Aug 292015
 

crude

Zero Hedge: “Saudi Arabian ground troops have advanced into northern Yemen, in a bid to push back against Houthi Shia militia and forces loyal to ousted president Ali Abdullah Saleh, military and tribal sources said.

This is Saudi Arabia’s first ground offensive in Yemen since it launched an extensive military campaign in March targeting Houthi positions.”

Opinion: For the past few months, the oil price appeared to be a bottomless pit. Oil inventories at glut levels, oil rig count up, fracking companies thriving and every analyst bearish.

What a time for a rally.

I scratched my head for three days wondering why oil was rising. It wasn’t until this article that it became clear.

Yemen’s Houthi rebels, in addition to messing up President Obama’s example of how well his foreign policy was working, are financed by Iran and heavily armed (thanks to the US abandoning the area leaving 500 million in weapons and Humvees behind).

Wait what?

That’s right, Iran, our partners in peace, wants Yemen to control an oil choke-point from Egypt and is using US foreign policy blunders against us.

So if Iran can knock off the House of Saud, and the oil put under the Iranian-backed rebels, the price of oil will be back at $100 faster than you can say c-r-u-d-e.

Newsflash: Despite the oil-hating progressive left’s war on fossil fuels, the world still runs on the stuff.

 

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Aug 272015
 

ustr

Zero Hedge: “On Tuesday evening in “Devaluation Stunner: China Has Dumped $100 Billion In Treasurys In The Past Two Weeks,” we quantified the cost of China’s near daily open FX operations in support of the yuan.

As BNP’s Mole Hau put it on Monday, “whereas the daily fix was previously used to fix the spot rate, the PBoC now seemingly fixes the spot rate to determine the daily fix, [thus] the role of the market in determining the exchange rate has, if anything, been reduced in the short term.” And a reduced role for the market means a larger role for the PBoC and that, in turn, means burning through more FX reserves to steady the yuan.

Translation and quantification (with the latter coming courtesy of SocGen): as part of China’s devaluation and subsequent attempts to contain said devaluation, China has sold a gargantuan $106 (or more) billion in US paper just as a result of the change in the currency regime.

Notably, that means China has sold as much in Treasurys in the past 2 weeks – over $100 billion – as it has sold in the entire first half of the year.”

Opinion: It is important to follow this gibberish, so let’s start with definitions:

  • The yuan (sign: ¥) is the basic unit of the renminbi, but is also used to refer to the Chinese currency generally.
  • The renminbi is the official currency of the People’s Republic of China. The name literally means “people’s currency.”
  • Soc Gen/Société Générale S.A. is a French multinational banking and financial services company headquartered in Paris.
  • Mole Hau is an economist with the Times of India.
  • FX means foreign exchange or trade of currencies
  • US Treasury is money loaned to the United States in exchange for interest payments.

China is one of the largest holders of US debt. That infusion of capitol is what the US uses to finance its operations after it uses up tax revenues. It is a US credit card.

Since the US dollar is the world reserve currency, it is necessary for nations to own dollars in order to buy commodities like oil, wheat, etc.

By owning US  treasuries, a nation in effect owns dollars. When the largest debt holder manipulates it’s currency and divests itself of dollars, it is a pretty good bet that that nation is planning another method of buying commodities.

And that, my dear Watson is what makes this a problem.

If/when the US dollar loses world reserve status, the dollar will crumble and the new reserve currency will be in demand.

China’s renminbi is not strong enough at this juncture to be the lone reserve currency but it could be included in the Standard Depository Receipt along with the euro and yen basket as a first step to deposing the dollar.

The International Monetary Fund (IMF) meets in October. It will be interesting to see if recent rumors of delaying the decision on the renminbi are accurate.

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Aug 252015
 

money

The Telegraph: “When the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort. Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.

Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.

The FTSE 100 has now erased its gains for the year, but there are signs things could get a whole lot worse.”

Opinion: “But seven years of famine will follow them. Then all the abundance in Egypt will be forgotten, and the famine will ravage the land.” Genesis 41:30

The 7 year Biblical cycle ends in a Shemittah year when debts are forgiven. Shemittah years are the last of a 7-year cycle and often are accompanied by financial turmoil.

One week ago today, the financial world wondered if the Federal Reserve would raise interest rates the next day or the next month. The markets were quiet.

On Wednesday, the Fed minutes were unclear saying that they would evaluate data to determine when they would raise. The markets, on the heels of massive Chinese currency manipulation, were not amused. The Fed had lost control.

So now what? Expect the experts to be negative short term but also expect to hear the words ‘buying opportunity’ over and over again.

We have been duped. The Fed and related government departments have been exaggerating economic data because the US economy has been rising on $4.5 trillion counterfeit dollars.

I am expecting violent rallies and steep declines and if we are where I think we are on the Bible’s timeline, the end result will be a global power shift away from the US dollar.

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Aug 242015
 
Jack Lew in China: China’s Markets Aren’t ‘Linked’ to Rest of World

Gabien (.com): Jack Lew, speaking at the Brookings Institution in July, confidently assured that Americans were immune from weakening markets in China. “I will say that China’s markets still are pretty much separated from world markets,” the secretary of Treasury, said. “They’re, obviously, moving towards being more integrated, but right now they’re not.” “So you’re

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Aug 242015
 
China Chooses Her Weapons

Zero Hedge: “China’s recent mini-devaluations had less to do with her mounting economic challenges, and more to do with a statement from the IMF on 4 August, that it was proposing to defer the decision to include the yuan in the SDR until next October. The IMF’s excuse was to avoid changes at the calendar

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Aug 222015
 
DOW SINKS INTO CORRECTION, OIL CRASHES BELOW $40

Business Insider: We just witnessed the worst week for the US stock market in four years. The blue-chip Dow fell more than 500 points Friday and entered correction territory on an intra-day basis — defined as a 10% drop from recent highs. Major stock markets across Europe and Asia also closed sharply lower. Opinion: The chaos

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Aug 202015
 
After 6 Years Of QE, And A $4.5 Trillion Balance Sheet, St. Louis Fed Admits QE Was A Mistake

Zero Hedge: “As you’re no doubt aware, the Fed is fond of using the research departments at its various branches to validate policy and analyze away bad economic outcomes. For instance, earlier this year, the San Francisco Fed came up with an academic justification for the now infamous double seasonally adjusted GDP print – they

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