The Center’s Got To Give
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Unknown George Daniels Pontiac, Van Ness Avenue, San Francisco 1948 I was thinking about something along the lines of The Center Cannot Hold and Somet
[See the full post at: The Center’s Got To Give]On Zero Hedge:
“Turkish President’s Stunning Outburst: The French Are Behind The Charlie Hebdo Massacre; Mossad Blamed”
I have now observed, in more than one posting, reports suggesting that Mossad was behind the organization of the Charlie Hebdo killings. Some of the events being reported concerning this whole incident look a little fishy to me, I have to admit. Some of the things appear quite similar to false flag operations of the past.
The more people believe and accept that false flag operations do in fact take place, the whole charade being perpetuated on us by the elite will really start to crumble around the edges, at the very least.
Keep an eye on whodunnit with the French attacks.
Who is about to spring a big project like the Afghanistan/Iraq warfest that followed 9/11?
https://www.workers.org/articles/2015/01/13/charlie-hebdo-free-press-racism/
Bibi Netanyahu has his upcoming election sewed-up. How Big?
What enemy is still rich enough to attack, and weak enough to make it safe?Thanks for the history recap. I was reading this blog in those early days, not so much The Oil Drum, but that may have been where the links came from. It has been too long for me to say what came first, Juan Cole, or Naked Capitalism, or ZH, or Mish. Early days, for sure, for the scenes behind the scenes, the not mainstream explainations of the truth in all the twisted numbers and obvious fabrications. This price fall always had the seeds of collapse in it, even if it was started as some ‘scheme’ to get us, or the russians, or whatever. All the trillions that poured into Drill Baby Drill loaded decline with the potential to crash everything. It still could yet, assuming we don’t blow it up before collapse.
I have to disagree. What if oil were $1/bbl, or free? Since GDP is known to be in effect an energy proxy, free energy would allow the least possible friction on GDP/economic activity. That is, any time a species comes into an energy windfall, it’s a good thing: they grow, populate, build things, yada yada.
If not, then surely we should try the opposite: have the LEAST possible amount of energy available for a species, which would be best and most prosperous for them. …But of course not. Energy is life.
That said, we can now focus on the reason oil falling NOW is a bad thing: debt. Any time there is a boom, or humans BELIEVE in a boom, however (un)credible (Tulips, Mississippi Bubble, etc) they create and accept larger promises from each other, believing those promises to be reasonable. In our social context, they ‘extend debt’. Many trillions now in the U.S. oil patch, probably larger than the U.S. real estate bubble. Those high debts can only be repaid with high prices. Otherwise, somebody will not keep their promises and default, and consolidate, and some creditor takes a multi-billion dollar haircut, and then loses the faith of HIS creditors, then THOSE creditors have others reduce the promises (debt) available to them, and so on.
And it’s THIS that causes “Deflation”, not nominal prices, not “money”, but confidence, as indicated by the willingness of participants to extend promises to each other. It’s a contraction of CREDIT, not money. Even today, money actually doesn’t expand all that quickly compared to credit. And in our system, “money” is hardly even relevant, only credit. Printed currency is now some 0.001% of “money,” while banks are free to extend credit more or less regardless of their reserves. In a system without moorings to an even slightly solid medium-of-trade, credit becomes the only thing that matters. And since it rests on confidence, it can reverse on social perceptions alone, in an instant. Falling oil prices can create that perception.
The solution to this is both simple and elegant: erase all those promises that will not be repaid and stop LYING. The assets are re-distributed to different and remaining players, BUT ALL THE REAL ASSETS REMAIN. The railroads, the oil wells, the factories, the grid. NOTHING IS DESTROYED. That’s why it’s so easy, as in 1921, to have a panic and restart the system with so little disruption. The only thing that is destroyed is the ILLUSION of wealth or money which, like gold on the Mississippi shores, NEVER EXISTED IN THE FIRST PLACE.
That is also why it never happens in practice: it takes a moral people to voluntarily give up the illusion of wealth that makes them rich and influential to others. Instead, they will use that (illusionary) influence to prevent the truth from coming out, and thereby extend their power at the expense of, well, anyone. That’s why we cannot have real news, real statistics, real discussions: the minute you begin, their power wanes, and their power to maintain their power wanes, then reality takes hold and they take a haircut. Fraudulent, phony assets are written off, and the comparative rich fall in worth and value a great deal, while the comparative poor only fall a little bit, equalizing the wealth gap. That’s also why is MUST happen. Illusions can go on a long time but not forever. The truth will out.
But the point is that it has nothing to do with the oil price. Low oil prices ARE good…for an economy at least. What we have is a DEBT problem. The debt is predicated on a high oil price, so all that DEBT is repudiated and collapses with low oil prices, taking a lot of the (illusionary) financial sector with them. …And a lot of rich people get poor, and their power collapses to become equivalent to ours again.
And I think that’s a good thing.
Dr. Diablo,
Low prices of oil, or anything else for that matter, are only good for an economy when they are in balance with the prices of everything else in the economy. If I am one of those people or companies that is trying to bring oil to market, I need a parity price to make it worth my effort. In other words, I need a price that covers my costs and provides a reasonable margin. I know this well, because I have been involved in agriculture all my life and have grown things and brought them to market. I used to tell people that I didn’t care whether potatoes were $1.00 per bushel, $4.00 per bushel, or $100.00 per bushel, as long as it covered my costs of production. On the flip side, I didn’t care if diesel fuel was $1.00 per gallon, $4.00 per gallon, or $100.00 per gallon, as long as the price of my produce was in parity with that.
Thus is the problem with our economy. When things aren’t in balance, we have issues. The whole economy can represented by a T-account. On one side you have the income of business, the net income of farms, and rental income. On the other side you have wages and net interest. In essence, wages (labor) and interest are the only real costs in the economy. All other costs are someone else’s income. If the income of business can’t cover their costs, then debt most often is used to make up the difference in order for it to keep running.
And so you are right, Dr. Diablo, we have a debt problem. The income of business can’t cover the costs when the price of that production is not at parity. Likewise, people can’t consume their own production when their wages are not at parity. They either go without (poverty), or go into debt (slavery). Lately, there has been a whole lot of consumer debt, has there not?
And we know that with debt there is the 8th wonder of the world called compound interest. It just keeps multiplying and multiplying. And if things are not in balance, you keep piling it on (i.e. Congress). I think that is where your repudiation idea comes in.
Thanks for the discussion.
The greatest fear on the part of the central bank is falling prices. Oil has a significant enough input influence on prices of most everything, that the creator of money “currency” will see to it that the price of it is supported.
How? Well, one way might be, the DoD is the biggest single consumer, and it is a branch of the same entity the Fed hails from. Matter of fact, the Department of Defense even uses the Feds products, ie; Federal Reserve (notes) Credit. Oh, so does the U.S. Treasury. So much for the Fed “independence” meme.
Likely, the DoD curtailed it’s ME interventions a bit too hastily, cutting oil consumption too rapidly. My guess is, re-escalation will be on .gov’s agenda soon. That, and maybe some sort of surprise “terra” operation on production/distribution facilities, to accelerate the process, mind you.
I don’t believe I want to be short oil here, or bet on the possibility the Fed won’t double down on it’s grand monetization drive. (Inflate, or die?”)
Or, to put it another way, if oil hits $20-$30, I’d wager on a money blizzard that could block the sun. Then one might leverage the hell out of “long oil.” Long everything but the buck, for that matter.
“What we have is a debt problem”
Yes, Doc, and it is all in the process of being diluted as we speak. That, because it can’t be paid back in like value,,,period.
Only wildcard is, does the Fed make it to the exit (strategy?) before the pitchforks come out?
Ah, yes,,,the devil is in the Geopolitics, this just in;
https://www.zerohedge.com/news/2015-01-14/russia-cuts-ukraine-gas-supply-6-european-countries
And Vlad is the bad guy again.
Raúl, I see a scenario that looks more than possible. Pastor Williams anounced a few years ago that his elite friends were going to drive oil down to $ 25. It happened just like he said it would. Since oil has been financialized, the oil majors have been losing a lot of money and the banks have been making a lot of money. I believe that The good pastor’s elite friends have done it again. They supported oil unitil everybody was drawn into the high-yield market,,, then, they yanked out the rug when the unfolding decline in demand was ready to break loose. The “smoking gun” is the price of gasoline. They drove it WAY down by decree. Copper is down but, retail copper is still rising. The oil majors wanted to drive all profit out of the oil business. There are several $ trillions of derivatives involved in the energy market.
The default and contagion will bring it all down. After U.S. shale oil producers are bankrupt and shut down, we will have to import most of our oil. That is when the oil exporters will demand trade settlement in gold. The R.O.W. is very tired of warmongers. They can only clip our wings economically, not militarily. This is a matter of survival for them. Canada is our #1 supplier but, they can’t carry the whole country. The world will close ranks on exports. They can survive.
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