Taper Hawks Screech
Andrew Huszar, former Federal Reserve official responsible for executing the Fed’s first plunge in quantitative easing, gave his confession to the Wall Street Journal yesterday: “The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.” Meanwhile, Mohamed A. El-Erian, CEO and co-Chief Investment Officer of PIMCO warns about the uncertain future of central bank supremacy, he begins with this statement: “History is full of people and institutions that rose to positions of supremacy only to come crashing down.” Great.
Fracking Babies and Singles’ Day in China
The strength of the United States economy’s recovery varies widely state to state, and therefore, so do fertility rates. Some demographers and economists are pointing to states like South and North Dakota, Idaho, Kansas, Texas and Ohio where unemployment is about 6% on average and fertility rates are the highest. An increase in birth rates is often cited as accompanying a recovering economy and may indicate ripple effects for consumer spending and housing. Meanwhile, Monday was “Singles’ Day” in China, the antithesis to Valentine’s Day. Apparently on Single’s Day the tradition is to spend money online: “more than 400 million unique visitors shopped on online shopping portal Alibaba, [and they] spent at least $5.7 billion.”
Let Them Have BMWs: Oil and Gas Innovation, Recklessness and Expansion
The Northeastern United States is becoming more and more reliant on natural gas for power generation due to low natural gas prices and regional environmental initiatives aimed at inhibiting coal burning. Meanwhile, natural gas companies like Continental Resources Inc. are embracing transparency and sharing drilling plans with other oil and gas companies in an effort to reduce the amount of wasted natural gas. Due to a lack of infrastructure and piping, natural gas companies are forced into “flaring” their excessive supply of natural gas if their storage wells are already at full capacity, resulting in more than $100 million lost each month in North Dakota alone. Continental Resources has managed to save more than $2 million per quarter while they share drilling plans three to five years in advance with pipeline companies like Oneok Partners LP and Hiland Partners LP. Also, former BP Chief Tony Hayward “has joined a breed of wildcatters who deploy a risky and sometimes lucrative strategy(Alt): look for oil in politically or geologically fraught lands after cutting deals with governments that claim the lands.” His most recent trip: Somalia. While the Mogadishu government is opposing the expansion of oil companies in Somalia, Mr. Hayward is resolute in his belief that “If people have the opportunity to earn money and buy a BMW, rather than run around the hills with a Kalashnikov, they’ll do it.” But not all natural gas innovations are going off without a hitch: last Friday a train carrying oil derailed and burst into a fireball killing 47 people and leveling buildings in the center of Aliceville, Alabama. Meanwhile, the International Energy Agency is warning that Middle East oil producers may crunch the oil supply(Alt) as they start to take a “wait and see approach” to the US shale revolution.
German Exports Under EU Review
Tensions between the European Union and Germany are flaring again as the EU plans an in-depth review of the German economy(Alt) over an excessive current-account balance. Germany has run a current-account surplus of at least 6% since 2006. Some are taking this announcement as a symbolic test of the emerging power dynamic between Germany (a financial backstop for the region) and the rather young, newer authority of the European Union. Meanwhile, after 16 hours of negotiations, the European Union has agreed to a budget(Alt) for 2014 and will cut spending by 6% from last year.
Global: Where Credit is Due
A staggering presentation of the entangled history of financial innovation and crisis in the World.