Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
Exclusive: Privately, Saudis tell oil market- get used to lower prices (Ron Bousso and Joshua Schneyer, Reuters) The Saudis say that they will accept prices as low as $80 for an extended period, even a "year or two". Venezuela has been requesting OPEC production cuts to force oil back above $100 a barrel. Saudi Arabia and Kuwait reportedly say increased output from Russia and the U.S. would keep prices below $100 even if OPEC made cuts, but that production costs would reduce Russian and U.S. output if prices stayed in the 70s or went lower than $70.
Germany exports have recorded their biggest fall since the height of the global financial crisis, in yet another sign that Europe's largest economy is faltering amid broader euro zone weakness and crises abroad.
Sales of German goods overseas slumped by 5.8pc in August, the sharpest fall since January 2009.
German Exports Decline (Walter Kurtz, The Daily Shot email, no url) When shown in the context of normal fluctuation in Germany's export numbers the latest report is nothing out of the ordinary. And the fact that the "biggest drop since January 2009" came after the highest level ever recorded (data goes back 65 years) was not on most radar screens. August 2014 exports value was almost as much as the pre-financial crisis peak. Kurtz says he doesn't "see a major export problem for Germany - just fluctuations in large orders". The reports in the mainstream press (and by bloggers as well) did not present the true picture regarding German exports. That doesn't mean that the latest negative GDP print is not a problem and that the German economy is not slowing down - just that the export data is not yet part of that scenario. If September exports are down further then we can take a more serious look.
Oil Price War Throws the Fed into Crisis Mode (Pam Martens and Russ Martens, Wall Street on Parade) The Martens argue that the last barrier against persistent deflation was $100 crude oil. With that gone there is no further force to prevent prices from falling, leading to production being cut, leading to employment and compensation weakening, leading to prices falling some more and so on.
End of U.S. Dollar Hegemony - Not (Michael Shedlock, MISH'S Global Economic Trend Analysis) Mish presents a well developed expose of the shortcomings of the collapse of the dollar crowd.
Ruble for sale (Walter Kurtz, Sober Look) With the outlook for the first Fed rate hike moving out toward the end of next year, Monday saw a big jump in a number of currencies. An exception: the Russian Ruble. Falling oil prices and economic sanctions have the Russian bear trapped right now.
The damage from a high US trade deficit (Dean Baker, Al Jazeera) Dean Baker has contributed to GEI. Everything Dean Baker says in this piece is true: The U.S. trade deficit "helps Big Finance, outsourcers and vacation takers but hurts manufacturing and low-wage workers [in the U.S.]". But Baker is confusing cause and effect. He attributes the problem cause to inequality of income distribution creating diminished domestic demand. An equally cogent (or more so?) argument is that the problem is the effect of the burden the U.S. incurs as the supplier of the world's reserve currency. Michael Pettis (GEI Analysis) has pointed out that the U.S. trade deficit can increase as a result of trades between other countries even when the U.S. is not involved. Increased global trade requires increased medium of exchange, that is the U.S. dollar and therefore the U.S. must increase supply of U.S. dollars via increased trade deficits or increased net foreign investment or other dollar transfers. This constitutes a component of the U.S. fiscal deficit which provides no direct benefit to domestic demand, boost to employment at home or any other domestic benefit outside of opportunity for increased financial siphoning by rentiers. By this argument the burden of reserve currency status is a cause (note, we do not say the only cause) of income inequality and reduced domestic employment and demand. Pettis argues that this condition is a destabilizing vector for both the U.S. and for the world economy.
This really is going to be the Greatest Show on Earth because it's going to expose the criminality of the system that bailed out some of the biggest crooks in the world, who then leveraged taxpayers and economies to make ungodly sums of money with the de facto understanding that the Fed and the Treasury had their backs.
Saxobank CIO Warns "The Narrative Of Central Bank Omnipotence Is Failing" (Tyler Durden, Zero Hedge) A serious argument is made for inflation fading from the developed world, the day of central bank credibility and effectiveness ending, a topping for the dollar (although perhaps "there is a significant possibility of the US dollar retesting recent highs") and bond yields going much lower (U.S. 10-year to 1.5% and 30-year to 2.5%). See Treasuries Now Looking Down (GEI Investing) and the latest yields from the U.S. Department of the Treasury Resource Center (rates for each day first posted at 5 pm Eastern time). Note intraday market rates are available real time from Investing.com, 10-year rates and 30-year rates. At the market close Monday (13 October 2014) the 10-year had declined two more basis points (bp) to 2.29% and the 30-year yield was also down 2 bp to 3.01%.
Do Small Cap Stocks Lead the Market? (Walter Kurtz, The Daily Slot e-mail, no url) If they do are you getting a message from this chart?
Bears in Hibernation (Walter Kurtz, The Daily Slot e-mail, no url) Should we call today's discussions the "market correction corner"? Kurtz points out here that the last time there were fewer bears was 27 years ago, just before the crash of 1987. Remember that one? Down more than 23% in one day! Complacency kills!!!!
Other Economics and Business Items of Note and Miscellanea
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