Euro Strengthens in Forex Trading

Currency trading with the euroThe euro is gaining in forex trading today as German GDP information shows growth. The euro zone economy is showing inflation, and the European Central Bank continues to use this inflation worry as a reason not to cut interest rates.

However, many do not expect growth in the euro zone economy to continue through to the end of the year. As the seconf half of 2008 approaches, the euro zone is expected to slow down as well.

Look for more economic data today, as there is a packed calendar for the euro zone economy.

See Also

• Euro in Forex Trading
  World currencies on the FX market

I WANT $7 GAS!

  Americans don't like $4+ gas. I would like gas to be $5, $6, or even $7. I'm not joking.

  First: Many think gas prices are a big rip-off by price-gouging, greedy oil companies. That's wrong. In reality, it's mainly a matter of supply and demand. Demand has been growing faster than supply.

  When Exxon Mobil earned a record $40 billion profit last year, the word "obscene" was widely invoked. But rare was any mention of Exxon's sales level: over $400 billion. So Exxon was making a great big dime on the dollar. Oh, and Exxon paid $30 billion in taxes. Not to mention the additional taxes its shareholders paid on their returns.

  Anyway, oil company bashers don't seem to realize that around 90% of the world's oil (and hence the price) is controlled not by private corporations but by governments.

  And those governments black with oil are often black in other regards: the Iranian mullahs, the authoritarian Putin regime of Russia, the phony populist Chavez of Venezuela, the blood soaked al-Bashir regime in Sudan, the Nigerian kleptocracy. When I fill up at the pump, it's not oil companies I clench my teeth at—it's those regimes. High oil prices are keeping all these bad guys in fat city.

  Oil wealth, for a nation, is not a blessing but a curse. It empowers the rulers rather than the people—who tend therefore to be less free, and poorer, than in other countries where circumstances impel them toward development of entrepreneurialism, industriousness, and accountable government. Those are the kind of countries we want to share the world with.

  That's why I want a big gas tax, to raise prices at the pump—to create a huge incentive to reduce usage—which (because of supply-and-demand) will make the price at the well-head go down. We use so much oil because it's (relatively) cheap. Make it costly, and the free market will do its thing. Pretty soon we'll have cars getting 60 miles to the gallon, because the market will insist on it. And we'll have more nukes and wind and solar power replacing oil-fired power plants.

  That's good with regard to global warming. Climate change is a real problem. But I believe we can deal with it—not by shutting down our industrial economy and making people poorer—but by evolving it to use less fossil fuel, which can be done, and pushed along with proper economic incentives—like $7 gas.

  Europeans already pay gas taxes, and prices at the pump, at the levels I'm talking about.

  But, you say, you hate taxes? Me too! But the fact is, we're already paying a big gas tax. We're paying it to Chavez, Putin, Iran, and Sudan. I'd rather be paying it to our own government than to those creeps. Right now we're just empowering troublemakers.

  And a $2 tax might, conceivably, ultimately reduce demand enough to pay for itself by knocking $2 off the cost of the gas itself. Oil's price has doubled within a very short time; it could be halved by the same market forces working the other way. Admittedly, demand from rising nations like China is a bigger factor than U.S. consumption, and I'd hesitate to predict that anything we do will serve to reduce oil prices that much. However, if the U.S., once and for all, showed it is serious about reducing oil dependency, that would undoubtedly have a tremendous psychological impact on the market.

  But maybe it's not rational optimism to imagine Americans going with my proposal.

  (Acknowledgement: author Thomas Friedman has been saying some of this stuff too.) 

Don’t Be Afraid, Buy Gold

By. Peter Schiff - May 30th, 2008 - http://www.europac.net

Video of Peter Schiff May 28 2008 Fox Business News - Bulls & Bears

As the price of gold has taken some lumps since it crashed into the symbolically significant $1,000 per ounce mark back in March, those on Wall Street who had consistently underplayed its potential on its way up are now assuring its continued retreat. According to these gold market spectators, prices have risen solely as a result of financial panic, and now that the fear has apparently subsided, gold's gains will evaporate as well.

I have been buying gold and gold stocks for myself and my clients since 1999 and not once did I buy out of fear. In fact, from my perspective the only fear I've observed in the gold market is from those who have been too afraid to buy.

While fear may from time to time play a role in creating price spikes in gold, the underlying bull market has been driven by solid fundamentals. Those who have been too afraid to buy simply do not understand the underlying dynamics and have instead decided that the market is irrational. As a result, gold continues to climb the classic wall of worry as any dip in its otherwise upward trajectory causes the speculative investors to jump ship.

Gold's ascent from less than $300 an ounce to its current level was, and is, being driven by those who prefer it as a store of value to the paper alternatives offered by governments. As the Federal Reserve's dollar debasement policy kicks into high gear and other central banks around the world are forced to follow suit to maintain their pegs against the dollar, the rational choice for long term investors is gold. Thus, the decision to buy is not rooted in fear but reason. On the other hand, the decision not to buy is not only rooted in fear, but ignorance as well.

Those oblivious to gold's warnings instead place their trust in government-supplied statistics. Based simply on flimsy CPI reports, these observers believe that inflation is nowhere in evidence, and that the flight to gold is therefore unwarranted. Yesterday's GDP report provides the latest illustration of this dynamic. The government was able to present an annualized first quarter growth rate of .9% based on an assumed annualized rate of inflation of only 2.6%. In other words, inflation in the first quarter of 2008 was the lowest first quarter inflation in the last four years. How such a claim did not elicit howls of laughter is beyond me. The government previously reported that in the years 2007, 2006, and 2005, annualized first quarter inflation rates were 4.2%, 3.4% and 3.9% respectively. Does anyone, besides Fed governors and Wall Street economists, really believe inflation so far in 2008 is 33% below the average rate over the past three years?

Many of those who place their faith with government figures and dismiss the movements in gold believe that inflation is not a problem so long as wages are not rising rapidly. The fact that wages are lagging other prices merely means that inflation is that much more problematic for average Americans. Ironically, what is overlooked is that wages are in fact rising, just not in America. They are rising in the nations that produce the goods that we consume, and those higher costs are indeed being passed on to Americans.

However, recent action in the bond market suggests that a few more people are getting wise to the government's con. This week, yields on long-term treasuries hit new highs for the year, with the yield on the ten year up 90 basis points from its March low. While the Pollyannas on Wall Street attribute this move to the strengthening U.S. economy, those of us buying gold know it's more likely a long overdue increase in inflation expectations. Got gold?

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book "Crash Proof: How to Profit from the Coming Economic Collapse."

Author Kunzru tackles globalisation

Author Hari Kunzru has told the BBC that his follow-up to the award-winning The Impressionist is aimed at highlighting the effects of globalisation - through a computer virus.

Kunzru, who last year refused the John Llewellyn Rhys award as he objected to the politics of its sponsor the Mail On Sunday, tackles both cyberspace and immigration in his new novel. But at the heart is globalisation and the way it allows a virus to bring together three totally unconnected individuals - an Indian immigrant to the US, a marketing boss and a Bollywood actress.

Kunzru told BBC World Service's The Ticket programme that it was unusual for him to have such a definite starting point for his work.

"Usually for me it's a very non-rational set of starting points - they're often images, or just odd conceptual connections," he said.

"With this book there was a definite starting point with the image of a young guy walking along the side of an American road with fast cars driving past, and another image of somebody down on the beach, having been washed up on the shore.

"They felt, for whatever reason, like they were part of the same thing, and the rest of the whole tottery edifice gets built up on those."

'Fake globalism'

Transmission focuses on the contrast between Guy Swift, the cocaine-addled head of a marketing consultancy from England, and Arjun Mehta, who has great difficulties as an immigrant getting into and getting on in America.

Arjun seeks a job in Silicone Valley, but is swiftly fired as the company are able to continually bring in ever-cheaper foreign workers.

In his anger, Arjun releases a computer virus that begins to affect people's lives worldwide.

Transmission is, however, as much about mobility as computers, with Guy able to go anywhere at a moment's notice, and Arjun struggling to find his way as a restricted-stay foreigner in America.

"I think we're living in a world where ease of travel is becoming almost the defining sign of status," Kunzru said.

"If you have the right citizenship and you have money, you can flit across the surface of the Earth. But for other people, their kind of rootedness in place and their inability to move is a sign of their low status, of their oppression under globalisation.

"The real difficulties of the people at the bottom of the tree are only glimpsed at the edges, in the distance - they're serving drinks or they're doing the dirty work to facilitate the lives of the mobile and wealthy."

The book also reveals what Kunzru called his despair at "fake globalism."

At one point, Guy declares his mission is to mine the "emotional magma that wells from the core of planet brand."

Meanwhile the character of Arjun's sister works in a call centre in India, fielding calls from New South Wales. During this time she learns how to speak in an Australian accent - although she does not perceive this as a negative thing.

"She's having quite a good time, and is enjoying learning about Australia," Kunzru stated.

"It's kind of a good thing - much to the wonder of her traditional middle-class parents."

Pro-American

But Arjun does not fare so well.

In contrast to his sister, dealing with the West from within India, Arjun is alone in the heart of the global system.

"He, like many migrant workers, faces the difficulties of not having proper citizenship status in the places where he's trying to live and work," Kunzru stated.

"He believes in America whole-heartedly - he's a really pro-American character.

"But he's on a very restrictive visa, which allows US companies to bring in cheaper talent from abroad. He finds that even in the land of plenty there is relative poverty, and that kind of suburban environment he's trying to move around in as a non-driver is very hostile in a way.

"It's car world - he's almost physically oppressed by the spaces of suburban California."

Overall the book is a satire, mocking excesses of Western life - Guy Swift in particular is the target of much of this, although Gavin Burger, a word-mangling US President, is clearly the subject of some scorn too.

Kunzru stressed he was particularly concerned about marketing, and what he felt "the fact that people are selling us information and people are selling us feelings more and more, rather than just products and services".

"So buying and selling is worming its way into our innermost cells, and that's very dangerous - and potentially, in effect, a profound transformation in our abilities to feel and relate to each other without buying stuff," he added.

Philippine debt swaps

IN 2006, I had been tasked to write about the feasiblity of converting our debts to development projects. The bright idea was proposed by then House Speaker Jose De Venecia. PLCPD then distributed this paper to various congressmen. When a UN representative visited the Philippines to discuss with legislators the viability of such a project, I was asked to discuss the paper to a representative who was invited to participate in the meeting. As a young policy analyst back then, I considered it a great privelege to be helping in the creation of a sound policy-decision making.

I have yet to thank my friend-activist, Mong Palatino for sharing his thoughts on this  in a UP Online Asia article.

throw out the development experts, bring in … everybody?

Bill Easterly – the development industry's angriest critic* – had a column in the Financial Times this week.

 

[I didn't realize, as I wrote this off-line on my commute home yesterday, that Chris Blattman was writing something closely related at more or less the same time.]

 

He starts out with a reasonable argument that experts don't know that much about how to make poor countries grow:

 

The report of the World Bank Growth Commission, led by Nobel laureate Michael Spence, was published last week. After two years of work by the commission of 21 world leaders and experts, an 11- member working group, 300 academic experts, 12 workshops, 13 consultations, and a budget of $4m, the experts' answer to the question of how to attain high growth was roughly: we do not know, but trust experts to figure it out…

 

Why should we care about the debacle of a World Bank report? Because this report represents the final collapse of the "development expert" paradigm that has governed the west's approach to poor countries since the second world war. All this time, we have hoped a small group of elite thinkers can figure out how to raise the growth rate of a whole economy. If there was something for "development experts" to say about attaining high growth, this talented group would have said it.

 

What went wrong? Experts help as long as there are useful general principles, such as could be established by comparing low-growth and high-growth countries. The Growth Commission correctly pointed out that such an attempt to find secrets to growth has failed. The Growth Commission concluded that "answers" had to be country specific and even period specific. But if each moment in each country is unique, then experts cannot learn from any other experience – so on what basis do they become an "expert"?

 

Unfortunately, Easterly then turns expert!  What's the magic bullet?

 

The answer is freedom for multitudinous individuals to figure out their own answers. (emphasis added)

 

The evidence provided is a quote from Friedrich Hayek (another expert) and five examples: "old, despotic, poor Europe compared with modern, free, rich Europe," "South Korea compared with North Korea, former West Germany compared with East, New Zealand compared with Zimbabwe."

 

I don't disagree that freedom leads to growth, and I make no defense of development "experts," but this analysis is about as helpful to poor countries in implementation and evidence as, well, saying "we do not know, but trust experts to figure it out."

 

* I had the pleasure of meeting Bill Easterly this week, and he is pleasant and funny.

* Easterly is the development industry's angriest critic among mainstream economists.  Outside our profession, there are definitely angrier.

Debunking Skill-biased Technical Change

David Card, who always does excellent work, and John DiNardo published a nice work on the subject. Here is their conclusion:

133-40: "Since the late 1980s, a consensus has emerged that the decline in real wages for low-skilled workers in the early 1980s and the subsequent slow recovery of these wage levels are explained by skill-biased technological change. In this chapter, we have argued that the evidence underlying this consensus is remarkably frail. Much of the evidence takes the form of "proof by residual." After accounting for changes in relative supply and (in some cases) making a modest list of other factors, proponents of this consensus note that the decline in the relative wages of low-skilled labor remains unexplained. Skill-biased technological change is then left as the only plausible explanation for the facts. Given the state of knowledge about how labor markets work, we find this line of argument unconvincing. Moreover, the evidence that emerges from such an exercise is highly model-specific. Depending on how the data for different groups are organized, the degree of substitution that is allowed between workers of different genders or ages, and the list of other job characteristics that are included in the decomposition, the results can suggest that rising inequality was either an ubiquitous phenomenon affecting virtually all workers over the past three decades or a trend that mainly affected young workers in the early 1980s."

Card, David and John DiNardo. 2006. "The Impact of Technological Change on Low-Wage Workers: A Review." In Rebecca M. Blank, Sheldon H. Danziger, and Robert F. Schoeni, editors. Working and Poor: How Economic and Policy Changes Are Affecting Low-Wage Workers (New York: Russell Sage Foundation): pp. 113-140.