Anthony Ricigliano News - The powers that be in China, after seeing growth heat up to 11.9 in the first quarter of the year, decided that is cooling down the economy with lending and investment curbs was needed to prevent overheating. These curbs went to work immediately, slowing the growth rate more sharply than expected with a result of reducing demand for U.S. and European factory machinery, industrial components from Asia and iron ore as well as other raw materials from Australia and Africa.
The timing of China’s slowdown comes at a bad time for exporters that have seen sales go slack just about everywhere else. Already a huge trading partner for many of these countries prior to the recessions that hit the U.S., Europe and others, China had taken a role as the only game town due to a stimulus-driven expansion program designed to compensate for slowing sales elsewhere.
Even with slowing growth China overtook Japan as the second-biggest economy in the second quarter. It is a buyer of 28 percent of Taiwan's exports, 25 percent of South Korea's and more than 20 percent of Australia's mining and raw materials production. Japan just reported sharply lower growth for its second quarter as the growth of exports was almost halved from the first quarter
That being said, it is the producers of iron ore for steel production and other construction-related raw materials which are expected to take the hardest hits from China’s self imposed slowdown. The winding down of a construction boom pushed by China's $586 billion stimulus program as well as billions of dollars in of bank lending is already being felt. These producers include Australia, Indonesia, Malaysia, Brazil and parts of Africa.
New construction projects dwindled as Beijing wound down its stimulus and tightened credit in the second quarter to take the air out of inflating bubbles in real estate and stock prices, slashing demand for steel, cement and other construction related materials. Factory output slowed as well and is expected to head lower in the third quarter as well.
Overall, China’s import growth slowed by about one-third in July, sending tremors throughout the world as the most robust buyer of imported goods for many countries took a step back from the table. An example of the bind China’s slowdown is putting countries in is Taiwan, a major source of components for Chinese factories that make televisions and other electronics, which are in turn sent as finished products United States. China’s slower growth, combined with slowing sales in the U.S. at the same time could hit Taiwan’s manufacturing industries particularly hard.
China, at this point, sits in the enviable position of trying to restrain growth while the rest of the world either relies on them for their relatively healthy economies, such as Australia or tries to recover from recession, like the U.S. With China expecting slower growth over the next several quarters, it could be a rough ride for everyone.
Author Anthony Ricigliano
Tuesday, October 26, 2010
Monday, October 25, 2010
Will BP’s Seal Stick? - News By Anthony Ricigliano
News by Anthony Ricigliano: After having held gushing oil in place since the middle of July, crews from BP are carefully drilling a secondary relief well which, when completed, will deliver a permanent plug into the oil well that has become the biggest oil spill in U.S. history. The drilling of the last phase of the relief well must be done with extreme caution to ensure that it intersects the broken well line. It is hoped that the relief well can reinforce the initial cap and provide a permanent solution by pumping more mud and cement into the well.
With the oil stopped since July 15th, all eyes will be on the "bottom kill" operation which is designed to both permanently seal the well and allow for options on reopening it in the future. Prior to the temporary seal going in, oil flowed out of the broken well for almost three months after Deepwater Horizon rig, which BP had leased, exploded on April 20. The explosion killed 11 employees on the platform and released over 200 million gallons of oil into the Gulf. Investigations are ongoing as whether BP cut corners in their operations in order to save money in the days preceding the blowout.
The first test after the connection of the relief well will be to see if pressure gradually builds up at the point of the seal. The lines which have been releasing oil and gas to surface ships to minimize pressure on the cap would be closed to see if pressure builds naturally within the well. Increasing pressure would indicate that the two and a half miles of casing which lines the well bore is intact which could lead to an oil capture scheme with surface ships capturing oil from the well. Estimates are that four ships could capture up to 60,000 barrels a day. If pressure does not build in the well it would indicate that the casing is damaged and testing would be halted. The relief lines which have been shut would reopen and testing of the casing would commence.
The operation to finally seal the well should provide relief to the cleanup efforts, but for many the damage has already been done. With the Fall shrimping season set to open on August 16th, many of the fishing grounds will remain closed as federal authorities monitor toxin levels in shrimp, crabs, and other seafood. The reminder of these closures was evident as the pre-season “Blessing of the Boats” ceremonies saw barbequed sausage, chicken, and other items on the menu but no sign of the shrimp and crab dishes that are the traditional fare for the celebrations.
There hasn’t been much talk about future plans for the well but it seems unlikely that it will remain closed permanently. While establishing another rig may be extremely unpopular with residents around the Gulf, the sheer volume of oil in the well and BP’s desire to recoup some of the $6.1 billion in costs related to the blowout make it likely that surface ships will eventually be replaced by another platform along the lines of Deepwater Horizon. One certainty in that situation is that it will be closely watched with highest safety standards possible. BP owes nothing less than that to everyone and everything that has been affected by this ecological disaster.
Author Anthony Ricigliano
With the oil stopped since July 15th, all eyes will be on the "bottom kill" operation which is designed to both permanently seal the well and allow for options on reopening it in the future. Prior to the temporary seal going in, oil flowed out of the broken well for almost three months after Deepwater Horizon rig, which BP had leased, exploded on April 20. The explosion killed 11 employees on the platform and released over 200 million gallons of oil into the Gulf. Investigations are ongoing as whether BP cut corners in their operations in order to save money in the days preceding the blowout.
The first test after the connection of the relief well will be to see if pressure gradually builds up at the point of the seal. The lines which have been releasing oil and gas to surface ships to minimize pressure on the cap would be closed to see if pressure builds naturally within the well. Increasing pressure would indicate that the two and a half miles of casing which lines the well bore is intact which could lead to an oil capture scheme with surface ships capturing oil from the well. Estimates are that four ships could capture up to 60,000 barrels a day. If pressure does not build in the well it would indicate that the casing is damaged and testing would be halted. The relief lines which have been shut would reopen and testing of the casing would commence.
The operation to finally seal the well should provide relief to the cleanup efforts, but for many the damage has already been done. With the Fall shrimping season set to open on August 16th, many of the fishing grounds will remain closed as federal authorities monitor toxin levels in shrimp, crabs, and other seafood. The reminder of these closures was evident as the pre-season “Blessing of the Boats” ceremonies saw barbequed sausage, chicken, and other items on the menu but no sign of the shrimp and crab dishes that are the traditional fare for the celebrations.
There hasn’t been much talk about future plans for the well but it seems unlikely that it will remain closed permanently. While establishing another rig may be extremely unpopular with residents around the Gulf, the sheer volume of oil in the well and BP’s desire to recoup some of the $6.1 billion in costs related to the blowout make it likely that surface ships will eventually be replaced by another platform along the lines of Deepwater Horizon. One certainty in that situation is that it will be closely watched with highest safety standards possible. BP owes nothing less than that to everyone and everything that has been affected by this ecological disaster.
Author Anthony Ricigliano
Friday, October 22, 2010
Anthony Ricigliano - The Fed, Wall Street, and the Unemployed
News By Anthony Ricigliano: With so much going on around it, the Fed appears to have forgotten one of its two mandates; the forgotten one being to promote full employment. The last time anybody there looked, the unemployment rate was and still is 9.5%. This number is very likely to head higher in the second half of the year. The economy lost another 130,000 jobs last month and estimates for the GDP range from a slip back into negative territory to around 1% to the positive over the next four quarters.
With these circumstances the Fed, if they were following their mandate, would be taking aggressive steps to bring the economy back to full employment. With inflation numbers hovering around one percent, there are no worries that prices are going to run away anytime soon. In fact, inflation numbers in the 3 to 4% area would probably go a long way toward getting companies to begin hiring again due to a sharp decrease in real interest rates.
The issue keeping the Fed from pursuing its employment mandate is that those levels of inflation would be very unpopular with Wall Street. Superseding the needs of Americans who are out of work, 3 to 4% inflation would be devastating to Wall Street by hammering the massive amounts of mortgage debt on which they’re currently sitting. So who is the Fed listening to?
The fact is that Ben Bernanke’s Fed has had Wall Street’s back all along, going back to the beginning of the banking crisis when, by their own doing, Wall Street’s banks teetered on the edge of bankruptcy. That time Bernanke conned Congress into passing the Troubled Asset Relief Program (TARP) by saying that the commercial paper market was in jeopardy of freezing up, with a near term result of denying access to short-term credit necessary to operate through the meltdown. What he didn’t mention was that the Fed could have opened its own lending facility for that purpose. Coincidentally, he announced the establishment of a lending facility to buy commercial paper the weekend after Congress approved TARP.
That the Fed had a direct responsibility for inflating the housing bubble goes without saying. Even as signs of overheating were becoming obvious, Alan Greenspan himself was talking up adjustable rate mortgages as a means buy a home. These were the same types of mortgages that started the housing debacle but the Fed stuck to its guns as long as possible.
What the country needs at this point is a truly independent Fed that is not beholden to Wall Street and remembers its mandate of promoting full employment for the citizens of this country. We don’t have that now and it’s hard to imagine getting something like that anytime soon. One thing is for certain, with the Fed behind it, Wall Street knows it can mess up big and the Fed will be there with a shovel to clean it up.
Author Anthony J Ricigliano
With these circumstances the Fed, if they were following their mandate, would be taking aggressive steps to bring the economy back to full employment. With inflation numbers hovering around one percent, there are no worries that prices are going to run away anytime soon. In fact, inflation numbers in the 3 to 4% area would probably go a long way toward getting companies to begin hiring again due to a sharp decrease in real interest rates.
The issue keeping the Fed from pursuing its employment mandate is that those levels of inflation would be very unpopular with Wall Street. Superseding the needs of Americans who are out of work, 3 to 4% inflation would be devastating to Wall Street by hammering the massive amounts of mortgage debt on which they’re currently sitting. So who is the Fed listening to?
The fact is that Ben Bernanke’s Fed has had Wall Street’s back all along, going back to the beginning of the banking crisis when, by their own doing, Wall Street’s banks teetered on the edge of bankruptcy. That time Bernanke conned Congress into passing the Troubled Asset Relief Program (TARP) by saying that the commercial paper market was in jeopardy of freezing up, with a near term result of denying access to short-term credit necessary to operate through the meltdown. What he didn’t mention was that the Fed could have opened its own lending facility for that purpose. Coincidentally, he announced the establishment of a lending facility to buy commercial paper the weekend after Congress approved TARP.
That the Fed had a direct responsibility for inflating the housing bubble goes without saying. Even as signs of overheating were becoming obvious, Alan Greenspan himself was talking up adjustable rate mortgages as a means buy a home. These were the same types of mortgages that started the housing debacle but the Fed stuck to its guns as long as possible.
What the country needs at this point is a truly independent Fed that is not beholden to Wall Street and remembers its mandate of promoting full employment for the citizens of this country. We don’t have that now and it’s hard to imagine getting something like that anytime soon. One thing is for certain, with the Fed behind it, Wall Street knows it can mess up big and the Fed will be there with a shovel to clean it up.
Author Anthony J Ricigliano
Subscribe to:
Posts (Atom)