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Our March 20, 2008 Newsletter
Edition
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WHAT
POLITICAL, SOCIAL AND ECONOMIC LESSONS
CAN
WE LEARN FROM A HOTEL STAY?
.
Editorial
By John Schroder
.
How
many of you have stayed in a hotel, whether on business or
vacation? You probably have lost count if you add up all those
hotel visits tabulated to date over the course of your lifetime so
far. But one thing that certainly you have experienced in common
with all of those stays, regardless of what hotel and what city, is the
check-in and check-out experience. In other words, what is the
first thing you ask once you arrive to sign in? And if you do not
ask, then what is the first and most direct information conveyed to you
in no uncertain terms by the desk clerk at that moment as well?
The answer is, the check-out time, and the fact you will charged more
should you choose not to vacate at the appointed hour. An
interesting concept, is it not? You will be charged more, should
you not vacate at the appropriate time. Hold that thought in your
mind as we explore this further.
.
Aside
from the check-out issue, one other thing in common is that you are
also usually asked to sign a form indicating you agree to be
responsible for any room charges, such as the ubiquitous mini-bar, long
distance telephone calls, and so on. Speaking of the good old
mini-bar, how many times has a hotel attempted to charge you for
mini-bar items you did not consume? You have probably lost count
of all those occasions as well, and were probably not very pleased when
such a thing has happened. In any event, what in the world does a
hotel stay, and the related experiences, have to do with socio-economic
issues? Excellent question, but before we delve into this, let us
first discuss a basic primer on what is known in economics as Moral
Hazard.
.
What is moral hazard? Well,
basically it is a term that applies to human behavior in relation to
economic behavior, and how some people throw common sense and caution
to the wind when they know someone else will pay for their
mistakes. Which is to explain, that the study of economics is
indeed a study of human behavior, or better said, how people react and
what they do under certain circumstances, with their money, and the
money of others, as the case might be. And so, to offer a very
simplified but logical example, let us use our hotel mini-bar analogy
to highlight this.
.
How
do you feel when the hotel puts charges on your bill for items you did
not consume or use? On the other side of this equation, what do
you think would be the reaction, when a hotel's accounting is so
screwed up, that they put all of your charges on someone else's
bill? What if it became well known that a stay at a certain hotel
was a great deal, simply because the hotel (due to mismanagement or
incompetence) almost always forgot to charge you for your mini-bar
usage, room service, long distance calls, or whatever else? Which
is to ask, what is human nature when someone knows no matter what they
consume, no matter what they do, that someone else will always pick up
the tab or pay for it? What if this became the norm or standard
operating procedure, year in and year out? Would it motivate
someone to limit their consumption and behave frugally or behave with
some morality (not abusing the liquor cabinet in the example of our
mini-bar analogy), or would it motivate someone to possibly consume
even more, knowing there was no recourse or bill to pay? In such
a case, we can speculate that it would be human nature to go hog wild
with the mini-bar knowing you would not be charged (or that someone
other than yourself would be). If you understand such an analogy,
then you more or less can understand the arguments involving moral
hazard.
.
Since
there has been enough incessant talk about recession and falling
housing prices already, let us instead focus on one single pointed
question: how is this economic mess going to be cleaned up and more
importantly, who is going to pay for it all? With this in mind,
my thoughts about Citibank come to the forefront, arguably the largest
banking institution inside the US and certainly perhaps one of the
world's largest banking entities as well. After a highly publicized
very recent cash infusion of roughly US$8 Billion Dollars from a Middle
Eastern country, we now hear that Citibank will need an additional
US$18 Billion Dollars to shore up its financial situation. Mind
you, Citibank paid out roughly US$35 Billion Dollars in bonuses and
executive compensation last year, in 2007. With this in mind, we
can argue they did have the where with all to set aside a rainy day
fund sufficient enough to cover the current problem, had they only paid
out only half this amount to executives, should they have wished to and
had there been enough foresight to do so. They did not, and whose
fault is that? More importantly, just as our mini-bar hotel
situation, will it be the case that someone else completely uninvolved
will be handed the bill? Once again, hold whatever thoughts you
have, but do keep in mind this is not the first time. Also keep
in mind that many other financial institutions are in dire straights as
well (another major US bank has reported over US$5 Billion Dollars
worth of credit card accounts in arrears at the moment, not to mention
that Bear Stearns has gone belly-up as well).
.
Looking
at this from a historical perspective, many US banks had gotten in
trouble before with foolish lending practices to developing countries,
whereby they were bailed out before as well by the US Treasury or the
Federal Reserve. Seems the more they get bailed out, the more
they expect it, and never learn any lessons. Too bad it usually
ends up being the taxpayers that foot the bill.
.
Concerning
this idea of a rescue or bailout, keep in mind that the Central Bank of
the United States (otherwise known as the Federal Reserve) announced in
early March of 2008, that it will increase the amount of loans it plans
to make available to banks by an additional US$100 billion. Then,
the week of March 10 the Fed announced another US$200 Billion Dollars,
plus a plan to basically accept those sub-prime mortgages from the
banks and brokerage firms as collateral for a loan (many of which are
in default and are already valued at a deep, deep discount from face
value. To clarify, the Fed has said they will accept investment
grade mortgage back securities from the banks and brokers as collateral
for loan money, but since Moody's and Standard & Poors has ranked
all this junk AAA, who really knows what is investment grade and what
is not?). The US Fed has already provided a total of $160 billion
in short-term loans to cash-strapped banks since December. Now this
latest announcement will involve making another $100 to $300 Billion of
additional money available to a broad range of financial
institutions. Where is the money coming from? Will they
simply print it or create it out of thin air? In addition,
various US government agencies have raised the amount of mortgages they
can insure to over $700,000 dollars, and simultaneously raised the
ceilings of mortgages and securities they can hold. Where will
they get the money from? It has been estimated by some economic
commentators that Fannie-Mae and Freddie-Mac are already technically
out of cash, or in other words, insolvent or broke to be quite
blunt (a March 2008 article from Barron's says Fannie-Mae could
be hit by cumulative credit losses of over $50 Billion Dollars).
And so, if that is indeed true, will the government once again borrow
even more money to bail out the failed banks and other financial
players? Since Fannie-Mae and Freddie-Mac carry an implied
backing from the US Federal Government, one can assume the US Treasury,
and thus indirectly individual US citizens, will be handed the bill for
that one as well.
.
Why
is it that we surely become perturbed and seek recourse when a hotel
attempts to bill us for room charges we did not incur, and yet when
government does so, we look the other way or believe it is not us that
will be affected? Is it that many people simply blindly believe
it is someone else getting stuck with the bill, and not
themselves? In terms of government debt and expenditures, each
and every individual citizen is a somewhat unwilling and unknowing
guarantor of this debt. How so? Well, if any government
decides to go even further into debt for whatever reason, who will they
look to in order to collect the funds to pay the interest and eventual
principal on that debt? Someone in another country, or it's own
citizens? Who will be placed on the hook and forced to pay
up? Surely not the executive directors of these various financial
entities who have collected multi-million dollar salaries and bonuses.
.
Similarly,
why should any citizen even care what the central bank does in terms of
printing or not printing more money? After all, it is magical
free money, is it not? Or, is there a cost involved to the
individual citizen that they themselves do not realize? Our
contention is that the cost involved is indeed the devaluation of the
currency, plus the resultant higher consumer prices associated with
such inflation. Interestingly enough, we are already starting to
see the effects of such policies. At the moment, money with zero
maturity is growing at a 22% annually and M3 calculations indicated a
growth or inflation of the money supply in the high teens (about 16
percent). Want to know why bread, cereal, beef, copper, silver,
and a whole laundry list of other items has done up? Look no
further than your own backyard, if you are an American or if your
country uses the US Dollar as its national currency, or pegs its own
currency to the USD (as one example, the recent street demonstrations
in Panama regarding higher cost of living highlights the problem of
nations that have adopted the US Dollar, as they too are now suffering
the very same inflation).
.
The
current situation is being called a credit crisis and yet there is no
shortage of money or liquidity. In fact, some will argue it
exists in excess, and of course the US Central Bank and various US
government agencies or institutions are doling it out like free voting
buttons at a political rally. Where this all leads is anyone's
guess, but we already have a solid idea what the true inflation rate is
and what that has already done to consumer prices (and the true rate of
inflation is not what is being reported by the various pundits in the
mainstream media nor political hacks as well). And so, we would
simply ask the philosophical question: Is it time to
check-out? Is it time to get out of the hotel before they attempt
to stick you with someone else's mini-bar bill?
.
The
answer to the above question is truly a personal one. Meaning, it
all depends upon what you believe is truly happening in the economy at
the moment, and also what your philosophical leanings are as well in
terms of government. Some will say it is correct and proper that
government steps in, yet again, to bail out the failed banks, brokers,
mortgage companies, and entities such as Fannie-Mae and
Freddie-Mac. On the other hand, it would seem that moral hazard
comes into play over and over again, as these private for profit
businesses make foolish business decisions with the knowledge that they
have no risk or down side, with the public coffers paying for their
errors and mismanagement. Surely this would be wonderful if it
applied to us in our own personal lives, knowing we could gamble away
our paycheck if we wanted, with no negative recourse, or foolishly
spend our retirement savings because someone else will pay all of our
bills for us if we loose it all. Of course, it does not work that
way, does it? In fact, we know all too well, that our own
mini-bar charges (metaphorically speaking) will surely appear on our
bill, along with maybe some other charges that are not ours as
well. Why is it that the banks and other financial institutions
are given a free pass, while the rest of us suffer the consequences of
a national currency approaching the worth of toilet tissue, or are
forced to pick up the corporate bill of a free lunch via higher taxes
and higher debt? Is this fair, and once again we ask the question
- is it check-out time? You decide.
.
.
IN
THE NEWS:
.
.
AS
DOLLAR HITS NEW LOWS, INVESTORS LOOK ELSEWHERE
By
Steven R. Weisman - March 14, 2008
.
How
low can the dollar go? Battered by bad news and mounting fears
over the American economy, the dollar plumbed new depths on Thursday,
helping drive oil prices to record levels. The greenback traded at a
new low of $1.56 against the euro, while oil prices settled at $110 a
barrel. Early in the day, the dollar sank below 100 Japanese yen for
the first time since 1995, but it ended the day slightly above that
milestone. The dollar has been declining in value against the
euro and several other currencies since 2002, slamming travelers to
Europe and American consumers purchasing European goods. Politicians
are deploring the weak dollar as a sign of American economic decline
and influence.
.
To
make matters worse, many economists say that the problems of a sagging
dollar are feeding off each other. As the dollar weakens, holders of
dollars, especially those overseas, are aiming for better returns on
their assets by diversifying their portfolios toward other currencies,
sending the dollar into further decline. If we look forward, we
are going to see the U.S. economy weakening more and interest rates cut
more, said Desmond Lachman, a resident fellow at the conservative
American Enterprise Institute. The immediate prospects for the dollar
do not look encouraging. The huge American trade deficit, while
shrinking somewhat, continues to generate more dollar reserves for
overseas exporters at a time when it is less attractive for them to
keep those reserves in dollars. Some Middle East countries are hinting
that they may move away from pricing their oil entirely in dollars,
which would cause further downward pressure.
.
http://www.nytimes.com/2008/03/14/business/worldbusiness/
.
EDITORS NOTES:
Ms. Liz Ann Sonders, the chief investment strategist at Charles Schwab
& Company is quoted as saying in March 13, 2008 New York Times
article that: We have to be careful about what medicines we throw at
this, whether it is a stimulus packages or a bailout. A lot of
what we are dealing with is a solvency problem. We need to let the
system wash it out (end of quote). Right on Liz, right on.
Which is to say, regardless of what you call it (a so-called stimulus
or a bail-out), the litmus test really should be: who will end up
footing the bill? Will it be the tax-payers, or will it be those
persons or entities that created the problem in the first place?
If the tax-payers or average citizens would be made to suffer either
from higher government debt, higher taxes or inflation, then such plans
(regardless of the semantics) should be rejected. Surely in a
perfect, fair, honest, just and moral world, the culprits would be
called to task while the innocents left alone. Meaning, surely to
be fair, the board of directors and senior management at some of these
financial institutions at best case could be accused of gross
mismanagement and incompetence, and at worst case, outright
fraud. No matter, we do not see that happening. We will
predict business as usual, with the average citizen and the middle
class metaphorically tarred and feathered in the process.
.
.
U.S.
MORTGAGE FORECLOSRES RISE AS OWNERS GIVE UP
By
Kathleen M. Howley - March 6, 2008
.
U.S.
mortgage foreclosures rose to an all-time high at the end of 2007 as
borrowers with adjustable-rate loans walked away from properties before
their payments increased, the Mortgage Bankers Association said
today. New foreclosures jumped to 0.83 percent of all home loans
in the fourth quarter from 0.54 percent a year earlier. Late payments
rose to a 23-year high, the organization said in a report today.
We're seeing people give up even before they get to the reset because
they couldn't afford the home in the first place, said Jay Brinkmann,
vice president of research and economics for the Washington-based trade
group. The central bank yesterday said the net worth of U.S.
households decreased by $532.9 billion during the fourth quarter as
home values fell.
.
http://www.bloomberg.com/
.
EDITORS NOTES:
Unbelievable, but true. Homeowners are simply walking away and
abandoning property before they even get a foreclosure notice or
advisement of the new rate on their adjustable mortgage. We can only
imagine or envision new residential home developments that look like a
scene from one of those horror films whereby everyone disappears from
some strange disease or phenomena, with one lonely guy left inside the
deserted town or city. I suppose on the bright side, it solves
the problem of noisy neighbors.
.
.
U.S.
HOUSEHOLD WORTH FELL FOR FIRST TIME SINCE 2002
By
Shobhana Chandra - March 6, 2008
.
U.S.
household wealth fell in the fourth quarter for the first time in five
years and borrowing slowed as home values plunged and lenders
restricted credit, Federal Reserve figures show. Net worth for
households decreased by $532.9 billion from the previous three months,
the first decline since the third quarter of 2002, according to the
Fed's quarterly Flow of Funds report today. Housing-related net worth
dropped by $176.4 billion. Lower home and stock prices and
reduced access to loans are prompting Americans to spend less and are
driving up foreclosures. A slowdown in consumer spending, which
accounts for two-thirds of the economy, threatens to push the U.S. into
a recession. Consumers are being squeezed from several
directions, Fed Governor Frederick Mishkin said in a speech this week.
Reduced household wealth, combined with a weakening job market and
near-record fuel prices are likely to restrain spending growth in the
period ahead.
.
http://www.bloomberg.com/
.
.
DOUBLE BUBBLE TROUBLE - By Stephen S. Roach -
March 5, 2008
.
Amid
increasingly turbulent credit markets and ever-weaker reports on the
economy, the Federal Reserve has been unusually swift and determined in
its lowering of the overnight lending rate. The White House and
Congress have moved quickly as well, approving rebates for families and
tax breaks for businesses. And more monetary easing from the Fed could
well be on the way. The central question for the economy is this:
Will this medicine work?
.
The
same question was asked repeatedly in Japan during its lost decade of
the 1990s. Unfortunately, as was the case in Japan, the answer may be
no. If the American economy were entering a standard cyclical
downturn, there would be good reason to believe that a timely counter
cyclical stimulus like that devised by Washington would be effective.
But this is not a standard cyclical downturn. It is a post-bubble
recession.
.
The
United States is now going through its second post-bubble downturn in
seven years. Yet this one stands in sharp contrast to the post-bubble
shakeout in the stock market during 2000 and 2001. Back then, there was
a collapse in business capital spending, a sector that peaked at only
13 percent of real gross domestic product. The current recession
has been set off by the simultaneous bursting of property and credit
bubbles. The unwinding of these excesses is likely to exact a lasting
toll on both homebuilders and American consumers. Those two economic
sectors collectively peaked at 78 percent of gross domestic product, or
fully six times the share of the sector that pushed the country into
recession seven years ago.
.
Over
the past six years, income-short consumers made up for the weak
increases in their paychecks by extracting equity from the housing
bubble through cut-rate borrowing that was subsidized by the credit
bubble. That game is now over. Washington policymakers may not be
able to arrest this post-bubble downturn. Interest rate cuts are
unlikely to halt the decline in nationwide home prices. Given the
outsize imbalance between supply and demand for new homes, housing
prices may need to fall an additional 20 percent to clear the
market. Aggressive interest rate cuts have not done much to
contain the lethal contagion spreading in credit and capital markets.
Now that their houses are worth less and loans are harder to come by,
hard-pressed consumers are unlikely to be helped by lower interest
rates.
.
http://www.nytimes.com/2008/03/05/opinion/
.
EDITORS NOTES:
It would seem that the ingenious plan concocted by the powers that be
is to create an inflation bubble to solve the other problems.
However, no good can come of it, and the rest of the world knows
it. This is why you are seeing other markets reacting negatively
to such news announcements. Gold's previous all-time inflation
adjusted record high was $2,284 on Jan. 21, 1980, according to a
calculator on the Web site of the Federal Reserve Bank of Minneapolis.
In 1980, when U.S. inflation was running in the double digits and oil
was on the rise, gold hit $873 (which is equal to US$2,284 in today's
inflation adjusted dollars). So here is the question. With
gold now selling at US$1,000 an ounce, is it really expensive, or is it
cheap in comparison? If the US Federal Reserve continues to cut
interest rates (and print money) while inflation is running in the
double-digits, where does the price of gold go?
.
.
NO
ANSWERS YET TO A TRILLION-DOLLAR QUESTION
By
James B. Stewart - March 5, 2008
.
Turmoil
continues in the municipal-bond market. This week tax-free municipals
have been yielding more than taxable Treasuries, a rare anomaly.
Auctions of variable-rate municipals have been faltering. The market
for tax-free auction-rate preferred securities remains frozen. Is this
a historic buying opportunity for municipal bonds and variable rate
securities -- or a warning of trouble to come? Last week the
market for variable-rate Municipal Bonds seized up. These are long-term
Municipal Bonds sold at rates set at auction, usually weekly. They
trade as individual bonds, rather than as shares in a closed-end fund
like ARPS. As such, they have remained somewhat more liquid than the
funds, but that liquidity, too, seems to be drying up. Hedge funds
exacerbated the situation last week when they had to meet margin calls
on their short positions in Treasuries by dumping Municipal Bonds and
depressing prices.
.
The
ARPS I wrote about last week constitute an estimated $330 billion
market. Variable-rate municipals are an estimated $500 billion market.
In other words, we're getting close to a $1 trillion crisis. Yet I
don't hear anyone in Congress, the Treasury or the Federal Reserve
offering any explanations or solutions. The silence from Wall Street
firms, which created these vehicles, remains deafening. Fortunately
many state and municipal officials are starting to demand some relief
from exorbitant interest rates that will eventually come out of
taxpayers' pockets. No one from the big Wall Street firms that
sold these vehicles has been willing to speak candidly to me for
quotation about this mess, but one executive, who requested anonymity,
offered these thoughts: This is a 100-year flood. We had 20 years of
liquidity in these auction markets. Now there's a panic.
.
http://online.wsj.com/
.
.
POSEIDON
ADVENTURE IN GOVERNMENT BONDS
By
Brett Arends - March 3, 2008
.
It's
the Poseidon Adventure in government bonds. A tidal wave of
(hedge fund) selling has just tipped the market upside down. So the
yield on tax-free municipals, which is normally way down in the hold,
has suddenly been lifted far above those on taxable Treasuries. It
makes for an easy trade. It's ludicrous, says Bob McIntosh, chief
strategist for Boston fund company Eaton Vance and an expert in
municipals. He calls it the craziest pricing he has seen in twenty-five
years following the municipal bond market. An upside-down market
takes some getting used to. You need to climb upwards to the
keel. Sell Treasuries. While there is no chance the bonds will
default, there is a big risk their prices will drop. That will happen
if interest rates rise higher because of inflation fears.
.
http://online.wsj.com/
.
EDITORS NOTES:
A reporter from the Wall Street Journal likens the US bond markets to
the Poseidon Adventure. I would like to add that the folks at the
US Treasury and the Federal Reserve might be compared to McHale's Navy
as well, using another movie analogy. However, the later was a
comedy, while the Poseidon Adventure no joke at all, at least for
passengers aboard that is.
.
.
TURMOIL
PUSHES US MUNICIPAL BOND YIELDS ABOVE TREASURIES
By
Michael Mackenzie and Saskia Scholtes in New York - March 4 2008
.
Yields
in the US municipal bond market have soared to historically high levels
compared with US Treasury bonds, as investors respond to uncertainty
over the fate of bond insurers and Wall Street banks withdraw support
from the market. In recent weeks a downward spiral has engulfed
the $2,600 Billion municipal debt market, where local government
authorities including universities and hospitals fund their borrowing
needs.
.
Municipal
bonds normally trade at about 80 per cent of Treasury market yields
because they are tax-free investments. Recent turmoil in the market has
pushed municipal bond yields to an unprecedented 125 per cent of
Treasury yields. Such levels are attracting some buyers. But many
investors remain wary as the credit crunch on Wall Street casts its
shadow. Problems came to the fore when funding of the $330 Billion
short-term municipal market was thrown into disarray last month.
Auctions of local government debt have failed, driving interest rates
sharply higher. Concerns that bond insurers, which guarantee many
municipal bonds, will lose their triple-A ratings, sparked a buyers'
strike. Wall Street banks stopped supporting the market amid worries
about their balance sheet exposure.
.
http://www.ft.com/
.
.
EMERGING MARKETS INSULATED FROM CREDIT
CRISIS, WORLD BANK SAYS
By Laura Cochrane and Oliver Biggadike - March 6, 2008
.
India,
China and other emerging markets are insulated from rising global
credit costs because of surging prices for commodities they produce and
the growth of domestic funding sources, a World Bank official
said. Developing nations have cut the amount of money they raise
in U.S. and European currencies to a residual part of their funding
needs as local bond markets grow, said Doris Herrera- Pol, World Bank's
global head of capital markets. Rising shipments of palm oil and
petroleum products helped boost markets such as Malaysia, where January
exports grew at twice the pace economists forecast. Emerging
markets are very well positioned to weather the storm, Herrera-Pol said
in an interview in Sydney yesterday. They are not as dependent as they
were 10 years ago on the functionality of international markets.
.
http://www.bloomberg.com/
.
EDITORS NOTES:
We have said it before, and we will say it again. Look for
countries that still are exporting more than they import, and mainly,
export of commodities. Look for countries whose economy is
primarily driven by cash and NOT by credit. That is where you
want to be living, and that is where you want to invest. In
addition, you should take note that many central banks in other
countries have NOT reduced domestic interest rates in tandem with the
US Fed. In such a case, those central bankers are more worried
about inflation, and would rather not capsize like the SS
Poseidon. When it comes to money, friendship has it's limits -
does it not? Interestingly enough, a bank billboard advertisement
in Bolivia advises citizens to start saving their money in Euros, since
the US Dollar is in a free fall. Interesting stuff coming out of
a supposed backwards Third World Banana Republic, or maybe we can call
it uncommon, common wisdom (uncommon and unusual because common
sense seems to be lacking these days in some other places, namely North
America). In any event, this is not your fathers stagflation of
the seventies nor your grand-fathers depression from the thirties, but
rather something else. In addition, investors in other countries
are not as dumb as one may think, and seem to be cautiously considering
how much more good money they are willing to throw after bad, in terms
of the US markets at the moment.
.
.
READERS
WRITE IN:
.
Hi,
John. You said: Now petroleum costs 500 percent more. Is it
not logical that the retail cost of gasoline at the pump should not
also increase by 400 or 500 percent in tandem? Not on the basis
of objective economics alone, since raw oil is only about half the cost
input for gasoline production. Costs of transportation (which
itself consumes fuel), storage, refining, marketing, taxes, etc., all
contribute significantly to cost of gas delivered at the pump. Unless
those other costs should rise commensurately, the price of a barrel of
raw oil cannot translate directly upward into the retail price of any
product made from it.
.
http://www.eia.doe.gov/bookshelf/brochures/gasolinepricesprimer/eia1_2005primerM.html
.
The
contemporary oil crisis would be substantially alleviated were the US
military not the largest single customer for petroleum in the United
States. The solution is to effect a profound change of foreign
policy, to stand down our behemoth military, and turn expenditure of
our precious energy (human as well as petroleum) to more productive use
than bossing other people around at gunpoint. Regardless of
whoever may next be elected, that change will not happen soon.
Eventually it must happen, of course, but probably only after the US
has literally gone broke.
.
EDITORS REPLY:
Thank you for your comments, and you are 100 percent correct.
Which is to say, there are a variety of costs that go into the final
production and delivery of any product, and of course, raw material
costs are indeed a percentage of the final retail price.
Regardless, I still hold the belief that retail gasoline costs in the
US are being held artificially low, or kept in check temporarily, for
political purposes. I am going to wager that once the US
Presidential elections are over, there will be nothing holding back or
restraining price increases. God help the American consumer
should the retail price at the pump hit US$7 per gallon.
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