OPEC EXPECTED TO CUT - WHERES THE CUT FROM UNCLE SAM

[Old-Ruffneck + 1,242]

On 3/14/2020 at 3:21 PM, El Nikko said:

That's not going to make an ounce of difference at this point especially if demand starts crumbling in the US and Europe

They all need to stop drilling right now and the siutation will balance itself out, also sending someone to have a little word in MBS's ear about pulling this stunt when there is a 'pandemic' already threatening the global economy.

Well, in the real world this sound like a "plan" but in reality their are contracts written well in advance of spudding in the hole. Ya just can't shut it down like that. Take about 6 months+ to get thru the signed and money already put down. 

[Ward Smith + 6,615]

2 hours ago, George8944 said:

First,  I understand how fractional banking works, it's not the sinful thing you portray.  Fractional banking has zero to do with any particular currency being the reserve currency.  Every modern country uses the reserve banking system in one form or another and they aren't reserve currencies. As such,  I'm not sure what you are including when you say this is "why all this happens".   The FED Reserve (FR) creates money to cover the excess spending of Congress.  Not vice versa.   (The FR buys Treasury Debt, not purchased by everyone else.  It's how we stay a float.)   Even this does has nothing ( well, little) to do with us being the reserve currency.  All Central Banks around the world are monetizing their political bodies debt and they aren't a resreve currency.  I'm not sure the link you were making is accurate.

We are the reserve currency because when we took the world off the gold standard, we were the largest, strongest economy in the world.  Other countries wanted to (maybe had to) buy from us and as the largest economy, with crazy consumerism they definately wanted to sell to us as well. With gold out of the picture, the currency most in circulation and with the strongest economy to stand behind the fiat paper promise was the United States.  That why we became the reserve currency.    As you said, the FR was created in 1913, but we didn't become the worlds reserve currency until we cancelled the Brenton Woods Agreement in the early 70's.  If it was their creation that made us the reserve currency, it would have happened around 1913, not 60 years later.

We need to keep an eye on China and Russia and the larger emerging markets of Brazil, India, etc.  China and Russia are creating their own bank transfer system.   We also aren't the manufacturing power house we once were.  That title goes to China.  As more of the world buys goods from China, and China buys from them (Think China buying soy beans from South America or cement and metal ore from Australia) those trading partners will switch away from paying in dollars to paying in Yuan.  China will pay in Yuan because countries will want the Yuan to buy manufactured goods from China.  Add to this, China is building a gold horde and will probably back their money with it. 

Russia is doing a similar thing with the Ruble.   They sell natural gas and oil to European countries.   Germany may allow Russia to buy German manufactured good in Rubles so the German State can turn around and use those Rubbles to buy natural gas.   Russia too is build huge stash of the cold, "useless" metal.

We can agree to disagree on this.

We can disagree because your knowledge in this subject is incomplete. @0R0 understands this subject better than me. I discussed it in a post called "Everything you think you know about economics is wrong". It's wrong because they don't want you to truly understand how this all works. I'll see if I can track down that link and save myself some time and effort. 

[0R0 + 6,251]

2 hours ago, Ward Smith said:

We can disagree because your knowledge in this subject is incomplete. @0R0 understands this subject better than me. I discussed it in a post called "Everything you think you know about economics is wrong". It's wrong because they don't want you to truly understand how this all works. I'll see if I can track down that link and save myself some time and effort. 

4 hours ago, George8944 said:

First,  I understand how fractional banking works, it's not the sinful thing you portray.  Fractional banking has zero to do with any particular currency being the reserve currency.  Every modern country uses the reserve banking system in one form or another and they aren't reserve currencies. As such,  I'm not sure what you are including when you say this is "why all this happens".   The FED Reserve (FR) creates money to cover the excess spending of Congress.  Not vice versa.   (The FR buys Treasury Debt, not purchased by everyone else.  It's how we stay a float.)   Even this does has nothing ( well, little) to do with us being the reserve currency.  All Central Banks around the world are monetizing their political bodies debt and they aren't a resreve currency.  I'm not sure the link you were making is accurate.

We are the reserve currency because when we took the world off the gold standard, we were the largest, strongest economy in the world.  Other countries wanted to (maybe had to) buy from us and as the largest economy, with crazy consumerism they definately wanted to sell to us as well. With gold out of the picture, the currency most in circulation and with the strongest economy to stand behind the fiat paper promise was the United States.  That why we became the reserve currency.    As you said, the FR was created in 1913, but we didn't become the worlds reserve currency until we cancelled the Brenton Woods Agreement in the early 70's.  If it was their creation that made us the reserve currency, it would have happened around 1913, not 60 years later.

We need to keep an eye on China and Russia and the larger emerging markets of Brazil, India, etc.  China and Russia are creating their own bank transfer system.   We also aren't the manufacturing power house we once were.  That title goes to China.  As more of the world buys goods from China, and China buys from them (Think China buying soy beans from South America or cement and metal ore from Australia) those trading partners will switch away from paying in dollars to paying in Yuan.  China will pay in Yuan because countries will want the Yuan to buy manufactured goods from China.  Add to this, China is building a gold horde and will probably back their money with it. 

Russia is doing a similar thing with the Ruble.   They sell natural gas and oil to European countries.   Germany may allow Russia to buy German manufactured good in Rubles so the German State can turn around and use those Rubbles to buy natural gas.   Russia too is build huge stash of the cold, "useless" metal.

We can agree to disagree on this.

 

First, the US going off the gold standard was the result of advice given by Milton Friedman among others based on Innes' line of thinking (Ward Smith's quoted his article as the intellectual basis for the Fed), which was essentially monetarist. The same advice that led to the US actually delivering on the gold for the gold exchange standard despite the European central banks collecting on their dollars were supposed to be keeping the bonds not cashing dollars for gold. The private market was fed by the London gold pool. The gold was redeemed to German French etc. CBs, but it never actually left the Fed's or BOE vaults other than by sale in the London bullion market and that was in a trickle. 

In Innes' tradition, Friedman and many others in the top of the bank food chain predicted that the price of gold would plummet and the dollar would be stable upon suspension of the gold window. Of course we know that it triggered the biggest gold bubble ever and gold peaked at over 20 X its initial value.  Obviously Innes and Friedman were off their rockers and money had to have a physical anchor - which Greenspan argued - preferring gold, or an attractive interest rate to deter savings from gold into financial instruments, which was Volcker's argument and Summer's analysis of Gibson's paradox which relates real interest rates to the trend in gold price. At Chase and Rockefeller's urging, all of the above was adopted as a solution. Kissinger negotiated a deal with Saudi whereby they put their oil sales in dollars alone and in return they got a big chunk payment for compensation of their losses off the break of the gold clause of their lease contract for Aramco. They also got to borrow the money to buy Aramco's assets when the 50 year lease was not renewed. Greenspan provided the lifeline on the gold side with the synthetic gold bond whereby Saudis got to buy treasuries with a gold future contract attached. He later got the Fed chair in part to administer it. Volcker got to play Gibson's paradox as Fed chair pushing up real rates till they were so high gold broke into a two decade bear market, and Summers later got to be treasury secretary once he was an actual adult.   

Von Mises understood banking, but Rothbard didn't.  Rothbard didn't get that the "out of thin air" was not correct. The debt money - whether redeemable in gold, backed by goods, or pure fiat issued as the other side of a loan, was no different than all the other predecessor instruments that circulated prior to the founding of the Fed and before banks were allowed to leverage themselves into insolvency. What always circulated were bank notes and real bills, all redeemable in gold, that were never redeemed,just moved around and into and between accounts.  Gold was used to settle the netted differences between banks' claims on each other as necessary to provide specie requirements by their customers. The banks prior to the Fed, had local NYC vaults and in London and Zurich that were used to do the settlements. 99% of transactions were netted with no gold changing hands.

The money creation mechanism was always loan is made, account is credited, account is drained, and other banks and merchants send the checks to be collected, it is netter with the other banks and if the new loan was issued with too little excess capital or reserves and the clearing does not balance, then the bank makes a mad scramble to obtain sufficient reserves or borrow them from other banks - arrange a repo (lend or post as collateral a loan or bond, get cash to be reversed in a short time) or sell assets at a discount if nobody wants to lend to it. 

From Solomon's day through Roman times to the Bank of England and the Fed, the basic idea of banking was always the same, you issue loans and book them as assets and produce a checking deposit on the other side of the balance sheet, and issue notes on demand for withdrawals, or checks and transfers.  Discount banks collected the 90 day commercial paper - real bills in the day - that business used to pay their employees and suppliers. The actual vault gold available only mattered to close out occasional large imbalances and gold withdrawals. But most of all, it was there to keep banks from having to do fire sales of loan assets to other banks who accumulated their liabilities and came to raid the bank in order to shake out some quality securities at a good discount. The Scottish free banking system ran with no central bank for ages and was rock solid with 30-50% of liabilities in gold reserves. The banks may have been leveraged beyond that 2:1 or 3:1, but they had reserves on hand, their own or borrowed. Predecessors before the BOE also did the same, and could reach 4:1 leverage to reserves and survive raids on their reserves or a bank run. But nobody managed to survive more than a few years with any more leverage than that.

The "brilliant" idea came up to consolidate the reserves in a bank cartel so that the same reserves could be used to back up the accounts of all the banks.  So banks rather than compete for reserves would share them through a central bank, who would also issue one set of notes rather than each bank issue its own. The notes had security features like serial numbers and watermarks and metal threads. So were easier to verify than gold coins and bars and came in easy denominations. 

This allowed all banks to leverage further, and till WWI it was largely no more than 10:1 leverage to reserves or to capital at BOE members. 

The Fed was similarly formed after Pres. Jackson shot down its predecessor the Bank of America 80 years before, because it had induced multiple boom and bust cycles. Again the idea was to form a reserve sharing arrangement to maximize leverage. Reserves were set relative to key account types and excess capital was required. The Fed was soon to loosen all of this as the war debt of WWI pumped up credit needs in industry. Once that was done they faced a huge wartime inflation, and then a deflationary depression,  and were concerned afterwards as the amount of gold reserves had ballooned over the war with huge exports. So during the late 1920s they pulled out reserves in order to prevent inflation.

Friedman, in his seminal work on the period noted that there had to have been a hidden monetary expansion somewhere because the stock market and real estate bubble continued on a tear despite the aggressive draw of reserves into the Fed and out of the banks. The enormous rush of capital from the Busted British Pound and the rapidly declining Wiemar German Mark, among many broken currencies was never considered, that at a time while over 1/3 of US economic activity was either imports or exports. The Fed's tightening, as was the case in the late 1970s and in the mid 2000s and during the Asian crisis, never considered that foreign investment flows - directly visible or subtly hidden within other activities. Bernanke was picked by Greenspan because he understood that the credit boom could not be sustained and knew to avoid the cash draw mistake that the Fed had done in the late 1920s in trying to restrain a credit bubble that was inflated from capital flight into the US. Of course, his expertise led him to repeat in perfect succession all of the mistakes the Fed had made in the late 1920s.  Then Yellen and Powell repeated the mistakes of the Fed in 1932 and 1937. We learn from history how to repeat its mistakes perfectly. 

The basic difference between a free banking gold based system and a central bank based system is the restriction on leverage and competition for reserves of the free bank system out of its own market dynamics. The free banking system stands aside from financial markets most of the time playing intermediary roles for real bills, payments, and working capital (including to investment banks), and large scale funding is done via investor owned bonds rather than by bank intermediation through money printing. Banks and companies issue circulating "currencies". Periodic credit booms and busts occur at a relatively small scale relative to the overall economy and some small portion of the banking system goes under. The free banking model is cash rich and liquidity  constrained all of the time. Cash can instantaneously expand to include silver nickel copper or other PMs. 

Gold standard with a central bank typically has much more leverage, is only liquidity constrained when the entire banking system has become over leveraged to reserves (1929 was about 30X) or capital. Otherwise, the central bank will actively restrict liquidity as a matter of routine. It tends to stabilize at 5:1 leverage and is usually sustainable at 10:1 for large countries.

The main attraction of the fiat debt money central bank centered system is that the reserves are traded for government debt, so in effect it is a structure to create artificial demand for government debt, which automatically becomes a "risk free asset" regardless of the government's finances because the bonds are always exchangeable for currency - with or without a haircut. The imposition of deposit insurance caps by the US in the wake of the experience of the Cyprus and Iceland bank crises forcing large depositors to hold repo eligible bond portfolios (short term sovereign debt) rather than bank accounts. Thus governments could obtain a new bid that bank accounts used to get. Moving a liability to the public from which the banks benefited (and thus economies had as well) into a government benefit for monetary demand for their treasuries. 

 

I should note that the entire post Colombian era was one of growing population, greater degrees of freedom of interaction in business and expanding economies. It is the world into which the modern banking system had developed where economic growth driven by population expansion and growing interactivity provides a return on investment at  a sufficient rate to provide a substantial interest on monetary credit such that the system does not deflate of its own accord. This has broken already long ago in Japan well over a decade ago in Europe and now in China, and globally with peak babies last year. The ability of the fiat debt money system to be self sustaining is in doubt as the number of people in the future to pay off debt is smaller than the number today. Thus the system has become inherently deflationary and need an artificial inflation to keep it running. 

[James Regan + 1,776]

10 hours ago, wrs said:

just last week

The futures also?

[wrs + 893]

1 hour ago, James Regan said:

The futures also?

Well I think it hit limit down in the pre-market futures 5%, the market opened and then went limit down at 7% after 4 minutes.  However, futures are traded during the market hours.  

 

Edited March 16, 2020 by wrs

[Old-Ruffneck + 1,242]

WTI Crude •10 mins28.99-2.74-8.64%

Bloodbath today 😥

[James Regan + 1,776]

52 minutes ago, Old-Ruffneck said:

WTI Crude •10 mins28.99-2.74-8.64%

Bloodbath today 😥

Looking grim all around, something has to give this is suicide mode it seams all factors are working against each other, “perfect storm “ is never been a more valid term 🙏🏻🙏🏻👊🏻👊🏻👊🏻

[Ward Smith + 6,615]

6 hours ago, 0R0 said:

First, the US going off the gold standard was the result of advice given by Milton Friedman among others based on Innes' line of thinking (Ward Smith's quoted his article as the intellectual basis for the Fed), which was essentially monetarist. The same advice that led to the US actually delivering on the gold for the gold exchange standard despite the European central banks collecting on their dollars were supposed to be keeping the bonds not cashing dollars for gold. The private market was fed by the London gold pool. The gold was redeemed to German French etc. CBs, but it never actually left the Fed's or BOE vaults other than by sale in the London bullion market and that was in a trickle. 

In Innes' tradition, Friedman and many others in the top of the bank food chain predicted that the price of gold would plummet and the dollar would be stable upon suspension of the gold window. Of course we know that it triggered the biggest gold bubble ever and gold peaked at over 20 X its initial value.  Obviously Innes and Friedman were off their rockers and money had to have a physical anchor - which Greenspan argued - preferring gold, or an attractive interest rate to deter savings from gold into financial instruments, which was Volcker's argument and Summer's analysis of Gibson's paradox which relates real interest rates to the trend in gold price. At Chase and Rockefeller's urging, all of the above was adopted as a solution. Kissinger negotiated a deal with Saudi whereby they put their oil sales in dollars alone and in return they got a big chunk payment for compensation of their losses off the break of the gold clause of their lease contract for Aramco. They also got to borrow the money to buy Aramco's assets when the 50 year lease was not renewed. Greenspan provided the lifeline on the gold side with the synthetic gold bond whereby Saudis got to buy treasuries with a gold future contract attached. He later got the Fed chair in part to administer it. Volcker got to play Gibson's paradox as Fed chair pushing up real rates till they were so high gold broke into a two decade bear market, and Summers later got to be treasury secretary once he was an actual adult.   

Von Mises understood banking, but Rothbard didn't.  Rothbard didn't get that the "out of thin air" was not correct. The debt money - whether redeemable in gold, backed by goods, or pure fiat issued as the other side of a loan, was no different than all the other predecessor instruments that circulated prior to the founding of the Fed and before banks were allowed to leverage themselves into insolvency. What always circulated were bank notes and real bills, all redeemable in gold, that were never redeemed,just moved around and into and between accounts.  Gold was used to settle the netted differences between banks' claims on each other as necessary to provide specie requirements by their customers. The banks prior to the Fed, had local NYC vaults and in London and Zurich that were used to do the settlements. 99% of transactions were netted with no gold changing hands.

The money creation mechanism was always loan is made, account is credited, account is drained, and other banks and merchants send the checks to be collected, it is netter with the other banks and if the new loan was issued with too little excess capital or reserves and the clearing does not balance, then the bank makes a mad scramble to obtain sufficient reserves or borrow them from other banks - arrange a repo (lend or post as collateral a loan or bond, get cash to be reversed in a short time) or sell assets at a discount if nobody wants to lend to it. 

From Solomon's day through Roman times to the Bank of England and the Fed, the basic idea of banking was always the same, you issue loans and book them as assets and produce a checking deposit on the other side of the balance sheet, and issue notes on demand for withdrawals, or checks and transfers.  Discount banks collected the 90 day commercial paper - real bills in the day - that business used to pay their employees and suppliers. The actual vault gold available only mattered to close out occasional large imbalances and gold withdrawals. But most of all, it was there to keep banks from having to do fire sales of loan assets to other banks who accumulated their liabilities and came to raid the bank in order to shake out some quality securities at a good discount. The Scottish free banking system ran with no central bank for ages and was rock solid with 30-50% of liabilities in gold reserves. The banks may have been leveraged beyond that 2:1 or 3:1, but they had reserves on hand, their own or borrowed. Predecessors before the BOE also did the same, and could reach 4:1 leverage to reserves and survive raids on their reserves or a bank run. But nobody managed to survive more than a few years with any more leverage than that.

The "brilliant" idea came up to consolidate the reserves in a bank cartel so that the same reserves could be used to back up the accounts of all the banks.  So banks rather than compete for reserves would share them through a central bank, who would also issue one set of notes rather than each bank issue its own. The notes had security features like serial numbers and watermarks and metal threads. So were easier to verify than gold coins and bars and came in easy denominations. 

This allowed all banks to leverage further, and till WWI it was largely no more than 10:1 leverage to reserves or to capital at BOE members. 

The Fed was similarly formed after Pres. Jackson shot down its predecessor the Bank of America 80 years before, because it had induced multiple boom and bust cycles. Again the idea was to form a reserve sharing arrangement to maximize leverage. Reserves were set relative to key account types and excess capital was required. The Fed was soon to loosen all of this as the war debt of WWI pumped up credit needs in industry. Once that was done they faced a huge wartime inflation, and then a deflationary depression,  and were concerned afterwards as the amount of gold reserves had ballooned over the war with huge exports. So during the late 1920s they pulled out reserves in order to prevent inflation.

Friedman, in his seminal work on the period noted that there had to have been a hidden monetary expansion somewhere because the stock market and real estate bubble continued on a tear despite the aggressive draw of reserves into the Fed and out of the banks. The enormous rush of capital from the Busted British Pound and the rapidly declining Wiemar German Mark, among many broken currencies was never considered, that at a time while over 1/3 of US economic activity was either imports or exports. The Fed's tightening, as was the case in the late 1970s and in the mid 2000s and during the Asian crisis, never considered that foreign investment flows - directly visible or subtly hidden within other activities. Bernanke was picked by Greenspan because he understood that the credit boom could not be sustained and knew to avoid the cash draw mistake that the Fed had done in the late 1920s in trying to restrain a credit bubble that was inflated from capital flight into the US. Of course, his expertise led him to repeat in perfect succession all of the mistakes the Fed had made in the late 1920s.  Then Yellen and Powell repeated the mistakes of the Fed in 1932 and 1937. We learn from history how to repeat its mistakes perfectly. 

The basic difference between a free banking gold based system and a central bank based system is the restriction on leverage and competition for reserves of the free bank system out of its own market dynamics. The free banking system stands aside from financial markets most of the time playing intermediary roles for real bills, payments, and working capital (including to investment banks), and large scale funding is done via investor owned bonds rather than by bank intermediation through money printing. Banks and companies issue circulating "currencies". Periodic credit booms and busts occur at a relatively small scale relative to the overall economy and some small portion of the banking system goes under. The free banking model is cash rich and liquidity  constrained all of the time. Cash can instantaneously expand to include silver nickel copper or other PMs. 

Gold standard with a central bank typically has much more leverage, is only liquidity constrained when the entire banking system has become over leveraged to reserves (1929 was about 30X) or capital. Otherwise, the central bank will actively restrict liquidity as a matter of routine. It tends to stabilize at 5:1 leverage and is usually sustainable at 10:1 for large countries.

The main attraction of the fiat debt money central bank centered system is that the reserves are traded for government debt, so in effect it is a structure to create artificial demand for government debt, which automatically becomes a "risk free asset" regardless of the government's finances because the bonds are always exchangeable for currency - with or without a haircut. The imposition of deposit insurance caps by the US in the wake of the experience of the Cyprus and Iceland bank crises forcing large depositors to hold repo eligible bond portfolios (short term sovereign debt) rather than bank accounts. Thus governments could obtain a new bid that bank accounts used to get. Moving a liability to the public from which the banks benefited (and thus economies had as well) into a government benefit for monetary demand for their treasuries. 

 

I should note that the entire post Colombian era was one of growing population, greater degrees of freedom of interaction in business and expanding economies. It is the world into which the modern banking system had developed where economic growth driven by population expansion and growing interactivity provides a return on investment at  a sufficient rate to provide a substantial interest on monetary credit such that the system does not deflate of its own accord. This has broken already long ago in Japan well over a decade ago in Europe and now in China, and globally with peak babies last year. The ability of the fiat debt money system to be self sustaining is in doubt as the number of people in the future to pay off debt is smaller than the number today. Thus the system has become inherently deflationary and need an artificial inflation to keep it running. 

Awesome post as always. And it's clearly just off the top of your head. Imagine how good it will be when you organize these thoughts into a book? Add gratuitous sex and violence and it could even be a movie.

Viz your final paragraph, there's the rub. The perpetual interest cycle only works if there are new rubes playing the game. In a declining population scenario the math is impossible (it already was impossible, just more egregious now). Throw in Millions of deaths from Covid 19, 20 & 21 along with the massive disrupting effect on food supply and the means to buy it, and massive printing presses can't fix anything. The fix, amusingly, is for banks to pay you to borrow money, and then governments sopping up all that excess liquidity with taxes. Naturally this will never happen, and Re your statement above about copying history, they'll Institute the other time honored method to shuffle the deck, called war. 

BTW found the old Topic link. It hasn't aged particularly well. I wish you'd been on board @0R0, you've got the chops to carry the conversation. Maybe we can start a new one? 

[James Regan + 1,776]

Trump gets barraged as market stalls..,,

His job must suck right now big time...

 

Edited March 16, 2020 by James Regan

[Tomasz + 1,608]

I know that there is now a discussion  who will go bankrupt first and whether oil will fall below $ 20 or even $ 10.

There is generally the mood of the global recession and coronavirus pandemic, moreover, fueled by the media.

But the fact is that many people do not see that the situation is different than in 2014.

During this period before 2014 we had the largest investments in the oil and gas sector in history for many years.

I know what the sentiment is now extremely bearish but on average investments fell in the oil and gas sector fell by 50% during last 6 years and investments in oil and gas exploration are really not existent 

Shale oil even without WTI price falling below $ 60, undoubtedly slowed down.

In my opinion, although I may be an optimist, it is simply not possible to stay in this position where we have long-term drastic decline in investments in the oil sector outside of shale to last a few more years.

This year I heard we introduce to production the latest investments started in Canada, Brazil and Norway before 2014.

American shale oil outside the Permian field are also very unlikely to threaten us with the III shale revolution or even significant growth in production in next few years.

I do not want to comfort anyone but I mean to look in the perspective of several years after coronavirus not several months.

The coronavirus pandemic will finally pass away and with all due respect this is not really  the black plague decimating Europe in the fourteenth century and then we will return to normalcy.

 

Edited March 16, 2020 by Tomasz

[George8944 + 128]

16 hours ago, 0R0 said:

First, the US going off the gold standard was the result of advice given by Milton Friedman among others

I guess you believe the more your write, the more impressive the arguement.  Why the US went off the gold standard and who influenced the decision is a straw man defense.  The point is the US went off the standard in favor of a fiat system constrained only by good will and the integrity of the printer.  Why we went off is really because countries, like France,  started demanding actual gold payment when they lost faith that the US Federal Reserve was holding to their promised dollar to gold peg.  Their suspicion was justified since we could not prosecute a war in Vietnam and expand social programs all without raising taxes.  We bled gold as they called our bluff that every dollar was backed by gold.  Finally, the decision was made to close the gold window.  Fifty years later the reason why is not nearly as important as the consequence of that decision and the fiscal decisions since the mid-1960's.

[El Nikko + 2,145]

On 3/16/2020 at 2:15 AM, Old-Ruffneck said:

Well, in the real world this sound like a "plan" but in reality their are contracts written well in advance of spudding in the hole. Ya just can't shut it down like that. Take about 6 months+ to get thru the signed and money already put down. 

Yes that's right, it would take at least 6 months to try and get a little balance in to the system, US production can fall and the Saudi's need to be forced to stop this price war at this moment. I'm not talking about small/medium companies I mean the corporations and large ones who can do something and someone needs to put serious pressure on the Saudis, this is not the time for playing games the entire economic system could collapse because of the effects of the coronavirus, adding to the problems is insane right now.

There are going to be potentially millions of people (in all kind of sectors) out of work in the next month or two and now because of the oil prices you can add to that more hundreds of thousands of people worldwide, there are so many ancillary jobs that are connected to the oil industry but not technically part of it that are at threat.

I personally believe the situation in general globally is critical, I hope I'm wrong but this could be easily as bad as the 2008-2009 crisis, maybe worse.

If there are calmer heads out there then please tell me I'm totally wrong/stupid or whatever becasue I am very worried right now and not for my job (I've been expecting all of that to dry up soon for months) but for everyone.

Today I got an email from a credit card company, they said they can give payment holidays to people who have been impacted by the coronavirus...I don't remember that happening in 2008/2009, I think they know that there will be huge economic damage because of this. I expect most banks to follow suit...has their been a time in hisotry where this has happened before?

[Ward Smith + 6,615]

45 minutes ago, George8944 said:

I guess you believe the more your write, the more impressive the arguement.  Why the US went off the gold standard and who influenced the decision is a straw man defense.  The point is the US went off the standard in favor of a fiat system constrained only by good will and the integrity of the printer.  Why we went off is really because countries, like France,  started demanding actual gold payment when they lost faith that the US Federal Reserve was holding to their promised dollar to gold peg.  Their suspicion was justified since we could not prosecute a war in Vietnam and expand social programs all without raising taxes.  We bled gold as they called our bluff that every dollar was backed by gold.  Finally, the decision was made to close the gold window.  Fifty years later the reason why is not nearly as important as the consequence of that decision and the fiscal decisions since the mid-1960's.

Here's the part you didn't understand from all those words. The purpose of Bretton Woods wasn't to beggar the US at the whim of our supposed allies. The only reason France held so many "dollars" was because we loaned them those dollars via the Marshall Plan! In other words, it was an asshole move by the ahole in chief, Charles DeGaul who famously said, "Countries don't have friends we have interests".

From a mercantilism perspective, at the end of WWII we had won! We had something like 90% of all the money and everyone owed us money! But yeah, we were morons and it was all about the Vietnam War and "social services". Or, and this is the big difference, we decided as a Christian nation to not stick it to our friends nor our enemies. Hence instead of Germany coming after us, as they went after those who utterly destroyed their economy after WWI, they became our allies, along with Japan. But yeah, we should still be on gold, which means the worldwide economy can only grow by the amount new gold gets added to the system. Worldwide gold production adds 0.25% to global supply annually. Divide by countries and how should that whopping GDP growth get allocated? 

[0R0 + 6,251]

4 hours ago, Ward Smith said:

5 hours ago, George8944 said:

I guess you believe the more your write, the more impressive the arguement.  Why the US went off the gold standard and who influenced the decision is a straw man defense.  The point is the US went off the standard in favor of a fiat system constrained only by good will and the integrity of the printer.  Why we went off is really because countries, like France,  started demanding actual gold payment when they lost faith that the US Federal Reserve was holding to their promised dollar to gold peg.  Their suspicion was justified since we could not prosecute a war in Vietnam and expand social programs all without raising taxes.  We bled gold as they called our bluff that every dollar was backed by gold.  Finally, the decision was made to close the gold window.  Fifty years later the reason why is not nearly as important as the consequence of that decision and the fiscal decisions since the mid-1960's.

Here's the part you didn't understand from all those words. The purpose of Bretton Woods wasn't to beggar the US at the whim of our supposed allies. The only reason France held so many "dollars" was because we loaned them those dollars via the Marshall Plan! In other words, it was an asshole move by the ahole in chief, Charles DeGaul who famously said, "Countries don't have friends we have interests".

From a mercantilism perspective, at the end of WWII we had won! We had something like 90% of all the money and everyone owed us money! But yeah, we were morons and it was all about the Vietnam War and "social services". Or, and this is the big difference, we decided as a Christian nation to not stick it to our friends nor our enemies. Hence instead of Germany coming after us, as they went after those who utterly destroyed their economy after WWI, they became our allies, along with Japan. But yeah, we should still be on gold, which means the worldwide economy can only grow by the amount new gold gets added to the system. Worldwide gold production adds 0.25% to global supply annually. Divide by countries and how should that whopping GDP growth get allocated? 

It was more complicated than that. 

The agreement was not intended to give the French and Germans gold. They got certificates. If they wanted the gold itself they had to buy it from the London gold pool sales. The gold was not leaving the US to their vaults, The vast bulk of dollars the European CBs had were generated by dollar credit in the Eurodollar markets. The driver for the credit (and Eurodollar money supply-  "M2") was dollar reserve generation by the likes of Italy, Japan, Spain, Korea, whereby they aggressively printed up their currencies (20-40% M2 growth annually for decades) and used them in part to exchange for dollars and buy dollar assets from the Eurodollar banks or commodities. The dollars were created in the Eurodollar market the same way they are created in US banks, The asset on the other side was the inflator's national currency, usually at a substantial yield. These were the dollars that created the global inflation of the 1960s and 1970s. These Eurodollars were eligible to buy gold, not exchange it.

The situation with Nixon was that he wanted Burns to hold down interest rates so that he could run both the war and increased social security, and then continue Johnson's "great society" spending without raising taxes, in process of making these demands, he literally beat Burns up. Johnson had already shut down the London gold pool in 1968. So gold was trading in London above  the official exchange rate. Burns said that either rates go up, or the dollar peg would have to be dropped, Thinking that would dissuade Nixon. It didn't. The reason was what I spoke of. The monetarists and bankers thinking along the lines of Innes theory that it was the dollar that gave value to gold on the peg. 

Despite the Eurodollar monetary expansion, which Milton Friedman identified as the source of inflation in the 1960s, in "the case of the missing money" it was finally the depletion of US oil production that finally caused inflation to breakout. And join in pushing the floating dollar down into the ground. The Yen was 250 to the dollar at the start of the floating dollar period, Marks were 4 to the dollar. By 1980 Gold was up 20X and the Mark and Yen were up by 100% or more. 

But the target of the US monetary expansion and Burns' low real interest rates was to allow funding of something way bigger than the War in Vietnam or the GI generation's inflated social security. It was to fund the oil exploration effort to maintain or expand US oil production. By the end of the  oil crisis, there were 4500 oil rigs running, 5 X more than there were in 1970. 

And yes, in the 1950s, De Gaulle definitely did use MArshal plan money to suck gold out of the gold window. 

 

[James Regan + 1,776]

Another stellar piece of news from the Target 🎯 

Despite the low oil prices that brought on by the combination of the coronavirus pandemic’s migration to the United States and the oil price war between (The journalist forgot USA )Russia and Saudi Arabia, US shale producers will together hit a new record output next month, according to the Energy Information Administration (EIA).

Today, the EIA predicted that OPEC’s shift to maintain its market share will cause global inventories to increase further, and prices to fall further.

The writer omitted to add USA as being involved in this price war, more head in sand syndrome.

 

Edited March 17, 2020 by James Regan

[James Regan + 1,776]

8 hours ago, El Nikko said:

The Saudi's need to be forced to stop this price war at this moment

WHY? With total respect why should they?

Cheap oil will only help the consumer screw the corporations looking for another bail out.

Free Market is a very loose term, let the dice roll this is economics , Bail out the people for once.

”Forced” how? War? Or a missile from “Iran” (or proxies far from the region).

 This is fundamentaly free markets at work “fundamentally”!!!!!

Edited March 17, 2020 by James Regan

[SERWIN + 749]

On 3/10/2020 at 6:50 PM, Old-Ruffneck said:

How many DUC wells left to be completed? If still above 7000 then drilling might come to a halt. They might concentrate on finishing wells to keep production up. Hope ya still have a job in a month!! I can't really see an all out KSA 10mbd+ to screw with Russia. Makes no sense as the bottom will fall out. US frac'n crews going to be the ones hurt. And right now supply is well over demand so....kinda hard to figure what their thinking is.

So again, what if Trump decided we didn't need them anymore and pulled completely out of the ME, let SA deal with Iran by themselves for a change. Kinda put our proverbial foot up MBS'a proverbial ass for being an idiot. All we have to do is pull out, and USA and Russia sit back and watch the ensuing mayhem, and reap the profits from oil that we will be selling, for some reason I'm guessing the VLCC's won't like picking up loads in war zones.... And we know Iran would sink ANY VLCC trying to leave the gulf with a load of oil... The problem would solve itself...

[El Nikko + 2,145]

Read this guys, letter from members of Congress to the Saudi's

https://www.sullivan.senate.gov/imo/media/doc/FINAL LETTER U.S. Senators to HRH MBS 031620 1.pdf

[James Regan + 1,776]

41 minutes ago, El Nikko said:

Read this guys, letter from members of Congress to the Saudi's

https://www.sullivan.senate.gov/imo/media/doc/FINAL LETTER U.S. Senators to HRH MBS 031620 1.pdf

اذهب ونم مع الماعز الخاص بك. لقد أحضرت هذا لأنفسكم الآن ، خذوه مثل الشيطان العظيم.
مع الاحترام
بمشيئة الله

🐪💨= 🛢🛢🛢🛢🛢

Edited March 17, 2020 by James Regan

[Petr0 N00b 0]

Could federal government use treasury/Fed $ to increase the strategic petroleum reserve as a way of reducing US oil exports/strengthening demand (and increasing reserves at a once-in-a-decade low price while we were at it)? Could this excess reserve be slowly released back onto the market (at higher prices) once things have stabilized? This would seem like a legal (and reasonable) lever Uncle Sam could pull to achieve a similar effect to cutting domestic production (or is SPR so small compared to global demand that this would have very little impact on short-term prices?)

 

Thanks!

-Petr0 N00b

[Old-Ruffneck + 1,242]

3 hours ago, Petr0 N00b said:

Could federal government use treasury/Fed $ to increase the strategic petroleum reserve as a way of reducing US oil exports/strengthening demand (and increasing reserves at a once-in-a-decade low price while we were at it)? Could this excess reserve be slowly released back onto the market (at higher prices) once things have stabilized? This would seem like a legal (and reasonable) lever Uncle Sam could pull to achieve a similar effect to cutting domestic production (or is SPR so small compared to global demand that this would have very little impact on short-term prices?)

 

Thanks!

-Petr0 N00b

I do believe yesterday 65mb was purchased or is in process of being purchased to refill the SPR. Many stripper wells can just as easily refill the formation. Just reverse the valves. Probably could inhale the last of the cash in the reserve.

[Alfredo + 3]

United States is a Free Market Economy, it has oil, technology and financial resources, it seeks a greater market share.
Market oil prices are low today, and U.S. Senators Urge Saudi Arabia To end oil war.
The United States is a market economy or it is not.

[Old-Ruffneck + 1,242]

4 hours ago, El Nikko said:

Read this guys, letter from members of Congress to the Saudi's

https://www.sullivan.senate.gov/imo/media/doc/FINAL LETTER U.S. Senators to HRH MBS 031620 1.pdf

WTF?? Too sad...……..

[James Regan + 1,776]

6 hours ago, Old-Ruffneck said:

WTF?? Too sad...……..

Ridiculous and has just strengthened the foreign players the game here is to inflict as much damage to LTO. Free marketeers are not th same as cartels.

”please Mr Chapo tell your Sinaloa cartel to stop selling cocaine to the worlds biggest consumer”

Give me a break low 20s here and IMO will touch teens shortly, spread getting bigger between Brent.....

[J.mo + 165]

Interesting is how so far, no additional oil has actually hit the market. It is only being SPOKEN of and has already rattled prices. 

I'm all for competition in big oil though. I've been in the gasoline business right about 10 years now, nearly my entire adult life, and 1/3 of my total years on this earth. The fiercest competition there is in business. Pennies amount to millions. its about time big oil has to compete. I've said this over and over here. 

The death rattle to oil, is big oil itself. Every industry at some point becomes less relevant and less profitable. Why is there an exception always to oil? Companies will have to take the hit sooner or later or risk forcing themselves to irrelevancy. Oil is an aging commodity. Consumers are tired of $4 gasoline and cannot wait to get into electric. 

If we played this game with every industry we would still be purchasing $200 VCR'S and renting from blockbuster, paying $200 a month for long distance landline calling and using AOL dial up and so on. IF we had even made it that far..

 Things change, and I know this is wild for oil to comprehend, especially 'ol Harry Hamm and the Saudis.  Times are changing and I hope it stays this way. Theres a guy who owns 50 stations who moved in across the street from me and wants to kick my ass 7 ways from sunday, think the feds are going to step in and kick me a bailout? 

Edited March 18, 2020 by J.mo