The last run up in oil prices, from 2004 to 2008, happened when the market was much tighter, with rapid growth in Chinese demand and just 1 million barrels per day of spare capacity available to balance out any potential disruptions.
Theres excess plant capacity everywhere, leveraged balance sheets and inflated real estate.
By providing a combination of capital and liquidity, this facility will effectively substitute public for private balance sheet capacity, in a period of sharp deleveraging and risk aversion in which such capacity appears very short.
Notwithstanding these positive factors, the unexpected losses and the increased pressure on their balance sheets have prompted banks to become protective of their liquidity and balance sheet capacity and, thus, to become less willing to provide funding to other market participants, including other banks.
America's government is working hard to revive markets for securitised debt, aware that banks lack the balance-sheet capacity to absorb all of those credit-card receivables and auto loans.
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The new company will also benefit from a larger balance sheet, giving it greater capacity to shoulder the costs of long term projects such as building nuclear power plants.
Tightening or loosing the availability of capital, which the Federal Reserve has power over, will not change the balance of oil production to refinery capacity or make the oil producing nations politically stable.
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MS. BRAINARD: If you reflect on how the world is growing right now, obviously it is critically important for the continued sustainability and greater balance in global growth for the emerging markets that have capacity, that have untapped domestic demand to be able to play a greater role as consumers in some of the advanced economies including the U.S. build back their balanced sheets.
Now "close to capacity", alternative receptor sites have been identified to house the "balance of the populations" still left at the London Gateway port site.
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The theme running through these properties is low to moderate price-earnings ratios, impeccable balance sheet strength, high free cash flow generation and the capacity to indulge in financial engineering in the form of share buybacks, dividends and deal activity.
Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets.
"Over time, by providing a market for these assets that does not now exist, this programme will help improve assets values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets, " US Treasury Secretary Timothy Geithner wrote in the Wall Street Journal before the programme was officially announced.
This distinction has a important impact on the balance of supply and demand because there is imbalance between production and refining capacity.
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