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We are in a serious recession and don't know it

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We are in a serious recession and don't know it

Unread postby dissident » Wed 14 Jan 2015, 18:51:25

http://www.zerohedge.com/sites/default/ ... 0chart.png

Image

The above graph is quite telling. It is not inflation adjusted so it is exaggerated towards more recent years, but you can see that the minima correspond to the global financial crises and recessions: 1997, 2000, 2008 and 2014. But 2014 is not being covered as a recession year and everything is supposedly hunky dory. But clearly things are not OK.

It really does look like 2008 all over again, including the oil price crash. If the global demand for oil reflected economic growth and not stagnation/decline, then the extra supply of US non-conventional oil would not have satiated the market and the price would not have dropped. The amount of the oil price decline reflects how serious the recession is.
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Re: We are in a serious recession and don't know it

Unread postby Pops » Wed 14 Jan 2015, 19:59:32

Hmmm, the original Reuters story says
The reversal is largely down to Russia and the rest of the ex-Soviet Union, which BNP estimates have withdrawn $57 billion from world markets.
Russian companies have been shut out of global markets since Western countries imposed sanctions because of the conflict in Ukraine. Those companies are increasingly forced to rely on their own cash reserves or central bank funding to meet external debt repayments.


So you have to help me out here: we sanction Russia, reducing their income, they in turn pull $57 billion out of the bank. How does that indicate recession? Or does it just contribute to an upcoming recession?

That's a lot of money and will no doubt put a crimp in liquidity, especially combined with the end of QE. But I don't get how it indicates current recession.
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Re: We are in a serious recession and don't know it

Unread postby BobInget » Wed 14 Jan 2015, 20:27:16

http://finviz.com/futures.ashx

http://www.bloomberg.com/news/2015-01-1 ... -drop.html

Funny thing, oil we most depend on is rat in the middle of an all out war zone and we don't know it. I won't bore everyone but Saudi Exports, 10 million B p/d could
be halted for weeks if not longer at any second. Then, Then, we will see panic.


In 2009 the global economy was collapsing, S&P fell to 666. Now S&P is 2000. The Fed balance sheet has expanded by trillions of dollars, we had massive QE by Japan and Europe is preparing a QE + infrastructure investment. The unemployment in USA is approaching its Natural Rate. Wage growth is not there but that did not stop gasoline demand from rising. Here we have S&P at 2000, all hedge funds are out of energy or short, energy stocks are sitting at multi-year lows and USD is sitting at a multi-year high. Analysts are downgrading stocks that have lost 80% of their values and we hear oil could fall to 40, 30, 20. Unless your pushing a self fulfilling prophecy, i fail to see recession.
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Re: We are in a serious recession and don't know it

Unread postby GoghGoner » Thu 15 Jan 2015, 07:36:00

Commodity prices indicate a severe global recession. How long can the U.S. stay immune? Got me!
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Re: We are in a serious recession and don't know it

Unread postby Ibon » Thu 15 Jan 2015, 07:48:09

BobInget wrote:
Funny thing, oil we most depend on is rat in the middle of an all out war zone and we don't know it. I won't bore everyone but Saudi Exports, 10 million B p/d could
be halted for weeks if not longer at any second. Then, Then, we will see panic.


Funny thing is, the last time that happened, back in the early 70's, it jump started a focus on solar and other alternative energies and actually had the president of the biggest global power telling us to turn the heat down and wear sweaters.
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Re: We are in a serious recession and don't know it

Unread postby Pops » Thu 15 Jan 2015, 10:11:59

Thinking about this still ...

IF the chart in the OP reflects oil co excess profits being invested outside the oil company then it makes sense that profits went up on short spare capacity through '07 but then the Cos decided they had better start drilling so they invested in CapEx. Then demand and the price dropped in '09 so they pulled back for a while before another little bump in '11 or so. Then finally, recently, the price has dropped again and of course they have less excess profit to invest.

Maybe these back that somewhat:

Image

Image
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Re: We are in a serious recession and don't know it

Unread postby ohanian » Thu 15 Jan 2015, 13:57:44

dissident wrote:If the global demand for oil reflected economic growth and not stagnation/decline, then the extra supply of US non-conventional oil would not have satiated the market and the price would not have dropped. The amount of the oil price decline reflects how serious the recession is.


How do you measure the global demand for oil? In units of volume? In units of joules? Or in units of US Dollars?

In which unit did the global demand for oil drop?

Why does the oil price drops reflect the seriousness of the recession? What it means is that there are more sellers than buyers. It does not automatically mean that the volume of oil sold (per annum) on the global market has dropped.
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Re: We are in a serious recession and don't know it

Unread postby AndyA » Thu 15 Jan 2015, 15:41:17

The great depression was manifest to a lot of people as an oversupply issue. Too much stuff, not enough buyers. We are facing the same situation today. I wouldn't say 'we are in' but we are near. I expect sometime in 2016 we will get the Greatest Depression. The rate at which babyboomers shift from investors to dis-investors will be nearing its peak, and I don't think Gen-X has the capital to replace them. Also the fallout from the lower commodity prices will be hitting hard, it's not yet, no way. MOST businesses will still have reasonable funds coming in, and reasonable balance sheets from the boom years. The overinvestment in production of pretty much everything (thanks to Chinese demand) will keep prices low for years to come. Steel is a classic example of this, look at how much capacity has grown, and will grow this year. These mines/mills are at the completion stage and can't be shut in. If I had money in stocks I would definitely be pulling it out now, or very soon. I would be looking for a place I could afford to live in when times get tough. This is the peak before the crash.
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Re: We are in a serious recession and don't know it

Unread postby Pops » Thu 15 Jan 2015, 15:52:46

Just thought I'd point out again that as far as I can tell, the chart in the OP is of oil profits invested outside the producing country - i.e. KSA buys stock in the S&P.
Not GDP
Not even oil profits, just outside investment of profits

Not sure how that relates to recession. It relates to oil profits, oil CapEx, and certainly global interest rates when they take their profits home - although the amount they have taken out is small overall - just not adding more really.

Unless someone has a better take ...
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Re: We are in a serious recession and don't know it

Unread postby KaiserJeep » Thu 15 Jan 2015, 16:01:01

Succinctly put, AndyA. The Boomers are retiring in huge numbers, and the strain on the various "entitlements" and "earned benefits" programs are growing.

In terms of actual purchasing power, the average American lifestyle has been in decline since the 1970's. It's a vicious down-spiral of inflating currency, retiring taxpayers, escalating healthcare costs, rising energy costs, and increasingly huge numbers of people who really do think that the government's job is to be their Nanny.

Having paid taxes so high I merely screamed from time to time, even though I was married to a CPA, I am now getting ready to retire. My wife just got one of those statements from the Social Security Admin about how much funds she has in her "account". We were laughing about it last week.

Funny thing, my Nanny hasn't called. Guess I'll have to take care of myself.
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Re: We are in a serious recession and don't know it

Unread postby Sixstrings » Thu 15 Jan 2015, 17:04:02

Hm, some really good argument in this thread predicting some economic doom. I've been convinced it's on the upswing.. you guys have me wonderin' now.

About oil prices, though -- that dip in '08 was because of deflation. Now, the dip we have is about US shale oil and shale fully coming online, I think.

You all have me wondering, but still, I just can't see us going into ANOTHER recession or even depression. We just came out of one.

I have to lean toward the natural cycle of things, like the long term real estate cycle that's a 30 year cycle. We already had a definite bottom, and things are ramping up on the long term cycle again, on the upswing.
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Re: We are in a serious recession and don't know it

Unread postby AndyA » Thu 15 Jan 2015, 17:49:35

Average cycle between recessions in the US for the post WWII period is about 5 years. 5 years 6 months and counting since the last one.
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Re: We are in a serious recession and don't know it

Unread postby dissident » Thu 15 Jan 2015, 18:55:09

Pops wrote:Just thought I'd point out again that as far as I can tell, the chart in the OP is of oil profits invested outside the producing country - i.e. KSA buys stock in the S&P.
Not GDP
Not even oil profits, just outside investment of profits

Not sure how that relates to recession. It relates to oil profits, oil CapEx, and certainly global interest rates when they take their profits home - although the amount they have taken out is small overall - just not adding more really.

Unless someone has a better take ...


The point is that this metric has been 1:1 with the global recessions over the last 20 year. You brought up Russia. Remove Russia from the graph and you still get the same dips. Also note that the drop in expenditures predates the price drop in oil.
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Re: We are in a serious recession and don't know it

Unread postby Sixstrings » Thu 15 Jan 2015, 19:15:51

AndyA wrote:Average cycle between recessions in the US for the post WWII period is about 5 years. 5 years 6 months and counting since the last one.


Ick.. I see positive trends out there, real estate and energy, but otherwise.. I don't see how the last recession (really a depression) ever ended. So how can it be time for another one again. :|

This shall be interesting.. if we do have another recession.. and more people just wind up poorer at the end of the next one.. then the doomer argument about stepping down to doom, in stages, would be correct.
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Re: We are in a serious recession and don't know it

Unread postby Pops » Thu 15 Jan 2015, 19:28:24

Also note that the drop in expenditures predates the price drop in oil.


But it isn't a chart of expenditures, it is a chart of oil profits invested in something different, in a different country, than where they were earned.

This may be the be all and end all of recession indicators, what do I know? But you should at least understand what it is that you are pointing to.

Like someone said upthread, this isn't anything like 2008, the oil companies aren't anything like in 2008, oil demand isn't the same, supply isn't the same, spare capacity isn't --- in '08 no one here had ever heard of fracking except OF2 maybe.


You know, I've noticed that the hair in my belly button grows counterclockwise just before a recession ...
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Re: We are in a serious recession and don't know it

Unread postby GoghGoner » Thu 15 Jan 2015, 21:10:20

We may not know it but some folks surely do.

Warning: Bond rates are going negative

"It's a bit jaw-dropping. It all makes you wonder: Do we really have a functioning global banking system when rates are essentially zero?" asked Colas.
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Re: We are in a serious recession and don't know it

Unread postby AndyA » Fri 16 Jan 2015, 01:47:19

We live in complicated times, but I have a simple story to tell.


The phony housing boom in the U.S. went bust in 2008, two years after house prices peaked nationally.

The global economy went into severe recession because the global financial system is highly integrated, so massive bank fraud and bad debt rippled across the world's economies, crippling them in the process.

Central banks all over the world stepped in to re-inflate the global economy. The "stimulus" applied was massive and sustained.

Stimulus seemed to work for a while, especially in so-called "emerging" markets (China, India, Brazil, Russia, others). Those markets had plenty of room to grow.

The "mature" (OECD) economies never did bounce back, despite millions of mindlessly optimistic references to "the recovery," the creation of millions of low-paying jobs in the U.S, and GDP growth based on a host of dubious factors. The EU and Japan are a total disaster.

In 2015, the re-inflation phase has run its course. Commodity prices (crude oil, copper, etc.) are dropping precipitously, indicating that growth in the "emerging" markets has nearly ground to a halt.

There is no new economic frontier to exploit this time around and further stimulus is pointless and probably harmful.

Next stop? No growth or contraction of the global economy, accompanied by much-dreaded deflation.

Is this story true? Maybe. It certainly has the ring of truth. Time will tell. The direction of the global economy in the near future (in 2015) is the kind of thing it is easy to be wrong about.

But I will tell you this: that simple story is the cause of all the economic anxiety the world is currently experiencing. There is lots of anxiety because many observers fear this simple story is true.
http://www.declineoftheempire.com/2015/01/a-simple-story.html
“I’m getting worried that this [drop in copper prices] is telling us not all is right with the global economy and that it is slowing faster than anticipated,” said Robin Bhar, head of metals research at Societe Generale.


“If you asked me three to six months ago, I would have been less worried; I would have said it’s oversupply of oil, iron ore, coal. But the combination of greater supply with weaker demand is suggesting it’s indicative that the global slowdown is taking place.”
http://www.theguardian.com/business/2015/jan/14/copper-prices-fall-fears-looming-global-recession
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Re: We are in a serious recession and don't know it

Unread postby AndyA » Fri 16 Jan 2015, 01:54:41

GoghGoner wrote:We may not know it but some folks surely do.

Warning: Bond rates are going negative

"It's a bit jaw-dropping. It all makes you wonder: Do we really have a functioning global banking system when rates are essentially zero?" asked Colas.

Swiss bonds are negative out to ten years. AKA people are paying money to the swiss government to look after their money. Not exactly risk on.
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Re: We are in a serious recession and don't know it

Unread postby kublikhan » Fri 16 Jan 2015, 05:00:03

I think there is a misunderstanding here of this graph. It measures how many petro dollars are entering/leaving the world market. It is not a barometer of the general health of the world economy. As for what this means for the world economy, that depends if you are an oil exporter or importer. It will be negative for exporters like Russia, Iran, Venezuela. However it will be positive for oil importing countries like India, Indonesia, Korea.

The energy exporting countries get a surge of wealth when energy prices are high. Conversely high energy prices act as a drag on the economies of energy importing nations. It's like a wealth transfer from energy importers to energy exporters. The situation reverses when energy prices collapse. Exporting countries take a hit when energy prices turn town. Conversely energy importing economies get a stimulus when energy prices are low.

Tumbling oil prices could prove to be a boon for the many Asian economies that depend on crude imports. With oil at its lowest price in more than five years, governments in countries such as India and Indonesia can spend money on much-needed infrastructure and other growth projects without stoking inflation. Falling crude prices also give China’s flagging economy a boost, allowing its central bank—and others in the region—to ease rates even as a recovering U.S. looks to do the reverse.

Combined with loose monetary policy and a gradual recovery in global demand for goods and services, falling oil prices should help lift emerging Asia’s gross-domestic-product growth this year to 4.7% from an estimated 4.3% in 2014. The decline in oil prices should boost GDP growth in the Asia-Pacific region by 0.25% to 0.5%.

Of Asia’s economies, none is more dependent on oil imports than China. The country spent $234.4 billion to import oil in 2013. That was just below the U.S., which was the world’s top buyer of crude until it was surpassed by China in 2014. Analysts say that if oil prices were 20% lower this year Chinese state coffers could see a $50 billion boost. Depressed oil prices could help China make up for some lost ground in its economy due to slowing industrial growth.

Malaysia, Asia’s biggest exporter of oil, could see oil-related revenue fall to 3.1% of GDP in 2015 from last year’s 5.9%. Low oil prices are set to reduce Australia’s petroleum resource rent tax by US$615 million over the next four years.
Falling Oil Spells Boon for Most of Asia’s Economies

The lowest oil price in four years will provide stimulus of as much as $1.1 trillion to global economies by lowering the cost of fuels and other commodities, according to Citigroup Inc.

“Cheaper oil is an advantage for both consumers as well as industrial and manufacturing operations, especially as winter approaches.” As lower energy prices help reduce commodity costs, they can push down the inflation rate. While freeing up more money for consumers, outsized declines could become a concern in places like Europe, where policy makers are trying to stave off deflation, which can exacerbate an economic slump.

“Lower prices, for most economies, reduce the cost of doing business and support economic growth,” the International Energy Agency said in a report Oct. 14. “Lower prices offer a cushion of sorts against an otherwise vulnerable macroeconomic backdrop.”

A decline to $80 would cost OPEC $200 billion of its recent earnings of $1 trillion, Morse said in an analysis on the topic that was published yesterday in the Financial Times. “It is a big chunk of stimulus. The macro economic analysis of higher oil prices was always that it is essentially a wealth transfer from leveraged spending U.S. consumers to saving Middle East sovereigns, so ultimately it reduces the global velocity of money significantly and it’s a net drag. Now a price fall reverses that.”
Citigroup Sees $1.1 Trillion Stimulus From Oil Plunge
The oil barrel is half-full.
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