Gilligan's Island Economics 101 for the U.S. Shale Oil Industry (Hint: Debt is *Not* a Long Term Solution)

[John Foote + 1,135]

OMHO the zero rate money put in place to prevent the great recession from being a great depression, was probably sensible for a short period of time. But left in place it became a cancer that the host/economy became addicted to. The shale game is just one of many issues, at at least it generates a real product, not just a financial game. As economic activity returned to something passing for normal, we needed to go back to more normal rates. And we failed, miserably.

Classic theory suggests 3-4% is about right. We didn't creep rates back up, created asset inflation, faux great stock markets, the right real estate, go crazy, and that did have some trickle down recovery. And holy molly will the deficit increase if interest rates are normalized.

Free money is bad. It encourages reckless behavior, and we collectively are frat boys on a huge bender. And if you can factor it enough, their is almost no downside to the well structured investor, someone else eats the fail, the joy of bankruptcy. But in the end, when it's big big fail, almost all of us gets to eat a shI* sandwich. A bi-partisan addiction. Both parties are horrible. 

Personally I've done OK by this last cycle, I could jump off the hamster wheel if I had to, but the situation is fundamentally unsound. And I have adult children who I worry for. I fear we've collectively max'd out the credit card with zero interest teaser rate, the real rate is going to happen. 

[Tom Kirkman + 8,860]

2 hours ago, John Foote said:

Free money is bad. It encourages reckless behavior, and we collectively are frat boys on a huge bender.

https://community.oilprice.com/topic/4980-green-new-deal/?do=findComment&comment=41701