The Oil Price Plunge Conspiracy Discussed

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The drop in oil revenues has triggered a self-reinforcing feedback dynamic.

Oil is not just something that is refined into fuel–it is capital, collateral, debt and risk. In other words, it is intrinsically financial. As I noted in The Oil-Drenched Black Swan, Part 2: The Financialization of Oil, oil has been financialized to the point that few outside the industry understand the dominoes that are currently toppling.
Let’s start with the obvious fact that the impact of lower oil is financial, political and geopolitical. Lower oil revenues are negatively impacting:
1. Oil-exporters’ revenues
2. Monetary policy of central banks
3. Trade flows
4. Global financial markets
Lower revenues are pressuring oil-dependent governments such as Russia, Venezuela and Iran, and destabilizing the geopolitical order as weakened oil exporters sink into recession and political turmoil.
Lower revenues are also kicking the financial supports out from under the debt-dependent, enormously capital-intensive oil exploration and development projects in North America.
Simply put, the sharp drop in oil revenues has knocked over a line of financial dominoes whose end is not yet in sight.
 
The drop in oil revenues has triggered a self-reinforcing feedback dynamic. As the financial dominoes fall, there is less capital available to maintain production, so oil output falls, further reducing income. As the collateral,income and impaired debt dominoes topple, risky debt in sectors completely unrelated to oil start falling as institutions trim risk throughout their holdings.
Gordon T. Long and I discuss the highlights of this complex set of issues in this video program, The Oil-Drenched Black Swan (28 minutes):

For another perspective, click the links below to watch Dean Henderson on Press TV talking about the Oil Conspiracy.  

On Preventing the Next #BailIn for #TBTF and The Global Bankers’ Coup

This is the first big move by the banksters in the legal space for a long time.  If Elizabeth Warren is pissed, then you KNOW the banksters did something illegal, immoral, unethical, and will likely cost taxpayers more money. It’s time to pass #GlassSteagall.  It’s time to #AuditTheFed. It’s time to build #PublicBanking.  It’s time for the #MonetaryReformAct supported by Bill Still. 

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“On December 11, 2014, the US House passed a bill repealing the Dodd-Frank requirement that risky derivatives be pushed into big-bank subsidiaries, leaving our deposits and pensions exposed to massive derivatives losses. The bill was vigorously challenged by Senator Elizabeth Warren; but the tide turned when Jamie Dimon, CEO of JPMorganChase, stepped into the ring. Perhaps what prompted his intervention was the unanticipated $40 drop in the price of oil. As financial blogger Michael Snyder points out, that drop could trigger a derivatives payout that could bankrupt the biggest banks. And if the G20’s new “bail-in” rules are formalized, depositors and pensioners could be on the hook.
The new bail-in rules were discussed in my last post here. They are edicts of the Financial Stability Board (FSB), an unelected body of central bankers and finance ministers headquartered in the Bank for International Settlements in Basel, Switzerland. Where did the FSB get these sweeping powers, and is its mandate legally enforceable?
Those questions were addressed in an article I wrote in June 2009, two months after the FSB was formed, titled “Big Brother in Basel: BIS Financial Stability Board Undermines National Sovereignty.” It linked the strange boot shape of the BIS to a line from Orwell’s 1984: “a boot stamping on a human face—forever.” The concerns raised there seem to be materializing, so I’m republishing the bulk of that article here. We need to be paying attention, lest the bail-in juggernaut steamroll over us unchallenged.” Finish the article here.

Knowing the White House and Congress are surrounded by Council on Foreign Relations and the Israeli lobby and they are both intricately interwoven with the banksters in the too big to fail banks and the Federal Reserve, it appears their plan is to go after OUR DEPOSITS and PENSIONS.  This is why the article is entitled “The Global Bankers’ Coup”.  It is a financial act of terrorism.

There are all kinds of alternatives to another bailout.  Let the too big to fail banks and their ponzi scheme Federal Reserve lending apparatus FAIL!

The Last 15 Years In the DJIA: 0.14% Annual Return

One of the great myths about investing that we’re told by the mainstream investment education is that we should “buy and hold” for the long term.
I remember being taught in a personal finance class long ago that I should just buy the S&P 500 index, walk away, and that years later I will have achieved huge gains.
The premise is that over a long period of time, it doesn’t really matter at what point you get in and out. The long-term trend of the stock market portends that you will make money.
It’s those kinds of investing myths that become axiomatic through repetition. You keep hearing the same thing over and over again and pretty soon people believe it.
Let’s look at the data.
It’s true that stock markets have plenty of peaks and troughs. Going back to the last relative peak, the Dow Jones Industrial Average (DJIA) hit just over 14,000 in October 2007; back then this was an all-time high.
If you had bought the DJIA back then, your return on the increase in share prices through today would work out to be a measly 3.5% on an annualized basis.
If you adjust that for taxes and inflation (even using the government’s own monkey numbers for inflation), you’re looking at a real rate of just 1.2%.
Now just think about everything that you saw in the last 7 years. The volatility. The risk. The turmoil.
Was it worth it? Probably not.
But if we go back further and hold an even longer-term view, the picture must brighten, right?
Let’s go to the peak before that. In early 2000, stocks once again reached what back then was an all-time high.
If you had bought the S&P 500 index back then (which is exactly what I was told at precisely the time that I was told), your annualized rate of return through today would be just 2.17%.
If you adjust that number for taxes and inflation, your real rate of return would be a big fat 0.14%… as in less than 1%. It’s practically ZERO.
Think about what you saw over the last 15 years in the markets—the collapse after 9/11, interest rates cut to zero, interest rates ratchet up again, huge swoons in markets, the credit crunch, Lehman’s collapse, the debt ceiling debacle, etc.
Is all that really worth a return of 0.14% per year? (i.e. 14 cents on every $100 invested)
It makes absolutely zero sense to do this with our money. But that’s what we’re forced into right now with most conventional investments at their all-time highs.
Bottom line—you don’t HAVE to be invested in the market. Sometimes the best investment you make is the investment you don’t make.
The challenge is, of course, that if you’re not invested in the market, your money is just sitting at the bank, earning less than the rate of inflation.
Welcome to the world of mainstream financial options. You’re damned if you do and damned if you don’t.
The conclusion here is very simple. It’s time to move on from the mainstream. There’s too much technology and too many global options now to be lulled into conventional investments that are born to lose.

JP Morgan Pays Enormous Fine to Keep Whistleblower Quiet

The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare | Rolling Stone

Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing.


Read more: http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106#ixzz3JdvfZJ8P


The Banker Commodity Cartel: Koch, JP Morgan Chase, and Goldman Sachs

The story of how JPMorgan, Goldman and the rest of the Too Big To Fails and Prosecutes, cornered, monopolized and became a full-blown cartel – with the Fed’s explicit blessing – in the physical commodity market is nothing new to regular readers: to those new to this story, we suggest reading of our story from June 2011 (over two and a half years ago),  “Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers’ Diamond Monopoly.” That, or Matt Taibbi’s latest article written in his usual florid and accessible style, in which he explains how the “Vampire Squid strikes again” courtesy of the “loophole that destroyed the world” to wit: “it would take half a generation – till now, basically – to understand the most explosive part of the bill, which additionally legalized new forms of monopoly, allowing banks to merge with heavy industry. A tiny provision in the bill also permitted commercial banks to delve into any activity that is “complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally.”Complementary to a financial activity. What the hell did that mean?… Fifteen years later, in fact, it now looks like Wall Street and its lawyers took the term to be a synonym for ruthless campaigns of world domination.
Some key excerpts:
Today, banks like Morgan Stanley, JPMorgan Chase and Goldman Sachs own oil tankers, run airports and control huge quantities of coal, natural gas, heating oil, electric power and precious metals. They likewise can now be found exerting direct control over the supply of a whole galaxy of raw materials crucial to world industry and to society in general, including everything from food products to metals like zinc, copper, tin, nickel and, most infamously thanks to a recent high-profile scandal, aluminum. And they’re doing it not just here but abroad as well: In Denmark, thousands took to the streets in protest in recent weeks, vampire-squid banners in hand, when news came out that Goldman Sachs was about to buy a 19 percent stake in Dong Energy, a national electric provider. The furor inspired mass resignations of ministers from the government’s ruling coalition, as the Danish public wondered how an American investment bank could possibly hold so much influence over the state energy grid.
The motive for the Kochs, or anyone else, to hoard a commodity like oil can be almost beautiful in its simplicity. Basically, a bank or a trading company wants to buy commodities cheap in the present and sell them for a premium as futures. This trade, sometimes called “arbitraging the contango,” works best if the cost of storing your oil or metals or whatever you’re dealing with is negligible – you make more money off the futures trade if you don’t have to pay rent while you wait to deliver.
So when financial firms suddenly start buying oil tankers or warehouses, they could be doing so to make bets pay off, as part of a speculative strategy – which is why the banks’ sudden acquisitions of metals-storage companies in 2010 is so noteworthy.
These were not minor projects. The firms put high-ranking executives in charge of these operations. Goldman’s acquisition of Metro was the project of Isabelle Ealet, the bank’s then-global commodities chief. (In a curious coincidence commented upon by several sources for this story, many of Goldman’s most senior officials, including CEO Lloyd Blankfein and president Gary Cohn, started their careers in Goldman’s commodities division.)
Then there are the political connections:
In 2010, a decade after the Rich pardon, Holder was attorney general, but under Barack Obama, and two Rich-created firms, along with two banks that have been major donors to the Democratic Party, all made moves to buy up metals warehouses. In near simultaneous fashion, Goldman, Chase, Glencore and Trafigura bought companies that control warehouses all over the world for the LME, or London Metals Exchange. The LME is a privately owned exchange for world metals trading. It’s the world’s primary hub for determining metals prices and also for trading metals-based futures, options, swaps and other instruments.
“If they were just interested in collecting rent for metals storage, they’d have bought all kinds of warehouses,” says Manal Mehta, the founder of Sunesis Capital, a hedge fund that has done extensive research on the banks’ forays into the commodities markets. “But they seemed to focus on these official LME facilities.”
The JPMorgan deal seemed to be in direct violation of an order sent to the bank by the Fed in 2005, which declared the bank was not authorized to “own, operate, or invest in facilities for the extraction, transportation, storage, or distribution of commodities.”The way the Fed later explained this to the Senate was that the purchase of Henry Bath was OK because it considered the acquisition of this commodities company kosher within the context of a larger sale that the Fed was cool with – “If the bulk of the acquisition is a permissible activity, they’re allowed to include a small amount of impermissible activities.”
What’s more, according to LME regulations, no warehouse company can also own metal or make trades on the exchange. While they may have been following the letter of the law, they were certainly violating the spirit: Goldman preposterously seems to have engaged in all three activities simultaneously, changing a hat every time it wanted to switch roles. It conducted its metal trades through its commodities subsidiary J. Aron, and then put Metro, its warehouse company, in charge of the storage, and according to industry experts, Goldman most likely owned some metal, though the company has remained vague on the subject.
If you’re wondering why the LME would permit a seemingly blatant violation of its own rules, a good place to start would be to look at who owned the LME at the time. Although it eventual­ly sold itself to a Hong Kong company in 2012, in 2010 the LME was owned by a consortium of banks and financial companies. The two largest shareholders? Goldman and JPMorgan Chase.
Humorously, another was Koch Metals (2.32 percent), a commodities concern that’s part of the Koch brothers’ empire. The Kochs have been caught up in their own commodity-manipulation schemes, including an episode in 2008, in which they rented out huge tankers and sed them to store excess oil offshore essentially as floating warehouses, taking cheap oil out of available supply and thereby helping to drive up energy prices. Additionally, some banks have been accused of similar oil-hoarding schemes.
And then there is of course Blythe, who is now looking for a new job precisely as a result of the cartel story:
Chase’s own head of commodities operations, Blythe Masters – an even more famed Wall Street figure, sometimes described as the inventor of the credit default swap – admitted that her company’s warehouse interests weren’t just a casual thing. “Just being able to trade financial commodities is a serious limitation because financial commodities represent only a tiny fraction of the reality of the real commodity exposure picture,” she said in 2010.
Loosely translated, Masters was saying that there was a limited amount of money to be made simply trading commodities in the traditional legal manner. The solution? “We need to be active in the underlying physical commodity markets,” she said, “in order to understand and make prices.”
We need to make prices. The head of Chase’s commodities division actually said this, out loud, and it speaks to both the general unlikelihood of God’s existence and the consistently low level of competence of America’s regulators that she was not immediately zapped between the eyebrows with a thunderbolt upon doing so. Instead, the government sat by and watched as a curious phenomenon developed at all of these new bank-owned warehouses, in the aluminum markets in particular.
Finally, the big picture:
[T]he potential for wide-scale manipulation and/or new financial disasters is only part of the nightmare that this new merger of banking and industry has created. The other, perhaps even darker problem involves the new existential dangers both to the environment and to the stability of the financial system. Long before Goldman and Chase started buying up metals warehouses, for instance, Morgan Stanley had already bought up a substantial empire of physical businesses – electricity plants in a number of states, a firm that trades in heating oil, jet fuels, fertilizers, asphalt, chemicals, pipelines and a global operator of oil tankers.
How long before one of these fully loaded monster ships capsizes, and Morgan Stanley becomes the next BP, not only killing a gazillion birds and sea mammals off some unlucky country’s shores but also taking the financial system down with them, as lawsuits plunge the company into bankruptcy with Lehman-style repercussions? Morgan Stanley’s CEO, James Gorman, even admitted how risky his firm’s new acquisitions were last year, when he reportedly told staff that a hypothetical oil spill was “a risk we just can’t take.”
The regulators are almost worse. Remember the 2008 collapse happened when government bodies like the Fed, the Office of the Comptroller of the Currency and the Office of Thrift Supervision – whose entire expertise supposedly revolves around monitoring the safety and soundness of financial companies – somehow missed that half of Wall Street was functionally bankrupt.
Now that many of those financial companies have been bailed out, those same regulators who couldn’t or wouldn’t smell smoke in a raging fire last time around are suddenly in charge of deciding if companies like Morgan Stanley are taking out enough insurance on their oil tankers, or if banks like Goldman Sachs are properly handling their uranium deposits.
“The Fed isn’t the most enthusiastic regulator in the best of times,” says Brown. “And now we’re asking them to take this on?”
Read the full story here (Rolling Stone link), or alternatively for those curious, here is a presentation highlighting all the key aspects of the aluminum price manipulation story by the big banks.

Did you ever see these charts? Maybe this is why we should #AuditTheFed NOW!

Hey Ben Bernanke, before you go, tell me just one thing.  Did you ever see this chart? Notice anything? Yeah, the people you are SUPPOSED to be SERVING are the United States Citizens and instead you are serving foreign masters, and we’re serving you.  Apparently you are the original Too Big To Fail Bank.  Well, you know how the old saying goes…

Screw me once, shame on you.  Screw me twice, shame on me.  Screw me threw times, what a pity.

Too bad we can’t order an independent indictment of this so called independent agency you work for.  Well, there are a few people calling for a complete independent and total audit of the Federal Reserve System and its Charter Members.  (You know, like the one we did a couple years back and discovered that you gave bail out money to every bank in your cabal.)

Senator Rand Paul and former Congressman Dr. Ron Paul have both called for one THIS YEAR, and it’s only January!  They have tried many times before with help from both the Left and the Right.  Unfortunately, 45% of Americans are independents and don’t pay attention to the Collectivist party announcements.

We have several months before Congress is supposed to go on recess again – they only work like 90 days a year or something like that, anyway, wouldn’t it be swell if we could just get a quick peak at the Federal Reserve’s books.  It would be an accounting boom.  You could provide a data feed for a small fee and muckrackers and alternative media journalists all over the world could sift through its contents, making nice charts like you.  Only this time we are going to pay attention and share our own views of what’s happening in the global economy.  Now that we are all linked up on the globalist network, a ripple in Syria or Japan could give us a headache or cancer.  This is serious economics here people.  Not benign statistics.  There is a war on for your mind and your money.  Are you going to come out on top this time?

Pay attention.  These are questions Senator Elizabeth Warren should ask of Federal Reserve Chairwoman, Janet Yellen.

What does this chart mean? What are the data sources? Where is that data hosted? At the Saint Louis Federal Reserve or some ISP? How will you be affected by the Trans Pacific Partnership? From a risk management perspective, shouldn’t you have a secure backup archive of all your data going back 100 years?

to be continued…

Personal Saving Rate (PSAVERT)

2013-11: 4.2 Percent   Last 5 Observations
Monthly, Seasonally Adjusted Annual Rate, Updated: 2013-12-23 7:46 AM CST
Graph of Personal Saving Rate
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Type:
Size:
Range:
Units:
Source: U.S. Department of Commerce: Bureau of Economic Analysis
Release: Personal Income and Outlays
Notes:

Personal saving as a percentage of disposable personal income (DPI), frequently referred to as “the personal saving rate,” is calculated as the ratio of personal saving to DPI.

BEA Account Code: A072RC1

A Guide to the National Income and Product Accounts of the United States (NIPA) – (http://www.bea.gov/national/pdf/nipaguid.pdf)