Here Comes The Double Dip Pt. 3

[AgentR11]

My hunch is $160 in current dollars is what it would take. Which would be comforting, if it weren't for that pesky summer season....

[Daniel_Plainview]

Spain in Freefall

Spain was firmly back in the spotlight on Friday, after news of a sharp rise in borrowing by the region’s banks from the European Central Bank triggered losses across European stocks ... The cost of insuring Spanish government debt against default using credit-default swaps, or CDS, rose to an all-time high. The five-year Spanish CDS spread widened to 505 basis points from 476 basis points on Thursday, according to data provider Markit. ... “Although some Spanish banks took advantage of the ECB’s generous provision of liquidity (via the LTRO), this has merely papered over the cratering being experienced on the asset side of their balance sheets,” added strategists at FXPro....

Here we go again ... it's déjà vu time ...

[Daniel_Plainview]

Turmoil in global markets as Spanish bank borrowing from ECB doubles
Spanish bank borrowing from the European Central Bank doubled last month, revealing a dangerous dependence on emergency funding that on Friday triggered renewed turmoil in financial markets.

The Bank of Spain disclosed the country's biggest institutions borrowed €316.3bn (£260.9bn) from the ECB in March, almost twice the €169.8bn in February.

Traders dumped Spanish stocks and bought insurance against Madrid defaulting, convinced the data showed that the banks are now almost shut out of international credit markets.

Spain's Ibex stock market plunged 3.6pc, with bank stocks leading the fall. The nation's benchmark 10-year bond yields soared past 6pc, heading deep into the danger zone that experts say is not sustainable without external support. Meanwhile, the cost of credit default swaps hit a record high of 500 basis points, meaning it costs £500,000 a year to insure £10m of Spanish debt over five years. This compares with around £70,000 for German debt.

The spectre of another eurozone bail-out saga - only this time far bigger than Greece - rattled stock markets across Europe. In Italy, where protesters against austerity measures gathered in Rome, the MIB closed down 3.4pc. The French CAC fell 2.5pc; Germany's DAX dropped 2.4pc; and in London the FTSE 100 slid 1pc.

The losses ended a roller coaster week on European bourses as the debt crisis sparked, was doused and now appears to be reignited again. Some analysts argued that Spain's banks had been encouraged to borrow from the ECB because of the €1 trillion cheap loans unleashed in December and February as part of the long-term refinancing operation (LTRO). Banks across Europe have increased their borrowing from the ECB. But there are fears that the LTRO "sugar rush" is compounding the debt problems and links between banks and weak sovereigns.

So ... this new era of massive central bank intervention is working out really well.

Meanwhile, the Eurozone submerges itself deeper and deeper into the abyss.

The Eurozone fiasco brings to light some lessons for the US:

1. Central bank intervention is, at best, a stop-gap bandaid.
2. For every action, there is an equal but opposite reaction.
3. Long-term reliance on central bank intervention WILL BACKFIRE.
4. Without the continual growth of the core, underlying economic engine, the house of cards will teeter toward collapse.
5. You can't have growth without cheap energy, and the Eurozone is now toiling under $120/bbl crude oil.
6. Persistent central bank intervention is now the most obvious indicator of a failed economic system that is doomed to collapse.

[Daniel_Plainview]

... btw, Mish has 2 excellent articles that further demonstrate how dysfunctional a central-bank controlled economic system is:

1. "Spain Would Be Dead Without ECB Loans" Says Spanish Secretary of State for Economy; Update on Black Market Transactions in Spain; Bartering in Greece

2. LTRO is Essentially Useless -- Massive Jump in Bank of Spain Borrowing from ECB: Bank of Spain Balance Sheet Shows Spain Deep in Trouble.

For those that are paying attention, the US economy is now -- just like the Eurozone -- a central-bank controlled economy.

[OilFinder2]

For those that are paying attention, the US economy is now -- just like the Eurozone -- a central-bank controlled economy.

And so is every single nation in the world (except Hong Kong, for some reason). Which tells us ... absolutely nothing!

Oh yeah, and while Spain might have a central bank (actually, it has two - its own, plus the ECB), unlike the US it doesn't ... have its own currency! Now, I wonder how many times myself or Anti-Doomer have to point out the very very very important distinction here!

[OilFinder2]

For those that are paying attention, the US economy is now -- just like the Eurozone -- a central-bank controlled economy.

And so is every single nation in the world (except Hong Kong, for some reason). Which tells us ... absolutely nothing!

Oops! It looks like Andorra and Monaco also don't have central banks! Golly gee, surely the US could get rid of its central bank and be just like Andorra and Monaco! The parallels between the 3 nations are striking!



Hong Kong isn't on the list - I guess they consider it to be part of China (technically it is, anyway).

Gee, (almost) every nation in the world has a central bank! I wonder why??? Even Cuba and North Korea have their own central banks! There must be some significance to this, ya think so?????

[Armageddon]

The FED is the biggest scam in history. They lend money to the US gov't at interest, which is a crime.

Give me control of a nations money supply, and I care not who makes it’s laws. Mater Amschel Rothschild, founder of the Rothschild banking dynasty.

[careinke]

Gee, (almost) every nation in the world has a central bank! I wonder why??? Even Cuba and North Korea have their own central banks! There must be some significance to this, ya think so?????

Of course there is significance to this. How do you think the 1% steal, I mean, earn their money?

[dolanbaker]

[quote="OilFinder2Oops! It looks like Andorra and Monaco also don't have central banks! [/quote]
Andorra used to use the Spanish Peseta, the country was simply too small to warrent the costs of operating its own banking system. The banking system should be a service to the economy, not the otherway round!

[dolanbaker]

The future definition of Cornucopia!

http://www.bbc.co.uk/news/business-17706336
The UK may have avoided a double-dip recession, but the economy will stall for the rest of the year, an independent forecasting group has said.

The Bank of England's monetary policy measures have boosted confidence, but now big business needs to fuel growth, the Ernst & Young Item Club said.

[Daniel_Plainview]

Here we go! ... Whee!

Spain’s 10-year bond yield shoots past 6 percent

MADRID — Spain’s cost of borrowing on the international debt markets rose sharply again Monday, increasing concern that the country may become the latest member of the eurozone to seek a financial bailout. The yield — the interest rate Spain would have to pay to raise money on the debt markets — on the country’s 10-year government bonds jumped to 6.10 percent on the secondary market, according to financial data provider FactSet. It had closed at 5.93 percent Friday after a week of persistent market tension.

Monday’s yield is the highest since the country’s new conservative government under Prime Minister Mariano Rajoy took office in December. The 10-year bond yield surged toward 7 percent late last year, a rate considered unsustainable for a country over a long period. Greece, Portugal and Ireland had to ask for bailouts after their yields stayed above 7 percent. Although the administration has implemented a barrage of labor and financial reforms, investors remain worried about Spain on several fronts:

— the country’s banks are weighed down by a mountain of bad loans from the collapse of the property market in 2008.

— many of the Spain’s 17 semiautonomous regional governments have overspent wildly.

— Spain is expected to enter its second recession in three years this quarter, with the country’s central bank forecasting its economy will contract 1.7 percent this year. The unemployment rate is 23 percent, rising up to almost 50 percent for those aged under 30.

The jump in Spain’s yield comes at the beginning of a week in which the country’s Treasury holds two rounds of bond auctions — 12- and 18-month bills on Tuesday, and benchmark 10-year bonds on Thursday.

The government insists it will have no trouble financing itself this year and that auctions held so far this year have gone well. But that changed almost two weeks ago, when a medium-term debt auction hit the bottom end of what the Treasury targeted, triggering the latest increase in yields and placing Spain firmly back into the center of the eurozone debt crisis.

The situation was not helped by government-released data Friday showing the country’s troubled banks borrowed a record €316.3 billion ($415.9 billion) from the European Central Bank in March, demonstrating the difficulty they have securing financing elsewhere.

Monday’s bond market jitters extended to Italy, viewed as another weak link in the 17-nation eurozone. Its 10-year bond yield rose to 5.60 percent from about 5.50 percent on Friday.

Spain’s Ibex 35 trading index was slightly negative after taking a punishing 3.6 percent drop Friday.

After the bailing out Greece, Portugal and Ireland, the eurozone has agreed to increase the size of its financial firewall to help out its members should they fail to raise money from the markets. But Spain’s €1.1 trillion ($1.45 trillion) economy is twice the size of the previous three bailout victims put together. Analysts say the eurozone’s €800 billion firewall is not large enough to deal with the potential threats coming from Spain and Italy.

Economy Minister Luis de Guindos traveled to Paris on Monday to meet investors to try to convince them Spain was on the right track. He will meet ECB President Mario Draghi on Tuesday.

Spain’s plight is also likely to addressed at the meeting next weekend in Washington of the International Monetary Fund and World Bank.

Spain's Double-Dip Confirmed
Spain's Economy Minister, Luis de Guindos, said the country has probably tipped into its second recession since 2009, as government borrowing costs climbed back above 6pc.

Official data for the first three months of this year is not due until April 30, but Mr De Guindos said gross domestic product was likely to have fallen a similar amount to the October-December period of 2011 when it shrank 0.3pc.

"At the moment I see a first quarter with a similar pattern to the last quarter of last year," he said in an interview published in El Mundo newspaper on Monday.

The Spanish economy has reignited fears over the eurozone debt crisis with investors worried that Madrid will fail to meet deficit-cutting targets at at time when the economy is tipping into recession.

Mr De Guindos ruled out any Greek-style debt rescue and said there are no plans for new tax increases or budget cuts this year.

He said the country had no "Plan B", adding: "Spain is not going to ask for a rescue. No intervention will take place. ...

[TheAntiDoomer]

DP you should start a Spain Double Dip thread! you might have more success than you have had with this US one!! LOL.

[Armageddon]

Empire State Manufacturing Index slid from 20.21 to 6.56. ouch

[OilFinder2]

^
Which is nonetheless still in growth territory. Meanwhile ...



U.S. retail sales rise sharply again in March

WASHINGTON (MarketWatch) — Americans splurged on a wide range of goods and services for the third straight month, as retail-sales data reported Monday suggest the U.S. economy grew somewhat faster than expected in the first quarter.

Consumers increased spending in virtually every category, whether at online stores or traditional bricks-and-mortar retailers. Automobiles, electronics and appliances, building materials, and clothing stores saw the biggest gains.

Retail sales climbed 0.8% in March, the Commerce Department said, following revised increases of 1.0% in February and 0.7% in January. February’s gain was revised down slightly and January was revised up a tick.

Consumer spending accounts for as much as 70% of U.S. economy, so the recent upsurge in spending likely means the nation’s growth in gross domestic product for the first quarter will be faster than expected. Before the latest retail report, economists polled by MarketWatch forecast that quarterly GDP would increase by 2.3%.

While sales at resurgent automobile companies jumped during the first quarter, other retailers also benefited. Sales excluding the U.S. auto sector were still up a sharp 0.8% last month.

Economists surveyed by MarketWatch expected retail sales to rise by 0.4% overall, or by 0.6% excluding the automobile sector.

[...]

[vision-master]

clif's wujo... - How to find work, re-thinking the process (mp3)

[Armageddon]

0% interest for 72 months on auto's and high gasoline prices are skewing the retail sales numbers. If these gas prices stay $4.00+ for an extended time, bend over and grab your knees and kiss your behind goodbye. It will suck the rest of the discretionary spending out of the economy.

[TheAntiDoomer]

^“If ifs and buts were candy and nuts, we'd all have a merry Christmas”.

[AgentR11]

If you will.. pause for a moment thinking about $4/gal. IF that is high enough to suck discretionary spending out of the economy, then it is high enough to destroy some demand for gasoline itself. By destroying demand for gasoline, it improves the ratio of domestic production / imported production, thus boosting the domestic economy. For the economic numbers, does it really matter much whether Bob buys US oil products as opposed to US hollyweird products? I'm just not seeing much difference.

In addition, $4/gal+ price is sufficient, if maintained, to encourage efficiency choices. Higher would be better, but I think $4 is enough to get things started. And the more efficiency choices that occur, again, the more the ratio of dom/imp improves.

And finally, the higher the price, the more that costly production sites can be developed and made profitable. Again, improving the dom/imp ratio.

The real trick is whether we are agile enough to run the economy here, right at the edge of a stall and tailspin. So far so good, but it is a dangerous game.

[Lore]

The problem is gas prices keep bumping up against the hard stop of consummer discretionary spending. Which has shown no real growth for a few decades. Right now the economy is pulling forward some domestic retail sales, but 40% of core sales by major corporations is coming from export, or overseas sales, and those markets are either pulling back, falling into recession or already in recession. We are more dependent on global GDP then at any time in our history.

[Daniel_Plainview]

6 Scary Energy Sources Being Tapped to Fuel our Desperate Post-PO Economy

As China and India develop as oil hungry consumer cultures, and as hydrocarbon addiction grows amid a growing global population, energy prices will continue to rise, opening the door of economic opportunity to a plethora of fracking-like energy extraction technologies. These are wildly irresponsible, terribly dangerous processes that only an addiction-maddened mind would contemplate, and only a greed-addled sociopath would execute. Think of this as taking fracking to the next level so that we can continue to speed along on our highway to hell—peak oil, and the earth, be damned.

1. Light Tight Oil

The next frack-like rush is for “Light Tight Oil” (LTO), also known as “Tight Light Oil” and “Tight Shale Oil.” The extraction technology and the environmental problems it causes, are much the same as those we see with natural gas fracking. It is produced by the same hydraulic fracturing method employing horizontal bores at the ends of deep vertical wells that inject a plethora of toxic fluids and sand into deep shale formations, breaking up that shale and releasing embedded oil. Today’s high oil prices make this technology immediately profitable. In the US, the largest current threat is to Eastern Montana, Western North Dakota, and aquifers in South-East Texas. Like with natural gas fracking, the process, by design, also produces billions of gallons of toxic waste water. The race to tap LTO has made the US the number one oil driller in the world, by some estimates, drilling more wells this year than the rest of the planet combined. As global oil prices rise, expect the drilling to move east into the Utica shale formations, starting in Ohio.

2. Utlra Deepwater Pre-Salt Oil

This technology is too new for its extraction industry to agree on a name for itself, so I’ll go with the easy to use, “Pre-Salt Oil,” or PSO. Costing slightly more than Light Tight, PSO is only now just entering the market, buoyed by the promise of continually rising oil prices. According the organizers of “Pre-Salt Tech 2012,” an upcoming industry conference in Brazil, PSO is currently “the most technically challenging ultra-deepwater oil recovery” process. It involves drilling in water that is over 8,000 feet deep, through another 5,000 or so feet of salt deposits at the bottom of the ocean, to finally hit oil. The only reserves currently tapped are off the cost of Brazil. Plugging a well blowout under these conditions would make dealing with the Deepwater Horizon disaster look like child’s play. According to Rio de Janeiro’s The Rio Times, the first PSO leak occurred in January of this year. Luck held out this time, preventing the pipe rupture from evolving into a full scale blowout. With perhaps 100 billion barrels of PSO off the coast of Brazil, expect rapid expansion of this gamble.

3. Oil Sands

Add ten bucks a barrel to the cost of PSO and you can extract oil from a sandy mix reachable through massive surface-destroying open mines and sand-pumping wells. Currently exploitable Oil Sand reserves are primarily in Alberta, Canada. Global warming scientists and activists argue that extracting this brown gooey stuff is an end-game scenario for the climate, as the energy intensive extraction and refining processes adds up to 15 percent more greenhouse gases to the atmosphere than we get from exploiting traditional oil reserves. The actual oil that is harvested is bitumen, which is risky to transport since when it spills into water, it sinks rather than floats, making clean-up and decontamination of water resources difficult or impossible. Oil-industry funded members of the US Congress are currently lobbying aggressively to fast-track construction of a pipeline across the US to bring this oil from Canada to ports in Texas, and onto the global market. Oil-connected media conglomerates are backing this play with oil PR-tainted “news” reports downplaying the risks while promising decades more of carefree motoring, if only we drink the brown Kool-Aid.

4. Offshore Arctic OIl

As both oil prices and global temperatures continue to rise over the next decade, expect to see a push for drilling in newly thawed areas of the Arctic Ocean. This is the ultimate climate feedback loop, with human greed and addiction proving as dependable as thawing bogs releasing methane. In this insanity, melting polar ice, while flooding coastal population centers, changing the salinity of the seas, and skewing climate patterns, also creates opportunities for end time oil plays. Yeah, try capping or cleaning up after a spill in this inaccessible inhospitable frigid wilderness. This is a move that only an addict would make—like smoking crack from a vile you find sticking out of a puddle of vomit. This threat circles the North Pole.

5. Shale Oil

Not to be confused with LTO, this “oil” is solid, and it’s embedded in shale, which is technically a rock. Think mining for gold. Only in this case, the riches embedded in rock come in the form of kerogen, which is converted to synthetic oil after the rock is mined and brought to a processing plant where it is cooked to almost 1,000 degrees Fahrenheit. The extraction process is extraordinarily destructive and dirty, like coal mining on steroids, producing unfathomable quantities of toxic tailings while often destroying vast tracks of forest and pasture lands where it is mined. Proposed Shale Oil operations in northern Michigan pose a direct threat to the Great Lakes ecosystem. The processing, essentially melting rock, requires a remarkable amount of the fuel being harvested, making this one of the most greenhouse gas producing energy schemes ever devised. Again, this is an end-game scenario. An addict’s last hit before overdosing.

6. Nuclear

... Of all of the dirty energy technologies that we are addicted to, nuclear power, whose wastes are easily spread in the atmosphere and are persistently toxic for millions of years, is the dirtiest. ... The Fukushima meltdown is continuing in all three General Electric-built Fukushima Dai-ichi reactors, apparently unabated, as we don’t seem to have the technology to contain it. Conditions, however, have recently gotten so bad at the plant, that the environment inside is too hot for even robots to operate in. With the growing possibility of a comprehensive containment breach at the Fukushima plant threatening to breathe new life, or more accurately, death, into this “old: story,” CBS News reported last week that damage to the #2 reactor is so severe that “the plant operator will have to develop special equipment and technology to tolerate the harsh environment and decommission the plant, a process expected to last decades.”

Get it? We don’t have the knowhow to deal with this, a year after the catastrophe began, yet we are relicensing identical plants, and building new plants.

Our desperate addiction to fossil fuels is nearing an end-game scenario ... the only question is whether we'll irreversibly destroy our ecosystems and environment in the process.

The Cornies exalt fracking, oil sands, shale oil, ultra-deep drilling, arctic drilling, etc. as triumphs in petroleum extraction technology, and they rationalize such catastrophes as the Deep-Water Horizon and Fukushima as necessary evils in our quest for BAU and "growth."

What they don't realize is that these high-risk, high social cost endeavors represent the LAST GASP for a dying regime ... similar to the final cravings of the meth-head / coke-head before the addiction reaches its end-phases. The growing reliance on these desperate, high-risk ventures is further evidence that we're already past peak.

But we're past the point of no return, such that it no longer matters what the social or environmental costs are to our addictions: we will keep fracking and drilling until it kills us. Period.

This is the end-game. We are witnessing the final paroxysms of a fatal addiction that has taken control of all reason and sensibility.