Sunday, December 07, 2008

The Economy - What to expect

Robert Rubin was the architect of Citigroup's strategy of taking on more risk in debt markets, which by the end of 2008 led the firm to the brink of collapse.

1. Oil will probably rise in price.

The futures market suggests this. (Financial. / Oil speculation: It's back/ Time to buy the black stuff? )

Saudi Arabia has said the price of oil is likely to rise by mid-2009.

The Nymex futures market prices crude at near $75 a barrel by the the spring of 2011.

Oil is a finite resource and it is becoming even more difficult to find. (Investing in crude oil could be a slick move)

Oil companies have been shelving expansion plans; oil countries have made some production cutbacks.

On October 1, 1998 crude oil cost just over $16 per barrel. By December 21 it had dropped to $10.35.

By May 1, 1999, the price rose to over $18 per barrel.

2. The UK pound may fall further. A month ago, a pound was worth $1.80. Now it's worth $1.46.

The UK Labour government of Gordon Brown has lowered interest rates. This weakens Sterling, and makes imports more expensive, and causes inflation. ( Financial medicine of lower interest rates.)

Lower interest rates do not encourage people to save. They encourage people to borrow.

3. The US economic situation will get worse, as Obama has chosen the wrong people for his government.

Eric Walberg, at Al-Ahram Weekly, tells us about Obama's odious entourage :

"Bloomberg notes, almost half the people on the Transition Economic Advisory Board 'have held fiduciary positions at companies that, to one degree or another, either fried their financial statements, helped send the world into an economic tailspin, or both.'

"This includes, for example, Anne Mulcahy and Richard Parsons, both of whom were Fannie Mae directors when the company fudged accounting rules. Mulcahy and Parsons were executives of their respective companies, Xerox and Time Warner, and were charged with accounting fraud by the Securities and Exchange Commission.

"Also on this team is Robert Rubin, who as Bloomberg notes, was 'chairman of Citigroup's executive committee when the bank pushed bogus analyst research, helped Enron cook its books, and got caught baking its own. He was a director from 2000 to 2006 at Ford, which also committed accounting fouls and now is begging Uncle Sam for Citigroup-style bailout cash.'

"Larry Summers, who was Clinton's treasury secretary, will head the National Economic Council - the president's senior economic adviser. This looks ominous.

"It was Summers who forced through the deregulation of financial markets in the 1990s and imposed disaster capitalism on Russia.

"Considering that he is a chief architect of the current financial meltdown, we should be wondering why Obama isn't preparing an arrest warrant for him, instead of offering him the most powerful economic role in the world.

"As chief economist for the World Bank, Summers wrote a memo saying the WB should actively encourage the dumping of toxic waste in developing countries, particularly 'under- polluted countries in Africa,' since poor people in developing countries rarely live long enough to develop cancer, making him a particularly bizarre appointment for Obama."

Having Robert Gates as defence secretary means more expensive wars.

Citigroup says gold could rise above $2,000 next year as world unravels


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