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On The Energy Cliff's Early Warning Signal

Tyler Durden's picture





 

The XLE closed yesterday at 63 - only a buck above the June 1 lows. For the year, XLE is now down a whopping 8 bucks. And of course oil, which started the year at 103 and peaked at 110, has dropped to 78. Jefferies David Zervos offers some critical insight into the energy sector bloodbath in the last few months, which of course begs the question - what in the world is going on? Shouldn't all this accomodative policy by the Fed, ECB, SNB, BoE and BOJ be sending commodities to the moon? The BoJ has been implementing additional QE, the Swiss have been printing francs at a breakneck pace to hold the peg, the BoE just announced the ECTRF (Extended Collateral Term Repo Facility), and Ben just extended the twist for 6 more months. Of course the ECB, as always, has been behind the easy money curve - but all signals point to some action in July: an MRO cut, a depo cut and some relaxation of the collateral lending rules. Maybe we even get another LTRO. So back to the original question; if the worlds' central banks are so easy, why is energy collapsing? And how can gold be unchanged YTD?

[ZH - As an aside - Oil priced in ounces of gold has slipped back to an important level here]


The answer is straightforward - central banks are NOT being accomodative enough. These downward trends in the energy and commodity complex should be a warning sign to anyone with a "price stability" mandate. There is a hefty disinflation trend developing and given the amount of debt in the system - and the weakness of global aggregate demand - any signs of significant disinflation should be cause for grave concern. We cannot mix a lot of debt with a lot of deflation - that will be the end of us!! That is Irving Fisher 101!

And while it may not be "common wisdom" to assert that our global central banks are being too tight, the proof is in the prices. A large sustained drop in energy costs at this stage of the reflationary game is VERY unsettling. It is the surest sign that monetary policy is too tight!

That said, I suspect it will not take much for us to see further action. US headline inflation has a one handle and is falling fast. Europe and UK are most likely in recession. And Japan still has deflation. The central banks have "talked the talk" when it comes to accomodation, but they have not "walked the walk". However, when push comes to shove in this post 2008 world, they always come through.

So while this move in the energy complex is unwelcome news on the reflation front, it does have two important positive side effects. First, as alluded to above, it lowers the bar for more accomodation to support a reflationary recovery. And Second, it has positive supply side effects. Cheaper energy will give a boost to consumer and (non XLE) business sentiment. The supply side implications for this energy drop are very supportive for the growth side of the reflationary equation, particularly in the US. But the positives on the supply side will hardly outweigh the negatives on debt/deflation side given the size of the debts.

For now we should look at this energy cliff as an early warning sign for stress in the system. And as such we should expect the usual central bank backstopping to come out in force if this trend picks up material steam! Its the same old story, reflation or bust - and I'm still betting the central bankers deliver the former! Good luck trading!

 


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Fri, 06/22/2012 - 09:39 | Link to Comment GMadScientist
GMadScientist's picture

All the king's horses, bitchez.

Fri, 06/22/2012 - 11:33 | Link to Comment Matt
Matt's picture

It was the worst case of deflation the world had ever seen. A loaf of bread, which cost $10 on Monday, was $5 on Tuesday, and by Friday could be picked up fresh at the bakery for under $0.50.

By the end of the month, electricity was $0.01 / KwH. You could get a new car for $100, straight off the lot.

After three months, the gold bugs were desperate to swap their gold coins for $20 bills, which was now a good month's pay at a government job, if you could get one. People were cruising around in brand new Hummers, Escalades, and other massive vehicles with gas down to a penny a gallon. We truly thought, at that point, that the world was going to end.

Fri, 06/22/2012 - 11:52 | Link to Comment otto skorzeny
otto skorzeny's picture

I actually saw some d-bag on Kudblow last night saying that with lower gas prices people will be able to return to buying SUVs. rinse-wash-repeat

Fri, 06/22/2012 - 12:05 | Link to Comment LowProfile
LowProfile's picture

lol.

@ Matt

Gold actually does well in deflation on fears of default, as default leads to PRRRRINNNNTTTTIIIIINNNNGGGG...

Not bullish for PMs, which IMO is fine.  Get ready for the last best chance to buy gold at these price points.

Fri, 06/22/2012 - 09:39 | Link to Comment mrktwtch2
mrktwtch2's picture

its the end of the euro..and i feel fine..

Fri, 06/22/2012 - 09:41 | Link to Comment mayhem_korner
mayhem_korner's picture

Good luck trading!

 

The only winning move is not to play.  (War Games)

Fri, 06/22/2012 - 09:42 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

How does one do that?

Fri, 06/22/2012 - 09:54 | Link to Comment CPL
CPL's picture

1) Open trade account window.

2) Transfer funds.

3) Determine there is no uHaul behind the hearse.

4) Hookers and blow.  Party until wild horses drag you away.

5) Do the end of the econmic universe of ponzi-nomics in style.

Fri, 06/22/2012 - 10:09 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

"I'm still betting the central bankers deliver the former!" - Really? Do you?!

This is a ridiculous assertion. The Central Banks have failed to deliver anything but the most epic bubble in the history of mankind using their unlawful mandate from our politicians to erroneously attempt to flatten out the business cycle, and just generally "manage the economy". Their corruption and 3rd-grade fiscal policies have placed the economies of the EU and America into a skid the will finish out with the "slow-motion rollover crash at 65Mph" of an SUV driven by the lady on the phone trying to put on her makeup! 

Why, oh why, would the author think that these clowns can get the system back on track?

Fri, 06/22/2012 - 10:15 | Link to Comment aerojet
aerojet's picture

Dunno.  He lost me when he said that central banks have too tight a monetary policy.  Really?  If an asshole were as loose as their monetary policy you could drive an 18-wheeler through it and still have room for the Dallas Cowboys cheerleaders to march through in full defilade!

Fri, 06/22/2012 - 11:16 | Link to Comment DosZap
DosZap's picture

 He lost me when he said that central banks have too tight a monetary policy

Yep, what he means is they are not loaning to people who NEED it, and the people who do not need it, are not asking for loans.

Also its far more profitable for them to just SIT on it and take that quarter basis point in interest.No chance of loss there.

Fri, 06/22/2012 - 09:41 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

The answer is straightforward - central banks are NOT being accomodative enough.

Classic. I'll have the usual, Rene.

Fri, 06/22/2012 - 10:06 | Link to Comment flying dutchmen
flying dutchmen's picture

not accomadative enough....  fuck off .... rates are damn near zero..  What they should really do is just mail every citizen a check for 5k.... at least that way it is fair and everyone gets some benefit.

Fri, 06/22/2012 - 10:12 | Link to Comment Hugh_Jorgan
Hugh_Jorgan's picture

C'mon man, look on the bright side; there is always that "last hurrah" of CTRL-P until we can wipe with 1,000,000,000 bills. Then finish out with another massive, bloody, world war!

Fri, 06/22/2012 - 10:17 | Link to Comment mendigo
mendigo's picture

Glucose drip for the dead patient.
Apparently the CBs are resorting to the combined power of horror and comedy - sort of a global Jerry Lewis marathon.

Fri, 06/22/2012 - 10:58 | Link to Comment mendigo
mendigo's picture

Glucose drip for the dead patient. Apparently the CBs are resorting to the combined power of horror and comedy - sort of a global Jerry Lewis marathon.

Fri, 06/22/2012 - 09:42 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Paper is irrelevant, more mental masterbation.  Mixing "debt" and "paper money" terms that are fake made-made bullshit with the realities of thermodynamics and physics.  Bullshit, apples and oranges, print all you fucking want, deflate all you fucking want, the energetic return and the energetic investment WON"T FUCKING CHANGE.

Fri, 06/22/2012 - 09:42 | Link to Comment Its_the_economy...
Its_the_economy_stupid's picture

November coming.....no support for energy.

Fri, 06/22/2012 - 09:51 | Link to Comment azzhatter
azzhatter's picture

Lower gas prices is all obama's got

Fri, 06/22/2012 - 09:53 | Link to Comment LawsofPhysics
LawsofPhysics's picture

load up (gas tank hedging) because it won't last much past November (regardless of the election outcome).

Fri, 06/22/2012 - 11:54 | Link to Comment otto skorzeny
otto skorzeny's picture

hebes are sharpening the knives to use on the Persians

Fri, 06/22/2012 - 09:43 | Link to Comment Flakmeister
Flakmeister's picture

PBT and PSE are holding a fire sale now...

And Tyler is bang on,  GOR is telling us that oil is a buy.....

Fri, 06/22/2012 - 09:44 | Link to Comment mess nonster
mess nonster's picture

They're neck and neck...

Massive hyperinflationary blowup due to CB easy-money policies on the inside,

but...Catastrophic default of entire trading blocs is gaining!

Fri, 06/22/2012 - 09:45 | Link to Comment Its_the_economy...
Its_the_economy_stupid's picture

Gas at the pump dropping 1.5% per day.

Fri, 06/22/2012 - 10:34 | Link to Comment aerojet
aerojet's picture

Ever since gas stations got electronic signs, they have been fucking the consumer ever harder.  Morning commute?  Prices up $.20.  Rainy Tuesday?  Prices down $.40.  It's micro-managing demand and they must be using the futures as an indicator, too, because you can sit in the parking lot watching a futures chart and only minutes later the price will change.  It's completely uncoupled from any sensible realistic approach to setting prices.  I need a god damn HFT computer to help me decide when to fill up!

Fri, 06/22/2012 - 11:10 | Link to Comment roadhazard
roadhazard's picture

oh no ! it's all about peak oil and supply and demand... my ass.

Fri, 06/22/2012 - 09:45 | Link to Comment Tirpitz
Tirpitz's picture

Could be the major oil players (GS, JPM et al.) are in for a quick shakeout, to back up the truck anew at a cheaper level.

Or they are seriously facing a cash squeeze, Lehman style. In either case I'd expect the combined central banker tribe to turn the liquidity spigot open wide and long again, and all within days.

Fri, 06/22/2012 - 10:10 | Link to Comment r101958
r101958's picture

Actually, at this point, commodities are a much better indicator of true economic reality. Also, the difference between equities and commodities is an accurate indicator of the extent to which central banks are propping up the stock market. They can not let the markets fall very far because they have a vested interest in them. However, they definitely can and will see to it that every other investment class suffers. Their goal here is to make it seem that the only profitable investment is in stocks.

Fri, 06/22/2012 - 09:45 | Link to Comment Seize Mars
Seize Mars's picture

This is Zerohedge. I thought we all knew that "managing to a target" is dumb.

Trying to ascertain what the value of XYZ ought to be, then jacking pices of paper to make it so, is not only silly and ineffectual, it's dangerous.

Everyone knows price control cause shortages. Well Supply controls will cause misery as well.

Stop the paper game, let prices tell the truth!

Fri, 06/22/2012 - 09:55 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Come on now, you know that true  price discovery can not be allowed to happen.  TPTB would be bankrupt overnight and would lose power and control - the latter is what this is all really about.

Fri, 06/22/2012 - 10:54 | Link to Comment Seize Mars
Seize Mars's picture

You're starting to make sense.

Starting.

Fri, 06/22/2012 - 09:45 | Link to Comment nobusiness
nobusiness's picture

God forbid the consumer gets a little cheap gas for his piece of shit 12 year old car and can heat his underwater home for the winter.

Fri, 06/22/2012 - 09:48 | Link to Comment John Law Lives
John Law Lives's picture

Whoremasters who promote debt to create debt slaves don't want deflation.  The Great Chairsatan hates it.

Fri, 06/22/2012 - 09:46 | Link to Comment Sockeye
Sockeye's picture

Somebody went all in on QE3.

Fri, 06/22/2012 - 09:47 | Link to Comment bigwavedave
bigwavedave's picture

Forgets that China, India and Japan have been the only marginal buyers for years now.

Fri, 06/22/2012 - 09:48 | Link to Comment EL INDIO
EL INDIO's picture

I said it before and I’ll say it again. The western world CBs are not idiots, in fact they are geniuses in what they do. That is if you understand what their objective is.

They push things in one direction as hard as possible but they stop before reaching breaking point, then they reverse course at full speed.

They pushed inflation as high as was possible without losing control, now they will let deflation do its work for as long as possible and then start again.

Fri, 06/22/2012 - 09:54 | Link to Comment Tirpitz
Tirpitz's picture

Real deflation would take down ALL of the major banks with their over-leveraged balance sheets. Won't happen in a world where central banks can print money at will.

Deflation on the income side of the working class (aka 'austerity'), however, that is a goal they pursue with fervor.

Fri, 06/22/2012 - 09:56 | Link to Comment EL INDIO
EL INDIO's picture

I’ll just add that, their only objective is to maintain this system that serves them so well.

Fri, 06/22/2012 - 10:33 | Link to Comment DUNTHAT
DUNTHAT's picture

the sole purpose and function of the Federal Reserve is to serve as a policeman for the Big Banks, so they play nice in the sand box AND promote debt expansion at all costs.

They don't care about anything else.

Fri, 06/22/2012 - 09:48 | Link to Comment asteroids
asteroids's picture

Oil and Gas is still very overpriced. There's a lot more to go.

Fri, 06/22/2012 - 10:00 | Link to Comment CommunityStandard
CommunityStandard's picture

Even if the price of oil plummets, oil companies will still charge the same for gas at stations and pocket the difference.  In 2007, people were constantly complaining about high gas prices at $3.50.  Now, $3.50 is normal.  The oil cartels succeeded in raising the price and making it acceptable, and won't give that up so easily.

Fri, 06/22/2012 - 09:55 | Link to Comment Monedas
Monedas's picture

If you want an omelette .... you have to break some eggs !  If you want some wine .... dirty peasant girls have to dance on the grapes and catalyze the fermentation process with their yeast droppings !  If you want some bread .... you have to beat the chaff out of the wheat ! If you want some gold .... you have to rock the sluice box !  What were we talking about ?       Monedas     1929      Comedy Jihad Cheap Oil Tour

Fri, 06/22/2012 - 10:11 | Link to Comment John Law Lives
John Law Lives's picture

" If you want some wine .... dirty peasant girls have to dance on the grapes and catalyze the fermentation process with their yeast droppings !"

That gets my vote as the most revoltingly graphic post of the day thus far...

Fri, 06/22/2012 - 10:14 | Link to Comment Monedas
Monedas's picture

I never once referred to the custom in Serbia .... where the girls gather their hems and do sitz squats in the mash ?   Monedas    1929        Comedy Jihad Musings Of An Incurable Romantic

Fri, 06/22/2012 - 10:20 | Link to Comment John Law Lives
John Law Lives's picture

Well, I suppose dingleberrys from Serbian lasses' arses enhance the flavor of the vino...

Fri, 06/22/2012 - 10:32 | Link to Comment Monedas
Monedas's picture

Exquisitely put ! Were talking the premium hand made wines here .... not the stainless steel tank car stuff fermented en route !      Monedas     1929       Comedy Jihad Longing For Old World Craftmanship

Fri, 06/22/2012 - 09:50 | Link to Comment waterwitch
waterwitch's picture

You forgot to mention that Saudi is pumping at near record rates. The reason given for this record pumping is to bury their good buddies, Iran and Iraq, with cheap oil.  Personally, I think the real reason is due to pressure from the Obama administration to keep oil prices low to insure re-electability.  I'm concerned that Saudi has exacerbated the demise of their largest field (Ghawar) with this accelerated pumping.  Just that much closer to the end...

Fri, 06/22/2012 - 12:55 | Link to Comment DaveyJones
DaveyJones's picture

Yup. All these "tricks" are only accelerating peaks decline

Fri, 06/22/2012 - 09:51 | Link to Comment abgary1
abgary1's picture

This is what debt deflation looks like!

Everything drops!

Fri, 06/22/2012 - 10:00 | Link to Comment fuu
fuu's picture

"The answer is straightforward - central banks are NOT being accomodative enough."

Who are you and what did you do to Tyler?

Fri, 06/22/2012 - 10:02 | Link to Comment EL INDIO
EL INDIO's picture

You have to keep an open mind and adapt to what happens.

CBs have been too accommodative after 2008 but right now the author claims they are not enough.

Commodity prices support his claim.

Fri, 06/22/2012 - 10:40 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

davidZ is a fuking jackass

and you sound just like him

"open-minded adaptation to prices" is now the FED's JOB?

what a crock!

Fri, 06/22/2012 - 11:01 | Link to Comment EL INDIO
EL INDIO's picture

You sound like a mindless fanatic looser.

Fri, 06/22/2012 - 12:16 | Link to Comment Thisson
Thisson's picture

You sound like a Keynsian.  How can anyone be in favor of rigged markets?  Neither the central bank nor the government has any business subsidizing anything or interfering in market pricing. 

 

Fri, 06/22/2012 - 10:31 | Link to Comment zapdude
zapdude's picture

No kidding.  I can't imaging TD writing anything like this, especially with the "Good luck trading!" signoff.  Sounds more like Fartman - I mean Dennis Gartman. 

I think TD forgot the huge /sarc tag, or I am missing some double meaning here???

Fri, 06/22/2012 - 10:45 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

davidZervos is NOT tyler!

tyler has a [zH parens] above a chart

Fri, 06/22/2012 - 11:04 | Link to Comment EL INDIO
EL INDIO's picture

What, are you Tyler’s bitch ?

Fri, 06/22/2012 - 13:14 | Link to Comment abgary1
abgary1's picture

The central bank created bubbles and zero interest policy have bankrupted and over indebted enough people that the stimulus no longer has the desired effect. Essentially the central banks have bankrupted the world. You do not solve a debt problem with more debt. 

Fri, 06/22/2012 - 10:01 | Link to Comment WhiteNight123129
WhiteNight123129's picture

Please do not confuse true deflation which is increase in output faster than increase in money quantities(1873-1896), with otherwise healthy debt levels (specially between 1880 and 1896)   with debt derangement contraction forcing liquidation of assets (1931-32) or today. PLease do not use a general metric of inflation which is lumping sectors in true debt derangement downward price spirals (retail, real estate) with sectors which have inelastic demand and supply like Tobacco or soft commodities. Please do not mix up commodities which are dependent on fiat cycle for demand (industrial commodities and energy) with commodities which are relatively invariant to those cycles (food). Aside from that, interesting comment!!! The CRB Food Index is NOT down ytd, it is about unchanged.

 

Fri, 06/22/2012 - 10:35 | Link to Comment post turtle saver
post turtle saver's picture

You can follow money all day looking for deflation or inflation and you won't find it. Levels of money printing have been superceded by availability of credit. Credit contraction and the inability of consumers to take on more debt is a much larger impact. Banks only want to lend to people who, frankly, don't need a loan to begin with. Business owners aren't going to take on more debt to invest in their business growth because they don't see a future of growth, only contraction. Furthermore, they will drive down their prices to keep the customers they have because getting new customers will become exceedingly hard to do.

All of this screams DEFLATION from the rooftops. It's gotten to the point where it's very easy to tell which way the market is going to go... if oil goes down, stocks go down. Oil goes up, stocks go up. In other words, energy = demand.

I definitely agree with you on the food equation... prices will go up for things we need, prices will go down for things we "want". This stuff is so easy even a central banker should be able to figure it out, but they can't... YOU CAN LEAD A HORSE TO WATER BUT YOU CAN'T MAKE IT DRINK.

Fri, 06/22/2012 - 10:09 | Link to Comment DavosSherman
DavosSherman's picture

I'd hate to smell Bernanke's kitchen when he makes toast.

Fri, 06/22/2012 - 10:27 | Link to Comment Monedas
Monedas's picture

Reminds me of an invention I'm working on .... a diesel fired toaster .... for underdeveloped countries with little electricity infrastructure grid !       Monedas      1929       Comedy Jihad Barrels Of Oil Bubbling Up In Ghawar Oil Sands  And Barges Of Grain Floating Down The Mississippi Keeps Socialist Chaos Away

Fri, 06/22/2012 - 10:15 | Link to Comment Arnold Ziffel
Arnold Ziffel's picture

"Deflationary Downward Death Spiral" is how my (now unemployed) neighbor words it.

Fri, 06/22/2012 - 10:27 | Link to Comment NumNutt
NumNutt's picture

Won't be long before we are all like your neighbor, unemployed that is. Shit, we will be lucky if we all don't end up dumster diving just to feed our families......Obama must be really proud with what he and his henchmen have done with this country...

Fri, 06/22/2012 - 10:27 | Link to Comment DUNTHAT
DUNTHAT's picture

There are two ways to eliminate debt:

<ul>Inflate and pay it off with valueless dollars and destroy all productive assets; stringing this torturous economy along for the sole purpose of keeping the TBTF banks alive( as well as the FED)</ul>

 

<ul>Deflate and walk away (bankrupt) from all obligations clearing the boards in one  massive transaction; killing the banks that got us into this mess in the first place and start all over with a savings oriented economy as opposed to a debt oriented one</ul>

Can I get an Amen?

 

Fri, 06/22/2012 - 10:39 | Link to Comment post turtle saver
post turtle saver's picture

Amen... silly bankers and bond holders, risk means sometimes you lose. Deflate and walk away ftw.

Fri, 06/22/2012 - 10:26 | Link to Comment Jason T
Jason T's picture

need to further adjust population to employement frmo 58.7% to 55%-56%  soon.. its simply regressing back to the levels of the 1950's and 1960's.

 

 

Fri, 06/22/2012 - 10:37 | Link to Comment Monedas
Monedas's picture

"As the world squirms !"   Soap opera pilot !      Monedas     1929        Comedy Jihad Fully Hoarded, Feeling Frisky And Ready To Rumble !

Fri, 06/22/2012 - 10:38 | Link to Comment web bot
web bot's picture

In the short term, not good for PMs... but I'm waiting with dry powder for $20.

Fri, 06/22/2012 - 10:40 | Link to Comment PeeramidIdeologies
PeeramidIdeologies's picture

I'm impressed. Looks like they have everything where they need it. CB's get a bad wrap around here but anyone betting against them has gotten handled the last couple of years. No doubt the tight rope tap dance has begun it's last number, but she's been a helluva show.

Fri, 06/22/2012 - 10:41 | Link to Comment web bot
web bot's picture

This is probably THE most important article written on ZeroHedge year to date.

+1000

Fri, 06/22/2012 - 10:43 | Link to Comment GoldbugVariation
GoldbugVariation's picture

Three possible reasons:

1)  Oil price in $ tracks gold fairly closely, and gold has been falling in recent weeks as all the hot money has piled into equities - come the reversal of that trend (which I'm not convinced we've seen yet, despite channel lines in S&P) then the hot money will flow back into physical assets as a safe haven

2)  Manipulation by TPTB (including by exerting political pressure on Saudis) to keep oil low for now to allow for massive QE3 to be announced in August

3)  In the real world, China and some other buyers can buy Iranian oil at a discount outside the conventional market because the US has blocked sales by Iran.  The availability of oil at a discount outside the conventional market will tend to depress the  price of Brent crude and other conventional benchmarks.  So the US govt policy of making it tough for Iran to sell its oil may unintentionally have lowered the oil price for everyone (as well as giving a special boost to China).

Fri, 06/22/2012 - 12:20 | Link to Comment Thisson
Thisson's picture

Either that, or China can buy cheaper Iranian oil, mark it up and resell it into the world market (arbitrage, bitchez!).

Fri, 06/22/2012 - 10:46 | Link to Comment q99x2
q99x2's picture

Elites are having to bank less profits. Shits going to hit the fan soon

Fri, 06/22/2012 - 11:00 | Link to Comment HEHEHE
HEHEHE's picture

Has Kudlow chirped about lower gas prices being a tax cut for consumers yet?  I he hasn't, he will, ad naseum, every night.

Fri, 06/22/2012 - 11:01 | Link to Comment EL INDIO
EL INDIO's picture

 

Fri, 06/22/2012 - 11:39 | Link to Comment Vinz Klortho
Vinz Klortho's picture

El Indio,

I like your analysis of the CB actions.

Please go into more detail if possible.

Vinz

Fri, 06/22/2012 - 16:29 | Link to Comment EL INDIO
EL INDIO's picture

CBs want to save their banking system. That means two things: preserving the banks and the fiat currencies but these two goals can be conflicting. So how do they manage that:

The banks are heavily indebted -> need money -> bailouts/money printing -> Inflation -> Faith on currencies gets shaken -> CBs stop printing for a while -> Money gets destroyed because of defaults -> Deflation -> prices go down -> Currencies appear more solid but banks get hurt -> Faith on currencies restored -> printing resumes -> and so on.

 

In summary: the problem is too much debt. They get rid of it by inflation through money printing and by deflation through managed defaults. They use one until its unbearable than switch to other.

Fri, 06/22/2012 - 12:13 | Link to Comment spinone
spinone's picture

You can postpone debt deflation, but not prevent it

Fri, 06/22/2012 - 12:21 | Link to Comment Thisson
Thisson's picture

Cue Ludwig Von Mises Quote: There is no avoiding the final collapse...

Fri, 06/22/2012 - 12:45 | Link to Comment Monk
Monk's picture

Especially given the implication that the collapse is caused by free market capitalism.

 

Fri, 06/22/2012 - 13:05 | Link to Comment JeffB
JeffB's picture

Um, no.

The inevitable collapse is caused by the boom/bust cycle which is in turn caused by the central bank's artificial stimulus via a fiat, debt based "money", and fractional reserve banking.

Austrian Theory of the Business Cycle - by Roger W. Garrison, Prof. of Economics, Auburn University.

A market collapse is no more caused by free market capitalism than weeds are caused by a garden.

Fri, 06/22/2012 - 12:43 | Link to Comment Monk
Monk's picture

Also, try global oil production per capita.

 

Fri, 06/22/2012 - 13:05 | Link to Comment Quinvarius
Quinvarius's picture

Or it is just all the margin raises in the energy commodities.

Fri, 06/22/2012 - 15:41 | Link to Comment el-greco
el-greco's picture

Rigged to bust the Iranian economy. Saudi A. would agree to taking a temporary hit for the cause.

Fri, 06/22/2012 - 17:21 | Link to Comment bushboy
bushboy's picture

Good stuff El Indio

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