Oil's Crash Is the Canary In the Coal-Mine for a $9 TRILLION CRISIS

Phoenix Capital Research's picture

The Oil story is being misinterpreted by many investors.


When it comes to Oil, OPEC matters, as does Oil Shale, production cuts, geopolitical risk, etc. However, the reality is that all of these are minor issues against the MAIN STORY: the $9 TRILLION US Dollar carry trade.


Drilling for Oil, producing Oil, transporting Oil… all of these are extremely expensive processes. Which means… unless you have hundreds of millions (if not billions) of Dollars in cash lying around… you’re going to have to borrow money.


Borrowing US Dollars is the equivalent of shorting the US DOLLAR. If the US Dollar rallies, then your debt becomes more and more expensive to finance on a relative basis.


There is a lot of talk of the “Death of the Petrodollar,” but for now, Oil is priced in US Dollars. In this scheme, a US Dollar rally is Oil negative.


Here’s the US Dollar:



Here’s a chart showing an inverted US Dollar (meaning when the Dollar strengthens, the black line falls) and Oil (blue line):



Oil’s collapse is predicated by one major event: the explosion of the US Dollar carry trade. Worldwide, there is over $9 TRILLION in borrowed US Dollars that has been ploughed into risk assets.


Energy projects, particularly Oil Shale in the US, are one of the prime spots for this. But it is not the only one. Emerging markets are another.


Just about everything will be hit as well. Most of the “recovery” of the last five years been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more “risk assets” (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a  standalone story.


If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system


And that’s assuming NO increased leverage from derivative usage.


The story here is not Oil; it’s about a massive bubble in risk assets fueled by borrowed Dollars blowing up. The last time around it was a housing bubble. This time it’s an EVERYTHING bubble. And Oil is just the canary in the coalmine.


If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.


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Best Regards

Phoenix Capital Research





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Creepy A. Cracker's picture

Please...  Give me a date for the start of the crash and/or multiple crashes.  Stating that a crash is going to happen between now and forever is just babbling (yes, and obviously true).

JRobby's picture

"This time it’s an EVERYTHING..."


Funny how that happens when you have no rational allocation of capital for 15 + years? Start off with a bubble here and a bubble there then ONE BIG POP!

rsnoble's picture

Since the taxpayers were just put on the hook for wallstreet's fuckups.........i'd venture to guess something could be on the horizon.  It may have even been postponed until such action was possible.  Of course passing it off on broke taxpayers is a joke as well it must be some sort of confidence measure.  "No worries, if we can't back it up our shrivled turnip of a population will".

In other news I loved how Opec exlaimed in an article I read this am "......maybe speculators drove the price down".

LMAO............after years of saying it was impossible for them to drive it up??

TheInfoman's picture

I'm not buying that the oil crash is a large enough black swan to take the banking system down.  Unlike the mortgage crisis of '08 which was a tsunami in proportion, oil is just a rough patch for some.

I am open to hear those who disagree, so chime-in please.


rsnoble's picture

Oil was this level not long ago, now it's a problem?

hooligan2009's picture

the writer is talking about 9 trillion of leverage within many markets, not just oil. Venezuela, Mexico and Russia are emerging markets that are leveraged twice; once to oil and the other to QE facilitated money. Saudi, Qatar, Dubai and other arab emirates are frontier markets that are leveraged locally from massive fiscal deficits.Brazil has marginal producers for alternatives to oil (e.g. sugar cane) that are much more profitable at higher oil price levels in the same way that frackers are impacted. Brazilian alternative oil producers are in the same boat (oil tanker) as shale oil and solar energy producers in the US.

China is leveraged by QE at home and receives QE indirectly from abroad. China is subject to fraud, theft and corruption in its collateral markets. So far only in metals, but who knows how far it extends.

Europe, US, India and Japan consumers stand to benefit most from oil price falls but oil majors in the US and Europe will have their earnings reduced by at least as much as the percentage oil pirce drop, before any leverage on their balance sheets is taken into account.

S&P earnings have been dominated by profits from oil majors (80% of oil is produced and consumed outside OPEC). As these earnings fall, S&P earnings and PE's are impacted (lower and higher).

Oil is deflationary for western economies, hopefully Core CPI remains the focus and action remains the focus for central banks who do not treat this as a deflationary event, in the same way it was not an inflationary event over the last five years of increases.

hootowl's picture

The trolls are out in force this morning.  Ovomit/Old Yeller must have added to their cadre of defrocked economists over the weekend.  This might create a shortage of third grade math teachers.

Radical Marijuana's picture

Another article grossly understating problems!

"... the last five years been fueled by cheap borrowed Dollars ... a massive bubble in risk assets fueled by borrowed Dollars ... it’s an EVERYTHING bubble."

"Borrowed dollars" are made out of nothing as debts, as ENFORCED FRAUDS, which are controlling EVERYTHING that our current civilization is doing!



“Let there be justice,

though the world perish.”

Indeed, since the injustice is so extreme, it appears that the human world is going to perish due to its own madness. (MAD Money As Debt backed by MAD Mutual Assured Destruction.) Any ability to develop better ecological economics, within a system based on making "money" out of nothing, appears practically impossible, especially since, by the time enough people recognize that, it will be too late. As many others have observed, we are decades, at least, too late, to start adapting to live differently, so that enforced frauds do not continue to drive us to live in criminally insane ways. The world is so far, far out of balance that apparently only the human world perishing is the way that will be balanced. Human society is so totally dominated by systems of lies backed by violence, because those were so successful within that human world, that it is almost impossible to estimate the degree to which that has driven the destruction of the natural world to be irreparable.

I have spent several decades attempting to DO something about that social insanity, only to discover that the more I learned, the worse it got, because the people who are the best at being dishonest, and backing that up with violence, continue to dominate society more and more, and so, things constantly get more insane everyday, while there appear no practical ways to prevent that from happening, automatically getting worse, faster ... I get by with irrational hopes for finite miracles, and transcendental hope for the ways that the conservation of energy may continue to drive evolutionary ecologies, despite that the human world is based on the maximum possible deceits and frauds, wherein people are able to continue to behave like monkeys and apes, despite having the industrial revolutions deliver to them powers which are trillions of times greater.

Furthermore, since the continued survival of civilization is looking like that would deliver powers and capabilities which would become quadrillions of times greater, but those would end up still primarily being employed by some people to control other people with lies backed by violence, while those social systems would still be deliberately ignoring everything else outside of continuing to be able to do that, the human world has developed such extreme injustice that it is not hard to comprehend how the human world perishing might be the only way that justice could be served.

Human beings are driving the sixth great extinction of other life forms, in ways which display no compassion, and so, are headed towards causing their own extinction. However, since the human world continues to be almost totally dominated by systems of legalized lies, backed by legalized violence, we collectively continue to prepare to commit suicide. Debt slavery has "successfully" driven numbers which have become debt insanities, which are set to provoke human death insanities. However, the same systems wherein "money" is made out of nothing to "pay" for everything (the borrowed Dollars ... EVERYTHING bubbles) are much more psychotically out of touch with the natural world, than those merely driving runaway social polarization.

As the ancient anonymous saying goes: "Whom the gods would destroy, they first drive mad." The human species is so totally dominated by systems of lies backed by violence, that we have collectively become criminally insane. Since there appears nothing within the human world that can stop that criminal insanity from continuing to get worse, faster, therefore, the resulting extreme degree of injustice, on a globalized scale, causing more and more other species to go extinct, faster and faster, appears to indicate that "justice" in that context would be the human species finally causing its own extinction.

After several decades of attempting to prevent that tragedy from unfolding, I have been gradually forced to face the facts that there are no practically possible ways to do that. The human world continues to be controlled by systems of lies, backed by violence, despite those enforced frauds causing us to behave in more criminally insane ways! The only way that the "justice" of evolutionary ecologies appears to be able to influence systems of electronic monkey money, backed by apes with atomic bombs, is for them to finally destroy themselves.

The most fundamental principles of physics are all pretty well deliberately ignored, or understood backwards, within the civilization that now dominates the world, through systems of organized lies, operating robberies, or ENFORCED FRAUDS, which have become too criminally insane to recognize how extremely far out of balance they are becoming, since they deliberately ignore those basic laws of nature, which are the reasons how and why things DO balance. Since we ARE being driven that far out of balance, indeed, the "final solutions" may be that drastic!

“Let there be justice, though the world perish," is a saying that currently seems to indicate that human world will perish!

hootowl's picture

You seem to be obsessed with the idea that human ideas and conventions are the answer to the existential devolution that humans have wrought.  That is like believing that an automobile can repair itself when it breaks down, or that the federal courts will correct a congress that has run amok or invalidate a deceiving, putative president when he/she tries to bring economic ruin and social devolution to our nation.  The federal courts are just as corrupt as the other three branches of government (I include the faux-Hebrew/Babylonian/Khazarian/fiat debt-money construct known as The FED as the fourth branch of this lawless government.)


We need to look to a governing source of authority far above the fickle, greedy, selfish, whimsy of all humankind to lift us from the devolutionary economic and societal vortex into which we have entangled ourselves.

Bob's picture

I take his reference to "ecological" ruin, while citing the ongoing 6th extinction even leading to the extinction of our species, to refer fundamentally to a collapse of the Planet's climate to a state that will not support human life--if any at all. 

Whether you accept the underlying position that climate change is "real" or reject it as socialist propaganda, one thing is undeniable:  Those who rule are the rich who own and control virtually all resources and certainly all systems of energy production.  We needn't argue about whether climate destruction is real or not to acknowledge that--if clearly manifested--it wouldn't matter as it unfolded, ever more dramatically over time, because the people whose wealth is derived from it, either directly or indirectly, will never voluntarily accept meaningful conservation, whether the lives of the majority of humanity depended upon it or not.

This is a system in which psychopaths have risen to the top and their only "value" wrt their brethren is exploitation and devaluation.  They would use their captured--sorry, owned--mass media to pump out whatever propagenda it took to allow the MAD machine to roll on the basis of manufactured consent and illusory legitimacy in the minds of enough people to defend that system to the end (until, at least, it's their own end.)  Look at the manufactured "debate" about climate change now, perfectly analogous to the "debate" about whether the US is guilty of torture and other war crimes. 

The rich will be happy to arrange for their governments to pay half of the working class to kill the other half for starters.  Even those who, bullshit aside, privately expect full eventual climate collapse are only concerned with making their insulated "survivor" colonies as mack daddy as possible. 

Sorry, Radical Marijuana, I have to agree with you, at the very least the vast majority of our species is under a death sentence.  Those who carry on the "torch of humanity" will be the psychopaths who brought about the deaths of the rest. 

Global Observer's picture

Justice is not going to be served merely with the collapse/perishing of the "civlisation" that runs ramapnt all over the world today. It will be served when it fails spectacularly, so that the remaining learn from the failure.

hootowl's picture

Unfortunately if history serves us at all it is to acknowledge that humans do not learn anything from history,.....especially when history is inspired by the Deceiver, and writ by the master charlatans who control the publication thereof.

Radical Marijuana's picture

You may well be right, Global Observer, (although I find the use of the world "learn" in that context to be a euphemism!)

kchrisc's picture

Oil crash only a canary if one pictures the western Zionists shooting the canary with a shotgun.

An Ameircan, not US subject.

jonytk's picture

someone is paying their $ debts with freshly borrowed euros, as they anticipipate $ rates to rise. ?

Consuelo's picture

"Now if I tell you that you suffer from delusions
You pay your analyst to reach the same conclusions
You live your life like a canary in a coalmine
You get so dizzy even walking in a straight line"


Torgo's picture

Excellent Police reference, thanks for taking me way back! De doo doo doo, de da da da to you.

AdvancingTime's picture

Bubbles are an interesting self reinforcing phenomena that feeds on itself and greed. The problem is how to recognize them as they form. The value of "something" is not an issue to take lightly.

Value is not a constant and can be derived from several factors such as how liquid a market is, supply and demand or utility value, things can spoil or become obsolete making where you invest very important. Value is not as constant as many people think or always destined to rise. I have discovered that when you start buying things at ten cents on the dollar your money begins to go a long way. This is a lesson many people may soon learn, or maybe not. The article below delves into how values constantly shift.


hootowl's picture

Assigning validity and import to the intricacies of the Machiavellian market manipulations of the faux-Hebrew/Babylonian/Khazarian/fractional reserve/debt-money creators is like focusing on the physiological intricacies of a bowel movement and not taking note of the product the bowel movement produces.

The charlatans entangle us in invalid, useless, pointless linguistic and mathematical mazes and trickery.  By the time we come to understand the nature of this confiscatory scheme, we are up to our necks in it.

Unless, of course, you are one of the Chosenites, who seem to be born pre-disposed to farming and fleecing the goyim, and who learn all about the various financial schemes at their father's knee.


Starve The Beast!!

JRobby's picture

"Starve The Beast!!"

Indeed Sir! +10,000

Grow your own, store up only what you will need, fix up what you got and be grateful for it.

Keep yourself and your loved ones safe.

God bless.

gadflew's picture

Blah blah blah Black Swandenberg and so on and so forth

Chat_noir's picture

We should ask the SEC to investigate Phoenix. To have survived being bearish from 666, they MUST have swindled their custies account.

Graham Summers is just the bearish version of Ponzi

jeff montanye's picture

stopped clock meet correct time of day.

badger10's picture

A strong dollar and deflation are not indicators for a bull market!

stocktivity's picture

It's all Bullshit!!!

bozoklown's picture

these guys are my new favorite contrary indicator