Tuesday, October 19, 2010
Geithner Weak Dollar Seen as U.S. Recovery Route
Oct. 19 (Bloomberg) -- For U.S. Treasury Secretary Timothy F. Geithner, a weaker dollar may now be in the national interest.
The dollar has dropped more than 7 percent since Aug. 27, when Chairman Ben S. Bernanke signaled the Federal Reserve is prepared to ease monetary policy. Where once such a decline may have been met with resistance from the U.S., Geithner may now be tolerating it as a way of bolstering the recovery.
Companies from Costco Wholesale Corp. to Deere & Co. have credited the weaker dollar for giving their earnings a boost, and the currency’s slide has helped propel the Dow Jones Industrial Average above 11,000 for the first time since May. Higher stock prices in turn are bolstering consumer and business confidence. The danger is that the decline gets out of hand, fueling increases in the cost of living over the long term and prompting investors to avoid U.S debt.
“In an era where deflation pressures appear to be the greatest risk, growth is below trend and the U.S. wants to boost exports, why would they not want” a weaker dollar, Jim O’Neill, chairman of Goldman Sachs Asset Management in London, said in an interview. “The answer is when it becomes a problem for financial markets. Until then it’s a straightforward strategy.”
The U.S. currency is slipping in reaction to a decline in interest rates that’s making U.S. assets less attractive to overseas investors. The yield on the two-year Treasury note touched 0.3508 percent yesterday, the least since reaching a record low 0.3270 percent on Oct. 12.
The Dollar Index, used by IntercontinentalExchange Inc. to track the greenback against six currencies including the euro, yen and pound, has dropped about 7 percent since Aug. 27, when Bernanke said the Fed “will do all that it can” to ensure a continuation of the economic recovery.
The index gained 0.4 percent today to 77.275 as of 9:08 a.m. in London. The gauge, which began in 1967, is still close to its low reached in April 2008.
The dollar is trading near parity against its Australian counterpart for the first time since 1983, and is close to its weakest versus the yen in 15 years.
Geithner said yesterday that the U.S. will preserve confidence in a “strong dollar.” Speaking at an event in Palo Alto, California, he said the U.S. “will not engage” in currency devaluation.
A weaker dollar can help the economy by making U.S. products less expensive in overseas markets and by boosting the overseas earnings of U.S. companies in dollar terms. As the cost of imports rises, American consumers switch to U.S.-made goods, and domestic producers face less competition from abroad.
“The dollar is going to go down,” Martin Feldstein, a Harvard University professor who was chief economic adviser to President Ronald Reagan, said Oct. 7 in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “It will cause Americans to shift from imported goods into domestic services. All of that will strengthen the economy.”
The trade gap widened 8.8 percent in August to $46.3 billion. Imports from China climbed to a record $35.3 billion in August, pushing the trade shortfall with the Asian nation to $28 billion, the highest since comparable data began in 1992.
The Standard & Poor’s 500 Index has jumped 13 percent since Bernanke’s speech on prospects that economic growth will be spurred by a resumption of large-scale asset purchases by the Fed and exporters’ earnings will benefit from a weaker dollar.
Companies in the S&P 500 that get more than half of their revenue internationally have returned about 5.1 percentage points more than those whose sales comes mostly from the U.S. since the start of September, according to data compiled by Bloomberg.
A weaker dollar is “a positive for equities as long as it’s not viewed as a collapse of the dollar,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion.
Matt McCormick, portfolio manager at Cincinnati-based Bahl & Gaynor Inc., which manages $2.9 billion, said the dollar’s weakness is benefiting companies he owns with “significant” overseas revenue, including McDonald’s Corp., Procter & Gamble Co., Intel Corp. and Qualcomm Inc.
“A low dollar will be with us for longer than most people expect,” he said.
Issaquah, Washington-based Costco, the largest U.S. warehouse club chain, is benefiting from foreign-exchange “tailwinds,” Chief Financial Officer Richard Galanti said Oct. 6. He said the dollar’s decline in many of the countries where the company operates increased sales by about $1.6 billion over the course of its fiscal year.
Moline, Illinois-based Deere, the world’s largest farm equipment maker, said in August that net sales of worldwide equipment operations rose 6 percent in the nine months ended July 31 from a year earlier, including a favorable currency translation of 3 percent.
Lawson Software Inc., a St. Paul, Minnesota-based provider of business-management software to Safeway Inc. and the Mayo Clinic, said appreciation of the euro on the quarter ended Aug. 31 boosted sales above its projections.
The economic benefits of a weaker currency give Geithner reason to downplay the “strong dollar” policy first articulated in about 1995, when he was deputy assistant Treasury secretary under Robert Rubin, who served as the Treasury secretary from 1995 to 1999.
“Geithner’s comments recently have been not exactly dollar-supportive,” said Barry Knapp, chief U.S. equity strategist at Barclays Plc in New York. “Typically what happens is that the Treasury either says we support a strong dollar or we think a free market should decide where the dollar goes, and that means we don’t mind if it goes down.”
That doesn’t mean the administration is actively trying to drive down the currency, which investors might interpret as a U.S. effort to devalue its way out of debt, said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.
Even if the U.S. is not trying to push the dollar higher, “you can’t say that that amounts to having an active policy to drive down the dollar,” he said.
Geithner this month blamed China’s policy of limiting gains in the yuan for contributing to a “damaging dynamic” of capital controls and currency-market interventions by emerging economies.
“It is very important to see more progress by the major emerging economies to more flexible, more market-oriented exchange-rate systems,” he said Oct. 6.
Geithner went further in comments yesterday, saying the yuan is “significantly undervalued, more so than is true of any major, significant emerging-market currency.”
A weaker dollar may be a relief for the U.S. economy, with an unemployment rate that is forecast to exceed 9 percent through next year, according to the median estimate in a Bloomberg News survey of economists.
In his State of the Union address in January, President Barack Obama said U.S. jobs will depend in part on the country’s ability to boost overseas sales. Meeting his target would mean exports reaching $3.14 trillion by 2015 from $1.57 trillion in 2009, according to the White House.
As long as the decline is “orderly, not negatively impacting U.S. asset prices -- Geithner is quite happy with the depreciation in the currency,” said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut.
Still, developing nations may not cooperate as they seek to protect their own exports and curb inflows of capital that threaten to lift their currencies.
China, the second-largest trading partner for the U.S. after Canada, has limited gains in the yuan to 2.7 percent since it dropped its peg to the dollar in June.
“We are committed to a more flexible exchange regime,” Yi Gang, Deputy Governor of the People’s Bank of China, said on Oct. 9 during a meeting of the International Monetary Fund in Washington. “But the approach is probably a gradual one.”
Brazilian Finance Minister Guido Mantega, who has spoken of a “currency war,” yesterday said the country will increase a tax on foreigners’ investments in fixed-income securities to 6 percent from 4 percent. The tax on foreign investors’ margin deposits for futures markets will climb to 6 percent from 0.38 percent, Mantega told reporters in Sao Paulo.
India’s central bank may intervene in currency markets if the rupee appreciates past 43 against the dollar, a finance ministry official with knowledge of the matter said Oct. 18. The rupee has climbed 3.3 percent in the last month to 44.36 per dollar yesterday.
Frictions may fester this week as Geithner and Bernanke meet with counterparts from the Group of 20 developed and emerging nations Oct. 22-23 in South Korea to craft an agenda for a Seoul summit of leaders next month.
“Each of these central banks and Treasury departments recognizes there is a competitive beggar-thy-neighbor devaluation game going on and that’s something you don’t want to be left behind in,” said Stephen King, chief economist at HSBC Holdings Plc in London.
To contact the editor responsible for this story: Christopher Wellisz firstname.lastname@example.orgFind out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone/
This peek into the future is brought to you by the letter "E" for Electrolux and ApplianceAssistant.com for when it breaks!
Electrolux Design Lab 2010 Intro
Portable Induction Cooking Concept"The Snail by Peter Alwin, India "
Eco Cleaner by Ahi Andy Mohsen, Iran
Why we would need dishes for encapsulated food is unclear :)
Elements Modular Kitchen by Matthew Gilbride, USA
Dismount Washer by Lichen Guo, China
Clean Closet by Michael Edenius, Sweden
Bio Robot Refrigerator by Yuriy Dmitriev, Russia
External Refrigerator by Nicolas Hubert, France
The Kitchen Hideaway by Daniel Dobrogorsky, Australia
Monday, October 18, 2010
Fix the #1 Most Common Refrigerator Problem "Defrost Cycle"
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A refrigerator doesn't actually create cold. It removes heat. Cold is the absence of heat, and the complete absence of heat is considered absolute zero, which is −459.67°F −273.15°C .
You may wonder where the "cold" came from, here is a little more physics. As the refrigerant moves from the very small capillary tube into the larger tubing of the evaporator the pressure of the refrigerant is greatly reduced causing it to boil at a lower temperature, greatly increasing its ability to absorb the warm air within the freezer compartment.
Your refrigerator has a compressor which is part of a sealed system of tubing that contains a special gas (the refrigerant). The compressor pumps the refrigerant through a very thin tube on its way to the inside of the freezer compartment. As the refrigerant exits this thin tube it enters a larger one. As the pressure of the gas drops, it’s ability to absorb heat increases.
Inside the freezer, a fan circulates air over the cool tubing and the refrigerant absorbs the heat from the freezer's warmer air. Just like wind moving from a high-pressure zone into a low-pressure zone to equalize, heat will move toward cooler areas to try to equalize. Equality cannot be achieved because the now warm gas continues through the system to the condenser. As the heated gas flows through the condenser coils on the back or under the refrigerator, the heat within the gas leaves in favor of the cooler air in the room, and the cycle starts again. If you prefer to just think of the fan blowing cold air into the appliance that's fine; but technically, the heat is being pumped out rather than cold being pumped in.
The cold air that is generated in the freezer passes through vents (the air diffuser) to the refrigerator compartment. A thermostat or cold control in the refrigerator activates the compressor whenever the temperature rises above the set point. In some newer models there is a separate cooling coil for the freezer and the refrigerator and thus two temperature controls.
As the air in the refrigerator cools, the water in the air (humidity) condenses. Water that condenses in the freezer will freeze and become frost. Most modern refrigerators have an automatic defrost heater in the freezer, which cycles on from time to time to prevent the build up of frost. The defrost system is simply a heating element that is controlled by a defrost timer and a thermostat. The water from the melted frost drains out of the refrigerator into a pan beneath the refrigerator near the hot condenser coils or compressor and evaporates.
A door switch closes a circuit when the door is opened and turns on the interior light. When the door is open some refrigerators will disable certain components such as the fan, defrost heater, icemaker, or ice and water dispensing systems.
Refrigerators and freezers don't cool efficiently when operated at temperatures below, roughly, 45 degrees (F). The first reason is that the outside temperature may get so low that the thermostat inside the refrigerator never gets warm enough to activate the compressor, so the freezer warms up to the outside temperature. Another problem is that if it gets too cold, the refrigerant pressure becomes too low to generate the necessary cold, so the freezer only chills down to the outside temperature. This can be a common issue when operating a refrigerator in the garage or other unheated space during cold weather.
Sunday, October 17, 2010
|Whirlpool Unveils Industry's Most Efficient Laundry Pair |
Oct 15, 2010
Thursday, October 14, 2010
Fed Mulls Raising Inflation Expectations to Boost Economy
Federal Reserve policy makers may want Americans to expect inflation to accelerate in the future so they spend more of their money now.
Central bankers, seeking ways to boost flagging growth after lowering interest rates almost to zero and buying $1.7 trillion of securities, are weighing strategies for raising inflation expectations as well as expanding the balance sheet by purchasing Treasuries, according to minutes of the Fed’s Sept. 21 meeting released yesterday.
Some Fed officials are concerned that expectations of lower inflation will become self-fulfilling, damping demand by increasing borrowing costs in real terms, the minutes said. By encouraging Americans to believe prices will start rising at a faster pace, the Fed would reduce inflation-adjusted interest rates and stimulate the economy. Chairman Ben S. Bernankesaid in 2003 that Japan could beat deflation by using a “publicly announced, gradually rising price-level target.”
“The Fed is on the verge of actively targeting a higher inflation rate,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. U.S. stocks advanced, sending benchmark indexes to five-month highs, the dollar fell and gold declined for the first time in three days after the minutes were released.
Trying to raise inflation expectations is untested in the U.S. The policy may backfire if actual inflation drifts higher than the Fed would like, potentially eroding gains won in the early 1980s by former Fed Chairman Paul Volcker, who raised interest rates as high as 20 percent to subdue prices.
“The theory is elegant, but it’s unclear in practice whether short-term moves in inflation expectations really drive real growth,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York and a former Fed researcher.
Jim O’Sullivan, global chief economist at MF Global Ltd. in New York, said in a Bloomberg Television interview that the biggest risk is “boosting long-term inflation expectations more than they lower real interest rates.”
Bernanke on Oct. 15 will deliver a speech on “Monetary Policy Objectives and Tools in a Low-Inflation Environment” at a conference at the Fed Bank of Boston. Some of the panels at the conference will deal with Japan’s experience of deflation.
The Sept. 21 statement saying the Fed “is prepared to provide additional accommodation if needed” was meant to accord “with the members’ sense that such accommodation may be appropriate before long,” the minutes said. The Standard and Poor’s 500 index is up 2.6 percent since Sept. 21 and rose 0.4 percent yesterday to 1,169.77.
The Thomson Reuters/University of Michigan consumer confidence survey showed consumers expect an inflation rate of 2.2 percent over the next 12 months in September, the lowest in a year and down from 2.7 percent in August.
The Fed gave several options for raising short-term price expectations, including providing more information on the inflation rate policy makers consider consistent with their long-term goals and targeting a path for the price level. For the first time, the Fed said it could also target a path for nominal gross domestic product, which isn’t adjusted for inflation.
“The minutes are one of their key communication tools, but it’s not clear what that approach will be,” Maki said.
The report provides more detail on the timing and components of potential easing actions without giving the amount of any additional asset purchases by the Fed. Since the meeting, weaker-than-forecast job growth in September and comments by policy makers, including New York Fed President William Dudley, have fueled speculation that the central bank will soon start a second wave of unconventional easing.
Projection for Purchases
Goldman Sachs Group Inc. economists are projecting that the Fed will announce $500 billion of purchases at the next meeting Nov. 2-3.
“They’re still ironing out the details,” said Chris Low, chief economist at FTN Financial in New York. At the same time, “if we don’t get an announcement in the next meeting I think we’d see quite a bit of disappointment in the bond market and the stock market,” Low said.
Bond traders expect the Fed’s actions to generate higher prices. Their inflation expectations for the next five years, measured by the breakeven rate between nominal and inflation- indexed bonds, rose to 1.47 percent from 1.2 percent on Sept. 20, the day before the Fed’s meeting. Gold prices hit a record $1,366 an ounce on Oct. 7.
Removing Punch Bowl
“The bottom line is, they are trying to reflate, and the market is concerned that historically they have always been late in removing the punch bowl,” said Richard Schlanger, a vice president at Pioneer Investments Inc. in Boston who helps oversee $18 billion. “We are going to be very judicious in our asset allocations here.”
Moderate growth and 9.6 percent unemployment are curbing price gains, prompting U.S. central bankers to warn for the second time in a decade that inflation is too low.
Inflation, measured by the personal consumption expenditures price index, minus food and energy, has been below the Fed’s goal for five consecutive months. The price measure rose 1.4 percent for the 12 months ending August. Prices excluding food and energy have gained at a 1 percent annual pace in the three months through August.
The European Central Bank and Bank of England are among central banks that target an inflation rate through monetary policy. The Fed, by contrast, has no formal inflation objective; instead, Fed officials state a long-run inflation rate they see as consistent with achieving the legislative mandates of stable prices and maximum employment.
The FOMC could adopt a combination of inflation targeting and price-level targeting to get inflation expectations up, said Mark Gertler, a New York University economist and research co- author with Bernanke.
The Fed could restate its commitment to keep inflation rising annually at around 1.7 percent to 2 percent. At the same time, the FOMC could announce some tolerance for inflation above that goal to make up for recent undershooting of those rates, Gertler said.
That would help convince the public that the Fed wasn’t going to raise rates rapidly if inflation moved above 2 percent, he said. Such a strategy “tells the market that the farther we undershoot, the more aggressive we are going to be,” he said.
A nominal GDP target is “a pretty unlikely outcome,” Gertler said. “I don’t think it is on the table as a serious proposal.”
The Fed’s consideration of price-level targeting may draw on research co-written by Gauti Eggertsson, a New York Fed researcher, and Michael Woodford of Columbia University. Eggertsson attended the FOMC meeting last month, his second since joining the Fed in 2004.
Eggertsson and Woodford said in a 2003 paper that a publicly announced price-level target is better than targeting the rate of inflation as a way to increase expectations. Bernanke cited their work in a 2003 speech about monetary policy in Japan.
Woodford said in an interview it would be “desirable” for the Fed to commit to keep rates low to ensure prices rise along a path identified by the central bank.
If people expect higher inflation, “that’s a reason to spend more,” said Woodford, who as a professor worked with Bernanke in the Princeton University economics department.
Japan, by contrast, tied its low-rate policy last decade to an inflation rate instead of the price level. Woodford declined to discuss his talks with Fed officials.
Dudley, who serves as FOMC vice chairman and is the only regional Fed president to vote at every meeting, said in an Oct. 1 speech that, for example, “if inflation in 2011 were 0.5 percentage point below the Fed’s inflation objective, the Fed might aim to offset this miss by an additional 0.5 percentage- point rise in the price level in future years.”
“There’s some evidence that inflation expectations are playing a role both in limiting demand and keeping prices low,” FTN’s Low said.
“You look at housing now and one of the reasons people aren’t buying is they expect they can get a better price if they wait,” he said. “If that behavior spreads into other markets, it could be a real problem.”
To contact the editor responsible for this story: Christopher Wellisz at email@example.com
Fed says "Spend Your Money" But mom told me to save. Hmm Who to trust...Who to trust?Fed%20Mulls%20Raising%20Inflation%20Expectations%20to%20Boost%20Economy http://www.bloomberg.com/news/2010-10-13/fed-considers-raising-inflation-expectations-to-boost-economy.html
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