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The Next Economic Crisis – Will Your Wealth Survive?

The Next Economic Crisis – Will Your Wealth Survive?

The greatest wealth transfer in history has already begun and the next crisis will only accelerate the process. As the printing presses continue cranking out more and more money, looking forward to a time when the markets pause or another economic crisis consumes the world is an issue we all should think about. How much wealth will escape the next large financial reset is very important because it will set the bar that determines the rate of inflation or deflation in coming years. If you believe we did not solve many of our financial problems after 2008 but merely masked them with a huge amount of newly printed money you are likely to embrace this concept.

The Shell Game Of Wealth Transfer

Much like a shell game where wealth is transferred about, in our modern society wealth is always on the move. Wealth and how things are valued is far from constant, it is fungible and constantly changing. While we may try to deny it, wealth is in a constant state of flux and constantly moving. Wealth comes in many forms, it can be held in the form of paper, promises, or as something more tangible and real such as property or goods.

Some items such as a tool hold “utility value” and its value may be based on how much work it can perform or the revenue it can produce. Replacement cost, supply and demand, and factors such as whether something can spoil or might grow obsolete over time also help determine its value as a place wealth can be safely stored. The term, safely stored in this case also includes placing it out of the reach of governments’ ability to tax it or make it illegal to own.
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The $2.3 Quadrilliion Global Timebomb

THE $2.3 QUADRILLION GLOBAL TIMEBOMB

Credit Suisse is hours from collapse and the consequences could be a systemic failure of the financial system.

Disappointingly, my dream last night stopped there. So unfortunately I didn’t experience what actually happened.

As I warned in last week’s article on Archegos and Credit Suisse, investment banks have created a timebomb with the $1.5 quadrillion derivatives monster.

A few years ago, the BIS (Bank of International Settlement) in Basel reduced the $1.5 quadrillion to $600 trillion with a pen stroke. But the real gross figure was still $1.5q at the time. According to my sources, the real figure today is probably over $2 quadrillion.

A major part of the outstanding derivatives are OTC (over the counter) and hidden in off balance sheet special purpose vehicles.

LEVERAGED ASSETS JUST GO UP IN SMOKE

The $30 billion in Archegos derivatives that went up in smoke over a weekend is just the tip of the iceberg. The hedge fund Archegos lost everything and the normal uber-leveraged players Goldman Sachs, Morgan Stanley, Credit Suisse, Nomura etc lost at least $30 billion.

These investment banks are making casino bets that they can’t afford to lose. What their boards and top management don’t realise or understand is that the traders, supported by easily manipulated risk managers, are betting the bank on a daily basis.

Most of these ludicrously high bets are in the derivatives market. The management doesn’t understand how they work or what the risks are and the account managers and traders can bet billions on a daily basis with no skin in the game but massive potential upside if nothing goes wrong.

DEUTSCHE BANK – DERIVATIVES 600X EQUITY

But we are now entering an era when things will go wrong. The leverage is just too high and the bets totally out of proportion to the equity.

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

 

Supply chain slowdown hits at key pillars of economy and will likely get worse: Dan Yergin

KEY POINTS
  • The pressures on supply chains are increasing and global disruptions are likely to only get worse as summer approaches and the economy booms.
  • Disruptions have converged at the same time in three important pillars of the global economy – shipping, computer chips, and plastics.
  • Port backups are described as the worst ever and delivery times are the longest in 20 years of data collection.
  • The system will ultimately adjust, but that will take time and requires new investment in ports and capacity.
Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, U.S., April 7, 2021.
Shipping containers are unloaded from ships at a container terminal at the Port of Long Beach-Port of Los Angeles complex, amid the coronavirus disease (COVID-19) pandemic, in Los Angeles, California, April 7, 2021.     Lucy Nicholson | Reuters

If you’re wondering why your new couch is going to take three or four months to arrive, not just a few weeks, the reason is simple:  You are at the very end of a global supply chain that has buckled.

For similar reasons, GM and Ford and other automakers around the world are slowing down manufacturing, temporarily shutting auto plants, and furloughing workers.

A recovering world economy that depends upon the synchronized, smooth running of global supply chains is now being slammed by what has turned out to be synchronized disruptions.

Although the massive Ever Given container ship has been unstuck from the Suez Canal, its continuing impact is only adding to the woes.

As government stimulus seeks to fuel a hyper recovery and the world economy accelerates over the rest of this year, the pressures on supply chains are increasing and disruptions are likely to grow as we head into summer.

Stretching supply chains   

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Saudi Arabia Goes the way of the Garamantes. Google Earth Confirms the Collapse of the Water Supply 

Saudi Arabia Goes the way of the Garamantes. Google Earth Confirms the Collapse of the Water Supply 

In 2008, I noted the decline in Saudi Arabian water production and I published an article in “The Oil Drum” titled “Peak Water in Saudi Arabia.” Using a simple version of the Hubbert model of resource depletion, I noted how the supply of “fossil water” had peaked in 1990 and had been declining ever since. This is the typical behavior of “fossil” resources: they tend to peak and then decline. It had already happened to the ancient Garamantes, inhabitants of central Sahara, who had developed sophisticated technologies of water extraction during the 1st millennium BC. That had allowed them to prosper for about one thousand years, but then depletion had its revenge and they vanished among the sand dunes. Something similar (but probably much faster) is going to happen in the Arabian peninsula. 

The old Hubbert model was developed to describe the cycle of extraction of crude oil. It may be oversimplified if you want to use it for detailed predictions. But, as a quick tool for understanding the situation of the production of a non renewable resource, it tells you a lot of what you need to know. That first stab of mine on water production in Saudi Arabia turned out to be correct.

It is impressive how, today, you can use Google Earth to look at the situation “from above.” You can see the collapse of the agricultural fields as depletion progresses. Here are the images of an irrigated area for a region East of Al Jubail, in Saudi Arabia,  26°48’29.60″N and  49° 8’47.58″E.

Let’s start with an image of the desert in 1984. There is absolutely nothing there:

One year later, 1985. Someone has started extracting water and irrigating the land. There are two active fields there.

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Gen IV SMR nuclear reactors

Gen IV SMR nuclear reactors

Preface. Peak conventional oil, which supplies over 95% of our oil, may have peaked in 2008 (IEA 2018) or 2018 (EIA 2020). We are running out of time. And is it really worth building these small modular reactors (SMR) given that peak uranium is coming soon? And until nuclear waste disposal exists, they should be on hold, like in California and 13 other states.

And since trucks can’t run on electricity (When Trucks Stop Running: Energy and the Future of Transportation 2015, Springer), what’s the point? Nor can manufacturing be run on electricity or blue hydrogen (Friedmann 2019). Once oil declines, the cost to get uranium will skyrocket since oil is likely to be rationed to transportation, especially agriculture.

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Cho A. 2020. Critics question whether novel reactor is ‘walk-away safe’. Science 369: 888-889

Engineers at NuScale Power believe they can revive the moribund U.S. nuclear industry by thinking small. Spun out of Oregon State University in 2007, the company is striving to win approval from the U.S. Nuclear Regulatory Commission (NRC) for the design of a new factory-built, modular fission reactor meant to be smaller, safer, and cheaper than the gigawatt behemoths operating today (Science, 22 February 2019, p. 806). But even as that 4-year process culminates, reviewers have unearthed design problems, including one that critics say undermines NuScale’s claim that in an emergency, its small modular reactor (SMR) would shut itself down without operator intervention.

NuScale’s likely first customer, Utah Associated Municipal Power Systems (UAMPS), has delayed plans to build a NuScale plant, which would include a dozen of the reactors, at the Department of Energy’s (DOE’s) Idaho National Laboratory. The $6.1 billion plant would now be completed by 2030, 3 years later than previously planned, says UAMPS spokesperson LaVarr Webb. The deal depends on DOE contributing $1.4 billion to the cost of the plant, he adds.

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Inflation, real interest rates revisited

U.S. Oil Bankruptcies Shoot Up In Q1 2021

U.S. Oil Bankruptcies Shoot Up In Q1 2021

The number of North American producers that filed for bankruptcy protection in the first quarter of 2021 reached the highest number for a first quarter since 2016, yet the wave of bankruptcies has significantly slowed since the peaks in the second and third quarter of 2020, law firm Haynes and Boone said in its latest tally to March 31.

The Oil Patch Bankruptcy Monitor showed that eight producers filed for bankruptcy this past quarter, which was the highest Q1 total since 2016 when 17 oil producers in North America sought protection from creditors.

Texas accounted for 50 percent of the total producer filings in the first quarter of 2021, with four in total, Haynes and Boone said.

The law firm noted that there were no producers with billion-dollar bankruptcies in Q2 2021, which had not happened since the third quarter of 2018.

The total debt for producers that filed in the first quarter was just over $1.8 billion—the second-lowest total for a Q1 after $1.6 billion in Q1 2019, according to Haynes and Boone.

Even though the number of first-quarter 2021 bankruptcies was the highest for a Q1 since 2016, it showed the trend of slowing filings after 18 oil and gas producers filed in the second quarter of 2020 and another 17 in the third quarter, the two quarters in which the oil price crash and the crisis were most severely felt by indebted producers.

Apart from eight producers, the first quarter of 2021 also claimed five oilfield services companies that filed for bankruptcy, Haynes and Boone data showed. This number is the third-lowest Q1 total since 2015, and much lower than 27 filings in Q3 2020 and another 17 filings from oilfield services companies in Q4 2020.

The aggregate debt for oilfield services companies that filed in Q1 2021 was over $7.2 billion—the third-highest Q1 total since 2015, but one company, Seadrill Limited, accounted for 99.8 percent of the aggregate debt for the quarter, Haynes and Boone said.

New Study: Cross-Border Energy Infrastructure Critical To U.S.-Canada Energy Trade, Benefits Consumers On Both Sides Of The Border

New Study: Cross-Border Energy Infrastructure Critical To U.S.-Canada Energy Trade, Benefits Consumers On Both Sides Of The Border

WASHINGTON, April 6, 2021 – The American Petroleum Institute (API) today released a new report examining how growth in cross-border petroleum trade between the United States and Canada has led to the further integration of North American energy markets, delivering economic benefits, lowering consumer energy costs and strengthening energy security on both sides of the border. The analysis, which API Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola highlighted in remarks before the 2021 Scotiabank CAPP Energy Symposium earlier today, underscores how continued development and maintenance of cross-border energy infrastructure will be critical to sustaining this trade relationship and further integrating North American energy markets.

“The integration of U.S. and Canadian energy markets has been a win-win for both countries, supporting economic growth and lowering energy costs for working families while bolstering North American energy security,” API Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola said. “None of this would be possible without the cross-border energy infrastructure that enables the safe and efficient transport of these energy resources. Continued development and maintenance of this critical infrastructure is essential to furthering the success and mutual benefits of this important trade relationship.”

U.S. and Canadian petroleum markets are increasingly integrated:

  • U.S.-Canada petroleum liquids trade nearly doubled over the past decade.
  • Petroleum liquids trade represents 10 to 20 percent of total U.S.- Canada trade flow.
  • U.S. crude oil made up 72 percent of Eastern Canada’s crude imports in 2019.
  • Canada supplied 58 percent of US heavy crude oil imports in 2019.

Integration of U.S. and Canadian petroleum markets strengthens the energy security of both countries:

  • Increased imports of Canadian crude oil in tandem with booming domestic production have allowed U.S. refiners to significantly reduce crude oil imports from OPEC 70 percent from 2010 to 2019.

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

If You Don’t See Any Risk, Ask Who Will “Buy the Dip” in a Freefall?

If You Don’t See Any Risk, Ask Who Will “Buy the Dip” in a Freefall?

Nobody thinks a euphoric rally could ever go bidless, but as Greenspan belatedly admitted, liquidity is not guaranteed.

The current market melt-up is taken as nearly risk-free because the Fed has our back, i.e. the Federal Reserve will intervene long before any market decline does any damage.

It’s assumed the Fed or its proxies, i.e. the Plunge Protection Team, will be the buyer in any freefall sell-off: no matter how many punters are selling, the PPT will keep buying with its presumably unlimited billions.

If this looks risk-free, ask who else will be “buying the dip” in a freefall?Former Fed Chair Alan Greenspan answered this question in his post-2008 crash essayNever Saw It Coming: Why the Financial Crisis Took Economists By Surprise (Dec. 2013 Foreign Affairs):

“They (financial firms) failed to recognize that market liquidity is largely a function of the degree of investors’ risk aversion, the most dominant animal spirit that drives financial markets. But when fear-induced market retrenchment set in, that liquidity disappeared overnight, as buyers pulled back. In fact, in many markets, at the height of the crisis of 2008, bids virtually disappeared.”

For the uninitiated, bids are the price offered to buyers of stocks and ETFs and the ask is the price offered to sellers. When bids virtually disappear, this means buyers have vanished: everyone willing to buy on the way down (known as catching the falling knife) has already bought and been crushed with losses, and so there’s nobody left (and no trading bots, either) to buy.

When buyers vanish, the market goes bidless, meaning when you enter your “sell” order at a specific price (limit order), there’s nobody willing to buy your shares at the current price. The shares remains yours all the way down.

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

So Who Wants a Hot War?

Unwelcome Inflation Heats Up in Mexico, Brazil, and as Always in Argentina

Unwelcome Inflation Heats Up in Mexico, Brazil, and as Always in Argentina

Brazil’s central bank struck back with shock-and-awe rate hike. Mexico’s central bank faces tough spot after big hit to economy. Argentina’s inflation exceeds 42%.

Around the world, there has been massive fiscal and monetary stimulus, an unprecedented growth in government-guaranteed lending, an explosion in the broad money supply, coupled with low inventories, supply chain shocks, rising shipping costs, and surging demand for certain commodities and consumer goods in developed countries, particularly the US. Companies are able to raise prices and pass on higher costs without triggering a buyers strike as the inflationary mindset has kicked in.

Many emerging economies are also having to contend with the additional inflationary impact of weaker domestic currencies. They include Mexico, where consumer prices rose to 4.7% in March — their highest level since December 2018. Prices are now firmly above the Bank of Mexico’s target inflation rate of 3%, with a one percentage point tolerance threshold above and below that level. In March alone, consumer prices grew 0.8%:

The items that saw the biggest month-on-month price increases were domestic LP gas (5.2%), low-octane gasoline (6%), and staple foods such as eggs (8%).

Surging commodities prices are being passed on to retail products. The price of corn reached $5.68 per bushel in March, up 74% from a year ago. Since last June, the price of this essential grain, for both human and livestock consumption, has risen every month. With consequences: The price of corn tortilla, Mexico’s most important staple food, rose by almost 3% in March from February.

Last year Mexico’s economy suffered its biggest contraction (8.5%) since the worst year of the Great Depression, 1932. It also appears to have contracted in the first quarter of 2021. But prices continue to rise, leaving the Bank of Mexico little choice but to abandon its plan to cut interest rates this month.

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Journalists, Learning They Spread a CIA Fraud About Russia, Instantly Embrace a New One

Journalists, Learning They Spread a CIA Fraud About Russia, Instantly Embrace a New One

The most significant Trump-era alliance is between corporate outlets and security state agencies, whose evidence-free claims they unquestioningly disseminate.

A US soldier in Afghanistan CREDIT: GETTY IMAGES

That Russia placed “bounties” on the heads of U.S. soldiers in Afghanistan was one of the most-discussed and consequential news stories of 2020. It was also, as it turns out, one of the most baseless — as the intelligence agencies who spread it through their media spokespeople now admit, largely because the tale has fulfilled and outlived its purpose.

The saga began on July 29, 2020, when The New York Times announced that unnamed “American intelligence officials” have concluded that “a Russian military intelligence unit secretly offered bounties to Taliban-linked militants for killing coalition forces in Afghanistan — including targeting American troops.” The paper called it “a significant and provocative escalation” by Russia. Though no evidence was ever presented to support the CIA’s claims — neither in that original story nor in any reporting since — most U.S. media outlets blindly believed it and spent weeks if not longer treating it as proven, highly significant truth. Leading politicians from both parties similarly used this emotional storyline to advance multiple agendas.

The story appeared — coincidentally or otherwise — just weeks after President Trump announced his plan to withdraw all troops from Afghanistan by the end of 2020. Pro-war members of Congress from both parties and liberal hawks in corporate media spent weeks weaponizing this story to accuse Trump of appeasing Putin by leaving Afghanistan and being too scared to punish the Kremlin. Cable outlets and the op-ed pages of The New York Times and Washington Post endlessly discussed the grave implications of this Russian treachery and debated which severe retaliation was needed…

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Shell To Exhaust Dwindling Oil & Gas Reserves By 2040

Shell To Exhaust Dwindling Oil & Gas Reserves By 2040

Shell expects to have produced 75 percent of its current proved oil and gas reserves by 2030, and only around 3 percent after 2040, the supermajor said in its Energy Transition Strategy that it will put to a non-binding shareholder vote next month.

Discussing the risk of stranded assets in the energy transition, Shell said that every year it tests its oil and gas portfolio under different scenarios, including prolonged low oil prices, and cross-references assets with break-even prices to assess if they would still be viable in case of low oil and gas prices.

At December 31, 2020, Shell estimated that around 70 percent of its proved plus probable oil and gas reserves, known as 2P, will be produced by 2030, and only 5 percent after 2040.

Shell’s proved oil and gas reserves have been declining in recent years, shrinking the reserves life to below eight years of production.

In 2020, Shell’s proved reserves—taking production into account—decreased by 1.972 billion barrels of oil equivalent (boe) to 9.124 billion boe at December 31, 2020, the firm’s annual report showed.

That’s reserves for just seven years of production, lower than most peers.

The declining reserves life is not unique for Shell. The largest international oil companies have seen their average crude reserves drop by 25 percent over the past five years, which could be a challenge for Big Oil’s production and earnings in the coming years, Citi said earlier this month.

The supermajors reported lower reserves in their most recent reports, also due to the 2020 oil price and oil demand collapse, which forced all of them to write off billions of U.S. dollars off the value of assets.

In Shell’s case, the declining reserves life is not in contradiction to its assessment from earlier this year that its oil production peaked in 2019 and is set for a continual decline over the next three decades.

Is China Preparing A Gold-Backed Yuan: Beijing Greenlights Purchases Of Billions In Bullion

Is China Preparing A Gold-Backed Yuan: Beijing Greenlights Purchases Of Billions In Bullion

In 2018, the Chinese launched a gold-backed, yuan-denominated oil futures contract.  These contracts were priced in yuan, but convertible to gold, raising the prospect that “the rise of the petroyuan could be the death blow for the dollar.

Two weeks ago, The IMF reported that the global share of US-dollar-denominated exchange reserves dropped to 59.0% in the fourth quarter, according to the IMF’s COFER data released today. This matched the 25-year low of 1995.

Also last week, Peter Thiel warned “Bitcoin should also be thought [of] in part as a Chinese financial weapon against the US… It threatens fiat money, but it especially threatens the U.S. dollar.”

All of which sets the stage for the dramatic headlines that hit this morning, as Reuters reports that China has given domestic and international banks permission to import large amounts of gold into the country,

The People’s Bank of China (PBOC), the nation’s central bank, controls how much gold enters China through a system of quotas given to commercial banks.It usually allows enough metal in to satisfy local demand but sometimes restricts the flow.

In recent weeks it has given permission for large amounts of bullion to enter, the sources said.

“We had no quotas for a while. Now we are getting them … the most since 2019,”said a source at one of the banks moving gold into China.

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

Fauci Preaching Total World Control is Necessary

Fauci is now pushing Bill Gates’ agenda that the ENTIRE WORLD must be vaccinated against a virus that is no more deadly than the flu. Yet, the vaccines have unknown problems. What will messing with our DNA do to future generations? The conflict of interest is overwhelming when Fauci is at least responsible for this outbreak and is in cahoots with not only Bill Gates but does videos for Klaus Schwab’s World Economic Forum, touting that inequality requires the Great Reset.

The mere fact that Fauci appears in WEF videos is very disturbing. To do so means he is in contact with the very people who are trying to change the world economy and bring capitalism to an end. My deep concern is that these same people are panicked over population growth. I do not buy the idea that the object of vaccinations is to make people healthier and live longer when the proponents simultaneously want to reduce the population.

In Australia, Fauci told the population that would be no freedom from the virus for Australia or any country that had successfully suppressed it within its own communities until the overwhelming majority of the world’s population was vaccinated against COVID-19 and its spread was controlled globally.

“As long as there’s the dynamic of virus replication somewhere, there will always be the threat of the emergence of variants which could then come back.”

“Even though most of the rest of the world is vaccinated, it can threaten the [countries] that [have] felt that they’ve controlled the virus, when they’re still quite vulnerable.

“If you want to maintain control you want to have control throughout the entire world.”

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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