The pillars of support preventing the overvalued euro from depreciating versus the U.S. dollar are quickly crumbling. On a purchasing power parity basis, our favored approach to estimating long-term currency values, the euro is deeply overvalued and has been for some time (Chart 1). The euro has been supported by a positive and rising interest rate differential between euro interest rates and U.S. interest rates. Chart 2 shows the interest rate differential between 2-year government bonds in the Euro-Zone and the U.S. The widening interest rate differential was caused by … [Read more...]
Archives for August 2008
The Energy Equivalent Value of Wood
People who live in cold northern climates are likely to face stiff home heating oil bills this winter. If heating oil prices average $5 per gallon this winter, as some analysts are estimating, the average heating oil consumer may have to fork over more than $4,000 just to keep warm. With many low and middle-income consumers already struggling from high prices at the pump, surging heating oil bills are not an expense some will be able to bear. One solution to ease high heating bills is wood. A cord or two of wood and a wood stove can go a long way in reducing home heating oil bills. To see … [Read more...]