30, 2008, a 75 basis point cut on March 18, 2008, and a 50 basis point cut on October 8, 2008.[9]

Federal funds rate history and recessions.png

Explanation of federal funds rate decisions

When the Federal Open Market Committee wishes to reduce interest rates they will increase the supply of money by buying government securities. When additional supply is added and everything else remains constant, price normally falls. The price here is the interest rate (cost of money) and specifically refers to the Federal Funds Rate. Conversely, when the Committee wishes to increase the Fed Funds Rate, they will instruct the Desk Manager to sell government securities, thereby taking the money they earn on the proceeds of those sales out of circulation and reducing the money supply. When supply is taken away and everything else remains constant, price (or in this case interest rates) will normally rise.[10]

The Federal Reserve has responded to a potential slow-down by lowering the target federal funds rate during recessions and other periods of lower growth. In fact, the Committee’s lowering has recently predated recessions,[9] in order to stimulate the economy and cushion the fall. Reducing the Fed Funds Rate makes money cheaper, allowing an influx of credit into the economy through all types of loans.

The charts linked below show the relation between S&P 500 and interest rates.

  • July 13, 1990 — Sept 4, 1992: 8.00%–3.00% (Includes 1990–1991 recession)[11][12]
  • Feb 1, 1995 — Nov 17, 1998: 6.00–4.75 [13][14][15]
  • May 16, 2000 — June 25, 2003: 6.50–1.00 (Includes 2001 recession)[16][17][18]
  • June 29, 2006 — (Oct. 29 2008): 5.25–1.00[19]
  • Dec 16, 2008 — 0.0–0.25[20]
  • Dec 16, 2015 — 0.25-0.50[21]
  • Dec 14, 2016 — 0.50-0.75[22]
  • Mar 15, 2017 — 0.75-1.00[23]

Bill Gross of PIMCO suggested that in the prior 15 years ending in 2007, in each instance where the fed funds rate was higher than the nominal GDP growth rate, assets such as stocks and/or housing fell.[24]

See also

References

  1. Jump up^ “Fedpoints: Federal Funds”. Federal Reserve Bank of New York. August 2007. Retrieved 2 October 2011.
  2. Jump up^ “The Implementation of Monetary Policy”. The Federal Reserve System: Purposes & Functions (PDF). Washington, D.C.: Federal Reserve Board. 24 August 2011. p. 4. Retrieved 2 October 2011.
  3. Jump up^ “Monetary Policy, Open Market Operations”. Federal Reserve Bank. 2008-01-30. Retrieved 2008-01-30.
  4. Jump up^ “Reserve Requirements”. Board of Governors of The Federal Reserve System. December 16, 2015.
  5. Jump up^ “Fed funds rate”. Bankrate, Inc. March 2016.
  6. Jump up^ Cheryl L. Edwards (November 1997). Gerard Sinzdak. “Open Market Operations in the 1990s” (PDF). Federal Reserve Bulletin (PDF).
  7. Jump up^ “BBA LIBOR – Frequently asked questions”. British Bankers’ Association. March 21, 2006. Archived from the original on 2007-02-16.
  8. Jump up^ “4:56 p.m. US-Closing Stocks”. Associated Press. December 16, 2008.[dead link]
  9. ^ Jump up to:a b “Historical Changes of the Target Federal Funds and Discount Rates, 1971 to present”. New York Federal Reserve Branch. February 19, 2010. Archived from the original on December 21, 2008.
  10. Jump up^ David Waring (2008-02-19). “An Explanation of How The Fed Moves Interest Rates”. InformedTrades.com. Archived from the original on 2015-05-05. Retrieved 2009-07-20.
  11. Jump up^ “$SPX 1990-06-12 1992-10-04 (rate drop chart)”. StockCharts.com.
  12. Jump up^ “$SPX 1992-08-04 1995-03-01 (rate rise chart)”. StockCharts.com.
  13. Jump up^ “$SPX 1995-01-01 1997-01-01 (rate drop chart)”. StockCharts.com.
  14. Jump up^ “$SPX 1996-12-01 1998-10-17 (rate drop chart)”. StockCharts.com.
  15. Jump up^ “$SPX 1998-09-17 2000-06-16 (rate rise chart)”. StockCharts.com.
  16. Jump up^ “$SPX 2000-04-16 2002-01-01 (rate drop chart)”. StockCharts.com.
  17. Jump up^ “$SPX 2002-01-01 2003-07-25 (rate drop chart)”. StockCharts.com.
  18. Jump up^ “$SPX 2003-06-25 2006-06-29 (rate rise chart)”. StockCharts.com.
  19. Jump up^ “$SPX 2006-06-29 2008-06-01 (rate drop chart)”. StockCharts.com.
  20. Jump up^ “Press Release”. Board of Governors of The Federal Reserve System. December 16, 2008.
  21. Jump up^ “Open Market Operations”. Board of Governors of The Federal Reserve System. December 16, 2015.
  22. Jump up^ “Decisions Regarding Monetary Policy Implementation”. Board of Governors of The Federal Reserve System.
  23. Jump up^ Cox, Jeff (2017-03-15). “Fed raises rates at March meeting”. CNBC. Retrieved 2017-03-15.
  24. Jump up^ Shaw, Richard (January 7, 2007). “The Bond Yield Curve as an Economic Crystal Ball”. Retrieved 3 April 2011.

External links

https://en.wikipedia.org/wiki/Federal_funds_rate

Monetary policy of the United States

From Wikipedia, the free encyclopedia
  (Redirected from U.S. monetary policy)
United States M2 money supply
% change in money supply
Money supply changes monthly basis

Monetary policy concerns the actions of a central bank or other regulatory authorities that determine the size and rate of growth of the money supply.

In the United States, the Federal Reserve is in charge of monetary policy, and implements it primarily by performing operations that influence short-term interest rates.

Money supply[edit]

Main article: Money supply

The money supply has different components, generally broken down into “narrow” and “broad” money, reflecting the different degrees of liquidity (‘spendability’) of each different type, as broader forms of money can be converted into narrow forms of money (or may be readily accepted as money by others, such as personal checks).[1]

For example, demand deposits are technically promises to pay on demand, while savings deposits are promises to pay subject to some withdrawal restrictions, and Certificates of Deposit are promises to pay only at certain specified dates; each can be converted into money, but “narrow” forms of money can be converted more readily. The Federal Reserve directly controls only the most narrow form of money, physical cash outstanding along with the reserves of banks throughout the country (known as M0 or the monetary base); the Federal Reserve indirectly influences the supply of other types of money.[1]

Broad money includes money held in deposit balances in banks and other forms created in the financial system. Basic economics also teaches that the money supply shrinks when loans are repaid;[2][3] however, the money supply will not necessarily decrease depending on the creation of new loans and other effects. Other than loans, investment activities of commercial banks and the Federal Reserve also increase and decrease the money supply.[4] Discussion of “money” often confuses the different measures and may lead to misguided commentary on monetary policy and misunderstandings of policy discussions.[5]

Structure of modern US institutions[edit]

Federal Reserve[edit]

Monetary policy in the US is determined and implemented by the US Federal Reserve System, commonly referred to as the Federal Reserve. Established in 1913 by the Federal Reserve Act to provide central banking functions,[6] the Federal Reserve System is a quasi-public institution. Ostensibly, the Federal Reserve Banks are 12 private banking corporations;[7][8][9] they are independent in their day-to-day operations, but legislatively accountable to Congress through the auspices of Federal Reserve Board of Governors.

The Board of Governors is an independent governmental agency consisting of seven officials and their support staff of over 1800 employees headquartered in Washington, D.C.[10] It is independent in the sense that the Board currently operates without official obligation to accept the requests or advice of any elected official with regard to actions on the money supply,[11]and its methods of funding also preserve independence. The Governors are nominated by the President of the United States, and nominations must be confirmed by the U.S. Senate.[12]

The presidents of the Federal Reserve Banks are nominated by each bank’s respective Board of Directors, but must also be approved by the Board of Governors of the Federal Reserve. The Chairman of the Federal Reserve Board is generally considered to have the most important position, followed by the president of the Federal Reserve Bank of New York.[12] The Federal Reserve System is primarily funded by interest collected on their portfolio of securities from the US Treasury, and the Fed has broad discretion in drafting its own budget,[13] but, historically, nearly all the interest the Federal Reserve collects is rebated to the government each year.[14]

The Federal Reserve has three main mechanisms for manipulating the money supply. It can buy or sell treasury securities. Selling securities has the effect of reducing the monetary base (because it accepts money in return for purchase of securities), taking that money out of circulation. Purchasing treasury securities increases the monetary base (because it pays out hard currency in exchange for accepting securities). Secondly, the discount rate can be changed. And finally, the Federal Reserve can adjust the reserve requirement, which can affect the money multiplier; the reserve requirement is adjusted only infrequently, and was last adjusted in 1992.[15]

In practice, the Federal Reserve uses open market operations to influence short-term interest rates, which is the primary tool of monetary policy. The federal funds rate, for which the Federal Open Market Committee announces a target on a regular basis, reflects one of the key rates for interbank lending. Open market operations change the supply of reserve balances, and the federal funds rate is sensitive to these operations.[16]

In theory, the Federal Reserve has unlimited capacity to influence this rate, and although the federal funds rate is set by banks borrowing and lending funds to each other, the federal funds rate generally stays within a limited range above and below the target (as participants are aware of the Fed’s power to influence this rate).

Assuming a closed economy, where foreign capital or trade does not affect the money supply, when money supply increases, interest rates go down. Businesses and consumers have a lower cost of capital and can increase spending and capital improvement projects. This encourages short-term growth. Conversely, when the money supply falls, interest rates go up, increasing the cost of capital and leading to more conservative spending and investment. The Federal reserve increases interest rates to combat Inflation.

U.S. Treasury[edit]

Private commercial banks[edit]

When money is deposited in a bank, it can then be lent out to another person. If the initial deposit was $100 and the bank lends out $100 to another customer the money supply has increased by $100. However, because the depositor can ask for the money back, banks have to maintain minimum reserves to service customer needs. If the reserve requirement is 10% then, in the earlier example, the bank can lend $90 and thus the money supply increases by only $90. The reserve requirement therefore acts as a limit on this multiplier effect. Because the reserve requirement only applies to the more narrow forms of money creation (corresponding to M1), but does not apply to certain types of deposits (such as time deposits), reserve requirements play a limited role in monetary policy.[17]

Money creation[edit]

Main article: Money creation

Currently, the US government maintains over US$800 billion in cash money (primarily Federal Reserve Notes) in circulation throughout the world,[18][19] up from a sum of less than $30 billion in 1959. Below is an outline of the process which is currently used to control the amount of money in the economy. The amount of money in circulation generally increases to accommodate money demanded by the growth of the country’s production. The process of money creation usually goes as follows:

  1. Banks go through their daily transactions. Of the total money deposited at banks, significant and predictable proportions often remain deposited, and may be referred to as “core deposits.” Banks use the bulk of “non-moving” money (their stable or “core” deposit base) by loaning it out.[20] Banks have a legal obligation to keep a certain fraction of bank deposit money on-hand at all times.[21]
  2. In order to raise additional money to cover excess spending, Congress increases the size of the National Debt by issuing securities typically in the form of a Treasury Bond[22] (see United States Treasury security). It offers the Treasury security for sale, and someone pays cash to the government in exchange. Banks are often the purchasers of these securities, and these securities currently play a crucial role in the process.
  3. The 12-person Federal Open Market Committee, which consists of the heads of the Federal Reserve System (the seven Federal governors and five bank presidents), meets eight times a year to determine how they would like to influence the economy.[23] They create a plan called the country’s “monetary policy” which sets targets for things such as interest rates.[24]
  4. Every business day, the Federal Reserve System engages in Open market operations.[25] If the Federal Reserve wants to increase the money supply, it will buy securities (such as U.S. Treasury Bonds) anonymously from banks in exchange for dollars. If the Federal Reserve wants to decrease the money supply, it will sell securities to the banks in exchange for dollars, taking those dollars out of circulation.[26][27] When the Federal Reserve makes a purchase, it credits the seller’s reserve account (with the Federal Reserve). The money that it deposits into the seller’s account is not transferred from any existing funds, therefore it is at this point that the Federal Reserve has created High-powered money.
  5. By means of open market operations, the Federal Reserve affects the free reserves of commercial banks in the country.[28] Anna Schwartz explains that “if the Federal Reserve increases reserves, a single bank can make loans up to the amount of its excess reserves, creating an equal amount of deposits”.[26][27][29]
  6. Since banks have more free reserves, they may loan out the money, because holding the money would amount to accepting the cost of foregone interest[28][30] When a loan is granted, a person is generally granted the money by adding to the balance on their bank account.[31]
  7. This is how the Federal Reserve’s high-powered money is multiplied into a larger amount of broad money, through bank loans; as written in a particular case study, “as banks increase or decrease loans, the nation’s (broad) money supply increases or decreases.”[3] Once granted these additional funds, the recipient has the option to withdraw physical currency (dollar bills and coins) from the bank, which will reduce the amount of money available for further on-lending (and money creation) in the banking system.[32]
  8. In many cases, account-holders will request cash withdrawals, so banks must keep a supply of cash handy. When they believe they need more cash than they have on hand, banks can make requests for cash with the Federal Reserve. In turn, the Federal Reserve examines these requests and places an order for printed money with the US Treasury Department.[33] The Treasury Department sends these requests to the Bureau of Engraving and Printing (to make dollar bills) and the Bureau of the Mint (to stamp the coins).
  9. The U.S. Treasury sells this newly printed money to the Federal Reserve for the cost of printing.[citation needed] This is about 6 cents per bill for any denomination.[34] Aside from printing costs, the Federal Reserve must pledge collateral (typically government securities such as Treasury bonds) to put new money, which does not replace old notes, into circulation.[35]This printed cash can then be distributed to banks, as needed.

Though the Federal Reserve authorizes and distributes the currency printed by the Treasury (the primary component of the narrow monetary base), the broad money supply is primarily created by commercial banks through the money multiplier mechanism.[29][31][36][37] One textbook summarizes the process as follows:

“The Fed” controls the money supply in the United States by controlling the amount of loans made by commercial banks. New loans are usually in the form of increased checking account balances, and since checkable deposits are part of the money supply, the money supply increases when new loans are made …[38]

This type of money is convertible into cash when depositors request cash withdrawals, which will require banks to limit or reduce their lending.[39][32] The vast majority of the broad money supply throughout the world represents current outstanding loans of banks to various debtors.[38][40][41] A very small amount of U.S. currency still exists as “United States Notes“, which have no meaningful economic difference from Federal Reserve notes in their usage, although they departed significantly in their method of issuance into circulation. The currency distributed by the Federal Reserve has been given the official designation of “Federal Reserve Notes.”[42]

Significant effects[edit]

Main article: Monetary policy

In 2005, the Federal Reserve held approximately 9% of the national debt[43] as assets against the liability of printed money. In previous periods, the Federal Reserve has used other debt instruments, such as debt securities issued by private corporations. During periods when the national debt of the United States has declined significantly (such as happened in fiscal years 1999 and 2000), monetary policy and financial markets experts have studied the practical implications of having “too little” government debt: both the Federal Reserve and financial markets use the price information, yield curve and the so-called risk free rate extensively.[44]

Experts are hopeful that other assets could take the place of National Debt as the base asset to back Federal Reserve notes, and Alan Greenspan, long the head of the Federal Reserve, has been quoted as saying, “I am confident that U.S. financial markets, which are the most innovative and efficient in the world, can readily adapt to a paydown of Treasury debt by creating private alternatives with many of the attributes that market participants value in Treasury securities.”[45] In principle, the government could still issue debt securities in significant quantities while having no net debt, and significant quantities of government debt securities are also held by other government agencies.

Although the U.S. government receives income overall from seigniorage, there are costs associated with maintaining the money supply.[41][46] Leading ecological economist and steady-state theorist Herman Daly, claims that “over 95% of our [broad] money supply [in the United States] is created by the private banking system (demand deposits) and bears interest as a condition of its existence,”[41] a conclusion drawn from the Federal Reserve’s ultimate dependence on increased activity in fractional reserve lending when it exercises open market operations.[47]Economist Eric Miller criticizes Daly’s logic because money is created in the banking system in response to demand for the money,[48] which justifies cost.[citation needed]

Thus, use of expansionary open market operations typically generates more debt in the private sector of society (in the form of additional bank deposits).[49] The private banking system charges interest to borrowers as a cost to borrow the money.[3][31][50] The interest costs are borne by those that have borrowed,[3][31] and without this borrowing, open market operations would be unsuccessful in maintaining the broad money supply,[30] though alternative implementations of monetary policy could be used. Depositors of funds in the banking system are paid interest on their savings (or provided other services, such as checking account privileges or physical security for their “cash”), as compensation for “lending” their funds to the bank.

Increases (or contractions) of the money supply corresponds to growth (or contraction) in interest-bearing debt in the country.[3][30][41] The concepts involved in monetary policy may be widely misunderstood in the general public, as evidenced by the volume of literature on topics such as “Federal Reserve conspiracy” and “Federal Reserve fraud.”[51]

Uncertainties

A few of the uncertainties involved in monetary policy decision making are described by the federal reserve:[52]

  • While these policy choices seem reasonably straightforward, monetary policy makers routinely face certain notable uncertainties. First, the actual position of the economy and growth in aggregate demand at any time are only partially known, as key information on spending, production, and prices becomes available only with a lag. Therefore, policy makers must rely on estimates of these economic variables when assessing the appropriate course of policy, aware that they could act on the basis of misleading information. Second, exactly how a given adjustment in the federal funds rate will affect growth in aggregate demand—in terms of both the overall magnitude and the timing of its impact—is never certain. Economic models can provide rules of thumb for how the economy will respond, but these rules of thumb are subject to statistical error. Third, the growth in aggregate supply, often called the growth in potential output, cannot be measured with certainty.
  • In practice, as previously noted, monetary policy makers do not have up-to-the-minute information on the state of the economy and prices. Useful information is limited not only by lags in the collection and availability of key data but also by later revisions, which can alter the picture considerably. Therefore, although monetary policy makers will eventually be able to offset the effects that adverse demand shocks have on the economy, it will be some time before the shock is fully recognized and—given the lag between a policy action and the effect of the action on aggregate demand—an even longer time before it is countered. Add to this the uncertainty about how the economy will respond to an easing or tightening of policy of a given magnitude, and it is not hard to see how the economy and prices can depart from a desired path for a period of time.
  • The statutory goals of maximum employment and stable prices are easier to achieve if the public understands those goals and believes that the Federal Reserve will take effective measures to achieve them.
  • Although the goals of monetary policy are clearly spelled out in law, the means to achieve those goals are not. Changes in the FOMC’s target federal funds rate take some time to affect the economy and prices, and it is often far from obvious whether a selected level of the federal funds rate will achieve those goals.

Opinions of the Federal Reserve

The Federal Reserve is lauded by some economists, while being the target of scathing criticism by other economists, legislators, and sometimes members of the general public. The former Chairman of the Federal Reserve Board, Ben Bernanke, is one of the leading academic critics of the Federal Reserve’s policies during the Great Depression.[53]

Achievements

One of the functions of a central bank is to facilitate the transfer of funds through the economy, and the Federal Reserve System is largely responsible for the efficiency in the banking sector. There have also been specific instances which put the Federal Reserve in the spotlight of public attention. For instance, after the stock market crash in 1987, the actions of the Fed are generally believed to have aided in recovery. Also, the Federal Reserve is credited for easing tensions in the business sector with the reassurances given following the 9/11 terrorist attacks on the United States.[54]

Criticisms

The Federal Reserve has been the target of various criticisms, involving: accountability, effectiveness, opacity, inadequate banking regulation, and potential market distortion. Federal Reserve policy has also been criticized for directly and indirectly benefiting large banks instead of consumers. For example, regarding the Federal Reserve’s response to the 2007–2010 financial crisis, Nobel laureate Joseph Stiglitz explained how the U.S. Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap.[55]

By creating $600 billion and inserting this directly into banks the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas by investing internationally in emerging markets. Banks were also investing in foreign currencies which Stiglitz and others point out may lead to currency wars while China redirects its currency holdings away from the United States.[56]

Auditing

The Federal Reserve is subject to different requirements for transparency and audits than other government agencies, which its supporters claim is another element of the Fed’s independence. Although the Federal Reserve has been required by law to publish independently audited financial statements since 1999, the Federal Reserve is not audited in the same way as other government agencies. Some confusion can arise because there are many types of audits, including: investigative or fraud audits; and financial audits, which are audits of accounting statements; there are also compliance, operational, and information system audits.

The Federal Reserve’s annual financial statements are audited by an outside auditor. Similar to other government agencies, the Federal Reserve maintains an Office of the Inspector General, whose mandate includes conducting and supervising “independent and objective audits, investigations, inspections, evaluations, and other reviews of Board programs and operations.”[57] The Inspector General’s audits and reviews are available on the Federal Reserve’s website.[58][59]

The Government Accountability Office (GAO) has the power to conduct audits, subject to certain areas of operations that are excluded from GAO audits; other areas may be audited at specific Congressional request, and have included bank supervision, government securities activities, and payment system activities.[60][61] The GAO is specifically restricted any authority over monetary policy transactions;[60] the New York Times reported in 1989 that “such transactions are now shielded from outside audit, although the Fed influences interest rates through the purchase of hundreds of billions of dollars in Treasury securities.”[62] As mentioned above, it was in 1999 that the law governing the Federal Reserve was amended to formalize the already-existing annual practice of ordering independent audits of financial statements for the Federal Reserve Banks and the Board;[63] the GAO’s restrictions on auditing monetary policy continued, however.[61]

Congressional oversight on monetary policy operations, foreign transactions, and the FOMC operations is exercised through the requirement for reports and through semi-annual monetary policy hearings.[61] Scholars have conceded that the hearings did not prove an effective means of increasing oversight of the Federal Reserve, perhaps because “Congresspersons prefer to bash an autonomous and secretive Fed for economic misfortune rather than to share the responsibility for that misfortune with a fully accountable Central Bank,” although the Federal Reserve has also consistently lobbied to maintain its independence and freedom of operation.[64]

Fulfillment of wider economic goals

By law, the goals of the Fed’s monetary policy are: high employment, sustainable growth, and stable prices.[65]

Critics say that monetary policy in the United States has not achieved consistent success in meeting the goals that have been delegated to the Federal Reserve System by Congress. Congress began to review more options with regard to macroeconomic influence beginning in 1946 (after World War II), with the Federal Reserve receiving specific mandates in 1977 (after the country suffered a period of stagflation).

Throughout the period of the Federal Reserve following the mandates, the relative weight given to each of these goals has changed, depending on political developments.[citation needed] In particular, the theories of Keynesianism and monetarism have had great influence on both the theory and implementation of monetary policy, and the “prevailing wisdom” or consensus view of the economic and financial communities has changed over the years.[66]

  • Elastic currency (magnitude of the money multiplier): the success of monetary policy is dependent on the ability to strongly influence the supply of money available to the citizens. If a currency is highly “elastic” (that is, has a higher money multiplier, corresponding to a tendency of the financial system to create more broad money for a given quantity of base money), plans to expand the money supply and accommodate growth are easier to implement. Low elasticity was one of many factors that contributed to the depth of the Great Depression: as banks cut lending, the money multiplier fell, and at the same time the Federal Reserve constricted the monetary base. The depression of the late 1920s is generally regarded as being the worst in the country’s history, and the Federal Reserve has been criticized for monetary policy which worsened the depression.[67] Partly to alleviate problems related to the depression, the United States transitioned from a gold standard and now uses a fiat currency; elasticity is believed to have been increased greatly.[68]

The value of $1 over time, in 1776 dollars.[70]

  • Stable prices – While some economists would regard any consistent inflation as a sign of unstable prices,[71] policymakers could be satisfied with 1 or 2%;[72] the consensus of “price stability” constituting long-run inflation of 1-2% is, however, a relatively recent development, and a change that has occurred at other central banks throughout the world. Inflation has averaged a 4.22% increase annually following the mandates applied in 1977; historic inflation since the establishment of the Federal Reserve in 1913 has averaged 3.4%.[73] In contrast, some research indicates that average inflation for the 250 years before the system was near zero percent, though there were likely sharper upward and downward spikes in that timeframe as compared with more recent times.[74] Central banks in some other countries, notably the German Bundesbank, had considerably better records of achieving price stability drawing on experience from the two episodes of hyperinflation and economic collapse under the country’s previous central bank.

Inflation worldwide has fallen significantly since former Federal Reserve Chairman Paul Volcker began his tenure in 1979, a period which has been called the Great Moderation; some commentators attribute this to improved monetary policy worldwide, particularly in the Organisation for Economic Co-operation and Development.[75][76]BusinessWeek notes that inflation has been relatively low since mid-1980s[77] and it was during this time that Volcker wrote (in 1995), “It is a sobering fact that the prominence of central banks [such as the Federal Reserve] in this century has coincided with a general tendency towards more inflation, not less. By and large, if the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.'”.

  • Sustainable growth – The growth of the economy may not be sustainable as the ability for households to save money has been on an overall decline[78] and household debt is consistently rising.[79]

Cause of The Great Depression

Money supply decreased significantly between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs

Monetarists who believe that the Great Depression started as an ordinary recession but significant policy mistakes by monetary authorities (especially the Federal Reserve) caused a shrinking of the money supply which greatly exacerbated the economic situation, causing a recession to descend into the Great Depression.

Public confusion

The Federal Reserve has established a library of information on their websites, however, many experts have spoken about the general level of public confusion that still exists on the subject of the economy; this lack of understanding of macroeconomic questions and monetary policy, however, exists in other countries as well. Critics of the Fed widely regard the system as being “opaque“, and one of the Fed’s most vehement opponents of his time, Congressman Louis T. McFadden, even went so far as to say that “Every effort has been made by the Federal Reserve Board to conceal its powers….”[80]

There are, on the other hand, many economists who support the need for an independent central banking authority, and some have established websites that aim to clear up confusion about the economy and the Federal Reserve’s operations. The Federal Reserve website itself publishes various information and instructional materials for a variety of audiences.

Criticism of government interference

Some economists, especially those belonging to the heterodox Austrian School, criticize the idea of even establishing monetary policy, believing that it distorts investment. Friedrich Hayek won the Nobel Prize for his elaboration of the Austrian business cycle theory.

Briefly, the theory holds that an artificial injection of credit, from a source such as a central bank like the Federal Reserve, sends false signals to entrepreneurs to engage in long-term investments due to a favorably low interest rate. However, the surge of investments undertaken represents an artificial boom, or bubble, because the low interest rate was achieved by an artificial expansion of the money supply and not by savings. Hence, the pool of real savings and resources have not increased and do not justify the investments undertaken.

These investments, which are more appropriately called “malinvestments”, are realized to be unsustainable when the artificial credit spigot is shut off and interest rates rise. The malinvestments and unsustainable projects are liquidated, which is the recession. The theory demonstrates that the problem is the artificial boom which causes the malinvestments in the first place, made possible by an artificial injection of credit not from savings.

According to Austrian economics, without government intervention, interest rates will always be an equilibrium between the time-preferences of borrowers and savers, and this equilibrium is simply distorted by government intervention. This distortion, in their view, is the cause of the business cycle. Some Austrian economists—but by no means all—also support full reserve banking, a hypothetical financial/banking system where banks may not lend deposits. Others may advocate free banking, whereby the government abstains from any interference in what individuals may choose to use as money or the extent to which banks create money through the deposit and lending cycle.

Reserve requirement

The Federal Reserve regulates banking, and one regulation under its direct control is the reserve requirement which dictates how much money banks must keep in reserves, as compared to its demand deposits. Banks use their observation that the majority of deposits are not requested by the account holders at the same time.

Currently, the Federal Reserve requires that banks keep 10% of their deposits on hand.[81] Some countries have no nationally mandated reserve requirements—banks use their own resources to determine what to hold in reserve, however their lending is typically constrained by other regulations.[82] Other factors being equal, lower reserve percentages increases the possibility of Bank runs, such as the widespread runs of 1931. Low reserve requirements also allow for larger expansions of the money supply by actions of commercial banks—currently the private banking system has created much of the broad money supply of US dollars through lending activity. Monetary policy reform calling for 100% reserves has been advocated by economists such as: Irving Fisher,[83] Frank Knight,[84] many ecological economists along with economists of the Chicago School and Austrian School. Despite calls for reform, the nearly universal practice of fractional-reserve banking has remained in the United States.

Criticism of private sector involvement

Historically and to the present day, various social and political movements (such as social credit) have criticized the involvement of the private sector in “creating money”, claiming that only the government should have the power to “make money”. Some proponents also support full reserve banking or other non-orthodox approaches to monetary policy. Various terminology may be used, including “debt money”, which may have emotive or political connotations. These are generally considered to be akin to conspiracy theories by mainstream economists and ignored in academic literature on monetary policy.

See also

https://en.wikipedia.org/wiki/Monetary_policy_of_the_United_States

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Asset Price Bubble Bursts Coming In October With 69 Months of Near Zero Federal Funds Interest Rates! — Interest Rate Suppression or Price Control and Manipulation Will Blow Up Economy — Suppressing Savings and Investment With Low Interest Rates Is A Formula For Diaster and Depression — Panic Time — Start A War Over Oil — Meltdown America –Videos

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U.S. Debt Clock

Current Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
09/17/2014 12,767,522,798,389.80 4,997,219,915,398.95 17,764,742,713,788.75

 

TABLE I -- SUMMARY OF TREASURY SECURITIES OUTSTANDING, AUGUST 31, 2014
(Millions of dollars)
                                              Amount Outstanding
Title                                         Debt Held             Intragovernmental         Totals
                                              By the Public         Holdings
Marketable:
  Bills.......................................        1,450,293                     1,704                1,451,998
  Notes.......................................        8,109,269                     7,365                8,116,634
  Bonds.......................................        1,521,088                        57                1,521,144
  Treasury Inflation-Protected Securities.....        1,031,836                        52                1,031,888
  Floating Rate Notes  21  ...................          109,996                         0                  109,996
  Federal Financing Bank  1  .................                0                    13,612                   13,612
Total Marketable  a...........................       12,222,481                    22,790 2             12,245,271
Nonmarketable:
  Domestic Series.............................           29,995                         0                   29,995
  Foreign Series..............................            2,986                         0                    2,986
  State and Local Government Series...........          105,440                         0                  105,440
  United States Savings Securities............          177,030                         0                  177,030
  Government Account Series...................          193,237                 4,993,277                5,186,514
  Hope Bonds 19...............................                0                       494                      494
  Other.......................................            1,443                         0                    1,443
Total Nonmarketable  b........................          510,130                 4,993,771                5,503,901
Total Public Debt Outstanding ................       12,732,612                 5,016,561               17,749,172
TABLE II -- STATUTORY DEBT LIMIT, AUGUST 31, 2014
(Millions of dollars)
                                              Amount Outstanding
Title                                         Debt Held             Intragovernmental         Totals
                                                 By the Public 17, 2Holdings
Debt Subject to Limit: 17, 20
  Total Public Debt Outstanding...............       12,732,612                 5,016,561               17,749,172
  Less Debt Not Subject to Limit:
    Other Debt ...............................              485                         0                      485
    Unamortized Discount  3...................           15,742                    12,421                   28,163
    Federal Financing Bank  1     ............                0                    13,612                   13,612
    Hope Bonds 19.............................                0                       494                      494
  Plus Other Debt Subject to Limit:
    Guaranteed Debt of Government Agencies  4                 *                         0                        *
  Total Public Debt Subject to Limit .........       12,716,386                 4,990,033               17,706,419
  Statutory Debt Limit  5.....................................................................                   0
COMPILED AND PUBLISHED BY
THE BUREAU OF THE FISCAL SERVICE
www.TreasuryDirect.gov

Interest Expense on the Debt Outstanding

The Interest Expense on the Debt Outstanding includes the monthly interest for:

Amortized discount or premium on bills, notes and bonds is also included in the monthly interest expense.

The fiscal year represents the total interest expense on the Debt Outstanding for a given fiscal year. This includes the months of October through September. View current month details (XLS Format, File size 199KB, uploaded 09/05/2014).

Note: To read or print a PDF document, you need the Adobe Acrobat Reader (v5.0 or higher) software installed on your computer. You can download the Adobe Acrobat Reader from the Adobe Website.

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Interest Expense Fiscal Year 2014
August $27,093,517,258.24
July $29,260,530,745.98
June $97,565,768,696.69
May $32,081,384,628.40
April $31,099,852,014.96
March $26,269,559,883.36
February $21,293,863,450.50
January $19,498,592,676.78
December $88,275,817,263.03
November $22,327,099,682.97
October $16,451,313,332.09
Fiscal Year Total $411,217,855,816.94
Available Historical Data Fiscal Year End
2013 $415,688,781,248.40
2012 $359,796,008,919.49
2011 $454,393,280,417.03
2010 $413,954,825,362.17
2009 $383,071,060,815.42
2008 $451,154,049,950.63
2007 $429,977,998,108.20
2006 $405,872,109,315.83
2005 $352,350,252,507.90
2004 $321,566,323,971.29
2003 $318,148,529,151.51
2002 $332,536,958,599.42
2001 $359,507,635,242.41
2000 $361,997,734,302.36
1999 $353,511,471,722.87
1998 $363,823,722,920.26
1997 $355,795,834,214.66
1996 $343,955,076,695.15
1995 $332,413,555,030.62
1994 $296,277,764,246.26
1993 $292,502,219,484.25
1992 $292,361,073,070.74
1991 $286,021,921,181.04
1990 $264,852,544,615.90
1989 $240,863,231,535.71
1988 $214,145,028,847.73

chart

fredgraph

fredgraph

BND-10-Year-Treasury-Yield-09122014

 JIM ROGERS Financial disaster coming – Dollar collapse – Countries Move Away From USD

US Fed signals move to normalize monetary policy

Dollar Meltdown, Massive Financial Bubble, Economic Collapse Marc Faber

Peter Schiff Iraq Crisis Threatens Global Economy

Peter Schiff – Fantasy About US Recovery Is Not Going To Materialize

Most important video Americans will see today – Doug Casey Interview

James Grant: Two Alternative Outcomes From Fed Policy – Much Higher Inflation or More Money Printing

Investor Jim Grant on Bubbles And Bargains

Jim Rogers Discusses Concern Over The Market

Jim Rogers On Economic Collapse And The US Debt‬

US Economy 2014 Collapse – *Peter Schiff* – FED will cause Huge Economic Crisis!

US ECONOMY COLLAPSE WILL LEAVE MILLIONS IN POVERTY

There Will Be No Economic Recovery. Prepare Yourself Accordingly

US Massive Financial Crisis Coming

Dan Mitchell Discussing Harvard Survey, Arguing for Growth over Class Warfare

The Coming Stock Market Crash and The Death of Money with Jim Rickards

Market Crash, Economic collapse 2014, The coming of World War 3 – Stock Market

Forbes: Obama’s Economic Reforms Are the Definition of Insanity

Why America Should Default and You Should Live Abroad: Q&A with Doug Casey

Doug Casey-No Way Out-Stock, Bond and Real Estate Markets Will Collapse

Russia conspired to destroy US dollar with China – clip from Meltdown America documentary

http://www.caseyresearch.com/lg/meltdown-video

 

 

Here a bubble, there a bubble: Ol’ Marc Faber

Even after the Dow and the S&P 500 closed at new all-time highs, closely followed contrarian Marc Faber keeps sounding the alarm.

“We have a bubble in everything, everywhere,” the publisher of The Gloom, Boom & Doom Report told CNBC’s “Squawk Box” on Friday. Faber has long argued that the Federal Reserve’s massive asset purchasing programs and near-zero interest rates have inflated stock prices.

The catalyst for a market decline, as he sees it, could be a “raise in interest rates, not engineered by the Fed,” referring an increase in bond yields.

 

Faber also expressed concern about American consumers. “Their cost of living have gone up more than the salary increases, so they’re getting squeezed. So that’s why retailing is not doing particularly well.”

A real black swan event, he argued, would be a global recession. “The big surprise will be that the global economy slows down and goes into recession. And that will shock markets.”

If economies around the world can’t recovery with the Fed and other central banks pumping easy money into the system, that would send a dire message, Faber added. He believes the best way for world economies to recover is to cut the size of government.

Read MoreBond market hears Fed hawks; stocks see doves

There’s a dual-economy in the U.S. and around the world with the rich doing really well and others struggling, he said. “[But] the rich will get creamed one day, especially in Europe, on wealth taxes.”

On the other end of the market spectrum, longtime stock market bull Jeremy Siegel told CNBC on Tuesday (ahead of Wednesday’s Fed policy statement leaving interest rate guidance unchanged) that he stands by his Dow 18,000 prediction.

The Wharton School professor sees second half economic growth of 3 to 4 percent, S&P 500 earnings near $120, and the start of Fed rate hikes in the spring or summer of 2015

http://www.cnbc.com/id/102016166

 

Fed and TWTR Overvaluation, Evidence of Looming Market Crash: Stockman

The Federal Reserve Wednesday reassured investors that it will hold interest rates near zero for a “considerable time” after it ends the bond-buying program known as quantitative easing in October. In response, the Dow Jones Industrial Average (^DJI) closed at a new record high.

Former Director of the Office of Management and Budget and author of the book, The Great Deformation, David Stockman, has significant concerns about that very policy.

“I’m worried… that we’ve got the greatest bubble created by a central bank in human history,” he told Yahoo Finance.

In a recent blog post, Stockman offered a handful of high-flying stocks as evidence of what he sees as “madness.”

                                               “…Twitter, is all that is required to remind us that once

                                               again markets are trading in the nosebleed section

                                               of history, rivaling even the madness of March 2000.”

Behind the madness

In an interview with Yahoo Finance, Stockman blamed Fed policy for creating that madness.

“We have been shoving zero-cost money into the financial markets for 6-years running,” he said. “That’s the kerosene that drives speculative trading – the carry trades. That’s what the gamblers use to fund their position as they move from one momentum play and trade to another.”

And that, he says, is not sustainable. While Stockman believes tech stocks are especially overvalued, he warns that it’s not just tech valuations that are inflated. “Everything’s massively overvalued, and it’s predicated on zero-cost overnight money that continues these carry trades; It can’t continue.”

And he still believes, as he has for some time – so far, incorrectly – that there will be a day of reckoning.

“When the trades begin to unwind because the carry cost has to normalize, you’re going to have a dramatic re-pricing dislocation in these financial markets.”

As Yahoo Finance’s Lauren Lyster points out in the associated video, investors who heeded Stockman’s advice last year would have missed out on a 28% run-up in stocks. But Stockman remains steadfast in his belief that the current Fed policy and the resultant market behavior can not continue. “I think what the Fed is doing is so unprecedented, what is happening in the markets is so unnatural,” he said. “This is dangerous, combustible stuff, and I don’t know when the explosion occurs – when the collapse suddenly is upon us – but when it happens, people will be happy that they got out of the way if they did.”

 

 

Federal Reserve Statistical Release, H.4.1, Factors Affecting Reserve Balances; title with eagle logo links to Statistical Release home page
Release Date: Thursday, September 11, 2014
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FEDERAL RESERVE statistical release

H.4.1

Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks September 11, 2014

1. Factors Affecting Reserve Balances of Depository Institutions

Millions of dollars

Reserve Bank credit, related items, and
reserve balances of depository institutions at
Federal Reserve Banks
Averages of daily figures Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014 Sep 11, 2013
Reserve Bank credit 4,377,690 +    4,183 +  761,693 4,379,719
Securities held outright1 4,159,537 +    2,675 +  765,361 4,160,521
U.S. Treasury securities 2,439,657 +    2,671 +  401,376 2,440,637
Bills2          0          0          0          0
Notes and bonds, nominal2 2,325,368 +    2,678 +  386,333 2,326,351
Notes and bonds, inflation-indexed2     97,755          0 +   11,737     97,755
Inflation compensation3     16,534 –        7 +    3,306     16,531
Federal agency debt securities2     41,562          0 –   22,868     41,562
Mortgage-backed securities4 1,678,317 +        4 +  386,851 1,678,322
Unamortized premiums on securities held outright5    208,963 –      219 +    5,815    208,907
Unamortized discounts on securities held outright5    -18,664 +       21 –   12,958    -18,654
Repurchase agreements6          0          0          0          0
Loans        291 –        8 +       18        352
Primary credit         10 –       18 –        8         53
Secondary credit          0          0          0          0
Seasonal credit        247 +        9 +       94        266
Term Asset-Backed Securities Loan Facility7         34          0 –       68         34
Other credit extensions          0          0          0          0
Net portfolio holdings of Maiden Lane LLC8      1,664 –        1 +      171      1,665
Net portfolio holdings of Maiden Lane II LLC9         63          0 –        1         63
Net portfolio holdings of Maiden Lane III LLC10         22          0          0         22
Net portfolio holdings of TALF LLC11         44          0 –       80         44
Float       -675 –       69 +       94       -627
Central bank liquidity swaps12         77 +        1 –      243         77
Other Federal Reserve assets13     26,369 +    1,784 +    3,517     27,349
Foreign currency denominated assets14     22,933 –      353 –      737     22,801
Gold stock     11,041          0          0     11,041
Special drawing rights certificate account      5,200          0          0      5,200
Treasury currency outstanding15     46,103 +       14 +      820     46,103
Total factors supplying reserve funds 4,462,967 +    3,844 +  761,776 4,464,863

Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.

1. Factors Affecting Reserve Balances of Depository Institutions (continued)

Millions of dollars

Reserve Bank credit, related items, and
reserve balances of depository institutions at
Federal Reserve Banks
Averages of daily figures Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014 Sep 11, 2013
Currency in circulation15 1,292,467 –      442 +   84,956 1,291,993
Reverse repurchase agreements16    266,584 +      818 +  173,996    267,602
Foreign official and international accounts    102,228 –      296 +    9,640    107,303
Others    164,356 +    1,115 +  164,356    160,299
Treasury cash holdings        165 +        4 +       23        164
Deposits with F.R. Banks, other than reserve balances     52,715 –    6,170 –   19,233     53,117
Term deposits held by depository institutions          0          0          0          0
U.S. Treasury, General Account     39,081 –    3,787 +      530     31,872
Foreign official      5,432 –    1,134 –    3,562      5,241
Other17      8,202 –    1,248 –   16,201     16,004
Other liabilities and capital18     63,991 –        1 +      818     63,033
Total factors, other than reserve balances,
absorbing reserve funds
1,675,922 –    5,792 +  240,561 1,675,910
Reserve balances with Federal Reserve Banks 2,787,045 +    9,636 +  521,214 2,788,954

Note: Components may not sum to totals because of rounding.

1. Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2. Face value of the securities.
3. Compensation that adjusts for the effect of inflation on the original face value of inflation-indexed securities.
4. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of
the securities.
5. Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized.  For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis.  For mortgage-backed securities, amortization is on an effective-interest basis.
6. Cash value of agreements.
7. Includes credit extended by the Federal Reserve Bank of New York to eligible borrowers through the Term Asset-Backed Securities Loan Facility.
8. Refer to table 4 and the note on consolidation accompanying table 9.
9. Refer to table 5 and the note on consolidation accompanying table 9.
10. Refer to table 6 and the note on consolidation accompanying table 9.
11. Refer to table 7 and the note on consolidation accompanying table 9.
12. Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned
to the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the
foreign central bank.
13. Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable.  Also, includes Reserve Bank premises and equipment net of allowances for depreciation.
14. Revalued daily at current foreign currency exchange rates.
15. Estimated.
16. Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
17. Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
18. Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation accompanying table 9. Also includes the liability for interest on Federal Reserve notes due to U.S. Treasury. Refer to table 8 and table 9.

Sources: Federal Reserve Banks and the U.S. Department of the Treasury.

1A. Memorandum Items

Millions of dollars

Memorandum item Averages of daily figures Wednesday
Sep 10, 2014
Week ended
Sep 10, 2014
Change from week ended
Sep 3, 2014 Sep 11, 2013
Securities held in custody for foreign official and international accounts 3,338,309 –      417 +   61,832 3,343,937
Marketable U.S. Treasury securities1 3,010,563 –      456 +   86,414 3,016,027
Federal agency debt and mortgage-backed securities2    285,805 +       28 –   29,008    285,934
Other securities3     41,942 +       12 +    4,427     41,976
Securities lent to dealers     10,669 +    1,648 –    1,429     11,123
Overnight facility4     10,669 +    1,648 –    1,429     11,123
U.S. Treasury securities      9,860 +    1,721 –    1,405     10,373
Federal agency debt securities        810 –       72 –       23        750

Note: Components may not sum to totals because of rounding.

1. Includes securities and U.S. Treasury STRIPS at face value, and inflation compensation on TIPS. Does not include securities pledged as collateral to foreign official and international account holders against reverse repurchase agreements with the Federal Reserve presented in tables 1, 8, and 9.
2. Face value of federal agency securities and current face value of mortgage-backed securities, which is the remaining principal balance of the securities.
3. Includes non-marketable U.S. Treasury securities, supranationals, corporate bonds, asset-backed securities, and commercial paper at face value.
4. Face value. Fully collateralized by U.S. Treasury securities.
2. Maturity Distribution of Securities, Loans, and Selected Other Assets and Liabilities, September 10, 2014

Millions of dollars

Remaining Maturity Within 15
days
16 days to
90 days
91 days to
1 year
Over 1 year
to 5 years
Over 5 year
to 10 years
Over 10
years
All
Loans1        118        234          0          0          0        352
U.S. Treasury securities2
Holdings          0         90      3,194 1,037,162    742,261    657,930 2,440,637
Weekly changes          0          0          0 +    1,615 –        1 +    2,037 +    3,651
Federal agency debt securities3
Holdings      1,556      1,329      3,584     32,746          0      2,347     41,562
Weekly changes          0          0          0          0          0          0          0
Mortgage-backed securities4
Holdings          0          0          0         10      4,698 1,673,614 1,678,322
Weekly changes          0          0          0          0 +      863 –      857 +        6
Asset-backed securities held by
TALF LLC5
         0          0          0          0          0          0          0
Repurchase agreements6          0          0          0
Central bank liquidity swaps7         77          0          0          0          0          0         77
Reverse repurchase agreements6    267,602          0    267,602
Term deposits          0          0          0          0

Note: Components may not sum to totals because of rounding.
…Not applicable.

1. Excludes the loans from the Federal Reserve Bank of New York (FRBNY) to Maiden Lane LLC, Maiden Lane II LLC, Maiden
Lane III LLC, and TALF LLC. The loans were eliminated when preparing the FRBNY’s statement of condition consistent with consolidation
under generally accepted accounting principles.
2. Face value. For inflation-indexed securities, includes the original face value and compensation that adjusts for the effect of inflation on the
original face value of such securities.
3. Face value.
4. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5. Face value of asset-backed securities held by TALF LLC, which is the remaining principal balance of the underlying assets.
6. Cash value of agreements.
7. Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to
the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign
central bank.

3. Supplemental Information on Mortgage-Backed Securities

Millions of dollars

Account name Wednesday
Sep 10, 2014
Mortgage-backed securities held outright1 1,678,322
Commitments to buy mortgage-backed securities2     80,643
Commitments to sell mortgage-backed securities2          0
Cash and cash equivalents3          4
1. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
2. Current face value. Generally settle within 180 days and include commitments associated with outright transactions, dollar rolls, and coupon swaps.
3. This amount is included in other Federal Reserve assets in table 1 and in other assets in table 8 and table 9.

4. Information on Principal Accounts of Maiden Lane LLC

Millions of dollars

Account name Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane LLC1      1,665
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2          0
Accrued interest payable to the Federal Reserve Bank of New York2          0
Outstanding principal amount and accrued interest on loan payable to JPMorgan Chase & Co.3          0
1. Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2. Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3. Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.

Note: On June 26, 2008, the Federal Reserve Bank of New York (FRBNY) extended credit to Maiden Lane LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to acquire certain assets of Bear Stearns and to manage those assets through time to maximize repayment of the credit extended and to minimize disruption to financial markets. Payments by Maiden Lane LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of the LLC, principal due to the FRBNY, interest due to the FRBNY, principal due to JPMorgan Chase & Co., and interest due to JPMorgan Chase & Co. Any remaining funds will be paid to the FRBNY.

5. Information on Principal Accounts of Maiden Lane II LLC

Millions of dollars

Account name Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane II LLC1         63
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2          0
Accrued interest payable to the Federal Reserve Bank of New York2          0
Deferred payment and accrued interest payable to subsidiaries of American International Group, Inc.3          0
1. Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2. Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3. Book value. The deferred payment represents the portion of the proceeds of the net portfolio holdings due to subsidiaries of American
International Group, Inc. in accordance with the asset purchase agreement. The fair value of this payment and accrued interest payable are
included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.

Note: On December 12, 2008, the Federal Reserve Bank of New York (FRBNY) began extending credit to Maiden Lane II LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to purchase residential mortgage-backed securities from the U.S. securities lending reinvestment portfolio of subsidiaries of American International Group, Inc. (AIG subsidiaries). Payments by Maiden Lane II LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of Maiden Lane II LLC, principal due to the FRBNY, interest due to the FRBNY, and deferred payment and interest due to AIG subsidiaries. Any remaining funds will be shared by the FRBNY and AIG subsidiaries.

6. Information on Principal Accounts of Maiden Lane III LLC

Millions of dollars

Account name Wednesday
Sep 10, 2014
Net portfolio holdings of Maiden Lane III LLC1         22
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2          0
Accrued interest payable to the Federal Reserve Bank of New York2          0
Outstanding principal amount and accrued interest on loan payable to American International Group, Inc.3          0
1. Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly. This table reflects valuations as of June 30, 2014. Any assets purchased after
this valuation date are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2. Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3. Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.

Note: On November 25, 2008, the Federal Reserve Bank of New York (FRBNY) began extending credit to Maiden Lane III LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to purchase multi-sector collateralized debt obligations (CDOs) on which the Financial Products group of American International Group, Inc. (AIG) has written credit default swap (CDS) contracts. In connection with the purchase of CDOs, the CDS counterparties will concurrently unwind the related CDS transactions. Payments by Maiden Lane III LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of Maiden Lane III LLC, principal due to the FRBNY, interest due to the FRBNY, principal due to AIG, and interest due to AIG. Any remaining funds will be shared by the FRBNY and AIG.

7. Information on Principal Accounts of TALF LLC

Millions of dollars

Account name Wednesday
Sep 10, 2014
Asset-backed securities holdings1          0
Other investments, net         44
Net portfolio holdings of TALF LLC         44
Outstanding principal amount of loan extended by the Federal Reserve Bank of New York2          0
Accrued interest payable to the Federal Reserve Bank of New York2          0
Funding provided by U.S. Treasury to TALF LLC, including accrued interest payable3          0
1. Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date.
2. Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York’s statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 9.
3. Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 8 and table 9.

Note: On November 25, 2008, the Federal Reserve announced the creation of the Term Asset-Backed Securities Loan Facility (TALF) under theauthority of section 13(3) of the Federal Reserve Act. The TALF is a facility under which the Federal Reserve Bank of New York (FRBNY) extended loans with a term of up to five years to holders of eligible asset-backed securities. The Federal Reserve closed the TALF for new loan extensions in 2010. The loans provided through the TALF to eligible borrowers are non-recourse, meaning that the obligation of the borrower can be discharged by surrendering the collateral to the FRBNY.

TALF LLC is a limited liability company formed to purchase and manage any asset-backed securities received by the FRBNY in connection with the decision of a borrower not to repay a TALF loan. TALF LLC has committed, for a fee, to purchase all asset-backed securities received by the FRBNY in conjunction with a TALF loan at a price equal to the TALF loan plus accrued but unpaid interest. Prior to January 15, 2013, the U.S. Treasury’s Troubled Asset Relief Program (TARP) committed backup funding to TALF LLC, providing credit protection to the FRBNY. However, the accumulated fees and income collected through the TALF and held by TALF LLC now exceed the remaining amount of TALF loans outstanding. Accordingly, the TARP credit protection commitment has been terminated, and TALF LLC has begun to distribute excess proceeds to the Treasury and the FRBNY. Any remaining funds will be shared by the FRBNY and the U.S. Treasury.

8. Consolidated Statement of Condition of All Federal Reserve Banks

Millions of dollars

Assets, liabilities, and capital Eliminations from consolidation Wednesday
Sep 10, 2014
Change since
Wednesday Wednesday
Sep 3, 2014 Sep 11, 2013
Assets
Gold certificate account     11,037          0          0
Special drawing rights certificate account      5,200          0          0
Coin      1,930 +        8 –       62
Securities, unamortized premiums and discounts, repurchase agreements, and loans 4,351,126 +    3,534 +  756,847
Securities held outright1 4,160,521 +    3,657 +  763,739
U.S. Treasury securities 2,440,637 +    3,651 +  399,549
Bills2          0          0          0
Notes and bonds, nominal2 2,326,351 +    3,661 +  385,784
Notes and bonds, inflation-indexed2     97,755          0 +   10,546
Inflation compensation3     16,531 –       10 +    3,219
Federal agency debt securities2     41,562          0 –   22,654
Mortgage-backed securities4 1,678,322 +        6 +  386,844
Unamortized premiums on securities held outright5    208,907 –      132 +    5,820
Unamortized discounts on securities held outright5    -18,654 +       19 –   12,787
Repurchase agreements6          0          0          0
Loans        352 –       10 +       75
Net portfolio holdings of Maiden Lane LLC7      1,665 +        1 +      167
Net portfolio holdings of Maiden Lane II LLC8         63          0 –        1
Net portfolio holdings of Maiden Lane III LLC9         22          0          0
Net portfolio holdings of TALF LLC10         44          0 –       68
Items in process of collection (0)         94 –       22 –       31
Bank premises      2,255          0 –       29
Central bank liquidity swaps11         77 +        1 –      243
Foreign currency denominated assets12     22,801 –      404 –      925
Other assets13     25,095 +    2,704 +    3,719
Total assets (0) 4,421,408 +    5,821 +  759,373

Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.

8. Consolidated Statement of Condition of All Federal Reserve Banks (continued)

Millions of dollars

Assets, liabilities, and capital Eliminations from consolidation Wednesday
Sep 10, 2014
Change since
Wednesday Wednesday
Sep 3, 2014 Sep 11, 2013
Liabilities
Federal Reserve notes, net of F.R. Bank holdings 1,247,980 –    2,086 +   84,510
Reverse repurchase agreements14    267,602 +   17,296 +  175,438
Deposits (0) 2,842,072 –    8,612 +  499,663
Term deposits held by depository institutions          0          0          0
Other deposits held by depository institutions 2,788,954 –   24,799 +  513,312
U.S. Treasury, General Account     31,872 +   10,836 +    1,852
Foreign official      5,241 –    1,326 –    3,524
Other15 (0)     16,004 +    6,676 –   11,978
Deferred availability cash items (0)        721 –      482 –      163
Other liabilities and accrued dividends16      6,693 –      299 –    1,529
Total liabilities (0) 4,365,067 +    5,817 +  757,919
Capital accounts
Capital paid in     28,170 +        2 +      726
Surplus     28,170 +        2 +      726
Other capital accounts          0          0          0
Total capital     56,341 +        4 +    1,454

Note: Components may not sum to totals because of rounding.

1. Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2. Face value of the securities.
3. Compensation that adjusts for the effect of inflation on the original face value of inflation-indexed securities.
4. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5. Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized.  For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis.  For mortgage-backed securities, amortization is on an effective-interest basis.
6. Cash value of agreements, which are collateralized by U.S. Treasury and federal agency securities.
7. Refer to table 4 and the note on consolidation accompanying table 9.
8. Refer to table 5 and the note on consolidation accompanying table 9.
9. Refer to table 6 and the note on consolidation accompanying table 9.
10. Refer to table 7 and the note on consolidation accompanying table 9.
11. Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to
the foreign central bank. This exchange rate equals the market exchange rate used when the foreign currency was acquired from the foreign
central bank.
12. Revalued daily at current foreign currency exchange rates.
13. Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable.
14. Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
15. Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
16. Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal
Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation accompanying table 9. Also includes the liability for interest on Federal Reserve notes due to U.S. Treasury.

9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014

Millions of dollars

Assets, liabilities, and capital Total Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas Dallas San
City Francisco
Assets
Gold certificate account     11,037        352      4,125        338        464        824      1,349        706        278        173        291        880      1,257
Special drawing rights certificate acct.      5,200        196      1,818        210        237        412        654        424        150         90        153        282        574
Coin      1,930         32         94        124        123        320        222        276         25         46        153        182        332
Securities, unamortized premiums and discounts, repurchase agreements,
and loans
4,351,126     88,009 2,670,390    104,231     94,993    243,168    240,542    177,833     53,725     26,795     57,330    132,586    461,524
Securities held outright1 4,160,521     84,160 2,553,576     99,673     90,839    232,534    229,991    170,046     51,317     25,497     54,804    126,772    441,311
U.S. Treasury securities 2,440,637     49,370 1,497,974     58,470     53,288    136,409    134,917     99,752     30,104     14,957     32,149     74,367    258,881
Bills2          0          0          0          0          0          0          0          0          0          0          0          0          0
Notes and bonds3 2,440,637     49,370 1,497,974     58,470     53,288    136,409    134,917     99,752     30,104     14,957     32,149     74,367    258,881
Federal agency debt securities2     41,562        841     25,509        996        907      2,323      2,298      1,699        513        255        547      1,266      4,409
Mortgage-backed securities4 1,678,322     33,949 1,030,093     40,207     36,644     93,803     92,777     68,595     20,701     10,285     22,107     51,139    178,021
Unamortized premiums on securities held outright5    208,907      4,226    128,220      5,005      4,561     11,676     11,548      8,538      2,577      1,280      2,752      6,365     22,159
Unamortized discounts on securities held outright5    -18,654       -377    -11,449       -447       -407     -1,043     -1,031       -762       -230       -114       -246       -568     -1,979
Repurchase agreements6          0          0          0          0          0          0          0          0          0          0          0          0          0
Loans        352          1         44          0          0          0         34         11         61        132         20         17         33
Net portfolio holdings of Maiden
Lane LLC7      1,665          0      1,665          0          0          0          0          0          0          0          0          0          0
Net portfolio holdings of Maiden
Lane II LLC8         63          0         63          0          0          0          0          0          0          0          0          0          0
Net portfolio holdings of Maiden
Lane III LLC9         22          0         22          0          0          0          0          0          0          0          0          0          0
Net portfolio holdings of TALF LLC10         44          0         44          0          0          0          0          0          0          0          0          0          0
Items in process of collection         94          0          0          0          0          0         93          0          0          1          0          0          0
Bank premises      2,255        121        434         74        110        222        209        198        124         97        243        224        200
Central bank liquidity swaps11         77          4         25          6          6         16          4          2          1          0          1          1         11
Foreign currency denominated assets12     22,801      1,037      7,335      1,714      1,813      4,754      1,311        629        192         96        240        381      3,299
Other assets13     25,095        535     15,039        739        546      1,547      1,374      1,014        356        219        347        798      2,580
Interdistrict settlement account          0 +   10,547 –   58,585 +    2,678 +    9,252 +      197 +    8,040 –   10,297 –   10,950 –    2,083 –      134 +    2,635 +   48,701
Total assets 4,421,408    100,833 2,642,468    110,114    107,543    251,460    253,799    170,787     43,900     25,434     58,623    137,969    518,478

Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.

9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014 (continued)

Millions of dollars

Assets, liabilities, and capital Total Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas Dallas San
City Francisco
Liabilities
Federal Reserve notes outstanding 1,443,974     44,572    489,349     42,766     65,118    103,568    212,875     94,569     37,360     21,242     36,783    115,911    179,862
Less: Notes held by F.R. Banks    195,994      5,311     63,063      6,357      8,870     11,177     20,690     11,915      4,937      4,278      5,302     25,736     28,359
Federal Reserve notes, net 1,247,980     39,261    426,285     36,409     56,248     92,391    192,186     82,654     32,423     16,964     31,481     90,175    151,503
Reverse repurchase agreements14    267,602      5,413    164,244      6,411      5,843     14,956     14,793     10,937      3,301      1,640      3,525      8,154     28,385
Deposits 2,842,072     53,409 2,030,175     62,876     40,791    131,999     42,547     75,315      7,510      6,356     22,882     38,429    329,783
Term deposits held by depository institutions          0          0          0          0          0          0          0          0          0          0          0          0          0
Other deposits held by depository institutions 2,788,954     53,397 1,977,410     62,837     40,788    131,731     42,538     75,306      7,510      6,355     22,881     38,428    329,774
U.S. Treasury, General Account     31,872          0     31,872          0          0          0          0          0          0          0          0          0          0
Foreign official      5,241          2      5,214          3          3          8          2          1          0          0          0          1          6
Other15     16,004         11     15,679         36          0        260          7          7          0          0          1          0          3
Deferred availability cash items        721          0          0          0          0          0        611          0          0        110          0          0          0
Interest on Federal Reserve notes due
to U.S. Treasury16
     1,693         19      1,199         20         10         23         86         73         20         12         20         54        155
Other liabilities and accrued
dividends17
     5,000        167      2,179        211        208        544        361        282        142        118        126        208        454
Total liabilities 4,365,067     98,270 2,624,083    105,927    103,101    239,913    250,583    169,261     43,395     25,200     58,034    137,021    510,279
Capital
Capital paid in     28,170      1,282      9,193      2,093      2,221      5,773      1,608        763        252        117        295        474      4,099
Surplus     28,170      1,282      9,193      2,093      2,221      5,773      1,608        763        252        117        295        474      4,099
Other capital          0          0          0          0          0          0          0          0          0          0          0          0          0
Total liabilities and capital 4,421,408    100,833 2,642,468    110,114    107,543    251,460    253,799    170,787     43,900     25,434     58,623    137,969    518,478

Note: Components may not sum to totals because of rounding. Footnotes appear at the end of the table.

9. Statement of Condition of Each Federal Reserve Bank, September 10, 2014 (continued)

1. Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.
2. Face value of the securities.
3. Includes the original face value of inflation-indexed securities and compensation that adjusts for the effect of inflation on the original face value of such securities.
4. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The current face value shown is the remaining principal balance of the securities.
5. Reflects the premium or discount, which is the difference between the purchase price and the face value of the securities that has not been amortized.  For U.S. Treasury and Federal agency debt securities, amortization is on a straight-line basis.  For mortgage-backed securities, amortization is on an effective-interest basis.
6. Cash value of agreements, which are collateralized by U.S. Treasury and federal agency securities.
7. Refer to table 4 and the note on consolidation below.
8. Refer to table 5 and the note on consolidation below.
9. Refer to table 6 and the note on consolidation below.
10. Refer to table 7 and the note on consolidation below.
11. Dollar value of foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the foreign central bank. This exchange rate
equals the market exchange rate used when the foreign currency was acquired from the foreign central bank.
12. Revalued daily at current foreign currency exchange rates.
13. Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable.
14. Cash value of agreements, which are collateralized by U.S. Treasury securities, federal agency debt securities, and mortgage-backed securities.
15. Includes deposits held at the Reserve Banks by international and multilateral organizations, government-sponsored enterprises, and designated financial market utilities.
16. Represents the estimated weekly remittances to U.S. Treasury as interest on Federal Reserve notes or, in those cases where the Reserve Bank’s net earnings are not sufficient to equate surplus to capital paid-in, the deferred asset for interest on Federal Reserve notes. The amount of any deferred asset, which is presented as a negative amount in this line, represents the amount of the Federal Reserve Bank’s earnings that must be retained before remittances to the U.S. Treasury resume. The amounts on this line are calculated in accordance with Board of Governors policy, which requires the Federal Reserve Banks to remit residual earnings to the U.S. Treasury as interest on Federal Reserve notes after providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in.
17. Includes the liabilities of Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and TALF LLC to entities other than the Federal Reserve Bank of New York, including liabilities that have recourse only to the portfolio holdings of these LLCs. Refer to table 4 through table 7 and the note on consolidation below.

Note on consolidation:

The Federal Reserve Bank of New York (FRBNY) has extended loans to several limited liability companies under the authority of section 13(3) of the Federal Reserve Act. On June 26, 2008, a loan was extended to Maiden Lane LLC, which was formed to acquire certain assets of Bear Stearns. On November 25, 2008, a loan was extended to Maiden Lane III LLC, which was formed to purchase multi-sector collateralized debt obligations on which the Financial Products group of the American International Group, Inc. has written credit default swap contracts. On December 12, 2008, a loan was extended to Maiden Lane II LLC, which was formed to purchase residential mortgage-backed securities from the U.S. securities lending reinvestment portfolio of subsidiaries of American International Group, Inc. On November 25, 2008, the Federal Reserve Board authorized the FRBNY to extend credit to TALF LLC, which was formed to purchase and manage any asset-backed securities received by the FRBNY in connection with the decision of a borrower not to repay a loan extended under the Term Asset-Backed Securities Loan Facility.

The FRBNY is the primary beneficiary of TALF LLC, because of the two beneficiaries of the LLC, the FRBNY and the U.S. Treasury, the FRBNY is primarily responsible for directing the financial activities of TALF LLC. The FRBNY is the primary beneficiary of the other LLCs cited above because it will receive a majority of any residual returns of the LLCs and absorb a majority of any residual losses of the LLCs. Consistent with generally accepted accounting principles, the assets and liabilities of these LLCs have been consolidated with the assets and liabilities of the FRBNY in the preparation of the statements of condition shown on this release. As a consequence of the consolidation, the extensions of credit from the FRBNY to the LLCs are eliminated, the net assets of the LLCs appear as assets on the previous page (and in table 1 and table 8), and the liabilities of the LLCs to entities other than the FRBNY, including those with recourse only to the portfolio holdings of the LLCs, are included in other liabilities in this table (and table 1 and table 8).

10. Collateral Held against Federal Reserve Notes: Federal Reserve Agents’ Accounts

Millions of dollars

Federal Reserve notes and collateral Wednesday
Sep 10, 2014
Federal Reserve notes outstanding 1,443,974
Less: Notes held by F.R. Banks not subject to collateralization    195,994
Federal Reserve notes to be collateralized 1,247,980
Collateral held against Federal Reserve notes 1,247,980
Gold certificate account     11,037
Special drawing rights certificate account      5,200
U.S. Treasury, agency debt, and mortgage-backed securities pledged1,2 1,231,743
Other assets pledged          0
Memo:
Total U.S. Treasury, agency debt, and mortgage-backed securities1,2 4,160,521
Less: Face value of securities under reverse repurchase agreements    257,508
U.S. Treasury, agency debt, and mortgage-backed securities eligible to be pledged 3,903,013

Note: Components may not sum to totals because of rounding.

1. Includes face value of U.S. Treasury, agency debt, and mortgage-backed securities held outright, compensation to adjust for the effect of inflation on the original face value of inflation-indexed securities, and cash value of repurchase agreements.
2. Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.

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Masters of Money — Keynes — Hayek — Marx — Videos

Posted on April 24, 2013. Filed under: American History, Banking, Blogroll, College, Communications, Economics, Education, Employment, Federal Government, Federal Government Budget, Fiscal Policy, government, government spending, history, History of Economic Thought, Inflation, Investments, Law, liberty, Life, Links, Macroeconomics, media, Microeconomics, Monetary Policy, Money, People, Philosophy, Politics, Rants, Raves, Talk Radio, Tax Policy, Unemployment, Wisdom | Tags: , , , , , , , , , , , , , , , , , , , |

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Masters Of Money: 1/3 – John Maynard Keynes (BBC Documentary Series)

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Masters Of Money: 2/3 – Friedrich Hayek (BBC Documentary Series)

karl_marx

Masters Of Money: 3/3 – Karl Marx (BBC Documentary Series)

Keynes the Man: Hero or Villain? | Murray N. Rothbard

Modern Myths of Keynesian Economics | Jeffrey M. Herbener

Deck the Halls with Macro Follies

Keynesianism Part I – It’s All About Spending

What GDP Leaves Out: An Austrian Look

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I Got The Obama Gasoline Price Blues–From $1.79 Per Gallon in January 2009 to $3.59 Per Gallon in February 2012–$5 Per Gallon By July 4, 2012!–Purchasing Power Plummets–Speculation Starves Society–Hope for Regime Change–Videos

Posted on February 24, 2012. Filed under: American History, Banking, Blogroll, Books, College, Communications, Economics, Education, Employment, Energy, Federal Government, Federal Government Budget, Fiscal Policy, Foreign Policy, government spending, history, Inflation, Investments, Language, Law, liberty, Life, Links, Macroeconomics, media, Microeconomics, Monetary Policy, Money, Natural Gas, Nuclear, Nuclear Power, Oil, People, Philosophy, Politics, Public Sector, Quotations, Rants, Raves, Regulations, Resources, Security, Strategy, Talk Radio, Tax Policy, Taxes, Technology, Transportation, Unemployment, Unions, Video, War, Wealth, Weapons, Wisdom | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , |

Government Theft May 1, 1933

http://gasbuddy.com/gb_retail_price_chart.aspx

http://gasbuddy.com/gb_retail_price_chart.aspx

Quantitative Easing Explained

http://www.aier.org/research/briefs/1826-the-long-goodbye-the-declining-purchasing-power-of-the-dollar

U.S. Inflation Calculator

http://www.usinflationcalculator.com/

U.S. Debt Clock 

http://www.usdebtclock.org/

Ron Paul: The Worst Thing You Can Do For A People Is Purposely Devalue The Dollar

Obama’s Got America Singin’ the Blues

As Gas Prices Rise, White House Goes on Offensive, Defensive

Ron Paul tells the real reason for the oil prices in 2007 and today 

END FED: Bernanke Explains How To Devalue the Dollar, Quantitative Easing AKA Asset Purchase

Glenn Beck – Devaluing The Dollar 

Beck: Devaluing the Dollar

Iran Sanctions, War, Israel & Gas Prices

Ron Paul Doubles Down On War Stance

Armed Chinese Troops in Texas!

Why Gas Prices Are Rising

Playing the oil prices money game

Secret Exemptions Allowed Speculators to Distort Futures Markets

Regulations on Speculation Weak, But Better Than Nothing

The Price Of Oil

Bill Black: What I’d Demand of the Fed

Bill Black’s eye-popping opening statement at House FinServ hearing on Lehman Bros.

END FED: Goldman Sachs To Blame For Global Food-Oil Price Crisis; Speculators Outnumber Hedgers

CFTC Commissioner: “A Hair Trigger Away from Economic Calamity”

Will CFTC Limit Excessive Speculation?

Oil Supply and Demand and the Next Oil Price Spike

Bio-fuels, Speculation, Land Grabs = Food Crisis

Speculation And The Frenzy In Food Markets

Food, Speculation and Parasitical Trading

Speculation Drives Up Coffee Prices

Food Speculation

Oil Speculators

Oil speculation and oil prices

The Real TRUTH Behind The OIL PRICES 

Banks Behind High Gas Prices? 

Rising Gas Prices Slowing Economy

Gas Prices Soaring 

Ripple Effect Of Rising Gas Prices Hits Consumers

Krauthammer: Obama’s “war on fossil fuels” causes rising gas prices 

Obama Wanted High Gas Prices…Gradually (2008 Election Campaign) 

Ron Paul Expains High Gas Prices & War in 2008

Can We Stop A War With Iran? 

Obama admits his intentions are to skyrocket oil prices 

Ford O’Connell On Fox News – February 24, 2012 

Ron Paul Expains High Gas Prices & War in 2007

Obama gas prices

A Coincidence Over High Gasoline Prices- MoneyTV with Donald Baillargeon

Obama Admits the Truth: He Can’t Do Much about Gas Prices

James Grant

Jim Grant – Bloomberg Interview (30/6/11)

Government Theft 2012

Press Conference with Chairman of the FOMC, Ben S. Bernanke

 Blame High Oil Prices on Speculators and Bernanke

Seven Bucks A Gallon For Gas!

2012 Energy Prices

Ed Wallace 

“…That’s right, we not only reduced our overall gasoline use in America, reversing a century-long trend, but in 2011 we dropped our demand for gasoline once again. This likely explains why in December WTI oil jumped by close to $7 a barrel, but the futures market for gasoline barely budged, moving just a few cents in either direction.

Another way to look at it is in the percentage of utilization of our refineries for this time of year. According to the government’s data, the last week of December our refineries ran at 84.2 percent of capacity. But if one compares that week to the same week in the boom years, 2003 to 2007, our refineries were running at 91.7 percent, 94.2 percent, 88.9 percent, 90.9 percent and 89.4 percent. For those who have forgotten, that last figure in that chain, marking the last week of December 2007, also denotes the month we officially slipped into a recession. Interestingly, data released by the International Energy Agency in September of 2008 showed oil and fuel demand falling worldwide starting in August of 2007.

And yet with our refinery utilization running at far below normal, we managed to have the all-time-record year for the exportation of refined fuels. While the media speculation on where oil’s price is going is almost solely based on “Asian Demand” or the prospect of a total embargo on Iranian oil, the real problem is something completely different.

What is it? It’s refiners trying to find ways to get the price of gasoline on the futures market more in line with the high price of oil. To this end it appears that three refineries in the Northeast, including Sunoco’s Marcus Hook and Philadelphia refinery, along with Conoco’s Trainer unit, will be closed. To be sure, both Conoco and Sunoco claim their first choice is to sell those refineries, but failing that they will be closed.

What does that mean to you and me?

Dow Jones Newswire quoted Gene McGillian, an energy analyst with Tradition Energy, as saying, “Gasoline futures prices are based on New York Harbor prices. When you start to see disruptions in that Northeast market, it’s definitely reflected in gasoline futures.”

Translation: Close refineries and you can bump the futures price of gasoline – and by extension the retail price – regardless of where the price of oil is.

How does oil speculation raise gas prices?

by Josh Clark

“…An oil futureis simply a contract between a buyer and seller, where the buyer agrees to purchase a certain amount of a commodity — in this case oil — at a fixed price

. Futures offer a way for a purchaser to bet on whether a commodity will increase in price down the road. Once locked into a contract, a futures buyer would receive a barrel of oil for the price dictated in the future contract, even if the market price was higher when the barrel was actually delivered.

­As in all cases, Wall Street heard the word "bet" and flocked to futures, taking the market to strange new places on the fringe of legality. In the 19th and early 20th centuries it bet on grain. In the 21st century it was oil. Despite U.S. petroleum reserves being at an eight-year high, the price of oil rose dramatically beginning in 2006. While demand rose, supply kept pace. Yet, prices still skyrocketed. This means that the laws of supply and demand no longer applied in the oil markets. Instead, an artificial market developed.

Artificial markets are volatile; they’re difficult to predict and can turn on a dime. As a result of the artificial oil market, the average price per barrel of crude oil increased from $31.61 in July 2004 to $137.11 in July 2008 . The average cost for a gallon of regular unleaded gas in the United States grew from $1.93 to $4.09 over the same period .

So what happened? …"

"…What speculators do is bet on what price a commodity will reach by a future date, through instruments called <strong>derivatives</strong>. Unlike an investment in an actual commodity (such as a barrel of oil), a derivative’s value is based on the value of a commodity (for example, a bet on whether a barrel of oil will increase or decrease in price). Speculators have no hand in the sale of the commodity they’re betting on; they’re not the buyer or the seller.

By betting on the price outcome with only a single futures contract, a speculator has no effect on a market. It’s simply a bet. But a speculator with the capital to purchase a sizeable number of futures derivatives at one price can actually sway the market. As energy researcher F. William Engdahl put it, "[s]peculators trade on rumor, not fact" . A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes they’ll be able to sell it later on at the future price. This drives prices up in reality — both future and present prices — due to the decreased amount of oil currently available on the market.

Investment firms that can influence the oil futures market stand to make a lot; oil companies that both produce the commodity and drive prices up of their product up through oil futures derivatives stand to make even more. Investigations into the unregulated oil futures exchanges turned up major financial institutions like Goldman Sachs and Citigroup. But it also revealed energy producers like Vitol, a Swiss company that owned 11 percent of the oil futures contracts on the New York Mercantile Exchange alone .

As a result of speculation among these and other major players, an estimated 60 percent of the price of oil per barrel was added; a $100 barrel of oil, in reality, should cost $40 . And despite having an agency created to prevent just such speculative price inflation, by the time oil prices skyrocketed, the government had made a paper tiger out of it. …"

<a href="http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm">http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm</a>

</div>
</div>
</div>
</div>
<h4></h4>
<h4>It’s no secret that speculators are driving up fuel prices. The surprise? It’s the Fed’s fault, writes Ed Wallace</h4>
<h4>"…The Fed’s Cheap Liquidity Flood</h4>
The problem starts with Ben Bernanke, no matter how many of his Fed presidents claim they are not to blame for the high price of oil. The fact is that when you flood the market with far too much liquidity at virtually no interest, funny things happen in commodities and equities. It was true in the 1920s, it was true in the last decade, and it’s still true today.

When Richard Fisher, president of the Dallas Federal Reserve, spoke in Germany late in March, Reuters quoted him as saying: "We are seeing speculative activity that may be exacerbating price rises in commodities such as oil." Fisher added that he was seeing the signs of the same speculative trading that had fueled the first financial meltdown.

Here Fisher is in good company. Kansas City Fed President Thomas Hoenig, who has been a vocal critic of the current Fed policy of zero interest and high liquidity, has suggested that markets don’t function correctly under those circumstances. And David Stockman, Ronald Reagan’s former budget director, recently wrote a scathing article for MarketWatch, "Federal Reserve’s Path of Destruction," in which he criticizes current Fed policy even more pointedly. Stockman wrote: "This destruction is namely the exploitation of middle-class savers; the current severe food and energy squeeze on lower income households … and the next round of bursting bubbles building up among the risk asset classes."

Let’s not kid ourselves. Oil in today’s world is worth far more than the $25 a barrel it sold for over a decade ago. But the ability of markets to function properly, based on real supply and demand equations, has been destroyed by allowing ridiculous leverage and the unlimited ability to borrow the leverage at historically low interest rates.

Fortunately for our elected officials, they’ve got the public convinced that the biggest threat from government is taxation and deficits. In reality the public should be infuriated with the rising costs of nondiscretionary items such as food and gasoline, which current Fed policy actively enables. …"

<a href="http://www.businessweek.com/investor/content/apr2011/pi20110419_786652_page_2.htm">http://www.businessweek.com/investor/content/apr2011/pi20110419_786652_page_2.htm</a>
<p style="text-align: left;"><strong>Price of petroleum</strong></p>
"…The <strong>price of petroleum</strong> as quoted in news generally refers to the spot price per barrel (159 liters) of either WTI/light crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma, or of Brent as traded on the Intercontinental Exchange (ICE, into which the International Petroleum Exchange has been incorporated) for delivery at Sullom Voe.

The price of a barrel of oil is highly dependent on both its grade, determined by factors such as its specific gravity or API and its sulphur content, and its location. Other important benchmarks include Dubai, Tapis, and the OPEC basket. The Energy Information Administration (EIA) uses the imported refiner acquisition cost, the weighted average cost of all oil imported into the US, as its "world oil price".

The demand for oil is highly dependent on global macroeconomic conditions. According to the International Energy Agency, high oil prices generally have a large negative impact on the global economic growth.<sup>[1]</sup>

The Organization of the Petroleum Exporting Countries (OPEC) was formed in 1960<sup>[2]</sup> to try and counter the oil companies cartel, which had been controlling posted prices since the so-called 1927 Red Line Agreement and 1928 Achnacarry Agreement, and had achieved a high level of price stability until 1972.

The price of oil underwent a significant decrease after the record peak of US$145 it reached in July 2008. On December 23, 2008, WTI crude oil spot price fell to US$30.28 a barrel, the lowest since the financial crisis of 2007–2010 began, and traded at between US$35 a barrel and US$82 a barrel in 2009.<sup>[3]</sup> On 31 January 2011, the Brent price hit $100 a barrel for the first time since October 2008, on concerns about the political unrest in Egypt.<sup>[4]</sup>

Price history before 2003

A low point was reached in January 1999 of 17 USD per barrel, after increased oil production from Iraq coincided with the Asian Financial Crisis, which reduced demand. Prices then increased rapidly, more than doubling by September 2000 to $35, then fell until the end of 2001 before steadily increasing, reaching $40–50 by September 2004.<sup>[5]</sup>
<h3>Price history from 2003 onwards</h3>
<div>Main article: 2003 to 2011 world oil market chronology</div>
<div>Further information: 2000s energy crisis</div>
<h4>Benchmark pricing</h4>
<div>Main article: Benchmark (crude oil)</div>
After the collapse of the OPEC-administered pricing system in 1985, and a short lived experiment with netback pricing, oil-exporting countries adopted a market-linked pricing mechanism.<sup>[6]</sup> First adopted by PEMEX in 1986, market-linked pricing received wide acceptance and by 1988 became and still is the main method for pricing crude oil in international trade.<sup>[6]</sup> The current reference, or pricing markers, are Brent, WTI, and Dubai/Oman.<sup>[6]</sup>
<h4> Market listings</h4>
<div>Main article: Commodities markets</div>
Oil is marketed among other products in commodities markets. See above for details. Widely traded oil futures, and related natural gas futures, include:<sup>[7]</sup>
<ul>
<li>Petroleum
<ul>
<li>Nymex Crude Future</li>
<li>Dated Brent Spot</li>
<li>WTI Cushing Spot</li>
<li>Nymex Heating Oil Future</li>
<li>Nymex RBOB Gasoline Future</li>
</ul>
</li>
<li>Natural gas
<ul>
<li>Nymex Henry Hub Future</li>
<li>Henry Hub Spot</li>
<li>New York City Gate Spot</li>
</ul>
</li>
</ul>
Most of the above oil futures have delivery dates in all 12 months of the year.<sup>[8]</sup>
<h4>Speculation</h4>
The surge in oil prices in the past several years has led some commentators to argue that at least some of the rise is due to speculation in the futures markets.<sup>[9]</sup>
<h4> Future price changes</h4>
In 2009, Seismic Micro-Technology conducted a survey of geophysicists and geologists about the future of crude oil. Of the survey participants 80 percent predicted the price for a barrel of oil will rise to be somewhere between $50 and $100 per barrel by June 2010.<sup>[10]</sup> Another 50 percent saying it will rise even further to $100 to $150 a barrel in the next five years.<sup>[10]</sup>

Oil prices could go to $200- $300 a barrel if the world’s top crude exporter Saudi Arabia is hit by serious political unrest, according to former Saudi oil minister Sheikh Yamani. Yamani has said that underlying discontent remained unresolved in Saudi Arabia. "If something happens in Saudi Arabia it will go to $200 to $300. I don’t expect this for the time being, but who would have expected Tunisia?" Yamani told Reuters on the sidelines of a conference of the Centre for Global Energy Studies (CGES) which he chaired on April 5th 2011.<sup>[11]</sup>
<h4>CFTC investigation</h4>
The U.S. Commodity Futures Trading Commission (CFTC) announced "Multiple Energy Market Initiatives" on May 29, 2008. Part 1 is "Expanded International Surveillance Information for Crude Oil Trading." The CFTC announcement stated it has joined with the United Kingdom Financial Services Authority and ICE Futures Europe in order to expand surveillance and information sharing of various futures contracts.<sup>[12]</sup> This announcement has received wide coverage in the financial press, with speculation about oil futures price manipulation.<sup>[13]</sup><sup>[14]</sup><sup>[15]</sup>

The interim report by the Interagency Task Force, released in July, found that speculation had not caused significant changes in oil prices and that fundamental supply and demand factors provide the best explanation for the crude oil price increases. The report found that the primary reason for the price increases was that the world economy had expanded at its fastest pace in decades, resulting in substantial increases in the demand for oil, while the oil production grew sluggishly, compounded by production shortfalls in oil-exporting countries.

The report stated that as a result of the imbalance and low price elasticity, very large price increases occurred as the market attempted to balance scarce supply against growing demand, particularly in the last three years. The report forecast that this imbalance would persist in the future, leading to continued upward pressure on oil prices, and that large or rapid movements in oil prices are likely to occur even in the absence of activity by speculators. The task force continues to analyze commodity markets and intends to issue further findings later in the year.
<h4>Future projections</h4>
<div>Main article: Oil depletion</div>
<div>Main article: Peak oil</div>
Peak oil is the period when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. It relates to a long term decline in the available supply of petroleum. This, combined with increasing demand, will significantly increase the worldwide prices of petroleum derived products. Most significant will be the availability and price of liquid fuel for transportation.

The US Department of Energy in the Hirsch report indicates that “The problems associated with world oil production peaking will not be temporary, and past “energy crisis” experience will provide relatively little guidance.”<sup>[16] …"</sup>

<a href="http://en.wikipedia.org/wiki/Price_of_petroleum">http://en.wikipedia.org/wiki/Price_of_petroleum</a>
<p style="text-align: left;"><strong>Gas prices soar on dollar devaluation even as consumption drops to 10-year lows </strong></p>
<strong>Written By Kenneth Schortgen Jr on Monday, February 13, 2012</strong>

"…One of the biggest misnomers in finance and economics today is that prices work according to supply and demand.  This was true when America performed in actual capitalist system, but since we moved to both fascism and crony capitalism, where corporations, banks, and government all work together at the betterment of themselves and not society, prices are fixed due to other factors such as dollar devaluation.
<div style="padding-left: 30px;"><strong><em>U.S. drivers used 2.8 percent less motor gasoline last year and consumed the smallest amount since 1999, the U.S. Department of Energy said Wednesday. Officials credited the decrease to more fuel-efficient cars and an aging population taking few trips.</em></strong></div>
<div style="padding-left: 30px;"><strong><em>Meanwhile, U.S. domestic oil production increased by more than 2 percent last year to 5.6 million barrels per day. – </em></strong><a href="http://www.desmoinesregister.com/article/20120209/BUSINESS/302090065/-1/TERMSOFSERVICE/Gas-consumption-lowest-since-1999"><strong><em>Des Moines Register</em></strong></a></div>
So… if consumption is way down, and production is actually up, should not gasoline prices be falling?  They should, except if you take into consideration the amount of money printing and currency devaluation being done by the Federal Reserve over the past four years, the amount of  inflation is being created by our own banking system, and not by a lack of products, or by higher demand.
In the end, Americans are being deceived by Fed Chairman Ben Bernanke. …"

<a href="http://www.thedailyeconomist.com/2012/02/gas-prices-soar-on-dollar-devaluation.html">http://www.thedailyeconomist.com/2012/02/gas-prices-soar-on-dollar-devaluation.html</a>
<h3 style="text-align: left;"></h3>
<h3 style="text-align: left;">Gasoline Prices Are Not Rising, the Dollar Is Falling</h3>
<strong><a href="http://blogs.forbes.com/louiswoodhill/">Louis Woodhill</a></strong>

"…Panic is in the air as gasoline prices move above $4.00 per gallon. Politicians and pundits are rounding up the usual suspects, looking for someone or something to blame for this latest outrage to middle class family budgets. In a rare display of bipartisanship, President Obama and Speaker of the House <a href="http://www.forbes.com/profile/john-boehner/">John Boehner</a> are both wringing their hands over the prospect of seeing their newly extended Social <a href="http://www.forbes.com/security/">Security</a> tax cut gobbled up by rising gasoline costs.

Unfortunately, the talking heads that are trying to explain the reasons for high oil prices are missing one tiny detail. Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more.

What the politicians, analysts, and pundits are missing is that prices are ratios. Gasoline prices reflect crude oil prices, so let’s use West Texas Intermediate (WTI) crude oil to illustrate this crucial point.

As this is written, West Texas Intermediate crude oil (WTI) is trading at $105.88/bbl. All this means is that the market value of a barrel of WTI is 105.88 times the market value of “the dollar”. It is also true that WTI is trading at €79.95/bbl, ¥8,439.69/barrel, and £67.13/bbl. In all of these cases, the market value of WTI is the same. What is different in each case is the value of the monetary unit (euros, yen, and British pounds, respectively) being used to calculate the ratio that expresses the price.

In terms of judging whether the price of WTI is high or low, here is the price that truly matters: 0.0602 ounces of gold per barrel (which can be written as Au0.0602/bbl). What this number means is that, right now, a barrel of WTI has the same market value as 0.0602 ounces of gold.

During the 493 months since January 1, 1971, the price of WTI has averaged Au0.0732/bbl. It has been higher than that during 225 of those months and lower than that during 268 of those months. Plotted as a graph, the line representing the price of a barrel of oil in terms of gold has crossed the horizontal line representing the long-term average price (Au0.0732/bbl) 29 times.

At Au0.0602/bbl, today’s WTI price is only 82% of its average over the past 41+ years. Assuming that gold prices remained at today’s $1,759.30/oz, WTI prices would have to rise by about 22%, to $128.86/bbl, in order to reach their long-term average in terms of gold. As mentioned earlier, such an increase would drive up retail gasoline prices by somewhere between $0.65 and $0.75 per gallon.

At this point, we can be certain that, unless gold prices come down, gasoline prices are going to go up—by a lot. And, because the dollar is currently a floating, undefined, fiat currency, there is no inherent limit to how far the price of gold in dollars can rise, and therefore no ultimate ceiling on gasoline prices. …"

<a href="http://www.forbes.com/sites/louiswoodhill/2012/02/22/gasoline-prices-are-not-rising-the-dollar-is-falling/">http://www.forbes.com/sites/louiswoodhill/2012/02/22/gasoline-prices-are-not-rising-the-dollar-is-falling/</a>

<strong>Why Gas Prices Are Actually Falling   </strong>
<div><strong>By Gary Gibson</strong></div>
"…It’s not gold and silver prices that are volatile. Those have been incredibly consistent for thousands of years in terms of commodities they could buy. And because of the increasing standard of living being raised by free market economies, in a very real sense these eternal monies actually buy more. It’s the dollar that has been erratic in its overall declining trend ever since it’s been cut loose from gold (and silver).

Again, people looking at the cost of a gallon of gas, or of milk, or the cost of a nice suit, or rent from behind their piles of gold and silver are finding very little to worry about. In fact, to them, prices are lower than normal and declining.

Also the price of oil has tended to track the price of silver awfully closely for about as long as oil has been industrially useful. And so it’s no mistake that you can still get a gallon of gas for about about $0.20…as long as that $0.20 is composed of a pre-1964 90% silver dimes. …"

<a href="https://raymondpronk.files.wordpress.com/2012/02/silver_quarter.png"><img class="aligncenter size-full wp-image-55554" title="silver_quarter" src="https://raymondpronk.files.wordpress.com/2012/02/silver_quarter.png" alt="" width="544" height="195" /></a>

"…You see, the pre-1965 quarter is worth $6.38 as I type this. The pre-1965 dime is worth $2.55. These coins hail from a time when the dollar was still tied to gold (at the official price of $35 per ounce prior to Nixon nixing the gold standard). The dollar was still as good as gold — even though Americans themselves were forbidden to own gold bullion from 1933 till 1974 — and there was actual silver in the coinage until that content was reduced in 1964 and eliminated in 1965.

Those old silver coins shine the harsh light on the strength of the currency and the abuse that currency suffers from the feds and the Federal Reserve.

If you’d been saving in gold, then from your point of view gas prices have been coming down for the past few years. If you’d been saving in that old “junk” silver (pre-1965 quarters, dimes and half dollars), then gas prices are a downright bargain, too. …"

<a href="http://whiskeyandgunpowder.com/why-gas-prices-are-actually-falling/">http://whiskeyandgunpowder.com/why-gas-prices-are-actually-falling/</a>
<h4><strong>Consequences to Expect if the U.S. Invades Iran   </strong></h4>
<h4><strong>By Whiskey Contributor<small>Feb 22nd, 2012</small></strong></h4>
<h4><strong>Exploding Oil Prices</strong></h4>
The U.S. has had a ban on Iranian oil imports since 1979, however, Iran still supplies about 5% of the global oil market. This might not seem like much, but Iran also has the means and ability to shut down the Straight of Hormuz, which is one of two major petroleum choke points in the world. Around 17 million barrels of oil per day are shipped through the Straight of Hormuz, or about 20% of all oil traded worldwide.
<p align="center"><img src="http://www.ezimages.net/WHISKEY/022212_pic2.png" alt="" width="363" height="208" /></p>
"…In 2006, during the last major Iran war scare, experts predicted gasoline price increases in excess of <a href="http://money.cnn.com/2006/02/07/news/international/iran_oil/" target="_blank">$10 a gallon if Iran was invaded.</a>

This would devastate the U.S. economy, which is already hanging by a thin thread. Iran has announced this past weekend it will cease all oil shipments to Britain and France in protest of their support of economic sanctions. This alone is causing oil to spike today. A global energy crisis will financially decimate average citizens who will have their savings sapped by extreme price inflation, not just in gasoline, but in all goods that require the use of gasoline in their production and shipping. If you like this idea, then by all means, support an invasion of Iran.

<strong>War Domino Effect</strong>

In January of 2010, I wrote an article for Neithercorp Press entitled <a href="http://www.alt-market.com/neithercorp/press/2010/01/will-globalists-trigger-yet-another-world-war/" target="_blank">“Will Globalists Trigger Yet Another World War</a>“. In that article, I warned about the dangers of an invasion of Iran or Syria being used to foment a global conflict, in order to create a crisis large enough to distract the masses away from the international banker created economic collapse.

In 2006, Iran signed a mutual defense pact with its neighbor, Syria, which is also in the middle of its own turmoil and possible NATO intervention. Syria has strong ties to Russia, and even has a revamped Russian naval base off its coast, a fact rarely mentioned by the mainstream media. Both Russia and China have made their opposition clear in the case of any Western intervention in Iran or Syria. An invasion by the U.S. or Israel in these regions could quickly intensify into wider war between major world powers. If you like the idea of a world war which could eventually put you and your family in direct danger, then by all means, support an invasion of Iran.

<strong>Dollar Collapse</strong>

Make no mistake, the U.S. dollar is already on the verge of collapse, along with the U.S. economy. Bilateral trade agreements between BRIC and ASEAN nations are sprouting up everywhere the past couple months, and these agreements are specifically designed to end the dollar’s status as the world reserve currency. An invasion of Iran will only expedite this process. If global anger over the resulting chaos in oil prices doesn’t set off a dump of the dollar, the eventual debt obligation incurred through the overt costs of war will. Ron Paul has always been right; it doesn’t matter whether you think invasion is a good idea or not. We simply CANNOT afford it. America is bankrupt. Our only source of income is our ability to print money from thin air. Each dollar created to fund new wars brings our currency ever closer to its demise. …"

<a href="http://whiskeyandgunpowder.com/consequences-to-expect-if-the-u-s-invades-iran/">http://whiskeyandgunpowder.com/consequences-to-expect-if-the-u-s-invades-iran/</a>
<h1 style="text-align: center;">Background Articles and Videos</h1>
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<h4 id="watch-headline-title" style="text-align: center;">Introduction to Futures</h4>
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<h4 id="watch-headline-title" style="text-align: center;">What is a Future?</h4>
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<h4 id="watch-headline-title" style="text-align: center;">Investopedia Video: How Do Futures Contracts Work?</h4>
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<h4 id="watch-headline-title" style="text-align: center;">Commodity futures margin accounts</h4>
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<div><strong> Security Futures—Know Your Risks, or Risk Your Future</strong></div>
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<strong>"…Margin & Leverage</strong>

When a brokerage firm lends you part of the funds needed to purchase a security, such as common stock, the term "margin" refers to the amount of cash, or down payment, the customer is required to deposit. By contrast, a security futures contract is an obligation not an asset and has no value as collateral for a loan. When you enter into a security futures contract, you are required to make a payment referred to as a "margin payment" or "performance bond" to cover potential losses.

For a relatively small amount of money (the margin requirement), a futures contract worth several times as much can be bought or sold. The smaller the margin requirement in relation to the underlying value of the futures contract, the greater the leverage. Because of this leverage, small changes in price can result in large gains and losses in a short period of time.

<strong>Example:</strong> Assuming a security futures contract is for 100 shares of stock, if a security futures contract is established at a contract price of $50, the contract has a nominal value of $5,000 (see definition below). The margin requirement may be as low as 20 percent, which would require a margin deposit of $1,000. Assume the contract price rises from $50 to $52 (a $200 increase in the nominal value). This represents a $200 profit to the buyer of the futures contract, and a 20 percent return on the $1,000 deposited as margin.

The reverse would be true if the contract price decreased from $50 to $48. This represents a $200 loss to the buyer, or 20 percent of the $1,000 deposited as margin. Thus, leverage can either benefit or harm an investor.
Note that a 4 percent decrease in the value of the contract resulted in a loss of 20 percent of the margin deposited. A 20 percent decrease in the contract price ($50 to $40) would mean a drop in the nominal value of the contract from $5,000 to $4,000, thereby wiping out 100 percent of the margin deposited on the security futures contract. …"

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<div><a href="http://www.finra.org/Investors/InvestmentChoices/P005912">http://www.finra.org/Investors/InvestmentChoices/P005912</a></div>
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<h4>Futures Margins<a href="http://www.dpbolvw.net/click-2519541-10992963" target="_blank"> </a></h4>
<!– google_ad_section_start –>Participants in a futures contract are required to post performance bond margins in order to open and maintain a futures position.

Futures margin requirements are set by the exchanges and are typically only 2 to 10 percent of the full value of the futures contract.

Margins are financial guarantees required of both buyers and sellers of futures contracts to ensure that they fulfill their futures contract obligations.
<h4>Initial Margin</h4>
Before a futures position can be opened, there must be enough available balance in the futures trader’s margin account to meet the initial margin requirement. Upon opening the futures position, an amount equal to the initial margin requirement will be deducted from the trader’s margin account and transferred to the exchange’s clearing firm. This money is held by the exchange clearinghouse as long as the futures position remains open.
<h4>Maintenance Margin</h4>
The maintenance margin is the minimum amount a futures trader is required to maintain in his margin account in order to hold a futures position. The maintenance margin level is usually slightly below the initial margin.

If the balance in the futures trader’s margin account falls below the maintenance margin level, he or she will receive a margin call to top up his margin account so as to meet the initial margin requirement.
<h4>Example</h4>
Let’s assume we have a speculator who has $10000 in his trading account. He decides to buy August Crude Oil at $40 per barrel. Each Crude Oil futures contract represents 1000 barrels and requires an initial margin of $9000 and has a maintenance margin level set at $6500.

Since his account is $10000, which is more than the initial margin requirement, he can therefore open up one August Crude Oil futures position.

One day later, the price of August Crude Oil drops to $38 a barrel. Our speculator has suffered an open position loss of $2000 ($2 x 1000 barrels) and thus his account balance drops to $8000.

Although his balance is now lower than the initial margin requirement, he did not get the margin call as it is still above the maintenance level of $6500.

Unfortunately, on the very next day, the price of August Crude Oil crashed further to $35, leading to an additional $3000 loss on his open Crude Oil position. With only $5000 left in his trading account, which is below the maintenance level of $6500, he received a call from his broker asking him to top up his trading account back to the initial level of $9000 in order to maintain his open Crude Oil position.

This means that if the speculator wishes to stay in the position, he will need to deposit an additional $4000 into his trading account.

Otherwise, if he decides to quit the position, the remaining $5000 in his account will be available to use for trading once again. …"
<a href="http://www.theoptionsguide.com/futures-margin.aspx">http://www.theoptionsguide.com/futures-margin.aspx</a>

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<div><strong>Federal Regulation of Margin in the Commodities Futures Industry: History and Theory</strong></div>
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<h4><a href="http://www.nationalaglawcenter.org/assets/bibarticles/markham_margin.pdf">http://www.nationalaglawcenter.org/assets/bibarticles/markham_margin.pdf</a></h4>
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<h4></h4>
<h4>How does oil speculation raise gas prices?</h4>
<h4>by Josh Clark</h4>
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"…The next time you drive to the gas station, only to find prices are still sky high compared to just a few years ago, take notice of the rows of <a href="http://money.howstuffworks.com/personal-finance/debt-management/foreclosure.htm">foreclosed</a> houses you’ll pass along the way. They may seem like two parts of a spell of economic bad luck, but high gas prices and home foreclosures are actually very much interrelated. Before most people were even aware there was an <a href="http://money.howstuffworks.com/government-bailout.htm">economic crisis</a>, investment managers abandoned failing <a href="http://money.howstuffworks.com/mortgage-backed-security.htm">mortgage-backed securities</a> and looked for other lucrative investments. What they settled on was oil futures.

An <strong>oil future</strong> is simply a contract between a buyer and seller, where the buyer agrees to purchase a certain amount of a commodity — in this case <a href="http://science.howstuffworks.com/environmental/energy/oil-refining.htm">oil</a>– at a fixed price

. Futures offer a way for a purchaser to bet on whether a commodity will increase in price down the road. Once locked into a contract, a futures buyer would receive a barrel of oil for the price dictated in the future contract, even if the market price was higher when the barrel was actually delivered. …”

“…What speculators do is bet on what price a commodity will reach by a future date, through instruments called derivatives. Unlike an investment in an actual commodity (such as a barrel of oil), a derivative’s value is based on the value of a commodity (for example, a bet on whether a barrel of oil will increase or decrease in price). Speculators have no hand in the sale of the commodity they’re betting on; they’re not the buyer or the seller.

By betting on the price outcome with only a single futures contract, a speculator has no effect on a market. It’s simply a bet. But a speculator with the capital to purchase a sizeable number of futures derivatives at one price can actually sway the market. As energy researcher F. William Engdahl put it, “[s]peculators trade on rumor, not fact”

. A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes they’ll be able to sell it later on at the future price. This drives prices up in reality — both future and present prices — due to the decreased amount of oil currently available on the market.

Investment firms that can influence the oil futures market stand to make a lot; oil companies that both produce the commodity and drive prices up of their product up through oil futures derivatives stand to make even more. Investigations into the unregulated oil futures exchanges turned up major financial institutions like Goldman Sachs and Citigroup. But it also revealed energy producers like Vitol, a Swiss company that owned 11 percent of the oil futures contracts on the New York Mercantile Exchange alone

.

As a result of speculation among these and other major players, an estimated 60 percent of the price of oil per barrel was added; a $100 barrel of oil, in reality, should cost $40

. And despite having an agency created to prevent just such speculative price inflation, by the time oil prices skyrocketed, the government had made a paper tiger out of it. …”

http://money.howstuffworks.com/oil-speculation-raise-gas-price.htm

Weekly Petroleum Status Report

Highlights

“…U.S. crude oil refinery inputs averaged just under 14.9 million barrels per

day during the week ending February 17, 170 thousand barrels per day

above the previous week’s average. Refineries operated at 85.5 percent

of their operable capacity last week. Gasoline production increased

last week, averaging nearly 9.0 million barrels per day. Distillate fuel

production decreased last week, averaging just under 4.3 million barrels

per day.

U.S. crude oil imports averaged nearly 9.1 million barrels per day last

week, up by 335 thousand barrels per day from the previous week. Over

the last four weeks, crude oil imports have averaged about 8.8 million

barrels per day, 211 thousand barrels per day above the same four-week

period last year. Total motor gasoline imports (including both finished

gasoline and gasoline blending components) last week averaged 845

thousand barrels per day. Distillate fuel imports averaged 122 thousand

barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic

Petroleum Reserve) increased by 1.6 million barrels from the previous

week. At 340.7 million barrels, U.S. crude oil inventories are in the

upper limit of the average range for this time of year. Total motor

gasoline inventories decreased by 0.6 million barrels last week and are

in the upper limit of the average range. Finished gasoline inventories

decreased while blending components inventories increased last week.

Distillate fuel inventories decreased by 0.2 million barrels last week and

are in the middle of the average range for this time of year. Propane/

propylene inventories decreased by 1.6 million barrels last week and are

above the upper limit of the average range. Total commercial petroleum

inventories increased by 3.3 million barrels last week.

Total products supplied over the last four-week period have averaged

about 18.1 million barrels per day, down by 6.7 percent compared to

the similar period last year. Over the last four weeks, motor gasoline

product supplied has averaged 8.2 million barrels per day, down by 6.1

percent from the same period last year. Distillate fuel product supplied

has averaged about 3.6 million barrels per day over the last four weeks,

down by 5.9 percent from the same period last year. Jet fuel product

supplied is 9.1 percent lower over the last four weeks compared to the

same four-week period last year.

WTI was $103.27 per barrel on February 17, 2012, $4.59 more than

last week’s price and $18.24 above a year ago. The spot price for

conventional gasoline in the New York Harbor was $3.023 per gallon,

$0.022 more than last week’s price and $0.483 above last year. The

spot price for No. 2 heating oil in the New York Harbor was $3.185 per

gallon, $0.002 less than last week’s price but $0.474 above a year ago.

The national average retail regular gasoline price increased for the fourth

week in a row to $3.591 per gallon on February 20, 2012, $0.068 per

gallon more than last week and $0.402 above a year ago. The national

average retail diesel fuel price also increased for the fourth straight week

in a row to $3.960 per gallon, $0.017 per gallon more than last week and

$0.387 above a year ago. …”

http://www.eia.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/pdf/highlights.pdf

Inflation:  Calculating the rate of inflation

Historical CPI-U data from 1913 to the present

“…For just current CPI data, see CPI page. The following table provides all the Consumer Price Index data CPI-U from 1913 to the Present.

The Consumer Price Index (CPI-U)  is compiled by the Bureau of Labor Statistics and is based upon a 1982 Base of 100. A Consumer Price Index of 158 indicates 58% inflation since 1982. The commonly quoted inflation rate of say 3% is actually the change in the Consumer Price Index from a year earlier. By looking at the change in the Consumer Price Index we can see that what cost an average of 9.9 cents in 1913 would cost us about $1.82 in 2003 and $2.02 in 2007.

To find Prior Consumer Price Index (CPI) data on this table (back through 1913) click on the date range links below the table.

For Inflation data rather than Consumer Price Index data go to the Historical Inflation page. If you would like to calculate the inflation rate between two dates using the Consumer Price Index data from this chart, use our handy easy to use Inflation calculator or you might prefer to use our Cost of Living Calculator to compare the costs in two cities. You can find links to Inflation and Consumer Price Index data for other countries HERE. A chart of Inflation by decade, Annual Inflation and Confederate Inflation is also available. Menu navigation is available on the menu bar on the left of every page. We have a complete listing of all of our Articles on inflation, including Inflation Definitions, Which is better High or Low Inflation, and How to Calculate Inflation.

You might also be interested in the wide variety of articles on our sister site Financial Trend Forecaster a complete list of the articles on Financial Trend Forecaster is at the FTF Article Archives.

Note Effective January 2007 the BLS began publishing the CPI index to three decimal places (prior to that it was only one decimal place).  But InflationData.com is still the only place to get the Inflation Rate calculated to two decimal places.

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2012 226.665
2011 220.223 221.309 223.467 224.906 225.964 225.722 225.922 226.545 226.889 226.421 226.230 225.672 224.939
2010 216.687 216.741 217.631 218.009 218.178 217.965 218.011 218.312 218.439 218.711 218.803 219.179 218.056
2009 211.143 212.193 212.709 213.240 213.856 215.693 215.351 215.834 215.969 216.177 216.330 215.949 214.537
2008 211.080 211.693 213.528 214.823 216.632 218.815 219.964 219.086 218.783 216.573 212.425 210.228 215.303
2007 202.416 203.499 205.352 206.686 207.949 208.352 208.299 207.917 208.490 208.936 210.177 210.036 207.342
2006 198.300 198.700 199.800 201.500 202.500 202.900 203.500 203.900 202.900 201.800 201.500 201.800 201.600
2005 190.700 191.800 193.300 194.600 194.400 194.500 195.400 196.400 198.800 199.200 197.600 196.800 195.300
2004 185.200 186.200 187.400 188.000 189.100 189.700 189.400 189.500 189.900 190.900 191.000 190.300 188.900
2003 181.700 183.100 184.200 183.800 183.500 183.700 183.900 184.600 185.200 185.000 184.500 184.300 183.960
2002 177.100 177.800 178.800 179.800 179.800 179.900 180.100 180.700 181.000 181.300 181.300 180.900 179.880
2001 175.100 175.800 176.200 176.900 177.700 178.000 177.500 177.500 178.300 177.700 177.400 176.700 177.100
2000 168.800 169.800 171.200 171.300 171.500 172.400 172.800 172.800 173.700 174.000 174.100 174.000 172.200
1999 164.300 164.500 165.000 166.200 166.200 166.200 166.700 167.100 167.900 168.200 168.300 168.300 166.600
1998 161.600 161.900 162.200 162.500 162.800 163.000 163.200 163.400 163.600 164.000 164.000 163.900 163.000
1997 159.100 159.600 160.000 160.200 160.100 160.300 160.500 160.800 161.200 161.600 161.500 161.300 160.500
1996 154.400 154.900 155.700 156.300 156.600 156.700 157.000 157.300 157.800 158.300 158.600 158.600 156.900
1995 150.300 150.900 151.400 151.900 152.200 152.500 152.500 152.900 153.200 153.700 153.600 153.500 152.400
1994 146.200 146.700 147.200 147.400 147.500 148.000 148.400 149.000 149.400 149.500 149.700 149.700 148.200
1993 142.600 143.100 143.600 144.000 144.200 144.400 144.400 144.800 145.100 145.700 145.800 145.800 144.500
1992 138.100 138.600 139.300 139.500 139.700 140.200 140.500 140.900 141.300 141.800 142.000 141.900 140.300
1991 134.600 134.800 135.000 135.200 135.600 136.000 136.200 136.600 137.200 137.400 137.800 137.900 136.200
1990 127.400 128.000 128.700 128.900 129.200 129.900 130.400 131.600 132.700 133.500 133.800 133.800 130.700
1989 121.100 121.600 122.300 123.100 123.800 124.100 124.400 124.600 125.000 125.600 125.900 126.100 124.000
1988 115.700 116.000 116.500 117.100 117.500 118.000 118.500 119.000 119.800 120.200 120.300 120.500 118.300
1987 111.200 111.600 112.100 112.700 113.100 113.500 113.800 114.400 115.000 115.300 115.400 115.400 113.600
1986 109.600 109.300 108.800 108.600 108.900 109.500 109.500 109.700 110.200 110.300 110.400 110.500 109.600
1985 105.500 106.000 106.400 106.900 107.300 107.600 107.800 108.000 108.300 108.700 109.000 109.300 107.600
1984 101.900 102.400 102.600 103.100 103.400 103.700 104.100 104.500 105.000 105.300 105.300 105.300 103.900
1983 97.800 97.900 97.900 98.600 99.200 99.500 99.900 100.200 100.700 101.000 101.200 101.300 99.600
1982 94.300 94.600 94.500 94.900 95.800 97.000 97.500 97.700 97.900 98.200 98.000 97.600 96.500
1981 87.000 87.900 88.500 89.100 89.800 90.600 91.600 92.300 93.200 93.400 93.700 94.000 90.900
1980 77.800 78.900 80.100 81.000 81.800 82.700 82.700 83.300 84.000 84.800 85.500 86.300 82.400
1979 68.300 69.100 69.800 70.600 71.500 72.300 73.100 73.800 74.600 75.200 75.900 76.700 72.600
1978 62.500 62.900 63.400 63.900 64.500 65.200 65.700 66.000 66.500 67.100 67.400 67.700 65.200
1977 58.500 59.100 59.500 60.000 60.300 60.700 61.000 61.200 61.400 61.600 61.900 62.100 60.600
1976 55.600 55.800 55.900 56.100 56.500 56.800 57.100 57.400 57.600 57.900 58.000 58.200 56.900
1975 52.100 52.500 52.700 52.900 53.200 53.600 54.200 54.300 54.600 54.900 55.300 55.500 53.800
1974 46.600 47.200 47.800 48.000 48.600 49.000 49.400 50.000 50.600 51.100 51.500 51.900 49.300
1973 42.600 42.900 43.300 43.600 43.900 44.200 44.300 45.100 45.200 45.600 45.900 46.200 44.400
1972 41.100 41.300 41.400 41.500 41.600 41.700 41.900 42.000 42.100 42.300 42.400 42.500 41.800
1971 39.800 39.900 40.000 40.100 40.300 40.600 40.700 40.800 40.800 40.900 40.900 41.100 40.500
1970 37.800 38.000 38.200 38.500 38.600 38.800 39.000 39.000 39.200 39.400 39.600 39.800 38.800
1969 35.600 35.800 36.100 36.300 36.400 36.600 36.800 37.000 37.100 37.300 37.500 37.700 36.700
1968 34.100 34.200 34.300 34.400 34.500 34.700 34.900 35.000 35.100 35.300 35.400 35.500 34.800
1967 32.900 32.900 33.000 33.100 33.200 33.300 33.400 33.500 33.600 33.700 33.800 33.900 33.400
1966 31.800 32.000 32.100 32.300 32.300 32.400 32.500 32.700 32.700 32.900 32.900 32.900 32.400
1965 31.200 31.200 31.300 31.400 31.400 31.600 31.600 31.600 31.600 31.700 31.700 31.800 31.500
1964 30.900 30.900 30.900 30.900 30.900 31.000 31.100 31.000 31.100 31.100 31.200 31.200 31.000
1963 30.400 30.400 30.500 30.500 30.500 30.600 30.700 30.700 30.700 30.800 30.800 30.900 30.600
1962 30.000 30.100 30.100 30.200 30.200 30.200 30.300 30.300 30.400 30.400 30.400 30.400 30.200
1961 29.800 29.800 29.800 29.800 29.800 29.800 30.000 29.900 30.000 30.000 30.000 30.000 29.900
1960 29.300 29.400 29.400 29.500 29.500 29.600 29.600 29.600 29.600 29.800 29.800 29.800 29.600
1959 29.000 28.900 28.900 29.000 29.000 29.100 29.200 29.200 29.300 29.400 29.400 29.400 29.100
1958 28.600 28.600 28.800 28.900 28.900 28.900 29.000 28.900 28.900 28.900 29.000 28.900 28.900
1957 27.600 27.700 27.800 27.900 28.000 28.100 28.300 28.300 28.300 28.300 28.400 28.400 28.100
1956 26.800 26.800 26.800 26.900 27.000 27.200 27.400 27.300 27.400 27.500 27.500 27.600 27.200
1955 26.700 26.700 26.700 26.700 26.700 26.700 26.800 26.800 26.900 26.900 26.900 26.800 26.800
1954 26.900 26.900 26.900 26.800 26.900 26.900 26.900 26.900 26.800 26.800 26.800 26.700 26.900
1953 26.600 26.500 26.600 26.600 26.700 26.800 26.800 26.900 26.900 27.000 26.900 26.900 26.700
1952 26.500 26.300 26.300 26.400 26.400 26.500 26.700 26.700 26.700 26.700 26.700 26.700 26.500
1951 25.400 25.700 25.800 25.800 25.900 25.900 25.900 25.900 26.100 26.200 26.400 26.500 26.000
1950 23.500 23.500 23.600 23.600 23.700 23.800 24.100 24.300 24.400 24.600 24.700 25.000 24.100
1949 24.000 23.800 23.800 23.900 23.800 23.900 23.700 23.800 23.900 23.700 23.800 23.600 23.800
1948 23.700 23.500 23.400 23.800 23.900 24.100 24.400 24.500 24.500 24.400 24.200 24.100 24.100
1947 21.500 21.500 21.900 21.900 21.900 22.000 22.200 22.500 23.000 23.000 23.100 23.400 22.300
1946 18.200 18.100 18.300 18.400 18.500 18.700 19.800 20.200 20.400 20.800 21.300 21.500 19.500
1945 17.800 17.800 17.800 17.800 17.900 18.100 18.100 18.100 18.100 18.100 18.100 18.200 18.000
1944 17.400 17.400 17.400 17.500 17.500 17.600 17.700 17.700 17.700 17.700 17.700 17.800 17.600
1943 16.900 16.900 17.200 17.400 17.500 17.500 17.400 17.300 17.400 17.400 17.400 17.400 17.300
1942 15.700 15.800 16.000 16.100 16.300 16.300 16.400 16.500 16.500 16.700 16.800 16.900 16.300
1941 14.100 14.100 14.200 14.300 14.400 14.700 14.700 14.900 15.100 15.300 15.400 15.500 14.700
1940 13.900 14.000 14.000 14.000 14.000 14.100 14.000 14.000 14.000 14.000 14.000 14.100 14.000
1939 14.000 13.900 13.900 13.800 13.800 13.800 13.800 13.800 14.100 14.000 14.000 14.000 13.900
1938 14.200 14.100 14.100 14.200 14.100 14.100 14.100 14.100 14.100 14.000 14.000 14.000 14.100
1937 14.100 14.100 14.200 14.300 14.400 14.400 14.500 14.500 14.600 14.600 14.500 14.400 14.400
1936 13.800 13.800 13.700 13.700 13.700 13.800 13.900 14.000 14.000 14.000 14.000 14.000 13.900
1935 13.600 13.700 13.700 13.800 13.800 13.700 13.700 13.700 13.700 13.700 13.800 13.800 13.700
1934 13.200 13.300 13.300 13.300 13.300 13.400 13.400 13.400 13.600 13.500 13.500 13.400 13.400
1933 12.900 12.700 12.600 12.600 12.600 12.700 13.100 13.200 13.200 13.200 13.200 13.200 13.000
1932 14.300 14.100 14.000 13.900 13.700 13.600 13.600 13.500 13.400 13.300 13.200 13.100 13.700
1931 15.900 15.700 15.600 15.500 15.300 15.100 15.100 15.100 15.000 14.900 14.700 14.600 15.200
1930 17.100 17.000 16.900 17.000 16.900 16.800 16.600 16.500 16.600 16.500 16.400 16.100 16.700
1929 17.100 17.100 17.000 16.900 17.000 17.100 17.300 17.300 17.300 17.300 17.300 17.200 17.100
1928 17.300 17.100 17.100 17.100 17.200 17.100 17.100 17.100 17.300 17.200 17.200 17.100 17.100
1927 17.500 17.400 17.300 17.300 17.400 17.600 17.300 17.200 17.300 17.400 17.300 17.300 17.400
1926 17.900 17.900 17.800 17.900 17.800 17.700 17.500 17.400 17.500 17.600 17.700 17.700 17.700
1925 17.300 17.200 17.300 17.200 17.300 17.500 17.700 17.700 17.700 17.700 18.000 17.900 17.500
1924 17.300 17.200 17.100 17.000 17.000 17.000 17.100 17.000 17.100 17.200 17.200 17.300 17.100
1923 16.800 16.800 16.800 16.900 16.900 17.000 17.200 17.100 17.200 17.300 17.300 17.300 17.100
1922 16.900 16.900 16.700 16.700 16.700 16.700 16.800 16.600 16.600 16.700 16.800 16.900 16.800
1921 19.000 18.400 18.300 18.100 17.700 17.600 17.700 17.700 17.500 17.500 17.400 17.300 17.900
1920 19.300 19.500 19.700 20.300 20.600 20.900 20.800 20.300 20.000 19.900 19.800 19.400 20.000
1919 16.500 16.200 16.400 16.700 16.900 16.900 17.400 17.700 17.800 18.100 18.500 18.900 17.300
1918 14.000 14.100 14.000 14.200 14.500 14.700 15.100 15.400 15.700 16.000 16.300 16.500 15.100
1917 11.700 12.000 12.000 12.600 12.800 13.000 12.800 13.000 13.300 13.500 13.500 13.700 12.800
1916 10.400 10.400 10.500 10.600 10.700 10.800 10.800 10.900 11.100 11.300 11.500 11.600 10.900
1915 10.100 10.000 9.900 10.000 10.100 10.100 10.100 10.100 10.100 10.200 10.300 10.300 10.100
1914 10.000 9.900 9.900 9.800 9.900 9.900 10.000 10.200 10.200 10.100 10.200 10.100 10.000
1913 9.800 9.800 9.800 9.800 9.700 9.800 9.900 9.900 10.000 10.000 10.100 10.000 9.900

To calculate inflation from a month and year to a later month and year, try our Inflation calculator

http://inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx

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Food Prices Rising–Videos

Posted on November 22, 2010. Filed under: Banking, Blogroll, Business, College, Communications, Crime, Demographics, Economics, Education, Employment, Energy, Farming, Federal Government, Fiscal Policy, Foreign Policy, government, government spending, Health Care, history, Homes, Immigration, Investments, Language, Law, liberty, Life, Links, media, Monetary Policy, Money, People, Philosophy, Politics, Rants, Raves, Regulations, Security, Taxes, Video, War, Wisdom | Tags: , , , , , , , , , , , , , , , , , |

 

http://www.shadowstats.com/alternate_data/inflation-charts

U.S. Producer Prices Rise 0.4%, Core Measure Falls 0.6%

 

Housing Starts Fall; CPI Increases Less Than Forecast

 

The Bottom 20% of America could be in for a long Cold, Hungry Winter

 

Higher Prices on the Horizon

 

Why Are Food Prices Rising?

 

Fuel on the cob

 

Ethanol- Don’t Believe The Hype… 

 

Biofuels scandal + food prices.

 

Are You Prepared for Food Inflation Flour up 400% rice up 200%

 

Food Prices On The Rise This Holiday

 

Higher Corn Prices To Impact Your Grocery Budget

 

Peter Schiff’s Admiration For ‘Intellectual Dynamo’ Sarah Palin’s ‘Really Good Stuff’

 

 

Glenn Beck: Prepare For What Is Coming- Food Prices on the Rise 18NOV10

Family Thanksgiving Dinner Could Soon Cost $826, Experts Predict

 

NIA Projects Future U.S. Food Price Increases – Glenn Beck

 

END THE FED!

 

Dear America, Your Taxes Are Going Up 20%, Food and Gas Prices Will Skyrocket, Fed Drops Bomb On Us

 

Background Articles and Videos

Meltup

Rising Global Food Prices Alarm UN

Food Sellers Grit Teeth, Raise Prices

 

Leadership Ethics and Corruption — EU Commission lecture

The Food Crisis Of 2011

 Addison Wiggin

“…Fact is,  the food crisis of 2008 never really went away.

True, food riots didn’t break out in poor countries during 2009 and warehouse stores like Costco didn’t ration 20-pound bags of rice…but supply remained tight.

Prices for basic foodstuffs like corn and wheat remain below their 2008 highs. But they’re a lot higher than they were before “the food crisis of 2008” took hold. Here’s what’s happened to some key farm commodities so far in 2010…

  • Corn: Up 63%
  • Wheat: Up 84%
  • Soybeans: Up 24%
  • Sugar: Up 55%

What was a slow and steady increase much of the year has gone into overdrive since late summer. Blame it on two factors…

  • Aug. 5: A failed wheat harvest prompted Russia to ban grain exports through the end of the year. Later in August, the ban was extended through the end of 2011. Drought has wrecked the harvest in Russia, Ukraine and Kazakhstan – home to a quarter of world production
  • Oct. 8: For a second month running, the Agriculture Department cut its forecast for US corn production. The USDA predicts a 3.4% decline from last year. Damage done by Midwestern floods in June was made worse by hot, dry weather in August.

America’s been blessed with year after year of “record harvests,” depending on how you measure it. So when crisis hits elsewhere in the world, the burden of keeping the world fed falls on America’s shoulders. …”

Packagers and Supermarkets Pressured to Pass Along Rising Costs, Even as Consumers Pinch Pennies

“…Food prices are rising faster than overall inflation. The consumer price index for all items minus food and energy rose 0.8% over the year to September, the lowest 12-month increase since March 1961, the Bureau of Labor Statistics said. The food index rose 1.4%, however. The U.S. Agricultural Department is predicting overall food inflation of about 2% to 3% next year.

The current pressure is nothing like it was in October 2008, when food prices were rising at an annual rate of 6.3% and some hard lessons were learned when producers passed along those costs: Shoppers switched to private-label products. …”

http://online.wsj.com/article/SB10001424052748704506404575592313664715360.html

 

The Biofuels Scam

By James M. Andrews

“…Since 2007, the price of food around the world has just about doubled. Bad harvests, inflation, or George Bush didn’t cause this price increase. According to a secret report from the World Bank, reported in the U.K.’s Guardian, 75% of the increase in price has one source: “Biofuels.” This contrasts with U.S. claims of only a 3% biofuels-caused increase. The World Bank also says that rising food prices have pushed 100 million people worldwide below the poverty line. Riots have been sparked from Bangladesh to Egypt.
Where is the outrage? Where are the MSNBC stories on food riots? Where is Sean Penn?
The Holy Grail of the Left in recent years is climate disruption (formerly known as global warming and climate change). Much ink has been spilled, and much airtime has been devoted to pushing the Green Agenda. Legislation has been passed in the U.S., Europe, and other places to address this so-called crisis. Incandescent bulbs have been banned and mercury-laden CFLs required. Coal-fired power plants are shuttered, raising the price of energy. Vast oil fields are placed off limits. “Cap and Trade” rules threaten our already reeling economy. Among other measures, Congress mandates that gasoline contain 10% by volume of ethanol. As a result, the U.S. is currently burning about 25% of its corn crop as fuel. Government subsidies and mandates work quite well at converting food into fuel, thus reducing the amount of food. As anyone with more than a room temperature IQ knows, less of something results in higher prices. Hungry people? Psh! Saving the planet takes precedence.
Brazil is clearing (by burning) tens of thousands of acres of rainforest to plant sugarcane — not for human consumption, but for conversion to ethanol. Much more acreage has been cleared for sugarcane production than for lumber. As a CO2 “sink,” sugarcane is nonexistent compared to the trees it replaced. If CO2 were such a threat to the survival of the human race, wouldn’t keeping the rainforest be a good idea? Doesn’t burning millions of trees produce many thousands of tons of CO2? Clearly, common sense is missing from the “settled science” agenda of climate disruption. …”

Global food crisis forecast as prices reach record highs

Cost of meat, sugar, rice, wheat and maize soars as World Bank predicts five years of price volatility

“…Rising food prices and shortages could cause instability in many countries as the cost of staple foods and vegetables reached their highest levels in two years, with scientists predicting further widespread droughts and floods.Although food stocks are generally good despite much of this year’s harvests being wiped out in Pakistan and Russia, sugar and rice remain at a record price.

Global wheat and maize prices recently jumped nearly 30% in a few weeks while meat prices are at 20-year highs, according to the key Reuters-Jefferies commodity price indicator. Last week, the US predicted that global wheat harvests would be 30m tonnes lower than last year, a 5.5% fall. Meanwhile, the price of tomatoes in Egypt, garlic in China and bread in Pakistan are at near-record levels.

“The situation has deteriorated since September,” said Abdolreza Abbassian of the UN food and agriculture organisation. “In the last few weeks there have been signs we are heading the same way as in 2008.

“We may not get to the prices of 2008 but this time they could stay high much longer.” …”

http://www.guardian.co.uk/environment/2010/oct/25/impending-global-food-crisis

Six casualties of the world food crisis

http://www.guardian.co.uk/environment/2010/oct/25/food-prices-crisis-staple-foods

Alternate Inflation Charts

“…The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living. 

Further definition is provided in our  CPI Glossary. Further background on the SGS-Alternate CPI series is available in the Archives in the August 2006 SGS newsletter. …”

“…CPI Year-to-Year Growth

The CPI-U (consumer price index) is the broadest measure of consumer price inflation for goods and services published by the Bureau of Labor Statistics (BLS). 

While the headline number usually is the seasonally-adjusted month-to-month change, the formal CPI is reported on a not-seasonally-adjusted basis, with annual inflation measured in terms of year-to-year percent change in the price index.

Here we show the annual percent change (year-to-year) in both the CPI-U and the SGS-Alternate CPI. …” 

 

http://www.shadowstats.com/alternate_data/inflation-charts

Consumer Price Index Summary

 Transmission of material in this release is embargoed until
 8:30 a.m. (EST) Wednesday, November 17, 2010   USDL-10-1600

 Technical information: (202) 691-7000 Reed.Steve@bls.gov www.bls.gov/cpi
 Media Contact:         (202) 691-5902 PressOffice@bls.gov

                  Consumer Price Index - October 2010

 The Consumer Price Index for All Urban Consumers (CPI-U) increased
 0.2 percent in October on a seasonally adjusted basis, the U.S.
 Bureau of Labor Statistics reported today. Over the last 12 months,
 the all items index increased 1.2 percent before seasonal adjustment.

 As has frequently been the case in recent months, an increase in the
 energy index was the major factor in the all items seasonally
 adjusted increase. The gasoline index rose for the fourth month in a
 row and accounted for almost 90 percent of the all items increase;
 the household energy index rose as well. The food index rose slightly
 in October with the food at home index unchanged.

 The index for all items less food and energy was unchanged in
 October, the third month in a row with no change. The indexes for
 shelter and medical care rose, but these increases were offset by
 declines in an array of indexes including new vehicles, used cars and
 trucks, apparel, recreation, and tobacco.

 Over the last 12 months, the index for all items less food and energy
 has risen 0.6 percent, the smallest 12-month increase in the history
 of the index, which dates to 1957. The energy index has risen 5.9
 percent over that span with the gasoline index up 9.5 percent. The
 food index has risen 1.4 percent, with both the food at home index
 and food away from home index rising the same 1.4 percent.

 Table A. Percent changes in CPI for All Urban Consumers (CPI-U): U.S. city
 average

                                  Seasonally adjusted changes from
                                          preceding month
                                                                          Un-
                                                                       adjusted
                                                                        12-mos.
                              Apr.  May   June  July  Aug.  Sep.  Oct.   ended
                              2010  2010  2010  2010  2010  2010  2010   Oct.
                                                                         2010  

 All items..................   -.1   -.2   -.1    .3    .3    .1    .2      1.2
  Food......................    .2    .0    .0   -.1    .2    .3    .1      1.4
   Food at home.............    .2    .0   -.1   -.1    .0    .3    .0      1.4
   Food away from home (1)..    .1    .1    .1    .0    .3    .3    .1      1.4
  Energy....................  -1.4  -2.9  -2.9   2.6   2.3    .7   2.6      5.9
   Energy commodities.......  -2.1  -4.8  -4.1   4.0   3.8   1.8   4.4      9.9
    Gasoline (all types)....  -2.4  -5.2  -4.5   4.6   3.9   1.6   4.6      9.5
    Fuel oil (1)............   2.3  -1.4  -3.2  -1.6    .9    .8   4.7     14.5
   Energy services..........   -.5   -.5  -1.6    .8    .4   -.8    .2       .9
    Electricity.............    .7   -.4  -2.2    .5    .2   -.3    .4       .6
    Utility (piped) gas
       service..............  -4.4  -1.0    .6   1.7   1.1  -2.3   -.4      1.9
  All items less food and
     energy.................    .0    .1    .2    .1    .0    .0    .0       .6
   Commodities less food and
      energy commodities....   -.3    .1    .2    .2    .1   -.2   -.2       .1
    New vehicles............    .0    .1    .1    .1    .3    .1   -.2       .4
    Used cars and trucks....    .2    .6    .9    .8    .7   -.7   -.9      8.6
    Apparel.................   -.7    .2    .8    .6   -.1   -.6   -.3     -1.2
    Medical care commodities
       (1)..................    .2    .1    .0   -.2    .2    .3    .1      2.5
   Services less energy
      services..............    .2    .1    .1    .1    .0    .1    .1       .8
    Shelter.................    .0    .1    .1    .1    .0    .0    .1      -.3
    Transportation services     .4    .4    .0    .0    .1    .3    .3      2.8
    Medical care services...    .3    .0    .4    .0    .2    .8    .2      3.6

   1 Not seasonally adjusted.

 Consumer Price Index Data for October 2010

 Food

 The food index rose 0.1 percent in October after a 0.3 percent
 increase in September. The index for food away from home rose 0.1
 percent while the food at home index was unchanged. Among the six
 major grocery store food groups that comprise the food at home index,
 the index for dairy and related products posted the largest increase,
 rising 1.1 percent. This was its fifth increase in the last six
 months and its largest since January. The index for meats, poultry,
 fish, and eggs also rose, increasing 0.6 percent as increases in the
 indexes for beef, poultry, and pork offset a decline in the eggs
 index. These increases offset declines in the remaining food at home
 groups. The fruits and vegetables group posted the largest decline,
 falling 0.7 percent, while the index for nonalcoholic beverages fell
 0.5 percent. The indexes for cereals and bakery products and for
 other food at home both fell 0.2 percent. Over the past year, the
 indexes for cereals and bakery products and for nonalcoholic
 beverages have declined, while the index for other food at home was
 unchanged and the indexes for the remaining three groups have risen.

 Energy

 The energy index rose 2.6 percent in October, its fourth consecutive
 monthly increase. The gasoline index rose 4.6 percent in October
 after rising 1.6 percent in September. (Before seasonal adjustment,
 gasoline prices rose 3.3 percent in October.) The household energy
 index, which declined in September,  rose in October, increasing 0.4
 percent. The natural gas index fell 0.4 percent, but this decline was
 more than offset by a 0.4 percent increase in the electricity index
 and a 4.7 percent rise in the index for fuel oil. The indexes of all
 the major energy components have risen over the last 12 months.

 All items less food and energy

 The index for all items less food and energy was unchanged in October
 for the third month in a row.  After being unchanged the previous two
 months, the shelter index rose 0.1 percent in October.  The indexes
 for rent and owners' equivalent rent both increased 0.1 percent while
 the index for lodging away from home declined 1.0 percent. The
 medical care index, which rose 0.6 percent in September, rose 0.1
 percent in October, with the medical care commodities index rising
 0.1 percent and the index for medical care services increasing 0.2
 percent. Within the medical care services component, the index for
 physicians' services fell 0.1 percent but the hospital services index
 increased 0.7 percent. Offsetting these increases were declines in
 several indexes. The index for used cars and trucks fell 0.9 percent
 in October, its second straight decline after a long series of
 increases. The index for new vehicles fell as well, declining 0.2
 percent. The apparel index fell 0.3 percent in October, its third
 straight decline. The recreation index fell for the fourth month in a
 row, decreasing 0.1 percent, and the index for tobacco fell for the
 first time since February, declining 0.3 percent.

 The index for all items less food and energy increased 0.6 percent
 over the last 12 months. Several transportation indexes have
 increased; the index for used cars and trucks has risen 8.6 percent,
 while the new vehicles index has edged up 0.4 percent and the index
 for airline fares has risen 4.4 percent. The medical care index has
 also increased, rising 3.4 percent. Indexes that have declined over
 the past year include shelter, which has fallen 0.3 percent,
 household furnishings and operations (down 2.5 percent), apparel
 (down 1.2 percent), and recreation (down 1.0 percent).

 Not seasonally adjusted CPI measures

 The Consumer Price Index for All Urban Consumers (CPI-U) increased
 1.2 percent over the last 12 months to an index level of 218.711
 (1982-84=100). For the month, the index rose 0.1 percent prior to
 seasonal adjustment.

 The Consumer Price Index for Urban Wage Earners and Clerical Workers
 (CPI-W) increased 1.5 percent over the last 12 months to an index
 level of 214.623 (1982-84=100). For the month, the index rose 0.1
 percent prior to seasonal adjustment.

 The Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
 increased 1.0 percent over the last 12 months. For the month, the
 index rose 0.2 percent on a not seasonally adjusted basis. Please
 note that the indexes for the post-2008 period are subject to
 revision.

 The Consumer Price Index for November 2010 is scheduled to be
 released on Wednesday, December 15, 2010, at 8:30 a.m. (EST).

http://www.bls.gov/news.release/cpi.nr0.htm 

 

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