Low Oil Prices: Why Worry?

Most people believe that low oil prices are good for the United States, since the discretionary income of consumers will rise. There is the added benefit that Peak Oil must be far off in the distance, since “Peak Oilers” talked about high oil prices. Thus, low oil prices are viewed as an all around benefit.

In fact, nothing could be further from the truth. The Peak Oil story we have been told is wrong. The collapse in oil production comes from oil prices that are too low, not too high. If oil prices or prices of other commodities are too low, production will slow and eventually stop. Growth in the world economy will slow, lowering inflation rates as well as economic growth rates. We encountered this kind of the problem in the 1930s. We seem to be headed in the same direction today. Figure 1, used by Janet Yellen in her September 24 speech, shows a slowing inflation rate for Personal Consumption Expenditures (PCE), thanks to lower energy prices, lower relative import prices, and general “slack” in the economy.

Figure 1. Why has PCE Inflation fallen below 2%? from Janet Yellen speech, September 24, 2015.

Figure 1. “Why has PCE Inflation fallen below 2%?” from Janet Yellen speech, September 24, 2015.

What Janet Yellen is seeing in Figure 1, even though she does not recognize it, is evidence of a slowing world economy. The economy can no longer support energy prices as high as they have been, and they have gradually retreated. Currency relativities have also readjusted, leading to lower prices of imported goods for the United States. Both lower energy prices and lower prices of imported goods contribute to lower inflation rates.

Instead of reaching “Peak Oil” through the limit of high oil prices, we are reaching the opposite limit, sometimes called “Limits to Growth.” Limits to Growth describes the situation when an economy stops growing because the economy cannot handle high energy prices. In many ways, Limits to Growth with low oil prices is worse than Peak Oil with high oil prices. Slowing economic growth leads to commodity prices that can never rebound by very much, or for very long. Thus, this economic malaise leads to a fairly fast cutback in commodity production. It can also lead to massive debt defaults.

Let’s look at some of the pieces of our current predicament.

Part 1. Getting oil prices to rise again to a high level, and stay there, is likely to be difficult. High oil prices tend to lead to economic contraction.  

Figure 2 shows an illustration I made over five years ago:

Figure 1. Chart I made in Feb. 2010, for an article I wrote called, Peak Oil: Looking for the Wrong Symptoms.

Figure 2. Chart made by author in Feb. 2010, for an article called Peak Oil: Looking for the Wrong Symptoms.

Clearly Figure 2 exaggerates some aspects of an oil price change, but it makes an important point. If oil prices rise–even if it is after prices have fallen from a higher level–there is likely to be an adverse impact on our pocketbooks. Our wages (represented by the size of the circles) don’t increase. Fixed expenses, including mortgages and other debt payments, don’t change either. The expenses that do increase in price are oil products, such as gasoline and diesel, and food, since oil is used to create and transport food. When the cost of food and gasoline rises, discretionary spending (in other words, “everything else”) shrinks.

When discretionary spending gets squeezed, layoffs are likely. Waitresses at restaurants may get laid off; workers in the home building and auto manufacturing industries may find their jobs eliminated. Some workers who get laid off from their jobs may default on their loans causing problems for banks as well. We start the cycle of recession and falling oil prices that we should be familiar with, after the crash in oil prices in 2008.

So instead of getting oil prices to rise permanently, at most we get a zigzag effect. Oil prices rise for a while, become hard to maintain, and then fall back again, as recessionary influences tend to reduce the demand for oil and bring the price of oil back down again.

Part 2. The world economy has been held together by increasing debt at ever-lower interest rates for many years. We are reaching limits on this process.

Back in the second half of 2008, oil prices dropped sharply. A number of steps were taken to get the world economy working better again. The US began Quantitative Easing (QE) in late 2008. This helped reduce longer-term interest rates, allowing consumers to better afford homes and cars. Since building cars and homes requires oil (and cars require oil to operate as well), their greater sales could stimulate the economy, and thus help raise demand for oil and other commodities.

Figure 2. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.

Figure 3. World Oil Supply (production including biofuels, natural gas liquids) and Brent monthly average spot prices, based on EIA data.

Following the 2008 crash, there were other stimulus efforts as well. China, in particular, ramped up its debt after 2008, as did many governments around the world. This additional governmental debt led to increased spending on roads and homes. This spending thus added to the demand for oil and helped bring the price of oil back up.

These stimulus effects gradually brought prices up to the $120 per barrel level in 2011. After this, stimulus efforts gradually tapered. Oil prices gradually slid down between 2011 and 2014, as the push for ever-higher debt levels faded. When the US discontinued its QE and China started scaling back on the amount of debt it added in 2014, oil prices began a severe drop, not too different from the way they dropped in 2008.

I reported earlier that the July 2008 crash corresponded with a reduction in debt levels. Both US credit card debt (Fig. 4) and mortgage debt (Fig. 5) decreased at precisely the time of the 2008 price crash.

Figure 3. US Revolving Debt Outstanding (mostly credit card debt) based on monthly data of the Federal Reserve.

Figure 4. US Revolving Debt Outstanding (mostly credit card debt) based on monthly data from the Federal Reserve.

Figure 6. US Mortgage Debt Outstanding, based on Federal Reserve Z1 Report.

Figure 5. US Mortgage Debt Outstanding, based on the Federal Reserve Z1 Report.

At this point, interest rates are at record low levels; they are even negative in some parts of Europe. Interest rates have been falling since 1981.

Figure 6. Chart prepared by St. Louis Fed using data through July 20, 2015.

Figure 6. Chart prepared by the St. Louis Fed using data through July 20, 2015.

I showed in a recent post (How our energy problem leads to a debt collapse problem) that when the cost of oil production is over $20 per barrel, we need ever-higher debt ratios to GDP to produce economic growth. This need for ever-rising debt contributes to our inability to keep commodity prices high enough to satisfy the needs of commodity producers.

Part 3. We are reaching a demographic bottleneck with the “baby boomers” retiring. This demographic bottleneck causes an adverse impact on the demand for commodities.

Demand represents the amount of goods customers can afford. The amount consumers can afford doesn’t necessarily rise endlessly. One of the problems leading to falling demand is falling inflation-adjusted median wages. I have written about this issue previously in How Economic Growth Fails.

Figure 7. Median Inflation-Adjusted Family Income, in chart prepared by Federal Reserve of St. Louis.

Figure 7. Median Inflation-Adjusted Family Income, in chart prepared by the Federal Reserve of St. Louis.

Another part of the problem of falling demand is a falling number of working-age individuals–something I approximate by using estimates of the population aged 20 to 64. Figure 8 shows how the population of these working-age individuals has been changing for the United States, Europe, and Japan.

Figure 8. Annual percentage growth in population aged 20 - 64, based on UN 2015 population estimates.

Figure 8. Annual percentage growth in population aged 20 – 64, based on UN 2015 population estimates.

Figure 8 indicates that Japan’s working age population started shrinking in 1998 and now is shrinking by more than 1.0% per year. Europe’s working age population started shrinking in 2012. The United States’ working age population hasn’t started shrinking, but its rate of growth started slowing in 1999. This slowdown in growth rate is likely part of the reason that labor force participation rates have been falling in the United States since about 1999.

Figure 9. US Labor force participation rate. Chart prepared by Federal Reserve of St. Louis.

Figure 9. US Labor force participation rate. Chart prepared by the Federal Reserve of St. Louis.

When there are fewer workers, the economy has a tendency to shrink. Tax levels to pay for retirees are likely to start increasing. As the ratio of retirees rises, those still working find it increasingly difficult to afford new homes and cars. In fact, if the population of workers aged 20 to 64 is shrinking, there is little need to add new homes for this group; all that is needed is repairs for existing homes. Many retirees aged 65 and over would like their own homes, but providing separate living quarters for this population becomes increasingly unaffordable, as the elderly population becomes greater and greater, relative to the working age population.

Figure 10 shows that the population aged 65 and over already equals 47% of Japan’s working age population. (This fact no doubt explains some of Japan’s recent financial difficulties.) The ratios of the elderly to the working age population are lower for Europe and the United States, but are trending higher. This may be a reason why Germany has been open to adding new immigrants to its population.

Figure 9. Ratio of elderly (age 65+) to working age population (ages 20 to 64) based on UN 2015 population estimates.

Figure 10. Ratio of elderly (age 65+) to working age population (aged 20 to 64) based on UN 2015 population estimates.

For the Most Developed Regions in total (which includes US, Europe, and Japan), the UN projects that those aged 65 and over will equal 50% of those aged 20 to 64 by 2050. China is expected to have a similar percentage of elderly, relative to working age (51%), by 2050. With such a large elderly population, every two people aged 20 to 64 (not all of whom may be working) need to be supporting one person over 65, in addition to the children whom they are supporting.

Demand for commodities comes from workers having income to purchase goods that are made using commodities–things like roads, new houses, new schools, and new factories. Economies that are trying to care for an increasingly large percentage of elderly citizens don’t need a lot of new houses, roads and factories. This lower demand is part of what tends to hold commodity prices down, including oil prices.

Part 4. World oil demand, and in fact, energy demand in general, is now slowing.

If we calculate energy demand based on changes in world consumption, we see a definite pattern of slowing growth (Fig.11). I commented on this slowing growth in my recent post, BP Data Suggests We Are Reaching Peak Energy Demand.

Figure 11. Annual percent change in world oil and energy consumption, based on BP Statistical Review of World Energy 2015 data.

Figure 11. Annual percent change in world oil and energy consumption, based on BP Statistical Review of World Energy 2015 data.

The pattern we are seeing is the one to be expected if the world is entering another recession. Economists may miss this point if they are focused primarily on the GDP indications of the United States.

World economic growth rates are not easily measured. China’s economic growth seems to be slowing now, but this change does not seem to be fully reflected in its recently reported GDP. Rapidly changing financial exchange rates also make the true world economic growth rate harder to discern. Countries whose currencies have dropped relative to the dollar are now less able to buy our goods and services, and are less able to repay dollar denominated debts.

Part 5. The low price problem is now affecting many commodities besides oil. The widespread nature of the problem suggests that the issue is a demand (affordability) problem–something that is hard to fix.

Many people focus only on oil, believing that it is in some way different from other commodities. Unfortunately, nearly all commodities are showing falling prices:

Figure 12. Monthly commodity price index from Commodity Markets Outlook, July 2015. Used under Creative Commons license.

Figure 12. Monthly commodity price index from Commodity Markets Outlook, July 2015. Used under Creative Commons license.

Energy prices stayed high longer than other prices, perhaps because they were in some sense more essential. But now, they have fallen as much as other prices. The fact that commodities tend to move together tends to hold over the longer term, suggesting that demand (driven by growth in debt, working age population, and other factors) underlies many commodity price trends simultaneously.

Figure 13. Inflation adjusted prices adjusted to 1999 price = 100, based on World Bank

Figure 13. Inflation adjusted prices adjusted to 1999 price = 100, based on World Bank “Pink Sheet” data.

The pattern of many commodities moving together is what we would expect if there were a demand problem leading to low prices. This demand problem would likely reflect several issues:

  • The world economy cannot tolerate high priced energy because of the problem shown in Figure 2. We have increasingly used cheaper debt and larger quantities of debt to cover this basic problem, but are running out of fixes.
  • The cost of producing energy products keeps trending upward, because we extracted the cheap-to-produce oil (and coal and natural gas) first. We have no alternative but to use more expensive-to-produce energy products.
  • Many costs other than energy costs have been trending upward in inflation-adjusted terms, as well. These include fresh water costs, the cost of metal extraction, the cost of mitigating pollution, and the cost of advanced education. All of these tend to squeeze discretionary income in a pattern similar to the problem indicated in Figure 2. Thus, they tend to add to recessionary influences.
  • We are now reaching a working population bottleneck as well, as described in Part 4.

Part 6. Oil prices seem to need to be under $60 barrel, and perhaps under $40 barrel, to encourage demand growth in US, Europe, and Japan. 

If we look at the historical impact of oil prices on consumption for the US, Europe, and Japan combined, we find that whenever oil prices are above $60 per barrel in inflation-adjusted prices, consumption tends to fall. Consumption tends to be flat in the $40 to $60 per barrel range. It is only when prices are in the under $40 per barrel range that consumption has generally risen.

Figure 8. Historical consumption vs price for the United States, Japan, and Europe. Based on a combination of EIA and BP data.

Figure 14. Historical consumption vs. price for the United States, Japan, and Europe. Based on a combination of EIA and BP data.

There is virtually no oil that can be produced in the under $40 barrel range–or even in the under $60 barrel a range, if tax needs of governments are included. Thus, we end up with non-overlapping ranges:

  1. The amount that consumers in advanced economies can afford.
  2. The amount the producers, with their current high-cost structure, actually need.

One issue, with lower oil prices, is, “What kinds of uses do the lower oil prices encourage?” Clearly, no one will build a new factory using oil, unless the price of oil is expected to be sufficiently low over the long-term for this use. Thus, adding industry will likely be difficult, even if the price of oil drops for a few years. We also note that the United States seems to have started losing its industrial production in the 1970s (Fig. 15), as its own oil production fell. Apart from the temporarily greater use of oil in shale drilling, the trend toward off-shoring industrial production will likely continue, regardless of the price of oil.

Figure 15. US per capita energy consumption by sector, based on EIA data.

Figure 15. US per capita energy consumption by sector, based on EIA data. Includes all types of energy, including the amount of fossil fuels that would need to be burned to produce electricity.

If we cannot expect low oil prices to favorably affect the industrial sector, the primary impact of lower oil prices will likely be on the transportation sector. (Little oil is used in the residential and commercial sectors.) Goods shipped by truck will be cheaper to ship. This will make imported goods, which are already cheap (thanks to the rising dollar), cheaper yet. Airlines may be able to add more flights, and this may add some jobs. But more than anything else, lower oil prices will encourage people to drive more miles in personal automobiles and will encourage the use of larger, less fuel-efficient vehicles. These uses are much less beneficial to the economy than adding high-paid industrial jobs.

Part 7. Saudi Arabia is not in a position to help the world with its low price oil problem, even if it wanted to. 

Many of the common beliefs about Saudi Arabia’s oil capacity are of doubtful validity. Saudi Arabia claims to have huge oil reserves, but as a practical matter, its growth in oil production has been modest. Its oil exports are actually down relative to its exports in the 1970s, and relative to the 2005-2006 period.

Figure 16. Saudi Arabia oil production, consumption, and exports, based on BP Statistical Review of World Energy 2015 data.

Figure 16. Saudi Arabia’s oil production, consumption, and exports based on BP Statistical Review of World Energy 2015 data.

Low oil prices are having an adverse impact on the revenues that Saudi Arabia receives for exporting oil. In 2015, Saudi Arabia has so far issued bonds worth $5 billion US$, and plans to issue more to fill the gap in its budget caused by falling oil prices. Saudi Arabia really needs $100+ per barrel oil prices to fund its budget. In fact, nearly all of the other OPEC countries also need $100+ prices to fund their budgets. Saudi Arabia also has a growing population, so it needs rising oil exports just to maintain its 2014 level of exports per capita. Saudi Arabia cannot reduce its exports by 10% to 25% to help the rest of the world. It would lose market share and likely not get it back. Losing market share would permanently leave a “hole” in its budget that could never be refilled.

Saudi Arabia and a number of the other OPEC countries have published “proven reserve” numbers that are widely believed to be inflated. Even if the reserves represent a reasonable outlook for very long term production, there is no way that Saudi oil production can be ramped up greatly, without a large investment of capital–something that is likely not to be available in a low price environment.

In the United States, there is an expectation that when estimates are published, the authors will do their best to produce correct amounts. In the real world, there is a lot of exaggeration that takes place. Most of us have heard about the recent Volkswagen emissions scandal and the uncertainty regarding China’s GDP growth rates. Saudi Arabia, on a monthly basis, does not give truthful oil production numbers to OPEC–OPEC regularly publishes “third party estimates” which are considered more reliable. If Saudi Arabia cannot be trusted to give accurate monthly oil production amounts, why should we believe any other unaudited amounts that it provides?

Part 8. We seem to be at a point where major debt defaults will soon start for oil and other commodities. Once this happens, the resulting layoffs and bank problems will put even more downward pressure on commodity prices.

Wolf Richter has recently written about huge jumps in interest rates that are being forced on some borrowers. Olin Corp., a manufacture of chlor-alkali products, recently attempted to sell $1.5 billion in eight and ten year bonds with yields of 6.5% and 6.75% respectively. Instead, it ended up selling $1.22 billion of bonds with the same maturities, with yields of 9.75% and 10.0% respectively.

Richter also mentions existing bonds of energy companies that are trading at big discounts, indicating that buyers have substantial questions regarding whether the bonds will pay off as expected. Chesapeake Energy, the second largest natural gas driller in the US, has 7% notes due in 2023 that are now trading at 67 cent on the dollar. Halcon Resources has 8.875% notes due in 2021 that are trading at 33.5 cents on the dollar. Lynn Energy has 6.5% notes due in 2021 that are trading at 23 cents on the dollar. Clearly, bond investors think that debt defaults are not far away.

Bloomberg reports:

The latest round of twice-yearly reevaluations is under way, and almost 80 percent of oil and natural gas producers will see a reduction in the maximum amount they can borrow, according to a survey by Haynes and Boone LLP, a law firm with offices in Houston, New York and other cities. Companies’ credit lines will be cut by an average of 39 percent, the survey showed.

Debts of mining companies are also being affected with today’s low prices of metals. Thus, we can expect defaults and cutbacks in areas other than oil and gas, too.

There is a widespread belief that if prices remain low, someone will come along, buy the distressed assets at low prices, and ramp up production as soon as prices rise again. If prices never rise for very long, though, this won’t happen. The bankruptcies that occur will mean the end for that particular resource play. We won’t really be able to get prices back up to where they need to be to extract the resources.

Thus low prices, with no way to get them back up, and no hope of making a profit on extraction, are likely the way we reach limits in a finite world. Because low demand affects all commodities simultaneously, “Limits to Growth” equates to what might be called “Peak Resources” of all kinds, at approximately the same time.

About Gail Tverberg

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to financial problems for oil producers and for oil exporting countries. We are really dealing with a physics problem that affects many parts of the economy at once, including wages and the financial system. I try to look at the overall problem.
This entry was posted in Financial Implications and tagged , , , , , , . Bookmark the permalink.

1,093 Responses to Low Oil Prices: Why Worry?

  1. Don Stewart says:

    Dear Ed
    You said you want to grow new brain cells. Slightly tongue in cheek, let me point to an outstanding example of the ability to grow brain cells.

    Birds that survive the winter in northern climates can’t count on finding seeds with deep snow on the ground. So some of them hide seeds during the warmer months.

    ‘Colin Saidanha at Lehigh University wondered how a chickadee could remember where it had hidden thousands of seeds months later. The simple question led to an amazing discovery about chickadee brains. In the fall, when chickadees face extraordinary memory challenges, their hippocampus increase its size by 30 percent. The hippocampus is the part of the brain responsible for memory, and by adding anew cells to its mass, it can increase the storage capacity of cache locations. Brains, however, are energy hogs, so in the spring, when insects once again become abundant and chickadees no longer need to think about where they hid their seeds, their hippocampus shrinks back to it normal size.’

    So I guess that a very good solution would be to have some chickadee genes in your lineage.

    Don Stewart

    • Ed says:

      Don, I enjoy and learn from your posts on the brain and its chemistry. Likewise on farming but more personal interest on psychology, physiology, culture. I hope you are having as happy and upbeat a day as your post suggests. 🙂

  2. Stefeun says:

    French translation of this post in latest Intl Press Review (3rd position) on renowned blog “Les Crises” by Olivier Berruyer. Translation of Gail’s article by “Vers-où-va-t-on”, who seems to do it more and more often.
    (people in the comment section seem to focus on TTIP and Syria, though)

  3. Stefeun says:

    “Central bank cavalry can no longer save the world”
    (linked in the GlobalResearch article Christian linked to yesterday)

    “By David Chance
    LIMA (Reuters) – In 2008 central banks, led by the Federal Reserve, rode to the rescue of the global financial system. Seven years on and trillions of dollars later they no longer have the answers and may even represent a major risk for the global economy.

    A report by the Group of Thirty, an international body led by former European Central Bank chief Jean-Claude Trichet, warned on Saturday that zero rates and money printing were not sufficient to revive economic growth and risked becoming semi-permanent measures.

    “Central banks have described their actions as ‘buying time’ for governments to finally resolve the crisis… But time is wearing on, and (bond) purchases have had their price,” the report said.(…)”

    Are they really as clueless and powerless as they say?
    Maybe their next rabbit is too weird to be pulled off the hat too soon..?

      • Rural says:

        Wow! Now that’s a negative article. I hadn’t really thought of Russia’s stepping up in the Middle East as kicking the US out, but that may be exactly what has happened. And if does look like confidence in US currency could be eroding to the point that folk don’t flock to it as they have in the past. I’ve never experienced a pull-back of the markets when the US dollar doesn’t do very well. Since I’m Canadian and Canadians tend to do a great deal of business with the US, I’m trying to work out what a global economic pull-back and a weak US dollar would look like… From the view inside and out of the US.

        • madflower69 says:

          “I hadn’t really thought of Russia’s stepping up in the Middle East as kicking the US out, but that may be exactly what has happened. ”

          I see it more as the US drew Russia in to help with the IS problem. The US pretty much had its hands tied, at the Iraq border because of the UN policies.

          The other trick here is that the Russian economy is tanking, and Russia actually has deep coffers and quite a few assets because of the lack of debt and they need to spend money to prop up their economy. Military spending is usually their method of operation for that.

          To me, the bigger surprise is they announced 175GW of renewable energy was going to be installed which is about the same amount and same time line as India’s 175gw. (most likely more successful at getting it installed too. ). However, India has secured all of the financing, and I am not sure Russia has.

  4. MG says:

    A few thoughts on gold:

    Why gold is such a symbol of money like no other metal? Because gold is yellow like fire and it shines almost eternally, as it is highly corrosion resistant – exactly like fire. It is this quality of gold, the symbolism of the energy of the fire, that makes people believe in its value as a carrier of energy.

    But what happens when we more and more miss the real energy? The value of gold goes down and down…


    Source: http://www.gcasset.com/chart-perspective-gold-100-year-historical-prices/


    Source: http://inflationdata.com/inflation/Inflation_Rate/Gold_Inflation.asp

    After the Grat Depression, the price of gold was faling until until 1970. Then it started to rise, falling for a while from 1974 to 1976 and then reached its peak in 1980. Then it was falling until 2001. Then it started to rise until 2012. From 2012, it goes down.

    It seams that the energy symbolism of gold can correlate with the world per capita energy consumption:


    Highest per capita oil consumption correlates with the highest price of gold:


    Maybe it is not 100% valid, maybe something needs to be corrected, but I have come to such tentative conclusions…

    • madflower69 says:

      “A few thoughts on gold:”
      oh my! That first graph of gold prices eerily mirrored the 1980 event of when the Hunt brothers tried to corner the silver market. (it also drove gold up, thus the spike on the gold chart.)

      In other words, if you just want to analyze the technicals, It looks like someone like glencore, noble, trafigura, were trying to corner the commodity market.

      The Hunt Brothers went bankrupt because they were over leveraged. Similar to the EU, China commodity traders.

    • Just as energy prices cannot go up and up, gold prices cannot go up and up. There are affordability limits that affect everything.

    • kesar0 says:

      And what are the conclusions?

      • MG says:

        Dear kesaro,

        I was just trying to figure out why gold is such a key metal regarding money. That it is its resemblance to fire that makes people subconsciously believe in its power to transfer energy.

        The visual information is more important than words. For many people, the meaning of the words can be easily twisted, they can be misinterpreted, but the photo is unecvivocal. That is why I also presume that the majority who come to this site and read something, do not understand it, and still believe that there is “somebody” who is responsible for the fact that their standard of living is deteriorating, the price of gold is manipulated etc.

        So, I would say, for the simple minded people, the gold can preserve and transfer energy. The problem for them is rather not enough money, than not enough energy. They believe in pictures of the ideals that are still farther and farther from the reality.

        If all people understand what is going on, the value of gold would be much lower.

        • kesar0 says:

          Dear MG,

          In my opinion gold is so precious in so many cultures, because the gold IS the medium of energy transfer. You need a lot of energy to extract and process it currently and even more in the ancient times. And this energy is embedded for eternity. It is “indestructible”. This property made gold so valuable for generations.

          I have ambivalent feelings about gold and silver. Both are totally usless excluding industrial purposes, which will be unavailable after the BAU collapses.

          On the other hand the post-collapse world will need some means of exchange. Barter will be not enough at some point. At the end of the day the value will be what people believe in. Gold might be the currency again at some point. Who knows.

          • MG says:

            Dear Kesaro,

            the medium of energy transfer is the pipe, the wire, the road, the river… The gold is also the medium of energy transfer, as it reflects the light on its surface. Its appearance and the history of use made money of it. The silver also reflects light and is used for production of mirrors. The copper did not rust, so it was used as money, too. More recently came nickel, that is something between silver and copper: not so shiny as silver, but still corrosion-resistant and cheap to produce.

            The cheapest to produced money are electronic money. Thus, the money creation also followed the path of more and more efficiency: from golden to electronic money. Recently, there were no problems with the Greek banks after the people started to withdraw money. The ECB simply sent some electronic money and all was o.k. The use of electronic money was also encouraged that also protected banks from being wihout the money.

            So, the gold is an outdated money. Now, we have mathematics instead of money: when an equation does not work, the central banks simply insert some additional numbers (electronic money) into it and it works again. Until, one day, the system collapses, as the trust can not be created out of nothing…

            And back to the gold: who will sell you anything for gold when the trust will be missing? The trust that you can provide some energy for exchange will be more and more important than money. If you are not trusted to provide energy for exchange, you are an energy sink and no one will care about you…

            • kesar0 says:

              I mostly agree with you, but I am still ambivalent toward gold. Currency is the fabric of trade. It is crucial element of every culture and civilization. People will need money as means of exchange in post-collapse world. Please choose whatever you wish for that role, but gold has many very usefull properties for that purpose. If you see any other, better currency proposals please name them.

            • MG says:

              Dear kesaro,

              my reasoning comes from the situations where the society etc. does not function due to e.g. harsh climate, weak crops, war etc. In such situations, the produced stuff and crops must be distributed according to other key that ownership of money. And that key is mostly energy: if you are important for the survival of the society, you will get more. If you are an energy sink, you wil get little or nothing. This is the base for the creation of the justice. If the society lets die those upon which it is dependent, then the society dies out. It is the same as with the natural resources depletion. The human resources depletion contributes to the fall of the society, too.

              The question is what exactly are the qualities that are needed in the post-collapse world for the survival of individuals and societies? The creation of gold currency needs wood that is better for heating. The protection of gold from stealing needs energy, so it is better not to have any gold, because the burglars can come and not only take your gold, but kill you, too…

            • kesar0 says:

              MG you don’t answer your own/my question. What is the most currency/means of exchange in after-collapse world in your view? Gold has some advantages in this matter IMO. Please propose something more suitable and then we can exchange arguments.

            • MG says:

              Dear kesaro,

              I think that the barter trade will be on the rise, as the industrial production will be declining. The people will try to keep various useful things that will remain from the industrial past and they will not sell these things but rather exchange them for something they need.

              The gold has no practical value in everyday life/as regards the survival, why should anyone keep it? Due to this economization, the presence of the currency will be superfluous. There was a lot of gold burried during the hard times because the people were affraid they will lose it, i.e. during such times it is not safe to have gold (that attracts simple-minded aggresive people).

              The shrinking world lacks the energy, so the mutual help is crucial. The currency is dependent on the states. When the states are collapsing, the currency is collapsing, too. If somebody wants gold for something, then o.k. But if somebody wants e.g. a piece of cloth and has no gold and there is no way form him to earn this gold, so he can offer just his work or something else he has got.

              The main point is that the prevailance of poverty excludes the use of gold or any currency. When the majority of the population are slaves or serfs they do not need currency, as practically nothing can change their life, especially saving money, hoarding gold etc. Their position within the system is firm and clear. They work and somebody else, responsible for them, gives them for their work what they need. This is the view of a stagnating world, as the progress stopped at some level of resource depletion due to the lack of energy for further expansion. That were the Medieval Ages that strived hard to surpass the Roman and Greek civilizations, but practically could not. Only the use of fossil fuels succeded in that…

  5. Ed says:

    How long can Potemkin World continue? It is amazing to me how long it has worked. I guess I will be surprised when it finally breaks.

  6. John Doyle says:

    These authors see a much rosier picture for oil.
    Do you agree with it?

  7. Fast Eddy says:

    Commodity contagion sparks second credit crisis as investors panic

    Falling commodity prices have caused panic in credit markets and just like 2007 the contagion is spreading

    The collapse in commodity prices has sparked a second credit crisis as investors dump high-yield bonds, shattering the fragile confidence necessary to support global markets. Those calling it a Lehman moment forget their history. Current events have chilling similarities to the Bear Stearns collapse and mark the start of a new crisis, not the end.

    Canary in the mine

    The world of commodity trading has been thrown into chaos as the cost of borrowing to fund operations soars. Glencore has become the poster child for the sector’s woes as its shares have more than halved in value during the past six months. More worrying has been the impact on the group’s credit profile.

    More http://www.telegraph.co.uk/finance/markets/questor/11923223/Commodity-contagion-sparks-second-credit-crisis-as-investors-panic.html

      • Instead of explaining the slump as, “Its structural, its structural, its structural,”the head of OECD should have said, “its lack of rapid growth in very cheap energy products, its lack of rapid growth in very cheap energy products, its lack of rapid growth in very cheap energy products.”

        Perhaps that is structural, but it is not what he is saying.

        • Ed says:

          It really is beyond what they have been programmed to think about. They are told the invisible hand of the market will meet all needs. The idea that we might run out of a fundamental input like cheap energy is outside their sphere of possible thoughts.

    • dolph9 says:


      You’re problem is that you live in reality. You keep insisting that reality matters. I know because I’ve been there but I decided to reconcile myself to fantasy, to the world of politicians, bankers, corporations, the media. Of myths and happy talk, of science fiction, optimism, and human self congratulation. Of technology and kumbaya. Of pretending and the play of words and images.

      It’s more fun! You get to see how the matrix works from the inside and you can play and laugh with it. And you can go to work in air conditioning and chow on carbohydrate foodstuffs when you get home. And if not you can go on food stamps.

      If I have to choose between this, the matrix, and reality (plowing the fields or suffocating in a mine until I drop dead from exhaustion), I choose the matrix.

      • Ed says:

        Where you live is determined by mother nature, you have no choice. What you think about on the trip is up to you. I enjoy knowing.

      • Fast Eddy says:

        ‘We can ignore reality, but we cannot ignore the consequences of ignoring reality.’

        Enjoy Koombaya Land while you can — because reality is going to smash it to pieces….

        A plane can appear to be flying — for awhile — even if the wings and engines have fallen off… but when it inevitably slams into the ground — you get a moment of reality as you look out the window and see the ground approaching at terminal velocity….

        • doomphd says:

          FE, I believe this is the metaphor you were looking for:


        • dolph9 says:

          Don’t get me wrong, I know it’s over. There’s nothing we can do, humanity screwed up big time. America screwed up big time.

          But there’s no life outside of the matrix. I also know this. You have to enjoy the remainder of this fossil fuel life because there’s nothing on the other end, either for future generations or in the grave that awaits us.

          Each of us in our own way is choosing how we will live out the end. Think about the people that get to see the beginning and development of a civilization. It must have been interesting. We get to witness the end. We get to play out the end. This is also interesting in a way.

          • Fast Eddy says:

            The Elders had a great plan …. brilliant in fact…. they invented democracy to control the sheeple… they took over the media to control the thoughts of the masses ….they took control of the money supply and created the central banks which further entrenched control…. everything was going so smoothly….

            And then they ran out of cheap to extract energy… and now they are racing about squealing like stuck pigs …. because the grand plan is about to be smashed on the rocks… and their response is — print more money….

            Rather amusing …. actually…. the best and the brightest…. acting like rats with their tales on fire….

            I feel a wee touch of schadenfreude

            • madflower69 says:

              “And then they ran out of cheap to extract energy… and now they are racing about squealing like stuck pigs …. because the grand plan is about to be smashed on the rocks… and their response is — print more money….”

              You are hilarious. It is really an EU problem you are trying to project on the US.

              Of the top 10 commodity traders, only 4 are from the US, and only 2 are really involved in Energy and Metal commodities. The two biggest ones, Koch Industries and Cargill, are privately held which aren’t listed on any exchange. Cargill is involved in a lot of Biodiesel and Solar. The Koch brothers, own cattle, paper/pulp, as well. The other two Archer Daniels Midland and Bunge, are almost purely involved in Food and Grain.

              The 5 of 6 are from Europe, and are mostly gas/oil, and metals, like Glencore, Trafigura, Gunvor, Mercuria, Vitol.

              The last one, the Noble Group, is Singapore.

              In otherwords, the EU is in trouble, similar to the Lehman brothers, so what is the EU going to do about it? We know more or less what China is doing.

            • If the economy were growing, as a result of a growing supply of very cheap fuel, none of these commodity traders would be in trouble. So I agree that it is a lack of very cheap fuel that is causing all of these problems–even if they are different types of commodities.

              We are now in a sufficiently interconnected world that a major debt problem one place is a major debt problem everywhere. Supply chains are now worldwide.

            • madflower69 says:

              “If the economy were growing, as a result of a growing supply of very cheap fuel, none of these commodity traders would be in trouble. ”

              I don’t agree. Prices for commodities were too high. It wasn’t a supply/demand problem. They tried to corner the market, which created a bubble. They just weren’t smart enough to realize what they had done and are now over leveraged. (or maybe they did and wanted to crash the EU)

              Then the market reacted by new production from higher cost sources, new alternative technologies, and efficiency. Now the market tanked. It will correct itself. But the companies that are overextended, will most likely crash and burn.

              I don’t know if the EU will bail them out or not.

              The best thing the US can do is try to buffer the impact of the ripple effect when prices go high again.

    • That is a great article. Glencore has been borrowing at an effective interest rate of 4%. Now its interest rate is up to 7.4%, after briefly spiking to 10%. It can’t make money as a commodity trader with that kind of interest rate. Several other companies have the same problem.

  8. MG says:

    One demographic trend from Slovakia regarding rising elder abuse from the side of their children:

    The following article describes a case when a daughter of an old retired professional soldier was seen beating him, cursing him with vulgar words, pulling his hair and forcing him to take shower naked by the well outside:


  9. Pingback: Deflation statt Inflation: Das andere Gesicht zukünftiger (Energie)Armut

  10. Fast Eddy says:


  11. Stefeun says:

    Not deflation yet, just negative inflation…

    Euro zone inflation turns negative, putting ECB in corner

  12. xabier says:


    I like the fact that those Atlas nuclear-war shelters claim to be invisible to metal-detecting drones: most up-to-date!

    I think Fast Eddy would have some trouble explaining one of those to his neighbours. The Chinese rice-eaters, yes, but a vast metal tube buried 10 ft down……..?

    • kesar0 says:

      LOL! This would be highly suspicious to the neighbours.

    • Stefeun says:

      They can claim everything they want, especially if it’s impossible to verify. Well, until it’s too late! Oops, sorry for that, we’ll fix it for next time…

  13. Fast Eddy says:

    Spot container rates as measured by the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index (SCFI) have dropped 6.7 percent in the last two weeks, from a reading of 571.95 two weeks ago to a reading of 533.91 on Friday.


  14. You can stop making comments. Everything we need to know is here:


    Chinese infrastructure: The construction of bridges to nowhere, ghost cities and the like, which has driven recent economic growth. “In China you don’t rob a bank, you rob infrastructure” (Minxin Pei, expert on Chinese corruption).

    • Fast Eddy says:

      That is outstanding work:

      Bankrupt: A person who has run out of liquidity. Also, the intellectual state of modern economics.

      Biotech: A pharmaceutical Ponzi scheme of a company.

      BRIC: A “Bloody Ridiculous Investment Concept” (Peter Tasker, fund manager and author). An emerging bull market acronym comprising the first letters of Brazil, Russia, India and China coined by Jim O’Neill, a former member of theGoldman Sachs marketing department.

      Business school: Networking hotspot where young people pay large sums of money to have their scruples expensively removed. See MBA.

      Finance: The work of the devil, sometimes known on Wall Street as “God’s work” (Lloyd Blankfein, CEO of Goldman Sachs).

      Fine: A punishment inflicted on a bank’s shareholders after its employees have abused their trust.

      Fund management: An industry built on the “illusion of skill” (Daniel Kahneman, Nobel laureate). Although it takes several decades to distinguish luck from skill in the investment world, successful fund managers are inclined to believe in their own skill. See Lucky fool*.

      Goldman Sachs alumni: Former employees who infest central banks and finance ministries around the world, ensuring that the authorities bail out the bank whenever it is about to go belly up.

    • I am sorry to say this guys, but I found those lists to be academic hogwash. And that distract us from the REAL problems:

      a) Growing human population
      b) Living is a finite planet
      c) In need of constant growth

      “The BRIC’S Bank is anti Petrodollar, not anti Money Power” — Anthony Migchels


    • Thanks! A couple of other examples:

      Asset price bubble: The most noticeable consequence of the U.S. Federal Reserve’s easy money policy.

      Black swan: A common bird on Wall Street, renowned for its fat tail.

  15. Fast Eddy says:

    Just making my way through this very interesting discussion …. https://www.youtube.com/watch?v=tWl1wORuugk

    While keeping these comments in mind:

    “I care not what puppet is placed on the throne of England to rule the Empire, … The man that controls Britain’s money supply controls the British Empire. And I control the money supply.” Nathan Rothschild

    “Once a nation parts with the control of its currency and credit, it matters not who makes the nation’s laws. … Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.” — Mackenzie King, Canadian Prime Minister 1935-1948.

    “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” – Woodrow Wilson, after signing the Federal Reserve into existence

    “Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive that they had better not speak above their breath when they speak in condemnation of it.” ― Woodrow Wilson

  16. VPK says:

    Why Worry?… This is Why!
    The Fukushima Daiichi Nuclear Power Plant No. 2 nuclear reactor fuel is missing from the core containment vessel. (Source: Up to 100% of No. 2 Reactor Fuel May Have Melted, NHK World News, Sept. 25, 2015.)

    Where did it go? Nobody knows.

    Not only that but the “learning curve” for a nuclear meltdown is as fresh as the event itself because “the world has never seen anything like this,” never.
    “The researchers say further analyses are needed to determine whether molten fuel penetrated the reactor and fell down,” Ibid. In short, researchers do not yet know if the molten hot stuff has penetrated the steel/concrete base beyond the containment vessel, thus entering Mother Earth.
    Here’s the big, or rather biggest, problem: Cesium is water-soluble and makes its way into soils and waters as it quickly becomes ubiquitous in a contaminated ecosystem.
    Categorically, “Long-lived radionuclides such as Cesium-137 are something new to us as a species. They did not exist on Earth in any appreciable quantities during the entire evolution of complex life. Although they are invisible to our senses they are millions of times more poisonous than most of the common poisons we are familiar with.
    A full meltdown would involve all of the fuel in the nuclear plant core melting and a mass of very hot molten material falling and settling at the bottom of the reactor vessel. If the vessel is ruptured, the material could flow into the larger containment building surrounding it, which is shielded by protective layers of steel and concrete (Ferguson).

    “But if that containment is ruptured, then potentially a lot of material could go into the environment,” according to Charles Ferguson, president of the Federation of American Scientists (Source: Mechanics of a Nuclear Meltdown Explained, PBS Newshour, Science, March 15, 2011.)

    So, looks like Reactor #2 breached the containment barriers and may be in the SOIL,
    Hope that clears up the matter of core meltdown.

  17. Stilgar Wilcox says:

    Here’s some anecdotal info. on the state of the economy. My wife and I have two businesses – one getting it’s revenue from to the top 5% and the other to the top 30%. The former is doing great and the latter has been tailing off sharply since July. Fortunately 90% of the income comes from the former. These businesses have accurately correlated to the state of the US economy now for 12 straight years.

  18. Fast Eddy says:

    During an appearance on the Alex Jones Show, Drudge asserted that copyright laws which prevent websites from even linking to news stories were being advanced.

    “I had a Supreme Court Justice tell me it’s over for me,” said Drudge. “They’ve got the votes now to enforce copyright law, you’re out of there. They’re going to make it so you can’t even use headlines.”

    “To have a Supreme Court Justice say to me it’s over, they’ve got the votes, which means time is limited,” he added, noting that a day was coming when simply operating an independent website could be outlawed.

    “That will end (it) for me – fine – I’ve had a hell of a run,” said Drudge, adding that web users were being pushed into the cyber “ghettos” of Twitter, Facebook and Instagram.

    “This is ghetto, this is corporate, they’re taking your energy and you’re getting nothing in return – nothing!”


    • What is happening in the world of books is that there are charges for using anything–quoting a short passage, using an image, almost anything. It is a big headache, besides being expensive for an author. The Internet has been not as careful about this kind of thing. I make most of my images, so that makes things easier. Also, some consider using numbers from copyrighted sources in a chart to be an infringement of copyright as well. Britain seems to be stickier about this than the US.

  19. Fast Eddy says:

    Food for thought …. is the Fed out of bullets?

    • madflower69 says:

      “Food for thought …. is the Fed out of bullets?”

      NZ no idea. Australia might be out, the EU might be out. China, and Russia both have bullets left. The US wants to raise rates.

  20. Ed says:

    Health wise I have every reason to expect to be here in 20 years. Resource depletion wise I have serious doubts. For me if I am here in 20 years I expect it will be by the grace of God. Yes I plan a little, but not enough to make much difference. You can cast this in any light you want, never the less it has a strong psychological benefit.

    • I have seen that kind of calculation before. And the price of the car seems to go up in proportion to the effort involved, not the fuel savings involved.

      • madflower69 says:

        “the price of the car seems to go up in proportion to the effort involved, not the fuel savings involved.”

        For a while at least. It is no different then anything else. the major cost is usually the upfront development cost which for cell phones or automobiles can easily be in the billions of dollars. Then you write that cost into the product cost for like the first million units, then you have recouped your development money, and it ends up to be just the component cost and labor plus profit.

        As it scales it becomes cheaper because the design costs are spread out over more units.

        It is one of the reasons why you usually only see incremental improvements, because you already have 90% of the work done.

  21. Ed says:

    I went to the public service commissions meeting on a new 1GW transmission line for 1.2 billion dollars but all cost over runs are OK and will be paid by the customers. I sat through hours of expensive economic consultants projecting the cost of natural gas out to 2065. Good news we have nothing to fear there will be unlimited natural gas until 2065. Lots of shoe with those nice little tassels wore by lawyers, lots of perfectly tailored suits.

  22. Ed says:

    We have already transitioned to the first type of command economy. Command by deception, illusion, lie, advertising, results like revenue, profits do not matter. Next will be the more conventional command economy here is your ration book get to work or we shoot you, you are free, choose. Then we get to the erosion due to real physical systems losses, breakdown, depletion. Population number adjusts and we carry on. Hopefully somewhere along that line someone throws the hot nuclear fuel (less than 5 years out of the reactor) into a lake, river or ocean.

    • dolph9 says:

      Right that’s the idea. We have to accept it, it’s going to happen this way.

    • Fast Eddy says:

      “results like revenue, profits do not matter”


      You’ll see how much they matter when major global corporations no longer have neither.

      What you are saying is akin to flying in a plane — and suggesting that the engines and wings don’t matter….. they could fall off the plane and all that would happen is the plane would fly a lot slower.

      You can ignore reality, but you cannot ignore the consequences of ignoring reality.

  23. Don Stewart says:

    Dear Stefeun
    Here is a little more grist for the mill in terms of depression and addiction and similar topics in the modern world.

    First up is a scholarly study which claims that our modern atomized world of Global Capitalism is not the world we are adapted to live in. Consequently, many of us fail to achieve psychosocial integration, and things go badly for us.


    The TED talk points to the connection between cancer killing medications and the subsequent death of new brain cells and depression. The speaker finishes with a discussion of how to encourage new brain cell growth. One thing is to avoid stress.

    However, let’s use Kelly McGonigle’s model of The Upside of Stress to put that into a context. Let’s suppose you face a serious problem, and your body starts making more cortisol in order to prepare you for the challenge. You work hard and cleverly and finally solve the problem. There is no question that you have been exposed to stress (from the cortisol), but I would argue that engaging in the mental and physical challenges probably encourages new brain cell growth.

    If, on the other hand, you just give up and decide to suffer, then you get the effects of the cortisol for a long time and there is no offsetting benefit from exercising your brain and body.


    If you put these two together, what you get from the first is that, statistically, things are going to go badly for lots of people (the Roy Baumeister finding with his cookies). But an individual may use a different mental model and actually benefit from the trial.

    I once wrote a little haiku-like poem:
    No gas for the car.
    What luck!
    I can enjoy the walk.

    Don Stewart

    • Ed says:

      Don I want to know how to encourage new brain cells. I do not want to watch the video can you just tell me?

    • Stefeun says:

      Thanks Don,
      yes, having a purposeful activity, whatever the goal is, is always beneficial.

    • Don,

      You might want to consider/add these takes as well.

      By Reg Morrison: “The human brain remains a piece of stone-age machinery, however you look at it, and no amount of culture can make it otherwise. Genetically speaking we are a finished product, not a prototype. What you see is what you get—there will be no bright utopian future— The Spirit in the Gene, page 247.

      And Ernst Mayr: From the point of view of a biologist, argued that it’s very unlikely that we’ll find any (life). And his reason was, he said, we have exactly one example: Earth. So let’s take a look at Earth. And what he basically argued is that intelligence is a kind of lethal mutation … you’re just not going to find intelligent life elsewhere, and you probably won’t find it here for very long either because it’s just a lethal mutation …

      He pointed out that if you take a look at biological success, which is essentially measured by how many of us are there, the organisms that do quite well are those that mutate very quickly, like bacteria, or those that are stuck in a fixed ecological niche, like beetles. They do fine. And they may survive the environmental crisis.

      But as you go up the scale of what we call intelligence, they are less and less successful. By the time you get to mammals, there are very few of them as compared with, say, insects.

      If nothing significant is done about it, and pretty quickly, then he will have been correct: human intelligence is indeed a lethal mutation. Maybe some humans will survive, but it will be scattered and nothing like a decent existence, and we’ll take a lot of the rest of the living world along with us.


      • Fast Eddy says:

        “and you probably won’t find it here for very long either because it’s just a lethal mutation”


      • That is a good point, about intelligence being a lethal mutation. A part you didn’t quote says,

        He also added, a little bit ominously, that the average life span of a species, of the billions that have existed, is about 100,000 years, which is roughly the length of time that modern humans have existed.

        • Stationmaster says:

          “the average life span of a species, of the billions that have existed, is about 100,000 years, which is roughly the length of time that modern humans have existed.”

          So how did the dinosaur get to celebrate his 180 millionth birthday? Just imagine all the candles on THAT cake.

          Just for laughs, you cab read the book by the man who postulated that dinosaurs MUST have developed intelligence in all that time. These allegedly humanoid dinosaurs also suffered global warming, which was (ahem!) caused by the pollution from their industrial activity:


          Incidentally, more than one person (in this case a mechanical engineer) has calculated that dinosaurs could not have supported their own weight:


          For them to do so, gravity would have had to be only 55% of what it is now.That means the Earth must have been only 55% of its present size. Which leads us to the expanding Earth theory:


          I don’t know what to think. All I know is that you can find all sorts on the internet. 🙂

          • bandits101 says:

            “So how did the dinosaur get to celebrate his 180 millionth birthday? Just imagine all the candles on THAT cake.”
            Crocodiles, lizards and all sorts of reptiles are still around. Mammals were around in the time of the dinosaur, as were birds. The quote was THE AVERAGE and there have been billions of specie.
            Dinosaurs were a genus. Maybe around 800 species of dinosaur have been identified, many more remain undiscovered and likely many more than that didn’t fossilise.

            Conditions on Earth change over time. Living things that make a niche for themselves may dominate until things change. This time humans are forcing change, most likely change that a majority of living things cannot survive.

        • I was afraid if I make the post too long, some people will skip it.

  24. Fast Eddy says:

    And as predicted…. bad news (plunging corporate profits) brings wonderfully good news!

    The Dow-Jones Industrial average closed over 17,000 today, for the first time since August.


  25. dolph9 says:

    Central banks have infinite hang time, but they probably don’t want to take things too far. Just let another crash happen, and then begin the cycle again.
    They can create unlimited currency at zero cost. Not hard to understand. They are not constrained by the limitations of the physical economy.
    So how many times can they do this? As many times as they want, as long as the plebes don’t revolt. That’s why keeping the populace fed and maintaining a militarized police force is so important.

    It ends when the plebes have finally had enough and violently storm the Fed and Capitol Hill, and then perhaps civil war, system reset, breakup of the United States into 4-5 separate nations. China will take over the global reserve currency role by default, with Russia and whatever is left of the EU having a seat at the table as well. That’s the endgame. Could be some time yet.

    • Fast Eddy says:

      So you think BAU can continue ‘to infinity’

      That would put you in the camp of quite a few people I know — they believe the central banks are omnipotent — that crisis is opportunity — the bigger the crisis the greater the potential opportunity to make millions…

      That’s because they reject the argument that this time is different — this time we are out of cheap to extract energy — a situation that is going to render the central banks irrelevant… impotent…

      • dolph9 says:

        Did I say infinity (much less a century, or even a human lifetime)?

        You think things are going to collapse any day now. You’ve been repeating that every day, and yet somehow things don’t collapse.

        I’ve been quite clear that my view is that this is a stair step down breakdown in our present system that is taking decades and we face another step down every soon. I think some form of “modified BAU” under a controlled command economy can continue for decades. The general outlines of the system will not end until we’ve extracted and burnt the last fuel that people can get their hands on. I’ve been studying this closely for more than 7 years (even to the detriment of my own life and future prospects) and that is what I’ve realized.

        I think what separates you from me is that I understand propaganda, I understand mechanisms of control. They actually do work. You don’t think they do, you think people won’t accept hell as heaven. I know people will, because they already do.

        How else do you get grown men to shoot weapons at and kill each other, and happily accept their own amputation? Easy, just manufacture some event, tell them it’s the foreigner out there (some other national/religious group) and when they come home maimed, give them a medal and a few photo opportunities and, voila, adult men will think of themselves as “heroes” as they rot in their wheelchairs.

        This is as old as history, and as American as apple pie.

        • Ed says:

          Yes most people are stupid. A pat on the back a shiny metal and they will die for you. They will stay at their posts (jobs) until they die of starvation. So far I do not even see car pooling.

        • Ed says:

          Dolph9, I was in town today. Had a strong sense of looking at people and thinking you have no idea where you are and what is coming. Now I have no desire or need to enlighten them but it is odd walking among the blind.

          • Fast Eddy says:

            Never mind the general public…. there are plenty of people on this site who have no idea what is coming….

        • Fast Eddy says:

          I have never said any day know… I am in the Gail camp — next year.

          It is a step down now – has been since the turn of the century when oil prices spiked — killing growth.

          Here are some numbers for some very large companies:

          Caterpillar (-13%), Dow Chemical (-13%), MetLife (-12%), Microsoft (-4%), Intel (-5%), International Paper (-21%), JPMorgan Chase (-3%), Johnson Controls (-11%), Oracle (-5%), PepsiCo (-6%), Pfizer (-7%), Procter & Gamble (-12%), Union Pacific (-10%)…. Then there’s former tech darling QUALCOMM (-14%), insurer ALFAC (-9%), and of course IBM, always, at least for longer than anyone can remember, well, for the thirteenth quarter in a row, strong dollar, weak dollar, hot China, cold China, nothing matters…. Its revenues decline through thick and thin, this time -15%.

          They are even worse in Q3:

          Caterpillar’s net income is expected to drop 53.5% from a year ago.

          General Electric’s (NYSE:GE) earnings are seen falling 31.6%.

          Average decline in profits for listed companies is – 7%

          This is happening in spite of 0% interest rates — trillions of QE and other stimulus…. it has been worsening in recent quarters and it will continue to worsen.

          These companies have debts to service — that is eventually not possible when profits are declining.

          These companies – thousands of them — will continue to shrink and wither and at some point they will cease to be viable. They will collapse.

          There is nothing the central banks can do about that — this is not AIG – or Bear Stearns — or Lehman — or Greece….

          These are not one-offs …. we are talking about massive systemic failure of essentially every company on the planet — because when the listed companies go — there will be a domino effect…. everything goes…

          When we get to that point the slow collapse we are in will accelerate — and BAU will unravel very quickly.

          Feel free to explain how the central banks will stop this?

          “This is as old as history, and as American as apple pie.”


          This time is different – history is no guide.

          • Fast Eddy,

            You need to slowdown down and realized that humans can be very cleaver.

            First: You don’t need to remind us that humanity is in deep trouble, because humanity is facing the end of the industrial age. We got that.

            Second: Dolph9 post is a great, and an accurate summary. It will go steeps down. Financial, mainly. Then commerce.

            Third: Geopolitical. If the US elites, helped by the British elites, can manage a war in the main land of Europe and a war in the Middle East, the US comes on top.

            Fourth: The Natives. The biggest fear of any government is their own population. So, an homogenize population, such was in the US and Germany in the 1903’s, is a NO NO. And the elites solved it by allowing immigration. US immigrants are mainly South Americans Catholics. Highly indoctrinated and gullible.

            However, in Europe, they are Muslims. People with a chip on their shoulders looking for revenge.

            And the wild card: China

            “America’s elites know that capitalism is totally unworkable. We try to impose it in the 3rd world so we can destroy them” — Noam Chomsky

            By the way, thanks for the list.

            • kesar0 says:

              Interesting perspective. I agree.

              US is trying to maintain the global hegemon role. The only parties able to threaten this position are some configurations including Europe (mostly Germany), Russia, China and Middle East oilers.
              Divide et impera! …same old, same old.

            • Fast Eddy says:

              Yes – we are so clever — we have worked out how to grow enough food using a non-renewable resource — so that we now have 7.3B people…. we’ve created weapons that can destroy the planet — we have engineered nuclear energy and now we have death ponds that will kill us all.

              Some might refer to our cleverness as stupidity.

              Enough of that.

              You have completely ignored the logic of my argument and addressed none of it.

              Oh right — we are clever – we’ll work it out. You may as well say we can pray for a good outcome

              Or better still — let’s just ignore the fact that the biggest companies on the planet are heading for bankruptcy …. quarter after quarter their top and bottom lines are being bombarded…

              And put the song on — and dance about the camp fire eating organic fruit bars…

              Because we all know — when we listen to the soothing words of Joan Baez…. everything will be okay…

              Quick — pull out your drum …. (made from road kill deer hide)….

            • Fast Eddy,

              I did not ignore your logic, because I have no quarrel with your logic. I thanked you for it.

              I just think that, the Societal collapse and human disintegration will start in the Middle East and Europe, first.

              Second, US has the strongest army. Once the (petro) dollar goes, the US army will take by force.

              Third: I have a very bleak view of humanity. And here is why: And I think you’ll appreciate this:

              An interesting debate that took place some years ago between Carl Sagan, the well-known astrophysicist, and Ernst Mayr, the grand old man of American biology.
              They were debating the possibility of finding intelligent life elsewhere in the universe.
              Sagan, speaking from the point of view of an astrophysicist, pointed out that there are innumerable planets just like ours. There is no reason they shouldn’t have developed intelligent life.
              Mayr, from the point of view of a biologist, argued that it’s very unlikely that we’ll find any. And his reason was, he said, we have exactly one example: Earth.
              So let’s take a look at Earth. And what he basically argued is that intelligence is a kind of lethal mutation … you’re just not going to find intelligent life elsewhere, and you probably won’t find it here for very long either because it’s just a lethal mutation.


            • Fast Eddy says:

              Let’s go to Wolf for a real word scenario of what happens when a single large company collapses:

              When Volkswagen struggles, so does the state of Puebla. The huge manufacturing plant built on the city’s outskirts 50 years ago provides roughly a quarter of local GDP. Its supply chain consists of 150 companies, generating 78,000 jobs – most of them secure and highly paid, at least by local standards. What’s more, Volkswagen recently built a huge new state-of-the-art plant for its Audi subsidiary in San José Chiapa, Puebla.

              In the words of my mother-in-law, a born and bred Poblana, there is not a single family in the city of Puebla that does not have some level of exposure to the VW plant.


              Once company – one factory – one city.

              The average decline in profits global listed companies last quarter was 7%.

              We grow – or we die.

              Collapse will be rapid — when the central banks run out of tricks.

          • greg machala says:

            I agree…history cannot be used as a guide as we go forward. We as a human race have never been in a situation even remotely close to where we are now. We are moving toward a singularity. The only survivors will be natives and elite who take to bunkers filled with MRE’s. Not a pretty picture – even for the elites.

  26. Stefeun says:

    “Van Beurden reiterated Shell’s support for a viable carbon pricing system. The Anglo-Dutch producer and five other energy companies have written to the United Nations climate change conference, which takes place in Paris from 30 November to 11 December, calling on governments to introduce carbon pricing systems where they do not yet exist.”

    Shell pushing for Carbon tax? Why??
    One answer: http://www.triplepundit.com/2015/10/shell-ceo-creates-tension-in-the-fossil-fuel-industry-with-call-for-carbon-tax/
    “… But companies such as Shell have seen massive opportunities in natural gas, as it has become the favored source for power plants in the United States. To that end, Shell is in the midst of a complicated acquisition of BG Group, which would significantly boost the company’s natural gas business.
    Thrown under the bus is America’s coal industry, which, despite its bellyaching over the Obama administration’s energy policy, has lost out mostly because of many utilities’ shift from using coal to an embrace of cleaner-burning natural gas.
    Furthermore, the reality is that a carbon tax will not have a significant impact on energy producers — those costs will largely be passed onto consumers.”

    I see the last part as the flaw in their plan, customers can’t pay higher prices.

    • Carbon taxes don’t work to begin with, unless all countries participate in them. Even then, they tend to push industry toward countries with lower costs–more coal, lower pollution standards, lower wages for workers, fewer benefits for workers. I posted this link before.


      The consumers don’t pay higher prices. Instead, industry goes elsewhere.

      • Ed says:

        A carbon tax is a negative subsidy. A positive subsidy can drive people from cheap coal to expensive PV. A negative subsidy can only drive people who can afford it to expensive PV. The rest become welfare load to the government needing to be given free or subsidized PV that they can afford. If the carbon tax is used to support the less well off then a carbon tax is a way to allocate decreased consumption to the well off. Making them less well off. Depending on how much welfare the carbon tax pays for the less well off can go positive, neutral or negative. It can force society to stop using cheap coal (yes short sighted cheap not thinking about health effects or global warming) and to force high cost energy with associated low wealth society. For the view of the elite shutting down the energy use of the not elite works fine. The sooner they die and the less messy they make while dying the better.

      • Exactly, Gail.

        And the video below, by Al Jazeera, highlight your point of shifting the pollution someplace else:

        While keeping as much as of the natural gas on the hands of the wealth nations.

        • madflower69 says:

          “While keeping as much as of the natural gas on the hands of the wealth nations.”
          In this case, the US NG supply is owned by the the Dutch Royal Shell. A US company isn’t even making the proposition for the tax.

          • Who cares for Taxes? It is the petrodollar.

            The Triffin Dilemma.
            We own them —they work for us— because they need dollars to buy oil.
            Then, they buy our hard assets.
            Soon we ‘American’ won’t afford them so, they will become unprofitable either way.
            Then, US bankers buy them on the cheap.

            Can’t find a better racket than that.

            • greg machala says:

              The oil-for-dollars scheme or petro-dollar is the single most ingenious brainchild ever foisted on the global economy.

      • Stefeun says:

        Yes Gail,
        any tax is an advantage given to those who avoid to pay it.

        • Right. If there were a way we could tax imported goods because of the pollution they caused (which we don’t know about) that would be helpful–but that doesn’t work.

      • yt75 says:

        For me the objective of a carbon tax, is also primarily to “drive” the products produced in the right direction. If you compare the the fuel tax levels for vehicles in Europe and the US (since the first oil shocks), and the associated cars/trucks produced, it seems clear to me that the tax level has pushed towards more efficient cars.
        (but at the broad level, all of this might not matter much).

        • We were talking about the carbon tax, which would be on pretty much everything. It doesn’t really focus spending in the right direction. It just makes it clear to foreign competitors without the tax that they will have less competition than they otherwise would have.

          If governments want to encourage smaller vehicles, because they cannot afford to import so much fuel, and because it is hard to park large cars on narrow streets, then a high tax on fuel for automobiles makes sense. It reduced the amount of tax that needs to be collected in other ways.

    • madflower69 says:

      “I see the last part as the flaw in their plan, customers can’t pay higher prices.”

      They are really trying to wipe the coal industry, and they have a price advantage right now with fracking, if they can seal up NG as the main generation fuel, then they have a backstop for their fracking campaign which guarantees their profits. It also leaves them in control of a lot of prices which I am not particularly a fan of.

      I don’t like fracking. I would rather get as much generation as possible into other forms of production. It just isn’t going to happen overnight. Prices of the alternatives need to go even lower. The landscape for energy is going to be significantly different in 10 years. I don’t think it is going to end up to be higher prices though.

      • As we have added wind and solar PV, the amount of hydroelectric has shrunk. We have ended up a little ahead, but not a whole lot. Since 1990, renewables (including hydro) have increased from 11.6% of US energy to 13.0% of US electricity, a gain of 1.4%. The gain for nuclear in this time period was greater, increasing from 20.0% of electricity generation in 1990 to 21.7% in 2014, a gain of 1.7%. The percentage of electricity from coal has shrunk from 53% to 43% over this period (in fact, actually over the period 2004 to 2014). The percentage of electricity from natural gas has grown from 11% to 22% in 24 years.

        Because of the low price of fossil fuels, I expect we will be seeing a lot of bankruptcies of companies providing coal and natural gas to the electricity industry in the next couple of years. The new buyers may not be able to continue providing supplies, because they will not be able to get enough financing to keep the mines/natural gas operations operating. We don’t have good option for near term solutions, because coal + natural gas amount to 65% of total generation in 2014, pretty much unchanged from 1990.

        • Ed says:

          The frack gas wells in the north east are capped due to low prices. They buy the rights and drill and frack then their ownership rights are in perpetuity. The current prices are too low to justify producing. Some north east nt gas is currently coming from Yemen. What could go wrong?

  27. Fast Eddy says:

    More on Glencore…

    Shares in Glencore rallied 6pc in early trade after the mining giant announced it was cutting production at its mines across Australia, South America and Kazakhstan by 500,000 tonnes a year, or one-third of its annual zinc output.


    So you cut production by 1/3 and that announcement results in: “Following its announcement, three-month zinc prices on the London Metal Exchange rose 6.7%”

    I am not an accountant but that looks like it would still result in a massive hit to revenues….

    Taken to the extreme — how about they cut production by 90% — and the price of zinc increases 50%….

    How do they service the massive debt load that cannot simply be wiped off the balance sheet — and the P&L?

    They bought those assets and if they are shuttered they return nothing…

    Some loaned the money — and that someone is going to want to be paid….

    • Have you seen this story purportedly connecting Glencore derivatives to some of the financial fluctuations we have seen recently?


      • Fast Eddy says:

        I had not seen that – thanks.

        “Most of our “leaders” either don’t understand what is happening or they are not willing to tell us.”

        The latter – Jean Claude Juncker: when it gets really bad you need to lie… (it must be very very bad right now)

        “The big financial institutions assure us that they have passed off most of the risk on these contracts to others and so there is no reason to worry according to them.”

        It’s Quiz Time on FW …

        Let’s say I had 10 trillion dollars … I jumped on my private jet and landed in Macau… rode the limo to the casino … walked up to the table and put it all on red…. the wheel spins…. tick tick tick tick tick… tick…. tick…….. tick… the ball stops:


        Do I collect my winnings?

        • madflower69 says:

          “Do I collect my winnings?”
          Minus the 400M USD you promised me so you could have this forum to yourself?

        • Ed says:

          This is the same as does the US lose for having sold and bought back 40 trillion dollars of bonds? No because no one can collect. If you owe one million dollars the bank owns you if you owe 100 trillion dollars no one has the power to collect.

        • SymbolikGirl says:

          Along these lines I wanted to throw in my two cents regarding the Casino-Fantasy world of High Finance and the Real World of main street. What we have seen over the last few decades is the complete decoupling of Wall Street from Main Street. Wall Street is no longer a reflection of main street and while the events of Wall Street can affect main street, main street up to a point has little effect on Wall street.

          Stock markets can soar and companies can mark questionably assets to whatever they please and can play any number of accounting games to keep them in the Casino for a bit longer, like the gambling addict who loses everything he came in with only to re-mortgage his house and go back to the tables. He looks to be solvent for a while but the house (reality) will eventually win and eventually he will gamble everything away and be left destitute. Wall Street has been taking money and debt from everywhere they can get it, from our pension funds and investments, from our wages and our labor and from the central banks but it never lasts forever. The future is now thoroughly mortgaged and balance sheets are full of debt that can’t be repaid. Main street has been rotting for years now with tens of millions of people thrown permanently out of work and millions more making due by waiting tables and serving Big Mac’s. But like the gambler, Wall Street has taken everything it can and now reality is beginning to hit home and commodity prices, corporate earnings and the labor participation rate clearly show that reality is now raining on Wall Street’s parade.

          When I think of what a fast crash will look like it won’t be go-to-bed on Friday night and then wake up to Mad Max on Saturday morning but things will happen pretty quickly. We could definitely see a case of ‘go to bed Monday night, wake up Tuesday morning and your bank account is frozen’, if you read Paulson’s memoirs you can see that we were within a few hours of that back in 2008, now it’s 2015, the world has piled on debt, interest rates around the world are at 0% or negative, commodities are low and many still falling and QE has been thoroughly discredited. Do I believe that this coming crisis will be the final one? No, I don’t. We have witnessed so many incidents of governments around the world doing whatever it takes to keep BAU going. What I think we will see is more nations being thrown under the bus like Greece, we will see far more local disruptions in fuel, credit and products and we may see a lot more in the way of restrictions on personal liberties.

          I think though that during the period to come over the course of maybe a year or two we will see exactly what was in the fiction novel “The Book of Strange New Things” where the stores will start to look a bit picked over, maybe one day Cadbury goes under and chocolate bars become hard to find, the next time you go to the supermarket they are no Bananas and Oranges because the freight company that was hauling them up from Florida and California and Mexico went bust the day before. The week after there may be huge lines at the gas pump and a max limit of 20 gallons per person because refineries have been struggling with a lack of credit to finance refurbishments and so they have either gone down or had to scale back production due to maintenance issues and now half the stations in the city are out of gas. The next month you go into Wally’s world and the shelves looks pretty bare because the companies in China making the plastic pumpkins and crappy flatware are going out of business faster than the parent companies can switch production over. But then one day you go to the super market and they have no produce, no milk and only a few cans of pickled beets. Prepper’s are hunted down by the media as ‘Hoarders’ and neighbors are encouraged to report their friends and family (for cash rewards) who hoard food and sundries. Suddenly it’s the next year and all of the grocery stores are closed, their lights off forever and their shelves bare, there are a few small stores still open but they only take cash or barter and are well protected by armed security. The Police force and fire department hasn’t been paid in Months and the armed officers go door to door looting from ‘Hoarders’ (ie: Preppers) to feed their families. Brownouts and blackouts become an ordinary thing, the use of air conditioners is banned and power permanently cut off to those caught using them. Then one day the power goes out for good, the few stores and markets that were still open are now gone and the world as we knew it is gone.

          • Ed says:

            Symbolik, I feel you have much of it. Being for the peaceful north I feel you have missed the war call up here in the U.S.. Congratulations you are going to Syria to fight shoulder to shoulder with ISIS against those evil Russians who hate our freedom. Just remember when our allies rape young boys as part of our support of diversity just look the other way. We respect their freedom. The Russia would take away our allies freedom to rape young boys it is our moral obligation to defend freedom.

            • SymbolikGirl says:

              Really? Didn’t the US learn anything from Libya, Iraq or Afghanistan? I work for a company headquartered in the US and have friends and family in the States but I will never understand the American governments obsession with waging useless wars in far-off places. I wonder if conscription will make a return, more poor kids dying for the 1%.

            • Fast Eddy says:

              Whether you are Tony Soprano — or the world’s super power — you need two things:

              1. You need to pound the living shit out of anyone who dares challenge you — because if you don’t then everyone will challenge you — because they will think you are weak….

              2. You need to ensure your organization is financially strong — when you are the ruler of the world that means cheap resources — it’s a zero sum game here — and a dog fight — so you need to make sure you have a stable, sufficient supply of the resources — particularly oil….. if another country has oil you must take it — because if you don’t one of your competitors will….

          • madflower69 says:

            “Along these lines I wanted to throw in my two cents regarding the Casino-Fantasy world of High Finance and the Real World of main street. ”

            This isn’t a Wall Street vs Main Street issue as much as it is other places like the EU, China, Australia, etc are all tanking because of their own Lehman type of crisis.

            The US Wall Street problem is really the outsourcing of jobs that could have been created in the US to help sustain the economy. Oil and Gas/metal commodity traders are mostly EU based and not even listed on Wall Street. Neither is the US’s biggest oil/gas commodity trader, which the Koch Industries, they are privately held.

          • kesar0 says:

            Fully agree.

            “How did you go bankrupt?”
            Two ways. Gradually, then suddenly.”

            ― Ernest Hemingway, The Sun Also Rises

      • Stilgar Wilcox says:

        Some describe derivatives as gambling while others say they are insurance, but either way I figure from their outrageous financial total, if they go up in smoke, we’re all toast.

        • madflower69 says:

          “Some describe derivatives as gambling while others say they are insurance, but either way I figure from their outrageous financial total, if they go up in smoke, we’re all toast.”

          It depends on the derivatives. Options are considered derivatives and given glencore is a producer, I would expect them to sell futures contracts and use a lot of options to help cover their positions.

          The ones the lehman brothers got in trouble with are called credit default swaps, which are kind of a weird derivatives. You can over leverage those like lehman did.

          The point is just saying they own a lot of derivatives is fairly meaningless without a more specific context.

          • Stilgar Wilcox says:

            My point was on all derivatives, not just Glencore’s.

            • madflower69 says:

              “My point was on all derivatives, not just Glencore’s.”

              Right. My point was just that not all derivatives are bad tools. LIke everything else overuse tends to create the most problems.

  28. Fast Eddy says:

    More bad news is on the way next week….

    But the stock market keeps climbing!!!

    Amazing what QE ZIRP money can do when failing companies borrow free money and buyback shares on an epic scale…

    This is truly an incredible situation given:

    Analysts predict that the industrials sector will see its earnings decline 3.7% and revenue fall 5.2%. Both DuPont (NYSE:DD) and Caterpillar (NYSE:CAT) have warned in recent weeks.

    Caterpillar’s net income is expected to drop 53.5% from a year ago.

    General Electric’s (NYSE:GE) earnings are seen falling 31.6%.

    Manufacturers are also being hurt as the materials and energy sectors slash spending due to weak demand and prices.

    I wonder what sort of hang time the central banks have left…


  29. Fast Eddy says:

    Alcoa Inc. on Thursday reported a sharp drop in third-quarter profit.

    The New York-based aluminum producer—the first major U.S. company to report quarterly results—posted a profit of $44 million, or two cents a share, down from $149 million, or 12 cents a share, a year earlier. Revenue fell 11% to $5.57 billion


    Of course none of this matters – the central banks will just print more cash — companies like Alcoa will borrow at ZIRP…. and buy-back shares to defy gravity and drive their share prices higher…

    “Shares, down 30% this year, fell 5.1% to $10.45 in late trading Thursday.”

    This is a stock to watch — if the slide continues be ready to buy …. but timing is crucial — things have to be really bad — because that’s when the Plunge Protection Team goes into action …

    They will throw billions at this to drive that share price the other way…

    Can’t have a big company like Alcoa collapse….

    BAD >>>> GOOD!!!!

    • Fast Eddy says:

      http://globalbem.com/ says:

      We Need Your Help to Free the Energy

      Awesome — I’d really like to contribute to extending civilization ….. but I can’t seem to find my credit card though…

  30. MG says:

    The curse of the economists is that they do not see the whole picture and that is why they move in circle. The following article is in Slovak and it just summarizes the basic erroneous concepts of the economists, who believe that the spending will save the economy, that central planning caused the problems etc., But its message is basically the fact that the economists can not provide any solution:


    They do not understand that the negative interest rates are just the symptom, not the tool for solving the problems regarding the deflation caused by the dwindling amounts of cheap energy that we have at our disposal. That you can not print enough money, confiscate money or force the people to spend more, as this will have no effect when the diminishing returns hit the whole system…

    The economy is dying, i.e. the surpluses are vanishing and can not be recreated or compensated. The individual parts of the system, connected and fed by cheap energy are withering and shrinking. The same way as the leaves of the plants in the autumn when there is less and less energy from the sun. The negative interest rates are just like the indication on the thermometer that the winter is comming…

  31. Fast Eddy says:

    Gail — why not run google ‘Ad Choice’ served banners on FW — they pay you per click … I am sure everyone would be more than happy to click a few of them on each visit ….

    Over the course of a month that could generate a decent amount of cash …

    See http://wolfstreet.com/ I usually click a few banners when I visit to support the site…

  32. Fast Eddy says:

    Wolf doesn’t have the volume of articles of ZH … but he makes up for that by publishing some of the very best info….

    Global Shipping Veers into Capital Destruction

    “I would be open to the possibility” of reducing the fed funds rate “even further” and go negative, explained Minneapolis Fed President Narayana Kocherlakota on Thursday. Some folks just don’t get it.

    Here are the results of seven years of global QE and zero-interest-rate policies:

    Global demand is going from sluggish to even more sluggish. Emerging market countries are leading the way, it is said, and China is sneezing. Brazil and Russia have caught pneumonia. Japan is feeling the hangover from Abenomics. Even if there is some growth in Europe, it’s small. And the US, “cleanest dirty shirt” as it’s now called, is getting bogged down.

    And here’s what this is doing to the shipping industry, the thermometer of global economic growth.
    On one side: lack of demand.

    Due to the “recent slowdown in world trade” shipping consultancy Drewry on Thursday slashed its forecast for container shipping growth to 2.2% for 2015 and lowered its estimates for future years. BIMCO, the largest international shipping association representing shipowners, issued its own, even gloomier report also on Thursday:

    On the US West Coast, it’s been slow all year, starting with the labor disputes that weren’t resolved until mid-March. Since then, year-on-year growth in the second quarter was almost on par with 2014. But for the first half year alone, inbound loaded volumes dropped by 2% according to BIMCO data.

    On the Asia to Europe trades, volumes were down by 4.2% in the first half of the year as 7.4 million TEU (Twenty-foot container Equivalent Units) was transported. Northern European imports fell by 3.6%, while the East Med and Black Sea imports fell by 4.8%.

    Intra-Asia shipments remain a stronghold with ongoing positive growth around 4-5%, but the increased uncertainty surrounding the economic development in China adds doubt as to whether such a strong growth rate can be sustained for the full year.

    “The severe lack of exports from China” is reflected in the China Containerized Freight Index (CCFI), BIMCO pointed out. The index, which tracks freight rates from China to major ports around the world, plunged below 800 in early July for the first time in its history (it was set at 1,000 in 1998). It’s currently at 814. The red line marks 800:


    On the other side: over-capacity.

    Drewry estimates that an additional 1.6 million TEU of new capacity is being added to the container shipping fleet this year, and not enough ships are being scrapped. Hence a fleet growth rate of 7.7%:

    As a result, Drewry’s Global Supply/Demand Index, a measure of the relative balance of vessel capacity and cargo demand in the market where 100 equals equilibrium, has fallen to a reading of 91 in 2015, its lowest level since the recession ravaged year of 2009.

    But in 2016, another 1.3 million TEU of new capacity will be delivered. Drewry projects that its “Global Supply/Demand Index will fall to its lowest level on record over the next few years, indicating that the overhang of excess capacity will be even greater than that experienced in 2009.”

    So freight rates have crashed globally. But graciously, the oil price crash led to lower bunker fuel prices, which has kept some, but not all shippers afloat.

    Shipping lines have responded half-heartedly with idling some of their ships, but so far without great success in raising rates. And these ships are heavily leveraged, so idling them and not earning revenues while having to service their debts isn’t helping matters.


  33. Fast Eddy says:

    A group of NASA scientists has discovered that, billions of years ago, Mars had a system of long-lasting lakes and water streams, thus proving the Red Planet was once a much more favorable living environment than researchers had previously thought.


    Another planet that humans burned out? Perhaps someone stuck some DNA in a bottle launched it into space at the last moment …. and it ended up on Earth….

    • Stationmaster says:

      Mars is rather weird. Ignore the off-putting title of the video below, and watch from
      47:14 to 51:20, to learn about how the Soviet probe to Phobos got mysteriously zapped:


      And there’s more:


      So you gonna set up home there, Eddy, and prospect for oil? Well, just remember what Charles Forte concluded about us humans: “We are property”. And Jacques Vallee, in “Passport to Magonia”, agreed with that conclusion. So if our REAL masters don’t want it, then forget it – you ain’t going! 🙂

  34. Fast Eddy says:

    Glencore to cut zinc production by a third – Output hit at mines in Australia and Peru, and 1,600 jobs lost


    That headline defines the problem — as commodity producers cut production — jobs are lost — and not only Glencore jobs in this case — there will be loads of indirect job losses associated with this — suppliers to the mines that are closed — retailers in these towns — builders — auto dealers — furniture and appliance dealers — restaurants etc etc etc….

    This puts further downward pressures on demand for commodities… which force producers to cut production further — more layoffs ensue…. etc…

    Another problem with this is that producers are all carrying debt — usually big debt — they obtained these loans based on cash flow and asset values — even if prices bump upwards total revenues are likely still going to remain below expectations…. so the burden of debt increases….

    That makes creditors itchy — the ratings agencies (as Glencore is finding out) — re-categorize the debts as junk…. debt servicing costs explode…. and insolvency beckons….

    Not to worry though — a TBTF company qualifies for Plunge Protection ….

    If you see one of these companies failing do NOT short them — go long…. the central banks will do ‘whatever it takes’…. so the more your investment target struggles — the better you will sleep at night…

    The last thing you want is for your target to turn a profit — or break even…. that would be a disaster…

    You really need to cheer when they report a massive loss…

    Bad is Good.

  35. Fast Eddy says:

    TOKYO (AP) — A new study says children living near the Fukushima nuclear meltdowns have been diagnosed with thyroid cancer at a rate 20 to 50 times that of children elsewhere, a difference the authors contend undermines the government’s position that more cases have been discovered in the area only because of stringent monitoring.


    Keep in mind Fukushima is a controlled meltdown (it is still being cooled) that affected only the reactor fuel….

    Spent fuel ponds are far more dangerous because they contain far more fuel rods….

    • VPK says:

      Fast Eddie, I read that one reactor (#2) had a complete meltdown…
      A Serious Meltdown is Underway? The Fukushima Daiichi Plant No. 2 Nuclear Reactor Fuel is Missing

      The World’s Never Seen Anything Like This
      Regardless of whom to believe, it is now known for a fact, a hard fact, that Fukushima Daiichi Nuclear Power Plant No. 2 is missing its fuel within its core containment vessel. This leads to a world of unknowns, and the biggest question is: What can be done about a full meltdown should it occur (maybe it’s already occurred)? Then what?

      A full meltdown would involve all of the fuel in the nuclear plant core melting and a mass of very hot molten material falling and settling at the bottom of the reactor vessel. If the vessel is ruptured, the material could flow into the larger containment building surrounding it, which is shielded by protective layers of steel and concrete.7

      But if that containment is ruptured, then potentially a lot of material could go into the environment.8

      What does a lot of material going into the environment really mean?

      Sources claim deadly Cesiun-137, which is only one of many dangerous isotopes, is water-soluble and makes its way into soils and waters, as it quickly becomes ubiquitous in the ecosystem. The question thus becomes would a full meltdown turn lose this deadly isotope, as well as others, on the surrounding environment? Frankly, it kinda seems like it would.

      Nobody knows whether Fukushima morphs full meltdown into Mother Earth, although the signposts are not good, and not only that but nobody knows what to do about it. Nobody knows what to do. They really don’t.

      The only thing for certain is that it’s not good. Going forward, it becomes a matter of how bad things get.

      The BIG Show is gearing up folks…hold on tight!

      • Fast Eddy says:

        I thought they had multiple meltdowns… that the cores are sitting somewhere in the tangle of metal and earth…

        The thing is….

        TEPCO is still cooling the melted cores — they have pumps running 24/7 pouring water onto the area where the cores are …. water this is seeping into the ground and the ocean of course….

        They cannot stop pouring water onto those cores for decades — because if they stop then things really go into high gear…. you get massive releases of radioactivity into the atmosphere if you fail to keep them cooled…

        So Fukushima is nowhere near a worst case scenario… it is a controlled ongoing accident…

        And as mentioned — it involves a fraction of the number of rods that would be in a spent fuel pond….

        • Christian says:

          How bad could it get?

          Daichi -because there is another big plant at Fukushima district, how would we call it in case it ever explodes?- and Tchernobyl present some differencies and similarities

          Among the last ones, we have a comparable amount of fuel involved (excluding pond number 4, which melting status is dubious anyway), an also comparable amount of athmospheric emitions on a per day basis (official data) of “uncontrolled” behavior, and a 20 miles designated exclusion zone.

          Uncontrolled means a big graphite fire in Ukraine and small rather zirconium fires in Japan, propelling material through a broken enveloppe. Fires have been extinguished and both situations are “under control”, sarcophagus mode (while we can presume it wont last so long as the egyptian ones) and cooling bath mode (perhaps can’t hold a sarc on post tsunami buildings)

          An interesting point is explosions -id est the rupture of the enveloppe- seem to only happen in hot wet contexts by hidrogen or vapour accumulation (excluding tsunami hitting). You can see under the label Steam Explosion Risk three volunteers died just after completing the process of drying a pool in Tchernobyl:


          In Debris Removal it is also said there that the first purpose of the sarcophagus is to protect rain making its way until the core. Finally we have in Tchernobyl reactor had no containment structure at all, as it is also said there under the label Containment.

          Conclusions: as of today, fires and tsunamis are to be equally dreaded, deserving 20+ miles niche (it was later reduced to 13 in overcrowded Japan)

          Questions: why is cooling so important in japanese reactors while sovietic stuff never received a single drop of water?

        • Christian says:

          in the hot end wet is the enemy, fast eddy

  36. Fast Eddy says:

    Look at what we’ve done!!! It’s so beautiful… but …


    AT FIRST glance this photo may appear to show snow covering a mountain. But the reality of what’s going on here is horrifying.

    This is actually an incredibly rare and very unnatural phenomenon. It’s a lake in India that’s so toxic that it froths over and even bursts into flames. It’s a scene straight out of a horror movie.

    Located in the bustling hi-tech hub of Bangalore, the 36 kilometre Bellandur Lake is the largest — and most polluted — one in the city.

    The foam is a result of the toxic water which contains a high content of ammonia and phosphate and very low dissolved oxygen. This has been put down to decades worth of untreated chemical waste being pumped into it.

    If that wasn’t bad enough, sewage from many parts of the city is also released into the lake, leaving it extremely polluted.

    During heavy rain, the foam spills onto the road, causing a traffic pile and spreading an unbearable stench in the air in the neighbourhood.

    And at times, due to the grease, oil and detergents that can be found in the froth, it catches on fire.


    Isn’t that kinda like showing up at a dinner pahteee…. dropping your pants …. and dropping load in the middle of the room?

    And people think we deserve not to be shown the door…

  37. Fast Eddy says:

    China, Russia, Norway, Brazil, Taiwan Dump US Treasuries

    Five large purchasers of US Treasuries – China, Russia, Norway, Brazil, and Taiwan – have changed their minds. They’re dumping Treasuries, each for their own reasons that are now coinciding. And at the fastest rate on record.

    For the 12-month period ended July, sales of Treasuries by central banks around the world reached a net of $123 billion, “the biggest decline since data started to be collected in 1978,” the Wall Street Journal reported.

    China, the largest foreign owner of Treasuries – its hoard peaking at $1.317 trillion in November 2013 – has been unloading with particular passion.


    • madflower69 says:

      “Five large purchasers of US Treasuries – China, Russia, Norway, Brazil, and Taiwan – have changed their minds. They’re dumping Treasuries, each for their own reasons that are now coinciding. And at the fastest rate on record.”

      It isn’t surprising since all 5 of those countries are either in a recession or approaching it quickly.
      They need to sell assets to get money to prop up their own ponzi schemes.

    • dolph9 says:

      All government debt denominated in a particular currency can be monetized by the issuer of that currency.
      All U.S. treasury debt…every last note, can be monetized by the Fed. The Fed can buy every last treasury note in existence, at zero cost.

      Don’t attack me, I’m just the messenger! Get used to it, it’s the way our system works.

      • Fast Eddy says:

        Yes of course they can — and plenty of countries have tried that throughout history….

        It ends in tears…

        If it was so simple as you just issue as much debt as you please — and print out an equal amount of cash to offset that debt (i.e. you 100% monetize your debt) … then the entire planet would be living large….

        • Rodster says:

          The Nobel Prize winning eCONomist Paul Krugman came up with a wonderful idea. Just print $1 trillion dollar coins, problem solved. 🤑🤓

          But he also suggested we fake an alien invasion to spur eCONomic growth. 😂

        • Ed says:

          Fast, it is all a question of who get stuck in the end. Yes, the new greenback. Cost to everyone disruption and friction. Does the US get hurt more than other? It does not look so to me. In the mean time US got to fund decades of war and living large for the 1%. Next go around wars and living large for 0.1%. Same tune.

        • Christopher says:

          Fed doesn’t have to print any money. Buying debt papers can be done as QE. I think dolph9 has a point. The collapse of the financial system can perhaps be postponed for a (long) while by central bankers buying debt. Though, I admit I prefer not to base the safety system of a nuclear plant on the correctness of this.

          A lot of the commentators here seems to have an inner wish for a collapse. Maybe it’s what our present human civilization deserves, I don’t know. At least, this longing for a collapse is a reason to why you can’t objectively think about even the faint possibility of avoiding a collapse.

          • Fast Eddy says:

            As I have stated previously …. central banks will indeed prop up the financial system to the bitter end… that stock markets will rise up until the last day….

            What tears this asunder will be a deflationary collapse brought on by collapsing corporate profits… bankruptcies… layoffs – by the tens of millions…

            You can print all the money you like to create the illusion that all is well….. but when the deluge starts the central banks will be powerless to stop it…

            Profits are down on average 7% globally …. here’s a snapshot of some very big companies… the central banks are powerless to help them reverse this….

            Eventually the bankruptcies and layoffs will come — unless of course we believe that these companies can just ignore their debts — that they can retain workers who will sit in the lunch room all day and play cards because there are no orders…..

            Caterpillar’s net income is expected to drop 53.5% from a year ago.

            General Electric’s (NYSE:GE) earnings are seen falling 31.6%.

            Alcoa posted a profit of $44 million, or two cents a share, down from $149 million, or 12 cents a share, a year earlier. Revenue fell 11% to $5.57 billion

            There is no such thing as a perpetual economic motion machine….

            • Ed says:

              Command economy. It is in the best interest of the nation to give zero interest money to these corporation to keep paying their employees. It is national security welfare payments. Suck it up Austrian school.

            • Fast Eddy says:

              An interesting concept —- essentially all listed companies crash into insolvency — but we change the accounting rules to make that irrelevant…

              The central banks print unlimited cash and hands it to workers so that nobody is laid off…

              As long as the banks pass along enough operating cash a company is declared solvent….

              Profits continue to plunge until all corporations are producing nothing — the workers are still paid — but they just show up for work, play cards and take naps…

              I can’t see that working out very well — the sheeple would recognize the madness of this — and they’d panic….

              Trying to implement a command economy would not work — there are billions of moving pieces…. if a single key piece is removed — the very complex machine known as BAU quickly stops….

              It would be like trying to create an Amazon basin and commanding every single aspect of the ecosystem x 1000.

            • Christopher says:

              @ Fast Eddy: I think you gave a good description of what will happen. Central banks will start buying corporate debt and maybe spice it with some helicopter money to boost consumption. Of course, a decline is necessary but the collapse may be postponed for a while or even a longer period. People can in general adapt even to crazy conditions. Most people don’t think very much and prefer to follow the herd. There just has to be a certain amount of bread and enternainment. Maybe you will be right and we will have a collapse within a shorter time frame. I am just not entirely convinced and I Think it is hard to acutally know what will happen.

  38. Fast Eddy says:

    Investors applaud this as a boost to share prices. Surprising to the naive, a decade of buybacks has reduced the S&P 500’s share count by only 2%. Share buybacks are one part of the triangle trade that transfers vast fortunes from shareholders to senior executives using stock options:

    – executives exercise their options when shares rise (i.e., the company sells shares to executives at a discount to current prices),
    – the executive sells those shares to the public,
    – the company buys back those shares from the public.

    Net result: the company has less money, their executives have more, the share count is unchanged.


    Those execs should be spending their windfalls quickly….. because it ain’t gonna last….

  39. Rodster says:

    Charles Hugh Smith has his own version of Gail’s, Leonardo’s Stick Toy. He shows why it’s impossible to change the ways of the Empire and what citizens are up against.



  40. Stefeun says:

    IMF seems to fear it’ll come from emerging markets:

    Next financial crash is coming – and before we’ve fixed flaws from last one

    Risk of global financial crash has increased, warns IMF
    Threat of instability and recession in emerging economies, and legacy of debt and disharmony in eurozone among ‘triad of risks’ outlined in stability report

  41. Fast Eddy says:

    Brazil, which is caught in a vicious recessionary spiral which is only set to get much worse before it gets better, tried to obtain some much needed cash when earlier today it conducted an auction to sell exploration rights for of its oil and gas. It was, in short, a disaster.

    According to Reuters, by midday Brazil had only sold 17 of 119 blocks offered. Companies made no bids at all for blocks offered in four of six basins, including areas in the prolific Campos Basin, Brazil’s top producing region, and the offshore Camamu-Almada and Espirito Santo basins. Worse, the auction sold just 2 of the 10 blocks for sale in the Sergipe-Alagaos basin, which had been expected to be one of the most fiercely contested.

    The winning bidders had no competition.


  42. Fast Eddy says:

    Some have claimed that the Saudi’s push the US around…. and I have stated that there is no way a bunch of fat whore-masters in bed sheets who spend most of their free time shopping push around the biggest baddest junk yard dog on the planet…

    ET: How would you describe the current relationship with the US? There has been much talk of a rift on the back of the US’ Iran nuclear deal.

    AA: The Saudi relationship with the US has always been based on one thing and that is oil. In 1943 President Roosevelt signed an agreement with King Abdel Aziz, the founder of the country, where the Saudis agreed to provide the Americans with access to cheap oil and in return, the Saudi ruling family Princes would be protected and their kingdom would be defended by the US. That remains the case until this day.

    However, things began to change after 9/11, where 15 out of the 19 terrorist attackers were Saudis. That vicious event changed US-Saudi ties forever. The split has materialized in key aspects of the relationship: different views on key policies and the US moving its military bases from Saudi Arabia to Qatar and other neighboring Gulf States. So the US’ need for the Saudis has been drastically reduced since that event.

    Additionally, the Arab Spring affected the US-Saudi relation even further. The Saudis wanted the US to help keep the Arab dictatorial regimes in power because they were Saudi allies and supporters. But the West in general saw that it was better for their businesses and national security interests in the long run to see these dictators go.


    Not only does the House of Saud not wag the dog…. it seems that the tail may soon be hacked off…

    Others have found out the hard way that super powers are very fickle…


    • VPK says:

      It’s been noted that Saddam was a very gracious, entertaining, dinner host. A real cultured, gentleman. Boy, did he underestimate the savages he was fooling around with across the ocean blue.

    • Ed says:

      That is a bad idea for any ruling class that wants to stay ruling. Give people money and they will expect more and more and more. Keep them slaving 14 hours a day to feed themselves and they will believe they are honest and hard working people of virtue. They will have no free time to think about rulers or justice, or better life.

      If the pension funds, insurance companies, 5% (those under the 1% and over the 95%) have their stocks and bond wiped out and they complain put them to work in the WPA camps.

      My predictions are more on the push them down rather than lift them up side.

  43. Fast Eddy says:

    When both Japan and Europe slid back into deflation lately, it served notice that trillions upon trillions in central bank asset purchases are definitely not working to restore confidence in the global economic recovery and/or reinvigorate inflation expectations.

    However, you cannot simply print trillions in paper liabilities in order to purchase your own other paper liabilities (and no, that is not a typo, that’s just simply what’s happening here) without creating distortions across capital markets and that’s exactly what’s happened across the globe as the Fed and its DM brethren have “accidentally” engineered an epic case of capital misallocation that, far from promoting an increase in global demand and trade, has actually contributed to a global deflationary supply glut.

    That is actually not nearly as complicated as it sounds. Put simply: if you keep uneconomic businesses in business, you also keep their supply online, which means that at the end of the day, if the fiat money you’re injecting doesn’t end up trickling down and stimulating aggregate demand because the NIM margins of the banks you’re giving it to are so low thanks to ZIRP as to discourage them from sharing the wealth, well then, all you’ve actually done is create a scenario where the idea of inflation expectations is essentially meaningless right up until everyone wakes up to what’s going on, and then it’s Weimar time.

    So consider all of that, and then consider the following from SocGen’s Albert Edwards who has some characteristically introspective commentary regarding the interplay between central banks and inflation expectations and generally does a nice job of explaining what we’ve been at pains to point out for months (if not years): namely that central bankers are largely hapless when it comes to achieving their stated goal of rescuing their respective economies from the deflationay doldrums.

    More http://www.zerohedge.com/news/2015-10-07/theyre-converging-dire-levels-socgens-edwards-delivers-critical-warning-inflation-ex

    Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation – Deflation –

  44. MG says:

    The declining value of education?


    The situation in Slovak school system continues worsening (in Slovak):


    The question is: Do we really need education when its value is declining, as the system is loosing its ability to solve more and more complicated problems? The introduction of computerization is just postponing the collapse…

    The lack of energy will prevent us from further study of the world using more and more complicated machines. This will bring the end of science, as we will not be able to go farther…

    • dolph9 says:

      Interestingly enough, I think information technology is both the final culmination of science and knowledge as well as its inevitable end.

      Think about it…we are swimming in more information than ever before, and yet it seems that nobody knows anything and that everything is mismanaged. And nobody agrees on anything!

      Does this make sense? Yes it does!

      It takes year of education and training to really know something, to be good at it. By democratizing knowledge and information, we have reduced it to its lowest common denominator. Also, too much information, information saturation, is limiting because you will cease to do the investigation or experimentation for yourself. You will simply believe it’s done already and will consequently believe anything somebody else tells you.

      I will make the analogy to capitalism which produces a lot of stuff, but everybody remains poor. Then there’s no point, because people don’t have the income to buy the stuff.

      No way around these dilemmas, we created them and will drown in them.

      • madflower69 says:

        ” Also, too much information, information saturation, is limiting because you will cease to do the investigation or experimentation for yourself. You will simply believe it’s done already and will consequently believe anything somebody else tells you.”

        It is a big problem. But … seeing what other people have done, and possibly identifying what they did wrong is extremely helpful.

  45. dolph9 says:

    Basically there are things that TPTB have control over and things they do not. The latter I refer to as black swans. Yes I know that might not be exactly correct, that black swans are merely rare events. But I prefer to think of black swans as events not foreseen by TPTB and their socially engineered consensus, though somebody with an objective mind may have indeed predicted them.

    Even after a black swan, however, TPTB can still manipulate the perception and consequences of the event.
    So with any event, you have to think:
    a) is this a natural event, or TPTB initiated?
    b) if this is a natural event, how is it going to be used by TPTB?

    In any case, I think TPTB will push things out as long as they possibly can. By the way, nobody wants to rock the boat too much yet. Europe, Russia, China, they don’t want the responsibilities that America has. They are well aware that if America goes down the whole system does, which is why we are being kept on life support. That’s what many people miss and why things aren’t quite falling apart yet.

    • Fast Eddy says:

      I’m a big fan of Taleb and his Black Swan book….

      But the more I think about this the more I have questions about the theory….

      Was 2008 a Black Swan?

      I don’t believe so — I believe the PTB knew this was inevitable — they knew Liar Loans were happening … so that says they approved of these activities — in fact I believe they encouraged them… (part of the policy of fighting against the end of growth caused by the end of cheap oil)

      This was always going to lead to a problem and I suspect the PTB initiated the 2008 crisis so that the sheeple would allow them to implement even more draconian policies aimed at keeping the hamster running….

      They needed a dramatic event to be able to launch the desperate policies we have seen since 2008…

      That said I do think Black Swans exist – but that they are not dangerous….

      As we saw in 2008 and as we are seeing now — the PTB have the power to shoot down Black Swans — they simply blast them out of the sky with QE…

      Case in point — the China market was imploding last month — that may have taken the PTB by surprise — what was their reaction? —- ‘do whatever it takes’

      They bought up the market — they threatened short sellers with jail time…. they throttled the Black Swan and put it in the cooking pot…

      When BAU collapses will that be because of a Black Swan?

      I don’t believe so.

      The PTB have likely already identified the trigger that shreds civilization… Bernanke told us that deflation was the mortal enemy…

      And what we have been seeing over the past 7 years are a series of policies aimed at the heart of deflation…. they are doing absolutely everything and anything to fend this off…

      Perhaps we will get more QE — we may even get QE ‘for the people’ — as in cash vouchers to encourage spending … who knows…

      But I believe the PTB know what the end game is — it is a deflationary spiral to hell that cannot be slowed or stopped by the central banks once it is set in motion (and they will have exhausted themselves trying to hold the giant snowball in place on the mountainside…)

      That is not an unforeseen outcome — so therefore could not be considered a Black Swan….

      It also cannot be shot out of the sky with more stimulus — so again — not a Black Swan.


      • MM says:

        I recommend to check out the “sudden fall” of Elliot Spitzer. He claimed that there was a misallocation of money in the housing market before he had some problems with prostitutes…

  46. SymbolikGirl says:

    Well, it looks like it’s really beginning to accelerate now, could be that the VW scandal is the black swan that is the final straw……..


    • Fast Eddy says:

      At some point control will be lost….

      • SymbolikGirl says:

        It looks like this may be part of either the Glencore or DB situations, we are flying pretty close to Gimbal-lock here:


          • Fast Eddy says:

            This raises the question — how many other actions are the central banks taking — that we are not aware of — that dwarf the actions that we are aware of — to keep BAU from collapsing…

            I reckon we are barely getting the tip of the iceberg — even if we follow non MSM sources….

            The real action is top secret….

        • Fast Eddy says:

          The thing is…

          Last month China was essentially Glencore x 100000000 …. by all rights that market should have collapsed….

          Yet it has not — because when faced with an outcome that would be the trigger event for the end of BAU — the PTB will do anything — absolutely anything — in their power to prevent/delay the outcome…

          As we all know China did ‘whatever it takes’ — the PBOC threw money at the market — when they came off the gas and the market started to drop again — they slammed their foot to the floor again — they kept doing that (and threatened short sellers with jail) — until such time as the naysayers twisted arms were busted and flopping uselessly …

          Which leads me to believe that Glencore will not be allowed to fail — unless it has been determined that it is not too big to fail…

          The rats were jumping ship a week or so ago — the share prices was collapsing because commodity prices were collapsed — and more importantly — future prospects looked to have huge downside (China is clearly sinking)…

          What has changed since … all the news from emerging markets continues to be negative — Q3 profits are down 7%….

          So if anything Glencore’s share price should be imploding ….

          Yet it is not.

          I smell the central banks at work here….

          ‘whatever it takes’ that’s the new catch phrase to replace ‘don’t fight the Fed’

          Don Draper came up with that when the central banks said — we need a new tag line — don’t fight the Fed is kinda like ‘green shoots’ — passe — stale — dull….

    • You may be right. Germany is the major exporter in the EU, holding together the European Union. The costs of the electric grid enhancements are coming home to roost, as well as cutbacks in Chinese orders, even apart from the VW problems.

      • Fast Eddy says:

        German exports fell sharply in August, in the latest sign that the slowdown in emerging markets is beginning to affect Europe’s biggest exporter.

        Exports in August were 5.2 per cent lower than July, their sharpest monthly fall since the financial crisis, according to Germany’s national statistics office. Imports also fell 3.1 per cent.

        The data come two days after Germany reported a bigger than expected decline in industrial orders, with orders from outside the eurozone particularly weak, suggesting that activity could slow further towards the end of the year.

        Concerns over the state of emerging economies have grown since China devalued its currency in recent months, raising suspicions it could be slowing more quickly than previously assumed.

        Europe’s biggest exporter, Germany — which sends 6.5 per cent of its exports to China — is particularly exposed to such trends, and German companies have been warning for a while of a Chinese slowdown.

        “The figures are consistent with the industrial data we’ve already had this week and round off quite a bad August for German data,” said Richard Grieveson, an economist at the Economist Intelligence Unit.


  47. tagio says:

    While financial system collapse is viewed here at OFW as the most likely trigger of systemic-wide, fast collapse (see FE’s continual refs to Korowicz’s Supply Chain Contagion), it is important to recognize that the financial system is in very large measure a psy-op and as such subject to psychological, hope- or greed-inducing manipulations. To the extent that a financial system collapse is a product of a “run for the exits,” since 2008, the system has built in more and more “circuit breaking” systems designed to slow these panic attacks down if not stop them in their tracks. After the 2008 crash, a lot of hedge fund built in limits on redemption requests . In some cases, you can only be redeemed at year end, and the fund managers have discretion to adjust your request to deal with all other redemption requests they are receiving. As an attorney, I have seen some of these limitations in documents I’ve reviewed for clients. The SEC is now allowing money market funds to impose limits in order to achieve “orderly liquidations” if confronted with a panic. We have all seen China’s criminalization of “malicious short selling” as a way of slowing down a panic. During the August flash crash, a lot of us learned about “Rule 48,” which seemingly appeared out of nowhere to save the day. http://www.cnbc.com/2015/08/24/ Now we get this: “BlackRock Calls For Pulling The Plug On Stocks To Prevent Big Drops” http://investmentresearchdynamics.com/systemic-leverage-blackrock-calls-for-pulling-the-plug-on-stocks-to-prevent-big-drops/

    In the time bought with trading stops, the plunge protection team can try to reverse momentum by stabilizing falling prices or driving them back up. Psy-Ops!

    As for the claim sometimes heard that the 600 – 700 trillion derivative market will blow up the system, I don’t buy it. If derivatives every threaten to wipe out the banking system, they will simply be declared null and void in the national interest. China already did this for its own banks in 2008. When the rules no longer work to line the banker pockets, the rules are changed.

    The heart of the problem is, as Nicole Foss describes it, there are too many claims chasing too few assets. You can preserve the illusion of wealth if you can draw out the process by which financial assets are converted into cash and used in the real economy – i.e., if you can force an “orderly liquidation” – a real can kicking operation! This thought lies behind the proposals to force people to turn retirement assets into Treasuries paid out as annuities.

    On the other side, you have the “investors” who are absolutely desperate to cling to the illusion that wealth is successfully “stored” in their financial assets and who will play pretend and extend as long as humanly possible.

    I am not saying that a financial system implosion is not possible, or won’t happen. However, there is HUGE psychic energy invested in pretending and hoping it will all work out, and the Establishment has more tricks to prolong its existence than ZIRP, QE, or NIRP. I think that the fact that the August 2009 flash crash was essentially successfully arrested is testimony to this. All this is to say that, it ain’t over till it’s over!, and, No one knows the time! No matter how much your rational mind sees that the whole thing is a sham and a scam with no foundation and is teetering on the brink, there is no way to know that the F.S. will collapse “soon,” because you are dealing with a social construct and a shared hallucination, not a physical system!

    • Fast Eddy says:

      I very much agree with you …. anything and everything will be done to keep the nervous system functioning…

      But where I see the dagger to the spine coming from is from the corporate sector….

      Corporate profits are collapsing …. because of lack of demand … because people have no job, have low paying part time jobs, or if they do have jobs their real wages are down….

      QE – the big macro policy aimed at floating the global economy — seems to have stopped working — Japan and the EU are still pumping out QE furiously — and they are sinking

      The US says it has stopped but even if they have trillions of QE from early rounds remains in circulation …

      So unless there is another gimmick we have not seen yet — I would expect these corporations’ profits to continue to decline…

      This will lead to layoffs and bankruptcies…

      At some point this is what breaks the camel’s back — the central banks can prop up the stock markets — they can even change the rules so that corporations are still solvent in spite of huge losses — perhaps even secretly stuff trillions of free money into their balance sheets to create the illusion of solvency

      But ultimately this is like pretending you can fly….. you leap out of the plane and for a moment you hang their in mid air…. then like a gannet you race through the air (believing you are flying) ….

      And then you smash into the ground….

      The corporate balance sheets can be made to look wonderful … to the very end…. the banks’ balance sheet likewise …. the stock markets will likely be at record highs … right till the very end…

      But all that is obviously irrelevant… it is a Potemkin universe….

      • Jarvis says:

        I would add to your watch list: corporate psychopaths, VW is a prime example where a few individuals have the potential to destroy the worlds largest car company although I wouldn’t be surprise if some rouge hedge fund manager or bank CEO starts the big cascade down the never ending hole.

    • Stefeun says:

      I mostly agree, but would nevertheless object that the financial system is not only virtual.
      It is run and ruled by psychological forces, OK, but its construction has some physical reality:
      it’s built upon the real economy, which itself was built upon cheap energy.

      Cheap energy is quickly depleting, and the real economy is increasingly struggling to “fuel” the financial system. Our wizards are still able to keep it (FS) in levitation, but at some point it’ll have to fall apart, deprived of fuel to grow.
      We just don’t know for how long the cannibalization phase can last, before death occurs.

    • 1. Anything that cannot go on forever, won’t.
      2. The powers that be are always fighting the last war. Our problems are likely to be in different areas-exchange rates that aren’t working anymore, widespread international debt defaults, failing supply chains, governments that have already exhausted their war chests of ways to deal with problems that happen.

Comments are closed.