Gold World News Flash |
- Fractional Reserve Banking – an Interview with Claudio Grass
- Zero Hedge: Strange pattern develops in dollar trading
- Michael Lebowitz: NIRP & Central Banks Driving People to Gold
- Central banks are already doing the unthinkable -- you just don't know it
- A Strange Pattern Emerges When Trading The US Dollar In 2016
- MarketWatch can report market-rigging rumor, so why not market-rigging fact?
- "Nobody Is Making Money" - Hedge Fund "VIP Basket" Obliterated, Plunges To Record Low
- Indian jewellers calls off strike; gold imports to rise
- Full Speech: Donald Trump HUGE Rally in Phoenix, AZ (3-19-16)
- Another False Oil Price Rally: Crossing A Boundary
- Russia Prepares For Armageddon - Withdraws From Syria
- Paul Craig Roberts on The Economy, Debt, Deflation, Interest Rate, Gold
- Gold And Silver - Shanghai Exchange Effect On Silver?
| Fractional Reserve Banking – an Interview with Claudio Grass Posted: 19 Mar 2016 10:00 PM PDT by Pater Tenebrarum, Acting-Man.com:
Bloomberg has numerous offices around the world, many of which appear to have quite an independent streak, at least that is our impression. Readers who occasionally watch clips from Bloomberg's Asia Edition are probably aware of this. One can often see in-depth interviews there with people who espouse views far from the mainstream and who are highly critical of governments and central banking, such as e.g. Dr. Marc Faber or Jim Rogers, to name two prominent ones. Logo of the Swiss "Vollgeld Initiative" – the text reads: "for crisis-proof money: money creation solely through the central bank!". The supporters of the initiative naively believe that the "profits" such a system would allegedly produce would be to "the sole benefit of citizens". This naïve statolatry is as amusing as it is pitiable.
What must be stressed here is the "in depth" qualification – there is a big difference between e.g. CNBC offering 60 seconds of sound bites from Dr. Faber and a 20 minute interview with presenters who are themselves willing to engage in a bit of critical thinking. We are mentioning this by way of introduction, because Kuzman Iliev and Vladimir Sirkarov of Bloomberg TV in Bulgaria seem to be part of this somewhat more off-the-beaten-path tradition as well. Recently they have done an interview with our friend Claudio Grass, the CEO of Global Gold in Switzerland on the topic of fractional reserve banking. Readers probably remember that there will soon be a referendum on fractional reserve banking in Switzerland, as the so-called "Vollgeld Initiative" (roughly translatable as "Fully Backed Money Initiative") has garnered the required number of signatures. The interesting thing about this initiative is that it is actually not led by free market supporters. On the contrary, the proposal comes from a bunch of socialists in close orbit around Karl Marx. It is therefore not surprising that the Swiss National Bank is far less opposed to the idea than it was to the gold initiative. The latter was painted in the starkest colors and said to be practically opening the doors to Hell, as it would actually have limited the SNB's interventionist powers somewhat (even if not really by as much as it made out).
Warming Up an old Central Planning Idea Loved by BureaucratsBy contrast to this, the Vollgeld Initiative is a warmed-up version of the so-called "Chicago Plan" originally proposed by the dreadful interventionist Irving Fisher and his colleagues, the forerunners of the Chicago monetarist school. As we have pointed out on a number of occasions in the past, largely thanks to Milton Friedman, the monetarists nowadays "define the borderline of respectable opinion on the political Right" to quote Hans-Hermann Hoppe. In other words, the ideas of the Chicago School represent the absolute maximum of support for the free market still considered acceptable by the establishment. |
| Zero Hedge: Strange pattern develops in dollar trading Posted: 19 Mar 2016 09:35 PM PDT 12:34a ET Sunday, March 20, 2016 Dear Friend of GATA and Gold: Zero Hedge takes note of what seems like a "strange pattern" in recent trading in the U.S. dollar, a pattern that has gotten stronger ever since the G-20 meeting in Shanghai -- the dollar's falling during U.S. trading hours. Zero Hedge says Bank of America's chief foreign exchange strategist, Athanasios Vamvakidis, believes that this pattern "would be consistent with emerging-market central bank interventions," presumably China selling dollars. Zero Hedge's commentary is headlined "A Strange Pattern Emerges When Trading the U.S. Dollar in 2016" and it's posted here: http://www.zerohedge.com/news/2016-03-19/strange-pattern-emerges-when-tr... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT We Are Amid the Biggest Financial Bubble in History; With GoldCore you can own allocated -- and most importantly -- segregated coins and bars in Switzerland, Singapore, and Hong Kong. Switzerland, Singapore, and Hong Kong remain extremely safe jurisdictions for storing bullion. Avoid exchange-traded funds and digital gold providers where you are a price taker. Ensure that you are outright legal owner of your bullion. If you do not own segregated bullion that you can visit, inspect, and take delivery of, you are exposed. Crucial guides to storage in Singapore and Switzerland can be read here: http://info.goldcore.com/essential-guide-to-storing-gold-in-singapore http://info.goldcore.com/essential-guide-to-storing-gold-in-switzerland GoldCore does not report transactions to any authority. Safety, privacy, and confidentiality are paramount when we are entrusted with storage of our clients' precious metals. Email the GoldCore team at info@goldcore.com or call our trading desk: UK: +44(0)203-086-9200. U.S.: +1-302-635-1160. International: +353(0)1-632-5010. Visit us at: http://www.goldcore.com Join GATA here: Mines and Money Asia http://asia.minesandmoney.com/ Mining Investment Asia http://www.mininginvestmentasia.com/ Support GATA by purchasing recordings of the proceedings of the 2014 New Orleans Investment Conference: https://jeffersoncompanies.com/landing/2014-av-powell Or by purchasing DVDs of GATA's London conference in August 2011 or GATA's Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: |
| Michael Lebowitz: NIRP & Central Banks Driving People to Gold Posted: 19 Mar 2016 09:30 PM PDT from WallStforMainSt: |
| Central banks are already doing the unthinkable -- you just don't know it Posted: 19 Mar 2016 07:58 PM PDT Unless, of course, you follow GATA. * * * Central Banks Are Already Doing the Unthinkable -- You Just Don't Know It By Mehreen Khan The lords of finance are losing their touch. Institutions which dragged the world from its worst depression since the early 20th century are finally seeing their magic desert them, if conventional wisdom is to be believed. Eight years on the from the Great Recession, voices as authoritative as the International Monetary Fund and the Bank of International Settlements -- dubbed the "central bank of central banks" -- have called time on the era of extraordinary monetary policy. ... Faced with political intransigence, central bankers are openly talking about the previously unthinkable: "helicopter money." ... Dispatch continues below ... ADVERTISEMENT We Are Amid the Biggest Financial Bubble in History; With GoldCore you can own allocated -- and most importantly -- segregated coins and bars in Switzerland, Singapore, and Hong Kong. Switzerland, Singapore, and Hong Kong remain extremely safe jurisdictions for storing bullion. Avoid exchange-traded funds and digital gold providers where you are a price taker. Ensure that you are outright legal owner of your bullion. If you do not own segregated bullion that you can visit, inspect, and take delivery of, you are exposed. Crucial guides to storage in Singapore and Switzerland can be read here: http://info.goldcore.com/essential-guide-to-storing-gold-in-singapore http://info.goldcore.com/essential-guide-to-storing-gold-in-switzerland GoldCore does not report transactions to any authority. Safety, privacy, and confidentiality are paramount when we are entrusted with storage of our clients' precious metals. Email the GoldCore team at info@goldcore.com or call our trading desk: UK: +44(0)203-086-9200. U.S.: +1-302-635-1160. International: +353(0)1-632-5010. Visit us at: http://www.goldcore.com A catch-all term, helicopter drops describe the process by which central banks can create money to transfer to the public or private sector to stimulate economic activity and spending. Long considered one of the last policymaking taboos, debate around the merits of helicopter money has gained traction in recent weeks. ECB chief Mario Draghi has refused to rule out the prospect saying only that the bank had not yet "discussed" such matters due to their legal and accounting complexity. This week, his chief economist Peter Praet, went further in hinting that helicopter drops were part of the ECB's toolbox. "All central banks can do it," said Praet. "You can issue currency and you distribute it to people. The question is: If and when is it opportune to make recourse to that sort of instrument." ... For some observers the next phase in extraordinary central bank action has already arrived, and it is Japan which is leading the way. The Bank of Japan's move to impose a three tiered deposit rate on banks this year can be seen as a covert attempt to transfer funds to the private sector, argues Eric Lonergan, economist and hedge fund manager. He notes that the BoJ's decision to exempt some reserves from the negative rate represents a transfer of cash to commercial lenders at rate of 0.1 percent. ... But central bank ingenuity -- however welcome -- raises separate concerns about the accountability of institutions whose independence is sacrosanct but where decision-making is often insulated from public view. Lord Adair Turner, a former chairman of the Financial Services Authority and one of the earliest advocates of helicopter money, calls for more transparency in a bid to finally smash the taboos around injecting money straight into the hands of consumers or governments. "I think it is more dangerous for central banks to be forever denying what they are doing," says Lord Turner. ... ... For the remainder of the report: http://www.telegraph.co.uk/business/2016/03/17/central-banks-are-already... Join GATA here: Mines and Money Asia http://asia.minesandmoney.com/ Mining Investment Asia http://www.mininginvestmentasia.com/ Support GATA by purchasing recordings of the proceedings of the 2014 New Orleans Investment Conference: https://jeffersoncompanies.com/landing/2014-av-powell Or by purchasing DVDs of GATA's London conference in August 2011 or GATA's Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: |
| A Strange Pattern Emerges When Trading The US Dollar In 2016 Posted: 19 Mar 2016 07:35 PM PDT One of the more surprising market developments of 2016 has been the violent obliteration of those who had taken part in the biggest consensus trade of 2015, namely long the USD. As the Fed finally admitted earlier this week, the US economy is sputtering and is woefully incapable of handling 4 rate hikes, or 3 for that matter. In fact, the Fed will be lucky to push through even one more rate hike without the Chinese Yuan collapsing and unleashing even more capital outflows (which precipitated the major market swoons in the summer of 2015 and early 2016) arguably the main topic during the alleged Shanghai G-20 "central bank accord." The result: this week saw the biggest two-day USD collapse against a basked of foreign currencies in years, and currently the DXY is trading at a lower level than a year ago. However, to say that the dollar selloff is a development would be incorrect: as Bank of America points out, Dollar selling has been going on for the past three months. But what is more curious is when during the day this selling has taken place. As Bank of America's FX quant strategist, Vadim Iaralov writes, "ahead of the Fed, the USD was already trending lower against 8 out of 9 G10 currency pairs with GBP being the only exception. The surprisingly-dovish Fed has only further accelerated the decline in the US dollar. The decline started in late January and has occurred during the critical local New York trading hours. The US hours downtrend looks likely to continue in the near future." What becomes immediately visible when one looks at the chart below is that all of the USD selling in 2016 has taken place during US hours.
This, according to BofA chief FX strategist, Athanasios Vamvakidis means that "the market moves would be consistent with EM central bank interventions." Perhaps: if true it would suggest that some very notable "EM" central banks (a polite euphemism for the PBOC) have been dumping the USD during US hours, which in turn would explain the coordinated attack against the USD - now with Fed participation - ever since the Shanghai G-20 meeting (although it would not explain why Japan or Europe would be willing to piggyback on this trade as while China wants a weaker dollar, Europe and Japan want the USD as strong as possible). Whatever the reason, and whoever may be causing this odd temporal divergence, thanks to BofA's observation an interesting arb emerges: buy the USD during Asia and UK hours, and sell during the US day, sit back and collect the profit. Then again, now that this trade has been exposed and every FX trader sure to jump on it, we would expect precisely the opposite to take place: dollar strength during US hours offset by weakness during the rest of the trading day. We will update readers when the temporal regime changes, which we are confident it will in the not too distant future. |
| MarketWatch can report market-rigging rumor, so why not market-rigging fact? Posted: 19 Mar 2016 07:21 PM PDT 10:20p ET Saturday, March 19, 2016 Dear Friend of GATA and Gold: MarketWatch tonight produces a true wonder of financial journalism. It's a story acknowledging a rumor about "conspiracy theory" involving central banks, a rumor that MarketWatch blithely declines to investigate by questioning any central banker. The rumor -- speculation, really -- is that, far from being a failure, the G-20 conference in Shanghai in February reached a secret agreement to reduce the U.S. dollar's value in the currency markets. It's plausible, but note how the MarketWatch report takes for granted that central banks are willing and able to rig markets in secret, how the report assumes that this is the natural order of things and not even worth questioning. ... Dispatch continues below ... 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To learn more, please visit: http://www.goldmoney.com/?gmrefcode=gata So why do MarketWatch and all other mainstream financial news organizations refuse to report that central banks long have been surreptitiously rigging the gold market as the prerequisite for all their market rigging, even though documentation and admissions of gold market rigging abound?: http://www.gata.org/node/14839 That is, if rumor and speculation are reportable, why not fact as well? The MarketWatch report is excerpted below. CHRIS POWELL, Secretary/Treasurer * * * Did Central Bankers Make a Secret Deal to Drive Markets? This Rumor Says Yes By Sarah Sjolin The dollar has taken a surprisingly big stumble in recent weeks, prompting traders to ask: What's really driving the selloff? The answer some are coming up with smacks of conspiracy theory. Rumors are flourishing that global policy makers made a secret deal at the G-20 meeting in Shanghai late last month. This "Shanghai Accord" to weaken the greenback was aimed at calming the financial markets, which had gotten off to an awful start to the new year, according to the chatter. No foreign-exchange pact was announced at the February meeting of central bankers and policy makers from the 20 largest economies. That hasn't stopped speculation that a plan of action was whipped up behind closed doors, as its supposed effects are beginning to emerge now: The greenback has shaved off more than 3 percent since the gathering, sparking a rally in stocks, emerging market assets, and commodities. The dollar has taken a surprisingly big stumble in recent weeks, prompting traders to ask: What's really driving the selloff? The answer some are coming up with smacks of conspiracy theory. Rumors are flourishing that global policy makers made a secret deal at the G-20 meeting in Shanghai late last month. This "Shanghai Accord" to weaken the greenback was aimed at calming the financial markets, which had gotten off to an awful start to the new year, according to the chatter. No foreign-exchange pact was announced at the February meeting of central bankers and policy makers from the 20 largest economies. That hasn't stopped speculation that a plan of action was whipped up behind closed doors, as its supposed effects are beginning to emerge now: The greenback has shaved off more than 3 percent since the gathering, sparking a rally in stocks, emerging market assets, and commodities. "To any conspiracy theorists, it's all become quite clear," said Chris Weston, chief market strategist at IG, in a note Friday. "There is a global coordinated central bank effort to weaken the [dollar] in play, which in turn has led to a massive de-risking in equity and credit markets." ... Plus, there is something of a precedent: The Plaza Accord. In 1985 the finance ministers from the U.S., France, West Germany, Japan, and the U.K. made a deal to jointly guide the dollar lower against the yen and the German mark. The action was meant to help jump-start the U.S. economy by reversing an extended run-up by the greenback. ... Joachim Fels, global economic adviser at bond-trading firm PIMCO, told Bloomberg he also suspects central bankers have coordinated their actions to prevent the dollar from growing stronger. "There seems to be some kind of tacit Shanghai Accord in place," he told the news outlet. "The agreement is to roughly stabilize the dollar versus the major currencies through appropriate monetary policy action, not through intervention." ... ... For the remainder of the report: http://www.marketwatch.com/story/did-central-bankers-make-a-secret-deal-... Join GATA here: Mines and Money Asia http://asia.minesandmoney.com/ Mining Investment Asia http://www.mininginvestmentasia.com/ Support GATA by purchasing recordings of the proceedings of the 2014 New Orleans Investment Conference: https://jeffersoncompanies.com/landing/2014-av-powell Or by purchasing DVDs of GATA's London conference in August 2011 or GATA's Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: |
| "Nobody Is Making Money" - Hedge Fund "VIP Basket" Obliterated, Plunges To Record Low Posted: 19 Mar 2016 07:08 PM PDT Exactly one month ago, when we learned that Goldman was looking to package its Hedge Fund VIP basket of stocks into an ETF we said, half jokingly, that we have discovered a "guaranteed way to make money: Short Goldman's "Hedge Fund VIP" ETF", adding that "with 5 of their Top 6 trades for 2016 already stopped out, and their recent heavy losses from swing-trading Gold, one might question the demand for an ETF that tracks Goldman Sachs' hedge fund research tips, but, as Bloomberg reports, David Kostin's "Hedge Fund Trend Monitor" report - tracking the 50 companies that matter most to hedge funds - is about to be launched." But more importantly we said that given the dismal performance, "one can only imagine that creating this ETF enables Goldman Sachs' clients to offload huge blocks of their positions into a muppet-friendly investment vehicle that every Tom, Dick, and Day-Trader will scoop up. For now the ETF has not been assigned a ticker symbol - may we suggest 'LOSE' or 'MUPT' or 'FUKT'?" And then, just for good measure, we added that "this being Goldman - the company which brought you the Made for Shorting Abacus CDO - the guaranteed way to make money with this ETF would be to short it." It wasn't a joke. While already a month ago this Hedge Fund VIP basket was imploding as we showed at the time...
... since then things have gone from terrible to absolutely abysmal, and as of this moment the GSTHHVIP index which tracks the performance of these "most popular" among hedge fund stocks, has never been lower despite the dramatic rebound in the broad market!
So yes, anyone who shorted this index one month ago as we suggested, has made money. Unfortunately for Goldman's hedge fund clients, the "basket" is still not available in ETF format, which means hedge funds are forced to pass these hot potato stocks among each other. It also explains why while the most popular hedge fund stock basket has never done worse, its alternative, the least concentrated basket of stocks has never done better.
In other words, and as we also said last time around, the only winning trade is to do precisely the opposite of what the hedge funds are doing, none of whom have any clue as to what is going in this market anymore. For those curious which stocks make up Goldman's "hedge fund VIP basket", so they can avoid them of course, here they are again.
Unfortunately for hedge funds it is too late to unwind exposure at this point, which is why despite the market rebounding to just modestly green on the year, most hedge funds remain deep in the red, because as Kostin puts it "the violent factor reversals have offset most efforts to generate alpha." More:
Visually:
Said simply, what the above means is that in their scramble to save the stock market, central banks who succeeded in generated the latest artificial rebound across global stock markets, have once again crushed hedge funds, whose hedges were only just starting to generate alpha before they were all eviscerated in the latest unprecedented short squeeze/stock buyback ramp. All of this goes back to a point we made back in 2011: why pay hedge funds 2 and 20 for the "privilege" of underperforming the market? After all, the "market" is so manipulated now, it can't withstand even a modest 10% correction before global, coordinated central bank intervention is unleashed as has been the case over the past month. In this environment, why hedge? Yes, short hedges may work for a while, but then it is these most shorted stocks that will soar and crush the most hedge funds in the process. Finally, if hedging the loss of central bank credibility, one can not possibly do that using stocks as an unwind of the "central-bank model" by implication means the total obliteration of every form of existing capital markets; in fact any asset that has counterparty risk would be annihilated. As such, the only assets worth holding on to would be those with zero counterparty risk... such as silly pet rocks, which for some odd reason have preserved their value for over 5,000 years... |
| Indian jewellers calls off strike; gold imports to rise Posted: 19 Mar 2016 06:07 PM PDT By Rajendra Jadhav Indian jewellers called off a 19-day strike late today after the government assured them they will not be "harassed" by the excise department in collecting a new tax, the head of a trade body told Reuters. Jewellers from the world's second-biggest gold consumer went on an indefinite strike from the start of March after government reintroduced a 1-percent excise duty on gold jewellery after four years. "We have called off the strike. From tomorrow jewellers will open shops," said Mohit Kamboj, president of India Bullion and Jewellers Association. "The excise duty will remain there, but the government has assured us that officials from excise department will not harass jewellers," he said. ... ... For the remainder of the report: http://www.reuters.com/article/india-gold-strike-idUSL3N16R08G ADVERTISEMENT Buy precious metals free of value-added tax throughout Europe Europe Silver Bullion is a fast-growing dealer sourcing its products from renowned mints, refiners, and distributors. Because of a legal loophole that will close soon, you can acquire the world's most popular bullion coins free of value-added tax throughout the European Union. You can collect your order in person at our headquarters in Tallinn, Estonia, or have it delivered in any of the 28 EU countries. Europe Silver Bullion is owned and operated by North American and European experts in selling, storing, and transporting precious metals. We have an extensive product inventory of silver, gold, platinum, and palladium, and our network spans the world. Visit us at www.europesilverbullion.com. Join GATA here: Mines and Money Asia http://asia.minesandmoney.com/ Mining Investment Asia http://www.mininginvestmentasia.com/ Support GATA by purchasing DVDs of GATA's London conference in August 2011 or GATA's Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: |
| Full Speech: Donald Trump HUGE Rally in Phoenix, AZ (3-19-16) Posted: 19 Mar 2016 05:18 PM PDT Saturday, March 19, 2016: GOP Presidential candidate Donald Trump held a campaign rally in Phoenix, AZ at Fountain Park. Full Speech: Donald Trump HUGE Rally in Phoenix, AZ (3-19-16) The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries ,... [[ This is a content summary only. Visit http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]]  |
| Another False Oil Price Rally: Crossing A Boundary Posted: 19 Mar 2016 04:47 PM PDT Authored by Art Berman Another False Oil Price Rally: Crossing A Boundary The oil-price rally that began in mid-February will almost certainly collapse. It is similar to the false March-June 2015 rally. In both cases, prices increased largely because of sentiment. As in the earlier rally, current storage volumes are too large and demand is too weak to sustain higher prices for long. WTI prices have increased 47% over the past 20 days from $26.21 in mid-February to $38.50 last week (Figure 1).  Figure 1. NYMEX WTI futures prices & OVX oil-price volatility, 2015-2016. Source: EIA, CBOE, Bloomberg and Labyrinth Consulting Services, Inc. (click image to enlarge).
A year ago, WTI rose 41% in 35 days from $43 to almost $61 per barrel. Like today, analysts then believed that a bottom had been reached. Prices stayed around $60 for 37 days before falling to a new bottom of $38 per barrel in late August. Much lower bottoms would be found after that all the way down to almost $26 per barrel at the beginning of the present rally. Higher prices were unsustainable a year ago partly because crude oil inventories were more than 100 mmb (million barrels) above the 5-year average (Figure 2). Current inventory levels are 50 mmb higher than during the false rally of 2015 and are they still increasing.  Figure 2. U.S. crude oil stocks. Source: EIA and Labyrinth Consulting Services, Inc. (click image to enlarge).
International stocks reflect a similar picture. OECD inventories are at 3.1 billion barrels of liquids, 431 mmb more than the 2010-2014 average and 359 mmb above the 2015 level. Approximately one-third of OECD stocks are U.S. (1.35 billion barrels of liquids). For 2015, U.S. liquids consumption shows a negative correlation with crude oil storage volumes (Figure 3). During the 2015 false price rally, consumption began to increase in April and May following the lowest WTI oil prices since March 2009–response lags cause often by several months. First quarter 2015 prices averaged $47.54 compared to an average price of more than $99 per barrel from November 2010 through September 2014 (44 months).  Figure 3. U.S. liquids consumption, crude oil stocks and WTI price. Source: EIA, Bloomberg and Labyrinth Consulting Services, Inc. (click image to enlarge).
This coincided with the onset of declining U.S. crude oil production after April 2015 (Figure 4).  Figure 4. U.S. crude oil production and forecast. Source: EIA March 2016 STEO and Labyrinth Consulting Services, Inc. (click image to enlarge).
Net withdrawals from storage continued until consumption fell in July in response to higher oil prices that climbed to $60 per barrel in June. Production increased because of higher prices from July through November before resuming its decline after prices fell again, this time, far below previous lows. This complex sequence of market responses shows how sensitive the current market is to relatively small changes in price, production and consumption. Most importantly, it suggests that a price variation of only $15 per barrel was enough to depress consumption a year ago. That has profound implications for the present price rally that is now $12 per barrel above its baseline and has already increased by a greater percentage than the 2015 rally. Why Storage Matters Although most analysts pay attention to storage volumes, market balance is generally thought of as a simple balance between supply and demand. But U.S. production is difficult to measure with confidence until several months after-the-fact and the EIA reports crude oil production but not supply. Likewise, EIA reports consumption but not demand. That's because supply and demand can only be determined by evaluating stock changes and how storage modulates production and consumption. Production plus available storage equals supply. In today's over-supplied market, consumption plus withdrawals from storage equals demand. Since April, U.S. production has declined 583,000 barrels of crude oil per day. With 163 mmb of crude oil in storage, that net production decline could be eliminated and April levels of production maintained by storage withdrawals for more than 9 months. That is why storage volumes must fall probably into the 2011-2014 range before a meaningful price rally can be maintained. That assumes that demand can tolerate those higher prices. Oil is accumulating in storage because of low demand and low prices. It makes more sense to pay the monthly storage cost (~0.65 per barrel) and sell the oil forward with ongoing futures contracts until the spot price increases and, hopefully, demand also increases. Many people think that the strip of futures contract prices are a reasonable guide to future prices. They are not. Futures prices mostly reflect the supply and demand of futures contracts.(1) That in no way discounts the profound effect that futures trading has on oil prices. The WTI futures market is one of the biggest gambling casinos in the world. Bets are often made on sentiment that in turn is related to world events. Price fluctuations that are based primarily on sentiment, however, have little chance of lasting longer than the sentiment or related events that produced them. Crossing A Boundary The current oil-price rally is based partly on a weaker U.S. dollar but mostly on hope that OPEC and Russia will cut production. For now, that is not even on the table. Rather, a somewhat meaningless production freeze is possible. Some rightfully believe that a dialogue about a production freeze may lead to a production cut some time in the relatively near future. I agree with that but it is a rather empty reason for oil prices to increase by almost 50%. Traders are "following the tape," meaning they have covered previous short bets and are following the momentum testing increasingly higher price thresholds as long as someone is willing to take the other side of the bet. That's the way the market works. It would not surprise me if this price rally lasts awhile like the 2015 rally. I am interested in the requisite conditions that would allow a meaningful and sustainable price rebound. Early in the 2014 oil-price collapse, I thought it was a relatively straight-forward matter of reducing production so that the market could balance. As low prices persisted, I recognized that a boundary had been crossed and that somehow, the principles that seemed to govern oil markets before September 2014 no longer applied in the same ways. I now believe that the world economy has been substantially weakened and injured by debt following the 2008 Financial Collapse and the easy-credit monetary policies that followed. At some time in the not-too-distant future, the relentless depletion of legacy production and underinvestment in current exploration and production will result in much higher oil prices. The global economy will have to be much stronger to adjust to that. The investigation I have presented here about the possible similarities between the present increase in oil prices and the false price rally of March-June 2015 reinforces my sense that a return to higher oil prices is not at all straight-forward. Oil markets are a leading indicator for the broader economy because the economy runs mostly on energy and not so much on money. (2) It seems that price and demand may be range-limited. Small changes in demand move prices up and down until those price changes feed back to changes in demand. Production has been like a machine working tirelessly in the background as easy money has kept it moving regardless of low prices and the absence of profit. That is how distorted the market has become. World production now appears to be falling and that is certainly a necessary step in the right direction toward market balance. I anticipate an OPEC plus Russia production cut in 2016 and that will unquestionably move the market to some kind of balance. I suspect, however, that the new balance may be one in which prices and demand both remain lower than on the other side of the price-collapse boundary that was crossed in 2014. _______________________________________________________________________ (1) J.M. Bodell (personal communication). Mike has taught me most of what I know about storage and comparative inventories. |
| Russia Prepares For Armageddon - Withdraws From Syria Posted: 19 Mar 2016 02:30 PM PDT The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free investigative journalists , researchers , Whistelblowers , truthers and many more [[ This is a content summary only. Visit http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]]  |
| Paul Craig Roberts on The Economy, Debt, Deflation, Interest Rate, Gold Posted: 19 Mar 2016 12:40 PM PDT Paul Craig Roberts discusses economy, debt, deflation, interest rate, gold The Financial Armageddon Economic Collapse Blog tracks trends and forecasts , futurists , visionaries , free investigative journalists , researchers , Whistelblowers , truthers and many more [[ This is a content summary only. Visit http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]]  |
| Gold And Silver - Shanghai Exchange Effect On Silver? Posted: 19 Mar 2016 12:09 PM PDT The trend for silver remains down, for now, but there is something going on within this market that does not confirm a change in trend but "appears" to be indicting a one. It has been acknowledged that the fundamentals for both silver and gold are overwhelmingly positive, yet price has not responded. More accurately, price has not been allowed to respond by the globalist's manipulation via their central banks, in general, and specifically by the both military and money might of the also manipulated United States, the federal corporate government version. |
The Swiss "Vollgeld" Initiative Revisited
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