Who’d have thought that the oil minister of the decidedly inconsequential nation of Oman would come up with the quote of the year? Not just regarding the oil market he was referring to, but the 44-year mad experiment in a global fiat Ponzi scheme regime. Which, after permanently breaking in 2008, is in the final stage of collapse – as the smoke and mirrors effect of relentless “recovery” propaganda is dead; and seven years of “can-kicking” via unprecedented money printing and market manipulation, at the very end of an extremely frayed rope. To wit, when asked his view of the historic oversupply of crude oil – which likely, will last for years to come – he espoused the following…
“This is a man-made crisis, as all we’re doing is irresponsible.”
“Irresponsible indeed!” In the past 15 years alone – not un-coincidentally, just after the 1999 repeal of the Glass-Steagall Act enabled Wall Street “banks” to become derivatives-spreading financial terrorists – the “cheap money” afforded by the Fed’s post- “tech wreck” monetary largess has been funneled into every imaginable avenue of irresponsible, non-productive spending. And whilst the motives for such forays were varied – from profit, to vote-garnering, to market manipulation – the cause was always the same. I.e. the evil, historically destructive “partnership” between Washington and Wall Street. And by “Washington,” I am referring to the 100% politicized Federal Reserve, as well as all other global Central banks. Whilst in “Wall Street,” I mean the New York and London-centered forces of destructive financial engineering, whose universal presence has poisoned the entire world.
As for the oil market, I could not be more vehement in my belief that it – and nearly all commodities – has been oversupplied so horribly, the overhang may last for many, many years. Equally ominously is the fact that what I wrote in last year’s “crashing oil prices portend unspeakable horrors” (ironically, just before Whirlybird Janet deemed lower oil prices not only “transitory” but a “net positive for the economy”) – is coming to pass right before our eyes – politically, economically, and socially.
To wit, a convoy two miles long of oil-filled supertankers is heading from the Middle East to America’s chief import port of Houston. Where, according to this satellite photo, dozens of VLCCs (very large crude carriers) are already awaiting “an absolution that may never come” – to quote Kate Winslet from Titanic. In other words, no one wants their cargo; as not only is global crude oil supply exploding – the product of technology, cheap financing, and plain old irresponsible behavior – but demand is clearly falling, no matter what lies the U.S., Chinese, and other governments espouse of “GDP growth.”
And just as Janet Yellen’s comment about low oil prices being a “net positive” qualifies as one of the dumbest ever; the IEA, or International Energy Agency’s, viewpoint today that the glut provides an “unprecedented buffer in times of geopolitical shock” wins the award for “most unsuccessful attempt to put lipstick on a pig.” Yes, in theory it’s a good thing to have lots of inventory on hand. However, when the cause of geopolitical shock – i.e, the aforementioned “unspeakable horrors” – is plunging oil prices, bloated inventories are as undesirable a scenario as can be imagined. More telling – and ominous – is today’s quote for Norwegian oil analyst Torbjoern Kjus, who espoused “there’s a sizable risk we could run totally full (in terms of storage capacity), on a worldwide basis.” Which, if it indeed occurs, will make today’s WTI close of $40.73/bbl look like the “good old days”; as sub-$30/bbl crude will become a high probability event.
Of course, said “man-made crisis” is far from limited to the energy sector. Where, I might add, we are about to witness a bloodbath akin to the 2008 mortgage crisis, given the $500 billion of junk bonds and “leveraged loans” financing the U.S. shale sector alone are imploding, as the last remaining above-market hedges are now expired. No, it’s everywhere – but particularly in China, whose gargantuan, Communist Party-created economic bubble puts all others, now and throughout history, to shame – in terms of both size and irresponsibility. To wit, in this new article about China’s insane plan to build 155 coal fired electricity plants – for a market that has seen flat-lining demand for years – we learn that China has wasted $11 trillion on non-productive “assets” in the past 15 years, including $7 trillion since the 2008 financial crisis; as exemplified by the “ghost cities” that will never be lived in, but caused trillions of dollars’ to be built. Underlying such “growth” was an unprecedented capacity expansion that not only has no use today, but will overhang global commodity pricing for years to come. Not to mention, global finances; as that debt becomes more difficult to repay with each passing day – especially if a certain “face-saving” Central bank were stupid enough to raise interest rates. Of course, we know how it will all end. Like it always does, with hyperinflation.
The evidence of historic, catastrophic mal-investment is everywhere – as discussed in this week’s re-visitation of January’s “direst prediction of all.” But nowhere more so than Wall Street itself, where hundreds of billions of dollars have been invested in unprofitable companies – a la 1999; many of which, are crashing to earth as we speak. But no chart depicts how destructive – and ominous – Wall Street’s Fed and PPT-supported equity uber-bubble has become, than the one below, depicting how today’s highest-ever level of corporate debt was entirely utilized to buy back stock, in most cases at or near record levels. In other words, not only are equity valuations at or near record highs; but debt levels have exploded; whilst industry-sustaining capital expenditures have been neglected. I.e., the perfect recipe for catastrophe, particularly if said Central bank attempts to “save face” by raising interest rates, even if by a measly few basis points. And by the way, just wait until FASB forces dozens of public companies to account for “operating leases” as the debts they actually are – causing corporate debt ratios to surge, and debt service ratios to plunge!
As for today’s news, as I write this article Friday afternoon, I wasn’t kidding when I wrote Wednesday that “horrible headlines are going parabolic” – starting with the IMF’s latest diatribe, concluding with the following…
“With global economic prospects repeatedly marked down over the last five years, there is a concrete risk of a world economy persistently mired in sub-par growth, with unacceptably high levels of poverty and unemployment.”
In the U.S. alone, where the majority of “analysts” still believe the Fed will raise rates next month (which, as I wrote on Tuesday, would be an utterly meaningless action), volumes of evidence contradicting the Fed’s expectations emerged. Starting with the all-out collapse of oil prices, which is looking less and less “transitory” each day. Or the catastrophically less-than-expected October PPI – coming it at negative 0.4% versus expectations of a positive 0.2%, demonstrating how the Fed’s expectation of rising inflation “over the medium-term” (at least, the way they calculate it) is decidedly not occurring. Let alone, the fact that on a year-over-year basis, the PPI declined more than at any time in the data series’ history. And this, in October; i.e., before this month’s commodity price crash!
And then there’s today’s horrific October retail sales report – up just 0.1%, versus expectations of up 0.3%. Again, before October’s commodity carnage, and before the explosion of September job layoff announcements started to be realized. And this, as Nordstrom, Fossil, and JC Penney followed up Macy’s’ earnings bloodbath yesterday, in unequivocally screaming recession. And given Walmart’s just released plans to go berserk with its “Black Friday” discounting, you can bet the house that last year’s holiday shopping season, which was the worst since 2009, will be far worse this year. But don’t worry, the Fed claims, the U.S. economy is “recovering.” Heck, “Citibank Jack” Lew, just yesterday, claimed the U.S. economy’s “strength” is due to magic. Yes, as in the smoke and mirrors temporarily afforded by fraudulent economic data and printing-press fueled market manipulation.
Last but not least, we saw yet another “unexpected” surge in business inventories, putting the retail (and wholesale) inventory-to-sales ratio in uncharted territory; as America prepares for an unprecedented liquidation – of inventories, at cutthroat prices; debt, which will inevitably be defaulted upon; and of course, employees. Which certainly won’t gibe with the Fed’s expectation of “further improvements in the labor markets” – as if there were any in the first place, other than via fraudulent “birth-death” model jobs and an “unemployment rate” that ignores a record amount of people – nearly 100 million strong – that have permanently left the labor force. Heck, the Fed itself discontinued said “unemployment rate” as a key input to its decision-making process two years ago! Not to mention, I just learned that one of every five U.S. jobs is tied to the export industry. And given that China’s imports plunged by 19% in October alone, my guess is we’re about to see an utter tsunami of U.S. export-related layoffs in the coming weeks and months.
In a nutshell, the entire global economy is collapsing; and not just in the “temporary” fashion experienced in 2008, when unprecedented Central bank money printing and market manipulation was able to “revive” it (like a zombie) for a few short years. No, this time, the entire brunt of this “man-made crisis” will be felt by the world’s 7.3 billion denizens; and I assure you, it won’t be pretty. From record amounts of incumbents being swept out of office; to political and economic coups; and aggressively nationalistic policies; the ill-effects of history’s largest, most destructive fiat currency Ponzi scheme are exploding as we speak. And now that commodities are collapsing – as highlighted by the CRB Commodity Index today closing below its 40-year low; whilst the “Dow Jones Propaganda Average’s” heavily-defended 200 day moving average was decidedly breached; anything can happen in the coming weeks. LOL, leading up to the Fed’s supposed “rate hike day” on December 19th.
And whilst this occurs, global gold and silver demand continues to surge to record levels; whilst above ground inventories vanish; and the horrific damage to the mining industry caused by 15 years of price suppression has set it up for historic production declines for years to come. Gee, I wonder how this will all end.