Debt Rattle October 20 2014

[Raúl Ilargi Meijer]

John Vachon Houses in Atlanta, Georgia May 1938 • Leveraged Money Spurs Selloff; ‘Liquidity Isn’t What It Used to Be’ (Bloomberg) • Fed’s Rosengren St
[See the full post at: Debt Rattle October 20 2014]

[pipefit]

Oil prices have come down, but so have those of natural gas. Therefore, the oil:gas ratio remains stubbornly high as 22:1 as of last Friday, and will be higher at Monday’s end-of-day.

The oil to gas ratio is important in an analysis of deflation and inflation because a key component of it is an unalterable scientific fact. That fact is that, on a btu equivalent basis, the oil to gas ratio is 7:1, if we are talking about 42 gallon barrels of W. TX intermediate crude and 1000 cu-ft of gas, which are the benchmark units.

So at 22:1, crude is selling for a 200% premium to natural gas on a btu equivalent basis. To put this in perspective, the oil:gas ratio hovered around 9:1 for the 1980’s and 1990’s. So you see, despite all the ‘deflation’ chatter, the free market is still seeing hyperinflation of the money supply on an ongoing basis.

The last time we had actual deflation, in late 2008 and early 2009, the oil:gas ratio plunged all the way to 6:1, below par!!!!!

This doesn’t mean we won’t get deflation in the near future. But the markets are not expecting it at all. The view seems to be that no matter what happens, the central banks will figure out a way to keep everything liquid and the money flowing. The DOW sold off over 10% in a couple of weeks and the oil:gas ratio dropped, but not that much.

[Raleigh]

pipefit – “…the free market is still seeing hyperinflation of the money supply…”

What free market? More like “rigged market”. As Ilargi and others have continually pointed out, the central banks are everywhere.

We seek him here, we seek him there,
Those bloggers seek him everywhere.
Will the markets rise? Will they tank?
That all depends on the damned, elusive central bank.

There’s nothing “free” about it. If markets were free, the losers really would have lost and we’d still be mopping up after 2008.

[pipefit]

What ‘rigged market’ are you talking about? I was clearly referring to the ng and crude oil markets. And with these markets, unlike stocks or precious metals, you have to take delivery. So the amount of rigging is several orders of magnitude less than a market in paper goods, like paper gold, lol.

With respect to your comment about central banks being everywhere, that is just another way of saying that the central banks are wandering around, hyperinflating the money supply, in every nook and cranny into which they can stuff a trillion dollars.

[Author]

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