In his most recent speech Ben B. highlights three policy tools the fed has:
"Policy Options for Further Easing
Notwithstanding the fact that the policy rate is near its zero lower bound, the Federal Reserve retains a number of tools and strategies for providing additional stimulus. I will focus here on three that have been part of recent staff analyses and discussion at FOMC meetings: (1) conducting additional purchases of longer-term securities, (2) modifying the Committee's communication, and (3) reducing the interest paid on excess reserves. I will also comment on a fourth strategy, proposed by several economists--namely, that the FOMC increase its inflation goals."
So let's look at the impact of each of these:
1) Buy more longer-term securities. While this might have the impact of lowering the long term rates, what good will that do? So what if rates go from 4.50 to 4.25 for a 30-year fixed rate mortgage? Does anyone think a small change in long-term rates is going to turn housing around?
The simple fact is this policy tool has limited value for increasing economic activity.
2) Communication.
Translate they can promise rates won't rise for like forever. Talk. Talk. Talk. A change in the committee can change that real fast. In addition, people are not buying houses because they expect interest rates to rise. While the Fed can change economic activity with talk at times (for example if they took out the extended rate provision the economy would tank further), at this point changes in the language are unlikely to INCREASE economic activity.
3) Reduce interest rates on balances at the Fed. Big deal. They only pay 25bps right now. Unless they move that to negative amounts (which he says will not happen in the speech), this change will have minor if any impact on the economy.
Summary: Helicopter Ben is out of fuel. The Fed has no more policy options that seem to make any sense. They don't have much ability to jump-start the economy. This is really bad news for the economy.
Friday, August 27, 2010
Tuesday, August 24, 2010
Production increases
The following chart by itself is very scary for natgas prices. But demand has been elevated during the past two months. The key question is this just because of warm weather or a more basic demand change?
Looking at Robry's data, clearly generation demand is higher, but both industrial demand (up by over 4 bcf day) and Residential and commercial demand (up by 4 bcf/day) have equaled the increase in production. What has caused this increase in demand?
Bears say the weather and once Sept hits, the huge increases in production will hit the storage causing the price to crash. Bulls can argue that the economy is starting to notice the huge disparity between oil and natgas and transfer demand from oil to natgas. Some evidence that refineries and other industrial users are consuming more natgas, instead of oil products. Robry's data clearly indicate a large increase in industrial demand.
But what about the 4 bcf/day increase in R&C demand? Is that a temporary weather demand or a real increase in demand?
Sept. should provide the answer.
.
Looking at Robry's data, clearly generation demand is higher, but both industrial demand (up by over 4 bcf day) and Residential and commercial demand (up by 4 bcf/day) have equaled the increase in production. What has caused this increase in demand?
Bears say the weather and once Sept hits, the huge increases in production will hit the storage causing the price to crash. Bulls can argue that the economy is starting to notice the huge disparity between oil and natgas and transfer demand from oil to natgas. Some evidence that refineries and other industrial users are consuming more natgas, instead of oil products. Robry's data clearly indicate a large increase in industrial demand.
But what about the 4 bcf/day increase in R&C demand? Is that a temporary weather demand or a real increase in demand?
Sept. should provide the answer.
.
Wednesday, August 11, 2010
Monday, August 9, 2010
NatGas Production increases, but demand also increases.
At first glance the following graph looks very bad for natgas. Production is skyrocketing and the future looks grim.
While the production increases appear to be able to overwhelm everything, there is hope.
The demand has really increased.
Specifically, the industrial demand has skyrocketed.
This is a dramatic and important increase in demand. First, the demand is constant year-around industrial demand. This is not the seasonal demand, but demand during ALL times of the year. Second, the numbers are the average of 6 months of data. This is not a one time event, but an increase in the 6-month average demand for natgas from industrial users. Third, the increase is crazy, considering the economy is still in deep trouble. Realize demand is now 3 bcf a day HIGHER than the highest point EVER reached. Industrial demand has skyrocketed EVEN in one of the worst economic slumps the economy has experienced. What will happen if we ever get a boom? What will the industrial demand look like when the unemployment rate falls to 5%??!?!
Thus, while the supply of natgas looks to be overwhelming, the market is picking up the fact that natgas is cheap. Companies are switching sources of energy to natgas. This will not be fast, but industrial demand is more constant year-around demand than heating demand.
While the production increases appear to be able to overwhelm everything, there is hope.
The demand has really increased.
Specifically, the industrial demand has skyrocketed.
This is a dramatic and important increase in demand. First, the demand is constant year-around industrial demand. This is not the seasonal demand, but demand during ALL times of the year. Second, the numbers are the average of 6 months of data. This is not a one time event, but an increase in the 6-month average demand for natgas from industrial users. Third, the increase is crazy, considering the economy is still in deep trouble. Realize demand is now 3 bcf a day HIGHER than the highest point EVER reached. Industrial demand has skyrocketed EVEN in one of the worst economic slumps the economy has experienced. What will happen if we ever get a boom? What will the industrial demand look like when the unemployment rate falls to 5%??!?!
Thus, while the supply of natgas looks to be overwhelming, the market is picking up the fact that natgas is cheap. Companies are switching sources of energy to natgas. This will not be fast, but industrial demand is more constant year-around demand than heating demand.
Wednesday, August 4, 2010
Summary of Haiti Trip
The High School youth of NPC went to Haiti from July 28 to Aug 3rd. Our group was almost 30 people, with 6 Adult leaders, 5 Foundation for Peace staff and 19 youth. But you also have to add our head cook and 2 bus drivers to our group.
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Our main task was to help finish a school on the 2nd story of a church in Anse-a-Pete, Haiti and start a water tower. We also had a very important medical clinic which saw about 700 people. To reach the smaller children, we did two Bible school events. Of course, we also had fun with a soccer game in Haiti and one in Pedemales, DR. Lastly, we were apart of three worship services (two in Pedernales and one in Haiti) and spent the afternoon at a fantastic beach.
Anse-a-Pitre Haiti is a small town of about 30,000 people in the southwest part of Haiti. It is isolated from most of the world, because of really bad roads and transportation system. Even though the city is on the Caribbean Sea, the roads are so bad, it takes over 8 hours of travel on the ground to get to a major airport. The roads in Haiti are difficult and dangerous. The roads in the DR take you along the coast and eventually to Santo Domingo, but only after 8 hours of grueling travel.
Our two partners were the Foundation for Peace, which provided the logistical support, planning and resources in Haiti and the DR. Our local church partner in Anse-a-Pitre was headed by Pastor Andre. Both partners were key in our trip.
Our major task was construction. Because we were doing the foundation of the building, we had to dig the holes for the supports. We then spent about 5 days mixing cement, moving sand and gravel and helping clean up the construction site. All of the work was manual labor and very little construction equipment was available. We had shovels, picks and buckets. To mix the cement, we mixed by shovel several wheelbarrows of sand, gravel (sometimes) and cement bags. After adding several buckets of water and much work, we had cement mix! The mix was put into buckets and set to the correct location to be thrown in the holes. We had cement for the foundation of the water towers, cement for the concrete blocks and some Haitian workers had cement for finishing the inside of the school.
Bucket lines were required often to move the material to the correct location. We moved a large amount of sand and other material to the correct location. We also made and put into place 8 rebar pillars that were cemented in place. All of this activity was really hard in 90 heat and the strong summer Haitian sun. If you were in the shade and could catch a breeze, it was quite pleasant. But if you had to do hard manual labor in the sun, you quickly sweat out huge amounts of liquid.
Our medical clinic was one of the few free medical services offered in Anse-a-Pete. Anse-a-Pete has only one doctor and he cannot treat all the people. Many of the people cannot afford the medicine and do not see a doctor. The conditions included malaria, TB, dengue fever, crazy high blood pressure (200/100) and a host of other problems. For example, one 13 year old girl had NEVER been to a doctor before in her life. Clearly the medical clinic saved some lives and made others more bearable with medicine.
The soccer games were fun and helped bring a spirit of sport to both Haiti and the DR players. We did one game in the AM in Haiti and one in the late afternoon in the DR. From the pictures, you can see the economic differences between the two countries.
Both VBS events were helpful to the children. They got a short skit, a bible reading and some craft work. Both VBS events took about an hour.
The worship services were significantly different than the more traditional service at National. The youth got also to see worship services in two different cultures. It is always interesting to see the similarities in ideas and the differences in style. The Haiti style is different than the DR, even though the churches are very close in their theology.
Finally, when you visit a great tropical beach, it is a good time. We got to swim and just relax for an afternoon. What a treat!
Overall, the trip was very powerful. We had the honor to help the people of Anse-a-Pitre have a better school, better water, better health care and some fun. We also had the opportunity to learn from them many important lessons about life, faith and surviving in difficult circumstances.
.jpg)
Our main task was to help finish a school on the 2nd story of a church in Anse-a-Pete, Haiti and start a water tower. We also had a very important medical clinic which saw about 700 people. To reach the smaller children, we did two Bible school events. Of course, we also had fun with a soccer game in Haiti and one in Pedemales, DR. Lastly, we were apart of three worship services (two in Pedernales and one in Haiti) and spent the afternoon at a fantastic beach.
Anse-a-Pitre Haiti is a small town of about 30,000 people in the southwest part of Haiti. It is isolated from most of the world, because of really bad roads and transportation system. Even though the city is on the Caribbean Sea, the roads are so bad, it takes over 8 hours of travel on the ground to get to a major airport. The roads in Haiti are difficult and dangerous. The roads in the DR take you along the coast and eventually to Santo Domingo, but only after 8 hours of grueling travel.
Our two partners were the Foundation for Peace, which provided the logistical support, planning and resources in Haiti and the DR. Our local church partner in Anse-a-Pitre was headed by Pastor Andre. Both partners were key in our trip.
Our major task was construction. Because we were doing the foundation of the building, we had to dig the holes for the supports. We then spent about 5 days mixing cement, moving sand and gravel and helping clean up the construction site. All of the work was manual labor and very little construction equipment was available. We had shovels, picks and buckets. To mix the cement, we mixed by shovel several wheelbarrows of sand, gravel (sometimes) and cement bags. After adding several buckets of water and much work, we had cement mix! The mix was put into buckets and set to the correct location to be thrown in the holes. We had cement for the foundation of the water towers, cement for the concrete blocks and some Haitian workers had cement for finishing the inside of the school.
Bucket lines were required often to move the material to the correct location. We moved a large amount of sand and other material to the correct location. We also made and put into place 8 rebar pillars that were cemented in place. All of this activity was really hard in 90 heat and the strong summer Haitian sun. If you were in the shade and could catch a breeze, it was quite pleasant. But if you had to do hard manual labor in the sun, you quickly sweat out huge amounts of liquid.
Our medical clinic was one of the few free medical services offered in Anse-a-Pete. Anse-a-Pete has only one doctor and he cannot treat all the people. Many of the people cannot afford the medicine and do not see a doctor. The conditions included malaria, TB, dengue fever, crazy high blood pressure (200/100) and a host of other problems. For example, one 13 year old girl had NEVER been to a doctor before in her life. Clearly the medical clinic saved some lives and made others more bearable with medicine.
The soccer games were fun and helped bring a spirit of sport to both Haiti and the DR players. We did one game in the AM in Haiti and one in the late afternoon in the DR. From the pictures, you can see the economic differences between the two countries.
Both VBS events were helpful to the children. They got a short skit, a bible reading and some craft work. Both VBS events took about an hour.
The worship services were significantly different than the more traditional service at National. The youth got also to see worship services in two different cultures. It is always interesting to see the similarities in ideas and the differences in style. The Haiti style is different than the DR, even though the churches are very close in their theology.
Finally, when you visit a great tropical beach, it is a good time. We got to swim and just relax for an afternoon. What a treat!
Overall, the trip was very powerful. We had the honor to help the people of Anse-a-Pitre have a better school, better water, better health care and some fun. We also had the opportunity to learn from them many important lessons about life, faith and surviving in difficult circumstances.
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