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Page added on January 25, 2016

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OECD’s perspective on the global economy

Consumption

“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up. Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief. It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something. The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly. Debt jubilees have been going on for 5,000 years, as far back as the Sumerians.”

William White, chairman, OECD’s review committee; former chief economist, Bank for International Settlements

“So much of the frenzy in shale in the past few years was a result of the money pouring out of Wall Street.  It was as much a Wall Street play as it was an oil-and-gas play. It was putting money to work. Companies took on all that risk and now we see the result [–bankruptcies].”

Terry Clark, White Marlin Oil & Gas Co.

Contents
1.  Oil and the Global Economy
2.  The Middle East & North Africa
3.  China
4.  Russia/Ukraine
5. The Briefs

1.  Oil and the Global Economy

Oil prices touched 12 year lows of just above $27 a barrel on Wednesday and then rebounded sharply to close above $32 on Friday. Other than the major east coast snowstorm in the US and the expectation there would be more demand for heating oil, there was no significant news to touch off the rebound other than traders feeling there was not much downside for oil prices left and that it was time to take profits. The rapid rebound was helped by the record size of the short positions held by hedge funds. As these were liquidated, the rebound accelerated to gain some 21 percent from the Wednesday lows.  Hints by the European Central Bank last week that there could be a further stimulus coming also supported the move.

Analysts and investment banks warned, however, that there is no fundamental reason to expect higher prices in the immediate future and that lower prices than were touched on Wednesday remain a possibility. The IEA warned last week that the oil markets could “drown in oversupply” once Iranian production begins to increase. The Bank of Montreal says it may be three years before the markets come into balance and prices start to rise significantly. There is still not much good economic news from the world’s main oil consumers and many expect consumption to slip further in the immediate future. Even the leading technical analysts are skeptical that we have seen this year’s lows as yet, terming the price jump last week a classic “dead cat bounce.”

As was expected, US crude inventories grew by 4 million barrels last week and gasoline stocks climbed by 4.6 million barrels.  Total products supplied by US refiners were down 1.8 percent from last year and gasoline consumption was down by 2.8 percent. The giant snow storm that shut down much of the east coast over the weekend, which climate scientists say was helped along by unusually warm water in the North Atlantic, will not do much to help with gasoline consumption this week.

The debate over whether we have enough space to store all the crude that is being sent into inventory continues with Reuters telling us that some 230 million barrels of new storage capacity will be completed this year.  Half of it, however, is in new Chinese strategic reserve sites not normally accessible for commercial use. The Chinese, however, are supposed to be building some 40 million barrels’ worth of new commercial space for their privately owned “teapot” refineries in Shandong province which are now allowed to import oil for the first time. There is also supposed to be at least 100 million barrels worth of space left in commercial storage tanks around the world. A lot of this “free” space however, is in inland facilities and salt caverns which are not normally used for temporary storage of commercial oil. Crude stocks at Cushing, Okla., up 191,000 barrels last week, are now around 70 percent of capacity, the level considered the practical maximum by the industry. While there is storage space available, it is not necessarily where people can make use of it. The question of whether a space shortage will drive prices lower in the coming year or so remains open.

Fears of epic debt defaults within the oil industry and elsewhere continue to rise. A leading monetary theorist has warmed the avalanche of bankruptcies that are coming will test the social and political fabric as the the global financial system becomes increasingly unstable. European banks have already admitted that they have $1 trillion in non-performing loans and Wall Street has its problems with defaults mounting in the US shale oil industry. The size of China’s debt is becoming legendary. Whether all this can be managed in an orderly fashion in the next few years is a critical question. The talk at the Davos conference this week is that oil prices could be “a lot lower for a lot longer.”

2.  The Middle East & North Africa

Iran:  Despite much brave talk on the part of Iran’s leaders that that new era is at hand and they will soon be exporting another million barrels a day, many are skeptical about how quickly Tehran can increase exports. The Iranians do have existing contracts with several major Asian oil buyers, but have been shut off from European markets for the last three years due to the sanctions. While the major sanctions forbidding importation of Iranian oil have been lifted, there are still many secondary sanctions, especially those imposed by the US, which may be a problem for insurance companies and bankers. Few large companies are willing to run afoul of US regulations which could ban them from doing business with the US for doing business with Iranian firms still being sanctioned.

The US has sanctions on much of Iran’s Republican Guard for a variety of actions it has taken over the years. Unfortunately for Tehran, the Guard not only guarantees the security of the state, but is also involved with many of the Iran’s most lucrative economic activities. There is a danger that companies could find themselves banned from doing business with the US in return for supplying insurance, banking, or other services to Iranian firms which turn out to be controlled by the Republican Guard. These issues may take considerable time to clarify. Some analysts are saying the Tehran may not be able to export much more than another 350,000 b/d this year no matter what the size of its discounts.

Iran’s problem become even trickier when Tehran tries to attract large foreign investments to upgrade its oil industry. As the Sunni-Shiite conflict intensifies, Iran may find that its deep involvement in numerous Middle Eastern conflicts will deter many from investing in its economy out of fears that there may be retaliation from the much larger community of Sunni Arab states, or that sanctions might be re-imposed for some misstep on Tehran’s part.

Syria/Iraq: Last week left mixed results in Syria none of which were good for a swift end to the civil war. In the West, Syrian forces with the help of heavy Russian bombing retook the last rebel-held town in Latikia province, removing the pressure on the Assad government. In the East, however, the Islamic State continued the attack to take the major government-held city Deir al-Zour which has a population of 200,000. The Observatory says both sides are suffering heavy losses in the siege of the city. The loss of Deir al-Zour to ISIL would be a major blow to the Assad government and to perceptions concerning Moscow’s intervention. So far the major result of the four-month Russian bombing campaign, which may be killing more civilians by indiscriminate bombing than actual rebel fighters, is to insure that the Assad government will not be driven from power by the uprising and to insure that the civil war can continue indefinitely.

As oil plays a decreasing role in the Syrian situation, except to the extent the remnants of Syria’s oil production keeps the Islamic State functioning, it is a fair question as just why the situation is of concern from a peak oil perspective. Nearly all the major players in the Middle East, including its major oil producers such as Iran, Saudi Arabia, and Iraq, are deeply involved in Syria, as are the US, EU, Russia, Turkey, and Israel. The refugee flood into Europe as millions of Syrians are being driven from their homes is beginning to tear at the political fabric of the EU and is even reverberating into the US presidential elections. As long as this situation continues to deteriorate, it threatens oil exports from the region — as is already happening in Libya.

The Pentagon and its coalition, which is much more careful in carrying out air strike strikes than Moscow or the Assad government, says it has killed more than 25,000 ISIL fighters in 18 months of air strikes and that the numbers are increasing. While many of these fighters have been replaced by recruitment or impressment of more fighters from the millions living in territory under ISIL control, US officers say there is a noticeable decline in the quality and dedication of the ISIL fighters. Turkey and other countries are making efforts to stem the flow of highly motivated foreigners into the conflict. The US says it is making preparations for a major push by Iraqi and Kurdish forces to retake Mosel this year.

Genel Energy which is deeply involved in Kurdish oil production says that low oil prices are becoming a major problem for the company’s profitability and for the Kurdish government, which depends on oil for nearly all its revenue.  Baghdad expects that it will be able to increase production by 400,000 b/d this year, despite the lifting of the sanctions on Iran.

Libya: The situation in Libya clearly is moving again. Last week 32 people were nominated to serve as cabinet members in a new Libyan unity government. These individuals still need to be approved by the parliament sitting in Tobruk. The US and its allies in Europe have begun to step up intelligence activities in Libya in anticipation of bombing and commando raids against the Islamic State which now controls about 150 miles of Libyan coastline extending out from Sirte. Last week the Islamic State’s forces attacked and damaged more oil storage tanks at the Ras Lanuf oil export terminal. Four tanks were set on fire as was a pipeline linking the tanks to the Amal oil field.

With pressure on the Islamic state increasing in Iraq and Syria, many of its foreign recruits are being directed to Libya where as yet there is no military pressure against the organization. It appears that this is about to change and the US and Europe are preparing for a military intervention against the 3,000 or so jihadists operating in the country.

Saudi Arabia/Yemen:

The anarchy in Yemen continues with ISIL car bombing having killed some 25 officials in Aden during the past month. Saudi bombings of Houthi-held towns, including the capital of Sana, continue to kill and injure dozens including many civilians. The new animosities between the Saudis and Iran have lessened the possibility of a negotiated end to the civil war which seems destined to go on indefinitely. The latest mediation efforts by Pakistan have been rejected. The Yemen war is estimated to be costing the Saudis some $200 million a day to support the bombing campaign and the foreign mercenaries it has recruited to fight the Houthis. Riyadh can ill afford this expenditure considering the size of the deficits it is running.

Saudi oil exports climbed to a seven-month high of 7.7 million b/d in November as the need for oil to support domestic air conditioning declined and refineries normally buying Saudi oil came back online from maintenance.

Rumors are increasing that 80-year King Salman is suffering from dementia and has increasing trouble functioning. This situation has raised questions as to how soon there will be a new king and whether he will be the 55-year old crown prince bin Nayef, favorite of the US or possibly the deputy crown prince and son of the current king, 29-year old Mohammad bin Salman.  It is too early to talk about the possibility of an intra royal family conflict over a successor to the king which could lead to serious consequences for the country and its oil exports; however, the issue looms in the background.

3.  China

Chinese economic growth remains at the top of the concern list not only for the oil industry, but for much of the global economy.  Last week Beijing announced that its GDP growth rate for the 4th quarter was down to 6.8 percent and for the year was down to 6.9 percent. Given the importance of these numbers to the reputation of the Chinese Communist Party and its ability to govern, it is doubtful if any lower growth rates will be announced in the immediate future, despite many indications that it is actually much lower.

Recent gyrations in Chinese equity markets are also raising concerns about the outlook for China’s economy although some see little relationship in what happens in the stock markets as compared to actual economic progress. Many see the stock markets driven by government announcements of the latest stimulus plan as opposed to corporate profitability. In general, companies do not depend on the equity markets for their financing which either comes directly from the state or through bank loans. Some see China’s stock markets as a way for the government to soak up excess spending power from the general public.

China’s economic slowdown is raising concerns among those countries which send a major share of their exports to China. Beijing consumes about 50 percent of some raw materials so any slowdown can have a major impact. Most vulnerable are those countries that have made major investments in the belief that Chinese firms would always be reliable customers for their exports. Sales in China account for some 15 to 30 percent of the earnings of German automobile companies. The recent anti-extravagance campaign is killing the sales of Cognac producers, one of which makes a third of its profit from Chinese sales.

In the oil news, one of China’s private “teapot” refineries recently ordered two crude cargoes worth $50 million from European traders. When the tankers arrived off the Chinese coast, the company found it was unable to secure the credit to pay for the shipments which had to be sent elsewhere.  This incident is increasing concerns about dealing with other than the large state-owned Chinese oil companies which do not have cash flow problems. The Chinese National Overseas Oil Co, which is the largest offshore oil company in China, announced that it is cutting its output for the first time since 1999 due to the low oil prices.  This is in line with what nearly all the large international oil companies are doing.

4. Russia/Ukraine

The ruble had a rather wild ride last week, falling below the 80 ruble to the dollar psychological threshold to touch 86, the lowest level on record. The ruble then rebounding along with oil prices on Thursday and Friday to close out the week at 78. Moscow abandoned supporting the ruble in 2014 after spending many billions of dollars trying to support it in the face of collapsing oil prices. Since then the Bank of Russia has said that it would only support the ruble if there are risks to the government’s financial stability. The Bank reacted to the sharp decline in the ruble last week as if it were a normal development and and did not seem worried about new lows against the dollar being touched. Oil companies and others with large export earnings are forced to make large conversions of dollars and euros into rubles at the end of each month in order to pay taxes. These large conversions usually give the ruble a nice bump.

Protests are rising across Russia as the government cuts pensions and senior subsidies in an effort to balance the budget. Many workers and retirees have been badly hurt by the rampant inflation that has taken place partly due to the sanctions imposed on Russia for its Ukrainian venture. Food prices were officially rose by 20 percent last year, but many say the true number is closer to 33 percent. Retail sales across Russia dropped by 13 percent in the year ending in November and new car sales are off 40 percent – but sales of Rolls Royces were up by 5 percent as the rich continue to spend. It is traditional in Russia for companies to cut working hours or simply stop paying workers in hard times. This keeps them officially employed and reduces the chances of social unrest.

In December, President Putin said the worst of the recession which shrank the economy by 3.9 percent and pushed inflation up to 12.5 percent was over and that 2016 would be a better year with modest growth returning. Putin has been looking at the oil price collapse as an opportunity to diversify Russia’s economy which, while not as bad as most oil exporting states, is still dependent on oil and gas sales for 50 percent of state revenues. Russia increased its oil production slightly last year, reduced some spending and is relying on its reserves to keep it going until oil prices recover.  It will be interesting to see if a deepening economic crisis brings about any changes in Russia’s newly aggressive foreign policy.

5.  The Briefs

The IEA’s executive director Fatih Birol said 2016 will be the third year in a row the world will have more oil supply than demand.  He said prices will remain under pressure. He doesn’t see any reason why we will have a surprise increase in the price in 2016. (1/19)

EIA forecast: The global market likely won’t pull away from the current supply side excess until at least 2017 as crude oil lingers in storage.  Adam Sieminski, the head of the EIA, told U.S. lawmakers the first draw of global inventories isn’t expected until the third quarter of 2017, which would mark 15 straight quarters of a build. (1/21)

Moody’s Investors Service has placed the ratings of 120 oil & gas companies around the world on review for downgrade, the rating agency said in a statement. The reviews reflect a mix of declining prices that are near multi-year lows, weakening demand and a prolonged period of oversupply that will continue to significantly stress the credit profiles of companies in the oil & gas sector. (1/23)

Royal Dutch Shell, Total and Statoil, three of Europe’s biggest oil producers, were among more than 100 energy companies whose credit ratings were placed on review for possible downgrade by Moody’s Investors Service. (1/22)

Royal Dutch Shell said it expects fourth quarter profits to come in at around 50 percent lower year-on-year as the industry continues to suffer from the dramatic declines in crude oil prices. There’s a durable sense of weakness in the oil economy and, while recovery is expected, it’s uncertain when, Royal Dutch Shell said Wednesday. (1/21)

The IMF cut its world growth outlook to 3.4% from 3.6% last October, as the commodities slump and political gridlock push Brazil deeper into recession, plunging oil prices hobble Mideast crude producers, and the rising dollar curbs U.S. prospects. (1/19)

The European Commission has decided not to include plans for centralized natural gas buying in its revised draft EU gas supply security regulation, which is expected to be proposed on February 10. (1/22)

The pace of drilling in the North Sea, the center of UK oil production for the past 40 years, has sunk to a record low as crashing energy prices force explorers to abandon costly projects. Just 63 percent of oil and gas rigs in the UK North Sea were being used as of Jan. 19, according to data provider RigLogix. That’s the lowest since the Houston-based company started tracking their operation in 2000. In the Norwegian North Sea, the 71 percent rate is also the worst on record. (1/22)

Norway’s Statoil said Tuesday it had almost halved the planned capital expenditure at the delayed Johan Castberg oil field in the Barents Sea to around $6 billion, as oil companies scramble to simplify projects and cut costs amid tanking prices. The company said it had chosen to develop the field with a floating production, storage and offloading vessel, or FPSO, and load the oil directly onto oil tankers rather than piping it to shore. (1/20)

Schlumberger will cut 10,000 more jobs from its current 95,000 staff due to ongoing cancellations of projects by customers.  The world’s largest oilfield services company disclosed on Thursday a $1bn loss for the final quarter of 2015.  The latest wave of cuts means Schlumberger will have axed 34,000 employees, or 26 per cent of its original workforce, since November 2014. (1/22)

Total said it reached an agreement to transfer 20 percent of its stake in a production sharing contract for the Kharyaga operation in Russia to state-controlled oil company Kharyaga.  Kharyaga would take a 40 percent stake and serve as the operator. The French energy company said the project near the Arctic north of Russia has produced around 110 million barrels of oil and generated $3 billion in revenue for the country since the start of operations in 1999. Average production from the two development regions within the Kharyaga oil field is around 30,000 barrels of oil per day. (1/22)

Russian energy company Gazprom is proposing to supply Russian LNG to Pakistan’s newly constructed LNG terminal and associated pipeline infrastructure at the port city of Gwadar near the Iranian border. The facility, the country’s first and built with Chinese assistance, went into service in May 2015. (1/22)

Offshore Australia: after years of delays, cost overruns and labor unrest, Chevron’s $54 billion Gorgon LNG project faces another challenge: the weakest energy prices in more than a decade. As Chevron prepares to start exports, oil prices — which traditionally determine the value of LNG shipments — are languishing near 12-year lows. The project will add to a wave of new supply, including the first deliveries from the U.S., amid weakening demand. Gorgon highlights the challenge of investing in major energy projects amid unpredictable and volatile prices. Brent crude has more than halved since Chevron decided to go ahead with the development in 2009, and its cost has ballooned to $54 billion from $37 billion. (1/23)

Malaysia’s state-oil firm Petronas is planning to slash as much as $11.4 billion in capital and operating expenditure over the next four years, according to an internal memo. (1/19)

In Iran, the next phase of development for the giant South Pars natural-gas field will start producing in February, Petropars, the state-owned company that runs it said. Phase 19 of the field initially will produce 11 million cubic meters a day and be earmarked for domestic consumption. South Pars, an offshore field in the Persian Gulf divided between Iran and Qatar, is the world’s largest natural-gas field not associated with crude oil. (1/21)

Saudi Arabia shipped 7.72 million b/day, the most oil in seven months in November in a sign that overseas refineries were getting prepared to put plants back on line after seasonal maintenance. (1/19)

The Iraqi oil ministry has reduced the local retail price of high octane gasoline from $0.87 to $0.69/liter to reflect the lower cost of importing it, the government said on Sunday. (1/18)

M.E. renewables: Why are the oil-rich countries of the Persian Gulf region announcing ambitious plans for renewable energy when the fossil fuels they produce are so cheap? It’s all about water. Water is a very expensive commodity in this part of the world and extensively used in the energy sector.  Increasing renewables generation can substantially reduce water withdrawal. (1/20)

Egypt: earlier this month, BP’s diversion of a tanker of liquefied natural gas (LNG) away from Egypt to Brazil due to payment issues is the first sign that the country’s currency crisis could be jeopardizing its energy supplies. (1/22)

For Nigeria, the lifting of sanctions against Iran could take up Nigeria’s share of oil exports to India. (1/19)

In Nigeria, the state oil company is shutting down two of the country’s four refineries because militant attacks on pipelines have affected their supplies. The refineries had recently reopened following months of inactivity. (1/21)

Offshore Ghana: Britain’s Tullow Oil is sending one of the world’s biggest floating deep-water oil production platforms to West Africa to pump crude for at least 20 years. With costs (operating plus capital expenditure) of around $20 per barrel and an expected production life of 20 years or more, Tullow hopes it can weather the lowest oil prices in 13 years. (1/22)

Venezuela’s opposition refused on Friday to approve President Nicolas Maduro’s “economic emergency” decree in Congress, saying it offered no solutions for the OPEC nation’s increasingly disastrous recession. Underlining the grave situation in Venezuela, the International Monetary Fund on Friday forecast an 8 percent drop in gross domestic product and 720 percent inflation this year. (1/23)

Venezuela default coming? Farmers brought parts of Uruguay to a standstill this week demanding the government help them recover unpaid bills from Venezuela in the latest sign that the crisis-ravaged South American country may soon renege on it debts.  In spite of Venezuela’s socialist President Maduro reassuring bond investors that he will make good on more than $10bn of payments this year, economists say default is “practically inevitable.” (1/23)

In Mexico, the drop in their crude oil prices this week to around $20 a barrel is likely to put pressure on an already tight budget of state oil company Pemex, while government revenue is protected at least this year by oil price hedges.  Pemex, which produces 2.27 million barrels a day of crude oil, has an investment budget this year equivalent to $16.3 billion at the current exchange rate and down from $23.5 billion in 2015.  But the fall in Mexico’s export crude price, which dipped below $19 on Wednesday and sent the Mexican peso to new lows against the U.S. dollar, raises concerns that Pemex may have to make further cutbacks. (1/23)

Canada’s biggest oil sands producers, which have stubbornly resisted halting output even as the price of their crude hits record lows, are planning a higher-than-normal maintenance schedule this year The move is seen temporarily curbing supply in the second and third quarters, which should lift crude prices in the region and give producers a respite from selling their barrels below cash costs. (1/23)

The U.S. total rig count declined by 13 for the week ended January 22.  Oil rigs declined by 5 to 510 while gas rigs dropped 8 to 127.

US exports: The first oil tanker to sail from the US after restrictions were lifted on the country’s crude exports has arrived in Europe three weeks later. The most likely ultimate destination for the oil is the Cressier refinery in Switzerland operated by a Vitol and Carlyle joint venture. (1/21)

The Texas Railroad Commission, the state’s energy regulator, reported crude oil production for November at 70.9 million barrels per day, about 4 million barrels, or 5 percent, lower than for the month of October. (1/23)

Hurting: Across oil fields from Texas to North Dakota fears are growing that crude’s plunge below $30 a barrel is more than just another market milestone and marks a countdown to an endgame for many shale producers that so far have braved the 18-month downturn. Many of around 50 listed U.S. independent oil producers and scores of smaller ones need $40-$60 a barrel to break even. A longer spell of $30 oil will confront them with stark choices: bankruptcy, debt write-downs in return for deep concessions to creditors, or fire sales of assets at a time when potential buyers are skittish. (1/21)

Negative oil price? Flint Hills Resources said it would pay negative $0.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude. That’s down from $13.50 a barrel a year ago and $47.60 in January 2014. The negative price is due to the lack of pipeline capacity for a particular variety of ultra-low-quality crude. (1/18)

Southwestern Energy Co. on Thursday announced a sweeping workforce-reduction plan that will lay off or reduce the roles of about 45% of the company’s employees as it struggles with plummeting fuel prices. The move will affect about 1,100 employees. The filing cited “anticipated lower drilling” and the company said it had no drilling rigs in operation at the start of 2016. (1/22)

Chesapeake Energy Corp. fell to the lowest since April 2000, making it the worst-performing stock in the Standard & Poor’s 500 Index Tuesday, on investor concern that sinking oil prices would hurt the company’s ability to repay debt. The stock hit $2.96 per share, down 84% year over year. (1/20)

Methane releases: The Interior Department proposed rules Friday to cut methane emissions from oil and natural gas operations on federal lands, the latest move in President Barack Obama ’s climate change agenda. The rules are aimed at helping meet an administration goal of cutting the oil and gas industry’s emissions of methane, a potent greenhouse gas, by as much as 45% from 2012 levels over the next decade. (1/23)

The American Petroleum Institute said the upstream energy sector was in decline, with completed wells down 51 percent year-over-year, and it was restrictive regulations that were to blame.  API argues for policies which reduce unnecessary regulations and speed up permitting on federal lands. (1/21)

In Oklahoma, after days of negotiations with regulators, embattled oil producer Sandridge Energy Inc. has agreed to shut down several wells used to dispose of wastewater that had been linked to earthquakes in the state. By early February, Sandridge will stop using seven wells. Three will be closed entirely; the other four, plus another previously unused well, will be given over for earthquake research. Sandridge also agreed to reduce the amount of wastewater injected into roughly 40 other wells. (1/21)

US drivers continue to see gas prices drop, though the rate of declines are leveling off with prices only 18 cents less than this date last year. Motor club AAA reports a national average retail price for a gallon of regular unleaded gasoline at $1.87. (1/21)

Coal vs. gas: Last year looks like it was an unwelcome watershed for the embattled U.S. coal industry. Power companies in 2015 for the first time may have burned more natural gas than coal to generate electricity, according to analysts who attribute it to the cheapest gas prices in 16 years and a record number of coal-fired plants retired from service because of the high cost of meeting environmental regulations. (1/21)

Carbon battle: A federal appeals court on Thursday declined to temporarily block a key Obama administration environmental rule to limit carbon emissions from power plants, rejecting requests by states and companies that wanted the regulation halted while they challenged it in court. (1/22)

 

ASPO-USA



14 Comments on "OECD’s perspective on the global economy"

  1. ghung on Mon, 25th Jan 2016 6:00 pm 

    Other than that, everything is just swell.

  2. makati1 on Mon, 25th Jan 2016 7:29 pm 

    A long article signifying nothing…

  3. Rick Bronson on Mon, 25th Jan 2016 8:36 pm 

    Yes its a long article that signifies nothing.

    IEA is also controlled by Big Oil and they never gave correct stats. They never predicted that Wind and Solar will become so big so soon.

  4. theedrich on Tue, 26th Jan 2016 2:46 am 

    The Organisation for Economic Co-operation and Development is trying to downplay as much as possible the news about Peak Everything.  Mustn’t alarm the investors, let alone the plebs.  And keep the Masters of the Universe secure in their belief system that all remains under their control.

    Megalomaniacs are by definition incapable of recognizing limits to their power, let alone decreases in it.  So it is with U.S. “unipolarist” policy planners.  In the Middle East they have turned whole countries into chaos while squandering trillions of dollars, to say nothing of loss of American blood and the insane demographic pollution of Europe with unassimilable refugees welcomed by our masters’ tools, the ruling Euro-genosuicidsts.  At the same time our new godlets have paid little attention to the rise of China, not just as an economic power, but as a military one.

    Completely apart from the Communist nation’s massive expansion of its “conventional” weaponry (i.e., standard naval forces, short-range missiles, etc.) and its ballooning nuclear might, it has concentrated especially on cyber and space warfare.  It is now, or soon will be, capable of destroying America’s entire GPS satellite system, thereby blinding us in any conflict with that nation.  Its cyber capabilities are formidable, as has been shown at a minimum by the recent Chinese capture of vast amounts of U.S. government personnel data.  Moreover, the Yellow Peril’s agents have been leapfrogging our military and industrial strength both by stealthily “cyber-spying” on our defense and manufacturing industries and extracting technical designs therefrom, and by reverse-engineering advanced American and Russian weapons systems.  The number of China’s skilled hardware and software technicians outstrips ours by orders of magnitude, which is why, for example, so many electronic products are produced in China — and cheaply.  (An Apple i-phone, for example, costs about $7 to produce there and, according to Apple CEO Tim Cook, the U.S. has nowhere near enough technical specialists to match the number of Chinese with corresponding critical vocational skills.)  It must also be remembered that the Chinese as a race have an average IQ of 105, whereas that of the rapidly shrinking, much smaller U.S. White population is 100, and that our nation’s overall median intelligence is declining rapidly with the importation of ThirdWorld sludge from Africa, Latin America and the Mohammedan lands.  The number of Chinese, thus, with IQs over 140 (the level required to become scientists, engineers and other high professionals) is immense, while ours is dwindling, and a portion of this critical Yankee segment likes to get high on drugs.

    Moreover, since 2008, the U.S. economy, because of suicidal taxation policies on American businesses, has transferred an estimated $4 trillion to China by forcing relocation of American manufacturing to that country for economic reasons alone (and a dollar goes much, much farther in China than in the U.S.).  Thus, whatever financial difficulties the Middle Kingdom is currently having (its GDP growth rate certainly being considerably less than the 6.8% that Beijing asserts), the Chinese have greatly expanded their economy at our expense.  It need not be recalled that they have recently also devalued their currency vis-à-vis the dollar, thereby increasing their advantage over us.  And they save more money by failing to implement expensive measures to safeguard the earth’s environment and ecology.

    But those same financial difficulties, among other changes, are now causing ominous power shifts in Asia.  Domestically, power is now migrating from the “civilian” Chinese Communist Party to the increasingly nationalistic People’s Liberation Army.  In its turn, the increasingly aggressive PLA is using nuke-armed North Korea as a proxy attack dog in its contest against America (and America’s vassal, Japan).  Having built new islands and taken over pre-existing ones in the South China Sea, that same military now dominates that body of water.  The U.S. Navy has been able to make only ineffective, symbolic protests against the takeover.  Other, nervous, regional powers (Philippines, Vietnam, etc.) are considering giving us naval ports (Subic Bay, even Cam Ranh Bay) to counter China, but it is most uncertain whether even that will deter the Tiger.

    In short, American supremacy is evaporating in East Asia.  And the increasingly effeminate, narcissistic U.S. must be careful in the extreme in dealing with the changing balance of power.  Because a wrong move by our megalomaniacs could well result in what has been called a “civilization-ending” event.

    In the face of all these truly menacing developments in the East, it is no wonder that the OECD gives us only a tale told by an idiot, full of sound and fury, signifying nothing.

  5. Davy on Tue, 26th Jan 2016 5:43 am 

    “The Fed Passes the Buck: Blame Oil and China”

    https://mises.org/library/fed-passes-buck-blame-oil-and-china

    “Moreover, the problem with the “China thesis” is that it doesn’t explain anything either. It merely observes a correlation in the markets and therefore makes it highly convenient to put the blame on “the other guys.” Let me not be misunderstood here: the Chinese and US economies are certainly influenced by each other, especially in our age of fluctuating fiat currencies. But ultimately, both China and the US — indeed the entire world — are being dragged down by past actions of their respective central banks and more specifically the illusion of prosperity via monetary and credit expansion.”

    “Rising prices can be a result of inflation, but it is not itself inflation. So then, inflation was actually very high in the last decade due to the Fed’s QE and other monetary policy schemes. Second, it should never be ignored that “rising prices” can easily be found in the capital markets themselves. It doesn’t take an investment guru to observe the staggering levels to which the various market indexes have reached. “

    “it is literally impossible for “price inflation” to take place as a direct result of QE due to the way that money currently enters the system as reserves. “Price inflation” would need to come from the actions of individual banks themselves who are at present cautious about their consumer lending practices. Therefore the Fed is not creating “price inflation,” but something far worse: capital misallocation.”

    “The point here is simply that those who want the interest rates to be continually suppressed so that economic activity will be encouraged, don’t even realize that this is literally the cause of bubble creations, not productive economic activity.”

    “It used to be, under the pre-crises fractional-reserve model, that there would be loads of malinvestment as a result of banks creating new loans (new economic activity would take place, and then collapse back down). But now, money is created, not by commercial banks, but mostly by the Fed itself. Which means that, in the phraseology of David Stockman, the new money is simply sloshing around the canyons of Wall Street and pushing up equity and bond prices, rather than reaching the “real economy.”

    “we want to stress the fact that, in raising rates, the most that the Fed could do is unravel previously made mistakes. In other words, there is nothing praiseworthy in the first place about artificially propped up stock market levels. We have no interest in lauding the longevity of the bubble, because the bubble is the enemy of the healthy economy.”
    “That is the true cause of the recent calamity. The dollar is “strengthening” by virtue of our credit system cracking at the seams. In other words, the so-called “strong dollar,” is merely one side of the pendulum swing of a volatile collapsing banking system. It shouldn’t be assumed that the dollar is becoming more sound; it is not.”

    “And thus oil too, after years of being elevated up toward the heavens via the Fed’s monetary shenanigans, is experiencing its own inevitable bust. The illusion is being exposed.”

  6. Davy on Tue, 26th Jan 2016 5:57 am 

    The global system rest on the backs of China and the US in respect to if they are unhealthy so is the global economy. Both nations have economies in poor health. The worst is yet to hit the US but it will likely this year. The momentum of China’s growth is slowing. The impact of this cannot be replaced. It is this unwind in China that will unravel the global bubbles. Oil, commodities, and trade levels cannot recover if China and the US do not recover. China has tipped and the US is tipping. This may play out for some time but the inevitable deflation of misallocated capital (bad debt) must be realized. Extend and pretend has its limits. We are there now. Once confidence is lost as it is now in China it will not return until the cycle runs it course.

    “China Stocks Plunge to 13-Month Low Amid Capital Outflow Concern”

    http://www.bloomberg.com/news/articles/2016-01-26/china-s-stocks-fall-amid-concern-capital-outflows-may-accelerate

    “China’s stocks tumbled to the lowest levels in 13 months amid concern capital outflows will accelerate as the economy slows and support for the yuan eats into the nation’s foreign reserves.”

    “It’s an issue about confidence and there’s no confidence in the market now,” said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai. “The depreciating yuan and slowing economic growth have been haunting the market for a while.”

    “China has been burning through reserves to reduce yuan volatility as the currency lost its status as a one-way bet on appreciation amid an unexpected devaluation in August. The stockpile of reserves plunged $513 billion last year to $3.33 trillion, the first annual drop since 1992. Foreign exchange reserves are seen tumbling $300 billion this year to the $3 trillion level, according to a Bloomberg News survey.”

  7. JuanP on Tue, 26th Jan 2016 8:24 am 

    There is so much BS, Western lies, and propaganda in this article that I am afraid that I am adding ASPO USA to the long list of people and institutions I no longer believe in. The article contains some interesting tidbits here and there.

    I really dislike pieces like this because they make it impossible for normal readers to know what is truth and what is not, one needs to know a lot to be able to tell the difference a bit. It seems no OECD institution is left uncorrupted, even those that originally fought the system like ASPO and Greenpeace have been corrupted.

  8. Davy on Tue, 26th Jan 2016 7:54 pm 

    “Inside China’s Dying, Abandoned Factories”

    http://www.zerohedge.com/news/2016-01-26/inside-chinas-dying-abandoned-factories

    “Massive credit expansion (from just a little over $7 trillion in 2007 to a staggering $28 trillion and climbing today) allowed the country to sidestep the economic malaise that followed the financial crisis. To whatever degree global demand and trade “recovered”, that recovery was underwritten by the Chinese, whose insatiable demand for raw materials buoyed commodity producers from Australia to Brazil.”
    “Unfortunately for the global economy, China was sowing the seeds for its own (and everyone else’s) economic demise. Beijing built, and built, and built, creating pockets of acute overcapacity throughout the country’s industrial complex and erecting sprawling ghost cities and other monuments to the idea that “if you build it, they will come”.
    “When the debt bonanza finally begin to taper off and China stepped back to assess the monster it had created, it was too late. Commodity producers the world over had come to depend on a perpetual bid from China. When demand began to slump as China set off down the long road towards creating a consumption and services-led economy, the world was caught flat footed. A global deflationary supply glut for commodities was born and the more quickly China’s economy decelerated, the larger it became.”
    “As for China itself, authorities are reluctant to allow the market to purge uneconomic productive capacity for fear of sparking social upheaval. That means perpetually bailing out companies that find themselves in trouble, thus preserving unwanted supply and fueling the disinflationary impulse.”
    “Or, as we put it back in October: “The cherry on top is that China itself is now trapped: it simply can’t afford to let anyone default, as one bankruptcy would cascade across the entire bond market and wipe out countless corporations leaving millions of angry Chinese workers unemployed, and is therefore forced to keep bailing out insolvent companies over and over. By doing so, it is adding even more deflationary capacity and even more production into the market, which leads to even lower prices, and even greater bailouts!”
    “But even as the Politburo struggles to prevent the entire house of cards from collapsing on itself, signs of the country’s deceleration are readily apparent and Beijing’s anti-pollution campaign has only served to put further pressure on the industrial complex. Below, find a series of images which depict forlorn, abandoned brick factories and worker dormitories in Chaomidian on the outskirts of Beijing, shuttered because they belched too much pollution and because, presumably, the country has all the bricks it needs.”

  9. GregT on Tue, 26th Jan 2016 8:39 pm 

    “Massive credit expansion (from just a little over $7 trillion in 2007 to a staggering $28 trillion and climbing today) allowed the country to sidestep the economic malaise that followed the financial crisis.”

    So in other words, we should be thanking China for these few extra years of more unsustainable growth, following the Global Financial Crisis which originated in the USA.

  10. Apneaman on Tue, 26th Jan 2016 11:26 pm 

    How’s that globalization working out fer y’all? Cancer kills. Starts on the periphery and works it way towards the centre.

    Small towns devastated after Wal-Mart Stores Inc decimates mom-and-pop shops, then packs up and leaves: ‘They ruined our lives’

    “The Town’n Country grocery in Oriental, North Carolina, a local fixture for 44 years, closed its doors in October after a Wal-Mart store opened for business. Now, three months later — and less than two years after Wal-Mart arrived — the retail giant is pulling up stakes, leaving the community with no grocery store and no pharmacy.”

    “That’s a big problem for small towns, often with proportionately large elderly populations. For the older folks of Oriental — a retirement and summer vacation town along the inter-coastal waterway — the next-nearest grocery and pharmacy is a 50-minute round-trip drive.

    They came in here with their experiment and ruined us”

    http://business.financialpost.com/news/small-towns-devastated-after-wal-mart-stores-inc-decimates-mom-and-pop-shops-then-packs-up-and-leaves-they-ruined-our-lives

  11. theedrich on Wed, 27th Jan 2016 12:03 am 

    The German war theorist, Carl von Clausewitz, said in his famous treatise, Vom Kriege, that war is merely a continuation of politics by other means (“Der Krieg ist eine bloße Fortsetzung der Politik mit anderen Mitteln”).  This definition can be expanded to say that international economics, too, is a “continuation of politics by other means.” It is impossible to separate economics from politics, no matter how much academics would like to do so.  This has got to be obvious to any objective observer, even on the domestic front.  Our, and every, government, constantly interferes with the economic status of its own people in order to benefit the government itself.  Figures, graphs, numbers and descriptions are continually redrawn and redefined to make the overlords seem beneficent and keep the population under control.

    But these same “other means” are employed to give one’s own nation an advantage over those of others.  When the United States inflated the reserve currency (the international dollar), it was simply transferring its own debt to the international realm — making other countries pay for debts our own masters had incurred.

    It is a mistake to think that China’s (or Washington’s) economic maneuvers can be separated from its overall political aims, including its military ones.  History is replete with examples of economically desperate countries launching war on their neighbors for economic gain.  Economics does not occur in some kind of an academic vacuum.  And the severe difficulties China is currently experiencing are clearly shifting its interior power balance toward more emphasis on its military.  The idea that China, or the world in general, will forever be satisfied with a Pax Americana is a pipe dream of American elites and their toadies.  But it is typical of Americans to imagine the rest of the world as somehow inert, a bunch of woebegones simply looking for handouts from Uncle Sap and his contrite, guilty Whites.

  12. Davy on Wed, 27th Jan 2016 6:20 am 

    You may think I am anti-Chinese but one needs to realize what happens in China does not stay in China. The rest of the world including the US is in the cross hairs of a Chinese contagion. Any talk otherwise is being proved wrong daily. One just needs to read the financial news to see it is all about China with the US market futures reacting to the news not the other way around. China is wagging the world’s tail in this financial descent. If China lands hard the rest of the world will land hard there should be no doubt about this.

    “China’s $1 Trillion Money Exodus Isn’t About Capital Controls”

    http://www.bloomberg.com/news/articles/2016-01-27/china-s-1-trillion-money-exodus-isn-t-about-capital-controls

    “Further undermining the Chinese savers’ confidence are the tough policy choices ahead. If the government is serious about supporting the yuan and warding off speculators, it may need to further wind down the country’s $3.3 trillion foreign-exchange reserve stockpile.”

    “Analysts worry that the buffer may not be as liquid as it appears or may in part be already committed to fund government projects. The reserve assets could hit a point considered uncomfortably low by mid-year, according to Bloomberg Intelligence. “China has a large reserve but at this rate or higher, the liquid portion of the reserve may run low in months — not years,”

    “Then there are more draconian measures such as hiking interest rates or allowing a steep one-off depreciation. But steps like that come with significant risks in an economy that is slowing and requires massive restructuring among its debt-burdened state-owned industries. The most draconian option of all — imposing comprehensive new restrictions on the flow of money — would fly in the face of past commitments to financial-sector reforms.”

    “Here’s another way of looking at the scale of the problem China faces: If just 5 percent of its 1.3 billion population sent the maximum $50,000 allowed out of the country, it would deplete the entire $3.3 trillion in reserves. Citizens frequently skirt the rules — from pooling quotas to using so-called underground banks.”

  13. Davy on Wed, 27th Jan 2016 6:31 am 

    Smart move

    “Canada do-over: Trudeau’s FM says time to reboot relations with Russia”

    https://www.rt.com/news/330261-canada-russia-bilateral-reboot/

    “Russia-Canada relations are about to get a reboot, with the countries’ foreign ministers expressing willingness to resume dialogue after a stall caused by events in Ukraine. The new Canadian government believes snubbing Russia was not productive.”

  14. joe on Wed, 27th Jan 2016 8:33 am 

    Hey, theres always more stimulus. Monetize the shiznik out of that problem dog.
    I guess artificial military islands is the price we pay for helping them build artifical islands for civilian airports. Hong Kong international was just practice, see? Todays global trade is tomorrows global war. Nukes are the level playing feild. Who needs gps satilites when new missile tech will fly a nuke at 50ft through a front door.
    As for eCONomics, its all done with a.i. superfast computers. One day the market is up, next its down, humans dont make decisions to ‘buy’ or ‘sell’. Welcome to the world of eternal fiat currency. Every problem solved with cash from central banks. Got a problem with pensions? No problem, issue bonds, the FED is picking up the tab.
    Thats never gonna go wrong, right?

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