Posted on 01/01/2015 6:27:40 AM PST by HomerBohn
The American people are feeling really good right about now. For example, Gallup’s economic confidence index has hit the highest level that we have seen since the last recession. In addition, nearly half of all Americans believe that 2015 will be a better year than 2014 was, and only about 10 percent believe that it will be a worse year. And a lot of people are generally feeling quite good about the people that have been leading our nation. According to Gallup, once again this year Hillary Clinton is the most admired woman in America and Barack Obama is the most admired man in America. I don’t know what that says about our nation, but it can’t be good. Unfortunately, when things seem to be going well common sense tends to go out the window. A couple days ago, the Guardian ran an article entitled “Goodbye to one of the best years in history“, and a whole lot of people out there are feeling really optimistic these days. But should they be?
Sadly, what we are experiencing right now is so similar to what we witnessed in 2007 and early 2008. The stock market had been on a great run, people were flipping houses like crazy and most people were convinced that the party would never end.
But then it did end – very painfully.
The signs of trouble were there, but most people chose to ignore them.
Sadly, the exact same thing is happening again.
On Monday, the price of oil hit a brand new five year low. As I write this, U.S. oil is sitting at a price of $53.76 a barrel, which is nearly a 50 percent decline from the peak earlier this year.
There is only one other time in history when the price of oil has declined by more than 50 dollars a barrel in such a short time frame. That was back in the middle of 2008, shortly before the worst stock market crash since the Great Depression.
Unless the price of oil starts really bouncing back, the U.S. economy is going to be hit really hard.
Since 2009, oil industry employment has risen by 50 percent. And jobs in the oil industry pay quite well. One figure that I saw put the average weekly wage at about 1700 dollars.
But now we aren’t going to be gaining those types of jobs. Instead, we are going to rapidly start losing them.
Already, the oil rig count has dropped for three weeks in a row and is now at an 8 month low. And as the oil industry suffers, all of the industries that it supports are also going to start feeling the pain. In fact, Business Insider is reporting that Texas business executives are “freaked out” about what is happening…
Business executives in Texas are worried about the drop in oil prices.
On Monday, the Dallas Fed’s latest manufacturing survey showed that activity in Texas was slowing down.
The latest composite index came in at 4.1, widely missing expectations and down big from November’s reading. Expectations were for the index to come in at 9, down from 10.5 last month.
So while most Americans are feeling really good about the coming year, many of those with an inside view are becoming quite alarmed. One Texas business executive went so far as to say that the stunning decline in oil prices was “going to make things ugly … quickly.“
Meanwhile, the 9 trillion dollar U.S. dollar carry trade is starting to unwind.
The following is an excerpt from a recent Zero Hedge article…
Oil’s collapse is predicated by one major event: the explosion of the US Dollar carry trade. Worldwide, there is over $9 TRILLION in borrowed US Dollars that has been ploughed into risk assets.
Energy projects, particularly Oil Shale in the US, are one of the prime spots for this. But it is not the only one. Economies that are closely aligned with commodities (all of which are priced in US Dollars) are getting demolished too.
Just about everything will be hit as well. Most of the “recovery” of the last five years has been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more “risk assets” (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story.
If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system.
And that’s assuming NO increased leverage from derivative usage.
Ouch.
And yes, as that last excerpt mentioned, derivatives could soon become a massive problem. The big banks are holding trillions in commodity derivatives that could blow up if the price of oil does not rebound. Overall, there are five U.S. banks that each have more than 40 trillion dollars of exposure to derivatives of all types, and the total global derivatives bubble is at least 700 trillion dollars at this point.
At the same time, many are becoming concerned that the unprecedented bond bubble that we are witnessing could soon implode and trillions of dollars of “wealth” could disappear into thin air.
In fact, Bloomberg says that we should “get ready for a disastrous year” for bonds…
Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending.
With Federal Reserve Chair Janet Yellen poised to raise interest rates in 2015 for the first time in almost a decade, prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg.
That certainly does not sound very optimistic, does it?
Anyone with even a minimal amount of intelligence should be able to see the massive financial bubbles that the central banks of the world have created, and anyone with even a minimal amount of intelligence should be able to see that we are heading for a massive financial implosion which will be extraordinarily painful.
Unfortunately, as I wrote about yesterday, the American people have become “zombiefied“. Instead of thinking for themselves, they let “the matrix” do their thinking for them. And right now “the matrix” is telling them that everything is going to be just fine in 2015.
If you do not think that there is a propaganda machine that tells us what to think, I want you to watch the video posted below very carefully. This video makes it so obvious that even a small child can understand it…
Today there are less Americans of working age actually working than ever before as a percentage .
obama is building massive debt 18 trillion and exploding. Obama borrowed more than all previous presidents combined. that will lead to collapse. more welfare recipients and disability than ever etc. etc. . less good jobs , debt exploding everywhere etc. we are living on debt.
and you keep pushing your lies that obama is making the economy so much better.
Easy there partner. Where in my post did I give credit to Obama for anything? Gas prices dropping has to do with fracking and China's economy stalling out. My personal IRA went up substantially but I'm not giving Obama credit for that either. I realize that we have real problems going forward, but my honest answer to a poll would have to be I had a very good financial 2014.
Good luck finding any post of mine where I'm pushing lies about Obama improving the economy. When you have to lie to make a point your user name is accurate.
The majority of the American people had no clue long before 2015 hit the calendars. And, even if they did know, they could care less, its all about “me” anyway, not what happens to the country.
What did the Saudi's do to Russia?
The Saudi's produced less oil in 2014 compared to 2013.
Russia produced more oil in 2014 than any country on the planet.
Because the Saudis are depressing the price of oil and wreaking havoc on the Russian economy?
As I said, the Saudi's produced less oil in 2014 than 2013.
What’s coming is WWIII.
Great website and I want to study it more...however in my studies I have come to see Ezekiel 38 and Ezekiel 39 as two separate wars. I believe Psalm 83 and Ezekiel 38 are one war that occurs right before the Millennium. It is the war which Yahshua himself puts to an end.
Ezekiel 39 and Rev. 20 are one war which will occur at the end of the Millennium when satan is unleashed for a short time.
You have just described the Minerals. Though we have “some” more rather than a lot more. Senior Mineral refuses to get out of CDs and complains about the returns. I have added several bricks to my pile since 2008. As you said, one of the things that puts us ahead is that Mineral Estate is completely paid for.
That group would no doubt largely be comprised of:
And, I said “depressing the prices”, not “producing more oil”.
True here.
And of course what you didn't say is how SA is supposedly depressing prices while actually decreasing production.
Nice post.
Things get better, they get worse, but the overall trend is for things to get better. Many people do lose sight of that.
President Reagan also believed that. This is on his tombstone:
“I know in my heart that man is good, that what is right will always eventually triumph, and there is purpose and worth to each and every life. “
I agree cheap oil is good. However crashes are bad. Why do you think the price of oil is getting lower?
Just do it.
And only “if” the US was a manufacturing economy, consumers would be buying more domestic products with the money freed up by lower energy costs, allowing lay offs in the energy market to be offset by increases in maunfacturing hiring . But, lo, we sent those jobs away.
As I said, although in general low oil prices are good for complex economies, IF the cause of the oil price collapse is the collapse of the underlying demand — because of a recession or worse — then that is bad news.
I don’t know the cause of the current collapse. Hopefully it’s just Saudi Arabia making a play for long-term control of the oil markets. Hopefully it’s not fundamental economic weakness (though that is a strong possibility).
“Unless the price of oil starts really bouncing back, the U.S. economy is going to be hit really hard. “
The idiot that wrote this is concluding high oil prices have not hurt the economy but low energy prices will. Idiot.
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