Posted on 01/03/2015 11:14:15 AM PST by blam
Does anyone think we would have these low oil prices if Bakken, Eagle Ford, and other plays were not producing?
No reasonable person does.
The columnist is simply trying to run away from “Drill Baby, Drill” of Palin fame.
Interesting choice of pronouns. For an unknown/generic person, it is traditional to use either "he" or "they." So what the writer has done is intentional - to make a point. Such actions make me suspicious of whatever point the author is trying to make - even if it is to explain a "currency carry trade."
Hyperinflation is due increasing resistance to accepting a given currency to the point that that currency ultimately fails completely.
It’s happened on this continent twice in history, with the “Continental” issued during the American Revolution, and with Confederate Dollars under the Confederate States of America.
Under what scenario or scenarios do you see this happening with the US dollar, domestically?
Yep- Sounds good. But that probably won’t work either.
Government confiscation for one.
And in the broken down state the country will be in after such a crisis then good luck eating your gold or finding someone else who wants to eat it. Global trade will be shut down for the average Joe. Trading in gold will most likely be illegal too. Being caught doing it will probably carry a heavy penalty.
Make no assumption about things working the way they should work when TSHTF. It will be a different world. Food and shelter will be all that most people will be worried about.
Honestly, I don’t understand any of this article at all.
My own feelings or take on everything?
1. The interest rates are at ZERO because the large financial institutions and the Fed want them there. Why? SO the large financial institutions can make all of the money back they lost back in 2008. The fed prints money, hands it over to the financial institutions basically for free, and they buy US treasury bonds and make a percent or two on them.
The greatest robbery in world history.
2. Democrats derided Reagan and “the Trickle Down” economy. What is going on now is many times worse than the idea they attacked. The President and the Fed are giving billions of dollars to the large financial institutions. Ever so slowly, that money is trickling out and making its way to the average American. They point to the stock market that the economy is booming. The stock market and the US Employment market economy have no relationship to each other. In our current family economic structure, it is IMPOSSIBLE for the economy to be improving while the Total Employment % is at 1978 levels.
3. The low oil price is mostly artificial. Don’t know the truth and probably will never know because the media and government will never tell us the truth. Fracking and a global economic slowdown have some part to do with that. But Saudi Arabia is playing games with Russia over..... something. Probably a lot more to this than we are being told. Anyway, Saudi is pumping the bottom out of the price of oil. That won’t last forever.
I also hate the use of “she” to make a feminist point in the middle of an otherwise interesting article. I, too, immediately dismiss the whole thesis as flawed. I’ve even seen this in books, too.
Interesting anlaysis but who is the author? Never heard of him. How leveraged is this currency trade? That’s the key question. Also, how much of it is hedge? This may be the makings of an interesting story but I don’t think I can buy what I’ve read entirely without hearing more from many more people who know the currency markets well.
Are they waiting for a republican president?
Obama did not get us all the way to Marxism, but he got us a long way down the path. Consider:
— Record breaking deficits
— Higher rates of Government dependency (basically, programs like Foodstamps and SSI have gone mainstream)
— Rule by executive edict, with the Republican-controlled Congress being marginalized
— Effective end of a Free Press
— A blizzard of regulations
— Mandated, state subsidized health care
— Mass amnesty for illegals
— A foreign policy that rewards our enemies and alienates our friends
Wash, rinse, and repeat. It may be hard to believe, but this strategy could work again, with the next “Obama” being even worse.
Under the same scenario it always occurs. This is the time-honored way for governments to get out of the mess they create time and time again.
See Reinhardt and Rogoff’s book, “This Time is Different” - it has gone the same way every single time for 900 years.
They will cut some zeros off of some future dollar.
Poland did it most recently when they cut four zeros off the zloty.
The same issues face America and they are unsolvable - as always. Just as they were in Poland.
My Polish father-in-law was showing me his ‘medals’ and ‘orders’ he got after the war.
One of them, he proudly said, “This one is worth an extra 500 Zloty per month on my retirement check!” Nowadays, 500 Zloty is about $175.00. But then, he wistfully added, “...in the old zloty...”
Which is instead worth about 1.75 cents.
That is the time honored way to solve government obligations.
When the other shoe drops, better to be a debtor.
Drilling and exploration cost a lot, and a lot of the people doing it took on debt to do so. Their servicing of that debt is based upon, say $X/bbl oil. Oil drops to X/2, but the debt servicing cost is the same. Now the producer is in a situation where he has to potentially destroy his future profit by selling 2 times the amount of oil now to meet payments, borrow more to make them (good ole ZIRP!), or go under.
“Maybe you can explain your reasoning?
It seems to me that wealth transfer has been AWAY from savers. Basically, they are getting zero (or worse) interest on their $$. This also has the effect of driving savers to riskier investments, such as the stock market. This has helped to pump up the stock market.
The US Gov has been doing quite well, because we are financing our massive deficit for almost zero. IMHO, that is what has been driving this train. IF the US had to pay reasonable interest rates on our deficit, the Entitlement State would be bankrupt quickly. The Federal Reserve has manipulated things to keep this from happening. If the stock market goes down, pension fund become insolvent and the house of cards starts to collapse”
More truth in this post than I can begin to explain.
We are behind the power curve, financially.
But are the changes coming fast enough to get the frog to jump out of the pot?
Nope. The frog is boiled, or more appropriately, the rest of the crabs are pulling the one wanting out back into the boiling water...
More truth in this post than I can begin to explain. We are behind the power curve, financially.
Oil had a terrible year, but the USD had a great year. That still stuns me because I think the US economy is a house of cards that is propped up by gimmicks, including: zero interest rates, an inflated stock market, massive Government spending (corporate and entitlement welfare), and buying our own debt. All of these gimmicks are related.
Commodities like oil will act as a safety net when the house of cards starts to fall apart. I think that will happen, but do have to tip my hat to the Fed (and Central Banking in general) for forestalling the inevitable. The real question is: how long can they do it?
The US definitely benefits from the fact that we are the world’s #1 military and economic superpower + have the world’s reserve currency. It allows us to play games that other countries can’t. Or, if they do, they need our approval. Do not believe the hype about China. I used to until I went there. They have a lot of problems and their stats cannot be taken at face value.
However, much of the world’s prosperity now is built on monopoly $$. We are also automating at a fast pace, so production and services require fewer and fewer people. Personally, I think the Elites wet their pants over the implications of all this. IMHO, no one really knows what to do, so its all about maintaining the status quo using smoke and mirrors. And it started in the 1980s. Much as I detested Carter, he was the last honest President who didn’t try to game the System.
The other (last) thing is that the whole System relies onn interest rates being zero or even negative. Cutting through all the noise, the most important metric in the World is the yield of the 10Y US Treasury bond. Right now is is about 2.12%. If you look at it’s historical chart since 1980, it is slowly winding down to 0%. To keep the US Government solvent, that yield can absolutely not be allowed to rise. Ever.
If the 10YR UST ever breaks 4%, watch out. It will be a sure sign that all HELL will break loose.
Agreed. I thought of this when asking the question, and how it exposes the risk of debt based economics, especially for government entities and businesses. Inflation may be hard on average citizens, but it is the bread and butter of governments and businesses that depend on inflation outstripping interest rates. Personally I prefer the stronger dollar, and the relief it brings to families that haven’t had a raise in pay since 2008.
So true.
I wrote that down on an index card a few years ago. It's still in my desk drawer somewhere.
I’ve been meaning to get this on Amazon!
Thanks for the link!
CA....
Yep, if we’re able to communicate through here - I’ll have egg on my face for sure!
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