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Could An Energy Bust Trigger QE4, Peter Schiff Asks

Tyler Durden's picture




 

Submitted by Peter Schiff via Euro Pacific Capital,

In a normal economic times falling energy costs would be considered unadulterated good news. The facts are simple. No one buys a barrel of oil to display above the mantle. No one derives happiness from a lump of coal. Energy is simply a means to do or get the things that we want. We use it to stay warm, to move from Point A to Point B, to transport our goods, to cook our food, and to power our homes, factories, theaters, offices, and stadiums. If we could do all these things without energy, we would happily never drill a well or build a windmill. The lower the cost of energy, the cheaper and more abundant all the things we want become.
 
This is not economics, it is basic common sense. But these are not normal economic times, and the mathematics, at least for the United States, have become more complicated.
 
Most economists agree that the bright spot for the U.S. over the past few years has been the surge in energy production, which some have even called the "American Energy Revolution". The stunning improvements in drilling and recovery technologies has led to a dramatic 45% increase in U.S. energy production since 2007, according to the International Energy Agency (IEA). And while some suggest that the change was motivated by our lingering frustration over foreign energy dependence, it really comes down to dollars and cents. The dramatic increase in the price of oil over the last seven or eight years, completely changed the investment dynamics of the domestic industry and made profitable many types of formerly unappealing drilling sites, thereby increasing job creation in the industry. What's more, the jobs created by the boom were generally high paying and full time, thereby bucking the broader employment trend of low paying part time work.   
 
The big question that most investors and drillers should have been asking, but never really did, was why oil rocketed up from $20 a barrel in 2001 to more than $150 barrel in 2007, before stabilizing at around $100 a barrel for much of the past five years. Was oil five times more needed in 2012 than it was in 2002? See my commentary last week on this subject.
 
Despite the analysts' recent discovery of a largely mythical supply/demand imbalance, the numbers do not explain the rapid and dramatic decrease in price. Yes, supply is up, but so is demand. And these trends have been ongoing for quite some time, so why the sudden sell off now? Instead, I believe that oil prices over the last decade has been driven by the same monetary dynamics that pushed up the prices of other commodities, like gold, or of financial assets, such as stocks, bonds, and real estate. I believe that oil headed higher because the Fed was printing money, and everyone thought that the Fed would keep printing. But now we have reached a point where the majority of analysts believe that the era of easy money is coming to an end. And while I do not believe that we are about to turn that monetary page, my view is decidedly in the minority. Could it be a coincidence that oil started falling when the mass of analysts came to believe the Fed would finally tighten? 
 
If I am wrong and the Fed actually begins a sustained increase in rates starting in 2015, oil prices may very well stay low for a long time. But apart from the fact that our broad economy can't tolerate higher interest rates, an extended drop in oil prices may create conditions that further force the Fed's hand to reverse course.
 
If prices stay low for very long, many of the domestic drilling projects that have been undertaken over the past few years could become unprofitable, and plans for further investment into the sector would be shelved. Evidence suggests that this is already happening. Reuters recently reported a drop of almost 40 percent in new well permits issued across the United States in November (this was before the major oil price drops seen in December).
 
This huge negative impact on the primary growth driver of U.S. economy may be enough in the short-run to overwhelm the other long-term benefits that cheap energy offers. If prices stabilize at current levels, then the era of triple digit oil may, in retrospect, be looked back on as just another imploded bubble. And like the other burst bubbles in tech stocks and real estate, its demise will make a major impact on the broader economy. But there is a crucial difference this time around.
 
When the dot-com companies flamed out in 2000, most of the losses were seen in the equity markets. Dot-coms either raised money either through venture capitalists or the stock markets. They rarely issued debt. The trillions of dollars of notional shareholder value wiped out by the Nasdaq crash had been largely paper wealth that had been created by the sharp run up in the prior two years. As a result, the damage was primarily contained to the investor class and to the relatively few number of highly paid tech workers and entrepreneurs that rode the boom up and then rode it down. In any event, the Fed was able to cushion the blow of the ensuing recession by dropping rates from 6% all the way down to 1%.
 
The real estate and credit crash of 2008 was a much different animal. Despite the benefits that lower home prices may have brought to many would be home-buyers who had been priced out of an overheated market, the losses generated by defaulting mortgages quickly pushed lending institutions into insolvency and threatened a complete collapse of the U.S. financial system. Unlike the dot-com crash, the bursting of the housing bubble posed an existential threat to the country. The construction workers, mortgage brokers, landscapers, real estate agents, and loan officers who were displaced by the bust represented a significant portion of the economy. To prevent the bubble from fully deflating, the Fed bought hundreds of billions of toxic sub-prime debt (that no one else would touch) and dropped interest rates from 5% all the way down to zero. 
 
I believe, a bust in the oil industry will likely play out somewhere between these two prior episodes. As was the case with falling house prices, while low prices offer benefits to consumers, the credit and job losses related to unwinding the malinvestments, made by those who believed prices would not drop, can impose severe short-term problems that the Fed will be unwilling to tolerate. Of course, long-term it's always good when a bubble pops, it's just that politicians and bankers are never prepare to endure the short-term pain necessary for long-term gain when they do.
 
A good portion of the money used to finance the fracking boom was raised by relatively small drillers in the debt market from banks, institutional investors, pension funds, hedge funds, and high net worth wildcatters. Public involvement has been involved primarily in the high yield debt market where energy companies have issued hundreds of billions of "junk" bonds in recent years. In 2010, energy and materials companies made up just 18% of the US high-yield index but today they account for 29%.
 
But many of the financing projections that these bond investors assumed will fall apart if oil stays below $60. Although the junk bond market is nowhere near as large as the home mortgage market, widespread defaults from energy-related debt could cause a crisis, which could make wider ripples throughout the financial edifice. Bernstein estimates that sustained $50 oil could result in investment in the sector to fall by as much as 75%. According to the Department of Labor, oil and gas workers as a percentage of the total labor force has doubled over the past decade, and have accounted for a very large portion of the high-paying jobs created during the current "recovery." As a result a bust in the oil patch will result in a very big hit to American labor, causing ripple effects throughout the economy.
 
But we are far less able to deal with the fallout now of another burst bubble than we were in 1999 or 2007 (the years before the two prior crashes). I believe it will take much less of a shock to tip us into recession. But I don't even believe that a burst energy bubble is even our biggest worry. Much greater and more fragile bubbles likely exist in the stock, bond and real estate markets, which have also been inflated by the easiest monetary policy in history. More importantly at present the Fed lacks the firepower to fight a new recession that a bursting of any of these bubbles could create. Since interest rates are already at zero, it has no ability to aggressively cut rates now in the face of a weakening economy. All it can do is go back to the well of quantitative easing, which is exactly what I think they will do.  
 
Despite the widely held belief that 2015 will be the year in which a patient Fed finally begins to normalize rate policy, I believe the Fed has no possibility of withdrawing the stimulus to which it has addicted us. QE4 was always much more probable than anyone in government or on Wall Street cares to admit. A recession and a financial panic caused by sub $60 oil will significantly quicken the timetable by which the Fed cranks up the presses. When it does, oil could once again increase in price, along with all the other things we need on a daily basis. That should finally dispel any remaining illusions that the Fed could successfully land the metaphorical plane. More QE may minimize the damage in the short-term, but I believe it will keep us trapped in our current cocoon of endless stimulus, where we will slowly suffocate to death.
 

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Tue, 12/23/2014 - 20:44 | 5586759 Soul Glow
Soul Glow's picture

Yes!  There are banks long oil and they just got crushed!

Margin call bitchez!

Tue, 12/23/2014 - 20:49 | 5586774 spinone
spinone's picture

Don't worry about the banks.  They'll be just fine.  Heads they win, tails you lose.

Tue, 12/23/2014 - 20:58 | 5586789 Soul Glow
Soul Glow's picture

A bank that was long oil will be blamed as the next Bear Stears.  Systems will capitulate.  Then Russia and China will dump their USTs and dollars, ensuing chaos will be blamed gold shorts as it triples over night.  Margin calls, margin calls, margin calls.

Tue, 12/23/2014 - 21:23 | 5586848 highandwired
highandwired's picture

Not enough.  What I'm looking forward to is $20 oil.

Tue, 12/23/2014 - 23:08 | 5587072 lasvegaspersona
lasvegaspersona's picture

Soul Glow

I'm not sure what you are saying but when banks need money they sell gold (they don't have).

Tue, 12/23/2014 - 23:16 | 5587094 Stained Class
Stained Class's picture

Banks are short interest rates. End of discussion.

Wed, 12/24/2014 - 13:45 | 5588835 Panafrican Funk...
Panafrican Funktron Robot's picture

"Don't worry about the banks.  They'll be just fine."

You are super duper right about this, and Schiff is right about the mechanism (QE).  Ditto for the student loan bubble.  The TBTF banks will be propped up at all costs by the Fed as long as they continue to have the authority to do so.

Tue, 12/23/2014 - 20:48 | 5586772 TeamDepends
TeamDepends's picture

She's dead, Jim.

Tue, 12/23/2014 - 21:10 | 5586819 knukles
knukles's picture

Ohurah, sweetie pie stinky pants, send a message for me pronto to Starfleet.  "Urgent.  If you'd send us some tees colored other than red, all those guys would quit dying.  Who loves ya', Kirkarama, baby, Out!" 

 

A precursor to QE4Ecah?  You gotta be kidding me asking!  Hell yes!

And lookie here.  The monetary base is collapsing!  They're draining reserves from the system, big time!

http://research.stlouisfed.org/publications/usfd/page3.pdf

Tue, 12/23/2014 - 21:48 | 5586905 Carpenter1
Carpenter1's picture

As badly as Schiffs PM funds need it, there still won't be QE4. CB's have begun the controlled demolision phase. Oil is at $57 for a reason, not by accident. The FED isn't desperate and confused, they've got complete control. 

 

And now it's time for the crash. No Peter, they won't be able to land the plane safely, but it'll look like they're trying. 

 

Notice there's no talk of oil's  price slide by anyone that matters. There's also no talk of the trouble in HY either, just like there was no talk of subprime products in 2008. They'll talk about it alright, after the damage is done and it's time for their big plan.

Tue, 12/23/2014 - 21:51 | 5586798 alexmark2013
alexmark2013's picture
ISIS sets the Price: $20 a barrel for oil. Collapse of infidel oil industry underway. http://investmentwatchblog.com/isis-sets-the-price-20-a-barrel-for-oil-collapse-of-infidel-oil-industry-underway/
Tue, 12/23/2014 - 21:04 | 5586815 razorthin
razorthin's picture

I assume that a key part of your premise is that the ES will be allowed to fall further than 10% without immediately snapping back with Fed speak only.  Not likely.

Tue, 12/23/2014 - 21:11 | 5586820 ebworthen
ebworthen's picture

OMFG - on the news tonight nothing but "GDP up 5%, DOW over 18,000, economy stronger than thought!".  LIES!

Schiff is right; the FED will prop anything and everything, openly or in secret, to keep the ponzi house of cards erect.

Get this straight you numb-nuts journalists - THERE IS NO FUCKING RECOVERY!!!

Wed, 12/24/2014 - 04:28 | 5587535 noben
noben's picture

Of course there's a Recovery.
That's why Demand for Oil is down. LMAO.

Tue, 12/23/2014 - 21:13 | 5586831 disabledvet
disabledvet's picture

I simply disagree with the price function as it relates to supply and demand. "Produce enough of something and it has enormous price...even if it's worthless" basically. So while I can see oil at a few bucks a barrel or the natty at well under a buck a bcf...produce enough of it and this exceedingly low price is of truly stupendous value.

Don't even get me started on Chevies.

This is the essence of "mass production" though. "Build enough of one thing and it becomes a quality."

Tue, 12/23/2014 - 21:15 | 5586836 spinone
spinone's picture

Lets be careful with terms.  There isn't any "Economic Stimulus". There is free money for banks.

Tue, 12/23/2014 - 22:35 | 5586992 Creepy A. Cracker
Creepy A. Cracker's picture

The money eventually has to come from someone.

Tue, 12/23/2014 - 23:24 | 5587063 ThirteenthFloor
ThirteenthFloor's picture

Spinone -> Agree. QE 4 is Japan retirement accounts being forced into treasuries. This ain't about America, it's the Cabal vs. BRICS. Anyone including Peter Schiff cannot see this is delusional. US economy went full bust in '08. It's all being charged on credit and free fiat.

Tue, 12/23/2014 - 23:39 | 5587148 ThirteenthFloor
ThirteenthFloor's picture

Spinone. We have had 6 years of QE (free banker bank roll) and the TBTF banks are still not profitable.

Is that not an indicator, that this system does not work or what.

Wed, 12/24/2014 - 00:50 | 5587302 Clowns on Acid
Clowns on Acid's picture

Oh.. ya mean they are not the same thing?

Wed, 12/24/2014 - 04:29 | 5587540 noben
noben's picture

You call it Money, I call it Debt Promises.

Tue, 12/23/2014 - 21:15 | 5586837 mickeyman
mickeyman's picture

For the last several weeks, the trend has been for gold and USDX to both rise. This suggests to me deflation--money is increasing in value.

But this trend is a continuation of the trend that ran from late 2009 until mid-2010, when gold rose from $1000 to $1200 while the USDX went from 76 to 88. That signalled deflation (depression) too. Then the QEs started, resulting in a huge blowout in gold prices which only recently ended. 

http://worldcomplex.blogspot.ca/2014/12/the-impossible-trend-week-6.html

The renewal of the trend is the resumption of the world falling into depression. Will the CBs try something to forestall it? Count on it. But maybe they'll come up with something "new".

 

Tue, 12/23/2014 - 21:35 | 5586883 Carpenter1
Carpenter1's picture

Good grief, don't we know by now the CB's are the cause of all this?! Holy %£€$@!!

There are no accidents or unforseen events. Oil is at $57 cause it's supposed to be, the DOW is at 18,000 cause it's supposed to be. The bust will happen right on time.

Tue, 12/23/2014 - 21:16 | 5586839 Spungo
Spungo's picture

Nothing is fucked?? The god damn plane has crashed into the mountain!

Tue, 12/23/2014 - 21:24 | 5586852 lordbyroniv
lordbyroniv's picture

CRACK UP BOOM..............BITCHEZ !11111111111

Tue, 12/23/2014 - 23:00 | 5587051 Amerikan Patriot
Amerikan Patriot's picture

"I'm a 'Merican!"

"Keep Stacking, Bitchez!"

Good grief....

Tue, 12/23/2014 - 23:06 | 5587066 TheFourthStooge-ing
TheFourthStooge-ing's picture

Made me laugh. This Kiev Junta troll is a merkin.

Keep stacking, ukie, but make sure the yellow paint is dry first.

Tue, 12/23/2014 - 21:31 | 5586870 Carpenter1
Carpenter1's picture

Planned bust, like all the rest. Forget QE4, FED is now your enemy.

Tue, 12/23/2014 - 21:39 | 5586890 seabiscuit
seabiscuit's picture

When was the Fed my friend?

Tue, 12/23/2014 - 21:45 | 5586903 starman
starman's picture

OPEC can go on with $20/ barrel for iternity.  

Not so much the shale industry. 

Tue, 12/23/2014 - 23:01 | 5587055 Amerikan Patriot
Amerikan Patriot's picture

Shale's implosion hurts a few million people.

Oil's implosion helps 300 million people.

See the difference?

Tue, 12/23/2014 - 23:09 | 5587075 TheFourthStooge-ing
TheFourthStooge-ing's picture

Kind of stupid. Typical for this cheap propagandist.

The incapability of US citizens to tackle predictable issues that are to mature in the future does not mean the issues do not exist.

Tue, 12/23/2014 - 21:58 | 5586926 rickv404
rickv404's picture

Of course. The energy "bust" was a result of suspended QE. And QE infinity is the antidote - and further economic decline to go with it. Infaltion is a scourge, always, regardless whether one thinks four dollar a gallon gas is good for the oil business.

Tue, 12/23/2014 - 22:34 | 5586986 Creepy A. Cracker
Creepy A. Cracker's picture

QE4 and QE Infinity have already been triggered.  When they get set off is the question.

Tue, 12/23/2014 - 22:33 | 5586987 the not so migh...
the not so mighty maximiza's picture

there was never an end to QE, it will go on till it can't overtly and covertly.   Zero interest will go on forever also untill the one day it does not.   The problem with this fraud is that other forces are aware and will plan accordingly.  Since we know no other tricks we will be put down easily.   The market is just a national security tool now, the insiders will make money no one else will.    Works good for awhile untill there are more robbed poor people then goverment connected people.

Tue, 12/23/2014 - 22:39 | 5586999 yrbmegr
yrbmegr's picture

Peter Schiff is an idiot.  Interest rates are actually going to go up.  Soon.

Tue, 12/23/2014 - 22:41 | 5587003 the not so migh...
the not so mighty maximiza's picture

i call BS,  intetest rates go up 1% the US goverment is done

Wed, 12/24/2014 - 00:42 | 5587277 TeethVillage88s
TeethVillage88s's picture

How can Rates go up... They pay $400 Billion at ZIRP/LIRP.

They don't intend to raise rates... Higher rates benefit private banks that we think are benefiting, but higher rates are politically a "hot potato".

- But the PR or Propaganda is very important with $18 Trillion in Debt
- That is why they push the faces of Middle Class Elderly & Retired in the Dog Doo... with ZIRP/LIRP

The Gaming of the System is so bad, how can Federal Government pass a new Budget or Expand Federal Government or Create new Agencies...?? If they increase Interest Rates??

- There are a lot of Third Rails... in government
- Budget will become one at some point
- SO it is war against Fixed Income by Congress & Banking Industry

Tue, 12/23/2014 - 23:51 | 5587204 yepyep
yepyep's picture

haha, paul volker style right? lol

Tue, 12/23/2014 - 22:41 | 5587000 Amerikan Patriot
Amerikan Patriot's picture

[What is Zero Hedge's favorite energy dictator trying to do here?  Hmmm...I bet he's limiting what ordinary Russians can see online because he wants what's best for them.   Yeah, that's it!]

Facebook Page for Russia Rally Blocked as Putin Tightens Grip on Internet By Ilya Khrennikov and Henry Meyer   Dec 23, 2014 10:16 AM CT The blocking of a Facebook Inc. (FB) page promoting a Russian opposition rally highlights the challenges the social network faces as President Vladimir Putin cracks down on the Internet amid a looming economic downturn.

Facebook agreed to block the page at the request of communications regulator Roskomnadzor, Vadim Ampelonskiy, a spokesman for the Russian agency, said today. The watchdog is seeking to prevent access to further Facebook pages that call for mass protests, as well as similar posts on other social networks, including VKontakte and Twitter, he said. A Facebook representative declined to comment.

The site promoted a Jan. 15 rally backing opposition leader Alexey Navalny, who is facing a prison term of as long as 10 years. The moves come as Russia, on the brink of its first recession since 2009, has been tightening controls amid an international standoff over the Ukraine conflict.

“Navalny is dangerous for Putin as he’s a popular figure, and now that the economy is in crisis, people who felt quite secure a few months ago today are desperate,” Alexei Makarkin, deputy head of the Moscow-based Center for Political Technologies, said by phone.

Navalny, a lawyer and anti-corruption activist who in 2011 and 2012 helped lead the biggest street protests of Putin’s 15-year-rule, has been under house arrest since February and is barred from using the Internet or phone.

Russian Demands

Putin signed laws this year that tighten his grip over information flows on the Internet, extending the government’s influence beyond more traditional media such as television and newspapers.

Facebook is trying to balance its push for more users in Russia with regulatory demands. The Menlo Park, California-based company had 10.5 million users in Russia as of July, trailing Moscow-based Mail.ru Group Ltd. (MAIL)’s social networks VKontakte and Odnoklassniki, which had 59 million and 53 million users respectively, according to ComScore Inc.

Russian activists criticized Facebook for its decision to comply with the Russian demand at the weekend.

“We were very surprised at the speed with which Facebook blocked the page at the request of Roskomnadzor without even consulting with the organizers of the event,” Navalny’s spokeswoman, Kira Yarmysh, said by phone today.

‘No Guts’

Pavel Durov, the founder of VKontakte, a Russian counterpart to Facebook, said the U.S. social network has “no guts or principles” in a Twitter posting. He left Russia this year after ceding control of the company.

Russian law gives the authorities powers to seek to block access to web pages calling for mass protest and extremism without a court decision, Roskomnadzor’s Ampelonskiy said.

VKontakte has been receiving such requests, its spokesman Georgy Lobushkin said by phone from St. Petersburg, declining to elaborate. Twitter Inc. didn’t immediately respond to an e-mailed request for comment.

Although Facebook initially complied with the Russian demand, it, along with Twitter, is now refusing to implement such requests, said Web pioneer Anton Nossik, who founded popular Russian news sites.

“They’ve brought things to a standoff,” he said by phone. “Either the Russian government proceeds or climbs down. The only option left is to shut down Facebook and Twitter entirely in Russia.”

Navalny, a 38-year-old anti-corruption lawyer turned politician, and his brother are scheduled to get a court verdict on Jan. 15 for alleged fraud. Navalny, who says the trial is staged, has used social networks to invite his supporters to a “popular gathering” on that day.

If Navalny, who was handed a suspended sentence in another embezzlement case last year, is sent to prison, this will provoke “serious protests,” said Makarkin, the political analyst. “Navalny appeals not only to the urban middle-class but to a wider section of society.”

Navalny, who finished second with 27 percent in Moscow mayoral elections in September 2013 and almost forced a run-off against Putin ally Sergei Sobyanin, said in an interview in October that he’s confident he can bring about the downfall of Putin’s “authoritarian” regime.

Tue, 12/23/2014 - 22:47 | 5587018 the not so migh...
the not so mighty maximiza's picture

Facebook is a CIA data mining operation; can't we get anouther source?

Tue, 12/23/2014 - 22:58 | 5587044 Amerikan Patriot
Amerikan Patriot's picture

Read the article, Bob.  Russia wanted it blocked not for the 'reason' you suggested, but because it was a call to demonstrate against Putin.

Can't have that!  All dissent to Putin's dictatorship must be squelched at the source.

Tue, 12/23/2014 - 23:19 | 5587102 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Read the article, Bob.

...and then try to explain to this guy. He copies and pastes a lot of crap but he doesn't understand the big words.

All dissent to Putin's dictatorship must be squelched at the source.

The source of such "dissent" is Vichy DC so yes, such squelchment would be an improvement.

Tue, 12/23/2014 - 23:28 | 5587139 lasvegaspersona
lasvegaspersona's picture

Puty will definitely lose some of the goodwill he gained when he was the victim of American actions in the Ukraine. I wonder if his popularity is really so tenuous that he must go all dictatorial.

It must be shit to live in a country with internet controls. It is bad enough here in the USSA where we have to put up with fellow citizens who won't find reliable non-MSM sources for info.

Wed, 12/24/2014 - 16:19 | 5589366 TheReplacement
TheReplacement's picture

Hey "Bob",

Facebook is not Russian.  If a foreign Facebook were calling for mass demonstrations in a country why is it so bad that the country might block said site? 

Everyone knows Facebook is western intelligence and propaganda tool, except its users.

Right "Bob"?

Tue, 12/23/2014 - 22:49 | 5587023 Amerikan Patriot
Amerikan Patriot's picture

How do mindless Zero Hedgers defend Putin's Russia, where there is no rule of law (merely 'Rule of Putin'), where corruption runs rampant (more on that in a separate post, below) and where Putin either directly controls the media (see, e.g., Russia Today, where it's impossible to find a truly anti-Putin or anti-Russia article on the site - while even the likes of the NYT and CNN often feature distinctly anti-Obama fare)?

Answer:  they pretend it doesn't exist!  "La la la la la la la la la la la...."

 

Tue, 12/23/2014 - 23:58 | 5587218 ejmoosa
ejmoosa's picture

And exactly what rule of law do you think we have here? 

Wed, 12/24/2014 - 01:39 | 5587375 Stormtrooper
Stormtrooper's picture

I think that most ZeroHedgers understand that Russia is run by the Russian Mafia under Putins control.

However, how can anyone defend Washington, D.C. where the rule of law has not existed in generations and where the Constitution is considered a worthless document to be trampled on at will.  Case in point, a man living in the White House who is an Indonesian citizen(not naturalized American citizen) and who claims to hold the highest office of the land.  Most Americans who have made a cursory effort to study this issue recognize that fact.  Congress has failed in their duty to vet his citizenship and take appropriate action.  Eight years of an illegal President signing laws that no patriotic American should accept as legal.  We are truly fucked if Americans do not wake up and realize that nobody but they can take back their own nation, hopefully thru peaceful protest but most likely thru bloody revolution.

"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same."

Ronald Reagan

A loyal citizen of the sovereign state of Ohio, and also an American

Wed, 12/24/2014 - 09:57 | 5587951 7againstThebes
7againstThebes's picture

American Patriot, let me see if I have this right.  Because Russian political practice falls short of the ideal, it is okay for the Government Entity in Washington to have ginned up a coup d'etat in Ukraine. 

And now this year, because Putin suppresses dissent, it is okay for the Government Entity in Washingto to send  "lethal aid"  to Kiev, to be used to kill Russian speakers living in the eastern part of the country.

Sorry, American Patriot, this is very low level stuff you are putting out.

(In fact, in the interest of improving the quality of discourse on ZH, let me pass along a comment to the bosses of American Patriot in Tel Aviv.  Hey, guys, I don't think that you all are getting your money's worth.  You may think that Am. Patriot is doing an okay job, but let me tell you a little secret. To us he sounds icky.)   

 

 

 

Wed, 12/24/2014 - 16:22 | 5589376 TheReplacement
TheReplacement's picture

If by "icky" you mean drastically under qualified and extremely overpaid, yeah.

Wed, 12/24/2014 - 16:20 | 5589373 TheReplacement
TheReplacement's picture

Putin is over there.

Putin is not a threat to me here.

The bankers are here.

The bankers are a threat to me here.

If Putin is the enemy of the bankers then he is the enemy of my enemy so I say let him run a bit and see if he can weaken my enemies here.  Once I do not have to worry about my enemies here I can afford to worry about my enemy there.

Sort of how I think of you too you banker tool.

Tue, 12/23/2014 - 22:51 | 5587025 Amerikan Patriot
Amerikan Patriot's picture

Each year, Transparency International surveys and rates the relative levels of perceived government corruption among 177 countries.  The Index then scores them on a scale from 0 (highly corrupt) to 100 (very clean).

The #1 position (i.e., least corrupt country) was shared by Denmark and New Zealand (score: 91), while Somalia, North Korea and Afghanistan shared last place (each scored 8).

The United States scored 73.

Russia’s government corruption score?  28. 

Tue, 12/23/2014 - 23:08 | 5587071 the not so migh...
the not so mighty maximiza's picture

is he a good guy?

 

The founder of Transparency International's Corruption Perception IndexJohann Lambsdorff has in fact found that investors prefer "grand" corruption compared to petty corruption for the simple reason that under the former they feel part of an elite group that is able to influence laws and regulations.

 

http://www.zoominfo.com/s/#!search/profile/person?personId=8695756&targetid=profile

Wed, 12/24/2014 - 00:30 | 5587268 TeethVillage88s
TeethVillage88s's picture

US Corruption Score is always Tainted. Taint this Taint That.

WTF?

Can anyone believe the Corruption score of the world Empire, the worlds bully, the worlds Corrupter?

Is there no common Sense remaining?

Tue, 12/23/2014 - 22:53 | 5587032 Amerikan Patriot
Amerikan Patriot's picture
Russia on Verge of Junk as S&P Puts Rating on Negative Watch By Olga Tanas, Anna Andrianova and Ye Xie Dec 23, 2014 1:08 PM CT

Dec. 23 (Bloomberg) -- S&P is reviewing Russia’s monetary flexibility and the effect of the weakening economy on the financial system. Bloomnerg’s Mia Saini reports on “Money Clip.” (Source: Bloomberg)

Russia may lose its investment-grade credit rating for the first time in a decade after Standard & Poor’s said it’s considering a cut amid the country’s worst economic crisis since the 1998 debt default.

There’s at least a 50 percent chance that Russia will be lowered to junk within 90 days, S&P said in a statement as it put the country on negative credit watch. Moody’s Investors Service and Fitch Ratings rank Russia one step higher than S&P, which lowered the rating one level in April to BBB-.

The move “stems from what we view as a rapid deterioration of Russia’s monetary flexibility and the impact of the weakening economy on its financial system,” S&P said. Oil prices at a five-year low and sanctions over the conflict in Ukraine have pushed the world’s biggest energy exporter to the verge of recession. The central bank in Moscow has spent one-fifth of its international reserves and increased benchmark interest rates six times since March, when Russia came under international sanctions after it invaded Crimea.

While the ruble strengthened for a third day as the government told state-run exporters to sell foreign currency, it’s still lost 40 percent against the dollar this year, the second-worst performer among more than 170 currencies tracked by Bloomberg after Ukraine’s hryvnia.

The ruble remained higher following S&P’s announcement, trading at 54.7005 per dollar as of 1:34 p.m. in New York, up 2 percent from yesterday. Dollar-denominated bonds fell, sending yields on notes due 2030 up 0.11 percentage point to 6.24 percent. Yields touched a five-year high of 7.64 percent Dec. 16.

Banking System

The costs to insure Russia’s debt against non-payment for five years more than doubled this year to 4.21 percentage points, according to data compiled by Bloomberg. That compares with 4 percentage points for Lebanon, which is rated B- at S&P, or six levels below Russia.

The S&P warning comes as Russia tries to avert a banking crisis. The central bank put National Bank Trust, the country’s 15th-biggest lender based on retail deposits, under its control yesterday, the first bailout since the currency crisis started.

Lawmakers rushed legislation through the lower house of parliament today allowing the Deposit Insurance Agency to buy stakes in banks before they face bankruptcy proceedings to keep the system stable.

The penalties imposed by the U.S. and its allies have locked Russian corporate borrowers out of international debt markets and curbed investor appetite for the ruble, stocks and bonds.

Capital Outflows

The central bank raised the key rate to 17 percent from 10.5 percent in the early hours of Dec. 16, the biggest increase since 1998.

The economy may shrink as much as 4.7 percent next year, the most since 2009, if oil averages $60 a barrel under a “stress scenario,” according to the central bank. Net capital outflows may more than double this year to $134 billion.

Investors often disregard ratings companies’ credit grade and outlook changes. France’s 10-year yield, which was 3.08 percent when S&P removed its top rating in January 2012, tumbled to a record-low 1.339 percent on Aug. 15 this year.

Moody’s cut Russia’s credit score one level to its second-lowest investment grade in October, citing concern that the sanctions will hurt its economy. The continued erosion of Russia’s foreign-exchange reserves because of capital flight, low oil prices and borrowers’ lack of access to credit were also cited by Moody’s.

Tue, 12/23/2014 - 23:24 | 5587119 TheFourthStooge-ing
TheFourthStooge-ing's picture

Somehow this nugget of copied paste doesn't square with FT.

http://russia-insider.com/en/2014/12/22/2104

Wed, 12/24/2014 - 10:02 | 5587965 7againstThebes
7againstThebes's picture

So, what is your conclusion, Am.Patriot -- that it is okay to kill innocent people in the Dombass?

Tue, 12/23/2014 - 23:36 | 5587169 Ewtman
Tue, 12/23/2014 - 23:58 | 5587219 ejmoosa
ejmoosa's picture

Wrong. 

QE has a negative effect on the markets long term.

Tue, 12/23/2014 - 23:48 | 5587190 Amerikan Patriot
Amerikan Patriot's picture

Who's manning Vlad's suicide watch tonight?

Tue, 12/23/2014 - 23:56 | 5587208 juicy_bananas
juicy_bananas's picture

What will happen if there is an energy bust?  It will be extremely painful. . . for those not part of the cartel.

Tue, 12/23/2014 - 23:57 | 5587213 Amerikan Patriot
Amerikan Patriot's picture

"Yes, I'm a brain-dead Zero Hedger that's on Putin's side - yes, that guy who wants to ban or block any and all media sources and articles that cast Vlad or his policies in a bad light.  I guess I'm on his side because he hates America, and I'll forgive just about any slight as long as he doesn't waiver on that. 

No freedom of speech?  No problem!  No rule of law?  No problem!  Rampant corruption on par with third world countries?  No problem!  You can say anything and do anything as long as your enemy is my enemy - America."

Wed, 12/24/2014 - 00:16 | 5587258 Serious.Lee
Serious.Lee's picture

Time off between building settlements?  

Wed, 12/24/2014 - 00:05 | 5587230 zen0
zen0's picture

Serious question.  Given QE to infinity, what is or are the signs of impending collapse, where QE  has no effect whatsoever.

 

i.e., the point at which gravity overcomes thrust.

Wed, 12/24/2014 - 00:08 | 5587232 Duc888
Duc888's picture

 

 

 

energy bust?

 

Lotsa energy here...dec 23rd

https://www.youtube.com/watch?v=5iGhQx1eJjw#t=12

https://www.youtube.com/watch?v=KlLj9F4FNX4

 

 

Wed, 12/24/2014 - 00:13 | 5587247 TeethVillage88s
TeethVillage88s's picture

Anybody been posting this link?

- Personal consumption expenditures: Nondurable goods: Gasoline and other energy goods
2014:Q3: $405.0 Billions (down from $442 Billion)
Quarterly, Seasonally Adjusted Annual Rate, DGOERC1Q027SBEA, Updated: 2014-11-25

http://research.stlouisfed.org/fred2/series/DGOERC1Q027SBEA

Wed, 12/24/2014 - 02:22 | 5587422 robnume
robnume's picture

QE 4? OMG, NO! Make it stop, daddy, make it stop!

Wed, 12/24/2014 - 05:30 | 5587569 Rusty Trombone
Rusty Trombone's picture

It's the Joooooooose !!!!

Wed, 12/24/2014 - 05:31 | 5587570 Rusty Trombone
Rusty Trombone's picture

It's the Joooooooose !!!!

Wed, 12/24/2014 - 06:34 | 5587611 GFORCE
GFORCE's picture

This rate rise stuff is all BS. CBs everywhere are going negative on rates and all-in on QE. The flimsy economies and banks have no stomach for a rate rise and dollar rally. This is a show!!

Wed, 12/24/2014 - 10:33 | 5588067 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

If Schiff is right about QE4 (very possible), you know damn well that the financial media fuckfaces will point to the "great economy" for the reason behind DOW 20,000.

What I really want to know is how long .gov can keep cooking the book and producing garbage economic numbers to validate their actions. 

Audit the Fed..!!

Wed, 12/24/2014 - 11:43 | 5588343 gcjohns1971
gcjohns1971's picture

There is no upper limit to lies.

But there is an upper limit to credibility.

The Fed and .gov's power rely on their credibility.

Credibility is a group psychological factor.

I no of no formula that can predict group psychology inflection points.  If I did, I would keep quiet about it and use the info to game the psychology of investors in the markets for easy trading wins.

Wed, 12/24/2014 - 11:56 | 5588410 AynRandFan
AynRandFan's picture

Now that the Fed has performed the amazing feats of canceling the debt crisis and, with the help of a free-spending federal government, extinguished the symptoms of our recession under a mountain of new public debt, there's a lot of credibility to spare.

In Japan, people kept believing for over 20 years, and incredibily they still seem to believe.  I no longer believe in a credibility problem.

Wed, 12/24/2014 - 11:39 | 5588299 gcjohns1971
gcjohns1971's picture

So, Schiff's point of view is that oil industry loan defaults will be the first oil-related negative to impact the economy.

I note that Western European banks have bet big on Eastern Europe and Emerging Markets.  And I note that Eastern Europe and Emerging Markets are HEAVILY dependent on oil and other energy revenues. 

Therefore I think that Euro-bank losses are more likely to negatively affect the global financial system than are US oil company loan losses, which as Schiff righty notes are a small portion of the economy.

However, I might be wrong.

We both agree that the dips in the oil price are temporary.  And we both agree that the economy can no longer operate without free money, but that TPTB are unwilling to allow a major crash - since they will be the net losers in such a crash.  And, hence, interest rate hikes are likely to be short and illusory followed by a resumption of QE.

As I see it the difference between our positions is in how long it would take for US unconventional driller-loans to go bad.  The longer the term of the loan, the less likely they will go bad from TEMPORARY price decreases.

Anyone have any insight into loan terms and maturity dates?

Wed, 12/24/2014 - 11:51 | 5588389 AynRandFan
AynRandFan's picture

Logical, insightful, and predictive.  Among the economic pundits, Peter Schiff always seems to make the most sense to me.

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