Cold War part deux

[hardnox]

http://www.businessinsider.com/why-oil-crashed-2014-9

Have been expecting this for some time and seems to be coming to pass.

The ultimate reason why the Soviet Union collapsed 1989 was becasue they were broke. Oil was by far their largest export and in 1985 the Saudis got tired of being gamed by the rest of OPEC and drove the price of crude below $10 and it stayed mostly below $20 onward.

I'll argue that was more by design than not but not necessary to the story.

PutinCorp is the largest fossil fuel player in the world but they have a very high COP if you assume the need to pay for the entire givernment with oil and gas revenues. It has been eatimated they need upwards of $110 Brent to stay solvent. 

Brent closed under $95 yesterday as the spread with WTI also narrows. I'll argue that this isn't a coincidence either but punky world demand decent supply certainly make it possible to flush it.

Ruble hits new lowas also as sanctions bite.

And so The Winter War commences with PutinCorp trying to freeze europe out before they go broke. The unknowable part is the matter of politicval support for PutinCorp as they now have a foreign enemy to blame. Also unknowable what they do if they're deperate.

When farming was, in part, an accidental vicitm of cold war gamemanship in the 80s, Reagn responded with the bigest bailout since the New Deal. 

Unlikely that any such thing is coming down the pike anytime soon given that we're on the immediate backside of a period of high profitability and neither party knows neither how to $%^& or go blind anyway.

[BA Deere]

Seriously, I wouldn`t doubt that a bit, that markets are manipulated as a more effective "weapon" than "boots on the ground".  Basically the levers are pulled for deflation    http://www.youtube.com/watch?v=bT8CRi9k4bo     all because Putin doesn`t play well in the NWO sandbox.   

Farmers being commodity heavy, take it in the `Fruit of the Looms`.  A "monster" corn crop that may have just been stopped at $4, looks to blow through $3.  Even though I may need it, I sure hope there isn`t another 1980s Bigshot bailout resulting from this.   🙂

[hardnox]

Well, the Saudis et al don't have anything close to the spare capacity they had then, so it ain't going to $10, probqbly not much under 80, if that.

About 99% of people would say that lower oil prices are a good thing. It is probably a little more complicated than that, but anyway.

The only direct effect on grains at this point- takes a little lower to price in wildcat biofuel gallons. Fairly minimal. Probably the indirect effect is greater- more weakness in commodity index and like investments. I don't feel sortry for anybody on that one because like ethanol as the policy was constructed, it is a double edged sword that felt good up front but turns around at the end to give you the Joni treatment.

As far as the NWO, sure, the neocons were plannning over the strategic elements of the last drips and drabs of oil and gas well before 9/11.  The interesting part here is that while we're kinda pretending to be fighting a crusade against them izzlammers here it is more than ever revealed that the Gulf Arabs are an integral part of our NWO. You have to keep up to date venn diagrams if you want to have half a chance of remembering who's who.

You'd probably be tempted to feel bad for Russia ifg it wasn't the sole property of 90-100 billionaires who recently stole all the assets off the guys who stole them first.

[hardnox]

I think the third kick in the pants might come from sources only slightly related.

That would be if the USD continues to strengthen and sets off a new global financial crisis.

That's probably a bigger deal than the first two I mentioned.

Think the buck might be a bit tired right here but I doubt the game is over longer term.

[nutlug]

It seems surreal that the dollar is strengthening at this point. Trillion dollar deficits, unfunded liabilities, and what seems to be a weakining economy to everyone but the 0.01% No idea long term how it plays out, but the attempt by Russia and China and to a lesser extent Iran to move away from the petrodollar as the reserve currency would definitely have a big impact on the US if they are successful.

[Palouser]

The alternative world currency is a pipe dream. None of the countries that mention it have the stability or economies or the political stability to back up another alternative currency. Will not happen.

[BA Deere]

Pal, what about a precious metals backed currency? The Chinese are snapping up gold, and silver is in backwardation. I would think a 50% gold backed Yuan that would be half guaranteed to not be manipulatable would be a desirable "world reserve currency".

[Palouser]

Precious metals is out. China could not have developed as quickly as it did with hard currency. Same with most developing countries. On the other hand, the population of India might own the most gold in a single country than anywhere else on the globe. But it's a form of personal savings worn on the body where the assets can always be kept safe. Other than that, hard currency backed by metals gives an advantage to countries that have the most natural resources.

It would also make modern transactions, credit and reactions to economic ripples more difficult. Besides, how do you return to precious metal as currency? Go out and buy it up with paper? Gold would immediately inflate in a fantastic way - and then eventually crash. We'll never go back to precious metals, though Russia might like that right now. Even so, when US currency was backed by metals we still had near constant severe economic 'panics' and economic disruptions. A ship would sink loaded w/ gold and all hell broke loose.

[timetippingpt]

Agree completely with Pal on this one. Most don't understand that the dollar index is only versus the euro (58%) japan (13%) and England (12%) and a few others. You might look up what share of grain exports go to these countries.

The dollar can and will very likely continue to loose value to our grain/protein customers, like China and India. Besides no one will go back to gold as currency, the Chinese could easily just make it convertable and it would have the same effect of gold plating their currency as opposed to every other currency which is paper only, well actually just electronic digits making it worth even less than paper.

The US$ index uptrend is breaking out on very strong COT data and open interest position. All this really tells you is that europe and japan are far more broke than we are...which is a fact.

Besides, since we don't really measure inflation anymore, it must not be a problem.

The fact our currency will continue to become worth less every year does not mean that it will loose value in the $index, nor do currencies vaporize in a straight line downward, there are blips of flight to "perceived" value through time that must be allowed for.

[bruce MN]

Expanding on what yousay:

http://www.macrobusiness.com.au/2013/06/leverage-versus-debt/