It's been a while since we had some bridge blogging, so I took the opportunity of a visit to Strasbourg last month to take a few pictures of the passerelle des deux rives, pedestrian bridge over the Rhine which links Strasbourg in France to Kehl in Germany.

the bridge as seen from Germany, from the North

Part of the irregular Countdown to $200 oil series.

Oil price breaks through $126 a barrel

Crude oil prices surged on Friday, breaching $126 a barrel for the first time and putting pressure on Opec, the oil producers' cartel, to increase output in an effort to lower global energy costs and prevent further inflationary pressures.

The new record came a day after Abdalla El-Badri, Opec's secretary general, suggested the cartel would not increase its output in spite of a 100 per cent jump in oil prices in the last 12 months and warnings it could hit $200 a barrel.

Since hitting $100 in early January, the oil is up 26% in 4 months. Coincidentally, another 2 increases of 26% in 4 months will bring us to mid-January 2009 and almost exactly to $200 oil.

The eagerness over the past few days by pundits and financiers to call the financial crisis essentially over has been quite remarkable. I've been collecting articles all saying the same thing and have selected a few here.

A LOT of heavy-hitters have spoken in almost identical terms on the topic:

Paulson sees end of credit crunch

US Treasury Secretary Henry Paulson has said that the worst of the credit crunch may have passed.

Financial crisis mostly over, Dimon says

WASHINGTON (MarketWatch) -- The financial crisis that began last summer and rocked markets is mostly over, the chief executive of JPMorganChase & Co.  said Thursday. "I look at it as like 75-85% done," said CEO Jamie Dimon.

Worst of US credit crisis over but economy to remain weak

SINGAPORE : John Thain, the newly-installed chief executive of US investment bank Merrill Lynch, has lent his voice to the view that the worst of the US credit crunch is over.

Several prominent people, including well-known investor Warren Buffet, have said over the last few days that the credit crisis in the US has eased.

Greenspan says worst of credit crisis over

(Reuters)--Former Federal Reserve Chairman Alan Greenspan said on Thursday that the worst of the credit crisis is over, according to sources who attended a speech he delivered in New York.

As in previous years, I got my ass whupped in my latest diary on DailyKos on gas taxes. Some commenters kindly called me a "rich elitist fuck" (guilty on all counts, of course) for wanting to bankrupt poor Americans who cannot do without gas, preferably cheap, and are already struggling mightily.

Well, here's the news:

Oil moves above $120 mark

Oil prices hit a record of more than $120 a barrel on Monday, driven by fresh supply disruptions in Nigeria and a growing sense of optimism that the US economy might escape recession.

(...)

Traders are unsure what level oil prices could reach once US oil demand starts to recover. Last month, Chakib Khelil, president of Opec, the oil cartel, warned that prices could reach $200 a barrel and said there would be little the cartel could do about it.

The entire WTI futures curve is trading well above the $100-a-barrel level with the longest dated contract for December 2016 up $1.57 to $110.55 a barrel on Monday, signalling the market's consensus that $100 oil is here to stay.

World's rich shrug off credit crunch

The ranks of the world's rich swelled to 8m during 2007 as the wealthy proved immune to the strains across global economies in the latter half of the year.

There was a 4.5 per cent increase last year in so-called "high net worth individuals", those with investable assets of more than $1m excluding primary residence, according to the 2008 wealth report compiled by Citi Private Bank and Knight Frank, published on Monday.

(...)

The report says that the rate of growth of high net worth individuals has outpaced growth in both gross domestic product, and GDP per head, which it believes indicates that the rich are getting richer relative to their respective countries.

"This is not a perfect measure of relative wealth growth across income levels," it says, "but there is an indication here that the plutonomy model retained its strength through 2007 and is in rude health."

The above is self-explanatory: the rich are getting richer, at the expense of everybody else.

Which makes it funny to read this:

The Demise of the Euro (Forbes)

Tensions between inflation-obsessed Germany and growth-hungry Latin countries will spell its end.

It is only a matter of time, probably less than three years, until the euro experiment meets its end. The financial crisis in the U.S. is hastening the process, as investors flee the dollar, pushing the euro to a price of $1.59. But it will not stay high for long. Countries like Spain and Italy will withdraw and return to their old currencies. Once that happens, get ready for the return of the deutsche mark and the French franc.

What will undo the euro: the mounting tension between the inflation-obsessed German bloc (including Austria, Luxembourg and the Netherlands) and the Latin bloc of France, Italy and Spain.

The FT is inching ever closer to adopting my concept of the Anglo Disease, this time under the byline of John Plender, one of its regular editorialists. In a pretty long and detailed article about rising inequality, he has this to say, among other things:

Income inequality in the US is at its highest since that most doom-laden of years: 1929. Throughout the main English-speaking economies, earnings disparities have reached extremes not seen since the age of The Great Gatsby.

(...)

In the 1930s, it ended with bank failures and the Great Depression. Now, after decades of "financialisation" in the US and other Anglophone economies, whereby financial services have increased their share of gross domestic product, banks are being bailed out - using public money - in an effort to ensure the same does not happen again.

(...)

The question is what will happen to wealth creation, stock market valuations and economic growth if, as seems increasingly likely, the public's tolerance of income inequality and what is loosely called the Anglo-American model of free-market capitalism wears thin.

The name - Anglo Disease - fits like a glove to these repeated descriptions of the Anglo- American financial capitalism model.

But, more interestingly, the article provides explicitly, for the first time as far as I can ascertain, the explication that I've been using as to why this model was tolerated for so long:

A few articles on the housing bubble (or the end thereof), as found over the past week.

Oil futures are contracts whereby parties commit to buy or sell oil at a pre-agreed price at a given date in the future. The graph shows at what price levels futures traded last Friday, on the first day of this year and a year ago (ie, the most recent futures indicate that markets expect prices to slowly go down from their current level above $100 per barrel to stable prices in the high 90s - and stay there for the next several years: in effect, market are betting on almost constant $100 oil over the foreseeable future).

The most striking thing about these graphs is that markets have no clue whatsoever as to where prices will be in the future. In the past, it used to be simple: whatever the short term price, future prices would be around $20, ie markets expected prices to be stable in the long run, whetever the short term variations. Today, they are in effect still clinging to the same formula, ie that prices will go back to some stable level from where they are today - but given that prices keep on increasing, that target can obviously no longer be $20, and given that they have not been stable at any level in the recent past, they are just taking last month's prices as a "safe" bet.

Which simply means that they have no clue.

As I've been promising for a while to create a new target for the successor of the "Countdown to $100 oil" series, this has left me in a quandary as to what new target to select - if the markets have no idea, it's not that controversial to say anything (well, except if I did end up with a $1000 target, but that would probably be a bet on US hyperinflation than on the oil market, today).

So what are the factors driving oil prices in the near and medium term?

Brought across by afew

Yep, the financial meltdown underway is such that Spitzer's story barely makes it to Bloomberg's headlines.

Every single one of these stories would be the main headline in all the financial press on any normal day. These days, you have so many unusual news that people shrug and move on. Oh, Fannie Mae dropped 10% again? Shrug... It's only the 5th time or so this happens since the beginning of the year...

Here's a tour of the financial panic underway. But first, go read Krugman's column this morning for the optimist view...

Bernard pointed us to an article in Businessweek that explicitly makes that assertion, with a pretty unambiguous title:  More Fodder for the Yank-Haters: The spreading U.S. credit crisis is turning up the heat on Europe's simmering anti-Americanism.

This is worth deconstructing in detail:

The western financial system is caught in a trap. On the one hand, there is an urgent need for clearing prices to be established for impaired assets to restore confidence; on the other hand, if this is done in a mark-to-market world, there is a risk that some banks will run out of capital.

(Gillian Tett, Financial Times)

The global economy is facing twin shocks. Natural resource markets are delivering a supply shock of 1970s dimensions, while the financial system is delivering a shock comparable to the bank and thrift crises of the 1988-1993 period.

(Tim Bonds, Barclays Capital, in the Financial Times)

One of the most extraordinary things today is that we are facing two simultaneous crises at the same time. To some extent, they are linked, as the growth in China or elsewehre that pushes commodity prices up by making obvious the resource constraints we are beginning to face was to a large extent fuelled by the financial capitalism-driven globalisation. But they are now having completely opposed consequences, as far as inflation is concerned, with emerging markets demand continuing to push prices up, while the credit crunch is savagely cutting into economic activity and causing across the board asset price drops.

What we are really seeing is a quite brutal change in the relative values of goods and assets. For years, we had debt-bubble-fuelled increase in asset prices (mostly real estate and financial assets) and stagnation in goods prices, caused by the downwards pressure from China and the wage stagnation engineered by financial capitalism's requirements.

Now that process is partly going into reverse. Oil and commodity prices are feeding into goods price inflation, while the credit crunch signals the end of the the dizzying valuations of assets. One category is inflating, and another is deflating. And wages and pensions (ie living standards for most people) are caught in the middle.

An argument often heard against wind is that it costs a lot in public subsidies for a solution that will always have a limited impact (because it still produces only a small fraction of overall needs, and because of its unreliability linked to its intermitten nature). This is an argument worth addressing in detail, especially when it is pointed out, as the graph shows, that wind is already almost competitive with the other main sources of electricity, which suggests that it might not even need the subsidies then (and the increase in commodity prices since that graph was prepared using 2004 data, only reinforces that argument).

We are on the brink of a new energy order. Over the next few decades, our reserves of oil will start to run out and it is imperative that governments in both producing and consuming nations prepare now for that time. We should not cling to crude down to the last drop - we should leave oil before it leaves us. That means new approaches must be found soon.

The above, from an article by Fatih Birol, the increasingly strident chief economist of the International Energy Agency, suggests that we need to develop all non-carbon based energy sources as quickly as we can to avoid the coming energy crunch from oil depletion. He suggests to push nuclear energy, but that may not be enough - and, as I will show below, the best way to push nuclear is also the best way to promote wind power...

My worst fears about Obama's foreign policy ideas are confirmed by his recent declarations on Afghanistan:

Obama Calls for Help from NATO Allies in Afghanistan

So far Obama hasn't said much about America's posture toward Europe, but the front-runner for the Democratic presidential nomination set a new tone on his campaign plane by telling reporters there had to be more give and take between Washington and its NATO allies.

"I've been very clear that we do need more support from them," he said, referring to NATO countries with troops in Afghanistan. "We also may need to lift some of the constraints that they have placed on their forces there."

Sounds like the usual "give and take": Europe gives and the US takes. How about actually thinking about the underlying policies, and put an end to the pointless - and now irredeemably lost - war in Afghanistan?

Greenspan tells Gulf to drop dollar   

Alan Greenspan, the former chairman of the US central bank, or Fed, has said that inflation rates in Gulf states, which are reaching near record levels, would fall "significantly" if oil producers dropped their US dollar pegs.
Speaking at an investment conference on Monday in Jedda, Saudi Arabia, he said the pegs restrict the region's ability to control inflation by forcing them to duplicate US monetary policy at a time when the Fed is cutting rates to ward off an economic downturn.

"Bubbles" Greenspan, the man who did more than anyone on the planet to ensure that there would be inflation on a global scale by bringing interest rates down to insanely low levels and flooding the markets with cheap credit is now trying to con Americans one last time by engineering a de facto default by the US on its foreign obligations, via devaluation.

This thread regroups all known media coverage of our Stop Blair campaign (sign the petition here!).

Feel free to add more links as you see them, following simple rules:

• use as subject header the media organisation
  
• include the date in that subject header
  
• provide in the comment the link, and a quote (in the original language)
  
• each new media organsation should have its own top level comment.

Ideally, we should keep this thread clear of more general comments on the petition.

A former senior US government official, reacting to some of the sentiments I expressed in a previous essay for the Atlantic Community, said I was too pessimistic in my assessments. Europeans, I was told, always loudly disagree with US proposals but, in the end, whether it be expanding NATO or recognizing an independent Kosovo, will acquiesce to what America insists upon. At the same time, the US can continue to have fundamental disagreements with its European partners over matters such as climate change policy or international law without causing any major damage to the relationship.

With Democrats on the other hand, the expectations are going to be very high, at least on the American side. They're gonna turn towards Europe and expect to be back in the game as if nothing happened. Delusions of American Exceptionalism are very strong and in my opinion resurgent among Democrats. I can already picture Obama flying in European capitals, all proud and shining of his brand new "historical" victory, the "New JFK" and the second coming of Holy Ronald Reagan all rolled in one, and explaining in grand rhetorical flourishes how everything is going to get better thanks to American Leadership (TM). They really believe that shit.

Yet another day of astonishing volatility on the markets today, with the Dow Jones jumping from -1% to +1% in a few minutes after it emerged that a bailout for monoline insurer Ambac was apparently imminent. Financial stocks, which had been sharply down on news of downgrades of Freddie Mac and Fannie Mae by analysts, brutally shot up.

What this makes clear is that the markets no longer know how to value stocks, in particular financial ones, and fluctuate wildly as new "input" becomes available, whether hard news like financial statements or corporate decisions, or soft news like  analyst recommendations or expectations of decisions... And as hard news are coming out in random blobs over time, this uncertainty is unlikely to change.

This might make market watching a lot more exciting, but it is also beginning to have an impact on the real economy, as the logical reaction of the financial world in the face of this uncertainty is to batten hatches, tighten lending criteria, and reduce down credit and investment activity.

Euphoria is followed by revulsion, and boom by bust.

Just a quick diary to flag a poll by HarrisInteractive (PDF!), which includes two questions that you may find of interest.

Le texte ci-dessous (colonne de droite) est une adaptation d'un essai initialement rédigé en anglais et reproduit ci-dessous (colonne de gauche). Il s'agit d'une tentative de synthèse d'un certain nombre de discussions menées au cours des derniers mois pour tenter d'éclaircir la génese de la crise financière en cours. Les liens vers ces discussions (qui sont essentiellement en anglais) est en bas de ce texte. Ce texte est dans la lignée de l'article Non, la France n'est pas en déclin et n'a pas besoin de "réformes" écrit avec John Evans (afew) et publié dans le Monde daté du 11 septembre 2007.

In the 70s, the Economist coined the label "Dutch Disease" to describe the economic travails of the Netherlands as the country's export-oriented industrial sector struggled with the increased exchange rates caused by the rapid growth in gas exports that followed the discovery and development of the massive Groningen field. The extractive sector was so profitable that it captured a large share of new investment, and its export volume was large enough to alter the trade balance and boost the currency, further rendering other activities less attractive.		Dans les années 1970, le magazine The Economist inventa le terme de "Dutch Disease" pour décrire le malaise économique qui avait frappé les Pays-Bas après la mise en production du champ gazier géant de Groningue Le secteur gazier était tellement rentable qu'il avait accaparé une grande part de l'investissement domestique, et : l'augmentation rapide des exportations de gaz avait conduit à une appréciation de la monnaie nationale, et à une perte de compétitivité pour les autres industries exportatrices du pays.
Today, we can observe a similar phenomenon on a large scale around the financial industry, whose high profitability for many years has also caused weakness for other sectors of the economy. As this has developed around the money centers in New York and, in an even more concentrated way, London, I would propose to label this the "Anglo Disease." While the Dutch managed to avoid the "oil curse" that has struck many oil exporting countries, I will also argue that the Anglo Disease carries its own curse, whose early symptoms are reflected in the current financial crisis.		Aujourd'hui, on peut considérer qu'un phénomène similaire est apparu autour du secteur financier, dont la très grande profitabilité ces dernières années a affaibli de manière symétrique les autres activités économiques. Comme ce secteur est très concentré autour des capitales financières que sont Londres et New York, nous proposons de nommer ce qui se passe aujourd'hui l'"Anglo Disease." Et tandis que les néerlandais ont au moins réussi à éviter la "malédiction de l'or noir" qui a frappé de nombreux pays exprtateurs de pétrole, il devient apparent que l'Anglo Disease est également porteuse de malédiction économique, dont les premier symptômes sont visibles aujourd'hui dans la crise financière en cours.