President Trump: The NEW one and only politics thread

This is why I said it was the ultimate arbitrage opportunity. ... that none of us could take advantage of.

For what it's worth, even at $21 on the June contract, that is such a low price that virtually none of the shale oil drillers in the U.S. can pull oil out of the ground anywhere near profitably.

Those shale drillers have lived on escalating debt for the last 5 to 10 years thanks to the Fed's brilliance. All of the debt they took on, allowed them to drill at levels that should have been ridiculously unprofitable, but because their interest payments were so low, they were able to go deeper and deeper into debt and keep up the charade. They have been zombies accumulating billions of dollars of mispriced debt.

The glut of oil they produced suppressed the price of oil. It was the artificiality of administered interest rates creating an artificial oil price.

Demand was already dropping off prior to the pandemic, which was putting even more pressure on the price, and that is when Russia decided to flood the market with oil to bankrupt those US drillers.

The cure for high prices is high prices. Similarly, though, the cure for low prices is going to be low prices, although it won't happen smoothly (with actual quick bankruptcies, as devastating as they will be), because the Fed is busy destroying the dollar and creating trillions of dollars out of thin air and using it to buy up the bad debt it was responsible for in the first place.

In another words, they are doing more of the same, but to an even greater degree to try to prop up their creation.

It puts us all on the hook for that bad debt, because what they are doing is depreciating the value of your dollars. If you are a saver, you are being robbed by stealth to bail out a lot of overindebtedness. It doesn't even fix the problem, though, it just makes a future credit crisis -- whether it is tomorrow or in 3 years from now -- way worse than what we would have been dealing with today. Just as today by necessity is worse than the mess they had created in 2008, which was worse than the debt bubble they had blown in the late 1990s.

 

At $50 to $60 a barrel, many of the drillers in the permian, eagle ford and bakken basins can operate profitably. If our dumbass monetary mandarins would stop engineering prosperity for us, we wouldn't need to go through the extreme booms and busts. Supply and demand could be the regulators of the market. It's such a novel idea.

 

How is what possible?

 

Not at the extremes I am talking about.

NYMEX oil has never traded NEGATIVE before today. I am not talking about boom and bust cycles. I am talking about unnatural, extreme boom and bust cycles, which are a consequence of price fixing the debt markets to make money way too cheap. Faux prosperity. It's fine when all aspects of society are running up huge amounts of debt, and governments, corporations, consumers, etc. are living a fantasy that can go on for years. When it becomes a potentially generationaly devastating problem is when all of that debt inevitably goes bust. Which of course is when the arsonist rides in on the fire truck to put out the fire.