Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
S&P 500 Just 2% Below Record High, But There's More Stock Market Uncertainty - 19th Jul 18
Stock Market Technical Picture - 19th Jul 18
Gold Market Signal vs. Noise - 19th Jul 18
Don’t Get Too Bullish on Gold - 19th Jul 18
Bitcoin Price Rallies to Upper Channel – What Next? - 19th Jul 18
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Petro Dollar Ponzi Madness

Commodities / Crude Oil Dec 12, 2014 - 12:29 PM GMT

By: Dr_Jeff_Lewis

Commodities

The drop in commodity, and especially oil prices, has been spectacular. The price action has generated a wide range of commentary. Some say this is a reflection of the true state of the global economy. Like the Baltic dry goods index or electricity consumption. 

Some will say the fall in oil is deflationary - priced in as the inevitable confluence of factors ranging from demographics to lack of real economic growth manifest. Or it is more evidence of failed monetary policy. And paradoxically, another excuse to double down and go the way of Japan in pursuit of a lost decade muddle thru. 


Others will point to currency wars. The drop in commodity prices has a massive effect on the Russian economy in particular, and the Middle East to a certain extent. Some have pointed out that this marks the end of the “petro-dollar” - and a foreshadowing of the end of the dollar as the world’s reserve currency. 

OPEC’s refusal to adjust supply accordingly is viewed as strategic. We’ve been hearing of the gradual move away from the dollar for many years now and of new deals between China and her trading partners. 

Quarterly, there is drama regarding the re-patriotization of central bank gold - from Venezuela to Germany to Holland. Ultimately the downturn began in the pits where, like every market, price discovery is always the pregnant moment giving rise to the beasts of volatility. 

I believe the cause was simpler than all of that. It all starts with price discovery. 

Trading is at the root of this. Someone or some entity benefited from this move down. A move that was initiated over six weeks ago in the same manner as the moves we see in the prices of every other commodity and precious metal. But this will remain buried beneath the speculative commentary. 

The aftermath will more than likely be a doubling down of intervention. Too much interest remains in keeping the status flow the way it is — from the abstraction we call the “military industrial complex” down to the big investment banks nurture (and consume the poison). 

Volatility is never good in a tightly wound market, as the entire financial web is threadbare. We are well beyond frayed ends unraveling, unmonitored and tangled to the point where evaluation of weakness can never result in pin point. 

But this is a geometric web ultimately reaching into every crevice of the economy.
These are webs like no other -- electronic but multidimensional. The dimensions are outgrowths from confidence, faith, and questionable collateral; tied to a tiny real collateral infrastructure. 

The probability of a black swan event has been statistically removed to keep the Ponzi alive. The long tail is no more. 

Gail Tverberg’s points out “Ten Reasons Why a Severe Drop in Oil Prices is a Problem”.

http://ourfiniteworld.com/2014/12/07/ten-reasons-why-a-severe-drop-in-oil-prices-is-a-problem/

Issue 1.  If the price of oil is too low, it will simply be left in the ground.

Issue 2. The drop in oil prices is already having an impact on shale extraction and offshore drilling.

Issue 3. Shale operations have a huge impact on U.S. employment. 

Issue 4. Low oil prices tend to cause debt defaults that have wide ranging consequences. If defaults become widespread, they could affect bank deposits and international trade.

Issue 5. Low oil prices can lead to collapses of oil exporters and loss of virtually all of the oil they export.

Issue 6. The benefits to consumers of a drop in oil prices are likely to be much smaller than the adverse impact on consumers of an oil price rise. 

Issue 7. Hoped for crude and LNG sales abroad are likely to disappear, with low oil prices.

Issue 8.  Hoped for increases in renewables will become more difficult if oil prices are low.

Issue 9. A major drop in oil prices tends to lead to deflation and, because of this, difficulty in repaying debts.

Issue 10. The drop in oil prices seems to reflect a basic underlying problem: the world is reaching the limits of its debt expansion.

The business of oil is massive industry suffused with and inseparable from big finance. Big finance relies on the constant flow of credit. Price is key across the board. 

Oil prices are tied to massive movements of liquidity. Violent moves like this are like continent size meteors landing in the middle of the ocean. The tsunami is preceded by an enormous recession; a massive drain of liquidity. 

As the water recedes, we get to see who is swimming naked. 

In the wake of the price downfall of oil we see volatility, defaults on the margins, and layoffs - as the tide goes out to reveal the finance gone wrong. 

We see a tributary of this great unnatural hydroelectric dam built on hope and confidence and promises.

A butterfly flapping its wings a million miles away. 

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2014 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules