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History crash

History crash

My previous post offered a retrospective take on my ‘Peasant’s Republic of Wessex’ post cycle that I completed a while back. I thought I might now turn to another such retrospective, this time on my recently-completed ‘History of the world’ cycle. So I’d like to offer a few thoughts on the way we think about history, with the help of a couple of books from my recent reading.

JG Ballard’s Crash is one of the weirdest books I’ve ever read – a novel about people who are sexually aroused by cars, and in particular by deaths and injuries in car crashes, deliberately orchestrated or otherwise1. It’s a disturbing, semi-pornographic and some might say depraved book, to which a publisher’s reader of the draft manuscript famously wrote “This author is beyond psychiatric help. Do not publish”. It’s also, in my opinion, completely brilliant. I can’t imagine what the hell was going through Ballard’s mind in writing it, but for me it touches on two themes relevant to this blog.

The first is that we tend to talk about technology nowadays as if it’s something that’s radically separable from what it is to be a person. So with cars, for example, we might draw up some kind of balance sheet where we say that the advent of the automobile has been positive, because it’s allowed us to get to places quicker and more freely, while acknowledging the downsides – road injuries, air pollution etc. I take Ballard to be saying that this way of thinking is flawed. Cars have changed who we are, and bled into the very fabric of what it means to be a person in the 20th or 21st centuries.

…click on the above link to read the rest of the article…

Mueller, Russia and Oil Politics

Mueller, Russia and Oil Politics

Dunder-Mifflin as Troll Farm

The Mueller indictment made public on Friday charges 13 Russian nationals with trolling the American electoral process to ‘sow discord’ by falsely representing themselves as American dissident personas. Once the field of presidential aspirants had been narrowed in 2016, their goal became to support Donald Trump’s candidacy while disparaging Hillary Clinton. There is no charge that the outcome of the 2016 election was changed by these actions.

The form of the alleged conspiracy was a ‘troll farm,’ an office populated by various functionaries who worked together from 2014 to today to magnify already existing social tensions on social media. Those charged were likewise mainly functionaries— IT workers, managers, etc. Despite allegations to the contrary in the American press, no links between the alleged troll farm and the Kremlin and / or Vladimir Putin were put forward.

The 13 people charged are Russian nationals presumably living in Russia. As of this writing none have been arrested. Unless they plan to voluntarily return to the U.S., an unlikely move, the charges will never be contested in a courtroom. This most certainly was understood by Mr. Mueller before the indictments were handed down. Lest this remain unclear, charges made without the likelihood of a trial are unlikely to ever be resolved.

In reading through the charges, what is striking is that the Russians aren’t charged with creating social tensions. They are charged with exploiting and exacerbating them. It is their personas that are deemed to be false, not the familiar chatter of quasi-anonymous voices on social media. The point is that the social tensions preceded the chatter. Mr. Mueller’s term ‘sowing discord’ literally means that discord was planted. The actual sequence is of discord being exploited.

…click on the above link to read the rest of the article…

Are Oil Prices Heading for Another Spike?

 Pipeline moves crude oil from Prudhoe BayJoe Sohm/Visions of America/UIG via Getty Images

Are Oil Prices Heading for Another Spike?

The decline in the dollar’s exchange rate seems to have gathered momentum, in part because the person who has his signature on US currency, Treasury Secretary Steve Mnuchin, seems unperturbed by its weakness. If it continues, will energy costs spiral upward?

CAMBRIDGE – The price at the pump for premium gasoline topped $3 per gallon in much of the United States over the past few weeks, which is surprising to consumers but not to analysts of the world’s oil markets. From its local low two years ago, the price of oil has more than doubled. As with any market, where you stand on this price increase depends on where you sit.

Higher oil prices buttress the fortunes of producers abroad and at home. The International Monetary Fund upgraded the GDP growth outlook of all six of the top ten oil producers that were shown separately in its 2018 forecast update, and the projected growth of world trade volumes was raised half a percentage point this year and next. Increased oil revenues improve the fiscal positions of most producing economies, and some have taken advantage of global investors’ hardier appetite to issue sovereign debt.

In the US, the five states with the largest gains in oil production this decade recorded employment growth of 2.75% in 2017, double the national average. Meanwhile, the number of oil rigs nationwide increased by roughly 50%.

At the same time, a doubling of energy costs takes a significant bite out of US households’ budgets, with energy costs directly accounting for about 6.5% of consumer spending. Even more problematic, this is a regressive tax, disproportionately draining lower-income households’ discretionary spending power.

…click on the above link to read the rest of the article…

The Abnormality of Oil

Oil barrelsAhmad Al-Rubaye/Getty Image

The Abnormality of Oil

At the 2017 Abu Dhabi Petroleum Exhibition and Conference, the consensus among industry executives was that oil prices will still be around $60 per barrel in November 2018. But there is evidence to suggest that the uptick in global growth and developments in Saudi Arabia will push the price as high as $80 in the meantime.

LONDON – Writing about oil prices is always risky. In a January 2015, I suggested that oil prices would not continue to fall, and even predicted that they would “finish the year higher than they were when it began.” I was wrong then; but I might not be wrong for much longer.

I recently spoke at the massive Abu Dhabi Petroleum Exhibition and Conference (ADIPEC), which is a kind of Davos for oil-market participants. While there, I caught the tail end of a discussion among senior oil executives who all agreed that at this time next year, crude oil will still be around $60 per barrel, as it is today.

I was about to be interviewed by the CNBC reporter Steve Sedgwick, to whom I said, “That would be a first. Oil prices hardly moving in a year?” Needless to say, Sedgwick began the interview by telling the audience what I had said, and quizzed me on why I disagreed with the others.

Before I get to my explanation, let me state the usual caveats. Forecasting oil prices is inevitably a fraught endeavor; in fact, it makes forecasting currency markets look easy. When I completed a doctorate on oil markets in the late 1970s and early 1980s, I had already concluded that trying to guess oil prices is a waste of time and energy. Later, when I was at Goldman Sachs, I was often amused to see commodity analysts in my research group struggling to cope with the usual chaos of oil-price developments.

…click on the above link to read the rest of the article…

UK’s Secret Cold War Plan For Middle East Oil Fields

UK’s Secret Cold War Plan For Middle East Oil Fields

Oilfield fire

The 1950s were a turbulent time on both sides of the Iron Curtain. With the Second World War over and the star role played by crude oil in its outcome, British and U.S. intelligence agencies wasted no time working out scenarios should the Soviets invade the Middle East.

In hindsight, especially to younger generations, this might seem eccentric, but not to those who remember the Cold War and the paranoia that raged on both sides. In the 50s, the British and U.S. intelligence services were genuinely concerned about a further Soviet expansion, into the Middle East, which at the time was the main source of crude oil for both countries. No wonder the region was a priority security issue for both countries.

The plans were first hatched by U.S. President Truman in 1949, Russian Sputnik writes, citing a number of recently declassified documents from both the UK and the United States. Dubbed “oil denial”, the plans involved oil company personnel in the Middle East sabotaging their own oilfields and refineries in case of a Soviet invasion, in hopes of restricting the invaders’ access to the precious commodity.

While sound in themselves, the denial plans of the Brits faced problems: the empire’s influence in the Middle East was in decline. Iran’s and Iraq’s governments, according to declassified documents, were believed to be particularly unlikely to cooperate with oil companies in sabotaging their own oil industry.

The reason for this was that the UK no longer had a monopolistic presence in these two, despite the U.S.-led 1953 coup in Iran, which returned the shah to power and BP to the helm of the Iranian oil industry. BP was at the helm, true, but the Iranian government controlled the refineries, and was building more. The Soviet invasion scenario involved not just oilfields but also refineries.

…click on the above link to read the rest of the article…

Art Berman: Like It Or Not, The Future Remains All About Oil

Vladimir Yudin | Dreamstime.com

Art Berman: Like It Or Not, The Future Remains All About Oil

And competition for it is heating up 

Art Berman, 40-year veteran in the petroleum production industry and respected geological consultant, returns to the podcast this week to talk about oil.

After the price of oil fell from its previous $100+/bbl highs to under $30/bbl in 2015, many declared dead the concerns raised by peak oil theorists. Headlines selling the “shale miracle” have sought to convince us that the US will one day eclipse Saudi Arabia in oil production. In short: cheap, plentiful oil is here to stay.

How likely is this?

Not at all, warns Berman. World demand for oil shows no signs of abating while the outlook for future production looks increasingly scant. And the competition among nations for this “master resource” will be much more intense in future decades than we’ve been used to:

Since the 1980s, we simply have not been replacing reserves with new discoveries. So how does that work? Well, obviously, we’ve got a lot of oil on production and in reserves, so we’re essentially drawing down our savings account if you want to think about it that way. You can do that for a long time if you’ve got a whole lot of money in your savings account, and we as a planet do. But you can’t do it forever.

Eventually, you either have to stop spending as much so you don’t draw down your savings, or you need to put some money back in the account. And it doesn’t seem like we’re doing much of either, and haven’t been doing much of either for a long time. So the concern is tremendous, at least, in my estimation(…)

…click on the above link to read the rest of the article…

The U.S. Foreign Policy Elite Still Wants the Middle East for Its Oil and Its Strategic Location

The U.S. Foreign Policy Elite Still Wants the Middle East for Its Oil and Its Strategic Location

In recent testimony before the Senate Armed Services Committee, four former U.S. diplomats provided remarkably candid commentary on recent U.S. involvement in the Middle East, revealing a number of the most closely guarded secrets of U.S. diplomacy.

The four former diplomats emphasized the importance of the region’s oil, spoke critically about the weaknesses of U.S. strategy, made a number of crude comments about U.S. partners, displayed little concern about ongoing violence, and called for more “discipline” throughout the region.

One of the former diplomats, James Jeffrey, criticized the Obama administration for withdrawing U.S. forces from Iraq in 2011 rather than going through with a secret deal to maintain a secret network of military bases in the country. Even today, Jeffrey said, officials in Washington must not “melt down” and retrench when U.S. forces get killed. Officials must accept that there could always be “new Benghazis and new Nigers,” he said, referring to incidents in which U.S. agents have been killed.

The four former diplomats also lambasted U.S. partners in the region. They criticized many of their closest allies for poor governance, a lack of democracy, and an inability to coordinate on shared strategic objectives.

Jeffrey made some of the strongest criticisms, charging Kurdish leaders in Iraqi Kurdistan with making their region into “another basket case” in the Middle East. He also complained that U.S. officials had to deal “with a lot of bitching” from the Turkish government over U.S. support for the Kurdish fighters confronting the Islamic State (ISIS or IS) in Syria.

…click on the above link to read the rest of the article…

Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?

Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?

The oil market price is setting up for one heck of a fall.  Now, could this large oil correction cause the next stock market crash?  Time will tell.  However, the indicators in the oil market are showing the largest net commercial short positions in history.  The current net commercial short positions in the oil market are even higher by 174,000 contracts than the level when the oil price fell from $105 in mid-2014 to a low of $30 at the beginning of 2016.

Furthermore, there was a previous trend in the 1980’s that suggests we are setting up for a MAJOR stock market crash.  I discuss the details of the current record net commercial short positions and the similar setup that took place during the 1980’s in my newest video, Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?

Here is one of the charts discussed in the video presentation above:

As we can see in this COT Report (Commitment Of Traders), the commercial net short positions jumped from 648,000 to 674,000 in the past week.  However, this chart only shows the change traders’ positions over one year.  To see how large the present commercial net short positions, please check out the short 12-minute video.

I believe the oil and stock markets are setting up for one large correction or even a market crash.  Thus, as the stock markets crack, we will likely see a huge move by retail investors into Gold ETF’s as well as precious metals investors tremendously increase their demand for physical gold and silver investment.

 

Gail Tverberg: The Coming Energy Depression

Gail Tverberg: The Coming Energy Depression

The math is straightforward, but cruel

As most PeakProsperity.com readers know, we fully agree with the statement: Energy is THE master resource.

Without it, nothing can get done.

Energy analyst and professional actuary Gail Tverberg returns to the podcast this week to revisit the global energy outlook. And fair warning, Gail warns it’s quite grim.

To her, it’s a simple math problem. We have too many people placing too much demand on the world’s depleting energy resources. The cost of energy is rising, which we are compensating for in the short term by using financial gimmicks to make “affordable” — when all we’re really doing is creating future promises that cannot possibly be repaid.

The increasing cost of energy is manifesting in higher prices (for everything, not just fuels) and lower real wages, a divergence she sees only worsening from here. This path leads to another Great Depression-style crisis from which she does not see a clear path out of:

What we really live on is what we pull out of the ground each year, in terms of oil or coal or natural gas or whatever. So what we have is just what we pull out.

Now, you accurately point out that we’re making too many claims on the future using debt. We’re actually doing this via a couple of different ways, which are pretty much equivalent. One of them is by issuing equity. This has the equivalent effect as using debt because what you’re saying is I’ll pay you dividends, and you’re going to get a higher price in the future. This is simply different kind of claim on the future. Another way to borrow from the future is through government promises.

…click on the above link to read the rest of the article…

Here is what’s holding back China’s plans for world domination

Here is what’s holding back China’s plans for world domination

Australia may be the worlds largest exporter of coal, sending out 388 million tons in 2015, but China’s production of coal the same year was 3,747 million tons — nearly ten times as much, and nearly half of global coal production. But the Chinese coal boom is turning. David Archibald describes the geopolitical ramifications. For me, the next question is what stops China doing nukes?    — Jo

PS: There is a rumor that Australia has only 4-5 days of fuel stocks today, and is especially low on aviation fuel. Anyone with info, please comment or email joanne AT this site.

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Here is what’s holding back China’s plans for world domination

One of the reasons that China produces the world’s cheapest solar panels, for example, is because it has some of the world’s cheapest coal-fired power

There is no doubt that China wants to subjugate Asia, echoing Japan’s role during World War II.  For those who think China’s economy might overtake the United States economy, and thus make China a more formidable adversary, this article aims to provide detail on China’s main constraint in that ambition: that its domestic coal production is near its peak and will then go into long-term decline.

Even if China can keep its energy supply constant with an accelerated expansion of its nuclear power sector, the cost of producing coal from deeper mines will mean that the costs of industrial production will rise due to higher feedstock costs.  One of the reasons that China produces the world’s cheapest solar panels, for example, is because it has some of the world’s cheapest coal-fired power.  German solar panel-producers are hobbled by that country’s energiewende, which, translated from the German, means the miracle required to replace coal and nuclear power with sunbeams and breezes and still have a functioning economy.

…click on the above link to read the rest of the article…

Venezuela Will Back Its Cryptocurrency With 5 Billion Barrels Of Oil, Gold Deposits

Four months ago, in a not entirely surprising move meant to circumvent US economic sanctions on Venezuela, president Nicolas Maduro announced that his nation would stop accepting dollars  as payment for oil imports, followed just days later by the announcement that in a dramatic shift away from the Petrodollar and toward Beijing, Venezuela would begin publishing its oil basket price in Chinese yuan. The strategic shift away from the USD did not work quite as expect, because a little over two months later, both Venezuela and its state-owned energy company, PDVSA were declared in default on their debt obligations by ISDA, which triggered the respective CDS contracts as the country’s long-expected insolvency became fact.

Then, in early December, clearly fascinated and captivated by the global crypto craze, Maduro shocked the world by announcing the creation of the “Petro“, Venezuela’s official cryptocurrency “to advance in the matter of monetary sovereignty, to make financial transactions and to overcome the financial blockade”.


Nicolas Maduro dances with supporters in Caracas, Venezuela, December 1, 2017

“The objective is to advance in the Venezuelan economy and overcome the financial blockade, this allows us to continue in the economic and social development supported by Venezuelan riches,” said the president, explaining that his government will make a cryptocurrency issue “backed by reserves of Venezuelan gold, oil, gas and diamond wealth.”

Still, as we said when he first commented  on Venezuela’s bizarre foray into digital currencies, “it was not exactly clear how this PetroCoin would be backed by various natural resources when the whole point of cryptos is that they are not backed by anything, and as such it appears that what Maduro is trying to do is admit that the hyperinflating Bolivar has failed as a sovereign reserve, and the country is hoping to confuse its global trading partners enough into believing that it somehow had a new “bitcoin” on its hands, which like the real thing would then proceed to appreciate in value in the near future.

…click on the above link to read the rest of the article…

Yuan-Priced Crude Futures Could Arrive Before Christmas

Yuan-Priced Crude Futures Could Arrive Before Christmas

Yuan

After years of setbacks and delays, China may be days away from launching a yuan-priced crude oil futures contract to make its currency more international and challenge the dominance of the petrodollar.

Many Chinese investors eagerly anticipate the start of yuan oil futures trading on the Shanghai International Energy Exchange, with hope it will come just in time for Christmas, when western markets will be either closed or calmer than usual.

Although local investors can’t wait to pour yuan into another commodity contract, international investors may not be as eager because it is not clear yet how much freedom China would allow in that trade. International traders may have to swallow Chinese intervention on the markets or rigid capital controls, Bloomberg reported last week.

In July, the Shanghai International Energy Exchange, INE, completed a four-step trial in crude oil futures denominated in yuan and said that it would carry preparatory works for the listing of crude oil futures, and would try to launch the contract by the end of this year.

The launch of the yuan oil futures contract will be a wake-up call for traders and investors who haven’t been paying attention to Chinese plans to create the so-called petroyuan and shift oil trade out of petrodollars, Adam Levinson, managing partner and chief investment officer at hedge fund manager Graticule Asset Management Asia (GAMA), said in October.

Although the petroyuan is not expected to immediately supplant the petrodollar, the world’s top oil importer launching a crude oil futures contract in its domestic currency is a sign that the Chinese want their yuan to play an increasingly important role in global trade, starting with the oil trade.

…click on the above link to read the rest of the article…

The Great Oil Swindle

silentera.com

The Great Oil Swindle

Is leading us to destruction

When it comes to the story we’re being told about America’s rosy oil prospects, we’re being swindled.

At its core, the swindle is this: The shale industry’s oil production forecasts are vastly overstated.

Swindle:  Noun  – A fraudulent scheme or action.

And the swindle is not just affecting the US.  It’s badly distorted everything from current geopolitics to future oil forecasts.

The false conclusions the world is drawing as a result of the self-deception and outright lies we’re being told is putting our future prosperity in major jeopardy. Policy makers and ordinary citizens alike have been misled, and everyone — everyone — is unprepared for the inevitable and massive coming oil price shock.

An Oil Price Spike Would Burst The ‘Everything Bubble’

Our thesis at Peak Prosperity is that the world’s equity and bond markets are enormous financial bubbles in search of a pin. Sadly, history shows there’s nothing quite as sharp and terminal to these sorts of bubbles as a rapid spike in the price of oil.

And we see a huge price spike on the way.

As a reminder, bubbles exist when asset prices rise beyond what incomes can sustain.  Greece is a prime recent example. In 2008 when the price of oil spiked to  $147/bbl, Greece could no longer afford imported oil. But oil is a necessity so it was bought anyway, their national balances of payments were stressed to the point that they were exposed as insolvent and then their debt bubble promptly and predictably popped.   The rest is history.  Greece is now a nation of ruins and their economy might as well be displayed alongside the Acropolis.

…click on the above link to read the rest of the article…

“Loonie Longs Are Set For A Painful Dose Of Reality”: Trader

“Loonie Longs Are Set For A Painful Dose Of Reality”: Trader

Is all hell about to breaks loose for Loonie longs?

Yesterday, Bank of America released a note titled simply enough “CAD longs at risk”, in which it said that “according to our liquid cross border flow (LCBF) data, hedge funds and real money now appear to be in the process of selling out of extended CAD longs after having been consistent buyers since the summer.” The Bank said that this represents an important directional shift and explained as follows:

As argued last month, risks remain sharply skewed to the upside in USDCAD over the next few months based largely on supportive US vs. Canada fundamentals and CAD position liquidation potential. Based on confirming trends in the LCBF data, we are more comfortable with our position liquidation thesis and continue to expect a retest of 1.33.  Hedge funds began buying CAD after BoC Senior Deputy Governor Carolyn Wilkins delivered an upbeat assessment of Canada’s economic economy on June 12, marking the beginning of a pivotal shift in the BoC’s policy stance that ultimately saw the two emergency rate cuts of 2015 reversed in the July and September meetings. Hedge funds were net buyers of CAD in 13 of the 15 weeks following that speech, amassing a large cumulative position that peaked the week of November 17. In the three weeks since, roughly 40% of hedge fund longs in CAD have been liquidated.

As a result, BofA thinks that the risk is that real money follows the hedge fund lead and initiates the position squaring process, and added that “after unprofitably fading the Wilkins speech in the back half of June, real money began aggressively building long CAD positions from July through September, a period over which 80% of its peak cumulative long CAD position recorded on November 24 was put on.

…click on the above link to read the rest of the article…

China Regulators Complete Final ‘Drill’ In Preparation For Petro-Yuan Futures Trading

China Regulators Complete Final ‘Drill’ In Preparation For Petro-Yuan Futures Trading

Amid all the chatter of Venezuela and Russia potentially creating oil-backed cryptocurrencies, the “huge news” of China’s launch of the Petro-Yuan has fallen off the front page… until now.

This week saw the Shanghai Futures Exchange complete its fifth yuan-back oil futures contract trading drill successfully…

As Bloomberg reports, 149 members of Shanghai International Energy Exchange traded 647,930 lots in the drill with total value of 268.2b yuan, according to a statement from the exchange, which added that the system basically met the listing requirements of crude futures after the drill.

While this was a success, it’s not all plain-saling…

As Bloomberg notes, as the world’s largest energy consumer and an increasing source of investment capital for oil-producing nations, China has an interest in using its own currency rather than that of a geopolitical competitor.

One hurdle for setting up a rival to Brent or West Texas Intermediate: Overseas oil producers and traders would need to swallow China’s capital controls and penchant for occasional market interventions.

Similar hurdles have kept foreign investors as bit players in China’s giant mainland stock and bond markets, and the share of payments in Yuan in the Global SWIFT system has fallen…

“This contract has the potential to greatly help China’s push for yuan internationalization,” said Yao Wei, chief China economist at Societe Generale SA in Paris.

“But its success will hinge critically on the degree of freedom allowed for the capital flows related to the contract,” she said.

“It is not unreasonable to envision a world in which the overwhelming share of commodity contracts, especially for oil, are no longer denominated just in dollars,” said Eswar Prasad, a former China division chief at the IMF.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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