Oil is our most-precious commodity as fuel for the global economy. It is also becoming a scarce commodity, as global production has flattened, while global demand continues to climb relentlessly, everywhere in the world except for the dying economies of Europe and North America. It is a classic “seller’s market.”
This great generational injustice is the direct consequence of central banks lowering interest rates to zero and inflating asset bubbles in a corrosive (and vain) attempt to generate a wealth effect of households borrowing and blowing their newly created asset wealth. In an economy that isn't whipsawed by central bank manipulation, the difference between middle class households' asset wealth is largely behavioral, not the random luck of coming of age before central banks began blowing destructive asset bubbles as a matter of policy.
Emergency legislation can be drawn up over-night. While Austria may be the first in enacting bail-in legislation there is no guarantee that savers, particularly in the peripheral nations, will receive any indication that their deposits may be at risk.
"It’s like walking in a mine field. Many risks lie ahead of you. Even if you are in the middle class, if something unexpected happens, you could slip into poverty."
Futures Flat On Minutes Day; Chinese Bubble Spills Into Hong Kong; Biggest Energy M&A Deal In Over A DecadeSubmitted by Tyler Durden on 04/08/2015 07:00 -0400
While US equity futures are largely unchanged, if only ahead of the now daily pre-open market-wide ramp, things in Asia have continued on their bubbly flurry, where China's Shanghai Composite briefly rose above 4000 for the first time since 2008, but it was the surge in the Hong Kong stock market that showed the Chinese bubble is finally spilling over, in the form of a blistering rally on the Hang Seng which rose nearly 4% on immense volume which at 250 billion Hong Kong dollars ($32 billion) was three times the average daily volume over the past year and nearly 20% more than the previous record volume day in October 2007, at the height of the pre-financial crisis bubble.
The present oil price collapse is because of over-production of expensive tight oil. The collapse occurred because of the inability of the world market to support the cost of the new expensive oil supply from shale, oil sands and deep water. The problem is structural and systemic and firmly rooted in the irresponsible funding of under-performing U.S. tight oil companies since at least 2010. The first step to price recovery is the severing of capital supply to companies that could not fund their operations from cash flow when oil prices were more than $90 per barrel. If this does not happen, we could be in for a long period of low oil prices.
Facing A Housing Hard-Landing, Chinese Propaganda Goes All-In: "Set Positive Agenda; Boost Market Confidence"Submitted by Tyler Durden on 04/05/2015 12:53 -0400
With China's economy facing an imminent hard-landing unless it succeeds in stabilizing its housing sector, what is China doing? The same thing that the US has been doing over the past 7 years using such traditional propaganda pathways as mainstream media and Financial TV outlets such as CNBC, however with an emphasis on real-estate instead of stocks: it has unleashed an unprecedented propaganda onslaught by its "Department of Truth" urging China's population to drop everything and back the truth up with a brand new Chinese house... or second... or third. Because unless it succeeds to get the local population to jump right back on the housing bandwagon, the hard landing beckons.
Put another way, the financial landscape is now so screwed up by the Central Planners, that investors are actually INCINERATING their money by lending it to Governments.
Our current faith in central banks' ability to "make the economy all better, all the time" is horrendously misplaced.
Current policy coming from the Fed seems to be geared to create a never-ending series of booms and busts, with the hope that the busts can be shortened with more debt and easy money. Yet one major driver behind the financial crisis in 2008 was too much debt - much of which led to taxpayer-funded bailouts. In spite of this, the best the Fed can come up with now is to lower interest rates to boost demand to induce households and governments to borrow even more. Interfering with interest rates, however, is by far the most damaging policy. The economy is not a car, and interest rates are not the gas pedal. Interest rates play a critical role in aligning output with society’s demand across time. Fiddling with them only creates an ever-growing misalignment between demand and supply across time requiring an ever larger and more painful adjustment.
Bad News For America's Biggest Housing Bubble: San Francisco Home Prices Suffer Biggest Drop In Three YearsSubmitted by Tyler Durden on 03/31/2015 13:50 -0400
It was not only the annual growth rate of only 7.9%, matching the lowest since the European debt bubble burst in 2010, but also the sequential rate of price drops, at -0.9% - the biggest monthly drop in three years, or since January 2012 - that will once again be a subject for concern of housing watchers. Because should the price decline resume its acceleration without any emerging tailwinds to prop up the local housing market, then there will surely be some severe fallout such as this peak housing bubble example, in which as Curbed reported last week, a run down shack which listed for $799,000 sold for 50% more, or $1.2 million a few weeks later!
While we wait to see which “well capitalized” bank will be the next to crumble under the weight of mountainous writedowns occasioned by the sudden souring of “riskless” assets, we get to read the DuesselHyp post-mortem, which shows that the bank was effectively AIG’d by Eurex.
The Fed may engage in a symbolic rate hike... but we will not enter a truly hawkish period... not when the TBTFs have $551 trillion in interest rate based derivatives outstanding.
There is only one way to end the financial tyranny of the Federal Reserve--abolish it, and put an end to the predatory pathologies of its policies...
"Now a legal quirk could bring a surreal ending to... foreclosure cases around the country: [borrowers] may get to keep their homes without ever having to pay another dime."