11 August 2008

Economics Update

Well, we are now seeing reports that the FDIC is going to have to raise premiums to cover losses from bank failures.

They should have started last year.

Meanwhile, the Chinese economy is showing signs of significant inflation, with China's wholesale prices rising 10% year over year in July.

The problem here is that the obvious solution, the central bank raising interest rates, will server to further weaken the dollar, which will drive their exports down....Catch 22.

Meanwhile, it appears that Morgan Stanley has problems, because Moody's just cuts its credit rating to A1 from Aa3 because of losses in the mortgage market.

Interestingly enough, even though Georgia and Russia are in something very close to a war, and the Georgian pipeline is a crucial link for Europe, oil is down, largely on the Iranians agreeing to a new round of negotiations on their Uranium enrichment program.

Gasoline is down again, for the 25th day in a row.

The dollar rose today, probably as a result of concerns about the conflict between Georgia and Russia, which tends to send money fleeing to the relative safety of the US dollar.

And in the, "Funnier if it weren't so true" department:

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