Tag: finance

By EconMatters

We discuss the real reasons Financial Markets have so mispriced the potential failure and market risks associated with a Trump Presidency in this video. Hint: Follow the Central Bank Asset Purchases Programs!

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Submitted by Nick Giambruno via CaseyResearch.com,

The establishment is setting up Donald Trump.

The mainstream media hates him. Hollywood hates him. The “Intellectual Yet Idiot” academia class hates him.

The CIA hates him. So does the rest of the Deep State, or the permanently entrenched “national security” bureaucracy.

They did everything possible to stop Trump from taking office. None of it worked. They fired all of their bullets, but he still wouldn’t go down.

Of course, the Deep State could still try to assassinate Trump. It’s obvious the possibility has crossed his mind. He’s taken the unusual step of supplementing his Secret Service protection with loyal private security.

The Deep State’s next move is to pin the coming stock market collapse on Trump. When people think “Greater Depression,” they’ll think “Donald Trump.”

The economy has been on life support since the 2008 financial crisis. The Fed has pumped it up with unprecedented amounts of “stimulus.” This has created enormous distortions and misallocations of capital that need to be flushed.

Think of the trillions of dollars in money printing programs—euphemistically called quantitative easing (QE) 1, 2, and 3.

Meanwhile, with zero and even negative interest rates in many countries, rates are the lowest they’ve been in 5,000 years of recorded human history.

This is not hyperbole. We’re really in uncharted territory. (Interest rates were never lower than 6% in ancient Greece, and ranged from 4% to over 12% in ancient Rome.)

The too-big-to-fail banks are even bigger than they were in 2008. They have more derivatives, and they’re much more dangerous.

If the Deep State wants to trigger a stock market collapse on par with 1929, it just has to pull the plug on the extraordinary life support measures it’s used since the last crisis.

It’s already baked in the cake. It’s just a matter of when they decide to trigger the controlled demolition.

Donald Trump is the perfect fall guy. And there are signs the Deep State is already starting to get its revenge.

The most important variable to watch is the Federal Reserve—the quintessential establishment institution.

Source: Ben Garrison

Even though most politicians, economists, and pundits in the mainstream media won’t admit it, central banks exist to help governments finance themselves, at the expense of the average man. It’s the hidden, but real, reason they exist.

The Fed accommodated Obama—effectively financing his regime’s deficits by creating new currency units. I doubt they will do Trump the same favor. And Trump will likely run up enormous deficits. Don’t forget about the $1 trillion in stimulus spending he has planned.

If the Fed doesn’t gobble up the debt used to finance Trump’s spending, it will only work to push up interest rates.

Interest Rates

Manipulating interest rates to near 5,000-year lows is a crucial part of the life support system. Now the Fed is set to pull the plug and leave Trump holding the bag.

In December 2015 the Fed raised interest rates for the first time in almost a decade, from 0% to a mere 0.25%.

The Fed kept rates there until last month, when it raised them to 0.50%. It also announced it would accelerate rate hikes throughout 2017—three in total.

There’s a good chance the Fed will announce these rate hikes during the eight Federal Open Market Committee (FOMC) meetings it has scheduled in 2017. I think some of these rate hikes will be much bigger than the 0.25% most expect. They could pull a series of 0.50% rate hikes… or go even bigger.

Anything greater than the normal 0.25% tempo would shock the market—and seem designed to hurt Trump.

The establishment will get its revenge on Trump. The Federal Reserve is its weapon of choice.

Trump seems aware of the situation. He recently said, “They’re keeping the rates down so that everything else doesn’t go down.”

He’s also said that “We have a very false economy” and the stock market is a “big, fat, ugly bubble.”

During the campaign, Trump called Fed Chair Janet Yellen “highly political.” He said the Fed should raise interest rates but won’t because of “political reasons.” (Raising rates before the election would have hurt Hillary Clinton.)

The Media

The mainstream media is another variable to watch.

Paul Krugman, a New York Times economist—or, more accurately, witch doctor economist—has come out against Trump’s $1 trillion infrastructure stimulus.

It’s bizarre because Krugman, a die-hard Keynesian, had previously never seen a “stimulus” program he didn’t like. Once, he even advocated faking a space alien invasion to stimulate the economy. It shows that Krugman is not only a fool, but a hypocrite.

This is a clue.

I bet the rest of the mainstream financial media—CNBC, Bloomberg, The Economist, etc.—will morph from bullish cheerleaders into pessimistic doom-and-gloomers after Trump takes office.

Don’t expect them to find any “green shoots” after the market tanks on Trump’s watch.

All this is why what happens after Trump’s inauguration could change everything… in sudden, unexpected ways.

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In one of the first international phone conversations by the new US president since his inauguration, Israel PM Netanyahu is set to call Trump on Sunday afternoon: the civil war in Syria, the Palestinians and the nuclear agreement with Iran will be on the agenda Netanyahu told his weekly Cabinet meeting.

PM Netanyahu: This evening there will be a telephone conversation between President Trump and myself.

— PM of Israel (@IsraeliPM) January 22, 2017

The Prime Minister said that a top concern for Israel was the nuclear threat still posed by Iran under the terms of the landmark 2015 nuclear agreement. “The supreme goal of the state of Israel continues to be stopping the Iranian threat and stopping the threat from the bad nuclear deal signed with Iran,” he said

There are many issues between us including the Israeli-Palestinian issue, the situation in Syria and the Iranian threat.

— PM of Israel (@IsraeliPM) January 22, 2017

Stopping the Iranian threat, and the threat reflected in the bad nuclear agreement with Iran, continues to be a supreme goal of Israel

— PM of Israel (@IsraeliPM) January 22, 2017

The Prime Minister said that a top concern for Israel was the nuclear threat still posed by Iran under the terms of the landmark 2015 nuclear agreement. “The supreme goal of the state of Israel continues to be stopping the Iranian threat and stopping the threat from the bad nuclear deal signed with Iran,” he said.

Netanyahu has been a fierce opponent of the nuclear pact, called the Joint Comprehensive Plan of Action, negotiated between Iran and the P5+1 group of world powers — the United States, the UK, France, China and Russia plus Germany. Under the deal, Iran must reduce its uranium stockpile by roughly 98%, phase out its centrifuges over the next 15 years, limit research activities, allow heightened inspections and ship spent fuel outside of the country.

In return, many of the international sanctions imposed on Iran were lifted. Trump has repeatedly denounced the nuclear deal calling it “incompetently negotiated” and pledged to renegotiate its terms.

Sensing that Trump could indeed end the Nuclear deal to appease Netanyahu, on Saturday the head of the Atomic Energy Organization of Iran, Ali Akbar Salehi, told CBC in that “we can very easily snap back and go back not only to where we were, but a much higher position technologically speaking.” He continued the threat, added that “I don’t want to see that day. I don’t want to make a decision in that course, but we are prepared”: Salehi

Iran has never intended to manufacture missiles that would go as far as the U.S., Salehi says in reaction to post on White House website saying new U.S. administration intends to develop missile defense system “to protect against missile-based attacks from states like Iran and North Korea”

But while a discussion of Iran is assured, even if a treaty decision by Trump is unlikely any time seen, an unexpected twist was reported by Israel Channel 2 which said that the “President of the United States Donald Trump will announce tomorrow move of the U.S. embassy to Jerusalem”

BREAKING: President of the United States Donald Trump will announce tomorrow move of the U.S. embassy to Jerusalem – (Channel 2).

— Israel News Feed (@IsraelHatzolah) January 22, 2017

Channel 2 cited an anonymous source as saying a member of the Trump administration would announce the highly controversial move on the President’s first full working day in office. The news channel said it had received no confirmation of the claim and there has been no public statement on the move since Friday’s inauguration of the new US President.

As the Independent notes, relocating the US embassy to Jerusalem would represent a major break with US policy. Donald Trump has said repeatedly that he intends to relocate the US embassy to Jerusalem, despite warnings the move would violate international law and destroy the peace process.  Earlier in January, US officials and Israeli Foreign Ministry sources said the incoming US ambassador to Israel could be based in Jerusalem, while the official embassy building remains in Tel Aviv.

Relocating the embassy to Jerusalem would be seen as a provocative move by Mr Trump’s critics as the city is claimed by both the Israelis and Palestinians as their capital. Israel annexed east Jerusalem in the 1967 Six Day War. The move has not been recognised by the international community.

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Submitted by Sarah Cronin via TheAntiMedia.org,

Indiana passed a bill on Wednesday that authorizes police officers to shut down highway protesting “by any means necessary.” S.B. 285, as it is known, obliges a public official to dispatch all available officers within 15 minutes of discovering any assembly of 10 or more people who are obstructing vehicle traffic.

The bill then authorizes the responding officers to clear roads “by any means necessary.”

Critics are calling it the “Block Traffic and You Die” bill, an apt name for a bill that has co-opted the phrase “any means necessary,” used famously in speech delivered by Malcolm X during the Civil Rights movement, turning it into a threat against government dissent (with no apparent awareness of the irony).

S.B. 285 is among a collection of increasingly hostile ‘anti-obstruction’ laws that have been quietly submitted in states around the nation over the past few months. A report by The Intercept published Wednesday tracked five such anti-protest laws introduced by Republican lawmakers in different states, four of which are currently pending.

One of the most disturbing among them is House Bill N. 1203, a bill introduced earlier this month by North Dakota lawmaker Keith Kempenich in response to the Dakota Access Pipeline Protests. The bill would exempt motorists who hit demonstrators with their cars from any liability in cases where the victims were “obstructing vehicular traffic on a public road, street, or highway.” This twisted take on protest criminalization comes short of condoning manslaughter as a viable means of crowd control.

Also this month, Minnesota State Representative Kathy Lohmer led the effort on submitting H.F. 322, a bill that would re-classify obstructing highway traffic from a misdemeanor to a “gross misdemeanor” and would authorize government units to sue protesters for “public safety response costs related to unlawful assemblies.”

The proposed legislation is strikingly reminiscent of Washington State Senator Eric Ericksen’s proposal to punish protesters as ‘economic terrorists,’ which Anti-Media first reported on in November.

All of the proposed laws share a common trait in that they were all adopted in response to a major protest event in that state. H.F. 322 was submitted shortly after a judge dismissed the riot charges against protesters who took to the St. Paul Interstate last July in a demonstration against the police shooting of Philando Castille. Ericksen’s “economic terrorism” bill announcement came just days after anti-fracking protesters blocked railroad tracks in Olympia, Washington. DAPL protests inspired both the Indiana and North Dakota bills.

These retroactive responses on behalf of Republican state lawmakers are also seen as preemptive strikes against the threat of increased protests during the Trump presidency.

As ACLU staff attorney Lee Rowland expressed in an interview with The Intercept, these so-called ‘obstruction bills’ are but thinly disguised efforts to squash any government dissent.

“A law that would allow the state to charge a protester $10,000 for stepping in the wrong place, or encourage a driver to get away with manslaughter because the victim was protesting, is about one thing: chilling protest,” Rowland said.

Growing tension between government officials and protesters is expected to come to a culmination on Inauguration Day in D.C., where there will already be many barriers in place to limit demonstrations.

First and foremost is the Federal Grounds and Buildings Improvement Act of 2011, known as H.R 347.

H.R.-347 is a revision of a 1971 federal trespassing law that made it a crime to “willfully and knowingly” remain in an area under Secret Security protection. H.R. 347 removes the word “willingly,” a legal technicality that effectively lowers the bar on the mental state required to be found guilty under the law.

As explained by the American Civil Liberties Union:

“Under the original language of the law, you had to act ‘willfully and knowingly’ when committing the crime. In short, you had to know your conduct was illegal. Under H.R. 347, you will simply need to act ‘knowingly,’ which here would mean that you know you’re in a restricted area, but not necessarily that you’re committing a crime.”

Under current federal law, protesting in proximity to an elected official under the protection of the Secret Service, which includes President Trump, is a crime punishable by fine and up to ten years in jail.

Protesting during Trump’s inauguration comes with additional complications as the National Park Service reserves a large portion of the inaugural parade route along Pennsylvania Ave and in Freedom Plaza for ticket sales under the exclusive discretion of Trump’s Presidential Inaugural Committee (PIC). This means the PIC can refuse to allow protesters along the route.

An activist group called Act Now to Stop War and End Racism (Answer) has been engaged in a  legal battle with the National Park Service since 2005, arguing the privatization of the Inauguration is an attempt to “sanitize” the streets of dissent.

While the National Park Service has been controversially setting aside tickets for the PIC since 1980, the issue garnered more attention this year when it was discovered that the sidewalk in front of the Trump International Hotel, a significant site for protesters, would be a part of PIC’s ticket-only area.

Adding another level of bureaucracy, the Washington Post reported the hotel and plaza in front are actually under the control of Trump’s real estate agency, meaning protesters would have to literally ‘ask permission’ to remain in the space.

As the week comes to an end, it becomes apparent that dissent is being criminalized not only nationwide but on multiple fronts. Increased regulations are appearing that limit the public spaces that can be lawfully occupied in protest. Meanwhile, legislation is also being introduced to increase the negative consequences for newly unlawful protests. Should more states follow suit with Indiana, demonstrators will soon find themselves paradoxically protesting for their right to protest at all.

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Improving the (Mole) Economy One Broken Window at a Time

By

Cognitive Dissonance

 

 

We have a mole. Correction…we have moles.

And judging by the extensive tunnel network spread across the nearly two acres of grass area I cut (I use the term ‘grass’ loosely because they’re actually closely cut weed fields) I would estimate we have at least two moles and possibly 6 million.

Give or take a few.

I noticed the mole infestation was getting worse just as the late fall days turned cold and I was in the process of winterizing all our power equipment. In addition to changing the oil, cleaning off the dirt and crud, touching up the rusty areas with paint and running stabilized gasoline through the fuel systems, I like to move the most used pieces of equipment into a central area where they can huddle together during the winter months and swap stupid human stories amongst themselves.

You’ve just got to hear the one about Mrs. Cog and the Husky tiller.

It was during equipment moving day when I first noticed the significantly increased mole activity. It became particularly obvious when the right rear wheel of one of my tractors dropped into the abyss and up to its axle, nearly throwing me out of the saddle in the process. Have you ever tried climbing off a tractor poised at a sharp angle while on the side of a steep hill? There is no graceful way to exit, particularly when you are 6’ 4’ and on the wrong side of 250 pounds.

I must have hit a den of thieves because the activity just under the surface was frantic and just a little bit frightening. I may be north of 60 years of age and just as north of senile, but as far as I remember the ground is not supposed to move like that. And yet here it was doing exactly that. Fumbling for the glasses in my coat pocket (why wear glasses for a crystal clear view of reality when slightly…err…very blurred is so much more comforting) I quickly surveyed the scene.

There were mole tunnels EVERYWHERE, all intricately interconnected into a mass of humps and bumps that would put a capital city planner, so proud of his/her geometric street grid pattern, to shame. There is no such thing as straight lines in Moleville.

Lacking the time, nor the inclination, to do anything about the moles at that precise moment, I levered the tractor out of the sinkhole and carried on with my winterizing business. There were tractors to keep before I sleep. And tillers, lawn mowers, chain saws, generators, pumps, log splitters, carts and wagons.

Within a week it turned cold. Very cold in fact, at least for these parts. As in low teens and single digits cold, with a few visits below zero just to remind this mere mortal who’s really in charge of the outdoor thermostat.

Hint: it ain’t me.

During my thrice a day trips to feed the bottomless pit called our outdoor wood furnace, I surveyed the land to assess the mole activity and was smug in the knowledge the resident mole population had beat a hasty retreat from the cold. Out of sight, out of mind is how I like my mole problems. Heck, if the United States of America can kick the can down the road with regard to every socioeconomic problem on the books, and several dozen well off the books, who am I to think it might not work for me?

Of course the infestation had not disappeared, but had simply dug itself even deeper.

Alas the cold spell receded, the snow turned to rain and my attention turned to things other than moles. Over the holidays Mrs. Cog and I got really really sick and became house bound for nearly two weeks. Essentially we took turns doctoring each other while continuing to feed the Heatmaster.

At first we diagnosed our malady as the return of the black plague and posted notices on all the doors and windows to turn away those not yet infected. But towards the end I managed to drive myself down to the local store to purchase medical supplies and discovered the locals talking about the entire one horse town being sick with some god awful yuck that lasted two or three weeks.

It was then we christened our illness the Bubba Bug. Who says you can’t laugh while you’re dying?

Today was the first day in nearly three weeks I managed to summon the strength to actually walk the outbuildings and nearby weed fields. Guess what I found?

Moles. Lots of moles. Gazillions of moles.

Actually, to be precise I saw no moles, just mole ‘sign’ in the form of surface tunnels crisscrossing the land as far as the eye could see. They’re back and with a vengeance. Naturally my mind immediately turned to mole murder and the various methods I could employ to accomplish the molicide. But then another thought crossed my mind.

With Trump just a few days from being crowned King, I have been thinking about his economic stimulus plans, particularly his stated interest in rapidly increasing investment in public infrastructure projects. It suddenly occurred to me the moles had already heavily invested in their own infrastructure projects and the local mole economy was certain to enter a recession, if not an outright depression, when the inevitable molenomic slowdown kicked in.

Instantly my mind turned to that economic genius (sarc) Paul Krugman, and his brilliant (double sarc) ‘alien invasion’ and ‘broken windows’ theories. In a flash I realized I could introduce Paul Krugman to the moles by raining a ‘natural’ disaster upon Moleville by the resident ‘alien’, little ole me. I was certain I would soon be awarded the Moleville Medal of Freedom for my heroic efforts.

 

Krugman's own personal broken window. He refuses to fix it because his insurance deductible is too high, thereby making Krugman personally responsible for preventing the US economy from fully recovering from the 2008 Great Financial Crisis. The man simply refuses to drink his own toxic Kool-Aid.

 

Just before the first snow ‘we’ (meaning ‘I’ while dragging Mrs. Cog by her pigtails) had purchased a new garden tractor. You know, to stimulate the economy. It was our patriotic duty. But ‘we’ (meaning ‘I’) have not had much of a chance to break her in (the tractor, not Mrs. Cog) before the cold and snow arrived. In an attempt to smash thousands of windows with one measly stone, or tractor as the case may be, I fired up the brand new Husky tractor and proceeded to flatten every mole hill and tunnel I could find within a 200 yard radius.

With supreme confidence and a touch of shear madness, I knew without a shadow of a doubt I was increasing Moleville’s GDP by a minimum of 10% per day for at least the next three to four weeks. Paul Krugman, eat my exhaust. The Nobel Memorial Prize in Economics would soon be awarded to my fat ass, just as soon as I can get it off this tractor and into the house to polish up my thesis.

After finishing the dirty deed, then picking the mole collateral damage out from between the tire treads, I proceeded to establish the National Bank of Moleville and fire up the electronic fractional reserve fiat faker so the moles could burrow…umm…borrow themselves to health, wealth and prosperity as they repel the alien invasion and repair all those broken windows and crushed tunnels. Of course, in return for my minor contribution to Moleville’s economic miracle, I will become filthy rich and honorary King of the Mole Hill.

Someone contact Trump and inform him I am available for consultation if the price is right or the presidential medal is big enough.

Since it is blatantly obvious even to a deaf, dumb and blind man (paging Paul Krugman) that my molenomic plan will be a smashing success (pun intended) there is no need to follow up with Moleville economic studies and careful mole observation to confirm my theories. Even if initial indicators show little economic growth, there remain several gallons of stabilized gasoline in the tractor, allowing me to launch several more alien invasions.

What doesn’t kill the proles moles will most certainly make them stronger. So says the Federal Reserve, so says Cognitive Dissonance.

You may now kiss my ring.

 

01-22-2017

Cognitive Dissonance

 

The Alien Star Cruiser towing the automatic window breaker. The Husky tiller can be seen way in the back of the shed. Mrs. Cog made me promise never to tell you that story.  You'll have to hear it from the machines.

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Former WSJ reporter Asra Nomani asks in the NYT's "Women In the World" section what is the link between one of Hillary Clinton’s largest donors and the Women’s March? Her answer: "as it turns out, it’s quite significant."

Here is what else she discovered.

Billionaire George Soros has ties to more than 50 ‘partners’ of the Women’s March on Washington

 

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Source: ft.com

The past few years, ‘currency war’ was the ‘talk of the town’, but truth be told, there was no real ‘cold’ trade and currency war. In fact, the European Central Bank kept on decreasing its benchmark interest rates when the Federal Reserve took baby-steps to increase its own interest rates again, so we do have to take the previous ‘currency war’ declaration with a mid-sized spoon of salt.

But in 2017, the gloves might come off, as several countries have been warning for ‘expensive currencies’. China, for instance, might become under increased pressure from the Trump administration who will very likely announce and initiate some protectionist measures to boost the domestic economy inside the USA. China also is an easy ‘victim’ as it’s easy to use the country as a ‘target’ when things go wrong in the USA. The statement ‘the US Dollar is overvalued whilst China is keeping its currency rate artificially low’ isn’t coming out of the blue.

Source: The Economist

And of course, China will obviously encounter its fair share of problems as well, this year, as its annual growth rate just continues to decrease, and any protectionist move in the USA will aggravate the situation.

China is clearly worried, as its president, Xi Jinping, was one of the biggest advocates of globalisation and world trade at the recent economic forum of Davos. That’s not unexpected, as China has hands-down been the main beneficiary of the recent push for globalisation in the past sixteen years of this millennium.

Source: ABN AMRO

The country is clearly feeling the pressure on its economic situation, as even though the import growth rate has been picking up again, the export growth remains in the negative territory, pointing in the direction of a global trade pattern which is slowing down. To make things worse, the import growth was predominantly caused by a (temporary?) increase in the import of raw goods to replenish the stockpiles (before the Chinese new year starts).

And the pressure on the Chinese economy is coming from all angles. The real estate market seems to be bracing for (yet another) correction as the local governments have started to tighten the regulations in an attempt to slow down the overheating market. This seemed to be working as there has been a substantial slowdown in the total volume of mortgage applications, but it looks like this was just the first step.

China also had to solve the trilemma of having an independent monetary policy, the free movement of capital and a fixed exchange rate as that’s technically, theoretically and practically pretty much impossible. More measures have been announced and implemented (by suspending the possibility to purchase foreign assets that have no industrial use, and reducing the possibility for citizens to purchase foreign currency.

Source: The Economist

The credit growth rate remains positive and with credit levels increasing towards 300% of the GDP, China can’t afford any missteps as any serious contraction of its growth rates and/or the level of its economic activity could push the country over the cliff, with disastrous consequences.

China will need to keep its currency cheap and will have to work on its relationship with President Trump to ensure a good relationship. Globalisation is key for China, and a slower world trade will hurt the country.

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After Sunday’s latest meeting between OPEC and non-OPEC countries in Vienna, energy ministers struck an optimistic note regarding the recent agreement to cut oil output as a committee set to monitor compliance with the deal meets for the first time. Oil producers said they are in “total agreement” on the mechanism for monitoring pledged output cuts, Kuwait Oil Minister Essam Al-Marzouk told reporters after the committee ended its meeting in Vienna.

“I am satisfied, I am optimistic and, as I said, the markets are on their way to rebalance and it’s happening,” Saudi energy minister Khalid al-Falih said. He added that compliance with the agreement, which calls for cuts to begin this month, had been “fantastic”, he said adding that “based on everything I know, I think it’s been one of the best agreements we’ve had for a long time.” The issue, however, is that what everyone else knows is largely sourced from word of mouth statements, at least until the first official reports of monthly production emerge, validating his optimism.

As a reminder, under the Vienna deal struck last December between OPEC and non-OPEC nations, producers agreed to lower production by nearly 1.8 million barrels per day (bpd) aiming to ease a global glut that has weighed on oil prices for more than two years.

Following Falih’s claim last week that 1.5 million bpd in production had already been taken out of the market, on Sunday the Saudi energy minister added that “usually non-OPEC would raise their production to compensate for voluntary cuts by OPEC. Now, we are seeing voluntary cuts by both sides.”  Saudi Arabia, has already exceeded its target with an output reduction of more than 500,000 barrels a day, Al-Falih said, while Algeria and Kuwait have also cut to levels beyond their targets, according to ministers from those nations. Other OPEC members such as Iraq and Venezuela have not yet reached their quotas but say they are more than half-way there.

Al-Falih then predicted that “the other 300,000 bpd, for all I know, is still happening,” and hoped for 100 percent compliance in February. Full compliance could take global oil inventories back close to their five-year average by mid-2017, lowering oil in storage by around 300 million barrels, Falih said.

Still, despite the elated promises of cooperation, it still remains unclear just how monitoring of compliance would take place. According to Reuters, Kuwaiti oil minister Essam Al-Marzouq, who chairs the five-member compliance committee, said it would examine how to best monitor compliance and what level of compliance would be acceptable.  The other members of the committee represent Algeria, Venezuela, Russia and Oman.

In other words, faith in “compliance” still remains largely a function of trust that OPEC is telling the truth, which in light of historic precedent, when numerous OPEC members complied with initial cut agreements only to defect shortly thereafter, can be a major leap of faith. Indeed, as Bloomberg notes, OPEC has often flouted its own target as member nations quietly tried to gain market share at their peers’ expense.

Venezuela’s new oil minister, Nelson Martinez said his country has achieved more than half of its planned 95,000 bpd cut, although again there was no way to verify. 

“[There are] no surprises so far in terms of demand or supply from other sources so there is no reason for us to suddenly come in January and say we need a bigger reduction or a longer period,” he said.

The biggest wildcard remains Russia. It Energy Minister Alexander Novak on Sunday said he was satisfied with the level of compliance shown. Russia has cut its oil output by around 100,000 bpd, Novak told Russia’s TASS news agency. Novak added Russian oil production has averaged around 11.15 million bpd this month. In his opening speech to the Vienna meeting, Novak said many countries had lowered their oil output by more than they had agreed to and added that Russia was lowering its production ahead of schedule.

He told reporters that oil output cuts had been positive for markets, adding it was too early to talk about extending the output-reduction deal beyond the planned six months but that remained an option. “Every one sees that the agreements on oil production cuts have already have a positive effect on oil markets. The market has become more stable and predictable.”

“We are starting to see a shift in the momentum and the emergence of more bullish sentiment on the market,” Kuwait’s Oil Minister Essam Al-Marzouk said at the start of the monitoring committee’s first official meeting. “These are all encouraging signs that we are on the right track.”

Meanwhile, Saudi Arabia is reportedly producing slightly below 10 million bpd and has informed buyers of Saudi crude of substantial cuts scheduled for next month, he said.

How (non) compliance will be evaluated?

With January not yet complete, Bloomberg reports that the committee will focus mostly on how to assess compliance rather than produce any new data, said one person. As outlined in OPEC’s initial agreement, monthly production data known as “secondary sources” compiled by analysts in the group’s secretariat will be the principal tool for judging whether members are complying with the deal, said three people. Those figures don’t cover non-members such as Russia.

The committee currently has no plans to use external agencies, such as consultants that track oil exports by monitoring tanker movements, to verify that countries are implementing the pledged supply curbs, said three people familiar with the matter. It will meet every month, the Kuwaiti oil minister said. Additionally, the OPEC committee said it would not need export data, and will instead only focus on output data.

“Evaluation of conformity to the respective country production adjustment will be based on production data only,” according to OPEC statement on group’s website.  OPEC will present a report with monthly production data to Joint OPEC-Non-OPEC Ministerial Monitoring Committee, known as JMMC, on 17th of each month; report also to include non-OPEC producers’ oil liquid output. Furthermore, the monitoring committee would meet next on March 17, then for 3rd time in May before OPEC gathers that month; with the March meeting said to be in Kuwait.

Each of the 5 member countries comprising JMMC to nominate one technical contact person to form Joint Technical Committee (JTC), which will also include OPEC presidency.

These export obfuscations – the real variable in OPEC compliance – suggests that beneath the thin veneer of deal “compliance”, the underlying production dynamics may end up being far different from the promised 1.8mm, if not greater, reduction.

But the clearest indication that non-compliance will be a major hurdle was a statement by the Russian energy minister Alexander Novak who told reporters that violators to the output cut agreement will not be penalized. Which means that without negative reinforcement, compliance may work as long as prices are rising offsetting volume losses, but the moments prices slip expect the agreement to be quickly violated by one or all member states.

“We started to trust each other better, which is just as important as the market re-balancing,” Russia’s Novak said. “One year ago not many believed in the success of this initiative.”

That said, when we check back one year from today, the skepticism of the “many” will be justified. Here’s why.

Why Only A Six Month Deal?

As OPEC has claimed before, there’s no indication that the cuts will need to be extended beyond the initial six-month term, Algerian Energy Minister Noureddine Boutarfa said in an interview, echoing comments from his Saudi counterpart earlier this week. “If we really comply by 80 to 90 percent, it may not be necessary to continue,” Boutarfa said. “We aren’t excluding it, but signals are positive.”

But why just six months? As Bloomberg’s Julian Lee writes overnight, “that seems a very quick and painless solution to an oversupply problem that has bedeviled the oil market for the past two years, brought several producers to the brink of collapse and tipped others over it.”

We now may have the answer.  As Lee adds, “the latest numbers from the Joint Organisations Data Initiative offer a different, and compelling, narrative” from the widely accepted one, namely that “brimming supply had created financial difficulties for the kingdom, and also complicated the forthcoming IPO of a small part of Saudi Aramco.”

This is what happened:

It turns out that, as the deal was being thrashed out, Saudi Arabia was enjoying a 35-year high in total oil exports. One big factor was a huge drop in the amount of oil the country needs to burn to generate electricity. The punishing Saudi summers boost demand for electricity — mostly to run air-conditioners — to a level that previously required vast amounts of oil-fired generating capacity to be brought into use. The direct burning of crude oil in power stations would roughly double to about 900,000 barrels a day at the height of the season.

 

But that changed last year. The start-up of the Wasit gas plant allowed the kingdom to slash the use of crude in power generation by as much as a third — freeing that oil up for export. In addition, the kingdom cut fuel subsidies, pushing down oil consumption by 2 percent year-on-year in the first eleven months of 2016. That’s the first dip since at least 2003, when JODI records begin.

As a result, Saudi Arabia was left with “an embarrassment of riches as the OPEC negotiations were underway last year.” Unless it cut output, it would start flooding the market during the first half of 2017. The stars were aligned for it to solve the problem by persuading others to share the burden in a way that has not been seen since the financial crisis of 2008, while at the same time restoring its credentials as a team player within OPEC.

“This new read on the Saudis’ motivations for agreeing to the deal has the benefit of explaining why Al-Falih is looking for a six-month time line and why the kingdom has been prepared to make such a deep cut in its production. Its surplus will have disappeared by that time, at which point it can start to boost production again in order to get exports back to the level it wants to maintain.”

Lee’s conclusion: “Such a move could easily be the catalyst for the whole deal to fall apart by June.” Which, in turn, would explain why OPEC is repeatedly pointing out the “6 month” bogey as a successful deal deadline, after which OPEC members wil go their separate ways once again, pumping to the max. However, there’s no way the global backlog of inventory will be dealt with at that time.

Ultimately, “this seems a situation designed to antagonize the rest of the group and create a raft of bad feeling. If maintaining exports is more important to Saudi Arabia than balancing the market, then so is a willingness to back out on a hard-won deal that took the kingdom and its partners a lot of political capital to achieve.”

In short, enjoy the OPEC “deal”, with minimum surveillance, virtually no compliance markers and zero penalties for violators, the production cut “deal” relying entirely on “trust” between OPEC members, is anything but.

For now, however, oil will trade with each and every optimistic headline out of OPEC, likely pushing the price to a level where the recent surge in US shale production becomes a flood, and threatens to cut deeply into OPEC’s own production levels, guaranteeing that the collapse of the OPEC supply reduction is only a matter of time.

via http://ift.tt/2jcG5yI Tyler Durden

Submitted by Mac Slavo via SHTFPlan.com,

Could there be a crash coming in 2017? Will increasing interest rates at the Federal Reserve trigger the beginning of the end?

It is possible, but not certain.

It will fall, perhaps, after a new sense of normal sets in, and some become comfortable with the change in leadership, and accustomed to drowning out the opposition yelling noisily from the other side. Expectations have been set for a growing economy, fresh infrastructure and new hopes for the average worker.

But getting too comfortable would be a huge mistake. All that could prove to be a mirage. And things could come crashing down.

Now that Donald Trump has been inaugurated as the 45th President, all eyes will be on his first 100 days as he demonstrates what kind of president he will be, and his cabinet takes action. But even with the best intentions and carefully laid plans, there is no telling at this point how firmly he will be tested, and what kind of crisis America will have to endure during his first term. Wars, terror attacks, civil unrest, debt crisis and financial collapse all loom overhead.

Many have seen dark signals about the immediate future, but no one can claim to know the timing.

However, former Wall Street banker and now best selling critic of the predatory financial system Nomi Prins sees the pattern unfolding, and fears that the end of 2017 may be the time that everyone has been watching for. At the center of it is the whiplash effect of Federal Reserve stimulus-withdrawal (i.e. rate hikes and the contraction of easy money).

Greg Hunter of USAWatchdog interviewed Nomi Prins:

Former top Wall Street banker and best-selling author Nomi Prins correctly predicted no financial crash for 2016. Prins’ upcoming book is titled “Artisans of Money.” It is all about central bank money creation. What does Prins say about this year? Prins predicts, “In 2016, I pegged the non-crash. . . . Central bankers were finding new ways to extend their money creation policies. That is what kept the markets up.

 

There was a separate bid on the markets after Trump was elected. It was on the expectation that he would be good for growth, that he would be good for infrastructure and that he would create jobs. I do think there is a little juice in the central banks. I keep thinking there shouldn’t be, but they keep surprising all of us with their ability to boost the markets. They have artificially stimulated so many different asset bubbles, whether it’s debt, which is epic, or stock markets, many of which are at historic highs. If we have a crash, it will be in the second half of 2017. The promises, the rate hikes, the dollar being high could collapse into the realities of the stability and this artificialness. I am not sure about a crash this year, but if we see a big decline, it will be in the last quarter.”

Prins foresees gold prices surging during this last quarter period of instability. Those who’ve been eating sinking gold prices may find some relief once again, but the larger economic system is in danger of crashing and burning, and the possibility that the dollar will lose out:

“I think with the expectation of things going well, the dollar will be keeping a bit of a bid. It will be within a range but staying fairly up. I think the dollar will turn around and weaken in the second half of the year. . . .That’s why, in the last half of the year, gold will catch more of a bid.”

Prins discussed the alliance between Russia and China and what is about to unfold geopolitically.

“Because Russia, Putin’s very smart. He’s not just waiting to see what happens with Trump and the U.S. You know, there’s been very favorable rhetoric so far, but, you know, that could be a wild card. Things could be changed.

 

Someone could get annoyed at someone else. So what he’s been doing, he’s been fortifying his relationship with Eastern Europe, his relationships with the UK, with Japan and particularly his relationship with China and the non-Russia BRICS countries. So all of this will be in flux…”

According to Nomi Prins, the crash wouldn’t be so much an immediate headline flashing-event, as it would be a steady decline and gradual sinking to the bottom.

via http://ift.tt/2jN6MdR Tyler Durden

Those wondering if Trump would change his tweeting ways now that he is president – and has not just one, his personal @realDonaldTrump account, but two including the official @POTUS username – got an answer in three parts this morning, when Trump greeted Sunday morning with three tweets addressing three distinct media newslines over the weekend.

In his first tweet at around 7:35am Sunday, Trump said he had a “great” meeting at CIA headquarters on Saturday, and appearing to seek a restoration of cordial relations, said the CIA had amazing people, not forgetting to note that he got “long standing ovations.”

“Had a great meeting at CIA Headquarters yesterday, packed house, paid great respect to Wall, long standing ovations, amazing people. WIN!”

Had a great meeting at CIA Headquarters yesterday, packed house, paid great respect to Wall, long standing ovations, amazing people. WIN!

— Donald J. Trump (@realDonaldTrump) January 22, 2017

In remarks at CIA HQ on Saturday, Trump blasted the media, accusing news networks of lying about the size of his inauguration crowd, a topic that would later dominate one of the most bizarre White House press briefings.   “Honestly it looked like a million and half people, whatever it was it was. But it went all the way back to the Washington Monument … and by mistake I get this network and it showed an empty field, and it said we drew 250,000 people. Now that’s not bad, but it’s a lie,” Trump said.

Trump also blamed the “dishonest” media for reports of a “feud” with the intelligence community. “I have a running war with the media,” Trump said. “They are among the most dishonest human beings on earth. And they sort of made it sound like I had a feud with the intelligence community. And just want to let you know that the reason you’re the No. 1 stop is exactly the opposite.”

After Trump’s remarks Former CIA Director John Brennan was reportedly “deeply saddened.” Former CIA deputy chief of staff Nick Shapiro said Brennan believes that Trump “should be ashamed of himself” for his “display of self-aggrandizement.” “Former CIA director Brennan is deeply saddened and angered at Donald Trump’s despicable display of self-aggrandizement in front of CIA’s Memorial Wall of Agency heroes. Brennan says that Trump should be ashamed of himself,” Shapiro said in a pair of tweets.

In his second tweet, showing he has no plans of moving beyond the topic of his inauguration’s popularity, Trump boasted:

“Wow, television ratings just out: 31 million people watched the Inauguration, 11 million more than the very good ratings from 4 years ago!”

Wow, television ratings just out: 31 million people watched the Inauguration, 11 million more than the very good ratings from 4 years ago!

— Donald J. Trump (@realDonaldTrump) January 22, 2017

Bloomberg reported on Saturday that according to Nielsen data, Trump’s ratings were higher than Obama’s second election in 2013, but below the first inauguration in 2009 which drew a national audience of 37.8 million, the second-largest since 1969. Bill Clinton’s first inauguration was also slightly lower. Ronald Reagan’s first inauguration in 1981 holds the audience record at 41.8 million viewers. Inexplicably,  nearly 35 million people watched Jimmy Carter swear the oath of allegiance in 1977.

As noted above, Trump slammed the media for underreporting crowd size for the inauguration, first during a speech at the CIA, and second when his spokesman Sean Spicer chided the press for misreporting the size of Friday’s crowd, calling it “shameful and wrong.”

“This was the largest audience to ever witness an inauguration, period, both in person and around the globe,” Sean Spicer said during his first official appearance in the James S. Brady Press Briefing Room.

Finally, addressing yesterday’s countrywide women’s protests, Trump raised questions about whether protesters who marched in Washington and around the nation a day earlier voted in the presidential election.

“Watched protests yesterday but was under the impression that we just had an election! Why didn’t these people vote? Celebs hurt cause badly.“

Watched protests yesterday but was under the impression that we just had an election! Why didn’t these people vote? Celebs hurt cause badly.

— Donald J. Trump (@realDonaldTrump) January 22, 2017

According to to a review of official and unofficial estimates from the nation’s largest cities and press reports, at least 3 million protesters on Saturday swamped the streets of Washington, D.C. and cities across the world on the first full day of Trump’s presidency. Large turnouts were reported in Boston, New York City, Chicago and Los Angeles as organizers for the main rally and march in Washington, D.C. grappled with huge numbers of demonstrators. Half a million people showed up at the National Mall and nearby streets for the Women’s March on Washington. Both Democratic nominees, Bernie Sanders and Hillary Clinton, tweeted in support of the marchers.

At the event in Washington, D.C., a number of Democratic lawmakers and celebrities encouraged demonstrators to take action in the wake of a Trump presidency. After lashing out in a “f-bomb” filled tirade against Trump, Madonna said that she had “thought an awful lot about blowing up the white house”, but that in the end she “chose love.”

On Sunday morning, Trump on the other hand, chose to tweet, and suggest that either the protesters did not vote, or if they did, that they are ignoring the will of the majority.

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