by Calculated Risk on 8/21/2011 08:08:00 PM

For discussion:

• From al Jazeera: Libya Live Blog. At 8 PM ET:

Al Jazeera's Zeina Khodr is in Green Square:

"There's a party in the Libyan capital tonight. The people are in charge of the city. They've decided the square is now called Martyr's Square, the original name/.

"They're shouting "we're free" and shooting at a poster of Gaddafi."

• From Reuters Top News

• From the NY Times: Latest Updates on the Battle for Tripoli

• From the Telegraph: Libya live

• From the WSJ: Live Blog: Libyan Rebels Pour Into Tripoli

Earlier:
• Summary for Week ending August 19th (with plenty of graphs)
• Schedule for Week of Aug 21st
• Some preliminary thoughts on Bernanke's 2011 Jackson Hole Speech

by Calculated Risk on 8/21/2011 05:00:00 PM

"Split-Rated" is a new song from Curtis Threadneedle, Merle Hazard and Marcy Shaffer. (Merle says they have another song in the works).

Lyrics by Curtis and Marcy. Merle wrote and arranged the music, performed by Curtis Threadneedle with Merle's band including Wolf Jackson (guitar) and Frances Cunningham (mandolin).

Websites: Curtis Threadneedle, Marcy Shaffer, and Merle Hazard. Some other songs include Merle's "Double Dippin" and Marcy's "Bearish"

Earlier:
• Summary for Week ending August 19th (with plenty of graphs)
• Schedule for Week of Aug 21st
• Some preliminary thoughts on Bernanke's 2011 Jackson Hole Speech

by Calculated Risk on 8/21/2011 01:07:00 PM

As I mentioned in the weekly schedule, the most anticipated event this coming week is Fed Chairman Bernanke's speech at Jackson Hole on Friday.

Here are some preliminary thoughts about the speech ...

• Last year Bernanke paved the way for QE2 with his Jackson Hole speech on August 27, 2010. Bernanke outlined three possible policy options for additional monetary accommodation: 1) additional purchases of longer-term securities (QE2), 2) change extended period language (the FOMC just did this), and 3) lower the rate of interest that the Fed pays banks on the reserves.

• It is likely that Bernanke will again outline policy options for further easing. It appears that Bernanke will once again discuss the possibility of additional purchases of longer-term securities (QE3), and some analysts have suggested that Bernanke will also discuss changing the composition of the balance sheet (keeping the size of the balance sheet stable, but changing the mix toward longer term securities). There will probably be some discussion of other options - like a higher inflation target - but just like last year, Bernanke will probably argue against these options.

• Bernanke will NOT commit to any option. Any further easing will be announced by the FOMC. However Bernanke might provide clues as he did last year. Here is what he said:

Under what conditions would the FOMC make further use of these or related policy tools? At this juncture, the Committee has not agreed on specific criteria or triggers for further action, but I can make two general observations.

First, the FOMC will strongly resist deviations from price stability in the downward direction. ...

Second, regardless of the risks of deflation, the FOMC will do all that it can to ensure continuation of the economic recovery. ...

He might change these comments a little this year.

• Economic outlook: Bernanke will probably make statements consistent with the recent FOMC statement:

"The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased."

Since the FOMC expects the unemployment rate to decline gradually, they probably expect trend growth (as opposed to the very slow growth that many analysts expect). That is consistent with comments from NY Fed President William Dudley this week:

Some of the weakness in economic activity in the first half of the year was due to temporary factors such as the hit to household income from higher food and energy prices, and supply chain disruptions following the tragic earthquake in Japan. These restraining forces have abated and thus, we should see stronger growth in the second half. But it is clear that not all of the weakness was due to these one-time factors—and in light of this, I have revised down my expectations for the pace of recovery going forward.

And from Cleveland Fed President Sandra Pianalto:

My latest forecast is for the economy to grow at a rate of about 2 percent this year, and about 3 percent in each of the next two years. Our economy has to grow at about a 2-1/2 percent clip just to absorb new labor force entrants and to keep the unemployment rate from rising.

That is still weak growth, but more optimistic than many analysts.

• My guess is Bernanke will outline some policy options, and probably focus on changing the composition of the balance sheet as the first choice. Additional asset purchases (QE3) will probably be discussed too.

Yesterday:
• Summary for Week ending August 19th (with plenty of graphs)
• Schedule for Week of Aug 21st

by Calculated Risk on 8/21/2011 09:38:00 AM

With the recent decline in oil prices, most analysts are forecasting a sharp decline in gasoline prices over the next few weeks. (Update: the graph shows WTI, but gasoline prices are impacted by Brent international prices - and Brent hasn't fallen as far as WTI).

Gasoline prices jumped from about $3.10 per gallon in early February to over $3.50 per gallon in early March as WTI oil prices increased from about $84 per barrel to over $100 per barrel. Since oil prices have declined back to the early February levels (Bloomberg: WTI is at $82 per barrel and Brent is at $108), gasoline prices will probably decline too.

Note: Professor Hamilton recently noted an asymmetric response to changes in oil prices ("although oil price increases were often associated with economic recessions, oil price decreases did not bring about corresponding economic booms."). But a decline in gasoline prices will help a little.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

Yesterday:
• Summary for Week ending August 19th (with plenty of graphs)
• Schedule for Week of Aug 21st

by Calculated Risk on 8/20/2011 09:17:00 PM

From Rachel Ensign at the WSJ: For Many Seniors, There May Be No Retirement

Already battered nest eggs took another beating this month with the market's wild swings. With interest rates essentially at zero since 2008, income from Treasurys and certificates of deposit is pretty paltry. ... On top of that, housing prices [leave] homeowners with much less equity to tap.

Here is the survey mentioned in the article: The New Retirement: Working

• The survey found that for many Americans, the foundation of their retirement strategy is simply not to retire, to work considerably longer than the traditional retirement age, or work in retirement:
–39 percent of workers plan to work past age 70 or do not plan to retire
–54 percent of workers expect to plan to continue working when they retire
–40 percent now expect to work longer and retire at an older age since the recession

• Workers’ greatest fears about retirement include “outliving my savings and investments” and “not being able to meet the financial needs of my family.”

• Most workers will continue working out of financial necessity:
–Workers estimate their retirement savings needs at $600,000 (median), but in comparison, fewer than one-third (30 percent) have currently saved more than $100,000 in all household retirement accounts
–Most workers, regardless of age or household income, agree that they could work until age 65 and still not have enough money saved to meet their retirement needs
–Of those who plan on working past the traditional retirement age of 65, the most commonly cited reasons are of need versus choice
–Many workers (31 percent) anticipate that they will need to provide financial support to family members

Earlier:
• Summary for Week ending August 19th (with plenty of graphs)
• Schedule for Week of Aug 21st