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"There Will Be Blood": Petrodollar Death Means A Liquidity And Oil-Exporting Crisis On Deck
Recently we posted the following article commenting on the impact of USD appreciation and dollar circulation among oil exporters, as well as how the collapsing price of oil is set to reverberate across the entire oil-exporting world, where sticky high oil prices were a key reason for social stability. Following today's shocking OPEC announcement and the epic collapse in crude prices, it is time to repost it now that everyone is desperate to become a bear market oil expert, if only on Twitter...
How The Petrodollar Quietly Died, And Nobody Noticed
Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company - the end of the system that according to many has framed and facilitated the US Dollar's reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.
The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, "developed world" status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements, leading to, among other thing, such discussions as, in today's FT, why China's Renminbi offshore market has gone from nothing to billions in a short space of time.
And yet, few would have believed that the Petrodollar did indeed quietly die, although ironically, without much input from either Russia or China, and paradoxically, mostly as a result of the actions of none other than the Fed itself, with its strong dollar policy, and to a lesser extent Saudi Arabia too, which by glutting the world with crude, first intended to crush Putin, and subsequently, to take out the US crude cost-curve, may have Plaxico'ed both itself, and its closest Petrodollar trading partner, the US of A.
As Reuters reports, for the first time in almost two decades, energy-exporting countries are set to pull their "petrodollars" out of world markets this year, citing a study by BNP Paribas (more details below). Basically, the Petrodollar, long serving as the US leverage to encourage and facilitate USD recycling, and a steady reinvestment in US-denominated assets by the Oil exporting nations, and thus a means to steadily increase the nominal price of all USD-priced assets, just drove itself into irrelevance.
A consequence of this year's dramatic drop in oil prices, the shift is likely to cause global market liquidity to fall, the study showed.
This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.
But no more: "this year the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations."
In short, the Petrodollar may not have died per se, at least not yet since the USD is still holding on to the reserve currency title if only for just a little longer, but it has managed to price itself into irrelevance, which from a USD-recycling standpoint, is essentially the same thing.
According to BNP, Petrodollar recycling peaked at $511 billion in 2006, or just about the time crude prices were preparing to go to $200, per Goldman Sachs. It is also the time when capital markets hit all time highs, only without the artificial crutches of every single central bank propping up the S&P ponzi house of cards on a daily basis. What happened after is known to all...
"At its peak, about $500 billion a year was being recycled back into financial markets. This will be the first year in a long time that energy exporters will be sucking capital out," said David Spegel, global head of emerging market sovereign and corporate Research at BNP.
Spegel acknowledged that the net withdrawal was small. But he added: "What is interesting is they are draining rather than providing capital that is moving global liquidity. If oil prices fall further in coming years, energy producers will need more capital even if just to repay bonds."
In other words, oil exporters are now pulling liquidity out of financial markets rather than putting money in. That could result in higher borrowing costs for governments, companies, and ultimately, consumers as money becomes scarcer.
Which is hardly great news: because in a world in which central banks are actively soaking up high-quality collateral, at a pace that is unprecedented in history, and led to the world's allegedly most liquid bond market to suffer a 10-sigma move on October 15, the last thing the market needs is even less liquidity, and even sharper moves on ever less volume, until finally the next big sell order crushes the entire market or at least force the [NYSE|Nasdaq|BATS|Sigma X] to shut down indefinitely until further notice.
So what happens next, now that the primary USD-recycling mechanism of the past 2 decades is no longer applicable? Well, nothing good.
Here are the highlights of David Spegel's note Energy price shock scenarios: Impact on EM ratings, funding gaps, debt, inflation and fiscal risks.
Whatever the reason, whether a function of supply, demand or political risks, oil prices plummeted in Q3 2014 and remain volatile. Theories related to the price plunge vary widely: some argue it is an additional means for Western allies in the Middle East to punish Russia. Others state it is the result of a price war between Opec and new shale oil producers. In the end, it may just reflect the traditional inverted relationship between the international value of the dollar and the price of hard-currency-based commodities (Figure 6). In any event, the impact of the energy price drop will be wide-ranging (if sustained) and will have implications for debt service costs, inflation, fiscal accounts and GDP growth.
Have you noticed a reduction of financial markets liquidity?
Outside from the domestic economic impact within EMs due to the downward oil price shock, we believe that the implications for financial market liquidity via the reduced recycling of petrodollars should not be underestimated. Because energy exporters do not fully invest their export receipts and effectively ‘save’ a considerable portion of their income, these surplus funds find their way back into bank deposits (fuelling the loan market) as well as into financial markets and other assets. This capital has helped fund debt among importers, helping to boost overall growth as well as other financial markets liquidity conditions.
Last year, capital flows from energy exporting countries (see list in Figure 12) amounted to USD812bn (Figure 3), with USD109bn taking the form of financial portfolio capital and USD177bn in the form of direct equity investment and USD527bn of other capital over half of which we estimate made its way into bank deposits (ie and therefore mostly into loan markets).
The recycling of petro-dollars has benefited financial markets liquidity conditions. However, this year, we expect that incremental liquidity typically provided by such recycled flows will be markedly reduced, estimating that direct and other capital outflows from energy exporters will have declined by USD253bn YoY. Of course, these economies also receive inward capital, so on a net basis, the additional capital provided externally is much lower. This year, we expect that net capital flows will be negative for EM, representing the first net inflow of capital (USD8bn) for the first time in eighteen years. This compares with USD60bn last year, which itself was down from USD248bn in 2012. At its peak, recycled EM petro dollars amounted to USD511bn back in 2006. The declines seen since 2006 not only reflect the changed global environment, but also the propensity of underlying exporters to begin investing the money domestically rather than save. The implications for financial markets liquidity - not to mention related downward pressure on US Treasury yields – is negative.
* * *
Even scarcer liquidity in US Capital markets aside, this is how BNP sees the inflation and growth for energy exporters:
Household consumption benefits: While we recognise that the relationship is not entirely linear, we use inflation basket weights for ‘transportation’ and ‘household & utilities’ (shown in the ‘Economic components’ section of Figure 27) as a means to address the differing demand elasticities prevalent across countries. These act as our proxy for consumption the consumption basket in order to determine the economic benefit that would result as lower energy prices improve household disposable income. This is weighted by the level of domestic consumption relative to the economy, which we also show in the ‘Economic components’ section of Figure 27.
Reduced industrial production costs: Outside the energy industry, manufacturers will benefit from falling operating costs. Agriculture will not benefit as much and services will benefit even less.
Trade gains and losses: Lost trade as a result of lower demand from oil-producing trade partners will impact both growth and the current account balance. On the other hand, better consumption from many energy-importing trade partners will provide some offset. The percentage of each country’s exports to energy producing partners represents relative to its total exports is used to determine potential lost growth and CAR due to lower demand from trade partners.
Domestic FX moves are beyond the scope of our analysis. These will be tied to the level of openness of the economy and the impact of changed demand conditions among trade partners as well as dollar effects. Neither do we address non-oil related political risks (eg sanctions) or any fiscal or monetary policy responses to oil shocks.
GDP growth
The least impacted oil producing country, from a GDP perspective, is Brazil followed by Mexico, Argentina, Tunisia and Trinidad & Tobago. The impact on fiscal accounts also appears lower for these than most other EMs.
Remarkably, the impact of lower oil for Russia’s economic growth is not as severe as might be expected. Sustained oil at USD80/bbl would see growth slow by 1.8pp to 0.6%. This compares with the worst hit economies of Angola (where growth is nearly 8pp lower at -2%), Iraq (GDP slows to -1.6% from 4.5% growth), Kazakhstan and Azerbaijan (growth falls to -0.9% from 5.8%).
For a drop to USD 80/bbl, it can be seen (in Figure 27) that, in some cases, such as the UAE, Qatar and Kuwait, the negative impact on GDP can be comfortably offset by fiscal stimulus. These economies will probably benefit from such a policy in which case our ‘model-based’ GDP growth estimate would represent the low end of the likely outcome (unless a fiscal policy response is not forthcoming).
Global growth in 2015? More like how great will the hit to GDP be if oil prices don't rebound immediately?
On the whole, we can say that the fall in oil prices will prove negative, shaving 0.4pp from 2015 EM GDP growth. The collective current account balance will fall 0.58pp to 0.6% of GDP, while the budget deficit will deteriorate by 0.61pp to -2.9%. This probably has the worst implications for EM as an asset class in the credit world.
Energy exporters will fare worst, with growth falling by 1.9pp and their current account balances suffering negative pressure to the tune of 2.69pp of GDP. Budget balances will suffer a 1.67pp of GDP fall, despite benefits from lower subsidy costs. The impact of oil falling USD 25/bbl will be likely to put push the current account balance into deficit, with our analysis indicating a 0.3% of GDP deficit from a 2.4% surplus before. Fortunately, the benefit to inflation will be the best in EM and could help offset some of the political risks from reduced growth.
As might be expected, energy importers will benefit by 0.4pp better growth in this scenario. Their collective current account will improve by 0.6pp to 1.1% of GDP.
The regions worst hit are the Middle East, with GDP growth slowing to 0.3%, which is 3.8pp lower than when oil was averaging USD105/bbl. The regions’ fiscal accounts will also suffer most in EM, moving from a 1.7% of GDP surplus to a 1.8% deficit. Meanwhile, the CAB will drop 5.3pp, although remain in surplus at 3.9%. The CIS is the next-worst hit, from a GDP perspective, with regional growth flat-lined versus 1.91% previously. The region’s fiscal deficit will worsen from 0.7% of GDP to -1.8% and CAB shrink to 0.7% from 3% of GDP. Africa’s growth will come in 1.4pp slower at 2.8% while Latam growth will be 0.4pp slower at 2.2%. For Africa, the CAB/GDP ratio will fall by 2.4pp pushing it deep into deficit (-2.9% of GDP).
Some regions benefit, however, with Asia ex-China growing 0.45bpp faster at 5.5% and EM Europe (ex-CIS) growing 0.55pp faster at 3.9%, with the region’s CAB/GDP improving 0.69pp, although remain in deficit to the tune of -2.4% of GDP.
* * *
And so on, but to summarize, here are the key points once more:
- The stronger US dollar is having an inverse impact on dollar-denominated commodity prices, including oil. This will affect emerging market (EM) credit quality in various ways.
- The implications of reduced recycled petrodollars has significant ramifications for financial markets, loan markets and Treasury yields. In fact, EM energy exporters will post their first net drain on global capital (USD8bn) in eighteen years.
- Oil and gas exporting EMs account for 26% of total EM GDP and 21% of external bonds. For these economies, the impact will be on lost fiscal revenue, lost GDP growth and the contribution to reserves of oil and gas-related export receipts. Together, these will have a significant effect on sustainability and liquidity ratios and as a consequence are negative for dollar debt-servicing risks and credit ratings.
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This will be old news by Friday. Print more. Worry less. All is well. W T F....No riots today. and I hate football.
The sheeple are celebrating $2.50 gasoline at the pump going into shopping season... Little do they know the impact of $60 oil in the long term...
"You boys are a little late".
https://www.youtube.com/watch?v=y9ClsOQdlUE
This ZH article is going on several years old now ... but I still think it's thesis is pretty spot on ...
http://www.zerohedge.com/news/2012-11-24/goodbye-petrodollar-hello-agri-...
The list of countries that import all their food are at the highest risk of being completely fucked when the petro-dollar tanks. Gold might be next in line. It might be SDRs. Maybe the Yuan steps up and gets a bigger share of the reserve currency pie. It may very well just be chaos.
It is important to remember that all these BS fiat games enable trade/consumption that ain't gonna happen on a "more honest" system of accounting. That means everyone tightens belts all the way around.
Regards,
Cooter
yes, everything and everyone will go down ... there will be no winners... it reminds me of the old saying to ZH ... be careful what you wish for !
The commodities market trading tomorrow and on Monday will redefine "Black Friday" for many years to come. There is a currency crisis about to hit and the US public is so damned ignorant about it, it is hilarious.
So if the problem is not enough dollars being fed to the rest of the world to recycle, would the recent price drop not cause the US to shift away from using it's own (more expensive to produce) oil and again tilt the tables in favor of importing, thus sending more US Dollars out into the world to again restart the "recycling" process?
... the Fed traders might have to sell airlines and retailers to buy oil.
"Impacts" make my nose bleed.
Zero Hedge has supported the Peak Oil Theorist.
Why change colors now. Is this herd chasing.
two different subjects
Things can't be that bad or you would be seeing oil executives jumping off buildings. Oh wait....
http://www.bloomberg.com/news/2014-11-27/head-of-enel-s-romanian-units-d...
aside from the impact on the shale industry, this analysis shows how catastophic the oil drop is to america. I no longer beleive the idea that USA & saudi Arabia colluded to drive oil down to hit russia. I think the US govt is really stupid, but not really totally absolutely hopelessly stupid.
I rather beleive that saudi arabia did it on its own, or possibly in the wake of some clandestine shift in alliance to china
didn't KSA have a "get together" with Russia and China(?) back in 2010 or 2011 that was only reported in The Independent wrt the petro dollar?
Falling oil prices I believe are a direct result of the heavy deflationary pressures on the USD. Oil being priced in USD for the last 40 years has given .gov the freedom to commit all kinds of financial fraud, sanctions, and malfeasance.
A falling oil price goes hand in hand with a move away from USD, as we are now seeing and as we saw in the shock of 2008. The article makes total sense.
You ever heard of supply and demand?
I can't speak for oil, but "supply and demand" has been completely irrelevant for the gold and silver markets for over 3 years now.
This move down in oil has been as relentless as the move up in US stocks, "orderley and efficient Markets" via Financial Engineering.
'I can't speak for oil",
Waddya mean? There's been a huge demand for paper gold and silver. Every morning at like 2 am they sell tons of it. Wait,,, oh neber mind.
Sarc off
EXACTLY !! Who in the hell is buying this shit ?!?!?
.... The other "relic" , supply and demand.
A few months ago oil was $105, I guess that means oil demand is dropping 7% a month or so. Peak Oil to Free Oil in one year at this rate.
NO it's means the fed just isn't throwing money in that direction ...
That and demand for oil priced in $s is dropping. Other deals have been done.
what, in the fuck, does 'supply and demand' have to do with the price of oil?
<_<
>_>
You got me on that one.
Well...China has cities that sit empty....Why did they build them....To CooK The Books
American CEO's are experts at this
No suppy and demand there
Commodities? Hope to fuck the corn and soybean market doesn't tank any further...we've already lost 50% since last year this time. I'm screwed.
Corn & Soybean? GMO too no doubt. Maybe when farmers begin actually growing food again things will turn around. Meanwhile, Monsanto is one happy bunch of crazy evil fuckers.
Fuck Monsanto.....We grow all non-gmo corn and soybeans. Funny thing though...when we deliver our non-gmo.....they allow for 5% contamination....so basically every non-gmo seed variety has been polluted.
not trying to be an asshole, but when you are messing around with something as manipulated and govt controlled as corn, expet shit to happen. Ever since they started mandating corn alcohol in gasoline, and instituting sugar tariffs to protect a handful of wealthy cane growers, thereby encouraging/forcing people to use high fructose corn syrup instead of sugar, and the beef industry using corn instead of the natural food of cows(grass), people have jumped on the corn bandwagon, diverting land from other productive crops in order to feed off the govt subsidized teat. It was bound to happen sometime, since when you subsidize something, you get a whole lot moar of it.
Not saying you are necessarily one of those people, and I didn't downvote you. Sorry you are having troubles, non big agri farmers like you are getting scarce these days
The chemists can make everything from corn
ascorbic acid blew me away.
John,
What kind of trading do you see? And why?
Thanks
CrazyCooter,
Accordingly to Rickards SDR will become the next reserve currency and US will debase the dollar against gold and tax gold profit very high.
And the US will blame the SDR (IMF) for the dollar collapse.
Anyway, you might appreciate this post as well. It’s one of my favorites:
Thermodynamics for Economists by Mark B Cunnington that goes by the name of Null Hypothesis, at “The Oil Drum”.
If you walk outside you’ll see birds chirping, trees whispering…., except we have nicer looking cars…
What’s so different about today that provokes Chicken Littles like me to scream that the world is about to end?
The answer to this is that our entire financial system, and its history going back at least 100 years, has been predicated on, and driven by, perpetual economic growth. That is what provides value to money. Money is literally created out of future debt….
People historically bought those bonds because they were reasonably confident that the economy would grow at a rate roughly equal to the bond coupon,
But in 1970 the US hit Peak Oil. As a result, its economy should have begun declining because it couldn’t grow anymore. But it didn’t decline, at least to the degree one would have expected. Why not? Because there was a fundamental change to the monetary system. In 1971, the US defaulted on its gold convertibility and the dollar became a fully debt backed fiat currency.
Those systems are dependent on perpetual exponential growth and they invariably, 100% of the time, blow up in hyperinflation. How did the US avoid that catastrophe? It (militarily) enforced the dollar as the world’s reserve currency, that’s how, which extended the US empire around the world and forced other countries to sell their resources (oil and manufactured gizmos) to the US in exchange for pieces of paper. That was a fundamental system change in 1971.
In order to keep the bond vigilantes at bay and prevent a runaway monetary collapse, in 1982 the Fed increased interest rates to about 20%. This “destroyed” the economy, but the alternative was hyperinflation which would have destroyed it as well. Back then, the economy could weather those high interest rates without completely collapsing because it wasn’t over-leveraged. And more importantly, the US still retained the world’s reserve currency, so it could run a perpetual trade deficit and CONTINUE GROWING – using other countries’ resources, who hadn’t yet hit Peak.
We are now looking at another imminent system change.
There is now no “productive” monetary asset left that can provide a positive real rate of return, absent central bank manipulation of select markets, at the expense of others.
We’re at Peak Oil. Duh! How can anyone seriously expect a consistent rate of return on their investments when the real world upon which those investments are valued isn’t growing?
Anyone who casually looks out the window and concludes that what is going in society now resembles anything close to historical norms is in for a big surprise.
The system WILL end, and it will not end with a whimper.
All this talk about whether total global oil production is up or down a …. it’s all just statistical noise.
The world will be on its downward spiral. And the naysayers taunting the doomers will mysteriously vanish into the woodwork, just like they always do after every ponzi scheme crashes.
http://markbc.net/doomer-economic-commentary/thermodynamics-for-economists/
EI, perpetual economic growth? notice how the population grows? anyway, more like ebb and flow; mostly flow. Or you prefer a managed economy? managed by.....EI and co.? your doom and gloom naysaying is taunted because the world has never witnessed 'growth' like the past 30 years, even 100 years. because
it passed you by means it is somewhere else. sorry for that
I am sorry. I have NO idea what you're talking about.
But, from where I stand, it looks like you got intoxicated by:
a) The Gospel of Prosperity by the churches
b) Indoctrinating Obedience by the education
c) Irrational Exuberance by the clueless friends
d) Positive Psychology and forget the facts by our academia
e) Pseudo-Science of Happiness by our PhD’s
“Moral courage doesn't reside in ‘doing good’ so much as in fighting the bad. My moral obligation is to destroy the economic establishment, and I will” -- Nassim Taleb
a) thru e) maybe it's academic; you stopped short at "F".
pray tell Taleb(an), replace it with what?
There have been several significant population booms in human history. They usually, well never so far, last forever. Depopulation will happen. Live it up son. It ain't gonna last.
Rickards is a good thinker and is definately "plugged in" so to speak, but I am not sure anyone can really know how this pans out. I don't see how transition can be orderly - at all.
Any move to a system which requires consumers to approximately pay producers for goods (i.e. produce in kind value in exchange) will see hellacious deflation and standard of living collapses. What do you think happens to the entire block of elderly voters in the US when their sustance HAS TO BE PAID FOR IN KIND. Then there is the FSA army to deal with.
If SDR is the global currency, then who gets the cream and who gets the cob? In the past models, one nation tended to dominate the others, until they rotted from within and were replaced by a younger/stronger nation so to speak. The SDR model is business as usual but with everyone agreeing to play nice at the elite level. I don't see that happening when there is growing unrest in all involved nations as deflation eats away at society.
When the petro-dollar slowly rolls over, in an increasingly energy constrained environment, trade is going to become very complicated and food will quickly rival oil in strategic importance.
Said differently, sometimes I like to tell people, when they ask me how I am doing, that "I have three hots, a flushing pot, and a warm cot. Life is good!" What they often don't realize is I am serious. :-)
Regards,
Cooter
CrazyCooter
I have a bleak view of humanity once the low IQ and uninformed masses realized it’s over.
Here’s the list that I find compelling:
1. Financial Collapse
What Collapses: Banks, currencies, the value of savings & assets
Signs of Collapse: Bank failures/rescues, stock/housing market collapses
Cultures at this Stage: Iceland during 2008 crisis
Coping/Resilience Mechanism: Eliminating and repudiating debts, using community currencies, let the banks fail
2. Commercial Collapse
What Collapses: Credit availability, trade, businesses, tax revenues, industrial food & energy systems
Signs of Collapse: Corporations become criminal, rampant corruption, regulatory mechanisms fail, trade and supply chains seize up
Cultures at this Stage: Russia after collapse of USSR.
Coping/Resilience Mechanism: building self-sufficient communities, local self-employment and essential supplies, creating a Gift/Sharing Economy
3. Political Collapse
What Collapses: Law & order, regulatory enforcement, safety nets, power grid & other infrastructure (including health, education, water and emergency response systems and the Internet), nation states
Signs of Collapse: Citizen unrest, surveillance society, scapegoating, rise in totalitarian governments, war and despotism
Cultures at this Stage: Afghanistan & Pakistan
Coping/Resilience Mechanism: creating local, direct (non-representative) democratic or egalitarian anarchistic institutions
4.-5. Social Collapse and the Disintegration of Humanity
What Collapses: Community: social institutions, trust, social cohesion, faith, cooperation; and then Humanity, kindness and compassion
Signs of Collapse: Permanent refugee cultures, disintegration of health care and waste management, endemic diseases, alienation, anomie, inurement, fighting violence with violence, hero worship, personal disintegration
Cultures at this Stage: Ik tribe of E. Africa
Coping/Resilience Mechanism: few or none
http://howtosavetheworld.ca/2013/07/05/will-the-collapse-of-civilization-begin-with-global-corporatist-totalitarianism/
agree CC. but I ask, who is the breadbasket of the world? largest oil producer? center of finance? place EVERYONE wants to
come? Our problem is consumption, as in OVER. Productivity, innovation, technology, creativity, higher education and arts; its here. I like to tell people,
it may seem like we're going down, but it's more that others are going up faster. Disruptive no doubt but more doing well is more doing well.
And long on Bibles.
By Boomer ll: “Significant numbers of Americans think Jesus is coming back and the worse it gets, the more the signs point to him coming soon. So long-term planning doesn’t exist for some folks.”
http://peakoilbarrel.com/bakken-sweet-spots-petering/comment-page-1/#comment-455900
Been watching what products and services are completely bogus. They will be the first to fall. The amount of surplus crap out there is at an all time high. Stuff made by the millions with limited use or does not live up to the claims now sits in dollar stores collecting dust.
The number of womens clothing stores in malls is outright rediculous and lets not forget the multi billion dollar crap comming out of holly wood.
Days are numbered.
onthesquare,
re: let's not forget the million dollar crap coming out of hollywood...
my grandfather lived through 2 depressions, 2 wars, and he said when it gets dark, desperate and poor, always invest in ways to help people escape and use the money you'll make to invest in land, metals and buy the beautiful objects people will be literally giving away. he owned a pub, from there he bought a hotel which had a pub as well as a lounge. he then bought farmland, cattle, hogs, turkeys, peasants. he never invested in film but he always viewed theatre, film, and sports as just another way to sell alcohol, the drug of so many.
W T F???? I'm interested to know how he was buying the "peasants?"
opportuity everywhere...you know the old saw "when there is blood in the streets....RELOAD."
Napoleon used to attack on holidays. OPEC probably didn't pick US's Thanksgiving day at random. Both the US shale industry and I guess the petrodollar have been targeted. I wonder what US response OPEC was afraid of if they haden't picked Thanksgiving? I would not be surprised if Saudi A. ends up being the next Iraq.
look up the true origin of thankgiving. To thank God for helping us slaughter the Indians; men, women and children. Holidays during Napoleon's time were all religious.
just saying
Another product of the progressive education system?
DaddyO
"That means everyone tightens belts all the way around".
Spot on Cooter....
Just to fuck with you guys. What if we are on the verge of nuclear fusion. Unlimited energy. Gold to zero. Oil? who cares. Just say'n.
EDIT: Some people might know
Why would a business or person, who invests in ingenuity and creates real tangible products, see their worth go to zero? That's essentially what you're saying by saying gold to zero. Gold represents a store of wealth. If you provide a service, get paid in fiat, redeem in gold and store that production in gold, gold never goes to zero. Can't.
Now extraction costs may change, sure, but the intrinsic value of gold as a store of wealth will never change.
An upper class suit for a Roman 2500 years ago was worth 1 oz of gold. What's an upper class suit worth today? Gold transcends time and always holds value.
There's no holding on to 8 tracks when MP3 players are the future... but they are already the past. If we have cheap unlimited energy, we can extract all the minerals we want or get them from other planetary bodies. The time may be close. Some people may know.
What is gravity? Has anyone figured that out yet? What if a photon is not a particle, or an energy charge, but maybe it's shaped like a dumbell spinning at different speeds which makes it store more energy when it spins faster. Polarized sungglasses? I think they are real. 3D movies? Yeah, some use polarized glasses. Why? because maybe the aformentioned is real.
Fusion? Might be here. I'm just say'n. If energy is free, how much would it cost to dig up gold?
You mean Cold Fusion?
http://www.extremetech.com/extreme/191754-cold-fusion-reactor-verified-b...
Yes, thanks, cold fusion. :)
Cold fusion has been so thoroughly debunked it's not even funny. Ya' don't get somethin' for nuthin'. Unless you're a banker.
One important thing to keep in mind is what 'also' comes out of a barrel of oil. Many industries are based on what we don't burn as fuel from a barrel of oil. Even if we had free energy we would still want petro products and lots of them.
With unlimited energy, we could just manufacture a lot of those products from the base elements. All sorts of new economic niches would open up as a result. We'd still want to hang the bankers though. Anyway, with fusion, we've been 20 years away from having a working fusion reactor for the past 30 or 40 years. I'm not going to say that it cannot be done (nor that it can,) but rather, we're not really going to put our minds to it until its too late.
I predict huge black and grey markets in gold and silver on the horizon just as there are in India and China and many Asian nations now. I won't be surprised if your local convenince store doesn't become a local trading place since many are already owned by Pakis and Indians who are long time hoarders of the so-called, "Foolish Metals" ... those "silly" metals that many banks and big investment funds are grabbing and hoarding like crazy.
hey, they had replicators on Star Trek, so somebody figured out something.
we're good!
unless you're a really really large object in space
That's just garden variety thermonuclear fusion. Tough to do on the small scale with any sort of control.
The cold fusion or LENR phenomenon has been demonstrated in hundreds of labs around the world. Even transmutations have been observed.
Not that it matters: collectively we're too stupid to see the opportunities nature holds for us.
All of them require more energy input than they produce.
Yeah, reminds me of another one related to corn.
https://www.youtube.com/watch?v=x0HEjh8bm0o
I know leaders in LENRs who carried on after it went out of style... they all call complete BS on that.
The only man-made fusion device to achieve ignition to date is the hydrogen bomb.
I'm just say'n.
Right, yes, cold fusion. Technology only seems to get better, right? How long until machines are as smart as we are? How long until we can take nuclear fusion to a safe level? So many "ifs". I just think we are at the verge. What happens then? I don't know, but I'm sure gold will be the last thing we should think about unless you are designing space drones that need some sort of protective layer, or you want some bling.
I think there's a division here. Technology vs. banker thievery. It's going to be interesting.
Somebody's gonna screw up some day with one of those particle accelerator experiments...
Eyeroller
So, you'll appreciate this:
An interesting debate that took place some years ago between Carl Sagan, the well-known astrophysicist, and Ernst Mayr, the grand old man of American biology.
They were debating the possibility of finding intelligent life elsewhere in the universe.
Sagan, speaking from the point of view of an astrophysicist, pointed out that there are innumerable planets just like ours. There is no reason they shouldn't have developed intelligent life.
Mayr, from the point of view of a biologist, argued that it's very unlikely that we'll find any. And his reason was, he said, we have exactly one example: Earth.
So let's take a look at Earth. And what he basically argued is that intelligence is a kind of lethal mutation ... you're just not going to find intelligent life elsewhere, and you probably won't find it here for very long either because it's just a lethal mutation.
http://www.chomsky.info/talks/20100930.htm
Chomsky? LOL!
I love reading Chomsky's stuff..... almost as much as I like ZH.....
When the government comes for the internet [not too long - the usual suspects are hard at work right now] - "hate" speech and other such things red-blooded, Budweiser and football-lovin' 'Mericans will demand government proscribe, those old broadcast TV wavelengths may well come in handy as the backbone of RebelNet.
"What is gravity".
Heck, I'm still trying to figure what a electrical ground, does.
it gives the current a place to safely go, instaed of thru you.
the CFR has been very quiet of late, davos, bilderberger's, UN, are keeping a low profile, while nation state .gov goons are pushed into the limelight,, g 7 g20. EU add in a weak and to me obviously unstable USA president, with a policy to add millions more of low cost labor into a market with no demand for labor..add up to the elite .01% are letting the puppets in .gov take the blame for NWO economics. rape of labor and killing of the middle class goes on ..in a well armed land full of battle tested veterans..amazing heads have not rolled. debt holds it together drugs games and food that fills while it kills, while msm sings the siren sounds and adds misdirection and division of race to keep the ave person confused and apathetic.
stand back from your addictions, and open your eyes wide shut..it will hurt and scare you, the evil that is obvious to open eyes, slaves, we have no spartacus..waiting will only mean we fall farther into poverty and slavery to the state.
Put that cold fusion and a mountain of wishes in one hand and 5 pounds of shale in the other and see which fills up first.
I'll take the mountain of wishes, thank you.
You would learn that scarcity is a geographic issue. It will take a decade or more to scale to any reasonable share of energy production. It too will require scarce resources, which will be bid up in price (frontrunning). And, the energy will have to be distributed to where it is needed. The real world is complex. We are working on DG and distributed transportation fuel production. The economics ate better than shale anyway... what matters is the domestic content (energy and labor) of the energy we consume.
If it will work, it will be simple. Most things that work are simple.
Gold value will go to zero when your "unlimited" source of energy (remember 2nd principle of thermodynamics if you deem it appropriate) is able to produce supernovas (and thus the 79 atomic number chemical element known as gold) leaving someone alive to trade your "product" with.
Yeah, let's print moar gold.
There are things, wait change that, there are an infinate number of things in which we don't understand. Matter and what makes matter is a perfect example. Have you not heard of the word, "infinity"? Science is so immature.
EDIT: :) Science is already there. Humans just can't do the work... not yet. Machines can. We'll join forces, I hope, one day.
EDIT AGAIN: So where does that leave gold?
I'm a downer, but I'm a scientist.
EDIT again again: The future will be quite exciting and wonderful.
The fusion cat is out http://amsacta.unibo.it/4084/1/LuganoReportSubmit.pdf
Personally I like the idea of the Thorium breeder reactor.
https://www.youtube.com/watch?v=Z3pxPP3m0k0
nah "no outside of the box" on this board bunch old stuffed shirts who drink their way to omniscient...bunch a buggy whip maker investors lol
How many people do you think certain types would be willing to kill in order to control the technology?
Free energy, YAY! Now bend over if you want some.
Nothing changes.
You need to read "To Much Magic" by Kunstler
The old saying goes ... "the cure for high oil prices is ... high oil prices"!
Regards,
Cooter
So the Federal Reserve, which controls all markets, should buy every barrel of oil on the planet, stockpile it in the strategic petroleum reserve (SPR) and send prices to the moon. That will teach the Saudi's whose boss.
You do realize there will be more on the market tomorrow right?
And the difference is...?
Heck no! By Friday - or a week from Friday - it'll translate into lower gas prices.
Hallelujah!
And Vlad and crew are just going to have to figure out exactly how much gold they're going to need to sell.
I hope it's a lot!
"The science" of economy.Aahem...
This brand of articles drive me crazy. The general idea is to sell the theme of unmitigated disaster.Today it´s the soaking up of liquidity by sinking oil prices. Yesterday it was the impending disaster caused by excess liquidity....
By shady backwardlooking econometric statistics you can prove ....anything.Correlation is not causality and myopia prevents looking at the bigger picture is my answer.
As a scientist myself I proclaim these theories to be bunkum and hoax in abscence of observation confirmed by controlled experiments.The science of economy...indeed.
As for investing I propose a an extremely crude (no pun intended) method.Observe what goes up in price or increases in value and invest in said sector.If trend is confirmed you can,if you like start the auto-erotic art of building theories , as a release for the excel geeks. But it doesn´t matter.The only thing that maters is that it goes up. And that you increase your wealth.And get out in time.And the latter thing is not science either.More like - an art.
There are so many ifs and buts -what if the general theory of the Economy v.2.0 is true...? Then this doom porn based on petrodollar flows hither and yonder is irrelevant.
+1 for your second and third paragraphs; whether they come from a scientist or a garbage man is irrelevant.
As an aside. No real geek would ever in a million years use excel. Haven't you got the memo - we use Libre office/open office calc or equivalent :)
cheers
I actually took your chalenge and asked the garbage collector today when he came around to my house - but he couldn´t distinguish between correlation and causality. But he was most interested in the general price level of houses in this area "and how much they had increased" (translated into English from his thick dialect). For good measure i cheerfully threw in that any increase in value is non-existant until realized since he´s a firm believer in the theory of ever-increasing prices for ageing bricks and mortar. I told him that I myself belong to the Calvinistic sect who put faith more into scientific progress in the areas of machinery , biotechnology - etc and that I believe that quite a lot of work opportunities may become redundant or replaced by other things- such as molecular biology and so on. But he´s a steadfast believer in the universal theory of brick-and-mortar. So there it is.
As to your second point - how do you in your country refer to excel-lovers?I may have missed out on the latest development in the English language. They are still abundant here. The people who download copious amounts of data and find statistically significant anomalies (that can not be explained by logic or seem to have any grounding in reality - mass significance effect as it sometimes is referred to). As an example you can without any doubt whatsoever see that when brokers born in the zodiac signs of Libra and Capricorn are in the office the value of crude goes down and so does M3.
The author seems to hold the quaint view that money supplies and credit markets are somehow tied to economic fundamentals. That may have been true at one time, but now we have the Federal Reserve that will just fix it with more dollars. That others may consider those dollars worth less is inconcievable.
Your move Vlad, play the gold card already!
Russia and China are orchestrating there move to kill the USD, once they have disposed of all the UST;s they're holding...
When?!?! Not in any of our lifetimes, that's for sure ... not forgetting that in doing so they will be killing themselves in the process. All this shit about Russia and China being 'shining beacons of hope for all mankind and the world in general' is nauseating at best and mindless drivel at worst. Fuck, go live there if you love it so much!
Funny, you assume I live in the US, but that's ok, I didn't expect any more of you... I gave up on the US a long time ago...
Just WTF do you think this article is all about, puppy dogs and unicorns? Wake the fuck up...
In case you missed it, I was not advocating what is going to happen, merely giving my view of future events... Only an idiot or a sheeple cannot see the moves that are being made on a global stage and destruction of the USD is at the top of the list... So, which are you?
The death of the petro dollar argument is nothing new. Do you seriously think that the dollar is going to disappear? Until Saudi Arabia goes Russian (meaning never) the petro dollar isn't going away. So, my fellow idiot, I say again ... when does it fall? Give me a date or shut the fuck up.
Plus, you have implicitly agreed with my position that you are a Russia/China lover that thinks they have it all figured out. Who's the fucking idiot on that one?
And, for what it's worth, I'm glad you don't live here. One less FSA cart rider that I have to pull with my hard work.
Saudi's and also Russians are low cost producers. The can easily hold out even a longer period of low spot prices. Worst hit will be highest cost producers. Some US shale, some Arctic projects some complicated offshore will be in focus with funding problems and rescheduling. Projects will probably be delaid and a medium price recovery is therefore programed. Don't count on the end of the Petrodollar.
Either we come up with an alternative to crude oil, or shit will certainly crash by 2021 or 2022. Probably a lot sooner, because that's just based on resource uses in a world where there is no such thing as financial instability. When it comes, you're going to be standing there with a look on your face that is reminiscent of a guy who just had his dick cut off.
I have the exact date but will not tell you until you tell me the exact date you have for the Chinese (or Russians, Indians, or most of the other CBs in the world) to say they made a mistake and really don't want all the gold they've been buying.
Who do you shill for? Who pays you and why do you do it?
I'm no shill you moron. I've been on ZH from the earliest days, unlike you. I can't be bought. I just don't blindly buy into all the negative shit that flows here consistantly as you seem to though either. And, for what it's worth, you don't know shit about any of this ... just like the rest of us. For what it's worth, I do have plenty of gold, and silver and lead on hand (lots of the latter actually). I also have virtually no debt and a healthy distrust of anyone who claims they have it all figured out, as you seem to think you do. The petro dollar uncoupling is NOT coming anytime soon. It's not time yet. As I already said, it ain't coming in this lifetime ... maybe in my children's. Until then the turds are simply going to keep circling the bowl.
Do you seriously think the world is going to allow Russia and China to run the roost? Not a fucking chance. Both countries are seriously fucked up structurally, economically and politically. They also treat their people like total shit. That cream ain't rising to the top, I guarantee you.
Sounds like you have it all figured out.
No, but I'm comfortable living within my means, providing a stable place for my family, and trusting my instincts that there are still more good people around than bad.
While it is easy for me to agree with some of your logic, some of it is not so well thought out. True, Russia and China are; "seriously fucked up structurally, economically and politically", but you don't think the US isn't? Here is a news flash for you: With the exception of a small hand full of countries, the rest of the world hates our guts. They would love nothing more than to see the US knocked off of it's pedestal. One more thing to consider: Take away the House of Saud, and you can kiss the petro $ good-bye. Governments rise and fall all of the time, especially in the middle east. The House of Saud has reigned longer than any other {and thats no accident}. Any thing can happen. The US-UK-Western Alliance seems to have lost allot of influence recently in the middle east, and should that not revert back to the old status quo, things will get very interesting.
You're right about the US system being f'd up too (although I still would rather live here than any place else and we remain cleanest dirty shirt in the laundry .. for a while longer I think), and you are definitely right about the House of Saud. I made similar comments to that effect on another thread. Your last sentence summed it all up nicely.
Yeah. I am working on that. I figure South America because of the protection the coriolis effect gives. as a bonus, the way I figure it, the Southern Hemisphere has 10% of the population and 10% of the bullshit.
The southeren hemisphere may only have 10% of the population.... but it only has 32% of the global land mass.... and antarctica take of 9% of the total global land mass....
Got any other arguments... because that dog don't hunt...
And Frodo Baggins will eventually stomp out Gollum with his big hairy feet and get Saurman and Sauron to implode and the Shire will be saved.It´s true! I saw it in a film! And read it in a series of books.It´s all true!It must be true! Otherwise I can´t make sense of or explain life as it unfolds! And then I would have to leave mom´s basement and start living my life in the real world. Extremely unpleasant idea.
Fortunately I own a few 'basements' with nice homes above them (free and clear) but happily my offces in each all get a lot of sun! It helps me remain thankful I've been so fortunate to date (from my own hard work and sweat equity) and to continually strive to see the positive side of things, being ever mindful of the negative.
Good for you! And I really mean it. I like success stories.
As fast as Vlad is burning through his stash, his 'gold card' moves are roughly (1) sell gold, or (2) don't eat.
Shill out dude. I know Vlad's stockpile got smaller when he bought 155 tons of gold so... yeah.
well what do u know???
they did a real nice job slamming the phony paper prices of Gold and Silver after markets closed over here and in Asia...all perfectly normal that the gains added and stabilized over the past 2 days should be erased over in London - aye???
right b4 the referendum....
$10, enjoy!
Need to step away from ZH for a while, so we can enjoy Turkey Day. Shit's getting real!
irrelevant nothing burger
Fauxcoveries can do that to projected break even points on curves.
The petrodollar's not much different than the SS trust fund in terms of BLS'd estimates of how long the scheme would continue to prop up USSA recklessness before it became a burden.
There will be blood if the Black Friday protesters get in the way of 300 lb. women who will be stampeding into Walmart to get a deal on $2 waffle irons.
Black Friday reminds me how disgusting modern American society has become. Mindless crowds acting like brutish wild animals.
In other words, Full Retard.
Those Black Friday video clips are like a smear campaign against humanity.
Actually there is Purity and Uncompromised Beauty in British wild animals.
Nothing to do with Black Friday Humans. Totally different planet altogether.
In my day . . . . go back and read American history and or even a local big city and read about all of the horrible screwed up $hit that groups of people did. Large groups of people acting foolishly is something humanity will always do.
Find the e-book Riots of New York.
OPEC has less liquidity, but I have more. Zero sum game.
Reserves can be levered to infinity, your spending, not so much.
As a nation loses its grip on global power, it becomes increasingly desperate. This is exactly what we are currently starting to witness. The smart ones (those with means) have already left. When there is a mass exodus, Americans will be pariahs. Every country will turn its back on us. We will reap what we have sowed...
www.TopTheNews.com
I didn't sow anything, except seeds in my survival garden. All I need now is a good crop of lead (p'bably have to buy that though)..
Not sure what you're waiting for. That which is good, do quickly.
Petrodollar death: RIP Petro, long live Dollah!
Take advantage.. Fill up the gas tank and point the car to where the sun sets. Turn left at the Rocky mountians
You want people to defect to Mexico?
some people say he's up there still...
As a side issue I noted that The Squid was forecasting $200 a barrel a few years back. How anyone believes anything from theese monsters baffles me, let alone paying for the 'advice'.
Muppetology
The economic war is ALL collateral damage to the citizens rather who do not realize they are the ones bearing all the pain so the respective oligarchs can fight for control. It's time for PEOPLE to take control back from the TBTJ banks. Vote your values with your wallets. Liquidate float scams. But gold. Shift your assets to local and community banks. Keep 3-5% of your assets in physical cash. If you do all these things, those wreaking havoc on their citizens on all will bear the pain of their actions.
It will be incredibly interesting to see the reaction of the US Gov't.... WW3 is on the horizon.
This is a action from our .guberment. Attack on Putin was the first move then also to crush the Shale play by the Liberal Technocrats. It's a win win they believe.
Hope, Hope and Change!!!
Hype and Chains.
Supported by liberals and conservatives.
Supported by democrats and republicans.
No wonder they call it a one-party system.
I am waiting in anticipation to see how this conundrum of debt explosion vs CB QE printing pans out.
To find out in real time which thesis will win.
The Austrians maintain that debt will kill us, no way they can get round it.
The Keynesians say an exit is possible by diluting insolvency in monetary inflation, PROVIDED there is growth to avoid that debt increases mechanically; aka we pay more and more interest on principal.
Now with cheap energy appearing, the main accelerator to growth has been freed of monopoly speculative plays; or so they say.
If this is true, the Keynesians have an oxygen baloon at their disposal.
So... we will see in real time how this plays out.
Remember that there were two MAIN factors that pleaded in favor of the Bears : peak cheap oil (to bridle the real economy) and peak cheap money (to bridle the financial economy).
Now one constraint is gone for the next year or two. What will it do to the other asymptote?
Will the Titanic avoid the big white one?
Lets see!
solution = debt jubilee
That's not going to happen...
...by choice.
that's why we have hackers.
yes, after reading this, for sure i'm going to shift my assets to Shanghai. right behind that will be Moscow. balance to France right?
gimme a friggin break. the only blood is coming from these suckers who write this crap and are long euros. BNP calling the
S&P a 'ponzi house of cards'; precious, USA/KSA combo; we got it covered for the next twenty years minimum.
unless they get that graphene stuff going: http://www.theguardian.com/science/2013/nov/26/graphene-molecule-potenti...
Happy Thanksgiving ZH'ers, peace out
Peak oil
Neptune in Pisces = oil & gas found everywhere, by everyone.