The Demise Of Dollar Hegemony: Russia Breaks Wall St's Oil-Price Monopoly

Russia has just taken significant steps that will break the present Wall Street oil price monopoly, at least for a huge part of the world oil market. The move is part of a longer-term strategy of decoupling Russia’s economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy.

Later in November the Russian Energy Ministry has announced that it will begin test-trading of a new Russian oil benchmark. While this might sound like small beer to many, it’s huge. If successful, and there is no reason why it won’t be, the Russian crude oil benchmark futures contract traded on Russian exchanges, will price oil in rubles and no longer in US dollars. It is part of a de-dollarization move that Russia, China and a growing number of other countries have quietly begun.

The setting of an oil benchmark price is at the heart of the method used by major Wall Street banks to control world oil prices. Oil is the world’s largest commodity in dollar terms. Today, the price of Russian crude oil is referenced to what is called the Brent price. The problem is that the Brent field, along with other major North Sea oil fields is in major decline, meaning that Wall Street can use a vanishing benchmark to leverage control over vastly larger oil volumes. The other problem is that the Brent contract is controlled essentially by Wall Street and the derivatives manipulations of banks like Goldman Sachs, Morgan Stanley, JP Morgan Chase and Citibank.

The ‘Petrodollar’ demise

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The Financial Crisis Of 2016 Rolls On – China, Oil, Copper And Junk Bonds All Continue To Crash

Never before have we seen a year start like this.  On Monday, Chinese stocks crashed once again. The Shanghai Composite Index plummeted another 5.29 percent, and this comes on the heels of two historic single day crashes last week.  All of this chaos over in China is one of the factors that continues to push commodity prices even lower.  Today the price of copper fell another 2.40 percent to $1.97, and the price of oil continued to implode.  At one point the price of U.S. oil plunged all the way down to $30.99 a barrel before rebounding just a little bit.  As I write this article, oil is down a total of 6.12 percent for the day and is currently sitting at $31.13.  U.S. stocks were mixed on Monday, but it is important to note that the Russell 2000 did officially enter bear market territory. This is yet another confirmation of what I was talking about yesterday.  And junk bonds continue to plummet.  As I write this, JNK is down to 33.42.  All of these numbers are huge red flags that are screaming that big trouble is ahead.  Unfortunately, the mainstream media continues to insist that there is absolutely nothing to be concerned about.

A little over a year ago, I wrote an article that explained that anyone that believed that low oil prices were good for the economy was “crazy“.  At the time, many people really didn’t understand what I was trying to communicate, but now it is becoming exceedingly clear.  On Monday, one veteran oil and gas analyst told CNBC that “half of U.S. shale oil producers could go bankrupt” over the next couple of years…

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The TPP as a Set of International Economic Rules

An agreement on the Trans-Pacific Partnership has finally been reached, but the full text of the agreement has not been released yet. This column looks at the new set of rules comprising the TPP and whether it deserves to be called a ‘21st century free trade agreement’. It argues that the success or failure of the 12-country pact rests ultimately on the dispute settlement procedures.

An agreement on the Trans-Pacific Partnership (TPP) has finally been reached. The TPP negotiations involved only 12 countries, but had to go through lots of twists and turns because of a criss-cross of confrontational relationships, i.e. large advanced economies versus emerging economies, exporters versus importers in agricultural trade, and market economy countries versus state capitalist countries. The successful conclusion of the TPP agreement, an ambitious trade liberalisation initiative, is surely an event worthy of celebration. It has been achieved despite various difficulties and came at a time with no evident signs of hope for the Doha Round of negotiations under the WTO. As the full text of the TPP agreement has not yet been released as of this writing, this is going to be guess work. But I would like to attempt to outline and share my ‘first impression’ of this new set of rules based on the summaries of the agreement and explanatory notes released by the governments of the TPP member countries and supplementary information from media reports.1

The TPP and Shortcomings of the WTO

At the conclusion of the TPP agreement, leading figures including Akira Amari, Japan’s state minister in charge of the TPP, repeatedly called it a “21st century agreement”. By this definition, the TPP is an agreement that facilitates trade in parts and intermediate goods as well as the accompanying international movement of services, data, people, and know-how. It goes beyond trade in finished products predicated on the division of labour and based on the theory of comparative advantage. Trade in parts and intermediate goods has been growing with the advancement of information and communications technologies (ICTs) prompting more companies to unbundle their production processes and leading to the development of international supply chains. Richard Baldwin calls this chain of factors the “trade-investment-services-intellectual property nexus” (Baldwin 2012) and an agreement designed to facilitate the formation of such nexuses is what is meant by a 21st century agreement.

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Stock Market Crash 2016: This Is The Worst Start To A Year For Stocks Ever

We have never had a year start the way that 2016 has started.  In the U.S., the Dow Jones Industrial Average and the S&P 500 have both posted their worst four-day starts to a year ever.  Canadian stocks are now down 21 percent since September, and it has been an absolute bloodbath in Europe over the past four days.  Of course the primary catalyst for all of this is what has been going on in China.  There has been an emergency suspension of trading in China two times within the past four days, and nobody is quite certain what is going to happen next.  Eventually this wave of panic selling will settle down, but that won’t mean that this crisis will be over.  In fact, what is coming is going to be much worse than what we have already seen.

On Thursday I was doing a show with some friends, and we were amazed that stocks just seemed to keep falling and falling and falling.  The Dow closed down 392 points, and the NASDAQ got absolutely slammed.  At this point, the Dow and the NASDAQ are both officially in “correction territory”, and some of the talking heads on television are warning that this could be the beginning of a “bear market”.  But of course some of the other “experts” are insisting that this is just a temporary bump in the road.

But what everyone can agree on is that we have never seen a start to a year like this one.  The following comes from CNN…

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China Halts Stock Trading After 7% Rout Triggers Circuit Breaker

Chinese stocks in Hong Kong fell to the lowest level in four years as mainland shares plunged, forcing an early halt to trading for the second day this week after the central bank cut its yuan reference rate by the most since August.

Hong Kong’s Hang Seng China Enterprises Index tumbled 4.2 percent to the lowest level since Oct. 6, 2011. Trading of shares and index futures in the mainland was halted by automatic circuit breakers from about 9:59 a.m. after the CSI 300 Index slid more than 7 percent. The People’s Bank of China cut its reference rate on Thursday for an eighth straight day, fueling concern that tepid economic growth is prompting authorities to guide the currency lower.

“The yuan’s depreciation has exceeded investors’ expectations,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “Investors are getting spooked by the declines, which will spur capital outflows.”

The yuan weakened 0.6 percent to 6.5938 per dollar at 4:20 p.m. in Shanghai. The currency rallied from early declines in offshore trading, strengthening 0.4 percent in Hong Kong amid speculation the central bank propped up the exchange rate after setting a weaker fixing that sent the currency tumbling.

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Here's The Ultra-Clever Way That The Chinese Are Circumventing Capital Controls

Well, it happened again.

China’s stock market plunged, sending more than half a trillion dollars to money heaven.

What a surprise, it turns out that a massive credit bubble is actually unsustainable and will eventually burst. Shocker.

And just like what happened last year when Chinese stocks tanked, the government is stepping in to centrally plan the stock market recovery.

Last year we saw some of the most extraordinary tactics; China’s government jailed short-sellers (i.e. people who bet on stocks declining), and they even encouraged their citizens to BORROW money against their homes to buy stocks.

But no centrally planned bailout is complete without the cherry on top– capital controls.

Capital controls are like a bear trap for your savings. They’re what governments impose when they want to hold your money hostage.

In Europe, for example, governments have propped up failing banking systems by imposing withdrawal restrictions, preventing people from taking out too much of their own money.

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Stock Markets All Over The World Crash As We Begin 2016

The first trading day of 2016 was full of chaos and panic.  It started in Asia where the Nikkei was down 582 points, Hong Kong was down 587 points, and Chinese markets experienced an emergency shutdown after the CSI 300 tumbled 7 percent.  When European markets opened, the nightmare continued.  The DAX was down 459 points, and European stocks overall had their worst start to a year ever.  In the U.S., it looked like we were on course for a truly historic day as well.  The Dow Jones Industrial Average was down 467 points at one stage, but some very mysterious late day buying activity helped trim the loss to just 276 points at the close of the market.  The sudden market turmoil caught many by surprise, but it shouldn’t have.  The truth is that a whole host of leading indicators have been telling us that this is exactly what should be happening.  The global financial crisis that began in 2015 is now accelerating, and my regular readers already know precisely what is coming next.

The financial turmoil of the last 24 hours is making headlines all over the globe.  It began last night in China.  Very bad manufacturing data and another troubling devaluation of the yuan sent Chinese stocks tumbling to a degree that we have not seen since last August.  In fact, the carnage would have probably been far, far worse if not for a new “circuit breaker” that China recently implemented.  Once the CSI 300 was down 7 percent, trading was completely shut down for the rest of the day.  The following comes from USA Today…

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Unmanageable Money: Hedge Funds Keep Losing (And Closing) - Why It Matters

How do you make money in a world where history is meaningless? The answer, for a growing number of big fund managers, is that you don’t.

Hedge funds, generally the most aggressive species of money manager, do a lot of “black box” trading in which bets are placed on previously-identified patterns and relationships on the assumption that those patterns will repeat in the future.

But with governments randomly buying stocks and bonds and bailing out/subsidizing everything is sight, old relationships are distorted and strategies that worked in the past begin to fail, as do the money managers who rely on them. A few recent examples:

Why should regular people care about the travails of the leveraged speculating community? Because these guys are generally considered to be the finance world’s best and brightest, and if they can’t figure out what’s going on, no one can. And if no one can, then risky assets are no longer worth the attendant stress.

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2015 Was The Worst Year For The Stock Market Since 2008

It’s official – 2015 was a horrible year for stocks.  On the last day of the year, the Dow Jones Industrial Average was down another 178 points, and overall it was the worst year for the Dow since 2008.  But of course the Dow was far from alone.  The S&P 500, the Russell 2000 and Dow Transports also all had their worst years since 2008.  Isn’t it funny how these things seem to happen every seven years?  But compared to other investments, stocks had a relatively “good” year.  In 2015, junk bonds, oil and industrial commodities all crashed hard – just like they all did just prior to the great stock market crash of 2008.  According to CNN, almost 70 percent of all investors lost money in 2015, and things are unfolding in textbook fashion for much more financial chaos in 2016.

Globally, over the past 12 months we have seen financial shaking unlike anything that we have experienced since the last great financial crisis.  During the month of August markets all over the world started to go haywire, and at one point approximately 11 trillion dollars of financial wealth had been wiped out globally according to author Jonathan Cahn.

Since that time, U.S. stocks rebounded quite a bit, but they still ended red for the year.  Other global markets were not nearly as fortunate.  Some major indexes finished 2015 down 20 percent or more, and European stocks just had their second worst December ever.

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Crude Oil Prices Suffer Biggest 2-Year Bloodbath On Record

With yet another false-dawn of crude prices blowing in the wind of cash-flow generation desperation, we thought it an appropriate time for a bigger picture glance at the state of the carnage in crude...

Financial Armageddon Approaches: U.S. Banks Have 247 Trillion Dollars Of Exposure To Derivatives

Did you know that there are 5 “too big to fail” banks in the United States that each have exposure to derivatives contracts that is in excess of 30 trillion dollars?  Overall, the biggest U.S. banks collectively have more than 247 trillion dollars of exposure to derivatives contracts.  That is an amount of money that is more than 13 times the size of the U.S. national debt, and it is a ticking time bomb that could set off financial Armageddon at any moment.  Globally, the notional value of all outstanding derivatives contracts is a staggering 552.9 trillion dollars according to the Bank for International Settlements.  The bankers assure us that these financial instruments are far less risky than they sound, and that they have spread the risk around enough so that there is no way they could bring the entire system down.  But that is the thing about risk – you can try to spread it around as many ways as you can, but you can never eliminate it.  And when this derivatives bubble finally implodes, there won’t be enough money on the entire planet to fix it.

A lot of readers may be tempted to quit reading right now, because “derivatives” is a term that sounds quite complicated.  And yes, the details of these arrangements can be immensely complicated, but the concept is quite simple.  Here is a good definition of “derivatives” that comes from Investopedia…

A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.

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January 1, 2016: The New Bank Bail-In System Goes Into Effect In Europe

If you have a bank account anywhere in Europe, you need to read this article.  On January 1st, 2016, a new bail-in system will go into effect for all European banks.  This new system is based on the Cyprus bank bail-ins that we witnessed a few years ago.  If you will remember, money was grabbed from anyone that had more than 100,000 euros in their bank accounts in order to bail out the banks.  Now the exact same principles that were used in Cyprus are going to apply to all of Europe.  And with the entire global financial system teetering on the brink of chaos, that is not good news for those that have large amounts of money stashed in shaky European banks.

Below, I have shared part of an announcement about this new bail-in system that comes directly from the official website of the European Parliament.  I want you to notice that they explicitly say that “unsecured depositors would be affected last”.  What they really mean is that any time a bank in Europe fails, they are going to come after private bank accounts once the shareholders and bond holders have been wiped out.  So if you have more than 100,000 euros in a European bank right now, you are potentially on the hook when that bank goes under…

The directive establishes a bail-in system which will ensure that taxpayers will be last in the line to the pay the bills of a struggling bank. In a bail-in, creditors, according to a pre-defined hierarchy, forfeit some or all of their holdings to keep the bank alive. The bail-in system will apply from 1 January 2016.

The bail-in tool set out in the directive would require shareholders and bond holders to take the first big hits.Unsecured depositors (over €100,000) would be affected last, in many cases even after the bank-financed resolution fund and the national deposit guarantee fund in the country where it is located have stepped in to help stabilise the bank. Smaller depositors would in any case be explicitly excluded from any bail-in.

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Meanwhile, Over At The "New York" Stock Exchange... Many Lasers

The "device", as Extremetech explained in early 2014, was the AOptix IntelliMax laser (used in various US defense programs), and now generously provided by Anova to various very wealthy HFT clients - in exchange for a very generous installation and recurring monthly fee - who desired to eliminate the 0.18 millisecond microwave latency between the NYSE and Nasdaq, by going straight to laser.

High-frequency trading — the practice of making thousands of algorithmic stock trades per minute — is about to get a big boost in the USA. Anova, a company that specializes in deploying low-latency networks for stock trading, is completing an ultra-high-speed laser network between the New York Stock Exchange (NYSE) and the NASDAQ. The link will be just a few nanoseconds faster than the current microwave and fiber-optic links — but in the world of high-frequency trading (HFT), those nanoseconds could result in millions of dollars in profits for the trading companies. Such is the insanity of the stock markets; such is the unbelievable capacity of HFT to create money out of almost nothing.

If you want to get a signal quickly from point A to point B, you basically have three options: fiber-optic cables, a network of microwave dishes, or laser links. Electrical (copper wire) networks are feasible over short runs, but their reduced functionality and bandwidth over longer runs makes them less desirable than fiber. Microwave (and even higher-frequency millimeter wave) networks also aren’t very high-bandwidth, but because they’re purpose-built, they can take a very direct route, significantly undercutting the latency of an oft-congested and round-about fiber network. 

Laser networks have all the advantages of microwave/millimeter wave networks, but they have higher bandwidth, and some very clever adaptive optics means they’re not impacted by bad weather. (Microwaves really hate inclement weather.)

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Switzerland To Vote On Ending Fractional Reserve Banking

One year ago (and just two months before the shocking announcement the Swiss Franc's peg to the Euro would end, dramatically revaluing the currency, and leading to massive FX losses around the globe and for the Swiss National Bank) the Swiss held a referendum whether to demand that their central bank should convert 20% of its reserves into gold, up from 7% currently. After the early polls showed the Yes vote taking a surprising lead, the Diebold machines kicked in and the result was a sweeping victory for the No vote, without a single canton voting for sound money.

Ironically, this unexpected nonchallance about the Swiss central bank's balance sheet by one of Europe's more responsible nations took place just before the same bank announced CHF30 billions in losses on its long EUR positions following the revaluation of the CHF. It also took place when not just Germany, but the Netherlands and Austria announced they would repatriate a major portion of their gold in a move which, all spin aside, signals rising concerns about the existing monetary system.

We wonder if the Swiss have changed their mind about just how prudent it is to have their central bank operate as one of the world's largest - and worst - after its CHF 30 billion loss in Q1 FX traders, and hedge funds with $94 billion in stock holdings, since then.

We may soon have the answer, because in what is shaping up to be another historic referendum on the treatment of money, earlier today the Swiss Federal Government confirmed that it had received enough signatures and would hold a referendum as part of the so-called "Vollgeld", or Full Money Initiative, also known as the Campaign for Monetary Reform, which seeks to ban commercial banks from creating money, and which calls for the central bank to be given sole power to create the money in the financial system.

In other words, an initiative to ban fractional reserve banking, and revert to a 100% reserve.

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58 Facts About The U.S. Economy From 2015 That Are Almost Too Crazy To Believe

The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy.  This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions.  Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016.  Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally.  Some of the largest economies on the entire planet such as Brazil and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one.  So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media.  When you look at the cold, hard numbers, they tell a completely different story.  The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…

What we have seen so far is just the very small tip of a very large iceberg.  About six months ago, I stated that “our problems will only be just beginning as we enter 2016″, and I stand by that prediction.

We are in the midst of a long-term economic collapse that is beginning to accelerate once again.  Our economic infrastructure has been gutted, our middle class is being destroyed, Wall Street has been transformed into the biggest casino in the history of the planet, and our reckless politicians have piled up the biggest mountain of debt the world has ever seen.

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