Stock Markets Pounded, Bond Prices Hounded, Consumer Confidence Grounded
But any hope of a return to happy days when bulls roamed the Street mooing about good times ahead were dashed yesterday as the index of giant industrial companies lost three-quarters of a percent, as did the broader index of 500 big companies' stocks. The NASDAQ composite index fell nearly a full percentage point in value, pulling ever further below the 2000 point mark above which it had valiantly struggled to stay until last week.Dark Wraith CyberGloss
Indices like the Dow Jones Industrial Average and the Standard & Poors 500 measure the pulse of big-company corporate America, while indices like the NASDAQ composite indicate how investors are assessing the health of the far larger set of companies that are relatively small by comparison.
Fueling investor woes was a larger than expected drop in the Conference Board's March consumer confidence index, which fell by two full points to 102.4 from a revised February figure of 104.4. Analysts had expected an easing of the index but had forecast that it would fall to 103, pointing once again to professionals' failure to come to grips with and adequately model the extent of the weakening of the American economy as gasoline prices, interest rates, and costs of consumer goods and services all move into ranges where households begin to experience real and noticeable adversity.
Bond prices, which slid on Monday, went down fractionally more on Tuesday, pushing yields upward. The ten-year Treasury bond closed Tuesday at a yield of 4.66 percent, up two basis points from Monday. Short-term Treasury bills and the long bond stepped up, too.
In early news on Wednesday morning, the revised figures for fourth quarter, 2004, GDP were released without any change in the overall measure of the economy's growth rate.
However, a somewhat less noticed figured released on Tuesday was the change in the consumer-level price index that excludes the costs of food and energy, both of which are contributing substantially to rising expenditures for households. However, even taking these two price busters out of the equation, the price index for the fourth quarter rose at an annualized rate of 1.7 percent, just about double its annualized pace in the third quarter. Federal Reserve Chairman Alan Greenspan has stated on more than one occasion that he pays particular attention to this "core" inflation rate indicator, so its upward momentum in the waning months of last year means that he will be very unlikely in the coming months to back off the Fed's battle against inflation, which he still claims to Congress is under control, despite spiraling costs of energy and other products that consumers are seeing in their everyday lives.Dark Wraith CyberGloss
Most figures that are released by the government are later revised, usually because more complete data have come in. While the initial numbers are generally given wide attention in the media, the revised figures are barely mentioned, even when they differ significantly from those released initially.
Published 3/30/2005 10:03:00 AM
<< 17 Comments Total
What happens to the value of the dollar if/when China and/or Saudi Arabia start backing their curreny with Euros rather than dollars?
Just to throw a monkey wrench into our already perilous economic situation...
Who wants to bankrupt the U.S.? Someone wants us bankrupt...Funny how a lot of foreign countries own most of our 7 TRILLION dollars of debt...what happens if we defautl? Do they foclose on and reposses the White House?
I'd like to have the mechanics of such a default explained, too, but I think paradigm shifter can imagine a little of what would happen with a currency shift by looking at Great Britain. Their currency was the currency of exchange until the early or mid 50's, I believe.
Have they been a geopolitically dominating player since then? (I realize it's a little more complicated than that, but still....)
- oddjob
Darkwraith,
a little OT but...
Be ready to give up your right to privacy RE: the internet...
The www.ntia.doc.gov voted to
"disallow new private domain name registrations on .US domain names. In addition, if you already own a private .US domain name registration, you will be forced to forfeit your privacy no later than January 26, 2006. By that time, you will need to choose between either making your personal information available to anyone who wants to see it, or giving up your right to that domain name."
see http://www.bobparsons.com/
and http://www.thedangerofnoprivacy..../? isc=GDG0329US
Sorry Darkwraith, that one link should be
http://www.thedangerofnoprivacy.com
Well DW, if you don't want to give up your personal info you could always change your web site to something like Takeaflyingleapatarollingdonut.com
Oddjob, I thought of you when I saw this cartoon. Social Security Scratchers
Take A Flying Leap At A Rolling Doughnut dot com?!
Mr. Goat, you have been deeply and perhaps irreversibly affected by the ground water.
I admire that.
The Dark Wraith checks for domain name availability.
Good evening, Paradigm Shifter.
You simply must be one of the best resource locators I've seen in a while.
If only every student in my more advanced courses could take the initiative to go out and dig up stuff and be able to direct me to where they found it, I think I'd die a happy professor.
Okay, I need to get moving on a major project here, right now.
The Dark Wraith will be back in a couple of hours with an announcement about a change... I hope.
(Must be 85 or older to collect....)
Ain't that the truth!
(Sardonic, sad smile.)
- oddjob
Mr. Goat, you have been deeply and perhaps irreversibly affected by the ground water.
Buuurrrppp! 'cuse me ossiffer. The solfents made me do it.
-----------
So why is clogger working so well today, because you're about to dump it?
On another note....
http://durrrrr.blogspot.com/
Good morning, Paradigm Shifter.
That blog for which you provided the link was truly unusual to say the least.
Now, to deal with the question you posed that started this thread: what would happen if the U.S. dollar were to be abandoned as the primary currency for denominating global transactions?
Among the several and generally dire effects is that this would signal the end of the United States as the world's banker. Now, this might sound like a rather diffuse matter, but it is not. You see, banks are financial intermediaries. A fundamental necessity for being such is that funds must be obtained at a lower rate than that at which they are then lent. In other words, the liabilities side of the balance sheet must have a lower cost of capital than the assets side has as a return on capital.
In practical terms, then, a bank must be able to pay less for money than what it makes on money.
If the greenback no longer serves as a positive conduit for return on assets of the United States, then necessarily, our interest rates will rise to the level of any other end user of a banking system.
This effect is wholly apart from issues of monetary policy, wherein the Federal Reserve system manages real interest rates through variations in the rate of growth of the money supply in relation to the real growth rate of the economy.
Parking the matter on brass tacks, we have, for more than a half century, benefited as a nation from being able to acquire capital at a substantially lower cost than that which other nations had to pay. We were the banker, and that's one of the big benefits of being the banker. Once we lose that status, we pay what everyone else pays; and that is quite a bit more. That means the real growth rate of the U.S. economy will be lower, and it will stay that way.
Now, who would want to bankrupt us? Certainly not the Chinese; neither would the Europeans, nor the Arabs, nor the Japanese, nor any of the Asian tigers. Not one of these countries would be stupid enough to destroy a huge customer for its goods and services, and not one of these countries would be financially reckless enought to wipe out the massive store of value that is held in its reserves of U.S. currency.
So, who would? The only country—as a nation, not as some conspiracy of malevolent interests within its borders—that might be interested in seriously crippling the U.S. would be Iran, and that is partly our fault: we've seen to it that they don't hold the huge levels of foreign reserves in dollars, and we've seen to it that they are snuggled close to the breast of Europe and China, so we've made them not just our enemy, but far worse, our enemy that doesn't have a lot of incentive to keep us chugging along like in the good old days.
There are certainly other countries out there that might be interested in boxing our ears back a little or a lot, and there are most decidedly countries out there that would like to see us behave in a more circumscribed manner. Those desires might come to fruition through the long, slow degradation of our economy in the 21st Century, but even that is a risky game to play. Our neo-conservative whackos currently in power have demonstrated a rather amazing willingness to allow the U.S. economy to sustain damage just so they can continue to press their agenda for American Empire. As a result, damaging the United States economically is proving not to be a particularly effective way of teaching us the lesson we need to learn about trying to be the world's bully. If anything, at least the neo-cons who are running the White House and the Pentagon seem to be completely clueless that there should be a point where the failures of their operational plans lead to a re-assessment of the fundamentals of their world view. Although you can find interesting examples in the neo-conservative journals of some of their intellectual luminaries speaking in seriously concerned tones, those warnings have apparently fallen on deaf ears within the Bush Administration.
It would appear, then, that we are on a collision course with a good, old-fashioned butt-paddling, compliments not of a world that wants to wreck us, but rather of a global dynamic that wants us to once and for all grow up.
The Dark Wraith has spoken.
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Wow Darkwraith! Thankyou for your very well thought out and detailed post! My question was more rhetorical and tongue-in-cheek but nevertheless I appreciate your commentary.
My only comment would be that if we do back Taiwan up and a war breaks out between China and the U.S., I don't see the Chinese as hesitating to really jack up our economy...But that is strictly opinion based on little facts...certainly not as many facts as you have.
That is an interesting point that you make about Iran. It goes to show that a little country can get leverage against the U.S.
Great Work!
It would appear, then, that we are on a collision course with a good, old-fashioned butt-paddling, compliments not of a world that wants to wreck us, but rather of a global dynamic that wants us to once and for all grow up.
I don't disagree, but what form of paddling will make us grow up? With the rampant consumerism of earn and spend exhibited by the typical citizen, it seems as if any economic paddling will land on the wrong butt cheek. How do you spank the US and have it land on the assministration that we call government?
Didn't "the people" elect it (assuming it wasn't any more stolen than usual)? Even if it was more stolen, didn't "the people's" elected delegates with an obligation to examine and verify such (the Congress) decide NOT to do so?
Maybe a butt-paddling of the people isn't such a bad idea....
- oddjob
Good afternoon, Mr. Goat.
Lord only knows that I shall disclaim any expertise from formal training in the ancient and refined art of paddling, this despite having once been given a subscription to Stand Corrected magazine. (And yes, that is a real magazine, and I am not kidding about the gift). That having been said, I honestly do not see the current round of neo-conservatives learning their lesson despite the pain they will visit upon their countrymen. When the Uncle Milt's monetarist/libertarian cabal went down to South America and promptly wrecked some economies with their religious-vision zeal, they were lucky to escape with their lives in the aftermath. Did that teach them a lesson? It did, but only to the extent that it taught them to hide in academia, think tanks, and government agencies while projecting their craziness upon the world around them.
When Paul Wolfowitz made a visit to Baghdad, he nearly bought the farm when a rebel rocket blew the hotel floor below his to smithereens. I swear, at a press conference later that day, Wolfie looked like he was still concentrating on regaining full bowel control. But did that give him any new perspective on real-world consequences of his theoretical, halls-of-ivy genius? Again, only to the extent that he doesn't hang around Baghdad hotels anymore.
I do agree with him that those rebels are to be condemned, though.
The Dark Wraith has no use for people who can't hunt wolves properly.
So are you suggesting the impact may eventually be great enough that the sheeple get tired enough of the shearing to start hunting the wolves?
And speaking of wolves, we know where wolfie is hiding now.
And add this to the reading list. Cheney’s Oil Change at the World Bank