Economics and Investing:

Saudi Arabia is running out of money The cash crunch is so bad in Saudi Arabia that the government just hiked the price of gasoline by 50%. Yep, you read that right. Instead of paying the equivalent of $0.64USD for a gallon, they will now have to pay a whopping $0.96USD per gallon. – P.S.

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Petro Currencies Under Fire As Oil Keeps Sliding

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Items from Professor Preponomics:

US News

U.S. Shale Companies: Bankers are Quietly Tightening the Liquidity Noose (Zero Hedge) Watch out for the effects of possible liquidity triggers like this one. Excerpt: “It is these companies which find themselves inside this toxic feedback loop of declining liquidity, which forces them to utilize assets even faster, thus even further shrinking the borrowing base against which their banks have lent them money, that will be at the forefront of the epic bankruptcy wave that is waiting to be unleashed across the US, leading to tens of billions of defaults junk bonds over the next 12-18 months.”

Deutsche Bank Cuts US GDP Estimates (Reuters) Excerpt: “…they pared their view on domestic gross product in the last three months of last year by 1 percentage point to 0.5 percent, which they added “still might be too high in light of what could be much larger inventory liquidation than what we have assumed.”

“We Frontloaded a Tremendous Market Rally” Former Fed President Admits, Warns “No Ammo Left” (Zero Hedge) Excerpt: “What The Fed did, and I was part of it, was front-loaded an enormous rally market rally in order to create a wealth effect… and an uncomfortable digestive period is likely now.”

Are We Headed for Another Bust (Mises Institute) Excerpt: “The prolonged low interest rate policy of the Fed, on top of the Fed’s previous loose monetary policies (during Greenspan’s era), has severely weakened the pool of real wealth, which is currently in a dire state. This raises the likelihood that the elimination of bubbles as a result of a tighter stance while good in the long-term for wealth generators is likely to trigger a severe economic slump in the near to medium term.”

How Not to Use the International Trade Commission’s Economic Analysis of Trade Agreements (CATO Institute) This is an interesting article which advocates for the benefits of more open markets although the very language of the writer suggests a recognition that “more open markets” do not really mean “truly open markets”. The follow up question, of course, is whether and to what degree various economies benefit (or are harmed) by geopolitical market engineering. Excerpt: “…credible analysis clearly indicates that making markets more open and competitive will lead to improved resource allocation, expanded international trade, greater economic growth, and higher consumer welfare. Those objectives are genuinely worth pursuing.”

International News

China’s Doomsday Scenario (Business Insider) Spoiler Alert: Ever more Draconian capital controls are very likely coming. Excerpt: “Capital outflow is clearly accelerating, as evidenced by the sharp increase in the size of the net errors and omissions item in China’s balance of payment account.”

Investors Aren’t Very Happy with Portugal’s Bank Bond Decision (Bloomberg) Excerpt: “But the transfer has also left many debt investors scratching their heads and others raging from the rooftops since the move appears to fly in the face of the pari passu (literally “equal footing”) notion that demands creditors be treated equally and without preference.”

Personal Economics and Household Finance

How to Start a Home Vegetable Garden – Benefits & Saving Money (Money Crashers) Personal experience suggests that it does take some practice to accomplish maximum savings from a home garden, but the rewards for the effort are tremendous! Excerpt: “Burpee Seed Co. estimates that for every $50 a family spends on seeds and fertilizer, they’ll reap $1,250 in produce. Amazing!”