Bombshell From I M F -- Low I R Cause Of Oil Problems

[Realistbear]

http://www.nasdaq.com/aspxcontent/NewsStor...nternational.na

Low Interest Rates Drove Oil Price Spike - IMF Study

By Campion Walsh, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- Loose monetary policy spurred the latest oil price spike, suggesting an interest-rate response is needed to stabilize oil markets, according to an International Monetary Fund working paper.

"The sustained pressure on oil prices observed in 2004-05 can be explained by an excessively expansionary monetary policy, with interest rates falling to record levels in an integrated international capital market," according to the IMF working paper by Noureddine Krichene. "Stimulated by low interest rates and a depreciating U.S. dollar, demand for oil has expanded faster than supply."

Based on that experience, the study says "

monetary tightening to rein in oil prices and their inflationary implications may be substantial and may involve a trade-off between inflation and output

."

Big banks have issued the warning so NOW is the time to listen and take action--unload BTLs and leveraged properties that are IR sensitive. IR are going nowhere but up and now we have had it from the horse's mouth. The $ is going in the same direction as IR.

This is 100% Al Greenspan who said he would not spare froth in the real estate market. Bernanke has not deviated from this policy. The US is the largest contributor to the IMF fund and will influence higher rates.

[Down with the BBC]

http://www.nasdaq.com/aspxcontent/NewsStor...nternational.na

Low Interest Rates Drove Oil Price Spike - IMF Study

By Campion Walsh, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- Loose monetary policy spurred the latest oil price spike, suggesting an interest-rate response is needed to stabilize oil markets, according to an International Monetary Fund working paper.

"The sustained pressure on oil prices observed in 2004-05 can be explained by an excessively expansionary monetary policy, with interest rates falling to record levels in an integrated international capital market," according to the IMF working paper by Noureddine Krichene. "Stimulated by low interest rates and a depreciating U.S. dollar, demand for oil has expanded faster than supply."

Based on that experience, the study says "

monetary tightening to rein in oil prices and their inflationary implications may be substantial and may involve a trade-off between inflation and output

."

Big banks have issued the warning so NOW is the time to listen and take action--unload BTLs and leveraged properties that are IR sensitive. IR are going nowhere but up and now we have had it from the horse's mouth. The $ is going in the same direction as IR.

This is 100% Al Greenspan who said he would not spare froth in the real estate market. Bernanke has not deviated from this policy. The US is the largest contributor to the IMF fund and will influence higher rates.

Wow, from the nasdaq as well. If that makes the headlines here then a change of sentiment. BTW Ir here (if they go up) would they do wonders for my savings account???

[apom]

but low interest rates are a good thing are they not???

Lots of people tell me that.. I am sure it hasn't hurt the economy in any way..

[Realistbear]

IMHO the following words sum up the position of the IMF:

"trade-off between inflation and output"

In the eyes of the Fed inflation is public enemy number one. They will chose to fight inflation at the expense of output believing the latter will recover faster than the consequences of 1980's style inflation.

IR are still accomodative in the US, UK and EU as evidenced by the continuing high levels of borrowing. The HPI/inflation dragon is still alive and breathing which is why the central banks, under the guidance of the IMF, still have some work to do.

[Panda]

Thats my dose of medicine for the day , the news just gets better by the day.

Up Up and away, lovely jubbly

Cheers Doc Realistic Bear

[Charlie Don't Surf]

There were a few weeks where I thought they'd managed to bury all the bad news and they'd be pumping out spin to keep everything ticking over nicely.

But now there seems to be a lot of stuff piling up and forcing higher IRs is only the start of it

[apom]

Trying to think of a smug and funny line.. there must be so many..

hmmnn..

[mustrum_ridcully]

What no post from beenhearingthisforyears telling us how we're wrong and we're spinning blah blah blah?

Who/what rattled his cage this week as he'd been away for a good month or two?

[malco]

I suspect the paper was written by an economist of the type that only knows economics, not the physical and technical realities behind the numbers. The author probably has a point that sharp increases in demand have soaked up available supply, but they have missed the point that it is in this respect that the current price pressure is quite different from previous oil price shocks. Available supply was in any case in decline due to progressive depletion. One wonders how interest rates increasing will change the relentless shift of former oil exporting countries to oil importing - all due to failing domestic supplies as fields deplete, not due to any financial issue.

We'll see. In the short term higher interest rates ought indeed to relieve oil prices, but how long for?

[OnlyMe]

All a little too late, the inflationary genie is out of the bottle, and it is throttling the West more than it is the East (unhinged land prices, rising costs and falling productivity).

I will be looking to commodities to protect savings, I have no faith in the monetary policies doing so.

Sainsbury's today announced that a small part of their pension funds will be going into commodities for the first time ever, first of many I suspect.

Bonds and gilts have been bid up so far that their worth (unless outright depression ensues) is highly debateable - especially when central banks can inflate the money supply at will hidden behind a curtain of meaningless CPI stats. Equities? Who knows some will do well some will hit severe bumps in the road as the excesses of the last decade and more play out. Driven far enough the cost cutting measures and outsourcing will backfire spectacularly as the very cost savings made to improve sales and profits dwindle the core base of consumers able to participate in the experiment or people so pushed to save money are driven to the very lowest prices - thery will come direct from products supplied outside of the UK supply chain completely, with the new upstart companies able to source skills, material, facilities and services cheaper in other parts of the world and take skills bought and paid for by those companies offshoring.

Interesting times, unless you get dragged under in the downwave.

Edited March 22, 2006 by OnlyMe

[RobertPaulson]

"The sustained pressure on oil prices observed in 2004-05 can be explained by an excessively expansionary monetary policy, with interest rates falling to record levels in an integrated international capital market," according to the IMF working paper by Noureddine Krichene. "Stimulated by low interest rates and a depreciating U.S. dollar, demand for oil has expanded faster than supply."

Ahh.. I think you'll actually find that is called "peak oil". So, the IMF have called it then. Oh dear, we are all screwed.

[needle]

As Oscar Wilde once said, "I like to quote myself; it adds spice to my conversation"

I dont presume to such high company but I gotta say......dammit, I am good

My opinion, nothing else,

While I believe there should be a drop in property prices, and I also see it happening it will not be all that severe without outside an outside trigger.

That trigger will be oil.