briefly

[solarbird]

It's been a bad day, so here's only two bits of economics to throw at you before I go to bed. Well, three, I guess:

1. Third quarter 2007 jobs data - the real data - is finally out. Instead of the jobs gains manufactured by the birth/death model and other black-box devices, the actual, best count on the ground shows outright job losses of 100,000 per month in the private sector. Fourth quarter will probably be a similar ratchet downwards.

2. The new H3 report is out, showing bank reserves to have set a new round of, um, insolvency, higher even (in preliminary numbers) than the April 9 report; bank non-borrowed reserves are at US$-111B against US$42B required, indicating that without loans from the Fed, the banking system as a whole would be failing to meet reserve requirements by US$152B, or Billion. (The numbers aren't straight adds due to rounding.) There had been a couple of steps of improvement in the previous four weeks; this is a new negative record. There are rumours of possible FDIC actions this weekend, but even if something does happen, it'll be hard to know too much immediately because the FDIC website is being taken partially down for maintenance over the long weekend. Here's a MarketWatch story talking about some of the banks under particular pressure. Relatedly, Mish updates his coverage of one particular Washington Mutual mortgage pool, in the context of several others.

3. On the other hand, bond and stock markets behaved normally today; the stock selloff was not paralleled by a bond selloff; people bought treasuries as you'd expect. Again, one day is not meaningful, but I mention it because I've been mentioning the atypical days. Until we have May's overall treasury flow data, the clock remains started.

PS: Okay, fine, a bonus round: over at RGE Monitor, you have a look at Asian country fuel subsidies, and what kind of changes - if any - are forthcoming in those subsidy regimes. Controlled consumer prices mean no demand changes in response to higher crude costs, and you know what that means...

Comments

[technoshaman.livejournal.com]

you know what that means...

No, we don't... would you tell us, Professor?

(Seriously.... you've got a far, far better grasp of all this stuff than anybody else I know, you may as well be teaching it... )

Although I tell you what scares me more than anything. All this ya-ya about the high rollers going splody, I could give a tinker's dirt clod about; I have no consumer-grade debt and don't intend to get any anytime soon. Cash is king. But that first item there gives me the deer in the headlights... when the jobs on the ground go 'splody, I get twitchy.

Now, what I wanna know is what *kind* of jobs. Burger flippers, exec assistants, retail, construction, or, heaven forbid, geeks? The geekside market still seems to be jumping, but me, I've already got my claws dug into my seat... if the bottom starts to come out of the market, all the Victor Charlie will dry up, and the whiz kids that make them go will be looking for jobs at the big boys... and boom, there goes the market for geeks. And you hope to all the gods that the big boys don't start euphemism-izing.

(Personally, I like where I am in the market, our whole message is do more with less money, and we've got open headcount to beat the band.... I sure hope the boys back East don't decide to start messing with things anytime soon.)

[angharads-house.livejournal.com]

Controlled prices mean that there is no market-spike in prices that would trigger demand destruction; as long as the economies in question have lots of dollar reserves on their side of the ocean they can continue to bid for, and obtain, increasingly-scarce supplies of freely-tradable crude oil (as opposed to supplies which are tied up in mid- to long-term JV and sales arrangements).

The one cuckoo in the woodpile is fuel substitution, whether directly (e.g. the piles of coal under the abandoned Petro-China gasoline pump canopies that I saw in and around Wuhan City), or indirectly, such as SASOL and other coal-to-liquid conversion schemes. I'm NDA'd on most of that stuff; enough to say that it is happening, and it will continue to happen despite attempts to litigate it out of existence. Even within the native range of Arbutus menziesii trees, if you get my drift.

Now, after that brief early-morning warmup act, maybe Professor 'Bird can take the floor. ^_^ Gotta go find, and look at, more carbon.....

ETA: apologies for typos: MG is getting bad ugly again.

[solarbird]

Basically, what she said. Demand is normally elastic (to varying degrees) based on price - which means that as something gets more expensive, consumption of it goes down - eventually by inability to afford it. (C.f. a lot of countries in the third world which have already been priced out of the market all but entirely.)

What she didn't mention - it's not an answer to your question but is a further elaboration on the situation - is that is that most exporting countries do not allow domestic oil and products prices to float, resulting in a similar situation in the most important oil exporting countries. This is described in the "export land" model, wherein as production falls, domestic consumption continues to rise, resulting in an even steeper export falls and, accordingly, an even faster reduction in the amount of oil on the actual world market.

Countries which try to address this by raising prices/reducing the subsidy typically get rioting as a result. Iran finally managed to raise prices a bit, but it cost them a lot in terms of street riots and hurt regime legitimacy. You may remember these riots in the news some months ago.

[westrider.livejournal.com]

I just want to second the fact that you really do put together some of the clearest explanations of economic situations and their implications that I've ever seen. Thank you for making this information available in a form that I can actually understand.

[solarbird]

You're welcome. ^_^