Fed's Direct Loans to Banks Climb to Record Level The Federal Reserve's direct loans of cash to commercial banks climbed to the highest level on record in the past week as money-losing lenders increasingly turn to the central bank for funds. Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed's loans to Wall Street bond dealers rose by $75 million to $16.6 billion. Policy makers have increased the attractiveness of direct loans as they seek to alleviate the impact of the credit crunch. Fed Chairman Ben S. Bernanke said two days ago that while markets have improved, they remain ``far from normal,'' adding that the central bank is prepared to increase its twice monthly auctions of funds to banks.
China forex policy escapes manipulation tag The Bush administration refused again Thursday to identify China's currency practice as manipulative. In a semi-annual report, the Treasury Department said that China's current account surplus of $111 billion and $1.68 trillion in foreign exchange reserves were not enough to qualify as signs of manipulation under the language of the statute passed by Congress. But the report said China's foreign exchange policy remains a threat to global economic stability and urged the Chinese government to loosen its tight control over the yuan to allow "rapid" appreciation. Neither the Clinton nor Bush administrations ever had any appetite for naming China as a manipulator, despite heated rhetoric - especially from lawmakerrs -- bubbling up from time to time. Using the term would give Congress a whip hand to pass stiff protectionist measures against Chinese imports, analysts said.
Goldman raises oil price forecast by 32% to $141 a barrel Goldman Sachs on Friday raised its forecast for the average price of West Texas Intermediate oil in the second half of 2008 by 32% to $141 a barrel from $107 a barrel. "We believe that the market is not defying fundamentals but rather experiencing a structural repricing much like it did in 2004, searching for a new equilibrium against an uncertain long-term supply environment," the broker said. It added that long-term oil prices will need to continue to rise to bring trend oil demand growth in line with trend supply growth, which stands at around 1% a year. It added that long-dated prices will need to rise on average by 14% above current levels to $148 a barrel.
Chavez Says Attack by the U.S. Would Cause $500 Oil Venezuelan President Hugo Chavez said crude oil would rise to ``$400 or $500'' a barrel in the event of a U.S. attack on his country, the biggest petroleum exporter in the Americas. The reactivation of the U.S. Fourth Fleet in the Caribbean on July 1 and what he said is a possible U.S. base on the Guajira Peninsula, shared by Venezuela and Colombia, are both threats, Chavez said in a speech broadcast last night from the military academy. Colombian Defense Minister Juan Manuel Santos said his country doesn't plan to give the U.S. a base on the Guajira, EFE newswire reported yesterday. Chavez, who has long criticized the U.S. role in Latin America and warned that oil could rise to $200 a barrel in the case of an attack on Venezuela or Iran, said that given recent price increases in the crude market, his previous estimate was too low.
What if gas cost $10 a gallon? Forget pizza delivery. And cheap airfares. And bottled water. In fact, forget a way of life that looks much like today's. But would that be so bad? In four years, U.S. gas prices have doubled to more than $3.70 a gallon, and crude oil has tripled to around $125 a barrel. Allowing for inflation, that's higher than prices were during the 1978–83 oil shock that triggered a recession and sky-high interest rates. But . . . What if gas cost $10 a gallon? Thousands of truckers would go bankrupt. Airplanes would sit idle in hangars. Restaurants and stores would shut down. Car-pooling, hybrid vehicles, scooters and inline skates would swing into vogue. And telecommuting, rooftop vegetable gardens, home cooking and recycling would proliferate.
Dollar rally, leaks put fresh focus on G7 meetings Currency traders now suspect U.S. and European finance officials of some atypical arm-twisting to support the U.S. dollar at last month's G7 meeting, a gathering that initially made little splash in currency markets. Gains of 2% to 5% in the U.S. dollar from a key low point last month, combined with recent press statements from anonymous senior finance officials, have fostered suspicions that the group of industrialized nations backed up their public statements with some backdoor negotiations. "Talking doesn't really impact the market," said Greg Anderson, head of foreign exchange strategy at ABN AMRO. But pressure on some large foreign currency holders may have done what the official G7 communication, which raised a red flag over recent currency fluctuations, failed to do.
Californians leading the way to consumer bust As it did when the housing bubble began to burst, California is leading the way in the next leg: a consumer bust. Squeezed by rising unemployment, inflation in food and energy costs and plunging home values, Californians are cutting back on spending. Besides causing woes for state and local government, the cutback is giving California's economy another knock and makes further job losses, home repossessions and banking problems more likely. The figures are pretty bad. The median home price has fallen by 29 percent in the year to March, according to the California Association of Realtors, and repossessions are increasing. Unemployment hit 6.2 percent in March, up 1.2 percentage points from the same month last year.
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