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What Larry Summers thinks.

uly 1, 2009, 1:19 am

NEW YORK (AFP) - When it comes to the economic crisis, the worst is yet to come, top White House economic advisor Lawrence Summers said Saturday.

"I don't think the worst is over," Summers told the Financial Times. "It's very likely that more jobs will be lost. It would not be surprising if GDP has not yet reached its low."

Despite his worried outlook, Summers, director of President Barack Obama's National Economic Council, acknowledged a change in the economic environment.

"What does appear to be true is that the sense of panic in the markets and freefall in the economy has subsided and one does not have the sense of a situation as out of control as a few months ago," he said.

The US Commerce Department is scheduled to publish on July 31 its first gross domestic product (GDP) estimates for the second quarter, and economists are expecting a continuation of the decline that began last winter.

Indicators published last month suggested that the US economy had overcome the worst of the crisis, with a 5.5 percent GDP annual rate in the first quarter, after the previous quarter's 6.3 percent decline.

A survey of economists conducted by The Wall Street Journal this week found that 54 percent said the US recession that began in December 2007 will be over by summer's end.

But the poll also found that economists expect the US unemployment rate, currently at 9.5 percent, will rise to 10 percent by the end of the year and remain at that level until around June 2010.

The comments by Summers echoed the cautious approach to economic projections taken by most Obama administration officials of late.

Obama himself emphasized at the end of this week's G8 summit in Italy that "recovery is still a way off."

"It would be premature to begin winding down our stimulus plans and... we must sustain our support for those plans to lay the foundation for a strong and lasting recovery," he told a post-summit press conference.

[MFSSCW2c]

June 26, 2009, 11:40 am

WASHINGTON (AFP) - US consumer confidence sank in June as households worried about the prolonged recession and vanishing jobs, the Conference Board said Tuesday.

The business research group said its consumer confidence index retreated to 49.3 points in June from a revised 54.8 in May, an eight-month high.

Most analysts expected a much stronger reading of 55.3 points in the 100-point index.

Consumers felt more pessimistic about current conditions and conditions in the coming months, according to the monthly survey of 5,000 US households. The cutoff date was June 23.

The present situation index tumbled to 24.8 in June from 29.7 in June and the expectations index, measuring the outlook for the next six months, dropped to 65.5 from 71.5.

"The decline in the present situation index, caused by a less favorable assessment of business conditions and employment, continues to imply that economic conditions, while not as weak as earlier this year, are nonetheless weak," said Lynn Franco, research director of the Conference Board.

Franco said the expectations index continued "to suggest less negative conditions in the months ahead, as opposed to strong growth."

The June consumer confidence index however remains well above the April reading of 40.8, and is far better than the all-time bottom of 25.3 hit in February, the lowest level since tracking of the data began in 1967.

In the June outlook on current economic conditions, those finding business conditions "good" declined to 8.0 percent from 8.8 percent, while those claiming they were "bad" increased to 45.6 percent from 44.5 percent.

Consumers claiming jobs were "hard to get" rose to 44.8 percent from 43.9 percent. Those saying they were "plentiful" fell to 4.5 percent from 5.8 percent.

Expectations over the next six months deteriorated. Consumers expecting business conditions will improve dropped to 21.2 percent from 22.5 percent, while those anticipating they will worsen increased to 20.2 percent from 18.0 percent.

Consumers grew increasingly worried about the labor market, as many economists predict the unemployment rate will hit double-digit figures this year as the economy grapples with recession.

Consumers expecting more jobs available in the months ahead slid to 17.4 percent from 19.3 percent, while those anticipating a weaker job market climbed to 27.3 percent from 25.6 percent.

Most analysts expect the government's June unemployment report, due Thursday, to show a rise to an annualized 9.6 percent rate. The jobless rate hit a worse-than-expected 9.4 percent in May, the highest level since August 1983.

With job insecurity on the rise and home prices falling in the collapse of the housing market, consumers expecting an increase in their incomes in the next six months fell to 9.8 percent from 10.8 percent.

"The downturns in the confidence and expectations indices come as consumers continue to grapple with a tough labor market, depreciating home values, and a flat stock prices during June," Briefing.com analysts wrote in a client note.

[alex_loudermilk]

Sorry old boy when the Fed raises rates next year well know what happens to the price of gold.

Now now dont cry over it or the fact that Perth Property prices are down 130K and places like Giraultown, WA are dying

Tsk Tsk Tsk

[MFSSCW2c]

China Dumping Treasury Bonds for Gold as U.S. Debt Surges Higher
Commodities / Gold & Silver 2009
Jun 25, 2009 - 07:02 AM
By: Adrian Ash

THE WHOLESALE PRICE of physical gold rose again early Thursday in London, reaching one-week highs for UK and Euro investors as local stock markets fell and crude oil bounced back above $69 per barrel.

Base metals rose, soft commodities fell and government debt prices were mixed after yesterday's "no change" decision from the US Federal Reserve, rising at short maturities but falling on long-dated debt worldwide.

Gold in Dollars recorded its best London Gold Fix since last Friday at $934.25 an ounce.

"Gold broke the 100-day moving average at 927 with gusto," says a technical note from London market-makers Scotia Mocatta, "trading as high as 940.

"[Weds] shows as an 'up day' and thus confirms the technical reversal [and] gives added confidence that the metal may have 'hammered out its lows' to the downside.

"As a technical trade we would Buy Gold here, looking for an initial move to 944 – the mid-June congestion – with our stop below 927."

Reviewing the Fed's sixth month of zero-bound interest rates, "It watches and waits," says Brad DeLong, professor of economics at Berkeley.

"The FOMC chose not to mess with success – or at least, with some signs of stabilization," says a note from J.P.Morgan.

"Moreover, there were no changes to any of the Fed’s large-scale asset purchase programs."

Foreign central banks also continue to buy US securities – particularly government debt – reports John Jansen at AcrossTheCurve.com, with 68% of Tuesday's $40bn auction of new two-year Treasury bonds going to so-called 'indirect' bids "which the Street holds is a proxy for central-bank interest."

A change in definition means 'indirect bidders' may include some non-central bank demand, but some 62% of yesterday's $38bn in 5-year notes also went to indirect bidders, Jansen adds, helping squash the average yield down to 2.70%.

Five-year yields in the open market ended last night at 2.75%.

"Central banks are adding to their Dollar reserves," writes former US Treasury and IMF economist Brad Setser in his blog for the Council on Foreign Relations.

The New York Fed's custodial holdings – securities it holds on behalf of foreign central banks – "have been growing at a smart clip," Setser goes on, noting that over the last three months, foreign agencies grew their custodial accounts by $160bn, "with Treasuries accounting for all the increase."

But "central banks could be clustered at the short-end of the curve because they fear that US inflation will rise – and they don’t want to be stuck with longer-term US bonds."

"Should we Buy Gold or US Treasuries?" asked Li Lianzhong, chief economist at China's Communist Party policy research office, at a conference in Beijing today.

There is no suggestion Li was setting an official line, says the Reuters report quoting his comments. But "The US is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the Dollar will fall.

"So gold should be a better choice."

California's controller said last night that unless the state resolves its $24 billion budget deficit by next week, it will have to start issuing I.O.U.s to pay its bills.

"Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," said John Chiang in a statement.

Calling the US economy "a shambles", legendary value-investor Warren Buffett told CNBC overnight that "We have had no bounce...There are a lot of excesses to be wrung out, and that process is still under way.

"It looks to me it will be under way for quite a while."

Meantime in the United Arab Emirates, the Dubai Gold and Commodities Exchange said trading volumes rose 60% in May to the second-highest since its 2005 launch as speculative interest returned.

"We have experienced a wholesale return of trading liquidity to the market," said CEO Malcolm Wall Morris, forecasting "a year of consolidation rather than aggressive growth", with Gold Futures contracts set to make up 45% of DGCX business, down from 70% last year.

"Dubai is a pay-as-you-go model, dependent on foreigners' money and talent," says a new report from Swiss bank UBS, warning that the Middle East's boom town could suffer yet further as ex-pats head home.

"If foreigners exit, there is a domino effect through the entire economy."

Writing for Resource Capital Research's Sydney office, "Re-emergence of inflation is the monster under bed which could crawl out and become the dominant driving force in gold markets," says senior gold analyst Dr Tony Parry, quoted by the Australian Journal of Mining.

"It could see the Gold Price above US$1,000 per ounce in 2010."

[MFSSCW2c]

The sinking USD

[alex_loudermilk]

The sinking USD

Yes the beautiful sinking dollar, exactly what Bernanke wants

You have to hand it to the US, they are the best, they get Australia and Europe to eat their debt at a quicker pace just on currency manipulation and since all commodities are priced in US$, there are no higher import prices

The US is popping champagne corks over the low dollar

But now if only investors stop buying it whenever the market tanks the surprising strength of the dollar in 2009 is unwelcome.

Too bad the same cant be true of Arsetralia

Poor Arsetralia