Brian Kelly's  Instablog

While the Congress grilled Hammrin’ Hank Paulson, we took some time to dig deeper into the EIA weekly data to gauge whether or not higher gas prices may derail the economic recovery. Reviewing the EIA weekly petroleum data we find that crude stocks continue to fall, while gasoline and diesel are well supplied.

source: EIA

On CNBC Friday afternoon, I spoke about our bearish stance on the Dow Jones Transports and we are not alone, even Warren Buffet, in a Good Morning America interview, indicated he is concerned about the decline in freight traffic. The following is an excerpt from our research report on the US Transportation sector. We shall present our analysis in three parts; today Warren Buffet’s favorite indicator railcar loadings, tomorrow the truck tonnage index, and on Wednesday diesel demand and inventories.

In a speech given in Singapore, US Economic Advisor Laura Tyson suggested that the US economy has not stabilized and a second stimulus package must be considered.   She cited the awful employment report as evidence the economy was still in trouble.  While she stated that these views were her own, not the Obama Administration’s, it is hard to believe that the media savvy President would allow such talk out of school.

Combined with the admission by Vice President Biden that the government had misread the economy, this speech takes on special significance. 

I am publishing this in the "instablog" section because it is more of an unsupported opinion rather than a researched article.

As I was reading the Federal Reserve Press release on the FX swap lines it struck me that the wording had changed.

The Federal Reserve announced that it would extend swap lines with the BoJ, BoE, SNB and the ECB. These lines have been in place since May 2008. The difference is that in all the previous press releases the swap lines were to provide US dollar liquidity. In today's announcement the Federal Reserve announced that these swap lines were designed to provide Euro, Franc, Sterling and Yen liquidity to US institutions.

These are "swap" lines so the other central banks have the ability to draw US dollars if needed. In light of the problems with FX loans in Eastern Europe I found it interesting the Fed changed the wording of its press release.

From the April 6, 2009 Federal Reserve Press Release

Federal Reserve Actions
The Federal Open Market Committee has authorized new temporary reciprocal currency arrangements (foreign currency liquidity swap lines) with the Bank of England, the ECB, the Bank of Japan, and the Swiss National Bank. If drawn upon, these arrangements would support operations by the Federal Reserve to provide liquidity in sterling in amounts of up to £30 billion, in euro in amounts of up to €80 billion, in yen in amounts of up to ¥10 trillion, and in Swiss francs in amounts of up to CHF 40 billion.

From the October 29, 2008 Federal Reserve Press Release

Foreign Exchange Swap Lines
The Federal Open Market Committee (FOMC) has authorized a $330 billion expansion of its temporary reciprocal currency arrangements (swap lines).  This increased capacity will be available to provide funding for U.S. dollar liquidity operations by the other central banks.  The FOMC has authorized increases in all of the temporary swap facilities with other central banks.  These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $30 billion by the Bank of Canada, $80 billion by the Bank of England, $120 billion by the Bank of Japan, $15 billion by Danmarks Nationalbank, $240 billion by the ECB, $15 billion by the Norges Bank, $30 billion by the Reserve Bank of Australia, $30 billion by the Sveriges Riksbank, and $60 billion by the Swiss National Bank.  As a result of these actions, the total size of outstanding swap lines is $620 billion.