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Saudi Oil Minister: We Won’t Ramp Up Oil Production Soon

Saudi Oil Minister: We Won’t Ramp Up Oil Production Soon

Khalid al Falih

Saudi Arabia plans to stay within the limits of its ceiling under the OPEC+ production cut deal in May and will certainly not rush to ramp up production, although it would respond to customer needs if they want more oil, Saudi Energy Minister Khalid al-Falih said on Wednesday.

As the U.S. announced on Monday that it would be ending sanction waivers for all Iranian oil customers, the Trump Administration said that it “had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply.”

While the U.S. and President Trump appear certain that Saudi Arabia would compensate for Iranian losses, the Kingdom seems reluctant to start swiftly raising production before seeing actual figures for how much Iranian oil will actually be lost and how tight the market will be.

Saudi Arabia’s oil production in May is pretty much set and will differ “very little” from previous months, Reuters quoted al-Falih as saying in Riyadh today.

Last month, OPEC’s de facto leader and largest producer Saudi Arabia followed through its commitment from February to cut deeper and pump well below 10 million bpd in March. Saudi Arabia’s crude oil production dropped by a massive 324,000 bpd from February to stand at 9.794 million bpd in March—just as al-Falih had said the Kingdom would do. Saudi Arabia pumped around 9.8 million bpd in March, some 500,000 bpd below the 10.311-million-bpdcommitment in the OPEC+ deal.

Speaking today, al-Falih said, as carried by Reuters:

“Inventories are actually continuing to rise despite what is happening in Venezuela and despite the tightening of sanctions on Iran. I don’t see the need to do anything immediately.”

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

Living With Integrity

Living With Integrity

It’s time to choose a new direction.

Every so often, our work in the premium side of PeakProsperity.com is deemed so important that our paying subscribers request we share it with the general public. Last week’s ‘Off The Cuff’ podcast received so many of these requests that we are releasing it to all here.

In last week’s Off The Cuff podcast, Chris delivered a very personal message about how we each decide to live our lives.

A growing number of people are watching the “prosperity” around them — record high asset prices, record-low unemployment, new technologies, etc — and yet feeling that we’re making the wrong trade-offs as a society. All that wealth is flowing into fewer and fewer pockets, ecosystems are faltering and an alarming number of species are dying off, depression rates (especially among the youth) are skyrocketing.

In short: there’s more money flowing around than ever, and yet we and the planet are becoming sicker and unhappier.

Why?

From Chris’ point of view, it comes down integrity. The modern human way of life lacks integrity as a guiding principle. For those of us who desire a better future, brining our actions into better alignment with our integrity is the path to true prosperity.

My ultimate diagnosis of what’s going on in the United States culture and a lot of Europe culture — probably in other cultures, but I can’t speak to them as well – it’s that they lack integrity. Now, integrity isn’t simply “Oh, I don’t lie”. Integrity means that your actions are for the greater good. Sometimes there are acts of integrity which actually are not optimal for you; they’re optimal for the larger society around you.

Integrity is thinking out seven generations. Integrity is saying that beauty matters in our life, and that when we take out a species, we’re taking away something extraordinarily beautiful.

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

Wealth Bubble Leaves U.S. Economy in Uncharted Territory

wealth bubble

Wealth Bubble Leaves U.S. Economy in Uncharted Territory

There have been numerous signs that the U.S. is likely to go through another major recession at some point. And regardless of when or if a recession happens, it won’t change the fact that the U.S. economy is already in hot water.

At MarketWatch, the “hot water” is explained in terms of a U.S. “wealth bubble” that reveals a peculiar pattern:

Today the United States sits in the midst of the largest wealth bubble in post-World War II history, as measured by household net worth (or wealth) relative to gross domestic product. As I showed in detail recently in the Journal of Business Economics, only two other postwar bubbles come close, with peaks in 1999 and 2006, just prior to the tech stock crash and the Great Recession.

The largest wealth bubble (household net worth relative to GDP) is shown in a chart from the same article. (Shaded areas are recessions):

wealth bubble

As you can see at the bottom, the wealth bubble is “5 times the size” of the GDP.

But notice how the wealth bubble “pops” just before the 2000 and 2008 recessions. If you look at the end of the blue line, it appears the largest wealth bubble since World War II may already be popping.

Also notice how the green line dips before the 2000 tech stock “recession,” and the red line before the 2008 recession (caused mainly by subprime mortgages).

But according to the MarketWatch report, there’s another crucial detail to point out:

In both prior bubbles, the crashes led to a drop in the value of net worth to about 4 times GDP. Even that level remained high relative to prior history, since in no single quarter before 1998 had the household net worth-to-GDP ratio ever reached 4.0 or higher.

With that being said, according to the chart above:

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

Central Banking Is Central Planning

Central Banking Is Central Planning

At a time when the appeal of and demands for a new “democratic” socialism seem to have caught the imagination of many among the young and are reflected in the promises of a good number of political candidates running for high office, there is one already-existing socialist institution in America with few opponents: the Federal Reserve System.

The fact is, central banking is a form of central planning. The Federal Reserve has a legal monopoly over the monetary system of the United States. It plans the quantity of money in circulation and its availability for lending purposes; and it sets a target for the annual rate of price inflation (currently around 2 percent), while also intentionally influencing interest rates, affecting investment spending, and supporting full employment. Almost all discussions and debates concerning the Federal Reserve revolve around how it should undertake its monetary central planning: which policy tools should be used, what target goals should be aimed for, and who should be in charge of directing America’s central bank.

Federal Reserve Independence in the Trump Era

A complementary issue that has received renewed attention concerns the question of how much “independence” the Federal Reserve and other central banks should have to determine and implement monetary and interest rate policy. This has recently come to the fore due to comments made by President Donald Trump concerning Federal Reserve interest rate policy and the individuals he has recently proposed for positions on the Federal Reserve Board of Governors.

Several times over the last year, President Trump has expressed irritation and frustration with increases in market rates of interest under the Federal Reserve Board leadership of Jerome Powell, who Trump nominated for Fed chairman and who has held that position since February 2018. 

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

If “Getting Ahead” Depends on Asset Bubbles, It’s Not “Getting Ahead,” It’s Gambling

If “Getting Ahead” Depends on Asset Bubbles, It’s Not “Getting Ahead,” It’s Gambling

Given that the economy is now totally and completely dependent on inflating asset bubbles, it makes no sense to invest for the long-term.

Beneath the endlessly hyped expansion in gross domestic product (GDP) of the past two decades, the economy has changed dramatically. The American Dream boils down to social and economic mobility, a.k.a. getting ahead through hard work, merit and wise investments in oneself and one’s family.

The opportunities for this mobility in the post World War 2 era broadened as civil rights and equal rights expanded. The 1970s saw a disruption of working-class mobility as high-paying factory jobs disappeared, leaving services jobs that paid less or required more training, i.e. a college degree.

The U.S. economy took off in the 1980s for a number of reasons, including computer technologies, federal stimulus (deficit spending) and financialization (a topic I’ve covered many times). With millions more college graduates entering the workforce and the Internet creating entire new industries, the opportunities to “get ahead” increased across the social and economic spectrum.

But something changed in the aftermath of the dot-com bubble bursting.The fruits of financialization–highly leveraged debt gambled for short-term gains in markets–were extended to everyone with a job (or a willingness to lie) via liar loans, no-document loans and subprime mortgages.Just like bigshot financiers on Wall Street, J.Q. Citizen could leverage a couple thousand dollars in cash (or even better, borrow the closing costs via a 105% of value mortgage and put nothing down) and buy a McMansion worth $250,000 or even $500,000.

The only difference between bigshot financiers and J.Q. Citizen was the scale of the leverage and gamble: J.Q. Citizen could leverage a few grand into hundreds of thousands, while the financier could leverage a bit of collateral into mega-millions.

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

Loonie Tumbles As Bank Of Canada Capitulates

Loonie Tumbles As Bank Of Canada Capitulates

Add The Bank of Canada to the list of flip-flopping central banks as it has now fully abandoned its bias toward raising interest rates as the economy grapples with a slowdown, bringing its policy into line with the Fed.

“Governing Council judges that an accommodative policy interest rate continues to be warranted,” officials led by Governor Stephen Poloz said in the statement.

“We will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive.”

The Bank of Canada is keeping its key interest rate unchanged as it releases a downgraded 2019 growth forecast that includes a prediction the economy nearly came to a halt at the start of the year.

The Bank of Canada slashed its GDP growth forecast to 1.2% y/y in 2019, from 1.7% previous, and projecting growth of just 0.3 per cent in the first quarter of 2019.

The decision leaves the trend-setting rate at 1.75 per cent for a fourth-straight announcement – a pause that followed governor Stephen Poloz’s stretch of five hikes between mid-2017 and last fall.

The reaction makes sense – a sudden weakening in the Loonie…

And Canadian bond yields are tumbling…

Mark Carney Says Climate Change Will Bring Economic Disaster. Will the Powerful Listen?

Mark Carney Says Climate Change Will Bring Economic Disaster. Will the Powerful Listen?

Global bank heads say urgent action needed to prevent a ‘Minsky moment’ collapse in asset prices.

extinction-rebellion.jpg
Politicians and corporate heads might not listen to warnings from Extinction Rebellion protesters. Will they heed Mark Carney and other central bankers? Photo by Takver, Creative Commons licensed.

They may find themselves feeling just a little shaky, however, after a recent open letter written by Canadian Mark Carney, governor of the Bank of England, with Banque de France governor François Velleroy de Falhau and Frank Elderson, chair of the Network for Greening the Financial Services (NGFS)

These guys are not shaggy Extinction Rebellion protesters being busted in London. And teenage activist Greta Thunberg would likely ask why they took so long to admit what’s been obvious since long before she was born in 2003.

But Carney and his colleagues advise the masters of the universe; they are the consiglieri of the world’s corporate capos, and when they murmur a warning in the capos’ collective ear, wise capos heed them. 

Their open letter announced the first report of the Network for Greening the Financial Services, a group that includes central bankers from around the world. That report tells the capos that “climate-related risks are a source of financial risk.” (Greta Thunberg and billions of other girls would roll their eyes.)

The report continues with equally obvious warnings: climate change will affect the economy on all levels from households to government; it’s highly certain; it’s irreversible; and it depends on short-term actions (right now, this minute) by “governments, central banks and supervisors, financial market participants, firms and households.”

Back to 1960

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

Seeds Sown for Major Transatlantic Trade War Starting in May

Seeds Sown for Major Transatlantic Trade War Starting in May 

Trump wants a trade treaty with the EU to include agriculture. France says no. It only takes one.

Trump has made a considerable number of trade threats only to eventually back down. Will it play out that way again?

For a number of reasons, I think Trump will act this time. First, let’s look at the threats.

Severe Pain

On February 25, Trump told the EU Play Ball or ‘We’re Going to Tariff the Hell Out of You’

“The European Union is very, very tough. Very, very tough. They don’t allow our products in. They don’t allow our farming goods in,” Trump said at a meeting with U.S. governors, according to a transcript from the White House. He added that “maybe, in certain ways,” the EU is “tougher than China.”

On March 14, Trump Warned EU of ‘Severe’ Economic Pain if No Progress On Trade Talks.

Partial Agreement Won’t Fly

On April 15, Reuters reported EU Ready to Launch U.S. Trade Talks, but Without Agriculture.

The EU approved two areas for negotiation, opposed by France with an abstention from Belgium. But agriculture was not included, leaving the 28-country bloc at odds with Washington, which has insisted on including farm products in the talks.

EU trade agreement are unanimous. Tiny countries can and have influenced outcomes. It took over a decade to get an agreement with Canada over concerns of tiny nations.

Even if US-EU trade talks take place, nothing will come of them and Trump will quickly get frustrated.

Climate Change Now in the Picture

On April 18, France has signaled it will not cooperate with Trump in any way.

Please consider the new French demand: No EU-US Trade Talks Unless Trump Supports Climate Deal.

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

Decades of laissez-faire in Europe or the destruction of the middle class

Decades of laissez-faire in Europe or the destruction of the middle class 

The EU elites pay homage to the laissez-faire of liberalism. They have been deregulating and “liberating” the market for 30 years. The Western governments also follow the philosophy and hardly intervene in the market. There is only one authority that can intervene effectively in the EU: the ECB. Globalisation since the 1980s, as well as the liberation of trade and human traffic, has enabled a violent increase in world GDP and the enrichment of corporations. For emerging economies such as India or China, this was an opportunity to get out of poverty. The liberals, however, who had a global village and human happiness on their banner, were basically interested in opening up the large Asian markets for their products. The tools of these elites, the World Trade Organization and the IMF, ensured that the middle class grew in emerging countries and thus the sales markets for European corporations. Their bosses would probably say: it is a pity that India and China are not allowed to join the EU.

Awesome! In any case, the West monetized Asia’s cheap labour in this way. At the same time, the middle class in China, India, South Korea and other tigers grew, but at the expense of the European workforce and middle class, which were virtually cut off from liberal profits. While corporate profits, and hence GDPs, skyrocketed, real wages did not rise and wealth was concentrated among elites and their lobbyists. This process was accelerated by the reforms of the 2000s: in Germany at that time the reforms of the left-liberal coalitions were supposed to create more jobs for people through unusual forms of employment (mini-jobs, temporary work, fixed-term contracts, etc.), which led to the fact that even today there are more and more people with low incomes in abnormal working conditions. “The middle class has shrunk from 48 per cent in the period 1995-99 to 41 per cent in 2014-15.1)

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

Five dollars is not enough for five a day

Five dollars is not enough for five a day

In discussions about food, environment and health, a resource perspective is often lacking. For more than half of the global population what ends up on their plate is mostly a function of their economic and energetic circumstances. If one want to change what people eat it is necessary to understand the realities of the global food system. Without that, all well-intended advice for a diet better for health or for the environment are falling on barren rock instead of in fertile ground. 

The WHO says that 3.9 million deaths could be avoided if people ate more fruit and vegetables. The recent report of the EAT Lancet Commission recommends that people should eat at least 500 gram fruit and vegetables per day. Many countries have similar recommendations of a certain quantity in weight or in number of servings or portions. But in almost no country are people doing what they are told.  In Sweden only 1 percent of the men in rural Arjeplog eat their half a kilo per day while 19 percent of the women in wealthy, urban Täby does it. Are people stupid or what? 

In order to understand fruit and vegetables consumption it is essential to realize some pertinent facts. Fruits and vegetables are mostly luxury plants in comparison with grains, pulses, root crops. Very few traditional farming systems have had a high share of fruits and vegetables unless you include starchy crops like plantains, potatoes, cassava or yams in your definition. The reason for it is that they are fairly demanding to grow and their content of the most essential food components, energy and protein, is low. Even today, fruits and vegetables are expensive to buy. 

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

Do You Remember The Oil Crisis And “Stagflation” Of The 1970s? In Many Ways, 2019 Is Starting To Look A Lot Like 1973…

Do You Remember The Oil Crisis And “Stagflation” Of The 1970s? In Many Ways, 2019 Is Starting To Look A Lot Like 1973…

The price of gasoline is rapidly rising, economic activity is slowing down, the Middle East appears to be on the brink of war, and Democrats are trying to find a way to remove a Republican president from office.  In many ways, 2019 is starting to look a lot like 1973.  For many Americans, the 1970s represent a rather depressing chapter in U.S. history that they would just like to forget, but the truth is that if we do not learn from history it is much more likely that we will repeat our mistakes.  And without a doubt, right now a lot of things are starting to move in a very ominous direction.

“Stagflation” was a term that was made popular in the 1970s, and it occurs when there is a high rate of inflation but economic growth is declining or stagnant.

The U.S. hasn’t had a serious bout with stagflation in quite a while, but it appears that we may be moving in that direction.

Let’s talk about the slowdown in the economy first.  On Monday, we learned that sales of existing homes in the U.S. were way down in March

Home sales are struggling to rebound after slumping in the second half of last year, when a jump in mortgage rates to nearly 5% discouraged many would-be buyers. Spring buying is so far running behind last year’s healthy gains: Sales were 5.4% below where they were a year earlier.

On a year over year basis, existing home sales have now fallen for 13 months in a row.

That is terrible, and there is no way to “spin” that fact to make it look good.

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

The Fed is Going to Cut Rates to Negative 3% If Not 5%

The Fed is Going to Cut Rates to Negative 3% If Not 5%

As I warned last week, while most of the investment world has been glued to their trading screens watching the stock market rally.. something nefarious has  been unfolding behind the scenes.

That “something” is the Fed and other regulators implementing plans that will begin allow for large-scale cash grabs when the next downturn hits.

While stocks roared higher, Fed officials began openly calling for more extreme monetary policies including NEGATIVE Interest Rate Policy or NIRP.

NIRP is when a bank charges YOU for the right to keep your money there.

If you think this is conspiracy theory, consider that on February 5th 2019, the IMF published a report outlining how Central Banks could cut rates into DEEPLY negative territory.

We’re not talking negative 0.5%… we’re talking negative 3% or even 5%.

Many central banks reduced policy interest rates to zero during the global financial crisis to boost growth. Ten years later, interest rates remain low in most countries. While the global economy has been recovering, future downturns are inevitable. Severe recessions have historically required 3–6 percentage points cut in policy rates. If another crisis happens, few countries would have that kind of room for monetary policy to respond.

To get around this problem, a recent IMF staff study shows how central banks can set up a system that would make deeply negative interest rates a feasible option.

Source: IMF

Any time the elites want to implement a new policy, the IMF is the “go-to” organization to introduce the idea.

It was the IMF that signed off on the disastrous Greek bail-out deals in 2010-2012.

It was also the IMF that “signed off” on the “bail-ins” in Cyprus, in which savings deposits lost as much as 50% in 2013.

Now the IMF is promoting the idea that Central Banks should cut rates into “deeply” negative territory during the next downturn.

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

Are Two-Tier Monetary Systems a Possible Tool?

Are Two-Tier Monetary Systems a Possible Tool? 

QUESTION: Mr. Armstrong; It seems few people even understand that there have been two-tier monetary systems. Do you think this can be a possible tool in the currency crisis you are forecasting for 2021?

Thank you;

Looking forward to Rome and meeting Mr, Farage as well

PC

ANSWER: Various countries used to mint trade dollars in silver with different weights for external trade with China. That was a two-tier monetary system for trade during the 19th century. But there have been instances where there were two separate currencies that were also used as capital controls to isolate the domestic economy from the external international capital flows. This was the case with South Africa.

An important example of an official deliberate two-tier monetary system is the modern monetary history of South Africa. Until the late 1960s, South Africa had a fixed exchange rate for its currency. The rand was pegged to major foreign currencies, as was the case under the Bretton Woods system.

It was during 1979 when the South African government switched to a system that formally expressed parity against the dollar. The value of the rand followed changes in the balance of payments and moved roughly with sterling and other weaker currencies until 1985 when the dollar soared and the birth of the Plaza Accord took place.

The foreign debt crisis of 1985 caused the rand to depreciate at a spectacular rate and the dollar rose in value. The rand fell to an all-time low of less than 40 cents to the US$. The rand recovered somewhat in 1987, reaching 43 cents, but it declined steadily thereafter into 1998. The rand collapsed to about 26 cents against the US$ in late 1995. Between February 1, 1996 and May 1, 1996, the rand lost roughly 16% of its exchange value, falling from R3.7 to R4.33 = US$1, or a value of about 23 cents to the US$.

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

List of 24 Points Pressing Hard toward Recession

List of 24 Points Pressing Hard toward Recession 

  • The US stock market is slightly overbought (which is not a positive in terms of head room for more of a rally).
  • It’s massively built up on debt that is now more expensive to maintain and/or obtain.
  • The Fed is still rapidly tightening money supply and says it will continue to do so for several more months.
  • Interest rate increases and money tightening that already happened through this past December will continue to worsen economic conditions until summer because any changes by the Fed have about a half year lag time for the general economy.
  • That also means all the tightening that continues between now and September, will continue to pile more and more weight on top of the economy until next February, which is why the Trump admin. is screaming the Fed went too far.
  • 2019 Q1 US corporate earnings are coming in almost as poorly as economists said they would, and they don’t look set to start rising much in the next quarter … if at all.
  • Measures used to help earnings beat much lower expectations (and not by much) were mostly cost-saving measures, not revenue boosters, or they were mere accounting choices. Earnings are after-tax numbers, so they benefited hugely in 2018 from the Trump Tax Cuts in a way that had nothing at all to do with companies doing better business. They are also reported as a “per share” number, and the main thing that changed was the number of outstanding shares in the denominator as a result of stock buybacks. So, really, earnings were pathetic!
Real Investment Advice
  • Transportation is declining as product shipments decline. West-coast port imports plunged 19% from the previous quarter (3% YoY). Trucking lost ground four months in a row.

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

Italy Becoming Poor — Becoming Poor in Italy. The Effects of the Twilight of the Age of Oil

Italy Becoming Poor — Becoming Poor in Italy. The Effects of the Twilight of the Age of Oil

The living room of the house that my parents built in 1965. An American style suburban home, a true mansion in the hills. I lived there for more than 50 years but now I have to give up: I can’t afford it anymore. 

Let me start with a disclaimer: I am not poor. As a middle class, state employee in Italy, I am probably richer than some 90% of the people living on this planet. But wealth and poverty are mainly relative perceptions and the feeling I have is that I am becoming poorer every year, just like the majority of Italians, nowadays.

I know that the various economic indexes say that we are not becoming poorer and that, worldwide, the GDP keeps growing, even in Italy it sort of restarted growing after a period of decline. But something must be wrong with those indexes because we are becoming poorer. It is unmistakable, GDP or not. To explain that, let me tell you the story of the house that my father and my mother built in the 1960s and how I am now forced to leave it because I can’t just afford it anymore.

Back in the 1950s and 1960s, Italy was going through what was called the “Economic Miracle” at the time. After the disaster of the war, the age of cheap oil had created a booming economy everywhere in the world. In Italy, people enjoyed a wealth that never ever had been seen or even imagined before. Private cars, health care for everybody, vacations at the seaside, the real possibility for most Italians to own a house, and more.

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

Olduvai IV: Courage
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