[Note from the Saker: I take no position on the thesis presented in this article, but I do find it very interesting and I therefore decided to submit it to you all for discussion.]
by Brandon J. Ferro for Only Price Matters
In the chart below I plot crude, the Russian Ruble (RUB) and OPEC production.
From 2012 through mid-2014 all three print sideways.
However, to the day beginning on 7/29/14, crude and RUB begin to collapse while OPEC production soars.
Why such an abrupt reversal and why so vividly in lock-step, highly correlated fashion together?
Because on 7/29/14 the US and EU announced new, expanded sanctions on Russia designed to tighten the economic vice on the country for its involvement in the annexation of Crimea from Ukraine.
In other words, while the US publicly announced the latter sanctions, it simultaneously and surreptitiously initiated another, non-public sanction, namely crushing the price of crude oil to hurt Russia where it feels it the most.
How could the Obama administration accomplish such a challenging goal with crude prices being dynamically set on global markets on a daily basis?
The chart makes that answer fairly obvious.
The Obama administration asked demanded that the Federal Reserve abdicate its monetary policy independence to a higher calling, namely White House geopolitical strategy, by shifting to a tighter, more hawkish stance that began to intimate future rate hikes, thereby creating the conditions necessary for a major USD rally, which could in turn drive USD-denominated crude prices lower.
Luckily for the White House, the Fed had an FOMC meeting the day after Obama and the EU announced their expanded sanctions on Russia, a meeting it used to begin pivoting hawkishly. This pivot was accomplished via a planted dissenting vote from Charles Plosser as follows:
“Voting against was Charles I. Plosser who objected to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for “a considerable time after the asset purchase program ends,” because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee’s goals.”
But a USD rally alone would not be enough to inflict the desired damage to crude prices. Crude production would need to soar with a USD rally. Thus, concurrent with its demand to the Fed, the US pushed its Sunni Arab allies in OPEC to ramp crude production. Like the Fed, they obliged. And, why not? While they could survive a temporary collapse in crude prices, their US-based, debt-ridden shale competitors were unlikely to fare as well.
How did all of the above ultimately turn out? Swimmingly – over the ensuing 18 months the USD more than doubled vs. the RUB while rallying 25% more broadly as crude plunged 75%.
However, all of a sudden beginning on 2/11/16 all of the above began to change; after bottoming around ~$26 on that day crude has soared to $40 while the RUB has risen to $68 against the USD from below $80.
Why?
Because on 2/11/16 the US and Russia announced they had come to terms on a cease-fire agreement in Syria.
In effect, Putin used a military intervention in Syria as a masterstroke of geopolitics, crushing the US-backed rebel forces there in the process, thereby turning the tables against Obama and horse-trading himself out of the pinch he had been in by getting the Americans to let up on crude price pressure if he agreed to pull-out of Syria and leave Assad to fend for himself alone on human rights issues in the process.
With the latter agreement in place, the Federal Reserve, once again able to get back to the business of conducting the monetary policy we all know it always wants to conduct, concluded its FOMC meeting this week by back-tracking on 18 months worth of hawkishness and intimating via its dot plots that fewer rate hikes were likely on the table for 2016.
And with that retreat, we can return to our regularly scheduled programming of bubble creation.
Contrary to popular belief, the US economy depends on oil prices more than the economy of Russia.
The Petrodollar Quietly Died in March 2014.
http://www.zerohedge.com/news/2014-11-03/how-petrodollar-quietly-died-and-nobody-noticed
“he (Putin) agreed to pull-out of Syria and leave Assad to fend for himself alone on human rights issues in the process.”
How naive…
With allies like Iran, Syria, Pakistan, India, China, and coming Jordan, Afghanistan and Iraq,not to mentioned Russia’s Central Asian republics, Russia is the only major power in the Middle East.
I have a question. How does a rise in the U$ cause the U$ price of oil to fall? It may be obvious, I just can’t work it out.
And do the facts support the story told here? Ben Bernanke talked of “tapering” in 2013 (i.e. less quantitative easing), at which point real yields rose sharply. There was a rise in Saudi oil production around the same time (from 9.4m/bbl/day to 10.4m), although no great effect on the price. It was only in mid-2014 that the oil price started to fall and, at more or less the same time, the trade-weighted U$ began to rise – after Janet Yellen took over at the Fed in February of that year. She continued Ben Bernanke’s policy of indicating an imminent tightening, although I think she was much keener than he had been, to “get ahead of the curve”. The Fed raised its interest rate for the first time in a decade only in December 2015. The rise in the U$, the fall in equities, and the fall in breakeven inflation indicate that the gradual preparation of the markets since 2013 for tighter policy, the “tapering” itself, and now the rate hike, risk recession i.e. monetary policy is too tight. (BTW the FOMC is not always unanimous and dissenting opinions are always published. They do not usually move markets. I doubt Prof. Plosser’s dissenting opinion was some subtle signal. It was his opinion.)
The tightening by the Fed appears to be misguided – but then central banks are fallible (very). There is no evidence that the Fed is part of a conspiracy, and plenty of evidence that it is going about its business as usual. The central bank of China has been tightening at the same time. Tightening by the central banks of the two biggest economies is likely to contribute to pressure on the price of oil.
On Ewan’s question:
“And do the facts support the story told here?”
In answering, I will quote a former Russian here much to the likely castigation of the readership:
“The hardest thing to explain is the glaringly evident which everybody has decided not to see.”
There is no purer form of fact than the prices I plot on the chart which make it transparently obvious what went on and for what reasons.
Any other commentary is pure subjective conjecture. Price is objective, factual reality which, when lined up with the events on the chart, leave nothing to chance.
Brandon Ferro
Thank you for replying.
I think your reply refers only to my second question.
The first was, How does a rise in the U$ cause a fall in the U$ price of oil?
My second question may just be a misunderstanding. I took you to be saying not only that the US government (the State Dept., the Treasury, or the White House, or some combination) entered into a conspiracy with the Saudis to cut the price of oil by increasing supply, to coincide with punitive sanctions imposed on Russia by the US and its allies – but also that the Fed surrendered its independence to further this conspiracy. My question was, Is this really what the evidence of Fed policy since 2013 shows?
I have a third question, which is very likely just slow-witted-ness like the first one. A collapse in the U$ price of oil cuts the value of Russia’s exports. Does a rise in the U$ not increase the value?
Ewan, USD and oil price are historically inversely correlated. Here ‘s a really good explanation:
http://www.businessinsider.com/us-dollar-oil-prices-correlation-2014-10
I’ll let Brandon answer your second question. I also would like to know what proof Brandon has of Saudi-US collusion on oil price. I think this is the most tenuous aspect of his argument.
Serbian Girl
I’m really straining the brain cell now, but, as I recall, an R-squared of 0.4 ain’t hugely explanatory. I’m not sure what the story would be behind any stronger correlation. And I’m puzzled what would account for a rise in the U$ actually causing a fall in the U$ price of oil. And even if there were to be some causal link, the timing doesn’t quite fit – the relevant dates for the Fed are mid-2013, early-204, and late-2015. The sharp rise in the U$ and fall in the U$ price of oil was mid-2014 (I think).
Ewan, as far as I can see they are correlated, that’s all. To claim causality is a bit of stretch…
Serbian Girl
The correlation is quite low. And causality is what was claimed.
Ewan, you’re right. I looked up the FOMC meeting in July 2014, which Brandon refers to “pivoting hawkishly”. The conclusion of that meeting was to leave the interest rate unchanged. Therefore, this could not have been the catalyst of the dollar rally. The dollar rally which started in July 2014 coincided with the fall in oil price. But to claim that one caused the other is a tenuous argument.
Something doesn’t add up with this theory…
If your currency (USD) is worth 1 usd to 1 ruble and a barrel of oil cost 40 dollars you will have to pay 40 dollars to buy a barrel from Russia.
If you currency falls due to expansion of money supply and it now takes 2 dollars to buy 1 ruble that barrel will cost you 80 dollars.
If your currency rises and now it will take you 0.50 dollars to buy 1 ruble it will now cost 20 dollars to buy a barrel.
Because oil is traded in the world market. If all oil were produced and consumed in the US alone there won’t be this correlation. Very basic explanation but that is how works.
Z
Oil is priced in U$. If your exchange rate falls, you need to sell more domestic currency to buy U$. If the price of oil rises, likewise.
If you are an oil exporter, you sell your oil for U$. If your exchange rate falls v. the U$, your get more domestic currency for each U$. If the price of oil rises, you get more U$ to sell for domestic currency.
Is that not how it works?
Hi Ewan,
Z’s explanation is absolutely correct. If I am understanding your query correctly I will try to clarify:
There are two markets we are concerned with in this example, the oil market and the US Dollar exchange rate (vs. major currencies). IF the oil market remains at a constant or a near constant level and the US Dollar strengthens one would require less US Dollars to purchase the same barrel of oil. Alternatively if the US Dollar weakened then one would require more US Dollars to buy the same barrel of oil.
If the oil market moved higher for fundamental reasons but the US Dollar remained unchanged then it would require more US Dollars to buy that barrel of oil.
Commodities are generally priced in US Dollars so a strong dollar will cause the market price of a commodity to decrease in value PROVIDED there was no fundamental or market changes to the commodity in question.
Hope this helps,
Steppin Razor
This is a conspiracy to mess with my mind.
If the oil is priced in U$, and the price does not change, but the U$ appreciates against the currency of the purchaser of the oil, then the purchaser of the oil still has to pay the same number of U$ (the U$ price of the oil has not changed), but has to sell more of their home currency to acquire the U$ (the U$ has appreciated against the currency of the purchaser of the oil).
What, if anything, is wrong with this line of reasoning?
Hi Ewan, your reasoning is sound in your example and you are correct.
If the price of oil remained unchanged expressed in USD terms (from the perspective of a buyer using US Dollars) while the USD simultaneously strengthened the price of oil has actually increased in value. OR I could say that the oil price has increased relative to any currencies that have decreased in value vs. the USD.
I believe that recent Fed policy may be overstated by this author. In my opinion the factors that saw the price of oil decrease from approx $120/barrel to $30/barrel and now around $40/barrel would by supply and demand. As global demand dropped producers continued to supply the market in an effort to a: pay their fixed costs b: put pressure on Russia.
A country like Russia which a couple of years ago could get $100/barrel can now only get $40 so Russia would have to devalue their currency by over half if they wanted to get an equivalent amount of Rubles for a barrel of oil today that they did 2 years ago.
It can be confusing, I worked on a trading desk in financial markets and it can take some getting use to because it doesn’t necessarily come naturally. Sometimes I think things can seem “bass ackwards”.
Steppin Razin
And the number of rubles per U$ went from 34 in mid-2014 to 78 this quarter (Bloomberg).
It is all manipulations.. They are now so huge especially using derivatives that they can control anything, If you watch currencies they attack one country destroy its currency and move onto the next. Most countries outside nato have seen their currencies drop by 50%. Not just Russia.. Only those who pegged to the US$ and have the muscle to back it up have not been destroyed.. They use all kinds of lame excuses to explain it away.. Being the most notorious abusers of the very same examples they give to others for what happened. By now everything is so wound up, I think any one knowledgeable is hoping that when things blow up they don’t get destroyed in the process as well. It is all artificially controlled and would only take one string somewhere somehow to break and we are all in big trouble.
It’s not that the US dollar index rise caused the dollar price of oil to fall, it’s the US interest rate rise that caused both the dollar index to rise, and the $ price of oil to fall.
JC
I confess I no longer follow markets closely. What interest rate? The Fed funds rate only went up in December last year. Did forward rates rise markedly before the U$ appreciated? I suspect that it must have – but surely that would have happened when Ben Bernanke first signaled the coming end of quantitative easing. And whether or not oil prices fell would surely also have depended on whether the markets were expecting a pick-up in economic growth or a slowdown. Market prices, whether interest rates or oil prices, are not quite so closely controlled by policymakers as the article appears to say (ask OPEC – the oil price follow a random walk).
If you need USD to buy oil and the Fed strengthens the USD then you need to spend more local currency to buy the oil.
This will reduce consumption which will reduce demand which will reduce the price (if enough countries are affected at the same time)
Ceteris Parabus if supply and demand are in equilibrium then if over production happens quickly the price will drop because theres too many sellers and not enough buyers.
The low correlation surely shows that much more is going on. It is not a good idea to try to look at one market in isolation. Economies have boomed with oil prices higher. In this instance, does the fall in the oil price not at least in part offset the rise in the U$ for oil importers?
And our author is claiming an instantaneous effect: Prof. Plosser’s dissenting opinion is published, the U$ rises, the oil price falls. This seems to me implausible.
Interesting theory, but you should also mention that there was another major (financial) event that first week of March 2016 which was the probable cause of the rouble rise: Russia successfully issued its first bond since the sanctions.
Beginning of March 2016: Russia announces plan for bond issuance:
http://www.ft.com/intl/cms/s/0/2f52094a-cc27-11e5-be0b-b7ece4e953a0.html#axzz43Yr86neX
A week later, the bond is a sellout in the Swiss capital markets. Investor demand exceeded four times the offer size: http://www.bloomberg.com/news/articles/2016-03-16/gazprom-taps-switzerland-with-russia-s-first-eurobond-this-year.
RI and Alexander Mercouris did a great job covering this: Russia’s $3 Billion Eurobond Offering Proves Sanctions Are Pointless //russia-insider.com/en/business/russia-floats-3-billion-eurobond/ri13280
The pricing of those bonds came AFTER the agreement on Syria, meaning the event was allowed to happen.
So are you’re saying that because the first event (Syria cease fire) happened before the second event (bond auction), the first event caused the second event?
I’m saying without the first one, the second would not have been allowed.
And you have proof of this ?
Isn’t it equally possible that a third event prior to these two caused (or “allowed” as you say) these other two events to happen (for example Russia’s military action in Syria, or some agreement with China, or some event not even covered in the media),OR the two events could simply have nothing to do with each other.
It’s interesting to look for patterns, but I think you’re drawing causal links between events from data that could be interpreted in many different ways.
http://www.macrotrends.net/1335/dollar-gold-and-oil-chart-last-ten-years
I will take a position. The superficial correlations Brandon Ferro makes are obviously correct, as far as they go, and while the majority of people here in this vineyard probably already concluded or at least strongly suspected as much, the regular paid readership of Only Price Matters may be startled to read his analysis, while very few of us here would be, I would think.
The errors are more interesting. The most obvious is that the “White House” is calling the shots, and the FED, the Saudis. etc are obeying. This is a complete fallacy of composition.
The international financial elite own BOTH the Federal Reserve and Barack Obomber. He’s not controlling anything including his own disgusting sycophantic ego.
The international financial elites would also like to own the entire planet, but quite evidently, they don’t own 100% of Russia quite yet. They made a huge play, after Crimea to bust Russia financially and fell short to the extent of suffering a severe setback of their plans for the overthrow of Assad in Syria. They are pulling back and regrouping. What Obomber is doing is taking his pumped up house slave identity to Cuba to lecture Raul Castro on the virtues of kissing imperial ass. From the few minutes of review of that visit that I have done, Raul was polite, but firm, and reserves the right to pursue a more sanitary path.
With a such revealing title like “Only Price Matters”, that outfit and the Mr Ferro that works for it are also probably directly or indirectly owned by the same people that are now regrouping for other attacks on Russia.
Rothschilds, etc overture to Only Price Matters: “We would like to purchase your souls.”
OPM: “Now you’re talkin’!! You know what our name is! How much????”
What a wonderful, cynical conspiracy theory.
My paid readership amounts to one individual for what its worth. The site is a place for me to catalog my work. I put the pay-wall up because I value that work and have chosen not to share it with the outside world; the wall accomplishes as much.
Regardless, if my readership amounted to 100,000 paid members because I had wanted to create a business out of it as opposed to a peaceful place to reflect on my past, painstaking intellectual efforts, I would proudly exclaim as much, even if it made me a Rothschild.
Thank you for the compliment, Mr Ferro. After all, every human endeavor involving more than one person, even a traditional man/woman marriage is a kind of conspiracy ( con= together spirare = breathe…….ergo “those that breathe together”….so being a conspiracy is nothing to be defensive about or to deny….except for a false quality attributed to it by others that don’t understand it….)……………AND, I had to guess about your outfit and its motivations in the last 6 lines and had little else to go on but the name Only Price Matters, and the fallacy of composition described in my first 16 lines.
You could have easily avoided my concluding vitriol (also has a positive meaning!) with Truth in place of Price, by the way: Only Truth Matters. Yeah, yeah, I know. That would hardly be practical in a society where truth is viewed as an impossible if not non-existent goal, but where, on the other hand, everybody knows that, “Everyone has their price.” I get it. Go with the zeitgeist.
What I did not guess about was the part about the owners of the executive branch and the Federal Reserve. That part stands despite my apology now for being a wee bit rough on a new guest to the Vineyard of the Saker. Welcome to Alternative Media!
Also, I’m not for throwing the baby (your painstaking intellectual efforts) out with the bathwater, so you will have equally as much attention from me in subsequent offerings that you share here. After all, I did state, ” ……the correlations Mr Ferro makes are obviously correct……..”. And those correlations, in themselves, without the political conclusions about Obama deciding anything independent of the owners of the FED did truly strike me as such. Though I will finish scanning the opinions of others that know more about oil prices and currencies than I do, and reserve the right to change my tune on that , also. Thank you.
Typical. A very reasonable explanation by Ted is immediately branded conspiracy theory.
Actually, I find Ted’s theory more parsimonious than yours. It fits better with what I am observing on the ground.
Rarely understood:
Too high body temperature means fever.
Too low body temperature leads quickly to death.
Same goes for currencies.
Dear Brandon J. Ferro,
Another misconception… of “human rights”
This past Sunday after the rite of the Triumph of Orthodoxy, Patriarch Kirill, the Head of the Russian Orthodox Church, declared the teaching on “human rights” being a godless cult and heresy.
We all know that so called “human rights” are innate rights of rich white males, everyone else are offered to “fight for their rights.” I, as a westernized Russian, was told numerous times that I have no rights at all.
The Patriarch Kirill’s declaration of “human rights” to be heresy is the answer to the notion that Russia left ” Assad to fend for himself alone on human rights issues.”
We witness how the Western hegemonic narration falls apart, and we found nothing inside. It’s has been truly a clay giant with feet made of terror, and paper money.
Here is the Russian Orthodox view on so called doctrine of “human rights.”
https://mospat.ru/en/documents/dignity-freedom-rights/
“In the world today there is a widespread conviction that the human rights institution in itself can promote in the best possible way the development of human personality and social organization. At the same time, human rights protection is often used as a plea to realize ideas which in essence radically disagree with Christian teaching. Christians have found themselves in a situation where public and social structures can force and often have already forced them to think and act contrary to God’s commandments, thus obstructing their way towards the most important goal in human life, which is deliverance from sin and finding salvation.
In this situation the Church, on the basis of Holy Scriptures and the Holy Tradition, has to recall the basic affirmations of Christian teaching on the human person and to assess the theory of human rights and its implementation.”
My chart and related commentary was not meant to be a discussion point on human rights, ethics or morality.
If I must though, the idea that human rights are heretical because of some discordance with holy scripture is a breathtakingly medieval way of thinking about the world.
Anybody with the most basic sense of human rights, more aptly individual rights, would know that they flow not from god, but from man’s basic nature.
So long as living life is moral and reason is man’s basic tool of surviving that life, it follows that men must be free to choose how to survive said life, free from the interference of others, so long as that choice refrains from infringing on the rights of others.
As such, individual rights are consistent with man’s very nature, regardless of what one person’s god believes vs. another’s. In brilliant prescience, the Declaration of Independence refrained from identifying which god actually endowed us with those rights by ambiguously describing him (her?) as “creator”.
Capitalistic democracy is the only system that preserves those rights.
“Capitalistic democracy is the only system that preserves those rights.”
In watching the major political parties, it seems the right want to just bomb the darkies and grab the loot, the left want to bomb the darkies with humanitarian bombs, democracy bombs, gay bombs and green bombs.
While the left is beating their chests and announcing how they brought gayness, greenness, democracy, whatever to the barbarians, the right slip in and grab the loot.
Your above statement is about the most naive I have seen.
Ok…
I was just addressing your assessment that Russian government has traded Syria for a slightly higher oil prices. It’s preposterous to suggest that President Putin would let the West to do with Assad what you people had done to Milosevic, Kaddafi and Hussein, which was sodomizing and ripping those men apart, all because you are so humanly advanced, modern and not medieval at all.
You see. You are violating my human rights Article 18 by declaring my beliefs to be “medieval” and irrelevant .
http://www.un.org/en/universal-declaration-human-rights/
You wrote: “Capitalistic democracy is the only system that preserves those rights.”
Considering that the most of the Western countries and their Eastern allies are monarchies, and the majority of countries under their protectorate are their colonies this statement has no substance.
“Human rights,” just like free trade, and free markets and freedom are wonderful ideas. “The problem is none of these things exist in practice because they don’t provide sufficient advantages to the ruling class.” The Western ruling class that owns the Fed, which in turn owns the US government.
http://www.zerohedge.com/news/2016-03-22/why-trump-right-trade-agreements
The only reason why the Fed made paper oil to go up in price was that the US stock market was falling into an abyss.
https://www.google.com/?gws_rd=ssl#q=zerohedge+02%2F10%2F2016+
Let’s look at the headlines of the day:
“Someone” Desperately Intervened to Save Stocks Yesterday
It’s Worse Than 2008 – Zero Hedge
Here Is The Exchange That Left A Stunned Janet Yellen …
Something Very Disturbing Spotted In A Morgan Stanley …
“Investors Have Completely Lost Faith In Deutsche Bank” A …
“The dovish surprise is if she explicitly removes March from the hiking calendar (which would be Draghi-esque in front running the FOMC), broadly hints at a delay or expresses concern on downside risk to long term inflation or structural stagnation. The intention would be to show US households, business and investors that the Fed has their back.” 02.10.2016
http://www.zerohedge.com/news/2016-02-09/what-yellen-could-say-tomorrow-unleash-market-surge
Oil prices were plunged to destroy Russia’s economy, no argument here.
However, it was the US economy that has started to tank.
https://www.google.com/?gws_rd=ssl#q=economy+started+to+tank.+
Oil prices, that are simply rigged, are going up, only to save the US economy.
Your thesis that Russia sells Syria for slightly higher oil prices is what we can read every day on NATO occupied Ukraine’s propaganda channels. It’s pure fiction.
“Anybody with the most basic sense of human rights, more aptly individual rights, would know that they flow not from god, but from man’s basic nature.”
But this argument is circular, as it presumes Man is an individual with a single “basic nature” that can be the repository for rights. Perhaps Locke thought that, tho Hobbes arguably did. Kant, on the other hand, was well aware that moral dilemmas can stem from opposing points of view, points of view that can be held by one person at the same time, eg, should I act here purely in my personal interest? or in the interests also of my immediate family? or in the interests of my community?
Wayne Madsen has written: “Russian President Vladimir Putin has redefined the cause of international human rights to include the concept of «collective human rights». Putin rightly argues that in addition to individual human rights, which are being used by various special interests to advance such «boutique causes» as rights got lesbians, gays, bisexuals, transsexuals, pedophiles [as seen recently by the German Green Party’s defense of members of Green Party-run pedophile communes], groups of people have the right to protect their social, religious, linguistic, and cultural identities against forces that seek to undermine such distinctions.”
How very novel! Except… not. Madsen points out that Putin’s view is supported implicitly and explicitly by international law.
It’s a must-read. Here: http://www.strategic-culture.org/news/2014/10/17/president-putin-welcomed-redefinition-of-international-human-rights.html
It seems the US dollar is no longer the petro dollar? If oil trade was the major commodity creating demand for the US dollar, then demand for the US dollar should drop along with oil prices?
But the opposite happens. Oil price goes down and the US dollar goes up.
Funny, they didn’t lift a finger to stop the bailout of the Venezuela regime and completely ignored the ratings implications of dumping bad debt on the Dominican Republic balance sheet while encumbering the US taxpayer owned GDX.
http://www.zerohedge.com/news/2014-12-02/how-goldman-sachs-became-broke-venezuelas-loan-shark
First off I must say I detest the word “annexation” in the self determination of the people of Crimea to rejoin the Russian Federation under the threat of discrimination or worse at the hands of the Kiev Nazi junta imposed on Ukraine by the American- Central bankers.
Secondly, such sanctions are an act of economic war but this is old hat and well understood. Russia and President Putin, as leader of the free world, must understand that the U.S – Central bankers will stop only short of a full exchange nuclear war to win. They will stoop to any depth as morality means nothing to them, only the end goal of converting Russia and her peoples to a vassal state and her people slaves to the western debt-money system will do. Russia and her friends and others are in a fight for life as an independent nations. Let this be clearly understood. So far Putin has made all the correct moves and for this the peoples of the world owns him many kudos.
@BRF. That is a great comment. Right on the money.
Excerpts from http://www.barefootsworld.net/fedsecrets_00.html :
The Federal Reserve System is not Federal; it has no reserves; and it is not a system, but rather, a criminal syndicate. It is the product of criminal syndicalist activity of an international consortium of dynastic families, who own its stock.
The Federal Reserve system is a central bank operating in the United States. A central bank is the dominant financial power of the country which harbors it. It is entirely private-owned, although it seeks to give the appearance of a governmental institution. It has the right to print and issue money, the traditional prerogative of monarchs. It is set up to provide financing for wars. It functions as a money monopoly having total power over all the money and credit of the people.
When Congress passed the Federal Reserve Act on December 23, 1913, the members of the 63rd Congress had no knowledge of a central bank or of its monopolistic operations. Many of those who voted for the bill were duped; others were bribed; others were intimidated. The preface to the Federal Reserve Act reads “An Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial papers, to establish a more effective supervision of banking in the United States, and for other purposes.” The unspecified “other purposes” were to give international conspirators a monopoly of all the money and credit of the people of the United States; to finance World War I through this new central bank, to place American workers at the mercy of the Federal Reserve system’s collection agency, the Internal Revenue Service, and to allow the monopolists to seize the assets of their competitors and put them out of business.
The President of the United States appoints the Governors of the Federal Reserve Board, who are then confirmed by the Senate, which creates the fiction that the Federal Reserve is part of the Federal government. It is not, the Fed is privately owned. The Federal government has never owned a single share of Federal Reserve Bank stock. The Federal Reserve Act stipulates that the stock of the Federal Reserve Banks cannot be bought or sold on any stock exchange. It is passed on by inheritance as the fortune of the “big rich”. Almost half of the owners of Federal Reserve Bank stock are not Americans.
Federal Reserve notes are actually promissory notes, promises to pay, rather than what we traditionally consider money. They are interest bearing notes issued against interest bearing government bonds, paper issued with nothing but paper backing, which is known as fiat money, because it has only the fiat of the issuer to guarantee these notes. The Federal Reserve Act authorizes the issuance of these notes “for the purposes of making advances to Federal Reserve banks… The said notes shall be obligations of the United States. They shall be redeemed in gold on demand at the Treasury Department of the United States in the District of Columbia.” These notes, printed for a private bank, then become liabilities and obligations of the United States government and are added to our present $19 trillion debt. The government had no debt when the Federal Reserve Act was passed in 1913.
—
“People who will not turn a shovel full of dirt on the project nor contribute a pound of material, will collect more money from the United States than will the People who supply all the material and do all the work. This is the terrible thing about interest …
But here is the point: If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People. If the currency issued by the People were no good, then the bonds would be no good, either. It is a terrible situation when the Government, to insure the National Wealth, must go in debt and submit to ruinous interest charges at the hands of men who control the fictitious value of gold.
Look at it another way. If the Government issues bonds, the brokers will sell them. The bonds will be negotiable; they will be considered as gilt edged paper. Why? Because the government is behind them, but who is behind the Government? The people. Therefore it is the people who constitute the basis of Government credit. Why then cannot the people have the benefit of their own gilt-edged credit by receiving non-interest bearing currency on Muscle Shoals, instead of the bankers receiving the benefit of the people’s credit in interest-bearing bonds?” — Thomas A. Edison, New York Times, December 4, 1921
Nonsense. The Fed is not privately owned. It is a government agency answerable to congress and junior to the Secretary of the Treasury.
Central banks are just an accounting operation. They have much less power than people like to think.
The government issues dollars by spending them into existence.
There is a lot of confusion regarding the global oil industry as well as the oil price collapse of the last 15 months or so.
Even if all of the NATO-GCC Alliance is in on the trick to crush the oil price and harm the Russian economy (and Iranian, and Venezuelan, and Iraqi) as much as possible. This means that not only the Fed, but partly also the ECB, JCB and BoE were in on the act to some degree (because only then the dollar could rise substantially, if said rise was not only CB induced, but CB induced with the purpose of crushing Russia and her allies)
Even if this were the case, there are still factors in the global oil market beyond what the CBs do and the most important by far, is of course the actual production of oil. Let us first take OPEC. Did OPEC massively increase production? This is actually not the case. Only a cursory glance at OPEC production statistics reveals this. Most of OPEC’s production rise since early 2015 has been thanks to Iraq, a Russian and Iranian ally. Since Jan 2015, Iraq increased its production by roughly 1m/bbl/day. There was also a significant increase in KSA production of between 500k to 600k bbl/day in the period under discussion. More recently, there has been a jump in Iranian production (another Russian and Assad ally) due to the lifting of sanction on that country. There was also a minor increase in the production of the UAE (around 100k.bbl/day) Most other OPEC producers have been flat or declining (OPEC has 13 members, of which one, is an IMPORTER of oil, Indonesia)
So, whatever NATO-GCC play we may have had, the only NATO allies that managed any increases in production since the economic war on Russia begun, were KSA & UAE for a grand total of 700k/bbl/day.
Most of the OPEC increase has in fact come from Russia’s allies, Iraq & Iran. Remember that both these countries have been suppressed by the glorious NATO-GCC for decades now and are now rightfully regaining their place in the global energy markets and buying Russian weapons to boot (as well as fighting on Russia’s side on the battlefield, sacrificing blood & treasure.
If the GCC are looking to bring down Russia & co via low oil prices, they are not doing that great of a job it seems. All of Russia/Iran/Iraq are willing to take the short-term pain for long-term gain.
Having said that, I won’t deny that it is highly likely that NATO-GCC (and maybe even their CBs) tried to push oil prices somewhat lower than they would otherwise have been, had it not been for some of their statements and policies.
Another factor here are the declarations of the EIA and IEA. The first is based in the US and the latter in France, so both are under the NATO aegis. These two oil agencies have sounded quite bearish on oil prices for some time now and have been reporting stats that show that there is indeed a global oil glut. However, there have been precedents in which these agencies have been off the mark with their numbers and even more so with their forecasts. The likelihood that these agencies have been overstating global production as well as inventory levels is real, but far from certain, and will have to revised at some stage in the future.
In my view, there is indeed a temporary oil glut in the world market. This global glut is less to do with NATO’s conspiratorial skills and more to do with this being the residual effect of the previous long period of extremely high oil prices. These high prices encouraged massive and even reckless investments in high-cost forms of extracting oil such as US shale, Canadian tar sands and ultra-deep-water in the Gulf of Mexico, offshore Brazil & Colombia as well as offshore Africa. As I have stressed on this forum for so long, the current extremely low oil prices spell the long-term decline and even death for such types of oil extraction (if the price remains low long enough)
What is missing from the above analysis (as well as most analyses I read everywhere on the internet) is the disconnection of recent and current prices with potential future production. Yes, the low price of oil hurts Russia/Iran/Iraq/Venezuela in the short-term, but how long can the pampered GCC states handle it? Yes, they have tons of cash in reserve and they are also low-cost producers but their expenses are massive as they are obliged to be subsidizing the Western economies indefinitely and they have to preserve their dollar pegs or else face massive inflation (as they import almost everything the consume outside of oil)
More vitally and pertinently, how long can the US shale, Canadian tar sands and even the Western super-majors handle the current oil price war? The debt overhangs are massive and have triggered stock and bond market distress before the recent rally in oil prices. This indicates that we may very well be before the Lehman moment for these North American corporations with far-reaching consequences for the entire Western financial network. Russia and friends are not the only ones hurting from low oil prices! I believe (and we will soon find out whether I am right or wrong) that there will be yet one more vicious leg-down in oil prices that can briefly go as low as say $20/bbl. I think that this will deliver the KO blow to US shale and beyond. After that, the decisive retrenchment away from marginal production will be a given. And it is not just US shale, but production all over the world will suffer from the meltdown in prices of the last 16 months or so. This is the dynamic that the above analysis (as well as many others) is missing, and this is why I consider the collapsed oil price as only a temporary weapon against Russia.
What many seem to miss, is that oil production follows investment which follows price but only with a considerable lag time. US oil production has been declining in recent months and this decline will persist, especially if prices remain low. Similar tendencies will emerge in other parts of the globe. I think that the effects of the ongoing oil-price-wars will begin to be seriously felt from late 2017 onwards. From there on then, we will be looking at oil shortages and sky-high prices going forward.
Correlation is not causation.
Interesting theory with what appears prima facie to be evidence.
But the evidence is weak. Causation is not convincingly demonstrated, and the hypothesis put forward is completely speculative, with little corroborating evidence.
I’m not buying it.
Correlation is not causation. Though the correlation is interesting, there is no corroborating evidence for the hypothesis put forward. Pure speculation. Thin evidence.
I don’t buy it.
Silly me for imputing causation into what was just a crazy, incidental correlation.
Funny though how that correlation began and ended, literally to the day, on the two most major geopolitical announcements re: US/EU/Russia/Syria over the past two years, 7/29/14 and 2/11/16.
Good luck digging up the evidence you seek!
The price of crude and the value of the ruble (or the Cdn$) correlate tightly for obvious reasons. The correlation with OPEC production estimates is less cogent. But there are a lot of other facts to consider:
1. The Fed has been playing this will it or won’t it hike for a long time. Expectations for a rise in interest rates have been a constant factor in financial speculation for some time, and the BLS numbers and the fact that there has been almost 10 years of monetary accomodation have strengthened the case for a rate hike. The Fed’s credibility is on the line to act as though monetary policy is normalizing. In addition, NIRP will eventually kill the insurance industry, annuities, pensions, etc. etc.
>> It simply is not true that intimations of a Fed hike came out of the blue in the summer of 2014 and admit no other explanation than directives from the white house. The Fed remains in a quandry between normalizing and fear for the state of the economy. Perhaps Russia and the Crimea are less important to the POTUS than the state of the domestic economy, at least historically, domestic concerns have always trumped all others. And most countries are trying to help their exports by devaluing their currency.
2. The announcement of sanctions itself may be deemed to have had a major impact and of course co-incide precisely with the start of your data series.
3. The oil market has been well-supplied for many years now, with ramping production by US fracking, but also by among others Canada, by Saudi, and by Russia.
4. Saudi and Iraqi productions hikes are not just political: both have seen tremendous resources coming on line, the fruit of after years of investment.
5. There are a lot of theories about Saudi production hikes, none of which are entirely and obviously satisfactory.
6. The price of oil has been affected mainly by changes to storage volume, especially the nearing of maximum storage capacity.
7. The recent increases in oil price may well be yet undone: Oil and equities have been caught up in a tremendous short squeeze the last 6 weeks, and this may well unravel as yet, changing the end date of your data series to something else than the announcement about pulling out of Syria.
8. There is absolutely no corroboration for the idea that the USA has made a deal with OPEC or Saudi about the levels of oil exports over global demand (notably to the detriment to its own oil industry, and domestic economy, and endangering the viability of the domestic and perhaps global financial world).
>> Note that there are three to five items of speculation here: (a) Russia pulls out of Syria because of a deal about oil AND the price of the dollar; (b) USA has deal with Saudi about production; (c) Fed actions (to tighten) steered by the US president AND Crimea trumps all other global and economic policy decisions. There is no corroborating evidence for any one of these five hypotheses, and it could well be argued that even if this were true, the US is shooting a bullet through its own hide in order to strike Russia.
Yes. And I actually remember Feb. 22 very well. That day oil logged one of its largest one-session move up ever.
You have to realize the Putin cultists truly believe he’s fighting the NWO. They will turn a blind eye to any evidence that disturbs that narrative.
There is a reason oil recorded double digit gains on Feb. 22. And there’s a reason it’s up more than 50% since then… why Russia was allowed to issue its bonds… and why Russia declared “mission accomplished” in Syria.
Best analysis I’ve read on what went down in the last two years.
Certainly beats the constant “U.S. economy about to collapse” wishful thinking.
I wish I had discovered your work before.
I confirm this thesis,as I read the very same in a Daily Telegraph article of AEP(MI6 and son of MI6 agent) in april or may 2014 if not wrong?
I don’t remember but this ‘operation’ has even a name code?Like the ‘Condor operation’ actually taking place in South America against Brazil(almost done),Argentina(done),Venezueal(almost done),Bolivia(same) and Chile+Ecuador will follow.Not necessary in Mexico or Colombia with the narco traffic already already in power.
The problem is that more bubles ok but trees don’t reach the sky.There will be a solid hard landing one day.
Today we got the continuation of Gladio 2.0 in Brussels as a diversion.
Utter nonsense. The Fed has no control or influence on oil prices.
:D
Seriously?
You may want to listen to a few lectures by Imran Hosein.
Why?
I knew something like this made the changes in favour of destroying both Europe and Russia together that much easier almost overnight. Just like the US downed MH17 forced Merkel to cave into Washington orders the EU sanction Russia for things it did not do, 6 times as a matter of fact. She just approved a new set. Today Washington itself is terrified it will not be able to force Europe to continue the criminal sanctions on Russia permanently! It will do anything to stop the European Union form acting independently. Including massive amounts of downed passenger planes, new ziti-ti GMO flies, massive barrel bombed eruptions, etc…….and Mrs. William Clinton as a the choice world war President. Loves to kill.
The Fed is still abdicating it’s independence to genocidal geopolitical Whitehouse “strategy”. Will be forced to give up any independence permanently.
According to the Deputy Minister of Energy of Russia Kirill Molodtsov, “the average production cost of a barrel of Russian oil is about $2. The cost of producing hard-to-recover and offshore reserves is above $20. The rates also vary significantly depending on the cycle of mineral development. With declining production, the cost is higher, since at the same cost level less oil is extracted,” – said the official.
Earlier the president of “Rosneft” Igor Sechin said that because of financial speculators oil prices could fall to $10 per barrel. According to him, the annual decline in average daily production in the world is estimated at 3 million barrels a day. Meanwhile, according to Sechin, the excess of supply of oil over demand is between 1.5 and 1.7 million barrels a day, according to RBC.
Saudi Arabia is ready to sign an agreement on limiting oil production, even if Iran does not.”
http://www.fort-russ.com/2016/03/ministry-of-energy-cost-of-production.html
any help?
Brandon
I suppose I was just being nosy, but I clicked on “Only Price Matters”. What is the buy-side of a long-short fund (a hedge fund, I assume)?
Well written, very plausible.
Finance is driven by geopolitics, not the other way round.
2014-2016 is similar in objective to the engineered financial crisis that brought down Weimar and installed Wall Street’s Russophobes:
https://tauroggen-e.net/2015/09/20/weimar-ukraine-treason-is-a-master-from-new-york-and-london/
Or the Saudis could have been used like a cheap tool by the USA without their realizing the ramifications.
http://m.strategic-culture.org/news/2014/12/20/how-cia-launched-the-financial-pearl-harbor-attacks-russia-venezuela.html
By pumping salt water at high pressure under some of their old fields they boosted production and will get extra production but they can’t turn the tap off or even slow it down or the oil will be spoiled with salt water which will mix under the pressures involved.
If this theory is correct then the Saudis won’t be able to cut production for 4-5 years until the pressure wanes. That would be 2019-2020.