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Panic: “Falling Oil Prices Could Trigger Nightmare Scenario for Derivatives… Day of Reckoning Rapidly Approaching”

Michael Snyder
December 4th, 2014
The Economic Collapse
Comments (96)
Read by 13,006 people
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This article was originally published by Michael Snyder on his Economic Collapse blog.

Editor’s Note: While the insanely falling oil prices are giving a temporary moment of glee to consumers at the pump, it is already unleashing economic consequences to numerous regimes that have relied upon high oil prices; now it threatens to also destroy shale gas producers and unravel the massive and nearly unquantifiable derivatives market – a ticking time bomb disaster of apocalyptic proportions that was avoided in 2008 only through the problematic and criminal “too big to fail” philosophy that has allowed banks to keep on looting while holding the taxpayers of this country hostage.

Plummeting Oil Prices Could Destroy The Banks That Are Holding Trillions In Commodity Derivatives

Could rapidly falling oil prices trigger a nightmare scenario for the commodity derivatives market?  The big Wall Street banks did not expect plunging home prices to cause a mortgage-backed securities implosion back in 2008, and their models did not anticipate a decline in the price of oil by more than 40 dollars in less than six months this time either.  If the price of oil stays at this level or goes down even more, someone out there is going to have to absorb some absolutely massive losses.  In some cases, the losses will be absorbed by oil producers, but many of the big players in the industry have already locked in high prices for their oil next year through derivatives contracts.  The companies enter into these derivatives contracts for a couple of reasons.  Number one, many lenders do not want to give them any money unless they can show that they have locked in a price for their oil that is higher than the cost of production.  Secondly, derivatives contracts protect the profits of oil producers from dramatic swings in the marketplace.  These dramatic swings rarely happen, but when they do they can be absolutely crippling.  So the oil companies that have locked in high prices for their oil in 2015 and 2016 are feeling pretty good right about now.  But who is on the other end of those contracts?  In many cases, it is the big Wall Street banks, and if the price of oil does not rebound substantially they could be facing absolutely colossal losses.

It has been estimated that the six largest “too big to fail” banks control $3.9 trillion in commodity derivatives contracts.  And a very large chunk of that amount is made up of oil derivatives.

By the middle of next year, we could be facing a situation where many of these oil producers have locked in a price of 90 or 100 dollars a barrel on their oil but the price has fallen to about 50 dollars a barrel.

In such a case, the losses for those on the wrong end of the derivatives contracts would be astronomical.

At this point, some of the biggest players in the shale oil industry have already locked in high prices for most of their oil for the coming year.  The following is an excerpt from a recent article by Ambrose Evans-Pritchard

US producers have locked in higher prices through derivatives contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015.

Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely production.

So they are protected to a very large degree.  It is those that are on the losing end of those contracts that are going to get burned.

Of course not all shale oil producers protected themselves.  Those that didn’t are in danger of going under.

For example, Continental Resources cashed out approximately 4 billion dollars in hedges about a month ago in a gamble that oil prices would go back up.  Instead, they just kept falling, so now this company is likely headed for some rough financial times…

Continental Resources (CLR.N), the pioneering U.S. driller that bet big on North Dakota’s Bakken shale patch when its rivals were looking abroad, is once again flying in the face of convention: cashing out some $4 billion worth of hedges in a huge gamble that oil prices will rebound.

Late on Tuesday, the company run by Harold Hamm, the Oklahoma wildcatter who once sued OPEC, said it had opted to take profits on more than 31 million barrels worth of U.S. and Brent crude oil hedges for 2015 and 2016, plus as much as 8 million barrels’ worth of outstanding positions over the rest of 2014, netting a $433 million extra profit for the fourth quarter. Based on its third quarter production of about 128,000 barrels per day (bpd) of crude, its hedges for next year would have covered nearly two-thirds of its oil production.

Oops.

When things are nice and stable, the derivatives marketplace works quite well most of the time.

But when there is a “black swan event” such as a dramatic swing in the price of oil, it can create really big winners and really big losers.

And no matter how complicated these derivatives become, and no matter how many times you transfer risk, you can never make these bets truly safe.  The following is from a recent article by Charles Hugh Smith

Financialization is always based on the presumption that risk can be cancelled out by hedging bets made with counterparties. This sounds appealing, but as I have noted many times, risk cannot be disappeared, it can only be masked or transferred to others.

Relying on counterparties to pay out cannot make risk vanish; it only masks the risk of default by transferring the risk to counterparties, who then transfer it to still other counterparties, and so on.
This illusory vanishing act hasn’t made risk disappear: rather, it has set up a line of dominoes waiting for one domino to topple. This one domino will proceed to take down the entire line of financial dominoes.
The 35% drop in the price of oil is the first domino. All the supposedly safe, low-risk loans and bets placed on oil, made with the supreme confidence that oil would continue to trade in a band around $100/barrel, are now revealed as high-risk.

In recent years, Wall Street has been transformed into the largest casino in the history of the world.

Most of the time the big banks are very careful to make sure that they come out on top, but this time their house of cards may come toppling down on top of them.

If you think that this is good news, you should keep in mind that if they collapse it virtually guarantees a full-blown economic meltdown.  The following is an extended excerpt from one of my previous articles

—–

For those looking forward to the day when these mammoth banks will collapse, you need to keep in mind that when they do go down the entire system is going to utterly fall apart.

At this point our economic system is so completely dependent on these banks that there is no way that it can function without them.

It is like a patient with an extremely advanced case of cancer.

Doctors can try to kill the cancer, but it is almost inevitable that the patient will die in the process.

The same thing could be said about our relationship with the “too big to fail” banks.  If they fail, so do the rest of us.

We were told that something would be done about the “too big to fail” problem after the last crisis, but it never happened.

In fact, as I have written about previously, the “too big to fail” banks have collectively gotten 37 percent larger since the last recession.

At this point, the five largest banks in the country account for 42 percent of all loans in the United States, and the six largest banks control 67 percent of all banking assets.

If those banks were to disappear tomorrow, we would not have much of an economy left.

—-

Our entire economy is based on the flow of credit.  And all of that debt comes from the banks.  That is why it has been so dangerous for us to become so deeply dependent on them.  Without their loans, the entire country could soon resemble White Flint Mall near Washington D.C….

It was once a hubbub of activity, where shoppers would snap up seasonal steals and teens would hang out to ‘look cool’.

But now White Flint Mall in Bethesda, Maryland – which opened its doors in March 1977 – looks like a modern-day mausoleum with just two tenants remaining.

Photographs taken inside the 874,000-square-foot complex show spotless faux marble floors, empty escalators and stationary elevators.

Only a couple of cars can be seen in the parking lot, where well-tended shrubbery appears to be the only thing alive.

I keep on saying it, and I will keep on saying it until it happens.  We are heading for a derivatives crisis unlike anything that we have ever seen.  It is going to make the financial meltdown of 2008 look like a walk in the park.

Our politicians promised that they would do something about the “too big to fail” banks and the out of control gambling on Wall Street, but they didn’t.

Now a day of reckoning is rapidly approaching, and it is going to horrify the entire planet.


Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years. Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream. If you want to know what things in America are going to look like in a few years read his new book The Beginning of the End.

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Author: Michael Snyder
Views: Read by 13,006 people
Date: December 4th, 2014
Website: http://theeconomiccollapseblog.com/archives/plummeting-oil-prices-destroy-banks-holding-trillions-commodity-derivatives

Copyright Information: This content has been contributed to SHTFplan by a third-party or has been republished with permission from the author. Please contact the author directly for republishing information.

96 Comments...

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  1. Old Guy says:

    Lower fuel prices are a good thing. The decline of the USA manufacturing Began with the fake gas shortage in the 70,s. Suddenly the big engine big cars where undesirable. The USA car industry began to falter and like dominoes it spread. Cheap fuel will greatly lower the cost of production for every item produced. The federal gas tax isn’t on a percentage . Its a set amount per gallon. So cheaper gas translates to the government getting more revenue to fix the infrastructure. Example if as is $5 per gallon and the tax is ten cents per gallon . a ten dollar purchase nets 20 cents revenue. If gas is $2 a gallon a ten dollar purchase nets 50 cents revenue that can be used on infrastructure. No way are you going to convince me paying less for fuel is bad for the economy.
    42

    • FreeSlave says:

      Mac: “In recent years, Wall Street has been transformed into the largest casino in the history of the world.”

      Goodness Sakes, the stock market is up to a record high of 17,900+ as of this moment.

      There is a lot of cheering and yelling by the casino players.

      So much so that it’s making me regret my exit when the Dow was at 12,500.

      • KY Mom says:

        Other financial news…

        The Baltic Dry Index shows the true strength of the global economy. The Baltic Dry Index is the barometer that gauges the shipping dry bulk commodities around the globe.

        June 2014…
        The Baltic Dry Index Is Down 60% Year-To-Date; Worst On Record

        “has collapsed over 60% year-to-date”

        “worst first-half of the year on record”
        http://www.zerohedge.com/news/2014-06-24/baltic-dry-index-down-60-year-date-worst-record

        They call this a ‘Recovery’?
        December 3, 2014 – Baltic Dry Index is down to 1,079 points.

        Not so long ago…
        May 20, 2008 – The Baltic Dry Index reached 11,793 points.
        http://en.portnews.ru/news/191537/

        • KY Mom says:

          It’s official: America is now No. 2

          “The Chinese economy just overtook the United States economy to become the largest in the world. For the first time since Ulysses S. Grant was president, America is not the leading economic power on the planet.”

          “The International Monetary Fund recently released the latest numbers for the world economy. And when you measure national economic output in “real” terms of goods and services, China will this year produce $17.6 trillion — compared with $17.4 trillion for the U.S.A.

          As recently as 2000, WE PRODUCED NEARLY THREE TIMES AS MUCH AS THE CHINESE.”

          Market Watch dot com

        • WhoWuddaThunkIt says:

          The problem every market is being manipulated for some toprofit greatly off of. Instead of only allowing the real free market to play out in normal supply and demand steady ups and downs. Most of wallstreet should be in prisons. Banks should never be bailed out whatsoever. Let them fail. And you won’t see this mass speculation which just drives prices sky high, like housing and oil and gold and silver, etc. And they would not be gambling. Bailouts are like crack for a crack addict. Normal losses are not allowed in this organized crime racket called investment banking.

      • Cujo says:

        FSS, you shouldn’t have any regrets, if you’ve prepared that is. If you prepared you are holding something worth value instead of holding Fiat Currency.

        If you bought an MBR when they were between $350 to $700 that is an investment in it’s weight in gold.

        A 50lb bag of rice at COSTCO a few years back was $12 now it’s $19 that is about a 60% return on your dollar not to mention it will sustain life.

        I to pulled out of the market around the same time and when I had reservations (haven’t had them in the last 2 years)I just remind myself that this is for the long haul and Fiat vs Value and Worth.

      • jaxx says:

        Slave,

        I pulled out in 2007 and settled all debts outside of my mortgage. There has been a lot of churn since then in my own life which has prevented me from making fantastic progress, but I’m still out of debt except for mortgage at least and I have some preps, and after this semester I’ll have an advanced degree (and still no non-mortgage debt). I have zero regrets or reservations.

        You shouldn’t either, unless you have confidence in your ability to time the market and predict the future pretty accurately. Look at it this way…you sold out at DOW 12,500. Leaving aside the fact that the DOW isn’t a very good broad indicator, it’s now at 17,9XX and yeah, at a glance it looks like you missed a good opportunity. So how will it look in a month when the DOW is at 7,500? Or 3,000? Worst case, what if there is no DOW 6 months from now? In that case, whatever money you put into preps and PM is going to look like money pretty wisely spent.

        For my own future plans…I soon will have no debt, an advanced degree and a great desire to shore up my readiness. I’m going to live simply and whatever money I have extra at the end of each month is going straight into 75% preps and 25% PMs (50-50 gold-silver split, most likely), and as I start to feel better prepared I’ll gradually tilt that more toward PMs.

        And I won’t waste time feeling regret, because I’ll be too busy buying and sorting stuff and making plans and maybe taking some EMT classes or something. Because if SHTF comes, my advanced degree I spent so much time and effort and money on won’t mean squat, but a well-stocked and -sorted larder and armory and EMT knowledge will be pure gold. Probably better.

    • Archivist says:

      Gas was cheap during the depression, but most people didn’t have the money to buy it.

      Right now, in NC, the gas taxes are more than 20% of the price ($2.66 today). If gas prices dropped by 1/2, then the taxes would be 1/3 of the price. Pretty soon, the part that the station can make a profit from becomes too small to keep the station open. Then it won’t matter if gas is $1.00 a gallon, if you can’t find it. I know of a store owner who locked up his gas pumps because he wasn’t making enough money on the gas to keep the pumps serviced. He makes more money on beer, soft drinks, and snacks.

      Of course a lower price helps an individual, at least temporarily. But if it collapses the system, the lower price didn’t help a lot.

      I think gas is almost as cheap as it reasonably be, considering the prices of everything else, unless the government cuts the per-gallon taxes or changes them to a percentage instead.

      BTW, the federal tax is 18.4 cents per gallon. NY’s state tax is highest at over 50 cents per gallon.

      • KY Mom says:

        Off topic…

        American arrives at Atlanta hospital from West Africa for Ebola testing

        “A U.S. healthcare worker who may have been exposed to Ebola in West Africa arrived at Emory University Hospital in Atlanta early on Thursday for testing and observation, the hospital said.

        The patient, who has not been identified, was flown from West Africa and will be monitored to see if he or she has been infected with the virus, the hospital said.

        U.S. health officials this week designated 35 hospitals nationwide, including Emory, as Ebola treatment centers.”
        http://in.reuters.com/article/2014/12/04/us-health-ebola-usa-idINKCN0JI1CX20141204

        If there is NO EBOLA concern here anymore, why have 35 U.S. hospitals now been designated as Ebola treatment centers?

      • Brian Flag says:

        I don’t see a dropping gas price effecting station’s profits negatively. They pretty much operate on a few cents/gallon profit which should not change with price swings. If anything they will do better with more gallons sold.

      • WhoWuddaThunkit says:

        I remember back in the 1960’s Gas at $0.36 to .38 cents a gallon. And stamps at .03-.05 Cents each to mail a letter. lol

        In high school in the late 70’s gas was at .52 for a long time. I used to ride a motorcycle with a 2.5 gallon Tank. I could ride all week for just a few Bucks. Then the P2B invented Gas shortages.

    • Acid Etch says:

      The Garner verdict made something snap inside me. I can’t fucking believe this shit. Despite what you old people think of me, I am a man who values truth and justice over bullshit and politics and CYA. TPTB need a rearrangement.

      WISHING FOR SHTF

  2. GEO-LITHIC says:

    They can sell gas for 50 cents I don’t care let the house of cards they built fall and all the stupid money games the billionaires play crash like a monopoly game between a bunch of spoiled brats Wow the worlds a strange place getting even stranger!!!

  3. Hammerun says:

    The elephant in the room that everybody is ignoring is that the banks and our lovely government are so adept at stripping Americans incomes that they’ve gotten slick at it.
    Sink this economy and they’ll in effect “kill the golden goose”. They aren’t going to do that, not a chance. Oh, by the way we’re the golden goose. What they have been building for decades pays off handsomely and they don’t want to lose it. They’d take less than have it wiped out.
    Banks have gained outstandingly from mortgages that when paid off will pay off four fold in thirty years. Banks give you an option of a minimum payment on your charge cards that overall takes decades to pay off, plus interest of course.
    The IRS/government has morphed into a Vinnie’s cousin. The democrats are supposed to be the party for the people, right? Explain this point.
    How in six years did we go from $1.3 trillion to $3.1trillion in tax revenue with no tax hikes? And in this fledgling economy?
    Nah, they’ve got a good thing going here, they ain’t going to let this go, not a chance.
    The beancounters have this all worked out. If we remain the status quo, passive and compliant, BOTH will indeed survive. Bank on it!! (Pun intended)

  4. Marcus says:

    serves them right, speculating on derivatives is part of the reason prices got pushed higher to begin with: in order to make money on your bet, you had to manipulate the prices up six months from now… then do it all over again.

  5. Woogie says:

    This is why it is best to pay off your debts and become your own bank. You’ll be less affected when the banks fail again.

    When this bank failure happened in 2008, I was in debt up to my ears when my business failed and I borrowed money to open it, my job was lost, but I found other work, paid it off 2 years ago and stored a food and cash/pm bank of my own. And my money isn’t in any bank except enough for my monthly bills.

    The banks didn’t learn their lesson from 2008, and neither did the oil companies with their debts. They jumped into the oil boom without enough capital and borrowed money for equipment and drilling. When oil prices dropped below operational cost levels, they can’t pay back the loans. This is one HUGE reason why I learned never to borrow money to start a business.

    • Frank Thoughts says:

      I agree: never borrow money to start a business. Never. It is the number one reason why small businesses fail. Borrow once, and then you borrow again, and soon whatever profit you make is going on interest payments. Eventually, a crisis comes along and you go under.

      I have started a number of successful businesses with zero down. The secret is to look around and find the sector you want to work in and a current big player in the business you want to enter. For example, you wish to start a pioneering computer and device manufacturer. Go get a job at Apple: any job. Register your business on the quiet in a jurisdiction that is outside the legal clutches of the company you work for. Begin to ‘populate’ that business with your spare cash and the ideas and things you learn at work. Use the bigger company as your pace car. Try to mimic as much as possible the standards and habits of the pace care (this means you are basically getting their IP for free and legally). Do this until you are better than the pace car. When the time is right, quietly start your first project. There are zillions of options on the web to manufacture and market/trade your product. A good starting point is Ali Baba in China. Start this with your sh#ttier product idea because the Chinese will steal it soon enough. But in the meantime use the cheaper facilities and quicker pace and lower standards of Asia to get your product out there. This is your learning run. You will learn everything you need to know doing this. Give it a couple of years and then fold or cash out (sell to some guys in India).

      Now, you have several huge advantages: you have awesome experience and you know every facet of the business cold; you have been operating for a couple of years; you have built and launched and marketed a product for a couple of years; you have sales charts, customer feedback, customer details and data, you have established your brand and IP through your actions, etc.. Now it is time to get some real funding for your next product. And when you go to meet the money you aren’t just going with a limpd#ck powerpoint on a flash drive. You are walking in there with a company, products, sales, market share, data, data, data, logo, brand etc. Only an idiot would throw you out of the office and ignore your pitch.

  6. TPSnodgrass says:

    If one understands the basics of revenue generation for the Federal government, it is based on a confiscation, rather than actual generation of revenue. So, seeing the prices of oil fall, while excellent for the consumer, and also for the Feds and states overall taxable revenue coming in the door(lower prices means higher overall tax revenue volume) for the Feds and states.
    While I could care less about the idiocy of “investing” in any kind of derivatives, I do care about how truly under-capitalized our banks actually are. Having close friends who are in upper/regional management of the FDIC as well as the Comptroller of the Currency, according to personal statements made to me recently(a few days ago), most banks are under-capitalized by at least 20 to 1 or far more…
    This means that for every dollar of actual performing assets, they have extended credit far beyond the FDIC maximum requirements allowed by law. So, we as consumers(account holders) are totally screwed in terms of getting our accounts “back” when the bank fails. Of course, there is going to be some kind of “domino effect” as financial institutions collapse under the weight of their non-performing derivative holdings. If we as mere mortals, the little people, tried that kind of accounting, we would all be in prison already.
    We need to gut this one out, and it is not going to be pretty for anyone, however, we need to lay “blame” or more appropriately accountability, exactly where it belongs. We personal account holders are NOT to blame, nor should we take the mandatory account haircuts(Cypriot-style) that are indeed coming shortly.

  7. Ghost Rider says:

    Not going to lie… I had to look up exactly what a derivative was.

    For anyone else who wasn’t exactly sure check out:

    ht tp://beginnersinvest.about.com/od/stocksoptionswarrants/a/what-is-a-derivative.htm

    GR

    • Warchild Dammit says:

      Ghost,good link.I in the past even growing up with my dad and his friends and having some grounding in finance needed to at a point look into it’s meaning,tis important as so many of the big banks ect. have bet trillions in derivatives.Keep in mind my comments about the fed’s vice presidents speech in Sweden this last summer to I believe the imf or their ilk.Stevens said straight out bail ins a given for the US,do not understand bail ins just think Cyprus/Greece,all you really need to know!

  8. eppe says:

    T. Boone Pickens on 100$ oil returning.
    Good read, but who can tell the future?

    ht tp://www.cnbc.com/id/102233663

    • Gonetoolong says:

      Pickens has said a lot of BS also. He also said before that we would never again see oil again at below $100/barrel. Oops. Less than $60 right now. He is a gas pushing blowhard. The oil price is nothing more than muslims helping our muslim. The Saudis are doing a fav to Obama. This starves out the oil producers in the US and keeps the XL pipeline off the table. Also puts Russia, Venezelua, Libya, and Iran in bad shape. Nothing but world chess at play.

  9. Copperhead says:

    For what this is worth, as long as there is no replacement for the dollar as the reserve currency of the world, the dollar will not collapse soon. Why; way too many countries have too much invested in the good old dollar, the elitists has bails of it, they are not going to lose that. As for Gold and Silver what is its worth right now it’s in DOLLARS, what will it be in the future your guess is as good as mine. So the Dollar collapse means the end of the world economy and there is absolutely nothing out there to replace now, nothing. Now the collapse of the DOLLAR will only happen when the Star Chamber has all of their wealth entrenched in the new currency that they too will control so you see what future do we truly have, it will be the same as we have now, only under a new named wealth HELL it might be pine cones. Just learn how to provide for you and your love ones as best as you can and forget about all else. The SHIT will happen only when they want it too! The only wild card out there is some MAJOR NATURAL DISASTER! All of this just IMHO as to what the future holds.

    MTCFMF!!//RIP America.

    • passinwiththewind says:

      I don’t know, Copperhead.

      The latest info i have found, says that Russia and China have systematically cashed out most of their US treasury holdings, aka our National Debt. They are making manuevers in more finite resources, especially gold.
      Apparently, the Federal Reserve is making everything look hunky-dory by using Belgium as the “buyer” of that debt. Belgium doesn’t have that kind of buying power. Something quirky going on there. UN maybe?

      The big problem is Japan. They are deep in debt and have pulled out all the stops by taking up USA/Federal Reserve tactics, and infusing massive amounts of Yen into their economy, equivalent to 3 Trillion US dollars annually.

      What happens if the monkey wrench gets thrown into that equation? possibly a market crash that starts in Japan and ends with Wall Street and the dollar, dropping like the twin towers did. Another Fukishima catastrophe could be the catalyst?

      If China and Russia have their way, the new petro-currency will be the Yuan. It is happening already with Saudi Arabia, and a few more major world crude oil players are planning to make the move also. With China’s 20th new oil refinery going on line next year, they have a lot of say in what transpires with the petro dollar and consequently the domestic dollar.

      i would not want to be mortgaged to the teeth right now, without a convenient place to move into when the SHTF.
      Working for the NWO, to keep a house and piece of land isn’t my idea of retirement. Look out parents and in-laws, their coming with U-hauls and hoardes of rugrats.

      And quite possibly by this time next year.

      • hammerhead says:

        “Look out parents and in-laws, their coming with U-hauls and hoardes of rugrats.”

        YIKES !!!

        Now thats fear porn . LMAO

      • Breathial says:

        Belgium- Brussels, specifically- is the home for the Bank of International Settlements, THE bank that all central banks answer to.

        Which means the Western (fiat) system is now trying to stop the upcoming Eastern (gold-backed) system from getting operational. It’s an ongoing economic war, essentially.

      • Copperhead says:

        Pass’n: Thx for your input. Just trying to get people to start thinking. Again THX.

        MTCFMF!!//RIP America.

      • durango kidd says:

        PWTW: China still holds about $1.2 trillion in US debt with a similar number for the Euro in their currency reserves. The balance of their $3 trillion dollar currency reserve is in other currencies. China continually buys USD in the open market to manipulate its currency DOWN against the dollar.

        “Belgium” was not the US buying its own debt. It was discovered long ago that these US debt purchases were made by the Chinese. Catch up.

        Finally, Russia is DESPERATE for USD because its banks must repay western loans in those dollars or collapse, so the rush to sell US debt by Russia a few months ago is proving to be very foolish and exacerbating their current financial crisis.

        Get your facts straight before making really stupid comments about events that have already presented themselves. ie Belgium. You have no idea what you are talking about. 🙁

        • Breathial says:

          As usual, DK, you’re a day late, a dollar short and suffering a severe cranial-rectal inversion.

          China and Russia have stopped buying US debt in March 2013, and are quietly cashing them in for GOLD. They have NO REASON to buy more worthless US paper; the idea that CHINA brokered the deal with Belgium to buy the same worthless paper they’re trying to dump is utterly ridiculous. Such idiotic notions are believed only by fools and shills.

          The “foreign” backer for Belgium to buy the debt was none other than the Federal Reserve. That certainly would not happen in the BIS’s sandbox without their expressed permission if not downright blessing.

          Oh, you didn’t know that??? Here’s a link. EDUCATE yourself, boy, lest you look even more the fool… (though at this point I doubt that’s even possible.) http://beforeitsnews.com/economy/2014/11/who-buys-us-treasury-debt-now-that-the-fed-has-ended-qe-who-got-gold-2675758.html

          You’re dismissed.

          • passinwiththewind says:

            Amen to that, Breathial.

            If you are the same poster as was here a while back, Good to see your posts again.

            D kiddie, is an imposter that suffers from self-confidence and weak masculinity. he has to continually build himself up and blame others, for things that he has no clue about. The syndrome is caled Infantile Narcissim.

            My information was from an expert in the field of world economics and it was recent; thankfully not from a pee-diddy bank teller from the seventies that spouts such statements as…..

            “2001 is the year under GWB that the New World Order began transferring American manufacturing companies to China in earnest. Since then more than 60,000 factories have been transferred and 70 million American jobs lost. Its Bush’s fault!!!”

            Only another ignoramus would believe that crap.
            Yea GWB is illuminati and in on the whole NWO scam game, but it was his daddy GHWB, that called all the shots. He even called the shots during the Billery decade of destruction.

            GWB has the IQ of a seventh grader, or maybe less. he was a pawn for TPTB and did their bidding. How in the hell can it be his fault when it all started back in the twenties. (For USSAG, that is).

            d kiddie has blown his cover and exposed himself for the weak and ignorant boy he is. No man, could claim to be a christian and lie as much as he does.

            Anybody buying his crap needs buyers insurance, cause it will come back to bite them, eventually.

            it’s called, Insurance Against Bad Advice From the Economist Guru.

            lol…..

            that same “banking/economics expert”, ex-teller that goes by dk, had the ignorance to say, quote….

            • durango kidd says:

              PWTW: “Only another ignoramus would believe that crap.” LMFAO!!! 🙂

              Where do you think all of those factories in China came from, dumbshit??? They were financed with American deposits through the Gangster banksters and they called it FREE TRADE!!!

              Where do you think 300 million Chinese factory jobs came from, dumshit??? They were created by transferring American jobs, and European jobs to China and paying the average worker a dollar a day!!!

              That data, the lost jobs and the factory transfers, are available at the Bureau of Labor if you know how to find it. Its in the archives.

              You are a fucking moron!!! 🙂

              • Breathial says:

                I was wondering what a big-talking fool like you would do, when confronted with razor-sharp logic…?

                Unsurprisingly, you folded like a cheap suit, linked to either out-of-date articles and a Treasury report that mentions foreign buyers, but not WHO is backing those foreign buyers. Your conclusion was more foolish bluffing. I *will* give you credit, for consistency.

                You still haven’t given anything resembling a logical reason, why China would have Belgium be a broker for them? Apparently you suffered a momentary flash of lucidity by pointing out China can buy up all the worthless paper they want without a middleman.

                Assuming, of course, China was even remotely interested in worthless paper…

                Anyway, there’s no need to go further with you; there’s no sport kicking a dog when he’s down, so I’m done with you. You SHOULD be embarrassed, but you’re just a bit too cocky and a lot too stupid for that.

            • Breathial says:

              Yeah it’s me. Going through tough times right now, and mostly lurk. Only post when I’ve something to add to the conversation… otherwise I stay silent.

              Amazing how so many buy ideas (like China backing Belgium). Who thinks up this crap?

              If any of us were half as smart as DK faces himself to be, we’d have fixed the economic house of the good ship America decades ago… LOL.

          • durango kidd says:

            Guess again. The Chinese can purchase US Debt directly with the Yuan they create and they recently made a dollar purchase on Forex to manipulate the Yuan DOWN.

            Zero Hedge reported that the Belgium Bulge was the Chinese, some time ago. I consider Zero Hedge to be an accurate reporter of the news and a good analyst.

            Here’s a link for you: http://www.cnbc.com/id/101625105 🙂

  10. flabbergasted says:

    Sounds to me like Harold Hamm is taking his profits while he still can and will rely on the protection of the bankruptcy courts to help him keep them when things fall apart. He did not get this far over all the years and adversities by being out of touch with the big picture. He is not regrouping and solidifying his position, he is cutting and running while he still can!?

  11. TEST says:

    Just my opinion folks, but NOW is the time to pick up silver gold and platinum, if/as you can afford it. Easiest way is to get “junk” silver (pre-1965 coins), which have low markup, easily recognizable, and no one is going to counterfeit a silver dime.

    Even now that the banksters have articifically driven down the price of Au and Ag, while I could buy a gallon of gas for ROUGHLY around 30 cents in 1970 or so, you can STILL buy that same gallon of gas for ROUGHLY 30 cents – IF you pay in silver coin. (Also, recall the premium for physical silver right now, not to mention it is at an artificial low at present)

    Long story short, buy silver, gold and platinum, and TAKE PHYSICAL possession – no GLD or SLV nonsense, unless you want to be left with no chair when the music stops.

    • Nopittypartyhere says:

      …”no one is going to counterfeit a silver dime.” As folks get desperate they’ll do anything. Just a year or two ago my dear hubby got an email from another dealer. He had someone come in and try to pass off junk silver halves and quarters. They didn’t pass the ring test and he refused to allow the dealer to test. Just saying, nothing is 100%

  12. Jim in Va. says:

    One problem is that everybody jumped to cars that consumed a lot less fuel. With increased gas mileage less taxes are coming in. Now the government wants to tax you by the mileage on your car. Now it won’t matter whether you have a gas guzzler or not.

    • Old Guy says:

      Yes If gas gets cheap Ill start driving my old 55 chevy on the street a lot more. it has a souped up 454 engine with two four BBl carbs – 4 speed and 456 rear gears. the gas guage indicator falls as fast a the speedometer rises. Every time I crank it up I feel like a kid again.

  13. No-Forest-Just-Trees says:

    Earl? I don’t need no stinkin Earl.

  14. The Prophet says:

    The equities market is leveraged at record levels. It really compares to musical chairs. And the big boys know when the music is going to stop at least seconds before we do.

    • Rebel in Idaho says:

      I’m only around 40yo and haven’t had time to pay off everything yet. I did all the right things, got a doctorate, still in first marriage, frugal, great house and location (Idaho is awesome), still don’t have a tv; yet feel at the mercy of the banksters. We are prepping like mad, improving the farm rapidly, learning lots of skills, all while I still have a great paying job in town.
      I feel betrayed, lied to, and used by the previous generations that allowed the banking and finance cabal to jeopardize our future.

      Forget social security (I’ll never be able to draw and know it) and the stock market. My 401k is just the 4% my employer matches dollar for dollar and I don’t even count it for retirement as it will probably vaporize again. I just need time to keep working and fixing the farm. Who do I shoot for taking this away? What happened to the world my parents grew up in?

      • What? says:

        This is the world your parents grew up in. This world is the result of “unintended” consequences of the fiscal policies of our government, whether it be local, state, or national.

        Just as responsible for this mess, IMHO, is the press that was either too stupid, or too politically invested in the economic models that have “borrowed” their way into prosperity, without any attempt at reimbursement.

        The older generations, as a whole, are responsible for allowing this to continue. I don’t think that this could have been prevented from starting, but it could have been nipped in the bud. The press refuses to make an issue of the economic situation we now find ourselves in, and even if they did, they would do nothing to hold the policy-makers responsible for this mess. Just look at the acceptance of the talking points that the press exhibits. The journalists are afraid that their sources would dry up in a heartbeat if they really did their job.

        If the bankers are to blame for the mess we now find ourselves in, that’s OK with me. The press is a very close second.

        “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.” – Henry Ford

      • Kevin2 says:

        “What happened to the world my parents grew up in?”

        Too much power / wealth agglomerated into too few hands. This happened globally as villains were vanquished like NAZI Germany and the Japanese Empire along with the USSR leaving one nation as the indisputable Super Power. Domestically the Greatest Generation slept trusting their government would look out of their best interests. In the end the old saying applies, “Power corrupts and absolute power corrupts absolutely”.

      • FreeSlave says:

        Rebel in Idaho: “Who do I shoot for taking this away?”

        Consider the Libs. They’re a target-rich environment.

    • Kevin2 says:

      It helps when you have the musicians on payroll.

  15. Mr. Winky says:

    SAY ‘WHAT’ AGAIN? I DARE YOU…

    Remember GUN NUT Chief Kessler? He Claims He Was Working For The Feds As A Honeypot To Attract 2nd Amendment Groups, Patriot Groups!

    WHAT THE DUCK!

    wink wink

  16. Scout says:

    Sorry if this is a duplicate, my computer hiccuped.

    Charles Hugh Smith’s take on this…

    http://www.zerohedge.com/news/2014-12-04/oil-drenched-black-swan-part-4-head-fake-disruption-ahead

    For those interested in geopolitics and energy, read this gem.

    http://orientalreview.org/2014/12/02/cold-turkey-ankara-buckles-against-western-pressure-turns-to-russia/

    Overall geopolitical situation according to the “Golden Jackass.”

    http://investmentwatchblog.com/jim-willie-no-prisoners-in-the-global-money-war/

    “May you live in interesting times” – Ancient Chinese Proverb.

  17. Burt Gummer says:

    Elites may be manipulating the price to destroy the oil shale companies so when they bankrupt, the elites can byt them up for pennies on the dollar. Then watch how expensive the oil will become.

  18. Sinner says:

    A.Obama gets elected and starts writing Executive Orders empowering Him in a Crisis.
    B.Obama sets up a shadow government of Czars
    C.Obama gets caught running guns to Mexico to promote an anti-2nd Amendment agenda.
    D.The NSA starts spying on folks like us, while the IRS does damage to the Tea Party.
    E.Numerous Government emails/reports name Conservatives as terrorists.
    F. FBI/DHS start to buy millions of rounds of ammo
    G. Government Departments which have no need, start to militarize.
    H. Local some local police start to militarize
    I. Obama destroys the Constitution by starting to make his own laws. (Congress does zilch)
    J. Obama goes to Ferguson and tells the people who are organizing the protests to “Stay the course”.
    K. It comes out that many of the protests are organized by Communist Fronts. As they march, they chant “The only solution is a Communist revolution”!

    The third stage of a Marxist revolution is upon us. Ferguson will stay “hot”. Now the incident in NY will add fuel to the crisis.

    The Great Depression of 1929 was proceeded by a oil shock. If what economic numbers are as bad as reported, how much longer before another crash?

    crisis-Crisis-CRISIS! It’s the pathway towards martial law and complete Dictatorship. It all fits together.

    The MSM is either too frightened of have been promised high positions of power when the revolution occurs, to report it.

    • FreeSlave says:

      Sinner,

      A through K are bad, very bad. L through Z will be much worse.

      For many folks: Deer in Headlights look.

      Deer Sheeple: How did this happen? And who’s responsible? And what do I do now?

    • Frank Thoughts says:

      Anybody with a brain would not pay tax to support a bankrupt government that is borrowing and printing money to prop up their mates in the banks. The only way you can kill the system is to kill the economics. Once they realise nobody is earning anything and thus cannot pay the taxes, the bond markets will freak and jack the borrowing rates. That will pitch the UK into a massive crisis, and they will have to crash the pound to ‘ease’ the stress. This will make all imports massively expensive in a country that imports everything. Overnight, the British will be the poorest people in Western Europe (some would say they already are).

      There is no good outcome for the UK on this because the government has done nothing but lie about what is going on. The public trust has been obliterated.

  19. Mr. Winky says:

    Zog Amerika Home of White Guilt and Commie Land of Z.O.G.!

    I am a proud Jewish man said the Jewish man

    Í am a proud Mexican said the Mexican man

    I am a proud Black man said the Black man

    I am a proud Gay said the Gay Man

    I am a proud Transgender said the Transgender

    And…

    I am a proud White man said the Racist!

    wink wink

  20. The Old Coach says:

    I think that in broad terms he’s right for once. An awful lot of derivative contracts are executed by financial flunkies, (on both sides of the transaction), who don’t understand the risks involved. They’ve been given a set of marching order by the higher-ups, and they keep marching even when the music has already stopped. Without adequate supervision, (which they don’t get), they can put a large bank into a world of pain in just a few days or weeks when a major market move is taking place.

    Just such a fool brought down Baring’s Bank a few years ago. Remember?

  21. Ms.X says:

    The evil fraudsters need to go down but if they do they take everything down with them. That figures.

  22. KY Mom says:

    If you receive a gift card for Christmas, use it QUICKLY.

    HOLIDAY SHOPPING: BIG CHAIN STORES ON DEATH WATCH…

    Retailers with serious problems have low prospects for survival… Developing…

    SEARS to accelerate closings, shutter 235 stores…

    Drudge Report

    • The Old Coach says:

      Sears and Montgomery Ward were the two powerhouses of the mail-order business model, going back into the late 1800s when Railway Express was FedEx and UPS. They were to brick-and-mortar stores then what Amazon and evilBay are today. Sadly, neither one understood that, or they’d be right in there fighting. I’ll miss Craftsman tools, but little else.

  23. The authors of this site seem to be under the impression that every time something changes, that it will continue in that direction into some apocalyptic end. It’s called the normalcy bias, but these morons take it to a whole new level. Things go up and things go down. Relax, and live your lives.

    • The Old Coach says:

      Please don’t tar us all with the moron brush. Although I have to admit that the moron quotient has been rather high recently, there are some intelligent posters here like Sgt. Dale, Test, KY Mom, Durango Kidd, eppe, Kulafarmer, et.el. (I’m sure I’ve forgotten more than a few others – please don’t be offended.)

  24. AnneMarie says:

    Up here in Alberta oil is our biggest revenue generator, and our government has budgeted for oil priced at $90-$100 per barrel. The oil patch employs thousands of people here, a lot of them are Americans who live here. I’ve seen other booms-and-busts over the years, but this could be really devastating. There are bigger issues here than people paying less at the pump; there will be fewer schools built, cuts to programs, many layoffs. Low oil prices will mean BILLIONS in lost revenue for just this province.

    • Old Guy says:

      Our government is budgeted for oil priced at $90-$100 per barrel. Well boo hoo your government produces nothing. its employees & elected officials are all parasites. Your government will just have to tighten its belt and reduce services & spending. My household was budgeted for retail price of gas at $2 per gallon. When greedy oil companies raised their prices I had to reduce expenditures across the board. Just because some one or some government has a big wish list that’s no reason to think those things are a right or something deserved. Its unfair to the producing makers to always be Those billions in lost revenue the parasites who will lose that revenue had ought naught with producing that revenue in the first place. So its fine by me that the US citizens who where formerly charged exorbant prices prices for oil imported from Canada will receive a lower price. The exorbant prices untimately paid by the US consumers at the pump. For imported crude was the greatest exidious of wealth from their pockets and redistributed to other places . when its all said & done the US citizens must drive vehicles to do their business. and lower gas prices will have many more positive results than negative ones. One small example I know one rural county that has many miles of gravel roads. the high cost of fuel caused them to reduce the number of times thay graded the roads. they simply couldn’t afford the diesel fuel. as a result the public using the rods suffered. since they didn’t grade only half as much the laid of half of the grader drivers. the road budget slightly increase and less services. And this was just so some crude oil producer could become wealthier?

      • AnneMarie says:

        @Old Guy: What is your gripe? People who complain about the oil companies have no problem relying on said oil day after day. Just try living without it. And if you were in business, you would want to make a profit, so don’t deny it to the oil companies. And, just so you know, we do not have super-wealthy oil sheikhs here like in Saudi Arabia.

        Do you even know all that is involved in getting oil and natural gas to you and yours? Think of all the drilling and exploration, the huge refineries, thousands of jobs are involved here. So sorry that oil companies are successful and provide you with a comfortable lifestyle.

        And your comments are pretty sad coming from the United States whose economy is the pits and whose said economy will crash and take the rest of us down with them. The USA’s $18 trillion of debt and $115 trillion of unfunded liabilities and an empty Social Security pot is much more to be lamented than the big oil companies’ profits supposedly denying you a little bit of savings at the pump.

        • Old Guy says:

          My gripe is when we here in the USA pay through the nose for imported crude. that money leaves the coffers of the USA forever further impoverishing the country. Im not against anyone making a profit. Ive been self employed. Im not against T Boone Pickens or anyone that’s pumps US oil making money. I don’t like foriegn oil cartels fixing the price of crude. Cheaper fuel will greatly benefit the USA citizens. It will lower the cost of production. I know plenty about crude. I spent plenty of time at Eldorado Ark. That is a big oil patch& Murphy oil is located there. Ive actually pulled a tanker hauling the crude from the well to the refinery. Your durn right our economy is in the pits. Who in their right mind thinks with our bad economy we can continue to spent money importing over priced crude. If we buy only USA produced crude the money stays in the USA. The consumption of fuel decreases as the price rises. Last year they supposively ran out of LP. and they gouged the customers. So many customers got angry & over the summer installed wood stoves. Now the LP guys are crying because of reduced demand. There is a big difference between a fair profit and gouging and cheating. We have been being cheated ever since the fake gas shortage in the 1970,s. In the long run there will be many more good results from cheap fuel than bad ones. My paid for bulldozer hasn’t been run but very little ever since Obama got diesel over $4 per gallon. If diesel gets back to $2 a gallon. Ill start working it again. Put it back to work and provide some young person a job. Im to damm old to operate it myself more than a couple of days in a row. If the fuel remains cheap you will see every thing boom come spring.

  25. Anonymous says:

    Cue condor for his 12 paragraph rant about the joooooooooos in 24/48 hours after most have moved on to the next article.

  26. Ms.X says:

    The normalcy bias is underestimating what could take place in a disaster or other event. Those that refuse to look around and read between the lines are part of the herd. How anyone can say we are not living in a very unstable, unpredictable world is beyond me. People on this site have said for quite awhile to buy what you can now as prices will go up and up. Were they wrong? I have certainly come out smelling like a rose in some areas because the advice made sense to me. I’ve seen a lot of change and much is not good.

    • Nimrod Hunter says:

      Ms. X,
      I don’t think the people here have been wrong; we do see prices going up faster than TPTB will admit.

      However, have you heard it said that one should “fear the boom and not the bust”? For argument’s sake, let’s say that the banksters’ very big bubbles will make the crash much worse. Peter Schiff says as much in “The Real Crash”. Here’s a quote from an essay on the Mises Institute blog:

      “Many times deflation follows a period of central bank inflation. Deflation is part of the deleveraging process that is necessary following such an excessive policy by the central bank. As Austrian economists have always said, “fear the boom, not the bust.” Delaying the deflation by extending the bubble or creating new bubbles by printing more money only delays the adjustment making it much more painful.”

      So you are doing the right thing in the short term by buying grain and freeze-dried hamburger for your larder because prices are only going up. But consider that the crash they are building will probably dry up supply. There will likely be shortages of commodities and people will have fewer of the then-more-valuable dollars. Therefore, you may need to consider building a longer-term store of value, whether Mountain House food, silver, or ammunition just to make it through lean times.
      That store has a different purpose from the “wide-spot-in-the-pipeline” that you are saving as a hedge against inflation. The latter, longer-term store will be needed for survival after the Real Crash(tm). It should be physically placed in as many locations as you can reasonably expect to be able to reach.

      • The Old Coach says:

        Excellent post. Especially the understanding that the deflation event will disrupt supplies. Lacking liquidity, the manufacturers will be unable to make, shippers unable to ship, retailer unable to restock their stores, etc.

        BTW a good definition of “liquidity” = “Money that anyone will accept”. In normal times a supplier will ship goods “net 30 days”, i.e. on a promise to pay, (credit). When credit crashes, cash will be king, but nobody will have any cash, either. Supply pipelines freeze solid.

        • Nimrod says:

          Exactly, Old Coach. Remember last time, in 2008, when commercial paper dried up? Almost overnight, companies stopped issuing no-collateral securities to make payroll and keep the lights on. It was because nobody was buying. People forget that the liquidity crisis back then resulted in the bankruptcies of WaMu, Lehman Brothers, Circuit City, Sharper Image, The Chicago Tribune, and Frontier Airlines, and many others.

          This time it’s going to be so much worse when there are runs on not only banks but the whole shadow banking system. And what about when the value of all these arbitrary reference entities in the derivatives bubble crashes, either independently or because Citibank or Chase _induce_ an asset value crash so they can get their “insurers” to pay up? And then what happens when the counterparties can’t honor the derivatives contracts because they don’t have and never had the assets to cover the banks’ losses?

          I’m not an expert, but it sure looks like there’s a depression coming.

      • Ms.X says:

        Nimrod Hunter,
        I wrote what I did because a previous poster said the authors on this site were morons and they also defined normalcy bias wrong. I have a lot of my bases covered that you mentioned. For some reason I have not purchased any long-term food storage and if something happened tomorrow I would really regret it. My dad and my grandpa were very hard workers. They were operating engineers and in their free time would hunt and fish. I got my preparedness mindset from them. Thanks for your advice as it is appreciated.

  27. Frank Thoughts says:

    Watch how international organizations pay their staff. Right now, it is in dollars. If they start to switch, then you will know it is on. Even the BRICS bank is using dollars to capitalize. That tells you the dollar is still in the game.

    Basically, there are two things to watch to know if real shtf is on the way: 1) air routes: when air routes get shut down then you know a war is starting or something bad is going to happen: look at Ukraine or Syria, 2) the dollar and international organizations: int orgs run the world along with the big banks. If they make the switch to something else – SDRs, yuan – then it is on. Just pay attention to those two indicators: they are all you need.

  28. PhilipUpNorth says:

    Storage capacity in the US is only about 50% full at this point.
    When prices fall, storage fills up, as storage owners top off their tanks.
    Cheap oil means added demand as storage owners sock away oil for later sale at higher prices.
    As sales of cheap oil soar, the price will go back up. 😉
    http://optimalprediction.com/files/tokyo5-14-14.gif

  29. Anonymous says:

    So we all buy the guys book with our worthless peices of paper for $14.00 from Amazon which means that its still worthless paper and the funds keep paying the site paper and the writer paper etc etc and he then spends his paper and thus the whole thing still goes round and round and we stretch the collapse out a little longer. Are we not kicking the can down the road the same as the very PTB.??
    Wipe the world debt and start again, I see no other answer to this.
    Just to add in the UK now TPTB are not making enough on Income Tax as not enough people in work or fulltime work. It’s coming like a freight train from all sides.

  30. John Capstone says:

    It bothers me that non-traders write articles like this.

    It’s NOT the derivatives that are the danger. It’s the potential collapse of the bonds that financed it all.

 
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