Molokan Underground

IV Wrote:

2Real4me! Wrote:

IV Wrote:This Just In;

The real reason that the Feds want more control over the financial sector is because they want more control over it. What comes to mind with that statement?

The Fed's do control and regulateeverything in the financial sectorand if they want more control they already have it.

Actually, they are trying to gain even more control than they currently have. It's all over the news.

Here's an excerpt from a story and than a link for you to read. Don't look at me...I didn't vote for the current govt....strike that any govt.

"Treasury Secretary Henry Paulson announced Monday new proposed powers for the Federal Reserve which would give the banking special interest control of much of the financial regulatory system in the United States and lead the country further into socialism."



and the link....http://www.economist.com/finance/display...d=10947124

Maybe I'm tired...I don't know...but I did not see that quote anywhere in that article. Did you link the right one?

Next, technically Congress has total control of the economy but more or less sub-contracts it out to created bureacracy and agencies....so they don't get the temptation to mess with the economy for thier own personal political futures, gain, etc. Well...thats one smart thing they have done.

Various aspects of the economy are regulated by a number of different agencies (SEC, OTC, etc.) of which the Federal Reserve Bank and FOMC have no/little control over. Whats being proposed is essentially weaking these other agencies and giving more power over to the Fed, to..

• Manage the economy better</LI>
• Have to bail out a mess less oftenthat wasn't thier own</LI>

What I found interesting, they also want to be able to nationaly charter Insurance Companies....of which, they are currently only state chartered. Been a lot of talk about that but no action. States are bit reluctant to follow through on this for a number of reasons....one being, why should Montana policy holders help pay for people in Florida whose homes were wiped out by a hurricane. Granted they will still pay lessthan those who live in Florida (as the Gulf states will probally share more of the losses together and be catorgorzied to a specific Territory with that risk)..but if they underestimate....they can pull premiums from other states (which is currenlty prohibited in the majority).

Oh and by the way, Greenspan called Bill Clinton the most republican president we had in years.....and here's why. Prior to his presidency, the financial markets were heavily regulated due to the Great Depression....president Clinton and Congress did away with a majority of that regulation....Something Reagan was NOT willing to do and Bush Sr. to some extent.

From what I can tell, this is a proposal to put more power with the Fed....but not more regulation initially. In my opinion.....I prefer the heavy regulation that was intact prior to Clinton with some minor modifications, it made managing the economy much easier and globlization harder.

Corn Hits $6 a Bushel on Tight Supplies
Thursday April 3, 4:51 pm ET
By Stevenson Jacobs, AP Business Writer



Corn Prices Jump to Record $6 a Bushel, Driving Up Costs for Food, Alternative Energy

NEW YORK (AP) -- Corn prices jumped to a record $6 a bushel Thursday, driven up by an expected supply shortfall that will only add to Americans' growing grocery bill and further squeeze struggling ethanol producers.
Corn prices have shot up nearly 30 percent this year amid dwindling stockpiles and surging demand for the grain used to feed livestock and make alternative fuels including ethanol. Prices are poised to go even higher after the U.S. government this week predicted that American farmers -- the world's biggest corn producers -- will plant sharply less of the crop in 2008 compared to last year.
"It's a demand-driven market and we may not be planting enough acres to supply demand, so that adds to the bullishness of corn," said Elaine Kub, a grains analyst with DTN in Omaha, Neb.
Corn for the most actively traded May contract rose 4.25 cents to settle at $6 a bushel on the Chicago Board of Trade, after earlier rising to $6.025 a bushel -- a new all-time high.
Worldwide demand for corn to feed livestock and to make biofuel is putting enormous pressure on global supply. And with the U.S. expected to plant less corn, the supply shortage will only worsen. The U.S. Department of Agriculture projected that farmers will plant 86 million acres of corn in 2008, an 8 percent drop from last year.
Moreover, cold, wet weather in parts of the U.S. corn belt may force farmers to delay spring planting, potentially sending prices even higher.
While corn growers are reaping record profits, U.S. consumers can expect even higher grocery bills -- especially for meat and pork -- as livestock producers are forced to pass on higher animal feed costs and thin their herd size.
"Higher corn prices is going to affect meat prices. If you're feeding with $6 corn, you'll definitely have some (cost) pressure," Kub said.
In addition, corn and corn syrup are used in an array of products, meaning the price of everything from candy to soft drinks will eventually go up, analysts say. It's the latest dose of bad news for U.S. consumers, who are already struggling with higher food costs from record increases in the price of wheat, soybeans and other agriculture products.
Another loser in higher corn costs is ethanol producers, who are struggling to squeeze out gains as corn's record-setting run outpaces the price of ethanol, currently at around $2.50 a gallon.
"For years, corn was cheap and fermentation processes for ethanol production came to completely dominate the biofuel industry in North America," Michael Jackson, president and chairman of Vancouver-based ethanol maker Syntec Biofuel, said this week. "Now, with corn prices well over $5 a bushel, corn ethanol economics have gone out the window."
The nation's 147 ethanol plants now have the capacity to produce 8.5 billion gallons of fuel a year, according to the Renewable Fuels Association. Corn is the basic feedstock for most of the plants and about 20 percent of last year's 13 billion bushel corn crop was consumed by ethanol production. That percentage is expected to increase to 30 percent for the next crop year, which ends Aug. 31, 2009, according to Terry Francl, a senior economist for the American Farm Bureau Federation.
There are still plans to build or expand another 61 plants, which will add about 5.1 billion gallons of capacity. However, as corn prices have climbed over the past year or so, construction of several plants has been halted or delayed, shaving about 500 million gallons worth of capacity off the original figure, according to Broadpoint Capital analyst Ron Oster.
At least one facility, the Alchem plant in Grafton, N.D., shut down late last year because of high prices.
A new plant hasn't broken ground over the past couple of quarters, Oster said, and while producers can have positive gross margins with ethanol at $2.50 a gallon and corn at $6 a bushel, that doesn't mean companies are profitable.
"Bottom line earnings are near break-even or modestly below break-even," he said.
Looking ahead, only the strongest ethanol producers will survive in an era of ever-rising corn prices, said Soleil Securities analyst Ian Horowitz.
"There are going to be some particular companies that definitely have the balance sheet and efficiencies that will be able to eke out a positive return in this kind of environment," Horowitz said. "And then there will be others that will suffer at the hands of $6 corn."
Associated Press Business Writer Lauren LaCapra contributed to this report.

Bear Stearns Rescue Backed Amid Concerns
Thursday April 3, 6:49 pm ET
By Martin Crutsinger, AP Economics Writer



Bernanke, Bush Admin. Defend Decision to Rescue Bear Stearns Amid Questions by Lawmakers

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke and the Bush administration on Thursday defended the decision to rescue Bear Stearns amid questions by lawmakers about why the government was helping Wall Street investment houses but not people on Main Street.
Bernanke and Treasury Department Undersecretary Robert Steel said that the consequences to the U.S. economy and financial system would have been far more serious had the government allowed the nation's fifth largest investment house to go bankrupt.
"Given the exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain," Bernanke told the Senate Banking Committee.
The panel conducted a five-hour hearing as lawmakers sought to understand the decisions made during the hectic weekend of March 14-15 after Bear Stearns informed the Fed that it was on the verge of having to file for bankruptcy protection because nervous creditors were demanding to be repaid.
The investment house was purchased by JP Morgan Chase &amp; Co. with assistance from the Fed in the form of a loan backed by $30 billion of Bear Stearns assets. JP Morgan has agreed to absorb the first $1 billion of losses if the value of the assets declines, but taxpayers are at risk for the remaining $29 billion.
Bear Stearns, with a stock price around $150 per share a year ago, was sold for $10 a share, becoming the biggest victim of a severe credit crisis that hit financial markets in August.
That crisis, which was triggered by a prolonged housing slump and cascading mortgage defaults, has made it harder for consumers and businesses to get loans and helped to push the country to the brink of a recession.
Democrats on the Senate Banking Committee questioned why the Fed was willing to put such a large amount of money at risk to protect Wall Street while as many as 3 million homeowners are facing the risk of defaulting on their mortgages with the administration balking at greater efforts to help them.
"Was this a justified rescue to prevent a systemic collapse of financial markets or a $30 billion taxpayer bailout for a Wall Street firm while people on Main Street struggle to pay their mortgages?" Senate Banking Committee Chairman Christopher Dodd asked Bernanke and the other witnesses.
Bernanke said that government's effort was not a bailout for Bear Stearns shareholders, who will suffer big losses, but an effort to protect the financial system and ultimately the entire economy, which could have faced severe consequences from a Bear Stearns bankruptcy.
"The adverse impact of a default would not have been confined to the financial system but would have been felt broadly in the real economy through its effect on asset values and credit availability," said Bernanke. On Wednesday, Bernanke had for the first time raised the possibility that the current economic troubles could push the country into a recession.
Steel said that Treasury Secretary Henry Paulson was actively monitoring four days of marathon negotiations that began after Bear Stearns notified the Fed on March 13 that it was one day away from having to file for bankruptcy protection. Steel said the administration supported the Fed's decisions.
Most of the questions on the deal centered on the value of the assets the Fed is now holding as collateral for the loan.
Bernanke and Timothy Geithner, president of the Fed's New York regional bank, said they believed $30 billion was a valid price for those assets and Bernanke said the central bank could end up making money on the deal as the assets are sold along with interest on the loan.
But some lawmakers questioned whether the Fed had done enough to properly value the Bear Stearns assets and wondered whether the entire episode had set a dangerous precedent for future risky behavior by other investment houses.
"How big do you have to be to be too big to fail?" asked Sen. Jim Bunning, R-Ky. "Who let our entire financial system become so fragile that one failure jeopardizes the health of the entire system?"
Also appearing before the committee were Alan Schwartz, the head of Bear Stearns, and Jamie Dimon, the head of JP Morgan, who described grueling marathon sessions over the weekend as executives searched for the best way out of the crisis.
Schwartz told the panel that Bear Stearns was brought down by "unfounded" market rumors that led to what was essentially a "run on the bank" as Bear Stearns creditors began demanding payment out of fears the company was about to collapse.
"Facing the dire choice of bankruptcy or a forced sale under exigent circumstances, we salvaged what we could to avoid wiping out our shareholders, bondholders and 14,000 employees," Schwartz told the panel.
Dimon took issue with reports that the Fed had taken Bear Stearns' riskiest securities as collateral for the $30 billion loan the central bank made to facilitate the sale, saying that JP Morgan did not "cherry pick" the assets it would keep on its books and that it was critical that the sale be arranged.
"A Bear Stearns bankruptcy could well have touched off a chain reaction at other major financial institutions that would have shaken confidence in credit markets that already have been battered," Dimon told the committee.
Sen. Charles Schumer, D-N.Y., said entire episode pointed out the need to overhaul the government's regulatory system. On Monday, Treasury Secretary Henry Paulson put forward a plan that would scrap the current system of overlapping agencies for three super regulators, giving the Fed greater powers to monitor the safety of the entire financial system.
Dodd said his panel would examine the need for an overhaul of financial regulations but that this exercise, because of its complexity, would have to wait until next year when a new administration is in place.

ATA, Aloha Woes Likely Mean Higher Fares
Thursday April 3, 2:32 pm ET
By Adam Schreck, AP Business Writer



Bankruptcies at ATA Airlines and Aloha Airlines Likely Mean Higher Fares Into, Within Hawaii

The abrupt shutdowns of ATA Airlines and Aloha Airlines won't keep travelers off Hawaii's shores altogether, but they could make an already expensive vacation destination even pricier and potentially put the leis and luaus out of reach for many.
Flights to and from Hawaii had been a key part of ATA's business ever since the Indianapolis-based carrier scaled back its route network following a previous trip through bankruptcy in 2006.
On Thursday, the airline suddenly quit flying, leaving passengers on the islands and elsewhere stranded as it again headed for bankruptcy court. Virtually all the carrier's more than 2,200 employees were laid off.
"It'll hurt," said Minneapolis-based airline expert Terry Trippler. "They did a lot of business to and from Hawaii at fairly reasonable prices."
The carrier last year carried more than 632,000 passengers to the islands from the mainland, more than all but three other domestic airlines, according to the Bureau of Transportation Statistics.
ATA's surprise announcement came just two weeks after Aloha filed for bankruptcy protection following years of losses. The airline, which served the state for more than 60 years and was the islands' second-largest carrier, ended passenger service Monday and is hoping to offload its cargo business this month. It flew both inter-island routes and flights to the mainland.
The one-two punch, coming at a time when the airline industry is already straining under rapidly rising fuel prices, will likely prompt remaining carriers to push their fares even higher, industry observers said.
"They've really been thrown a curve ball. Nobody really expected two major competitors to go away," said Robert Mann, an independent airline analyst in Port Washington, N.Y. "When you pull out a major carrier, it's going to create a lot of demand on the remaining carriers."
Hawaiian Airlines, the state's biggest airline, could emerge as the biggest winner following its rivals' collapse. The carrier flies to nine cities on the mainland -- more than any other airline -- including all four markets where ATA operated. It also controls a hefty share of inter-island traffic.
A number of other domestic carriers also fly to the islands, and each will likely see additional traffic flowing their way now that two rivals are out of the picture.
Delta Air Lines and Continental Airlines competed against ATA on direct flights from Los Angeles, for example, while US Airways challenged the carrier in Phoenix. Northwest Airlines, United Airlines, American Airlines and Alaska Airlines all also fly from multiple mainland destinations.
"It helps all the carriers who fly from the U.S. mainland to Hawaii," Avondale Partners airline analyst Bob McAdoo said. "There'll be less seats offered at really deep discounts."
Flights between the islands could also grow more expensive.
Hawaiian and Mesa Air Group, the parent company of inter-island carrier go!, have each recently announced plans to add spare planes and flights on routes within Hawaii to help make up for the loss of Aloha service.
Even so, experts doubt fares that have fallen as low as $49 or less one-way are sustainable over the long term.
"It's an unrealistically low price," Mann said.

CNNMoney.com
Yellen: Economy 'all but stalled,' housing woes to continue
Friday April 4, 9:54 am ET

An influential member of the Federal Reserve said that the U.S. economy "has all but stalled" and could shrink over the first half of the year, the latest warning sign of a recession from a central bank official.
In a speech late Thursday, San Francisco Federal Reserve President Janet Yellen also warned that "economic prospects remain unusually uncertain," and said the Fed must be ready to act in a timely manner to try to spur the economy and keep it out of a recession.
Yellen is not a member of the Fed's rate-setting body, the Federal Open Market Committee, but she is considered an influential member of the central bank.
On the heels of Bernanke. Her remarks follow congressional testimony Wednesday by Federal Reserve Chairman Ben Bernanke that he believes that a recession is possible in the first half of this year, although he said he believes the economy is still growing slightly at this point.
Yellen said that the slowdown started in the fourth quarter, when the economy "slowed to a crawl." She pointed to the housing downturn as one of the major risks to the economy and said that it isn't likely to improve until next year at best.
"Huge inventories of unsold new and existing homes suggest that the end is not yet in sight," she said. "It seems likely that residential construction will be a major drag on the overall economy through the end of this year and into 2009."
She also said she expects inflation pressures to lessen, and that core inflation readings, which strip out volatile food and energy prices, should fall below the 2% annual rise later this year, which would put it in what is generally considered the Fed's so-called "comfort zone," which would enable it to cut rates further.
The Fed has cut the fed funds rate, its key short-term interest rate, by 3 percentage points since it started trying to head off a recession last September. The rate now stands at 2.25%.
Meeting later this month. The Fed next meets April 29 and 30. Investors trading fed funds futures on the Chicago Board of Trade are pricing in a 100% chance of another quarter-point rate cut at that meeting, but only an 18% chance of another half-point cut, according to late Thursday trading.
Investors and economists are waiting to see the March jobs report, due at 8:30 a.m. ET Friday. Economists surveyed by Briefing.com are forecasting that employers cut payrolls by 50,000 jobs, which would mark the third straight decline. There hasn't been a sustained period of job losses that long since early 2003.
The unemployment rate is forecast to rise to 5% from 4.8%, which would match a three-year high reached in December.

CNNMoney.com
Oil prices surge on weaker-than-expected inventories
Wednesday April 9, 1:00 pm ET
By Kenneth Musante, CNNMoney.com staff writer

Oil prices surged to record levels Wednesday after a government report showed an unexpected decline in crude supplies.
Light, sweet crude for May delivery rose $3.55 to $112.05 a barrel, after touching a record $112.15 in Globex trading. That beat the intraday mark of $111.80 set March 17.
"I think you can bank on oil closing at above $110 today," said Mark Waggoner, president of Excel Futures, a California-based commodities trading firm.
In its weekly inventory report, the Energy Information Administration said crude stocks fell by 3.2 million barrels in the week ended April 4. Analysts had been expecting an increase of 2.4 million barrels, according to a Dow Jones poll.
The big decrease, according to Stephen Schork, publisher of Pennsylvania-based industry newsletter The Schork Report, is simply "a one-off that will be corrected over the course of the next two reports."
The EIA's inventory report is released once a week. "All the trading community wants to do is focus on the headlines," Schork added.
The EIA said that gasoline supplies fell by 3.4 million barrels. Analysts had only expected a drop of 2.3 million barrels. Distillates, used to make heating oil and diesel fuel, fell by 3.7 million barrels, more than the expected drop of 1.2 million barrels.
The supply report comes on a day when average gasoline prices hit a new record high of $3.343 at the pump, according to AAA.
The larger-than-expected drop in gasoline stockpiles is mostly due to the seasonal purge of winter-grade fuel, according to Schork. It's "very seasonal, very normal," he said. However, very low refinery production levels are "the wild card here" as the warm weather driving season approaches.
Refining levels are currently at 83.1%. They should be running at 89% to 90% this time of year, according to Waggoner.
"Oil companies need to ramp up ... fast," he said.
Refinery input rose by about 142,000 barrels a day last week, the EIA said. Gasoline and distillate production both increased slightly.

Stocks Decline Following UPS Warning
Wednesday April 9, 12:25 pm ET
By Tim Paradis, AP Business Writer



Stocks Decline After UPS Profit Warning Stirs Concerns About Health of Corporate Earnings

NEW YORK (AP) -- Stocks extended their losses Wednesday after UPS lowered its first-quarter profit forecast, stirring concerns about the health of corporate earnings and the broader economy. A surge in oil prices also weighed on transportation issues and likely contributed to an overall pessimistic tone in the market.
United Parcel Service Inc., the world's largest shipping carrier, cited a weaker economy and higher fuel costs in trimming its forecast. Investors earlier this week received reports from aluminum producer Alcoa Inc. and chip maker Advanced Micro Devices Inc. that have made the market uneasy about overall first-quarter results.
Oil prices jumped following a government report showing inventories fell by more than expected last week. The rise hurt shares of airline and trucking companies, which have already struggled with high fuel prices.
Bill Schultz, chief investment officer at McQueen, Ball &amp; Associates in Bethlehem, Pa., said some investors are nervous that profit warnings could derail hopes for an economic recovery in the second half of the year.
"We know the first quarter is not going to be good. UPS is sort of indicating that maybe things are continuing to be not so positive out there," he said. "People are looking for clues more, I think, for the second half this year."
In midday trading, the Dow Jones industrial average fell 75.07, or 0.60 percent, to 12,501.37.
Broader stock indicators also declined. The Standard &amp; Poor's 500 index fell 11.43, or 0.84 percent, to 1,354.11, and the Nasdaq composite index declined 26.70, or 1.14 percent, to 2,322.06.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 495.9 million shares.
Bond prices jumped as stocks declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.47 percent from 3.56 percent late Wednesday.
Light, sweet crude jumped $2.62 to $111.12 per barrel on the New York Mercantile Exchange after the government inventory report.
The rise in oil hurt airline stocks. Three relatively small air carriers have filed for bankruptcy in as many weeks -- in part because of gas prices. Among airlines, Continental Airlines Inc. fell $1.15, or 5.3 percent, to $20.75, while trucking company J.B. Hunt Transport Service Inc. fell $1.68, or 5.3 percent, to $30.09.
Gold prices rose, while the dollar was mixed against other major currencies.
In economic news, The Mortgage Bankers Association said mortgage application volume rose 5.4 percent during the week ending April 4. Applications were up 10.9 percent from the same week a year ago.
Investors seemed little moved by Commerce Department figures showing a rise in inventories among wholesalers. In February, inventories rose 1.1 percent. Analysts had expected an increase of 0.5 percent, according to Dow Jones Newswires.
In corporate news, UPS' earnings forecast weighed on the company's stock. UPS warned at an investor conference last month that it might miss its earnings target if weakness seen in February didn't ease. UPS fell $2.41, or 3.3 percent, to $70.90.
AMR Corp.'s American Airlines fell 95 cents, or 9.2 percent, to $9.37 after the carrier canceled 850 more flights as it inspects the wiring on its MD-80 jets.
The Russell 2000 index of smaller companies fell 8.43, or 1.18 percent, to 703.49.
Overseas, Japan's Nikkei stock average fell 1.05 percent. Britain's FTSE 100 closed down 0.11 percent, Germany's DAX index declined 0.75 percent, and France's CAC-40 fell 0.77 percent.

Economy, Debt Weighing on Middle Class
Wednesday April 9, 1:17 pm ET
By Hope Yen, Associated Press Writer



Study: Middle-Class Americans Increasingly Downbeat About Their Short-Term Economic Progress

WASHINGTON (AP) -- Growing numbers of middle-class Americans say they aren't better off than they were five years ago, reflecting economic pressures amid growing debt, a study released Wednesday shows. Their short-term assessment of personal progress, according to the study, is the worst it's been in nearly half a century.
The survey by the Pew Research Center, a Washington-based research organization, paints a mixed picture for the 53 percent of adults in the country who define themselves as "middle class," with household incomes ranging from below $40,000 to more than $100,000.
It found that a majority of Americans said they haven't progressed in the last five years. One in four, or 25 percent, said their economic situation had not improved, while 31 percent said they had fallen backward. Those numbers together are the highest since the survey question was first asked in 1964. Among the middle class, 54 percent said they had made no progress (26 percent) or fallen back (28 percent).
Middle-class prosperity also lagged compared with richer Americans. From 1983 to 2004, the median net worth of upper-income families -- defined as households with annual incomes above 150 percent of the median -- grew by 123 percent, while the median net worth of middle-income families rose by just 29 percent.
At the same time, most middle-class people remained upbeat when asked to measure their progress over a longer timeframe, although their level of optimism lagged behind their richer counterparts. Two-thirds, or 67 percent, of middle-class Americans say their standard of living is better than the one their parents had at the age they are now.
In contrast, 80 percent of richer people said they exceeded their parents' standard of living. Among the lower class, only 49 percent reported better conditions.
"It's been a lousy run for the American economy and people feel it," said Paul Taylor, director of Pew's Social &amp; Demographic Trends project and lead author of the study. He noted that people's pessimism largely tracks annual median household income, which has seen little gain in recent years. Middle-class people also may be disproportionately feeling the pinch because they tend to borrow more heavily against their homes to support their lifestyles, Taylor said.
"Still, over a span of a generation, it's been a pretty good run, even as there are some recent pressures that I think people are feeling," he said.
The Pew poll involved telephone interviews with 2,413 adults, conducted from Jan. 24 to Feb. 19. The margin of sampling error was 3 percentage points.
Among the other findings:
--Nearly eight in 10 of all people, or 79 percent, said they believe it has become more difficult compared with five years ago for the middle class to maintain their standard of living, up from 65 percent in 1986.
--Among the middle class, no consensus existed on who was to blame for their economic problems. Twenty-six percent blamed the government, while 15 percent faulted the price of oil and 11 percent said the people themselves were responsible. Others faulted foreign competition and private corporations for economic woes.
--Some demographic groups have improved their income status between 1970 and 2006, while others saw declines. Among the winners were seniors ages 65 and older, blacks, native-born Hispanics and married adults. Losers included young adults (ages 18 to 29), the unmarried, foreign-born Hispanics and people with a high-school education or less.

Gas Prices Set Record, Oil Dips
Friday April 11, 1:08 pm ET
By Adam Schreck, AP Business Writer



US Retail Gasoline, Diesel Prices Rise to Another Record Even As Oil Dips

NEW YORK (AP) -- U.S. retail gas and diesel prices jumped to yet another record Friday, piling on the costs for motorists as well as everyday consumers reliant on trucks, trains and ships to deliver food and other goods to market.
Oil prices fell, however, easing further from a record above $112 a barrel set earlier in the week. Light, sweet crude for May delivery fell 84 cents to $109.27 on the New York Mercantile Exchange.
Gas prices at the pump edged higher overnight, adding 0.8 cents to $3.365 a gallon, according to AAA and the Oil Price Information Service. The increase marks the latest in a series of records in recent weeks, and leaves drivers paying 56 cents more a gallon now than they did a year ago.
Analysts expect gasoline prices may move even higher as more drivers take to the roads as summer approaches and refineries complete their conversion to more expensive summer-grade fuel. It is unclear how far prices will go, however, because a bigger fuel bill could convince drivers to cut back.
"I still do not believe there's enough strength in demand that it's going to justify that move to $4 a gallon" nationwide, said Tom Kloza of the Oil Price Information Service in Wall, N.J.
Retail diesel prices rose 2.1 cents to $4.066, topping the previous high set a day earlier. The spike in the key transportation fuel is significant because it affects the cost of a wide range of goods -- meaning even Americans who don't drive will feel the pinch.
"There's just not enough supply to meet demand ... and that's driving prices higher," Jim Ritterbusch, president of Ritterbusch &amp; Associates in Galena, Ill., said of diesel's surge.
An unexpected decline in U.S. crude and gasoline inventories drove oil prices to a trading record of $112.21 a barrel on Wednesday amid concerns about inadequate supplies ahead of the Northern Hemisphere summer driving season. Prices fell Thursday.
Ritterbusch attributed the late-week decline to traders looking to lock in strong prices before the weekend.
"The main thing I see is just profit-taking after we ran things up to record high," he said. "There's a strong possibility we'll see new record highs again next week."
Crude prices also came under pressure after the International Energy Agency lowered its global oil demand forecast for the year by 310,000 barrels a day to 87.2 million barrels a day, citing lower economic output expectations in the U.S. and elsewhere.
"The suspicion is it's not just the U.S. that's going to see a slowdown," Kloza said. "I think it's significant, but I also think the would-be sellers ... are probably not yet convinced."
The U.S. dollar strengthened against the euro and the pound, also putting pressure on oil prices.
Crude oil's recent run above $100 a barrel has been largely attributed to the steadily depreciating greenback. A weakening dollar attracts investors to commodities as a hedge against inflation, but when the dollar rises, the effect tends to reverse as oil also becomes more expensive to investors overseas.
More negative U.S. economic data also appeared to have taken steam out of oil's precipitous price rise this week. The Commerce Department reported the first decline in oil imports in a year -- a possible sign that high prices and an economic downturn were hurting crude sales.
Still, prices have shown little inclination to fall in response to eroding demand, especially with gasoline supplies shrinking and the Northern Hemisphere summer approaching.
In other Nymex trading Friday, heating oil futures fell 2.8 cents a gallon to $3.166 while gasoline futures fell by 1.64 cents to $2.7757 a gallon. Natural gas futures slipped by 20.1 cents to $9.897 per 1,000 cubic feet.
In London, Brent crude futures fell 24 cents to $107.96 a barrel on the ICE Futures exchange.

Fed Worried in 2002 About Deflation
Friday April 11, 12:10 pm ET
By Martin Crutsinger, AP Economics Writer



Just-Released Transcripts Show Fed Worried About Deflation When It Cut Rates in 2002

WASHINGTON (AP) -- Just-released transcripts show the Federal Reserve was worried about the threat of deflation when it decided to cut a key interest rate by a half-point in November 2002.
The transcripts, released Friday, show then-Federal Reserve Chairman Alan Greenspan and his colleagues were concerned about a sluggish recovery from the 2001 recession and the possibility that the country could tumble into a period of deflation, or falling prices.
Greenspan expressed concerns about the country falling into a "deflationary hole."
"It's a pretty scary prospect and one that we certainly want to avoid," Greenspan told other members of the Federal Open Market Committee.
The Fed did cut the federal funds rate, the interest that banks charge on overnight loans, by a half-point, moving it from 1.75 percent down to 1.25 percent, the lowest level in 41 years.
The United States last experienced a prolonged bout of deflation during the Great Depression of the 1930s. But Fed officials worried that the country could fall into the same problems that Japan faced in the 1990s -- a decade of falling prices and a stagnant economy.
The Fed would cut the funds rate one more time the next year, pushing it to a 45-year low of 1 percent on June 25, 2003. The central bank left the funds rate at that level for an entire year until it began a gradual move to raise rates in June 2004.
Some critics have argued that there was never a serious threat that the United States would experience a bout of deflation and that the extremely low interest rates engineered by the Fed created a housing boom in this country that drove prices and sales up to record levels only to burst in 2006, sending shock waves through the economy.
The transcripts show that Fed officials at the time were not that worried about the effects that an extremely low funds rate might have on the economy, arguing that if inflation started rising, the Fed could reverse course and start raising rates but that a bout of deflation would be harder to combat.
On the possibility that a half-point cut might be too much, Greenspan said, "It's a mistake that does not have very significant consequences. On the other hand, if we fail to move and we are wrong, meaning that we needed to, the costs could be quite high."
On deflation, Greenspan said, "I don't think we could adjust all that easily if we were to fail to move and the economy began to deteriorate and we were looking into a deep deflationary hole."
William McDonough, president of the New York Federal Reserve Bank, argued that if the Fed decided to cut rates by only a quarter-point, financial markets would view Fed officials as "a bunch of wimps, which is not an attractive assessment for a group that is supposed to be a very important public body."
Current Fed Chairman Ben Bernanke, who had joined the Fed earlier that year as a board member after having been an economics professor at Princeton, supported Greenspan's recommendation that the central bank cut rates by a half-point.
In discussing the economy, Bernanke said it appeared that the country was experiencing the same type of "jobless recovery" that had occurred for a prolonged period after the 1990-91 recession and that a cut in rates was needed to boost growth.
"A significant rate cut at this point would not be a panacea obviously, but I do think it would help," he said.
The 2001 recession ended in November 2001, but the country did go through a lengthy period of job losses that did not end until August 2003.
While the Fed releases minutes of its closed-door discussions three weeks after the meetings are held, the full transcripts are only released with a lag of five years.
The transcripts of the eight meetings in 2002 of the Federal Open Market Committee, the Fed panel of board members and regional bank presidents who set interest rates, total 987 pages and are available at the Fed's Web site.
Federal Reserve: http://www.federalreserve.gov