Post collapse, just what will we eat…..?

21 11 2017

Further to my post where I explained how Australia’s poor soils are largely incapable of growing much more than meat, this article landed in my news feed…

Here’s a list of what Australian farmers produce:

  • Each year, on average each Australian farmer feeds 600 people.
  • Agriculture powers 1.6 million Australian jobs.
  • Australian farmers manage 48 per cent of the nation’s landmass.
  • Cattle, wheat and whole milk are our top three commodities by value.
  • More than 99% of Australia’s agricultural businesses are Australian owned.
  • Out of the $58.1 billion worth of food and fibre Australian farmers produced in 2015-16 77 per cent ($44.8 billion) was exported. 
  • 6.8 million hectares of agricultural land has been set aside by Australian farmers for conservation and protection purposes.
  • Australian farmers are among the most self-sufficient in the world, with government support for Australian farms representing just 1% of farming income. In Norway it is 62%, Korea 49%, China 21%, European Union 19% and United States 9%.

Farm facts by commodity

  • In total, Australian beef cattle farmers produce 2.5 million tonnes of beef and veal each year. Australians eat an average 26kg of beef per person, per year. 
  • Australians consume an average of 45.3kg of chicken meat per person, per year. This not only cements chicken’s position as Australian consumers’ favourite meat, but also makes Australia one of the largest consumers of chicken meat in the world!
  • In a normal year, Australia’s cotton growers produce enough cotton to clothe 500 million people.
  • Australia produces about 3 per cent of the world’s cotton but is the fifth largest exporter, behind the USA, India, Brazil, Uzbekistan.
  • Australian dairy farmers produce 9,539 million litres of whole milk per year with the farmgate value of milk production being $4.3 billion.
  • On average, each Australian eats 3.08kg of dried fruit per year. Total Australian dried fruit exports in 2015–16 totalled 5,000 tonnes and was valued at $19.4 million.
  • The Australian forestry, logging and wood manufacturing industry employs 64,300 in the forest products industry. At the end of 2010, 13,067 million tonnes of carbon was held in Australia’s forests and harvested wood products in service and in landfill. Almost all this carbon 12,841 million tonnes – 98% was stored in living forest.
  • Australia’s grains industry accounts for more than 170,000 jobs across Australia from farm to export dock. About 65% of Australia’s grain is exported, including up to 90% of that grown per annum in Western Australia and South Australia.
  • Australians consumed more than 27kg of pig meat per person in 2015–16; ranked second behind poultry.  The Australian pig herd is free from many serious viral and bacterial diseases afflicting other pork producing countries.
  •  In 2016–17 there were 772 farmers who harvested rice, a significant increase on the 347 growers from the year prior. Australian rice growers use 50% less water to grow one kilo of rice than the world average.
  • Australia is the world’s largest exporter of sheepmeat, and is the world’s third largest producer of lamb and mutton. In 2016–17, Australians, on average, ate 9.5 kg of mutton and lamb per person.
  • The sugar industry directly employs some 16,000 people. The world’s principal sugar exporters in 2015–16 were Brazil, Thailand, Australia and India.
  • Wool production for 2016–17 is forecast to increase by 4.3%, to 339 million kilograms (greasy) from the estimated 2015–16 production period. The increase is largely the result of excellent seasonal conditions in many areas resulting in higher fleece weights.

So, I ask you, WHERE do our fruit and veggies come from?

We may export 77% of what we produce, but it’s all meat, dairy, grains, and wool or cotton……  the money earned therefrom pays for the importation of fruit and veggies not farmed here. In a post oil crash, most of that stuff we export will no longer be made, because it all utterly depends on fertilisers and tractors and harvesters……. If we can’t afford to import non meat/dairy food, will we all turn into carnivores…?

These are serious questions to ponder…..

The mobile butcher came this afternoon, and cut up our two sheep, which are now in the freezer.  We won’t be starving, that’s for sure!

If you are vegan, you might also like (or not..!) to read this… https://qz.com/1131428/if-the-entire-us-went-vegan-itd-be-a-public-health-disaster/

Advertisements




The EVERYTHING bubble…..

21 05 2017

I’m no financial guru.  Since studying Nicole Foss’ and Chris Martenson’s work, I have a reasonable understanding of how the economy works, enough to know it’s completely unsustainable and will eventually crash. I’m only interested in when it crashes because I worry it will all turn to dust before our new house is finished, and that could make my life difficult…. so I have to rely on proper gurus. I’d never heard of Mike Maloney until I heard him interviewed by Chris Martenson in a podcast, and my gut feeling is that he knows what he’s talking about.

We don’t have stocks and shares or gold and silver, because I believe that the real investment needed is farm land, and a shelter that doesn’t need to be connected to the rest of a collapsing world, which is why I don’t really follow all this stuff. But this turned up in my newsfeed, and it’s rattled me a bit……  so glad I’ve started building! it might even be time to pull money out of the bank and stash it under the mattress….

This is lifted from srsroccoreport.com, and I hope it’s useful to someone following this humble blog……

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The U.S. economy and markets are now the BIGGEST BUBBLES in history.  In 2000, we experienced  the Tech Bubble.  In 2008, we suffered both a Stock Market and Housing Bubble.  However, today… we are in the “EVERYTHING BUBBLE.”

This is an excellent video presentation by Mike Maloney at GoldSilver.com.  Mike puts together some of the best quality videos in the precious metals industry.  This one is a MUST SEE.  If you are frustrated with the performance of gold and silver since 2012, this video shows just how insane the markets have become.

In the video, Mike provides charts showing how the economic and market indicators are peaking, even much higher than what took place in 2008.  For example, Mike shows a chart on “Margin debt” in the stock market and how it is the highest ever:

The indicators and charts in Mike’s video presentation provides evidence that the market is now one GIANT BUBBLE ready to POP.  While the insanity could continue a bit longer, the indicators are now a BLINKING RED LIGHT that something is seriously wrong.

I highly recommend my readers to watch this video and please feel free to share it with others who are still gambling in the broader markets.  Maybe it might WAKE THEM UP before it’s too late.

You can also find this video presentation here: THE EVERYTHING BUBBLE: Code Red





The price of fuel..: what is going on..?

11 01 2017

Yesterday, I went to the big smoke for a medical appointment. I’m fine. But when I went to fill up to ensure I could make it home, I realised that the price of petrol had gone up by a whopping 20c/L in one hit. That’s a 14% increase……… in one day.Petrol price hike in Hobart

In the news, “Mr Moody (of the Royal Automobile Club of Tasmania) said prices were being driven up by increases in the global oil price, but he said the price should level out in Tasmania at about $1.40 a litre in about a month.”

Except that when I investigated this, the price of oil had not skyrocketed, it was still around $52 a barrel. Last time petrol was this expensive, oil was at $147 a barrel….. so what’s going on?

My take on this is that the oil companies must be finding it harder and harder to pay their interest bills. If they can’t make profits with oil, they’ll have to find them upstream at the pump.  Furthermore, maybe Peak Oil is on the cusp of getting really serious, and this might be the tip of the iceberg……. Nafeez Ahmed has just written the following article about how dire the oil situation is becoming…….

Brace for the oil, food and financial crash of 2018

80% of the world’s oil has peaked, and the resulting oil crunch will flatten the economy

New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.

A report by HSBC shows that contrary to industry mythology, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline; while European government scientists show that the value of energy produced by oil has declined by half within just the first 15 years of the 21st century.

The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil… unless we choose a fundamentally different path.

Last September, a few outlets were reporting the counterintuitive findings of a new HSBC research report on global oil supply. Unfortunately, the true implications of the HSBC report were largely misunderstood.

The HSBC research note — prepared for clients of the global bank — found that contrary to concerns about too much oil supply and insufficient demand, the situation was opposite: global oil supply will in coming years be insufficient to sustain rising demand.screenshot

Yet the full, striking import of the report, concerning the world’s permanent entry into a new age of global oil decline, was never really explained. The report didn’t just go against the grain of the industry’s hype about ‘peak demand’: it vindicated what is routinely lambasted by the industry as a myth: peak oil — the concurrent peak and decline of global oil production.

The HSBC report you need to read, now

INSURGE intelligence obtained a copy of the report in December 2016, and for the first time we are exclusively publishing the entire report in the public interest.

Read and/or download the full HSBC report by clicking below:

HSBC peak oil report

The HSBC report has a helpful, ten-point summary of the key arguments the bank makes, and what is going on right now. These arguments are summarised below…:

  1. Oil’s oversupply problem, which has caused most of the trouble in the markets in recent years will end by 2017, and the market will return to balance.
  2. Spare capacity will have shrunk substantially by then “to just 1% of global supply/demand.” This HSBC argues, will make the market more susceptible to disruptions like those seen in Nigeria and Canada in 2016.
  3. Oil demand is still growing by ~1mbd every year, and no central scenarios that we recently assessed see oil demand peaking before 2040.”
  4. 81% of the production of liquid oil is already in decline.
  5. HSBC sees between 3 and 4.5 million barrels per day of supply disappearing once peak oil production is reached. “In our view a sensible range for average decline rate on post-peak production is 5-7%, equivalent to around 3-4.5mbd of lost production every year.”
  6. Based on a simple calculation, HSBC estimates that by 2040, the world will need to find around 40 million barrels of oil per day to keep up with growing demand from emerging economies. That is equivalent to over 4 times the current crude oil output of Saudi Arabia.
  7. “Small oilfields typically decline twice as fast as large fields, and the global supply mix relies increasingly on small fields: the typical new oilfield size has fallen from 500-1,000mb 40 years ago to only 75mb this decade.” — This will exacerbate the problem of declining oil fields, and the lack of supply.
  8. The amount of new oil discoveries being made is pretty small. HSBC notes that in 2015 the discovery rate for new wells was just 5%, a record low. The discoveries made are also fairly small in size.
  9. There is potential for growth in US shale oil, but it currently represents less than 5% of global supply, meaning that it will not be able, single-handedly at least, to address the tumbling global supply HSBC expects.
  10. “Step-change improvements in production and drilling efficiency in response to the downturn have masked underlying decline rates at many companies, but the degree to which they can continue to do so is becoming much more limited.” Essentially HSBC argues that companies aren’t improving their efficiency at a quick enough rate, meaning that supply declines will hit them even harder.

Here is the chart showing the decline in production post-peak:

Oil peak production

As usual, the mainstream media is spruiking loads of rubbish, probably trying to not scare the children…… unless you peek elsewhere like this blog, or follow other bloggers who keep abreast of the truth, you could be forgiven for thinking America will be great again…. or some other such rubbish.

Under the current supply glut driven by rising unconventional production, falling oil prices have damaged industry profitability and led to dramatic cut backs in new investments in production. This, HSBC says, will exacerbate the likelihood of a global oil supply crunch from 2018 onwards.
So how do you improve profitability? You put the price of fuel up. Given that petrol is the single biggest purchase made by households on a weekly basis, the lift in petrol prices may lead to less household activity — a potential concern for retailers and the economy generally. High fuel prices combined with large debts is what broke the camel’s back in 2008, causing the GFC. Things are not only not different today, debt levels are even higher….. how long before GFC MkII kicks off is anyone’s guess, but it can’t be too far away now….




Do we have five years left…….?

23 10 2016

You may remember the articles I recently published about the twilight of the age of oil by Louis Arnoux….. well Raul Ilargi from the Automatic Earth has published them too, and this time, there’s a video to go with them. It’s very informative, and led me to understand all sorts of things, not least why the price of oil can never go back up. Basically, as less and less net energy is present in each new barrel of oil extracted, it’s simply worth less….

I was getting very enthusiastic about this presentation, right up until the end when Arnoux starts pushing this ‘green box’ of his, the logo for which appears (I now realise) in the bottom corner of all his slides. It’s called the nGeni. And it all sounds too good to be true, especially after telling us all that the economy probably has just five years left, and will grind to a halt…..

Here’s the video

After watching it, I then googled nGeni, and found this website trying to crowdfund it. I’d love to know what DTM readers think of this, because it all sounds like snake oil to me…..





This is the big one……

11 02 2016

This article from The Great Recession Blog just arrived in my news feed, straight from Nicole Foss no less…… written by David Haggith, it’s an amazing read, and you better hang onto your seat, we’re in for a pretty wild ride.

 

 

DavidHaggith-269x300

David Haggith

Only a couple of weeks ago, I said we were entering the jaws of the Epocalypse. Now we are sliding rapidly down the great beast’s throat toward its cavernous belly. The biggest economic collapse the world has ever seen is consuming everything — all commodities, all industries, all national economies, all monetary systems, and eventually all peace and stability. This is the mother of all recessions.

That’s a big statement to swallow, especially when many don’t see the beast because we’re already inside of it. You need to look down from 100,000 feet up in order to observe the scale of this monster that is rising up out of the sea and to see how rapidly it is enveloping the globe and how the world’s collapse into its throat is accelerating. The belly of this leviathan is a swirling black hole, composed of all the word’s debts, that is large enough to swallow every economy on earth.

Mexican retail billionaire Hugo Salinas Price has looked long into the stomach of this mammoth, and this is what he has seen:

 

[Global] debt [as a percentage of GDP] peaked in August of 2014. I’ve been watching this for 20 years, and I have never seen anything like it. It was always growing, and now something has changed. A big change of this sort is an enormous event. I think it portends a new trend, and that trend will be to get out of debt. Deleverage and pay down debt. That is, of course, a contraction. Contraction means depression. The world is going into a depression. It’s going to get very nasty. (USAWatchdog)

 

So, let’s step back and look at the big picture in order to see how immense this thing is: (One thing that you’ll notice is common in the statements of many sources below is comparisons to 2008, when we first entered the Great Recession. You hear that comparison every day now, which says many people feel that, after piling on trillions of dollars and trillions of euros and trillions of ___ in debt to save ourselves, we are right back where we started … but exhausted from the effort.)

 


Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy


 

Toxic debt flush heard round the world

 

As Hugo Salinas Price warns, toxic debt may have hit a ceiling where it has stopped going up because individuals, industries, and now nations have reached real debt limits they cannot support. According to the New York Times, toxic loans around the world are weighing heavily on global growth:

 

Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come. The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising.

 

The Times lists China as leading the world for personal and industrial bad debt at $5 trillion, which in terms of its economy is half of China’s GDP. As a result of hitting this ceiling, Chinese banks reeled in lending in the last month of 2015.

And this is just bad debt. It does not include debts that are being properly paid or China’s national debts. These are the loans already failing. Likewise with the global debt problem The Times is writing about. Bad loans in Europe, for example, total about $1 trillion. Again, that’s just the loans that are already falling into the abyss.

Many national debts are more than the entire annual GDP of the nation, including the enormous US national debt, which will reach $20,000,000,000,000 by the time the next president takes office. (You can’t even see wide enough to focus on that many zeroes at the same time. The “2” gets lost in your peripheral vision.) And many places like Greece and Brazil and Puerto Rico are defaulting on their debts.

The United State’s debt alone is only payable so long as interest rates stay near zero; but rates are now rising, and the number of financiers has greatly retreated. The only thing to save the US from its toppling debt problem in the short term may be that people all over the world run to the shelter of US bonds when everything else is caving into the black hole.

 


Between Debt and the Devil: Money, Credit, and Fixing Global Finance. One of Financial Times Best Economics Books of 2015. “A devastating critique of the banking system. Most credit is not needed for economic growth — but it drives real estate booms and busts and leads to financial crisis and depression.”


 

Bulls become bears

 

The first sign that this global change is now consuming the US is in how many of the market’s permabulls are becoming neobears and which sizable institutions are making the switch quickly. Citi has been bullish over the years, but now they have stepped out of the back half of the bull suit and put on a toothy bear suit, expecting oil to drop to the mid-twenties and geopolitical change that “is maybe unprecedented for the last decades”:

 

The global economy seems trapped in a “death spiral” that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi … strategists have warned…. “The stakes are high, perhaps higher than they have ever been in the post-World War II era.”(Yahoo)

 

Here’s a 100,000-foot-high look at the US stock market that is now swirling down the throat of the beast: Last year, the number of stock dividend reductions surpassed 2008. In fact, 2015’s number of cuts — now that the year is barely past — was 35% higher than the number of cuts going into the Great Recession. That gives you some sense of the scale of corporate pain that is just starting to be felt. Companies cut dividends when they have less profit to share with their owners. Bloomberg referred to it as “equity investors … suffered death by 394 cuts.”

Another high-view snapshot of corporate collapse can be see everywhere in US retail: Walmart, Macy’s, J.C. Penny’s, K-Mart, The Gap and many smaller retailers have all announced a large number of store closures and layoffs to come.

US Corporate earnings across all industries are on track for their third quarter in a row of year-on-year declines. That is an ominous signal because back-to-back periods of decline for just two quarters are always followed by a decline of, at least, 20% (a bear market) in the S&P 500.

 

This weakness in overall corporate earnings growth could bode badly for the broader stock market, as it represents the actual impact of geopolitical concerns, the slowdown in China, the weakness in oil prices and productivity, said Karyn Cavanaugh, senior market strategiest at Voya Investment Management. “Earnings discount all the noise…. It’s the best unbiased view of what’s going on in the global economy.” (MarketWatch)

 

As earnings fall, the much watched price-earnings ratio gets more top-heavy, putting pressure on stocks to fall. Thus, on Friday:

 

The willingness of U.S. stock investors to abide price-earnings ratios stretching into three and four digits all but ended Friday as the Nasdaq Composite Index fell to its lowest since October 2014. The … tumble in American equities turned into a full-blown selloff in stocks with the highest valuation. The Nasdaq Internet Index sank 5.2 percent, as Facebook Inc. lost 5.8 percent. (NewsMax)

 

The most significant part of this picture is that tech stocks have finally started making the big drop with the few that have been holding the stock market’s average up being the ones now taking the biggest plunge. Facebook, Amazon, Apple, and Microsoft are all falling fast. LinkedIn is getting “destroyed.” The time at the top is over, which leaves the market with zero levitation. Therefore, it’s no surprise that we saw another major sell-off on Monday.

Said USA Today, Bye, Bye Internet Bubble 2.0,” calling this “the worst start of a year for technology stocks since the Great Recession.

 

Collapse of the petrodollar opening sink holes everywhere

 

It’s no secret that Russia has outlawed trading oil in dollars among its satellite nations and that China and Russia trade in yuan now, not dollars, but Iran is the latest to stick it to the US, announcing that it will no longer trade oil in US dollars either but will sell its oil only for euros. So, we have the gargantyuan and the petroeuro, taking major bites out of the petrodollar now. China and Russia have also been divesting from US treasuries for some time and investing in gold, something I started point out here a few years ago.

All of this means that the US dollar is rapidly ceasing to be the trade currency of the world, and that prized status is the only thing that has made the US national debt manageable over the years, as the high demand for trade dollars guarantees low interest on the most colossal debt in the world because national treasuries and businesses sop up US bonds as a safe way to store trade dollars. The Federal Reserve has become the buyer of last resort for US debt; but it has maxed out.

The move away from the petrodollar is momentous. Losing its status as the reserve currency of the world will take a massive bite out of US superpower status, and that, of course, is exactly what Russia, China and Iran are counting on. With so many countries now trading oil exclusively in non-dollar currencies, one has to wonder how much longer overstretched Saudi Arabia can hold out as an oil supplier that trades oil only in dollars. Most likely they will feel a lot of economic pressure to start trading in other currencies, especially now that US support of Saudi Arabia appears to have weakened.

Iran’s announcement may be why the dollar dropped drastically in value last week. The high value of the dollar makes oil very expensive to other nations, who have to convert their low-valued currency to dollars to buy oil. This is surely another reason the price of oil has been falling, though almost no one talks about it … almost as if the economic geniuses of the world can’t figure this simple relationship out. As nations compete to lower the value of their currency with zero interest policies and quantitative easing, they are burying the petrodollar.

In nations with currencies priced very low compared to the dollar, oil is like an American export — too expensive for people in that nation to afford, causing demand to fall off and, thus, further increasing the problem of oversupply and lowering the price of oil. This creates another big reason for many nations to want to stop trading oil in dollars.

I’ve been reporting on this site for a few years now on this global campaign to kill the petrodollar, and that campaign is finally nearing maturity. For the US, it will mark a horrible transformation in the world, as it will hugely erode US superpower status because it will become much more difficult to finance a massive military machine.

 

The banks that are too-big-to-fail are falling FAST!

 

Deutsch Bank‘s derivative bonds (the kind that caused the Great Recession) are pealing away. The top-tier bonds of Germany’s largest bank have lost about 20% since the start of the year. Investors are fleeing as tumbling profits cause them to doubt the issuer’s ability to support the coupon payments on the bonds. InvestmentWatch reports that “Deutsche Bank is shaking to its foundations” and asks “is a new banking crisis around the corner?” DB stock has fallen off its high last July by 50%.

By how much is Deutsch Bank too big to fall? DB’s exposure to derivatives is over 55-trillion euros. That’s five times more than the GDP of the entire Eurozone or three times the amount of debt the United States has accumulated since it was founded. Its CEO says publicly he’d rather be somewhere else. Looking up at a leaning tower like that, I imagine so.

As DB bleeds red ink from its throat, its cries to the European Central Bank are burbled in blood. DB has warned the central bank that zero-interest-rate policies and quantitative easing are now killing bank stocks, but that didn’t stop giddy ECB president, Murio Draghi, from announcing a lot more easing to come … as much as it takes. As much as it takes to what? Kill all of Europe’s banks now that stimulus is working in reverse with negative interest making new money in reserves expensive to hang on to?

Is the ECB waging war on it major banks, or is it just too dumb to realize that QE is far beyond the high point on the bell curve of diminishing returns to where it is now killing stock values while doing nothing to boost the economy? (Hence, the move to negative interest rates to go to the ultimate extreme of easing because you have to push the accelerator through the floor when returns are diminishing that fast). As ZeroHedge has said, we are now entering a “monetary twilight zone”where …

 

Europe’s largest bank is openly defying central bank policy and demanding an end to easy money. Alas, since tighter monetary policy assures just as much if not more pain, one can’t help but wonder just how the central banks get themselves out of this particular trap they set up for themselves.

 

Credit Suisse reported a loss of 6.4 billion Swiss francs for the fourth quarter of 2015, suffering from its exposure to leveraged loans and bad acquisitions.

 

DoubleLine Capital’s Jeffrey Gundlach said it’s “frightening” to see major financial stocks trading at prices below their financial crisis levels…. “Do you know that Credit Suisse, which is a powerhouse bank, their stock price is lower than it was in the depths of the financial crisis in 2009?” (NewMax)

 

Credit Suisse has announced it will cut 4,000 jobs after posting its first quarterly loss since 2008. The Stoxx Europe 600 Banks Index has also posted its longest string of weekly losses since 2008, having posted six straight weeks of decline. The European Central Bank’s calculus says banks in Europe should be benefiting from QE, but it’s clearly lost all of its mojo or is now  actually more detrimental than good like a megadose of potent medicine. Negative interest rates are particularly taking a toll because banks have to pay interest on their reserves, instead of making interest.

Banks have rapidly become so troubled that NewsMax ran the following headline “Bank Selloffs Replacing Oil Rout as Stock Market Pressure Point.”  In other words, bank stocks are not just falling; they are falling at a rate that is causing fear contagion to other stocks. It’s not easy these days to beat out oil as a cause of further sell-offs in the stock market.

How quickly we moved from a world of commodity collapse to what now appears to be morphing into a banking collapse like we saw in 2008. Financial stocks overall have lost $350 billion just since 2016 began. Volatility in bank shares has spiked to levels not seen since … well, once again, 2008.

Consider how big the derivatives market is — that new investment vehicle that turned into such a pernicious demon in 2007 and 2008 because they are so complicated almost no one understands what they are buying and because they mix a little toxic debt throughout, like reducing the cancer in one part of the body by spreading its cells evenly everywhere. Instead of learning from the first crash into the Great Recession, we have run full speed into expanding this market. Estimates of the value of derivatives in the market range half a quadrillion dollars to one-and-a-half quadrillion dollars (depending on what you count and whether you go by how much was invested into them or their face value). Either way, that’s a behemoth number of derivatives floating around the world, many of them carrying their own little attachment of metastasizing toxins! (That’s, at least, a thousand trillions! More than ten times the entire GDP of the world.)

Still think 2016 isn’t the Year of the Epocalypse? Well, if you do, the rest of the ride will convince you soon enough. If I were the Fed, I’d be really, really worried that my star-spangled recovery plan was starting to look more like Mothra in flames.

 

The oil spillover

 

But don’t think oil is loosing its shine as a market killer. Another bearish prediction by Citi, now that it has change suits, is to expect “Oilmegeddon.” (Hmm, sounds like something that would be found in an epocalypse to me.)

 

“It seems reasonable to assume that another year of extreme moves in U.S. dollar (higher) and oil/commodity prices (lower) would likely continue to drive this negative feedback loop and make it very difficult for policy makers in emerging markets and developing markets to fight disinflationary forces and intercept downside risks,” the analysts add. “Corporate profits and equity markets would also likely suffer further downside risk in this scenario of Oilmageddon….We should all fear Oilmageddon,” Citi concludes. “Global recession, as we define it, would leave nowhere to hide in equities. Cash wins.” (NewsMax)

 

In the first months of the crash in oil prices, most analysts felt that the only companies that would be seriously hurt would be marginal fracking companies — the speculative little guys jumping into the oil shale. Now that fourth-quarter results are coming in from the world’s largest refineries, we find that isn’t true:

 

British Petroleum kicked off the European oil and gas reporting season with an ugly set of fourth-quarter results. The company reported a sharp drop in earnings for the fourth quarter. It’s own measure of underlying profit dropped 91%.… All of this is a recipe for two things — more cost cutting and more job cuts… What’s worrying for investors is that the first quarter, so far, doesn’t look much better. (MarketWatch)

 

That’s massive. BP has already announced the elimination of 7,000 jobs. Chevron and Shell also saw profit declines. Royal Dutch Shell has announced it will be making 10,000 job cuts.

If that’s how bad things got during the fourth quarter of 2015, imagine how bad they will get this quarter now that oil prices have gone down a lot more. Hence, the talk of “Oilmageddon.”

As if the industry wasn’t already burning up, President Obama is trying to impose a $10 carbon tax on each barrel of oil. At today’s oil prices, that is a 30% tax. At tomorrow’s prices, it may be a 50% tax! One has to wonder how far out of touch economically, a president can get in order to propose a hefty tax like that at a time like this.

Naturally, oil magnate T. Boone Pickens calls it “the dumbest idea ever.” While I have a general hatred for gigantic oil companies, especially since gasoline prices in my area have not dropped much, I have to agree that a $10/barrel carbon tax could cinch the noose around the neck of an already strangle industry.

Maybe that’s the plan. While the tax would hit the end user more, no tax helps an industry thrive.

 

The Epocalypse swallows everything whole

 

The reason the Epocalypse is going to be a far worse bloodbath than the first plunge into the Great Recession is that all of the central banks of the world have, by their own admission now, “exhausted their ammunition” to fight back against another recession. Back at the start of the Fed’s Goliath recovery plan, I posited that we would be falling back into the abyss right at the time when all central banks had exhausted their strength and when all nations had maxed their debt.

Here we are.

Many central banks are already doing negative interest; yet, their economies are still sinking. It appears that more negative interest could actually sink them faster by eroding their banks with internal ulcers. It will certainly require going cashless in order for those banks to start handing the negative interest down to their customers. They have to absorb the cost of negative interest if they cannot loan out their funds fast enough. That’s why some banks are now pleading with their government’s for a cashless solution … so they can prevent their customers from switching to the cash-under-the-mattress exit plan.

The world faces a tsunami of epochal defaults. William White, former economist for the International Bank of Settlements, says,

 

Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief…. It was always dangerous to rely on central banks to sort out a solvency problem … It is a recipe for disorder, and now we are hitting the limit… It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something. (The Telegraph)

 

We have finally reached that time in our decades of astronomical debt-based economic expansion where it is time to pay the piper. We traveled blithely along many decades on currency cushions filled with hot air. In an article titled, “Debt, defaults, and devaluations: why this market crash is like nothing we’ve seen before,” The Telegraph says,

 

A pernicious cycle of collapsing commodities, corporate defaults, and currency wars loom over the global economy. Can anything stop it from unravelling…? Commodity prices have crashed by two thirds since their peaks in 2014…. China, the emerging world, and financial markets – are all brewing to create a perfect storm in a global economy that has barely come to terms with the Great Recession…. “We are in a very unusual situation where market sentiment is of a different nature to anything we’ve seen before.”

 

Yes, this is the big one. The times we now face are the reason I started writing this blog four+ years ago. The Federal Reserve’s Goliath recovery plan was cloned all over the world for seven years, and for seven years all nations have done nothing to rethink their debt-based economic structures that are now cracking and groaning and falling into … the Epocalypse.





The unraveling is going global….

18 01 2016

You never hear about markets outside of New York, London, and Australia…….. but, as seen here from a Zerohedge article by Tyler, the rout is global.  And because these countries are at the core of our hydrocarbon energy sources, if they don’t recover……?

Broad Middle-East and African stock markets crashed over 5%, erasing any gains back to November 2008 as the carnage from last week continues. From Kuwait (-4.3%) to Qatar (-8%) it was a bloodbath as Saudi Arabia Tadawul Index plunged 5.4% – the most since Black Monday (now down over 50% from their 2014 highs). These losses are far in excess of US ‘catch-up’ moves and suggest a dark cloud over Asia this evening.

 

It’s been a bloodbath in the Middle-East since the year began…

 

Africa/Middle-East Stocks crashed 5%…

 

Saudi Arabia’s Tadawul Index is down 5.4% on the day – the worst since August’s collapse and has lost over 50% since its exuberant peak in 2014…

 

Kuwait down over 4% to 2009 lows…

 

But Qatar was carnaged… (down over 8%)

 

Makes you wonder where all that hot-money from The Fed flowed eh?

 





This is big…….

13 01 2016

Saudi Arabia state-owned oil firm Aramco slated for sale as crude prices tumble

Saudi Arabia is considering selling part of the giant state-owned Aramco oil company, with at least ten times the oil reserves of Exxon Mobil. Well……..  nobody really knows, because Aramco inexplicably revised its reserves numbers upwards by a factor of almost two in 1988.  Then, even though they’ve been pumping some 10 million barrels a day from their wells, the numbers just kept on creeping up, like magic…..

SAoilreserves

But if they’re selling, someone’s starting to feel the pinch of the oil price dropping like a stone. And who will buy?  With what money?  With Royal Bank of Scotland predicting $16 a barrel, and even worse, someone on the TV news last night talking about $10 (!), who in their right mind would buy Aramco, unless it was a fire sale?

From Peak Oil Barrel:

Saudi has the world’s largest oil field, Ghawar, and it is severely depleted. This 2004 paper, Selected Features of Giant Fields, Using Maps and Histograms, has a wealth of information on the discovery and depletion of giant oil and gas fields

Do the math, this 2004 chart says Ghawar started with 97 billion barrels of oil and was, in 2004, over 81% depleted. Of course the rest of Saudi is not that depleted. They have three fields that have been producing only a few years, Khurais, Manifa and Shaybah. These three fields, along with their other old giants, have enabled Saudi to keep production between 9 and 10 million barrels a day. But it is highly likely that they are about two thirds depleted.

Then, this just hit the news this morning:

Arch Coal, the second largest mining company in the US, filed for bankruptcy on Monday.

It is another blow for the ailing fossil fuel sector, as it struggles to adapt to environmental regulations dampening demand.

US coal production fell to 900 million short tons in 2015, the Energy Information Administration revealed on Friday, a 10% decline on the previous year.

Normally at this time of year, nothing much happens on economic fronts, but all this unraveling is a bit nerve wracking……  It’s easy to play up the idea that this is the beginning of the end of the fossil fuel era, yet it’s hard to say with any certainty that that’s not what’s happening…….

As I write, West Texas crude is trading at $30.50.