end of the liquidity cycle...


moralist

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Bank of America sees $50 oil as Opec dies "Our biggest worry is the end of the liquidity cycle. The Fed is done. The reach for yield that we have seen since 2009 is going into reverse”, said Bank of America.

By Ambrose Evans-Pritchard

8:01PM GMT 09 Dec 2014

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The Opec oil cartel no longer exists in any meaningful sense and crude prices will slump to $50 a barrel over coming months as market forces shake out the weakest producers, Bank of America has warned.

Revolutionary changes sweeping the world’s energy industry will drive down the price of liquefied natural gas (LNG), creating a “multi-year” glut and a mucher cheaper source of gas for Europe.

Francisco Blanch, the bank’s commodity chief, said Opec is “effectively dissolved” after it failed to stabilize prices at its last meeting. “The consequences are profound and long-lasting,“ he said.

The free market will now set the global cost of oil, leading to a new era of wild price swings and disorderly trading that benefits only the Mid-East petro-states with deepest pockets such as Saudi Arabia. If so, the weaker peripheral members such as Venizuela and Nigeria are being thrown to the wolves.

The bank said in its year-end report that at least 15pc of US shale producers are losing money at current prices, and more than half will be under water if US crude falls below $55. The high-cost producers in the Permian basin will be the first to “feel the pain” and may soon have to cut back on production.

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What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.

These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still contained. Nobody knows what will happen as the Fed tries break out of the stimulus trap, including Fed officials themselves.

Full article:

http://www.telegraph.co.uk/finance/oilprices/11283875/Bank-of-America-sees-50-oil-as-Opec-dies.html

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The world cannot escape the "liquidity trap" but what that is seems to be just beyond this author and Bank of America. It has little to do with the price of oil which is a standard case of major over-investment and dependence reflected in US shale and Canadian oil sands production and hitting one-note producing countries in the gut. The nature of the trap is the inevitable falling off of stimulus results--A dollar of government money into the economy equaling less than a dollar's worth of general economic stimulus most obvious in Japan's "Abenomics." Japan has been doing precisely the wrong thing for decades now. With government debt at 250% of its GDP and its demographic trap of too many old people and too many old people ratio getting nothing but worse, it's on the edge of seeing the triumph of the business cycle. Central bank countries around the world are about to find out that while they can keep their zombie banks on life support indefinitely, their out of control Keynesian policies cannot force money into the system enough to keep it all going, much less any appreciable economic expansion.

It's extremely hard to create price inflation in this economically depressionary environment. It breaks out here and there in food prices and some assets such as Manhattan real estate, the latter for special and peculiar reasons such as rich people using re to park their money. The problem is the structural nature of fractional reserve banking and money as debt. The Federal Reserve can create all the money out of thin air it wants to and park it in banks. The problem is getting banks to lend it out. But because banks cannot create borrowers thereby creating money--one dollar in a bank = ability to lend out--create--say, up to eight dollars but only if borrowers appear. The only way the Federal government can inject money into the economy is through its own spending, some of it deficit spending. One dollar in (taxes) and one dollar created (out of thin air) spent = two dollars economic activity. This is not two dollars in the bank being used to create ten to sixteen dollars injected into the economy through borrowing. That kind of massive money creation is pretty much done until there is massive private debt contraction even to the point of a major depression. The liquidity trap is this recessionary-depressionary trap. One and the same. Think of the world's economies as balloons with holes in them with central banks continually pumping in air while the holes just keep getting bigger and soon the balloons will start shrinking. It might as well be a law of physics. This cannot be stopped. Central bankers are merely politicians thinking they are businessmen but act just like stupid and cowardly politicians have always acted. Not being a slave to profit making they can only destroy profit making and capital accumulation.

It's going to be the end of the world as we know it and debt will be the end of people owing and owning debt. The only place to hide is in very short-term Treasury debt. There will be no general increase in equity and asset prices but decreases are probable. Buy and hold investing will become more and more like buy and die investing.

--Brant

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The only place to hide is in very short-term Treasury debt.

It's going to be the end of the world as we know it and debt will be the end of people owing and owning debt.

Do you see the connection between those two statements,Brant? Investing in other people's debt is just as fiscally insane as being in debt. The LAST place I'd ever put my money would be to prop up a bloated corrupt bankrupt liberal socialist government bureaucracy.

That's for FOOLS! :laugh:

The present "Ice Age" weather pattern is frigid upper latitudes with drought in the lower latitudes. So right now I'm investing in our own "private works" project of converting our septic system into a waste water treatment plant. This will enable us to recover agricultural grade water for our fruit trees. It's a completely passive stand alone system with a windmill powered pump to aerate the effluent, and a hand pump to dispense the treated and filtered water. Just poured the caissons for the windmill tower yesterday.

Greg

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The only place to hide is in very short-term Treasury debt.

It's going to be the end of the world as we know it and debt will be the end of people owing and owning debt.

Do you see the connection between those two statements,Brant? Investing in other people's debt is just as fiscally insane as being in debt. The LAST place I'd ever put my money would be to prop up a corrupt bankrupt liberal socialist government. That's for FOOLS! :laugh:

The present "Ice Age" weather pattern is frigid upper latitudes with drought in the lower latitudes. So right now I'm investing in our own "private works" project of converting our septic system into a waste water treatment plant. This will enable us to recover agricultural grade water for our fruit trees. It's a completely passive stand alone system with a windmill powered pump to aerate the effluent, and a hand pump to dispense the treated and filtered water. Just poured the caissons for the windmill tower yesterday.

Greg

Nope. I said short term. That government can just print more money to roll over its debt. And it will. It's like being in the eye of a hurricane and moving with the eye. If you buy long term Treasuries you can't move fast enough. However, you diversify by doing what you are doing and buying precious metals in tranches, etc. Also, dollars are no long term store of any value. When the S&P 500 comes down--it's too expensive now--you can start buying that and rotate out of those T-bills. If you have money the devil you are dancing with is the devil himself, but his T-bills are safer than CDs in the bank if you deal directly with him and do not use a brokerage or a bank as the go-between. Your fallback is if the world goes to hell I'll be okay, but you can die of old age before that happens. Goes to hell is not the same, btw, as going to hell. Yep, the world is going to hell but that doesn't mean it will get there.

--Brant

seeing the heat and feeling the fire can give the world pause if it's human caused--but that comet that will kill us all--well, hell--that'd be a bummer

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The only place to hide is in very short-term Treasury debt.

It's going to be the end of the world as we know it and debt will be the end of people owing and owning debt.

Do you see the connection between those two statements,Brant? Investing in other people's debt is just as fiscally insane as being in debt. The LAST place I'd ever put my money would be to prop up a corrupt bankrupt liberal socialist government. That's for FOOLS! :laugh:

The present "Ice Age" weather pattern is frigid upper latitudes with drought in the lower latitudes. So right now I'm investing in our own "private works" project of converting our septic system into a waste water treatment plant. This will enable us to recover agricultural grade water for our fruit trees. It's a completely passive stand alone system with a windmill powered pump to aerate the effluent, and a hand pump to dispense the treated and filtered water. Just poured the caissons for the windmill tower yesterday.

Greg

Nope. I said short term. That government can just print more money to roll over its debt.

I understand. Regardless of short or long term Treasuries, it's still granting sanction to the government to print money by your willingness to buy and to own its debt. Now I don't have any personal issue with what you or anyone else chooses to do, because, thankfully, by virtue of moral law I can't be forced to harvest what others plant.

If you liked 2008... you're gonna love 2015. :wink:

Greg

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Investing in other people's debt is just as fiscally insane as being in debt. The LAST place I'd ever put my money would be to prop up a bloated corrupt bankrupt liberal socialist government bureaucracy.

That's for FOOLS! :laugh:

Do you have the same view of debt issued by a productive corporation, e.g. Apple? Do you put savings in a bank account? That is usually called a "deposit" but it is very much like bank debt. The value of your account is included on the liability side of the bank's balance sheet, alongside any other debts of the bank.

If you liked 2008... you're gonna love 2015. :wink:

What's in your crystal ball?

Merlin the Mathemagician :smile:

P.S. In today's news: Could the US bail out its own oil sector?

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The only place to hide is in very short-term Treasury debt.

It's going to be the end of the world as we know it and debt will be the end of people owing and owning debt.

Do you see the connection between those two statements,Brant? Investing in other people's debt is just as fiscally insane as being in debt. The LAST place I'd ever put my money would be to prop up a corrupt bankrupt liberal socialist government. That's for FOOLS! :laugh:

The present "Ice Age" weather pattern is frigid upper latitudes with drought in the lower latitudes. So right now I'm investing in our own "private works" project of converting our septic system into a waste water treatment plant. This will enable us to recover agricultural grade water for our fruit trees. It's a completely passive stand alone system with a windmill powered pump to aerate the effluent, and a hand pump to dispense the treated and filtered water. Just poured the caissons for the windmill tower yesterday.

Greg

Nope. I said short term. That government can just print more money to roll over its debt.

I understand. Regardless of short or long term Treasuries, it's still granting sanction to the government to print money by your willingness to buy and to own its debt. Now I don't have any personal issue with what you or anyone else chooses to do, because, thankfully, by virtue of moral law I can't be forced to harvest what others plant.

If you liked 2008... you're gonna love 2015. :wink:

Greg

When my "sanction" has any real effect on anyone but me* I'll consider it in that context. I don't, btw, actually own any T-bills. That was likely over 30 years ago when Volcker was jamming up the rates. And I'm the type simply to pass on any bond now regardless.

--Brant

*after ground combat owning a T-bill isn't going to faze me ("I have sinned!" Boo, hoo, hoo.)

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Do you have the same view of debt issued by a productive corporation, e.g. Apple? Do you put savings in a bank account? That is usually called a "deposit" but it is very much like bank debt. The value of your account is included on the liability side of the bank's balance sheet, alongside any other debts of the bank.

Oh, not at all... you answered the question with the word productive. :smile:

The government produces nothing. It only takes money away from one person and gives it to another while extracting a "processing fee" to feed its bureaucracy of transfer agents. Personally, I don't do any stocks, bonds, mutual funds, CD's, T Bills. 401 K's, or IRA's... and only invest in my own business ventures. That way I get all of the rewards for assuming all of the risk.

What's in your crystal ball?

A war between the American Capitalist producers and the European Liberal Socialist government parasites.

Greg

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The only place to hide is in very short-term Treasury debt.

It's going to be the end of the world as we know it and debt will be the end of people owing and owning debt.

Do you see the connection between those two statements,Brant? Investing in other people's debt is just as fiscally insane as being in debt. The LAST place I'd ever put my money would be to prop up a corrupt bankrupt liberal socialist government. That's for FOOLS! :laugh:

The present "Ice Age" weather pattern is frigid upper latitudes with drought in the lower latitudes. So right now I'm investing in our own "private works" project of converting our septic system into a waste water treatment plant. This will enable us to recover agricultural grade water for our fruit trees. It's a completely passive stand alone system with a windmill powered pump to aerate the effluent, and a hand pump to dispense the treated and filtered water. Just poured the caissons for the windmill tower yesterday.

Greg

Nope. I said short term. That government can just print more money to roll over its debt.

I understand. Regardless of short or long term Treasuries, it's still granting sanction to the government to print money by your willingness to buy and to own its debt. Now I don't have any personal issue with what you or anyone else chooses to do, because, thankfully, by virtue of moral law I can't be forced to harvest what others plant.

If you liked 2008... you're gonna love 2015. :wink:

Greg

When my "sanction" has any real effect on anyone but me* I'll consider it in that context. I don't, btw, actually own any T-bills. That was likely over 30 years ago when Volcker was jamming up the rates. And I'm the type simply to pass on any bond now regardless.

Sorry, Brant... that was my misunderstanding.

It sounded like you were offering financial advice to people, so I assumed that you were also doing what you were saying. I have nothing against other peoples' own free choice to assume the risks of the debt markets even though I personally choose not to.

Greg

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Excellent, but doesn't touch on the role of the military in the economy or the fact that the military not the communists x-military holds the country together. The military was the force that crushed the student uprising in 1989.

--Brant

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Don't forget the Chinese Greg. They have been buying up every ounce of physical gold they can get their hands on..

...as well as a bunch of rare earth elements. In some ways, they're more Capitalistic than we are.

It's my hope that their state run Capitalism will eventually grow into individual Capitalism. That's totally the responsibility of the Chinese people, and not their government, because the people make the government and not the other way around.

Whenever ethics do not grow along side Capitalism, it will fail.

Ethics and Capitalism are inseparable.

Greg

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