Update on Personal Saving Rate

Update on Personal Saving Rate – According to the BEA, the personal saving rate declined in November to 5.3%:  Personal saving — DPI less personal outlays — was $614.8 billion in November, compared with $622.8 billion in October. Personal saving as a percentage of disposable personal income was 5.3 percent in November, compared with 5.4 percent in October. This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the November Personal Income report.  It is possible the saving rate has peaked, or it might rise a little further, but either way most of the adjustment has already happened and consumption will probably mostly keep pace with income growth next year.
Yes, There Are Prisons – Krugman – In answer to Scrooge’s question, yes indeed there are. And lots and lost of prisoners. Mike Konczal has an interesting post showing that there’s a quite strong correlation between conservative economic policies and large prison populations:  I’ll have to think about exactly what’s going on here. But the discussion brings to mind something I ponder on now and then: what happened to the inevitable collapse of American society? All through the 70s and 80s, and some way into the 90s, it was almost a given that all of America would turn into something like the South Bronx, or worse. It was practically a cliche of popular culture; only a return to traditional moral values could arrest our decline.  And then a funny thing happened. Values continued to shift: we kept on having premarital sex and getting divorces, gay and lesbian couples went out in public, relatively few Americans went to church (although a larger number claimed that they went.) Yet crime declined sharply, big cities (New York in particular) became safer than they had been in many decades, and in general society seemed to hold together.
Growing Hypoxic Zones Reduce Habitat for Billfish and Tuna, which could increase vulnerability to fishing – Billfish and tuna, important commercial and recreational fish species, may be more vulnerable to fishing pressure because of shrinking habitat according to a new study published recently in the journal Fisheries Oceanography by scientists from NOAA, The Billfish Foundation, and University of Miami Rosenstiel School of Marine and Atmospheric Science. An expanding zone of low oxygen, known as a hypoxic zone, in the Atlantic Ocean is encroaching upon these species’ preferred oxygen-abundant habitat, forcing them into shallower waters where they are more likely to be caught. While these hypoxic zones occur naturally in many areas of the world’s tropical and equatorial oceans, scientists are concerned because these zones are expanding and occurring closer to the sea surface, and are expected to continue to grow as sea temperatures rise.

Ocean acidification may disrupt the marine nitrogen cycle – Ocean acidification, the result of roughly a third of global CO2 emissions dissolving into the seawater and lowering its pH, has complicated and poorly understood consequences for ocean ecosystems. Scientists already know that a drop in ocean pH affects the carbon cycle, reducing the carbonate ions that organisms like corals, mollusks and crustaceans use to build shells and external skeletons. Now, a new study shows that a CO2-induced increase in acidity also appears to disrupt the marine nitrogen cycle. The finding, to be published December 21 in the Proceedings of the National Academy of Sciences, could have ramifications for the entire ocean food web. The authors of the study examined a specific step in the marine nitrogen cycle, called nitrification, in which microorganisms convert one form of nitrogen, ammonium, into nitrate, a form plants and other marine microorganisms require to survive.

Old, high grain prices near – Grains are all approaching their recent highs. Wheat, corn, and soybeans are within striking distance of the two-year highs made for all three crops.  Grains have some great examples in the commodities of just how volatile things can be, as sugar, cotton, and coffee all are giving the grains a sign of the type of strength that commodities can get when people are short supplies.   Coffee prices ran to new highs today, running above their recent highs and now at all-time highs for coffee prices, well above 2008 price levels. Cotton has rallied to new highs as well, impressive after a huge price dip of about 20% from the highs made in November.  Since then, cotton prices have rallied back to new highs, above the November highs, and the volatility seems to be accelerating (limit up Tuesday and limit down Wednesdday).  These are indeed interesting times, especially when one realizes that cotton competes with corn, soybeans, and wheat acreage in the cotton belt.  Surely there will be more cotton acres in 2011, and that will come at the expense of the other 3 major crops when they have no room to give up acreage.  That makes for some interesting times as we go into spring – with the battle for acreage heating up between the big 4 crops. 


Oil prices climb again today to over $91The national average for a gallon of regular gasoline topped $3 on Thursday. It’s the first time that the average retail price has been above $3 a gallon at Christmas. The average pump price rose about a cent and a half a gallon overnight, to $3.01, according to AAA, Wright Express and Oil Price Information Service. That’s 14 cents more than a month ago and 43 cents higher than a year ago. Pump prices have traditionally dropped after the peak summer driving season and into the winter, because fewer people are on the road.

  Crude oil at $250 per barrel? – Last month Mr Alexei Miller, CEO of Russia’s and world’s largest gas company OAO Gazpron predicted that the oil price would shoot up to $250 per barrel in the near future and the gas prices will follow similar upward trend. The new Russian President Dmitry Medvedev also commented, in a manner gentler than his predecessor’s but quite clearly, that the world has to get adjusted to the new reality of stronger Russian and weaker US economic power in view of high oil and gas prices.  Let us contemplate the scenario in which oil price does rise to $250 per barrel and stays there for an extended period. It would lead to a major global economic recession and possibly a depression. In the US, gasoline prices would rise to $10 per gallon and in India, the price of petrol could rise to Rs 75 to Rs 150 per litre, depending on the subsidy levels, with serious negative economic consequences. The high oil price will also further fuel the inflationary fires all over the world.  Central banks will be forced to raise interest rates to fight inflation and thereby slowing the economies even further. The increased diversion of agricultural outputs to produce biofuels and high cost of fertilisers could lead to very high food prices and shortage of food. The worst affected will be the poorer countries which will be faced with recession, high inflation and shortage of food perhaps ever famines.

Copper Rises in London After China’s Inventories Decline, Port Disruption –  Copper rose for the first time in three days in London after stockpiles declined in China, the world’s largest buyer, amid supply disruptions in Chile.  Copper stockpiles in warehouses monitored by the Shanghai Futures Exchange fell 5.8 percent this week, the exchange said on its website today. Prices have climbed 3.2 percent this week after owners of the Collahausi mine in Chile indicated they may not be able to supply all customers after a port accident.  “A drawdown in Shanghai inventories and ongoing concerns over Collahuasi’s main exit route for its concentrates are keeping copper supported,”

Sugar May Reach 40 Cents as Weather Hurts Global Crops, Thai Miller Says –  Raw sugar in New York may climb to 40 cents a pound by January on concern dry weather in Brazil, the biggest exporter, and record rainfall in Australia may tighten supplies, said the Thai Sugar Millers Corp.  “Bad weather conditions are threatening crops around the globe,” said Vibul Panitvong, executive chairman of the company that represents the country’s 46 millers. Thailand is the world’s second-largest exporter. Raw sugar in New York yesterday gained to the highest level in 30 years on speculation that shipments from Brazil and India, the top producers, may be too low to meet demand. Rain in Queensland state this month after Australia’s wettest spring on record forced producers to leave some cane unharvested. “Frost in Florida and heavy snow in Europe will also worsen the supply situation,”

Oil Rises in London as Snowstorm Returns, Inflation Spurs Commodity Demand – Crude oil in London traded within 1 percent of a two-year high, as the return of snowstorms to parts of Europe buoyed expectations that fuel demand will increase.  Brent crude climbed to its highest since October 2008 earlier today after a report yesterday showed confidence among U.S. consumers improved. Prices will extend gains next week, according to a Bloomberg News survey of analysts. OPEC’s seven Arab-country members are due to meet in Cairo tomorrow.  Brent crude oil for February settlement rose as much as 49 cents, or 0.5 percent, to $94.74 a barrel on the London-based ICE Futures Europe exchange, the highest since Oct. 2, 2008. It traded for $93.90 a barrel at 11:12 a.m. London time. Prices have gained 2.4 percent this week, and 20 percent this year.  West Texas Intermediate oil for February delivery advanced $1.03 to $91.51 a barrel yesterday on the New York Mercantile Exchange, the highest settlement since Oct. 3, 2008. Prices are up 15 percent this year. Electronic and floor trading is closed today because of the Christmas holiday.


China Fails to Complete 91-Day Treasury Bill Sale as Cash Crunch Worsens  –     China’s government failed to draw enough demand at a bill sale for the second time in a month as seasonal demand for funds and higher reserve-requirement ratios left banks with less cash.  The finance ministry sold 16.76 billion yuan ($2.53 billion) of 91-day securities, falling short of the planned 20 billion yuan target, according to a statement on the website of Chinabond, the nation’s biggest debt-clearing house. The average winning yield was 3.68 percent, higher than the 3.22 percent rate for similar-maturity debt in the secondary market yesterday.  “Banks are badly short of cash,” “Given the cash squeeze, the central bank probably won’t announce any tightening measure by the end of this year.”  The cash shortage has also sapped demand for bills sold by the central bank. The monetary authority has sold 1 billion yuan of one-year bills at each of its last four weekly auctions, the lowest sales amounts since October 2007.
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