U.S. Economic/Financial News

Sales of 30-Year Treasury Bonds To Be Resumed

The Bush Administration will resume sales of 30-year Treasury bonds next February, according to an announcement May 4, after sales were suspended in October 2001. The timetable announced was for public comment through August, then an auction to take place in February 2006. One source stressed the import of the action in terms of flailing around in hopes of propping up the dollar. He said, perhaps the bonds would carry an interest rate of 7% or so, in a year. At present, money is going off-shore to seek out and park in various short-term instruments. The thinking goes, that maybe it could be induced to come back.

Snow Again Demands China Revalue, Now

U.S. Treasury Secretary John Snow, in a May 3 interview with CNBC, again demanded that China let the value of the yuan float upward, and do it immediately. In response to continual Bush Administration demands since mid-April, Chinese officials have consistently said that they will not set any near-term date for action on their currency, because of the wide currency destabilization that could occur in Asia as a result. Nonetheless, Snow insisted that China must revalue now. "We've been engaged with the Chinese now for over two years in discussions on the direction of their currency. They're committed to move to greater flexibility. They've taken a lot of steps to accommodate greater flexibility through improvements in their financial system. We think they're ready and we think now is the time for them to move," said the Treasury Secretary.

Cartels Push for LNG as Part of World Energy Downshift

The Bush/Cheney energy crowd is moving all over the country to install liquified natural gas (LNG) terminals. Among the big backers are Federal Reserve Board Chairman Alan Greenspan and former Fed chairman Paul Volcker, the enforcer of the "controlled disintegration" policy of the late 1970s.

Some 32 sites on the U.S. Pacific, Gulf, and Atlantic coasts—17 of them live and hot—have been picked as terminals where the compressed liquefied gas is de-pressurized and dumped into pipelines for distribution. There are pitched regional battles over the policy, for example in New Jersey where BP wants a huge terminal. (The anti-LNG resistance arises from both somewhat scientific pro-infrastructure regional interests, as well as anti-infrastructure greenies).

Gas-fired power plants make up 85% of the new electricity generation. The plants can be put up quickly to support suburban sprawl development, and usually come in small packages of about 200 megawatts. Imports have been soaring, and BP et al. are moving hard on source areas for cheap gas. Trinidad and Tobago has been the leading source country, delivering 462 out of a total of 652 billion cubic feet (Bcf) in 2004. Algeria supplied the second-largest volume with 120 Bcf. Others include Malaysia (19.9 Bcf), Australia (14.9 Bcf), Qatar (11.9 Bcf), Nigeria (11.8 Bcf), and Oman (9.4 Bcf)

Transportation expert Hal Cooper's evaluation, based on years of experience in Alaska and environs, is that the gas and oil cartels have no intention of building pipelines and wells in the Alaska natural resources area—the target of the Democrats and others—because the cartel companies would have to spend relatively more on the gas-line corridors, etc.

Overall, the LNG craze is to "perpetuate a policy of dependency" on the use of natural gas, which itself was a retrograde move connected with not going nuclear. The LNG global scheme is entirely connected with control by the few interests dominating oil and gas. It perpetuates import dependence. Key to the whole intention is "minimal capital investment" in the terminals and some LNG freighters—relative to needed nuclear, and high-tech coal-based energy systems. So it's "on the cheap" energy "expansion!"

The LNG freighters and re-gasification terminals involve fantastic danger—this is not just a greenie myth. One freighter, if ignited, would be equivalent to an Hiroshima. To serve the few interests controlling this whole pattern, there is now a demand that the Federal Energy Regulatory Commission just override any local obstruction to the siting chosen by the cartels.

'Do Away with Amtrak,' Demands Lazard Mouthpiece

"Do away with" Amtrak, demanded the Lazard banking interests' favorite mouthpiece, the Washington Post May 3. In a snidely written editorial, "Off Track," the Post insists it is "madness" to subsidize long-distance rail routes, "spraying billions" at a "national rail network" that can't compete with airlines. Any route of five hours or more "should be dropped," the editorial insists. The Post notes Amtrak management's recent compromise with the Bush Administration's demand for elimination of what the Post calls the "absurd subsidies" for these routes—a compromise whereby Amtrak is to impose upon itself new financial reporting terms to create "transparency," showing the cost-effectiveness of the routes as a way to pressure them to perform or be terminated. The Post editors say it won't work: "Congress is capable of supporting absurd yet transparent subsidies (think farming), and members from states with uneconomic rail routes will fight to keep federal payments.... Congress is the chief reason reform is needed."

The editors uncloak the reality of Bush's plan to set up a 50/50 Federal-state match as the "alternative" to Amtrak as a Federal national rail program. "Devolve the management and most financial responsibility to the states," as Bush seeks to do, and this will "force the needed closures," of the long-distance routes, since the states cannot shoulder such a burden.

But reform (i.e., privatization) is going to be difficult, they lament, citing Sen. Trent Lott's charge that the Bush plan is "ridiculous" and Sen. Kay Bailey Hutchison's declaration, "My motto for passenger rails is 'national or nothing."

FDIC Report Expresses Anxiety Over Housing Price Rise

In a report issued on May 2, the FDIC, using the recently-released 2004 data for the house price index (HPI), said the acceleration of U.S. home prices in 2004 went way ahead of rises of rental prices and personal income. The HPI is published by the Office of Federal Housing Enterprise Oversight. The average home price rose by 11%, while personal income grew at a rate of 5.8%, and rental prices rose by 2.7%. The report also said the number of individual markets which met the boom criteria increased by 72% in 2004, to 55 metro-markets.

One of the main reasons for this boom market is "the increasing market penetration of innovative mortgage products. Some market participants estimate that these higher risk adjustable-rate mortgages (ARMs) are offered to people seeking low-or-no-documentation loans and to those with blemished credit histories." In some of these markets, investors have moved in big numbers. It is estimated that in some markets, investors' share of new mortgages is as high as 19%.

The report concludes that the boom will lead to bust. But what kind of bust that would be? The report was very cautious, saying that "in over 80% of the metro-area price booms we examined between 1978-1998, the boom ended in a period of stagnation that allowed household incomes to catch up with local home prices." Despite this unreal optimism, the report expressed worries, saying even the stagnation-led busts "cause significant distress in the local economy."