Jun 062012
 
 June 6, 2012  Posted by at 9:54 pm Energy
Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInShare on TumblrFlattr the authorDigg thisShare on RedditPin on PinterestShare on StumbleUponEmail this to someone

burningsands

September 1932. “Iraq oil fields. Man with fires in desert.” American Colony Photo Department, Matson Photo Collection.

Western developed economies have been resorting to almost every possible trick they can conjure up to maintain financial stability and economic growth over the last few years. And while stimulus, interest rate cuts, monetary easing, currency swaps, liquidity operations, bailout/austerity programs, bank “re-capitalizations”, loan guarantees, entitlement/welfare programs, data manipulation, etc. have kept them muddling through so far, the undeniable truth is that there will SOON come a time when none of those things makes the least bit of difference anymore.

For instance, Morgan Stanley just produced a report which concluded that the euphoric market effects of quantitative easing, the most potent monetary weapon possessed by CBs, may only last a few HOURS or DAYS, rather than weeks or months. This concept should be so familiar to readers of TAE by now that I don’t even need to link to any of our articles for reference. Here’s the bottom line – the U.S. population is still saturated with consumer, housing and business debts, as well as unserviceable public debts at the local/state level, and the deleveraging cycle is once again gaining momentum on the back of the Eurozone crisis.

And that means no amount of cheap liquidity will be able to substitute organic economic growth with artificial growth on paper. If monetary easing cannot even manage to temporarily juice housing data, jobs data, retail sales data, consumer sentiment data, manufacturing data, etc., then the big market players no longer have anything to hang their hats on. Without support for asset prices and corporate profits on paper via leveraged market speculation, most people in the the corporate AND consumer worlds will not feel wealthy, happy and complacent anymore. Thus, the panicked spiral of debt deflation picks up steam once again.  

Zerohedge: Morgan Stanley Sees QE3 Rally Lasting Hours Not Weeks

 

Global macro weakness seems set to trigger another round of global monetary easing. Prior aggressive policy action has coincided with risk asset rallies. However, those policy actions also corresponded with improving macro data, which we think was the critical factor. There will be a Pavlovian reaction from markets if we get further easing, particularly QE3 from the Fed. But if macro stays weak, expect any QE3 rally to last hours or days, not weeks or months.

 

Macro news is falling short of expectations almost everywhere.

 

 

 

What’s at issue now is whether unconventional policy either works to stimulate activity, or can directly boost risk asset prices. We’re skeptical on the first point. Deleveraging cycles mute the effect of monetary policy on growth. Unconventional monetary policy may be an effective shield – can defend against systemic breakdown – but not a good sword: broadly unable to encourage a return to normal credit creation, where monetary policy can work to stimulate growth.

 

Having said that, the important issue for many investors is whether further unconventional easing can trigger a tradable rally in risk assets, even if there is little or no effect on the macro outlook. We’re doubtful. When growth is the concern, as now, tradable rallies require better macro news.

 

 

Growth concerns, not systemic risk, are now unsettling markets. Investors, rightly in our view, are increasingly skeptical about the ability of unconventional policy to boost growth in developed economies. Certainly, it seems unlikely to counteract fiscal tightening, now under way in Europe and UK, and in prospect in the US. Further easing may trigger an initial market response – there are too many investors who think it works to think otherwise. But without macro improvement, that risk asset rally will be short-lived, in our view.

Over the course of the last year, and [not coincidentally] in concert with the inflection point of credit markets last year, the peanut gallery of pundits has shifted more and more into line with the views of the “gloom & doomers” out there. Morgan Stanley analysts, for example, are now literally telling you the same thing Stoneleigh was telling you three years ago – that QE by the world’s largest central bank would eventually fail to overcome the financial and psychosocial forces underpinning the greatest debt deflation to ever occur in the history of human civilization. Three years later and that statement seems almost like a tautology, rather than a matter of opinion.

Yet, we still cannot rule out the ability of central authorities to extend and pretend with certainty. Let’s say that the Fed decides to defy all expectations and announce the purchase of $2 trillion in MBS and municipal bonds as a part of QE3 in June, and then, on top of that, the ECB announces that it is actively considering the possibility of directly monetizing Eurozone sovereign bonds with Germany’s unconditional blessing. This is an extremely unlikely scenario, but there is no denying that it will boost the markets and maintain artificial economic growth for at least a few months (more likely a year).

What then? Has all of the gloom and doom over the future of economic growth finally been put to rest? No, not at all. Just as it took the pundits a few years to finally hone in on the dire reality of our global financial situtation, it will take them a few more years to hone in on the dire reality of our global energy situation. The fact is that Western economic growth over the last few decades has been fundamentally underpinned by access to cheap oil. Sometimes, we would engage in hard-handed “negotiations” to secure oil in other parts of the world, and, other times, we would just steal it.

I ran across an interesting statistic on Business Insider today, although I’m not sure the author of the article has any idea why the statistic is interesting. The article noted that Norway’s oil exports as a percentage of GDP had peaked at 17.5% in 2000, and has come down significantly to 12% in recent years. It then goes on to argue that countries above the 12% ratio, or “the Norway threshold”, are “some of the nastiest, most dangerous places on Earth, while those below it lead a relatively sanguine existence”. Let’s ignore that ridiculously simplistic description for a moment, and take a look at the countries above 12% (data sourced from the IMF; my commentary in brackets):

The Norway Threshold: The Most Dangerous Statistic In The World

 

- Brunei Darussalam: 78.65% [colony of U.K. until 1984]

 

- Republic of Congo: 73.41% [colony of France until 1960]

 

- Equatorial Guinea: 69.8% [colony of Spain until 1968]

 

- Iraq: 66.83% [U.S. supplied with aid/intelligence/weapons in 1980s war with Iran, invaded in 1990 Gulf War, invaded and overthrew government in 2003 Iraq War]

 

- Angola: 62.37% [colony of Portugal until 1975]

 

- Turkmenistan: 57.42%

 

- Kuwait: 57.1% [occupied by U.S. in Gulf War to allegedly defend against Iraqi incursions]

 

- Qatar: 56.34% [colony of U.K. until 1971, currently has strong ties with U.S. military]

 

- Gabon: 53.44% [colony of France until 1960]

 

- Azerbaijan: 52.38%

 

- Saudi Arabia: 52.34%

 

- Libya: 50.53% [repeated attempts by U.S. to assassinate leader Gaddafi in 80's, effectively invaded in 2011 - Gaddafi assassinated]

 

- Bahrain: 49.47%

 

- Chad: 43.88% [colony of France until 1960]

 

- Oman: 43.73%

 

- Singapore: 41.85% [colony of U.K. until 1960]

 

- Nigeria: 38.44% [colony of the U.K. until 1960]

 

- Algeria: 37.63% [colony of France until end of French-Algerian War in 1962]

 

- United Arab Emirates: 30.99% [colony of U.K. until 1971]

 

- Kazakhstan: 30.91%

 

- Venezuela: 27.9%

 

- Belarus: 25.37%

 

- Republic of Yemen: 24.35%

 

- Islamic Republic of Iran: 23.42% [Western forces deposed democratically-elected leader in 1953, constant sanctions and threats to attack over past decade]

 

- Trinidad and Tobago: 22.59% [colony of U.K. until 1962]

 

- Ecuador: 19.32%

 

- Lithuania: 16.65%

 

- Russia: 14.9%

 

- Sudan: 14.22% [colony of U.K. until 1954]

The sheer level of 20th-21st century economic, political and military intervention by Western powers in countries that exceed the 12% “Norway threshold” is clear, and most of the time these forms of intervention lasted well beyond WWII. Even countries that were never technically colonized or invaded, such as Saudi Arabia, Bahrain and Oman, have operated with very strong ties to Western powers for many years. Most of the the other countries, of course, were part of the equally imperialistic Soviet Union until its demise around 1990.

Who could have known that a continuous imperialistic presence in these regions over the course of decades would leave some of the “nastiest, most dangerous” countries in its wake?? Perhaps the same people who could have known that decades of reckless credit creation would destroy the internal organs of developed economies. BUT, now, we are approaching the end game of Western finance and imperialism. Just like the former Soviet Union, the Western imperial powers are now over-leveraged, over-indebted, over-extended and over-developed.

These powers were given a little shove and now we can watch them topple. First, we witness the wrath of a banking crisis that makes 0-1% annual economic growth seem like a miracle, and makes the combined central authorities of the Western world seem impotent. That is exactly where we are now. Next, we watch the energy/resource conveyor from the 12% nations to the rest of the West break down. To be perfectly clear, though, this coerced flow of energy will not be halted overnight, and the tactics used to preserve this flow will make quantitative easing look like amateur hour, with much greater consequences for every country involved.

At the same time, the flow will be under constant threat of disruption and its velocity will slow, leaving the vast Western infrastructure built from decades of imperial energy/resource extraction unable to sustain itself. Those factories, planes, cars, highways, skyscrapers and other monuments to industrial excess will become much bigger liabilities than assets on the “books” of Western populations. They will form a practically impenetrable wall to further economic growth – fiscal and monetary policies be damned. Welcome to the end of our “relatively sanguine existence”.

Home Forums Welcome to the No-Growth Paradigm

This topic contains 0 replies, has 0 voices, and was last updated by  ashvin 2 years, 1 month ago.

Viewing 7 posts - 1 through 7 (of 7 total)
Author Posts
Author Posts
June 6, 2012 at 9:54 pm #8505

ashvin

September 1932. “Iraq oil fields. Man with fires in desert.” American Colony Photo Department, Matson Photo Collection. Western developed economies ha
[See the full post at: Welcome to the No-Growth Paradigm]

June 8, 2012 at 12:26 am #3822

Reverse Engineer

I don’t think a “No Growth Paradigm” is the right label here, because it indicates a stability at this level. What is really true is that we are in a Contraction or Shrinkage Paradigm now. Zero Interest rates aren’t good enough in this paradigm, you need NEGATIVE interest rates to represent what is really going on.

Who however wants to loan money out at a negative rate of interest? This means I PAY you something to take out a loan from me. An the biggest scale this actually is occurring where German Bunds have a negative real rate of interest, and investors pay to loan money to Germany for the perceived safety of that loan. They figure to lose less that way per annum than they would otherwise.

Contraction places a much greater strain on the economic system than No Growth or Stagnation does. You can tread water for a while with No Growth, but Contraction sucks all the money out of circulation since nothing is a good investement and you can only lose money if you loan it out. So if you got some, you HOARD it, which is what all the TBTF Banks and Corporations are doing here. No matter how much Helicopter Ben prints, it doesn’t get lent out into the real economy. It gets pushed into speculative Bubbles, which either implode slowly like Oil or crash rapidly like Facepalm. It still never makes it into the real economy.

TPTB haven’t come to grips with the reality of contraction, and so keep making attempts at fixing through Growth paradigms that don;t work anymore. Until we abandon the idea of Growth and figure out ways to Shrink a bit less painfully, we are in BIG TROUBLE.

RE

http://www.doomsteaddiner.org

June 8, 2012 at 2:16 am #3823

william

I will try again to reply. Basically this follows predictions of peak oil. There should be no expectations of anything less than endless pain till oil runs out. After the peak comes the long decline.

To shorten it: wealth becomes fleeting, capitalism (redistributing wealth) becomes irrelevant, democracy acts identical to fascism (like the Nazis)

We are going in this direction and need to find another method of finding meaning to coexist or sit back and watch our governments remove citizens rights and commit human rights autocracies. Sit back and relax we are going to get to watch more violence and greater terror than some of hollywoods best.

June 8, 2012 at 6:26 am #3824

jal

Is this the beginning of a civilized response to insults.

http://www.youtube.com/embed/8jpxJifbhAA

June 8, 2012 at 7:42 am #3826

TheTrivium4TW

Reverse Engineer post=3445 wrote: I don’t think a “No Growth Paradigm” is the right label here, because it indicates a stability at this level.

Debt Money Tyranny is Ponzi like in nature. It must grow or else the collapse phase has been initiated.

It can’t grow exponentially forever, so it must collapse at some point.

The key take away here is that the wicked nature of Debt Money Tyranny doesn’t allow for steady state or sustainable living – it is the very nature of our money that drives this addiction to growth. That coupled with humanity’s misplaced greed, of course.

RE, the “Architects” not only are aware that collapse is coming, they knew it would come in 1913! The *engineered* in the collapse phase – the collapse is just as important as the preceding bubble for their societal asset stripping model.

“Under the Federal Reserve Act, panics are scientifically created. The present panic is the first scientific one, worked out as we figure a mathematical equation.” (Congressman Charles A. Lindbergh, The Economic Pinch, 1921.)

“The new law will create inflation whenever the trusts want inflation. It may not do so immediately, but the trusts want a period of inflation, because all the stocks they hold have gone down… Now, if the trusts can get another period of inflation, they figure they can unload the stocks on the people at high prices during the excitement and then bring on a panic and but them back at low prices.…The people may not know it immediately, but the day of reckoning is only a few years removed.” (Congressman Charles A. Lindbergh, referring to the Federal Reserve act, Congressman Lindbergh stated this a few years prior to the stock market crash in 1929 which ushered in the Great Depression Congressional Record, Vol. 51, p. 1446. December 22, 1913.)

From the Architect perspective, the collapse is not a bug, it is a feature.

Yes, I expect them to lose some of their major corporate structures. But, just like chess, you have to lose some pieces to win the game.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt.” Henry Ford

We can’t look at the “curtain” structure instead of focusing on the Wizard behind the curtain or else we will get ourselves confused as to what is actually transpiring before our very eyes… which is their goal.

War is all about deception – Sun Tzu, Art of War.

The best warrior never has to fight – Sun Tzu, Art of War.

All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved – Sun Tzu, Art of War.

For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill – Sun Tzu, Art of War.

Be extremely subtle, even to the point of formlessness. Be extremely mysterious, even to the point of soundlessness. Thereby you can be the director of the opponent’s fate – Sun Tzu, Art of War.

For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill – Sun Tzu, Art of War.

In the practical art of war, the best thing of all is to take the enemy’s country whole and intact; to shatter and destroy it is not so good – Sun Tzu, Art of War.

If ignorant both of your enemy and yourself, you are certain to be in peril – Sun Tzu, Art of War.

The Traitor is the Plague.

http://www.youtube.com/watch?v=-uSA1o07jx0

They know, RE, EXACTLY what they have done, are doing and will do.

More for those in real control, the Architect class and those minions they choose to keep by their side, and less for everyone else.

Much less.

The collapse is part of their strategy to take trillions upon trillions in real property value (today’s dollars) from unsuspecting sheeple who will have NO IDEA they have been conned by Debt Money Tyrants.

They will lose their assets just as if a National Socialist came up to them, stuck a gun in their face and told them to get out and never return.

The result will be the same – but with better marketing, the war victim will have no idea that there is even a war, let alone understand that they were a victim of a war. Unless people tell them – which is what I try to do.

In general, they don’t listen now. Unfortunately, our selfishness and emotional need to avoid contemplating danger is exploited so we stand down until the PAIN hits a crescendo… but by then it will be too late… nobody left to speak out at that point. BTW, this is why the [D]elites want the final collapse to be almost everyone all at once. Catch the suckers by surprise and all.

But they won’t let it be obvious that the financial system was a fraud and caused the collapse – so plan on them trigging the actual collapse initiation by blowing something up… the Strait of Hormuz or an American city, I do not know.

But there will be an “event” they orchestrate and their captured media will associate the collapse to the event. The suckers will do what they do best… suck it all up.

War is, after all, all about deception. Those that actually read and study the material the [D]elites and their minions read and study would know this.

June 8, 2012 at 10:28 am #3827

Reverse Engineer

TheTrivium4TW post=3449 wrote: That coupled with humanity’s misplaced greed, of course.

RE, the “Architects” not only are aware that collapse is coming, they knew it would come in 1913! The *engineered* in the collapse phase – the collapse is just as important as the preceding bubble for their societal asset stripping model.

“Under the Federal Reserve Act, panics are scientifically created. The present panic is the first scientific one, worked out as we figure a mathematical equation.” (Congressman Charles A. Lindbergh, The Economic Pinch, 1921.)

Triv, has it ever occurred to you that I’ve read all the quotes from Charlie Lindbergh, Andy Jackson, Benny Disraeli, Hank Ford, Woody Wilson et al exposing the nature of this scam hundreds of times already? You write in a lecturing style that presupposes everyone who is reading your posting has never been aware of or exposed to the concept of how money works or how debt works. Most of us here have been over this stuff many times already, although not everyone draws precisely the same conclusions of course.

I’ll give you an example here in your own rant.

Triv wrote:
They know, RE, EXACTLY what they have done, are doing and will do.

More for those in real control, the Architect class and those minions they choose to keep by their side, and less for everyone else.

Much less.

The collapse is part of their strategy to take trillions upon trillions in real property value (today’s dollars) from unsuspecting sheeple who will have NO IDEA they have been conned by Debt Money Tyrants.

If this is/was the Plan, IMHO these folks screwed up Big Time already. The Asset worth anything was Oil, and its mostly been burned up here and now exists only as CO2 in the atmosphere. They can’t repo it, they can’t asset strip it. The assets the Oil built are no longer assets, they are liabilities now. Bridges and roads that need repair, a failing electric grid people cannot afford, McMansions that are unlivable without the automobile and power to run them.

So if this was their Plan, they fucked up big time.

On the other hand, if the Plan was to royally screw up the environment and create a massive population overshoot so they could sit in a Bunker, eat Popcorn and watch people Die on the Big Screen TV, they succeeded admirably with that Plan.

This monetary system, as was true of all of them since they evolved past the Counting House stage was designed to sieve wealth into a few hands for so long as it could be maintained and the people bought the system. No different really than the monetary system run by the House of Medici in the Middle Ages or that run by the Romans in their time. Just somewhat bigger in scale and complexity is all.

Like all such systems also, it is fundamentally flawed on a mathematical level and eventually does collapse on itself. Anyone who understands this tries to time out when it happens or inititate it if they are in enough power to do so, but in order to emerge with real assets at the end of it, they actually gotta BE there to take. You also have the effect that War takes over as a means of Wealth acquisiton once the onetary system fails also. So you try to engineer yourself into a position where you run the War rather than fight in it.

Again, our Illuminati Masters have been quite good at that also over the Millenia, the difference again this time which was the case in Rome is that the Military will fracture here as each side bombs refineries and Oil production facilities out of existence.

So, the Final Outcome remains unclear here as of now. To me, the most likely outcome is a One to the many break up of Global networks and then the nation States into much smaller entities. This will of course not happen overnight and until the Big Ass Military and all its hardware really is down at the bottom of Davey Jones Locker, we will have soe serious Fascism around here to deal with. It will not last in perpetuity though, not IMHO. There will be a massive and nearly simultaneous failure of all the Conduits, and at that time the Balance of Power will shift in a 10.0 Earthquake on the Richter Scale. When that time comes, and come it will, we just have to be READY for it, and take the Once in a Millenia CHANCE you get to take back the Earth from the Forces of Evil. That is when you don’t just get MAD, you get EVEN.

RE

http://www.doomsteaddiner.org

June 8, 2012 at 11:55 am #3828

Golden Oxen

Ashvin Quote “Yet, we still cannot rule out the ability of central authorities to extend and pretend with certainty. Let’s say that the Fed decides to defy all expectations and announce the purchase of $2 trillion in MBS and municipal bonds as a part of QE3 in June, and then, on top of that, the ECB announces that it is actively considering the possibility of directly monetizing Eurozone sovereign bonds with Germany’s unconditional blessing. This is an extremely unlikely scenario, but there is no denying that it will boost the markets and maintain artificial economic growth for at least a few months (more likely a year)”

Agreed, except it is the most likely scenario in my opinion. There are many other options available that should not be overlooked, all of which will lead to inflation and the elimination of the debt overhang from it. As to the no growth, that is called stagflation, a situation that all the mature Western economies find themselves in, especially since they exported their polluting manufacturing to Asia. It is an era of high unemployment, high inflation, not the best of worlds, but hardly the end of the world. It has a few good unintended consequences such as stretching out the use of scarce resources, and letting the worst of the manufacturing pollution occur elsewhere. It also allows us, under the present fiat paper scheme. to purchase the hard work and resources of others with pretty pieces of paper rather than real money. Flirting on Facebook all day, our newest industrial giant, sure beats lumping sixty hours a week in a sweat shop in Asia, even if you only have your food stamps and unemployment check to get by on.

Viewing 7 posts - 1 through 7 (of 7 total)

You must be logged in to reply to this topic.