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FALLING OIL PRICES, THE US DOLLAR, AND CARRY TRADE: A GRAND STRATEGY ...

As most regular readers of this website are aware, I'm not one of those "the-dollar-will-collapse-any-day-now-and-will-no-longer-be-the-reserve-currency-the-financial-apocalypse-is-immanent" people. For that matter, and for the record, I've never been a singer in the Rockefeller-funded "oil is a fossil fuel and we're at peak oil" choir either. But like many, I've been wondering just what the heck is going on with the falling prices of crude oil(and, to be quite honest, it's not the only industrial commodity that is undergoing falling prices). If anything, the emergence of fracking in practical and widespread application in recent years has produced a clear counter-indicator to the "peak oil" theorists (not to mention the even more problematical findings of the "it's-not-a-fossil-fuel, dummy" crowd. O.K. We get it: there simply weren't enough dinosaurs ever alive on this planet - or elsewhere for that matter - to account for all the oil we've been consuming over the years. It was a dumb idea, and not the first dumb idea the Rockefeller crowd bought into and then made everyone else buy into.)

Apparently many of you were wondering in the past few weeks why the heck oil prices were in what appears to be free-fall, because over the past week and a half, many of you have sent me a spate of articles, in fact, well over twenty articles, all addressing this question, and quite frankly, anyone's guess is as good as, if not probably better, than mine.

But here, for my two cents' worth, are two articles that I think are close, if not spot on, the problem:

2015: Why's the Oil Price Collapsing? Answer: $8+ Trillion Carry Trade

David Bird, Missing Wall Street Journal Reporter, Foresaw an Oil Crash

Now, what's interesting about both of these articles is that they avoid the theory that the USA is doing this as a component that the USA is doing this as a short-term measure to "get Putin", of in some hypotheses, to "get Saudi Arabia", and in still other hypotheses, to "get both of them."

I want to draw your attention to a few paragraphs from the first article (which confirm the insights of David Bird, the missing Wall Street Journal reporter, that are rehearsed in the second article):

"You will have read about the oil price fall, OPEC, shale fracking, oil glut, Saudi Arabia, Iran, Russia, energy supply and demand, geo-strategy and geo-political risk, alongside myriad conspiracy theories. They all may have some truth in them, but they are relative side issues against the major story that ought to be followed and dissected: the explosion of the near $8+ trillion US dollar carry trade.

"Of that $8+ trillion, $5.7 trillion is emerging market dollar debt, a global reserve currency those countries can neither print nor control. Dollar hard-currency debt of emerging market economies has tripled in a decade, split between $3.1 trillion in bank loans and $2.6 trillion in corporate bonds. In the last two hundred years, very few cross border lending binges equate in size and scale to this dollar denominated debt colossus fuelled by first world quantitative easing on an unprecedented scale and with near Zero Interest Rate Policy (ZIRP).

"What Is The Carry Trade?

"It’s the borrowing of a currency of a low interest rate country, such as the US, converting it to a currency in a higher interest rate country and investing it in high yielding assets of that country and elsewhere. The big trading outfits do this with leverage of 100 or 300 to one. This causes important moves in the financial markets, made possible by the trillions of dollars of central bank money creation in recent years.

"Evaporating Dollar Liquidity?

"Borrowing US dollars is the equivalent of shorting the US dollar. If the US dollar rallies, as it has done over the last several quarters and months, then that dollar debt becomes more and more expensive to finance on a relative basis around the world. As a result, a US dollar rally is oil negative, commodities negative and most global asset classes negative. Much of the global debt was taken out at real interest rates of 1 percent or less on the implicit assumption that the US Federal Reserve would continue to flood the world with liquidity for years to come. This has now been stopped for the moment as announced by Janet Yellen, the chair of the board of governors of the US Federal Reserve. The Fed has already slashed its bond purchases to zero, withdrawing $85bn of net stimulus each month. It is clearly considering the raising of interest rates for the first time in seven years as the US economy recovers at a formidable pace of nearly four percent GDP growth as measured via the most recent last quarter's figures."

But here comes my high octane speculation, and it's strongly suggested even by the article itself, which hints at deeper underlying geopolitical agendas at work, and at the various geopolitically based theories: it's being done to smash OPEC once and for all, it's because of Russia, or Iran. Rather, the article suggests, it is all of these, and more:

"1. Just about everything is likely to be hit in 2015 and beyond, and not just oil, as the US dollar continues to rise. Much of the global “recovery” of the last five years has been fuelled by cheap borrowed dollars. Now that the US dollar has broken out of a multi-year range, we are going to see more and more “risk assets”, including projects or investments funded by borrowed dollars around the world, decline significantly in value step by step. Oil is just the beginning of this rout and needs to be looked at in the context of a bigger picture.

"2. Slow to negative growth economies that are closely aligned with commodities -- all of which are priced in US dollars -- are also going to get demolished step by step. Look at recent examples: Russia, Nigeria and Venezuela on the one hand and Brazil, Turkey and Indonesia on the other.

"3. The bigger story here is not about a mercurial oil price decline alone; it’s about a massive bubble in multiple risk asset classes aided by borrowed dollars blowing up step by step in a cascade. The last time around it was a housing bubble crash in 2007-2009. This time it’s an all asset classes bubble save the US dollar. Isn't oil just the Canary in that coal mine shaft? Remember when a few years back the unintended consequences of quantitative easing or printing money were discussed extensively. Whilst the examples of the Weimar Republic and hyperinflation abounded both within and without ATCA 5000's Socratic dialogue, it may well be that the reverse may yet come to pass as an alternative scenario. We also discussed, a massive global debt deflationary spiral across most asset classes and particularly in the emerging market countries unleashed, perhaps unintentionally, by the US Federal Reserve's eventual monetary policy tightening."(Emphasis added)

Or perhaps it is entirely intentional, and a mechanism whereby the USA's strategic "pivot to the Pacific" and "eastward pivot" of its NATO bases have been deliberately coupled to the timing of Russia's recent institution of an alternative financial clearing system. In the wider geopolitical context, in other words, it makes entire sense to use this mechanism to prevent further BRICSA collaboration, further Chinese penetration of Asian markets, and to weaken commodities driven markets.

Ok, that's clear enough, but where's the high octane speculation part of this? It's suggested in those last italicized lines of the quotation above, for if the Fed's policy is a matter of deliberate and intentional geopolitical and financial policy designed to ring in the BRICSA bloc, then we can expect it to be coupled to certain other developments, like increasing or expanding American military presence and bases in countries such as Thailand, and a deepening of economic and even military ties with - here it comes - Vietnam, increased pressure on countries such as Indonesia to become part of an expanded alliance system in the south Pacific, and so on. Time will, of course, tell, but for the moment, my money's on all of this being part of a grand strategic policy, and quite deliberate, with the Fed playing its dutiful role. If so, then watch American diplomatic moves with Thailand, Vietnam, and Indonesia, in addition to the "usual players"(Japan, Australia, etc.).

See you on the flip side...

 

26 thoughts on “ FALLING OIL PRICES, THE US DOLLAR, AND CARRY TRADE: A GRAND STRATEGY ...”

  1. Eerily mimics the script set up by the Pharaoh and Jacob.

    Establish 7 years of abundance and pull the rug out from under them after 7 years of famine, heck even the numbers match up, 2008 and 2015, like clockwork.

  2. This is very important….thanks for posting and the informative
    comments as always.

    It really all comes down to Raw Material Economics and the exploitation of the producers by “the interests whose interest is interest”.

    What the producers need to do is work together, and that is the genius of the BRICS as a union that can come together and say no the the load of crap, where ironically the moves of the west are helping such consolidation as we have been seeing.

  3. As for Viet Nam, one should never say never… but I doubt very much Viet Nam will ally themselves to the USA in the manner described above… They may deeply distrust China – if not hate China as their main adversary for as they say themselves 4.000 years.. BUT, they are real politicians.. China is way way way more important to the survival of Viet Nam geopolitically… than any agreements, whatsoever, with the USA can ever be… and they have not forgotten what USA did to Viet Nam, neither for that matter what the French did. Viet Nam will stay and keep sovereign to the last soul – they will never ever sell out. I worked in and with Viet Nam for 12 years… I respect and admire them for having defended their freedom and sovereignty for 4.000 years… they are proud warriors … they are freedom fighters … with probably more than 80% of the population over 45 being veterans of one, two or three wars… these are the dads and mums, grand dads and grand mums of the under 45 they are living in very tight knit families brought up in the spirit of ever being ready to fight.
    SO there you have it. …. and Thailand, no they won’t sell out either … Indonesia the most populous Muslim country with their 240 million people … they learnt a good lesson from the 350 years of Dutch colonialism … reinforced by the actions of USA murder incorporated … … that helped kill one million Indonesians, after toppling President Sukarno, their first President … they have not forgotten… I worked there for years too.

  4. nobodyouwantoknow

    В небольшом поселке, расположенном в тайге Приморского края, живет потомственный егерь Павел Широков. Однажды на его участке произошло дерзкое преступление: браконьеры отстрелили двух уссурийских тигров. В тот же день сотрудники ДПС остановили на трассе внедорожник. На просьбу открыть багажник пассажиры отреагировали агрессивно, началась перестрелка, и все ее участники погибли. Прибывший на место преступления полковник Хазов обнаружил в багажнике машины убитых тигров и узнал в одном из погибших браконьеров местного

  5. Dr. Farrell, you may want to check out the following website/blog. This gentleman has been researching the Globalists for many years. He has a truly insightful take on what is going on with the world financial system. Believe me, it is worth your while. I’ve pointed you to his writings on the West vs. East issues. However, there is a lot more info.

    If you want the total background on this “New World Order” of the BRICS, go to this website and read the plan in the Globalist’s own words:

    http://redefininggod.com/2014/11/

  6. I am watching all the other news on those southeast asian markets, Dr. Farrell (sounds like “Feral”? Love your name! Kinda like Wolf Blitzer)
    But this Site seems to hold all the Real News on Current Events! I only have three or four of your books, but the hidden history you’ve uncovered is incredible! Especially on Hans Kammler. Family members of mine back in the early 1980s made mention of him, wondering why his name hardly ever came up during the War-Crimes Trial of the late 40s and now I know why. I wish my Dad, a Pacific-Theater soldier in the Philipines had lived long enough to read “Brotherhood.” All of those ‘dead-ends’ at the butt-end of the War would’ve came together for him. Murrow from the 50s has nothing on YOUR reporting! Keep up that ‘high-octane’ speculation, Doctor. Peace!

  7. Robert Barricklow

    F William Engdahl nails oil. His investigative journalism not only exposed the dinosaur biological origins myth(oil is abiotic); but the OPEC/Kissinger Crisis Conspiracy that was drummed-up in the early 1970s. The dollar had recently gone off the gold standard and the banksters/natl security complex needed to strengthen it on steroids. Enter: Black Gold, in the form of an engineered OPEC Oil Crisis. It was already a de-facto agreed-upon-script to raise the price of oil 3 or 4 fold, via OPEC Oil for dollars only finacialized pipeline.
    The question is How Long Hass The Command & Control economy been masquerading as a competitive capitalistic one? How long has the fictitious dogma of supply & demand been throwing fast curves into the no-labor-strike zones? Labor has been a traditional slave to command & control economies for too damn long. Where political capital becomes compromised by the economic capital, rendering the public ineffective in labor policies.
    Thus the energy & food & moneyed monopolies rule.
    Oil is but one of many Black & Dark Chapters in mankind’s struggle against power.

  8. It will be interesting what Catherine Austin Fitts has to say about 2015 economics in the upcoming interview with Jospeh, that is scheduled for today (15th). Normally CAF makes it available to her members and then a few days later it should appear in the members audio area. If anybody has a handle on the forthcoming year, it’s CAF for sure.

  9. I admire your long-held insistence that the US is NOT a dead man walking, but for me this reeks of the last gasp of a vastly corrupt, over-extended and over-reaching, paranoid, oligarchically-plundered and self-defeatingly arrogant and pathologicallcy lie-ridden empire.

    But hey, I’ve been saying since the ’80s that they can’t keep this mess going, but they always manage to pull through. However, all indicators agree that this particular empire is not on the upside of its Laffer Curve anymore, but is fast gaining momentum on the downside…. Wheee!

    So, in a word, the undeclared Great Depression 2.0 cannot be papered over forever by FED money printing and wretched Keynsian excess, and at some point the laws of economics ARE going to come back into play, and that time is growing nearer and nearer, faster and faster. Frankly, oil dropping like a rock–along with copper, and pretty soon, just about all other commodities–just shows that we’re nearly there.

    1. IF YOU EQUATE DEPRESSION WITH DEFLATION THEN WE HAVE BEEN IN 2.XXX SINCE THE ARAB OIL EMBARGO

      It is now coming home to roost. JPM struggled this last quarter. Banks are not doing well even with the benefit of the carry trade.

      Everywhere trouble. Its time to hunker down for the final episode of oily monopoly capitalism.

      We are about to see some serious shit come down this year. Don’t worry be happy.

  10. Nobody is talking about an alternative to oil. Fact is, we should have been driving electric cars 20 years ago, but oh no, we’ve got to keep drilling to keep the game going. If the fall in the price of oil is a war, then the players maybe having a re-think. Who gets hurt the most, there’s no doubt who has been targeted, but I think Mr. Putin may be one step ahead of them, as he has been all along.
    See recent article at Zero Hedge.

    1. The electric car was killed a hundred years ago by big oil.

      Municipalities were actually paid to destroy there electric street cars, rip up the tracks and the replacement buses were subsidized by big c;oil serpent.

  11. Russia just pulled out of the petrodollar?

    What will that mean to the energy dollar? What will that mean to first world lifestyles?

    Control energy you control the nation.
    Control food you control the people.

    With the world flooded with zillions of US dollars…what if there is a massive, orchestrated and well timed dump?
    Hmmm, the US could wipe off all its debts with a worthless dollar and then start fresh…or….

    1. Robert Barricklow

      I think that’s been one of the end games – toward a worldwide privately-owned digitized-economy strictly commanded & controlled by an elite cadre of asylum madmen.

  12. As long as you are in the house, everything is subject to house rules (and of course the house owners are exempted). Only, in this house, the games are played gladiator style..
    And we call this civilization..

    That cold fusion card better be played carefully by the rightful players

  13. Now we can add investigating reporters to the listing of managing bankers who meet untimely ends a la Garry Webb and Michael Hastings now David Bird been disappeared. What a few people iced here and there our masters are planning larger killing in the future in the billions. All life is cheap to them that just the price of doing business to our oligarchs.

  14. “Spectre’s / FedGov”

    One or the other, or one doing the bidding of the other.

    They aint the same parties, and those who claim every action of the federal government is some Nazi plot, undermine anything the federal government may do; this includes inventing the internet.

  15. Bubble and Bust. The readers of this blog are not the only people looking into those 19 and 50 year economic cycles and how to use them…

    1. PS the “marketoracle” website contains considerable material on cycles, which it refers to as the “Elliott Wave” theory.

  16. Wow, it looks like it’s harvest time again. If you want to know who’s getting harvested, just goto YouTube and pull up George Carlin’s “You Ain’t in the Club” video. If money is indeed energy, then once you’ve accumulated enough of it, the threat of even a small short circuit looms large. Especially, if in your haste to accumlate all this energy you have not installed the proper safety fuses. The amount of energy/money they’ve stolen is astronomical. Walter Burien of CAFR fame, quantified the amounts on a recent interview with JB Wells. I almost fell out of my chair as he rattled off the numbers. Another indication of a possible meltdown is the PTB are doubling down on their bets and threatening their minions / henchmen who don’t follow orders. Boehner for example. Yes, that is a bit of high octane speculation. But, I’d like to thank Dr. Farrell for his amazing detective work on David Bird. Bird died becuz, he discovered Spectre’s / FedGov.Inc’s plan to pull the rug out from under oil.. Wow, who knew that “Dr. Strangelove” meets “The Ruling Class” would be a reality TV show?

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