Fed Cuts Rates to 4.5%

The Federal Reserve has lowered interest rates by a quarter of a point. This is the lowest level since January 2006. This drop was to keep the United States on track economically.

http://money.cnn.com/2007/10/31/news/economy/fed_rates/index.htm?cnn=yes

This move was widely expected due to weakness in the housing market along with problems with mortgages.

Could Next Year Be It?

Roll out the $100 barrel?
Oct 23rd 2007From Economist.com

The price of crude oil may be dipping again, but a significant record remains on the horizon
Jupiter Images
SOME call it a curse, but those awash in oil must feel blessed at the moment. As the price of a barrel of crude touched a record $90 last week, before sliding once again this week, speculators have been considering an even bigger benchmark: the $100 barrel. The number rattles consumers, but their worry is probably misplaced.
Such records have been broken before. Whenever the nominal price of oil reaches a new round number, minds wander towards the century mark. Analysts at Goldman Sachs, an investment bank, predicted in 2005 that prices would reach triple-digits this decade, and now many think it could happen next year. Despite the fact that oil supplies remain stable for now, it is just a matter of time before oil fetches $100 a barrel.
The strongest force lifting oil prices at the moment is America’s weakened dollar. Sellers with currencies that have strengthened against the dollar want more cash. And those buying oil with stronger currencies, such as the yen or euro, have an incentive to stock up, creating more demand and, again, higher prices.
On the political front, oil traders are closely watching the military activity on the border between Turkey and Iraq, where a brewing conflict could obstruct the flow of oil from the Kurdish region, stifling supply. Sharper diplomatic exchanges between America and Iran over the latter’s nuclear aspirations have added to the jitters. Meanwhile, demand for oil in China and India has become unquenchable.
Yet none of these factors are sudden or surprising, suggesting that buoyant prices could be signs of a bubble. According to the Organisation of the Petroleum Exporting Countries (OPEC), fundamentals do not support the current high price of oil. In fact, Abdullah al-Badri, OPEC’s secretary-general, said that the recent spike has “largely been driven by market speculators.” Nevertheless, OPEC has agreed to raise oil output by 500,000 barrels a day beginning in November to ensure ample supply during the cold winter months, and to temper prices.
Despite such assurances, speculators continue to bet that prices will march upwards. But what would $100 a barrel mean for the world economy? Price shocks can certainly cripple economies, but that does not mean they always will do so. In the past, spikes in the price of oil have created a “waiting” effect, where firms stall investment to see if prices will fall back. The impact can seep through the economy, affecting everything from industrial production to credit cards. Worst cases can lead to recession or the dreaded “stagflation”, when inflation soars and growth sputters.
This time, however, could be different. Adjusted for inflation, the $100 barrel would not exceed the record set in 1980. Also, big economies today are generally better insulated from oil-price fluctuations. Developed countries use half as much oil per real dollar of GDP as in the mid-1970s, thanks to improved energy efficiency. This year the price of oil has increased by about 70% since January without stunting economic growth in America.
Not only could the world withstand higher prices, some argue that further increases would be beneficial. A growing number of economists suggest that pricier oil is healthy, particularly for the environment. But the rise must be gradual and predictable so that economies can adjust. Large and sudden increases are the ones that tend to create recessions.
This week prices have shown signs of a mild retreat. Michael Lynch, of Strategic Energy & Economic Research, a consultancy, recalls that just a year ago inventories were high and prices too low. “Once the tanks are full and the oil is sloshing around, that can change the market,” he says. Like their counterparts forecasting the weather, the predictions of oil-industry analysts could be just as wide of the mark and the $100 barrel of oil could still be some way off.

Electricity Prices SKYROCKET, Frank O'Neil

Electricity prices see biggest jump in 25 years
The East sees largest price jumps, as price caps were lifted in many markets in 2006.

October 22 2007: 2:17 PM EDT

WASHINGTON (AP) -- The average retail price of electricity increased by more than 9 percent last year, the largest jump in 25 years, the government said Monday.
Electricity prices rose in 2006 by 10 percent or more in 14 states and the District of Columbia, according to an annual report released by the Energy Department's Energy Information Administration. The average price increase was the largest since 1981.

The price of oil shot into record territory, past 90 dollars a barrel. ITN's Bridgid Nzekwu reports.

http://www.cnn.com/video/#/video/business/2007/10/19/nzekwu.oil.prices.itn

Prices rose nationwide but most of the larger jumps were in the East, mainly due to the lifting of retail electricity price caps in states transitioning to competitive retail markets. That means consumers paid more from previous cost increases that had not been completely reflected while the caps were in place, according to the EIA.

Households that use electricity are expected to pay $32, or 4 percent, more this winter, with the price of power climbing 2 percent to 10.3 cents per kilowatt-hour, the EIA predicted earlier this month. Thirty percent of U.S. households are heated by electricity.

While consumers paid more in 2006, emissions of carbon dioxide, sulfur dioxide, and nitrogen oxides from electricity generation declined, according to the government report.

Sulfur dioxide emissions fell 7.9 percent, the largest drop since 2000, while carbon dioxide emissions dipped 2.2 percent, and nitrogen oxides emissions declined 4.1 percent. Carbon dioxide in the atmosphere contributes to global warming, while nitrous oxide produces smog and sulfur dioxide causes acid rain.

Decreases in generation from fossil fuels and increases from emissions-free sources like nuclear, hydroelectricity and wind helped drive the reductions, according to EIA

-CNNmoney.com

Frank O'Neil

Microeconomics

Suzy Ghareeb Interviews Alan Greenspan

Alan Greenspan is being interviewed and talking about his book "The Age Of Turbulence." His new book explains his efforts to ensure that America didn't experience an economic meltdown after September 11, 2001, in his fourteenth year as Chairman of the Federal Reserve Board. Alan had good reason to fear the worst after the stock market crash of October 1987, but remarkablely the economy was unchanged after 9/11 was. "The Age Of Turbulence" sounds like a good read!

The Indian Rupee is gaining compared to Dollar

A indian rupee is 39.32 cents to the dollar.
It has risen 12% to the US.

What other country is going to take down the dollar next?

more here..
http://news.bbc.co.uk/2/hi/business/7037807.stm