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Diamond Bullet Member/Moderator
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Discussion Starter #1
http://www.marketwatch.com/news/sto...x?guid={092D3543-5317-4AB5-B1A1-0FFDCD19CCD0}

This could be very significant - unrelenting federal spending in this country, now combined with the Fed lowering rates to bail out investers, finally coming back to haunt us. The dollar is plunging, and interest rates are SOURING today in response to the rate CUT as the foreigners pile out of dollar denominated assests - including government bonds.
 

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Diamond with Oak Clusters Bullet Member
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Eventually the spending will come back to haunt us. Whether it is now or later.
 

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Silver Bullet member
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But our budget deficit is dropping like a rock?

And the Euro block is lagging. They, and Canada, typically have very high national debt but extremely high taxes to fund their socialist welfare economies. The taxes keep their currency high, growth stagnant and standard of living lower than in the USA.
 

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Euro is at a record high against the dollar and ya gotta laugh at how really "significant" the Saudi move may be given this:

(London) - Royal Dutch Shell and Saudi Aramco on Friday said they would go ahead with a $7 billion expansion of the Port Arthur, Tex. refinery that would create the largest U.S. refinery and one of the biggest worldwide.
The plan is to expand the refinery's capabilities by 325,000 barrels a day, resulting in a refinery with a throughput capacity of 600,000 barrels a day, according to a statement from Motiva Enterprises, the jointly held unit of Shell and Saudi Aramco.

Motiva said the expansion is the equivalent of building the first new refinery in the U.S. in more than 30 years. It expects the capacity to be online in 2010.
The cost of the expansion will be $7 billion, funded mostly through Motiva's earnings, according to a person familiar with the situation.
James Neale, a Citigroup analyst, said the decision by Shell could be a surprise given that it has sold some Western hemisphere refining capacity in recent years.
"However, the 2006 summer gasoline demand season may have convinced the company that the U.S. refined-product market has reached a tipping point in terms of its gasoline supply-demand balance, with margins moving over $25 a barrel at times," he told clients.
U.S. refining margins are around $9 a barrel at the moment, Neale said.
Rob Routs, executive director of downstream at Shell, said the expansion was planned in anticipation that refining margins will decline because of the capacity being added throughout the industry.
"It will be profitable even if margins in the markets are low," Routs said on a conference call. "We want to create a refinery system that's competitive even at low margins."
Routs added that the refineries it has sold have high cost bases.
Refinery bottlenecks have been a key factor in pushing oil prices to record highs, including Thursday's landmark level of over $83 a barrel.
According to the International Energy Agency, global refinery throughput in North America is estimated to be 18.4 million barrels of oil a day.
Motiva said it awarded a contract to the Bechtel/Jacobs joint venture to manage the expansion project as the engineering, procurement and construction contractor.
The construction will require 4,500 jobs, and the new capacity will result in 300 full-time jobs be created.
 

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Refinery bottlenecks have been a key factor in pushing oil prices to record highs, including Thursday's landmark level of over $83 a barrel.
QUOTE]

....?.... I can see refinery bottlenecks causing Gasoline and other refined products to be artificially high in cost, but that should cause a glut on the oil side of the equasion and push crude prices down.
 

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Refinery bottlenecks have been a key factor in pushing oil prices to record highs, including Thursday's landmark level of over $83 a barrel.
QUOTE]

....?.... I can see refinery bottlenecks causing Gasoline and other refined products to be artificially high in cost, but that should cause a glut on the oil side of the equasion and push crude prices down.

Doesn't work that way Dave. Remember when Katrina shut down refineries and oil prices shot up?
Oh, I get it... You are expecting a supply/demand thing here.

Sorry, doesn't work that way. I don't know how it works yet, but that ain't it.
 

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Diamond Bullet Member/Moderator
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Discussion Starter #7
The Saudies making a large capital investment in the US doesn't mean they'll still purchase lots of dollar denominated assests. Sort of like us opening plants in Mexico or Vietnam - really just driven by costs here becomming cheaper, relatively speaking, then in other parts of the world with stronger currencies. They can pay the refinery workers in cheap dollars but start pricing oil in some more stable currency and really clean up.

Dave - our deficit may be falling, but it's still substantial and our unfunded liabilites are huge.

I don't know just how significant any of this is, but I do believe that the doom-and-gloomsters e.g. McCalvany or whatever his name is with their "Black Holes" and "Edge of the Abyss" and "Crest of the Wave" stuff will probobly be right eventually - like a massive earthquake in California, it' s just a matter of when.
 

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Silver Bullet member
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All those "unfunded liabilities" are in Medicare and Social Security. They disappear if you add 3 years to the retirement age. Those systems are out of whack because life expectency has increased so much since the last revision of the programs.
 

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Doesn't work that way Dave. Remember when Katrina shut down refineries and oil prices shot up?
Oh, I get it... You are expecting a supply/demand thing here.

Sorry, doesn't work that way. I don't know how it works yet, but that ain't it.
....Katrina not only shut down refineries, it shut down about 25% of our crude oil production. Oil prices spiked after Katrina 8/29/05 to about $70/Bbl, but dropped by Sept. 5, '05. and continued to drop to about $ 56/Bbl in Nov. '05. lotsa factors go into to oil pricing, Vinnie. You can't take one day and see any pattern. But it helps if you don't conflate oil prices with gasoline prices.
 

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But our budget deficit is dropping like a rock?

...to fund their socialist welfare economies. The taxes keep their currency high, growth stagnant and standard of living lower than in the USA.
The idea that growth is stagnant and the standard of living is lower sounds strange to me.

There are fewer poor people, more growth and generally high standards of living in most western european countries.

Norway is one of the highest evolved welfare states, and yes we pay high taxes, but, even when you subtract the gains from our oil, our economy is booming, there is little unemployment, high standards of living and growth in productivity that far exceeds the inflation (which is historically low). Wages, and thus living standards, increase more than interest rates and inflation.

And as for foreign debt the european countries are not leading, but the USA is, and the same goes for the "trade deficit". So, I'm not being disrespectful or in any way against your country, but I cannot see that your comments about the situation in europe are correct.
 

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They are not correct.I pay less income tax here than I did when I was working in the USA,and I did not have a higher standard of living there.Don't get me wrong we get hammered for tax,but so do they,I have seen this with my own two eyes.
 

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Discussion Starter #13
"Standard of Living" is highly subjective. Is it the square footage of one's dwelling, the amount of discretionary income one has after paying for essentials like food and energy, is it access to public transit, is it the time one waits in traffic in the morning and evening, is it access to fine dining, is it the price of phone and internet.....We would need to get down to specifics to debate it; I think anyone can argue anything without specifics as it is such a personnal thing. I would say my relative in Switzerland have a standard of living roughly equal to mine in California, although I would say they have fewer carreer choices then people do here. The one thing about where I live - and I would say much of the US - that I find superior to most other countires I have visited is the shear amount of space we have here. One can get away from the major centers of activity and have vast amounts of space all to oneself here with very little time and effort spent on travel. Not really pertinent to this thread, just the one thing about the US that has always impressed me. That and the amount of opportunity a person has if they have lots of energy and ambition.
 

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Silver Bullet member
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There are fewer poor people, more growth and generally high standards of living in most western european countries.

Norway is one of the highest evolved welfare states, and yes we pay high taxes, but, even when you subtract the gains from our oil, our economy is booming, there is little unemployment, high standards of living and growth in productivity that far exceeds the inflation (which is historically low). Wages, and thus living standards, increase more than interest rates and inflation.
It is generally accepted by economists that Norways boom is due entirely to oil and gas. prior to the oil boom Norway was in a downward spiral with outrageous tax rates and a declining welfare state. Norway was facing the same crisis as Sweden, where the economic decline forced substantial tax and welfare cuts.

That "fewer poor people" doesnt include the poor of eastern and southern Europe and the immigrants. On a recent trip to Italy I heard nothing but complaints about the declining standard of living since Italy went on the Euro. The average Italian lives about as well as the average resident of a blighted inner city in the USA.

See http://www.federalunion.org.uk/europe/060610EuropevsAmerica.shtml for a comparison of the EU and USA by a pro European Union organization. It shows the figures giving the USA a substantial lead in individual purchasing power (PPP). It claims that this is the result of Americans working longer and harder and having a higher employment rate, but Europe's lag in those areas are due to its socialist and paternalistic influences on employment practices, laws, taxes and unions.
 

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Discussion Starter #15
Interesting link. The part about Europeans retiring earlier puzzles me a bit - when European rates of unemployment are given, I find it hard to believe that retired people are being counted. In this country you're not counted as unemployed unless you're actively looking - isn't this also true for European countries?
This comment was interesting - "US external indebtedness in turn is driven by the US house price bubble, enabling US consumers to spend more than they earn." Actually, our external indebtedness has been growing since the mid seventies.
 

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Unemployment rate is defined as the percentage of the work force actively seeking work but not employed.

Employment rates or participation are a percentage of the entire population.

Europe in general has reduced retirement ages and increased benefits, while the basic government retirement program in the USA, Social Security, was originally designed merely for the disabled or families who lost the breadwinner, and its retirement benefits, despite a long history of attempts to raise payments and make it a full pension system (and get the votes of the elderly) , are really so low they're just a supplement to savings or company pensions. The USA is also raising retirement ages, not lowering them, and needs to raise them more to keep SS solvent.

Note that the author is pro EU, and construes the data presented in a way favorable to his interests. A growing foreign debt is typical of expanding economies, while slow growth economies just stop borrowing both internally and externally. The supposed decline in the earnings of the bottom ranks of US workers are due in large part to the time periods selected for analysis, in 1979 the USA was just entering the worst recession in the last 50 years. Since then the growth of poorly paid service industries, a shift of total pay from cash to fringe benefits such as medical insurance, and an influx of low income, unskilled, often illegal latino workers has hurt the apparent income of the lower end of the labor force, but the income growth of the entire labor force is pretty much on its post WWII track of increases.

Unfortunately the writer, and any other economist is limited by the data available. For example, Florida seems to be in the beginning of a recession, driven by the collapse of the real estate boom, high taxes and very high property insurance. Yet the unemployment rate and average pay has barely budged. I think that the reason is that illegal immigrants in construction are just leaving, and aren't visible to the statisticians. Things like that warp the view of economies.
 
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