When you're in the midst of the largest credit bubble in all of history — one that has been five decades in the making — it’s hard to fully comprehend the breadth and depth of your predicament.
The world has more than $200 trillion of debt on the books, and easily twice that amount in unfunded liabilities. Who can properly conceive what numbers that large actually represent? No one. It's just too large a magnitude for our brains to grasp (as a refresher, watch How Much Is A Trillion? again).
How all of those excessive claims on the future will be reduced to levels that align with reality is anybody’s guess.
Which means that the most important question in the world is not: How will those claims be repaid? (spoiler alert: they won’t). Instead, it's: Who is going to eat the losses?
Sometimes it helps to examine one narrow slice of the pie as a means to understanding the entire pie. In the case of the shale oil Ponzi scheme, we can both wrap our minds around the scale of the predicament and also answer the question of who the losses will be foisted on.
Once we’ve done that, you should be able to simply apply the same logic and learning to other sectors of the financial universe. Learn one sub-bubble, learn them all; small ones mirror larger ones which coalesce into a foamy, fractal misadventure.
Let’s start here…
A Quick Re-Cap
About a year ago I used the example of Occidental Petroleum (OXY) to both point out how deep the problems were within the shale patch (even back then) and to counter the increasingly ludicrous claims in the media that shale companies were making money at $70 per barrel. No, $ 60! Wait, $50! Hang on, we meant $30!!
These claims have simply not been backed up either in the financial statements of the companies themselves, nor the aggregate well productivity data coming from the shale basins in ND and TX.
The quotes in the media were, to be polite, for cherry-picked wells that were so far from being representative of the average well (even within the sweet spots) that even common core math couldn’t make the claims any more unbelievable or confusing.
Here’s what I wrote:
The Hard Facts About Shale Oil
This next article really set my antennae quivering because it refuted so many of the shale myths in a single blow, as long as you read between the lines:
Occidental Said to Seek Buyer for $3 Billion Bakken Asset
Oct 7, 2014
Occidental Petroleum Corp.
by cmartenson 
