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Russia
by
Chris Martenson
Executive Summary
- Geopolitical unity is fracturing as countries are forced to compete more
- LIBOR is signaling a credit emergency in Europe
- The market is sending signs a major war and/or a major recession may be imminent
- The last remaining heroes for risk-on capital, the FANG stocks, are quickly becoming villains
If you have not yet read Part 1: The Future Ain't What It Used To Be, available free to all readers, please click here to read it first.
The central banks of the world have failed: colossally, completely and dangerously. Yes, they will try to rescue the “markets” once again, as they did in 2011 and 2016 when things similarly looked to be falling apart.
The reason they might not be able to succeed this time?
They are out of maneuvering room.
Nothing will happen if interest rates are clubbed back down a percent or two. To do that, though, would require the same sort of lock-step coordination as prior times. The ECB, BoJ and Fed would all have to operate seamlessly again.
The most immediate of my concerns, even more than the tech-wreck that began a few weeks ago, is the rise in the LIBOR interest rate. Why? Because trouble always moves from the outside in.
Let’s do the math With $350 trillion worth of assets tied to LIBOR, that means each 1% rise in the LIBOR rate translates into $3.5 trillion dollars of increased interest costs.
LIBOR is now at its highest rate since 2009, and it's spiking for reasons nobody can fully explain. In my mind, higher LIBOR means that there’s less trust and/or liquidity in the system. It also means borrowing costs are heading up for…
Everything Is Suddenly Deteriorating, Fast
PREVIEW by Chris MartensonExecutive Summary
- Geopolitical unity is fracturing as countries are forced to compete more
- LIBOR is signaling a credit emergency in Europe
- The market is sending signs a major war and/or a major recession may be imminent
- The last remaining heroes for risk-on capital, the FANG stocks, are quickly becoming villains
If you have not yet read Part 1: The Future Ain't What It Used To Be, available free to all readers, please click here to read it first.
The central banks of the world have failed: colossally, completely and dangerously. Yes, they will try to rescue the “markets” once again, as they did in 2011 and 2016 when things similarly looked to be falling apart.
The reason they might not be able to succeed this time?
They are out of maneuvering room.
Nothing will happen if interest rates are clubbed back down a percent or two. To do that, though, would require the same sort of lock-step coordination as prior times. The ECB, BoJ and Fed would all have to operate seamlessly again.
The most immediate of my concerns, even more than the tech-wreck that began a few weeks ago, is the rise in the LIBOR interest rate. Why? Because trouble always moves from the outside in.
Let’s do the math With $350 trillion worth of assets tied to LIBOR, that means each 1% rise in the LIBOR rate translates into $3.5 trillion dollars of increased interest costs.
LIBOR is now at its highest rate since 2009, and it's spiking for reasons nobody can fully explain. In my mind, higher LIBOR means that there’s less trust and/or liquidity in the system. It also means borrowing costs are heading up for…
by
Chris Martenson
Executive Summary
- China's imminent peak in oil production
- The final key player in this story: Russia
- How to prepare before oil becomes a LOT more expensive
- What to prepare for? Higher prices (for everything real), lower prices (for everything paper), and more wars…
If you have not yet read Part 1: If The Saudi Arabia Situation Doesn't Worry You, You're Not Paying Attention available free to all readers, please click here to read it first.
China’s Impending Oil Peak
The motivations of China are completely obvious here. China is eager to forge better relations with any country from which it can import oil and KSA is right at the top of that list.
A truly startling (to me) report from the China University of Petroleum put all of this in proper context and urgency came out earlier this year (2017) which announced that after conducting a wide-ranging study that China faces an imminent peak in oil output (from both conventional and unconventional sources) as early as 2018.
This is really big news. The implications for global geopolitics, financial stability, and literally anything you consider personally important are huge.
China faces looming energy crisis, warns state-funded study
Oct 5, 2017
Nafeez Ahmed
A new scientific study led by the China University of Petroleum in Beijing, funded by the Chinese government, concludes that China is about to experience a peak in its total oil production as early as next year.
Without finding an alternative source of “new abundant energy resources”, the study warns, the 2018 peak in China’s combined conventional and unconventional oil will undermine continuing economic growth and “challenge the sustainable development of Chinese society.”
This also has major implications for the prospect of a 2018 oil squeeze — as China scales its domestic oil peak, rising demand will impact world oil markets in a way most forecasters aren’t anticipating, contributing to a potential supply squeeze. That could happen in 2018 proper, or in the early years that follow.
There are various scenarios that follow from here — China could: shift to reducing its massive demand for energy, a tall order in itself given population growth projections and rising consumption; accelerate a renewable energy transition; or militarise the South China Sea for more deepwater oil and gas.
Right now, China appears to be incoherently pursuing all three strategies, with varying rates of success. But one thing is clear — China’s decisions on how it addresses its coming post-peak future will impact regional and global political and energy security for the foreseeable future.
(Source)
The author of the article, Nafeez Ahmed (who we’ve interviewed before and admire greatly – he's one of the really good ones out there), left out one other option on China’s scenario table, which was to forge stronger relationships with the world’s two key oil exporters – Saudi Arabia and Russia. That scenario is now a reality and already well underway.
Here’s the mind-blowing chart that the study produced. It literally tells the…
The Oil Threat
PREVIEW by Chris MartensonExecutive Summary
- China's imminent peak in oil production
- The final key player in this story: Russia
- How to prepare before oil becomes a LOT more expensive
- What to prepare for? Higher prices (for everything real), lower prices (for everything paper), and more wars…
If you have not yet read Part 1: If The Saudi Arabia Situation Doesn't Worry You, You're Not Paying Attention available free to all readers, please click here to read it first.
China’s Impending Oil Peak
The motivations of China are completely obvious here. China is eager to forge better relations with any country from which it can import oil and KSA is right at the top of that list.
A truly startling (to me) report from the China University of Petroleum put all of this in proper context and urgency came out earlier this year (2017) which announced that after conducting a wide-ranging study that China faces an imminent peak in oil output (from both conventional and unconventional sources) as early as 2018.
This is really big news. The implications for global geopolitics, financial stability, and literally anything you consider personally important are huge.
China faces looming energy crisis, warns state-funded study
Oct 5, 2017
Nafeez Ahmed
A new scientific study led by the China University of Petroleum in Beijing, funded by the Chinese government, concludes that China is about to experience a peak in its total oil production as early as next year.
Without finding an alternative source of “new abundant energy resources”, the study warns, the 2018 peak in China’s combined conventional and unconventional oil will undermine continuing economic growth and “challenge the sustainable development of Chinese society.”
This also has major implications for the prospect of a 2018 oil squeeze — as China scales its domestic oil peak, rising demand will impact world oil markets in a way most forecasters aren’t anticipating, contributing to a potential supply squeeze. That could happen in 2018 proper, or in the early years that follow.
There are various scenarios that follow from here — China could: shift to reducing its massive demand for energy, a tall order in itself given population growth projections and rising consumption; accelerate a renewable energy transition; or militarise the South China Sea for more deepwater oil and gas.
Right now, China appears to be incoherently pursuing all three strategies, with varying rates of success. But one thing is clear — China’s decisions on how it addresses its coming post-peak future will impact regional and global political and energy security for the foreseeable future.
(Source)
The author of the article, Nafeez Ahmed (who we’ve interviewed before and admire greatly – he's one of the really good ones out there), left out one other option on China’s scenario table, which was to forge stronger relationships with the world’s two key oil exporters – Saudi Arabia and Russia. That scenario is now a reality and already well underway.
Here’s the mind-blowing chart that the study produced. It literally tells the…
by
Chris Martenson
In this week's Off The Cuff podcast, Chris and John Rubino discuss:
- Trade Wars
- Suddenly arising with Russia and China
- Modern Monetary Theory
- A delusion that dates back to the days of John Law
- A Great Crash Indicator
- RV sales are sending a warning sign
- Risky Real Estate
- Private equity will sell fast when times get bad
Chris and John discuss the looming trade wars with Russia and China, the long-term implications of the worldwide credit binge, and the indicators that will presage a systemic correction. John shares his assessment of one of his most trusted crash indicators, RV sales:
This is a typical cycle for RVs. It’s a big toy and people are cocky now because they’ve been working for a little while. They have extremely easy credit. Interest rates are incredibly low. If you’ve got a decent credit score you can buy an RV for 2 or 3% interest and a lot of people are taking advantage of that, just as they spent the last three or four years taking advantage of incredibly cheap car loan terms, and running, basically, an auto sales bubble. They’ve kind of shifted to RVs now, which is yet another sign that the cycle is nearing an end.
This "recovery" is 8 years old now. The typical recovery is 6 years. So we already have an expansion that’s a couple of years longer than normal. It’s actually the third longest since World War II. Which means that, everything else being equal, we should be pretty close to the end of this cycle and ready for a downturn. And now you’ve got indicators like RV sales going just parabolic, indicating that, at least in that little section of the market, money is incredibly easy and buyers are euphoric. And that’s also a sign that things are nearing the end. There are lots of other signs, but that’s one.
Every time there’s a bubble in an asset class, there’s always a new reason for it that appears to explain it. But historically the explanation never holds. The cycle still reasserts itself at some point. And things go back to normal. And I suspect that’ll be the case with RVs at some point.
Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.
Off The Cuff: A Dependable Crash Indicator Is Now Flashing
PREVIEW by Chris MartensonIn this week's Off The Cuff podcast, Chris and John Rubino discuss:
- Trade Wars
- Suddenly arising with Russia and China
- Modern Monetary Theory
- A delusion that dates back to the days of John Law
- A Great Crash Indicator
- RV sales are sending a warning sign
- Risky Real Estate
- Private equity will sell fast when times get bad
Chris and John discuss the looming trade wars with Russia and China, the long-term implications of the worldwide credit binge, and the indicators that will presage a systemic correction. John shares his assessment of one of his most trusted crash indicators, RV sales:
This is a typical cycle for RVs. It’s a big toy and people are cocky now because they’ve been working for a little while. They have extremely easy credit. Interest rates are incredibly low. If you’ve got a decent credit score you can buy an RV for 2 or 3% interest and a lot of people are taking advantage of that, just as they spent the last three or four years taking advantage of incredibly cheap car loan terms, and running, basically, an auto sales bubble. They’ve kind of shifted to RVs now, which is yet another sign that the cycle is nearing an end.
This "recovery" is 8 years old now. The typical recovery is 6 years. So we already have an expansion that’s a couple of years longer than normal. It’s actually the third longest since World War II. Which means that, everything else being equal, we should be pretty close to the end of this cycle and ready for a downturn. And now you’ve got indicators like RV sales going just parabolic, indicating that, at least in that little section of the market, money is incredibly easy and buyers are euphoric. And that’s also a sign that things are nearing the end. There are lots of other signs, but that’s one.
Every time there’s a bubble in an asset class, there’s always a new reason for it that appears to explain it. But historically the explanation never holds. The cycle still reasserts itself at some point. And things go back to normal. And I suspect that’ll be the case with RVs at some point.
Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today.
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