Virus, economies, and oil.

[bellisarius]

Going to cover a lot of territory here.

First of all covid-19 isn't all that bad. Unless you're elderly and/or have underlying respiratory issues it's just another flu. Not worthy of the panic we see.

But what the virus and ensuing panic has shown is the weak links in our economy/manufacturing techniques. The first to bite the dust is JIT (just in time inventory). A major disruption in the supply chain, no matter what the cause shuts down the plant. It's like buying toilet paper one roll at a time, not all that smart in the long run. The other major flaw uncovered was single sourcing. That used to be a given that you NEVER single sourced but over time that lesson was unlearned. In this case it was China but it could have been any other nation if you were silly enough to put all your eggs in that basket. Any of those industries that were shut down due to the Chinese labor disruption could have avoided the issue by having suppliers in other nations, hell, even here in the US. I suppose all those new fangled techniques sounded good at the time. I suspect when this is all over there's going to be some major restructuring.

As if the virus wasn't bad enough Putin wants to start an oil war. A well played gambit and his timing couldn't be better. Russia wants to break the monopoly the US dollar has in the oil trading market. All oil is traded in US dollars. He also remembers back when he was a young KGB officer how the US and the Saudi's worked together to destroy the economy, and ultimately the entire government, of the USSR. That lesson was not lost on him and he's playing the same game in reverse now. China is "all in" on this one, as is Brazil (they think they're a player but they're just tools in this game), and the Indians used to be in but are having second thoughts based on China's behavior. Basically Russia and China are out to unseat the dollar as the world reserve currency. They just haven't figured out with what yet. They've talked about a bit-coin type currency but it really boils down the Russia wanting it to be the Ruble and China wanting it to be the Yuan. If they succeed in toppling the dollar they'll end up going to war with each other over that issue.

The toppling of the dollar would mean a severe contraction of the US economy if not an out and out collapse. And so would go Europe as well. The third world shit holes that would love to see this happen will remain what they are, third world shit holes. Neither the Russians nor the Chinese have any burning desire to help them out so any celebrations they might plan would be short lived.

On the bright side, you might see $1/gal. gas again.

 

[Fuzzy1975]

"China took the top spot among foreign creditors at $1.123 trillion, followed by Japan, at $1.042 trillion, as of December 2018.

Japan and China own about 5.1% and 4.7% of the U.S. debt, respectively. Japanese-owned debt doesn't receive nearly as much negative attention as Chinese-owned debt, ostensibly because Japan is seen as a friendlier nation and the Japanese economy hasn't been growing at a 7% clip year after year."

Given the amount of debt owned by China ( think of them as a bank and the US of A owes them 1.123 Trillion plus interest) why would China be trying to devalue the US dollar?

Seem counterproductive.

https://www.investopedia.com/articles/investing/080615/china-owns-us-debt-how-much.asp

 

[IrezumiKiss]

First of all covid-19 isn't all that bad.

Ish when he gets his next nose-dripping fever and starts coughing violently:

https://i.gifer.com/3fIi.gif

https://media.tumblr.com/tumblr_lxpj6grFIe1qcaomb.gif

 

[Bas_van_Fraassen]

On the bright side, you might see $1/gal. gas again.

Thanks for the info, Grampa Wikipedia.

 

[sygn]

As if the virus wasn't bad enough Putin wants to start an oil war.
A well played gambit and his timing couldn't be better. Russia wants to break the monopoly the US dollar has in the oil trading market. All oil is traded in US dollars.

He also remembers back when he was a young KGB officer how the US and the Saudi's worked together to destroy the economy, and ultimately the entire government, of the USSR. That lesson was not lost on him and he's playing the same game in reverse now.

China is "all in" on this one, as is Brazil (they think they're a player but they're just tools in this game), and the Indians used to be in but are having second thoughts based on China's behavior. Basically Russia and China are out to unseat the dollar as the world reserve currency. They just haven't figured out with what yet. They've talked about a bit-coin type currency but it really boils down the Russia wanting it to be the Ruble and China wanting it to be the Yuan. If they succeed in toppling the dollar they'll end up going to war with each other over that issue.

The toppling of the dollar would mean a severe contraction of the US economy if not an out and out collapse. And so would go Europe as well. The third world shit holes that would love to see this happen will remain what they are, third world shit holes. Neither the Russians nor the Chinese have any burning desire to help them out so any celebrations they might plan would be short lived.

On the bright side, you might see $1/gal. gas again.

Wow. Thanks for an excellent thread.

I disagree with the first part - I think that we're in the first stages of a serious pandemic, given that 1/4th of the developed world are 65+
But of course governments use such crises as opportunities.

Two questions:

1. In no way am I a "Trumpette", but does Trump's attempt to 'downplay' the outbreak - as I read in the forum - have to do with what you said?

2. How exactly are Russia-China-Brasil trying to use the crisis to disrupt US's dollar monopoly?
Rumor spreading, ad hoc alternative businnesses or how?
It seems to me like China is the worst hit in it, businnesses are now avoiding them like the plague.

 

[RobDownSouth]

2. How exactly are Russia-China-Brasil trying to use the crisis to disrupt US's dollar monopoly?

Grampa Boxwine is overthinking things, as he often does.

Putin runs the world's largest kleptocracy.

When the Saudis demanded OPEC cut production to maintain high oil prices (and their coffers full), the Russians recognized a chance to make short term gains and sabotaged the Saudi deal.

The Saudis decided to teach Russia a lesson and opened up their production spigots full blast. The Saudis are going to teach Russia an expensive lesson. The world will benefit from cheap oil prices in the very near term, at the expense of the long term outlook.

 

[thør]

Vladimir Vladimirovich is setting himself up for another 16 years at the helm...

 

[bestone4ever]

Thanks for the info, Grampa Wikipedia.

Wonder how many oil industry workers will lose their job at $1.00 p/gal.

 

[bellisarius]

Vladimir Vladimirovich is setting himself up for another 16 years at the helm...

Yup, and the opposition to that is growing. A return to the good ole days of Lavrentiy Pavlovich Beria????

 

[Wat_Tyler]

That's Article 58 chatter if'n I ever read it.


The virus is overrated. Buy low while it's down.


Thanks be to Allah!!!

 

[bellisarius]

Wow. Thanks for an excellent thread.

I disagree with the first part - I think that we're in the first stages of a serious pandemic, given that 1/4th of the developed world are 65+
But of course governments use such crises as opportunities.

Two questions:

1. In no way am I a "Trumpette", but does Trump's attempt to 'downplay' the outbreak - as I read in the forum - have to do with what you said?

2. How exactly are Russia-China-Brasil trying to use the crisis to disrupt US's dollar monopoly?
Rumor spreading, ad hoc alternative businnesses or how?
It seems to me like China is the worst hit in it, businnesses are now avoiding them like the plague.

The Cold is also a Pandemic as is the Flu. The mortality rate is 4% and falling but to hear/read the media or some politicians you'd think this infection is a death warrant for all that catch it.

Trump has nothing to do with it. He's doing what he should be doing, trying to avoid promoting panic. The press is doing what it always does, "If it bleeds, it leads." They've just decided to put a political spin on the outbreak and push it hard.

The outbreak already had markets jittery, Putin's stunt at OPEC came down like a hammer blow. Gutted the oil market and the rest followed. This was an opportunity made in heaven (or hell) for him to put the ball in play. The Saudi's immediately reacted by opening the taps but a longer term response is required.

Yes, this has hurt China greatly, but it's only short term and the Chinese know that. This covid virus too will pass. There's only been some 4200 deaths in China total to date. And they will certainly benefit from buying oil at a 50% discount from their neighbor. Hell, at that discount rate we may end up buying Russian oil too.

The down side domestically is that it will shut down our Shale Oil production. Yes, I know that many will celebrate that. Shell, Exxon, etc. will buy up the leases and cap the wells. What was beginning to be a competitive market will once more be in the hands of the few.

Then there's the question of whether Putin can back up his play? Russia has plentiful oil reserves but it's deep oil not cheap oil. How much can he really sell at $25/bbl before he's selling at a loss?

 

[icanhelp1]

Going to cover a lot of territory here.

First of all covid-19 isn't all that bad. Unless you're elderly and/or have underlying respiratory issues it's just another flu. Not worthy of the panic we see.

But what the virus and ensuing panic has shown is the weak links in our economy/manufacturing techniques. The first to bite the dust is JIT (just in time inventory). A major disruption in the supply chain, no matter what the cause shuts down the plant. It's like buying toilet paper one roll at a time, not all that smart in the long run. The other major flaw uncovered was single sourcing. That used to be a given that you NEVER single sourced but over time that lesson was unlearned. In this case it was China but it could have been any other nation if you were silly enough to put all your eggs in that basket. Any of those industries that were shut down due to the Chinese labor disruption could have avoided the issue by having suppliers in other nations, hell, even here in the US. I suppose all those new fangled techniques sounded good at the time. I suspect when this is all over there's going to be some major restructuring.

As if the virus wasn't bad enough Putin wants to start an oil war. A well played gambit and his timing couldn't be better. Russia wants to break the monopoly the US dollar has in the oil trading market. All oil is traded in US dollars. He also remembers back when he was a young KGB officer how the US and the Saudi's worked together to destroy the economy, and ultimately the entire government, of the USSR. That lesson was not lost on him and he's playing the same game in reverse now. China is "all in" on this one, as is Brazil (they think they're a player but they're just tools in this game), and the Indians used to be in but are having second thoughts based on China's behavior. Basically Russia and China are out to unseat the dollar as the world reserve currency. They just haven't figured out with what yet. They've talked about a bit-coin type currency but it really boils down the Russia wanting it to be the Ruble and China wanting it to be the Yuan. If they succeed in toppling the dollar they'll end up going to war with each other over that issue.

The toppling of the dollar would mean a severe contraction of the US economy if not an out and out collapse. And so would go Europe as well. The third world shit holes that would love to see this happen will remain what they are, third world shit holes. Neither the Russians nor the Chinese have any burning desire to help them out so any celebrations they might plan would be short lived.

On the bright side, you might see $1/gal. gas again.

American debt is an extremely desirable asset globally. If China did a wholesale selloff there are other countries standing in line to buy. China loses. In 2015 China tried to sell off 170 billion in US treasuries with little impact on the US economy.

Our debt is larger than the whole of Russian GDP.

That's why, in my opinion, Trump's race to a zero fed rate is a big mistake, staying at 1.50 to 1.75 is a perfect place to be. Foreign countries are pouring money into the US as a safe haven.

Break even point for US big oil is around $50.00 a barrel, the current price of $34.00 a barrel is hurting everyone. I think the Russians took a big gamble getting into a production war with SA.

We'll never see $1 dollar gas, that would lead to a total collapse of our own industry. An oil glut and over production is just as bad as under production.

 

[icanhelp1]

Going to cover a lot of territory here.

First of all covid-19 isn't all that bad. Unless you're elderly and/or have underlying respiratory issues it's just another flu. Not worthy of the panic we see.

But what the virus and ensuing panic has shown is the weak links in our economy/manufacturing techniques. The first to bite the dust is JIT (just in time inventory). A major disruption in the supply chain, no matter what the cause shuts down the plant. It's like buying toilet paper one roll at a time, not all that smart in the long run. The other major flaw uncovered was single sourcing. That used to be a given that you NEVER single sourced but over time that lesson was unlearned. In this case it was China but it could have been any other nation if you were silly enough to put all your eggs in that basket. Any of those industries that were shut down due to the Chinese labor disruption could have avoided the issue by having suppliers in other nations, hell, even here in the US. I suppose all those new fangled techniques sounded good at the time. I suspect when this is all over there's going to be some major restructuring.

As if the virus wasn't bad enough Putin wants to start an oil war. A well played gambit and his timing couldn't be better. Russia wants to break the monopoly the US dollar has in the oil trading market. All oil is traded in US dollars. He also remembers back when he was a young KGB officer how the US and the Saudi's worked together to destroy the economy, and ultimately the entire government, of the USSR. That lesson was not lost on him and he's playing the same game in reverse now. China is "all in" on this one, as is Brazil (they think they're a player but they're just tools in this game), and the Indians used to be in but are having second thoughts based on China's behavior. Basically Russia and China are out to unseat the dollar as the world reserve currency. They just haven't figured out with what yet. They've talked about a bit-coin type currency but it really boils down the Russia wanting it to be the Ruble and China wanting it to be the Yuan. If they succeed in toppling the dollar they'll end up going to war with each other over that issue.

The toppling of the dollar would mean a severe contraction of the US economy if not an out and out collapse. And so would go Europe as well. The third world shit holes that would love to see this happen will remain what they are, third world shit holes. Neither the Russians nor the Chinese have any burning desire to help them out so any celebrations they might plan would be short lived.

On the bright side, you might see $1/gal. gas again.

The elimination of Shipyards and the talent that goes with ship building has also been a big mistake.

 

[icanhelp1]

The Cold is also a Pandemic as is the Flu. The mortality rate is 4% and falling but to hear/read the media or some politicians you'd think this infection is a death warrant for all that catch it.

Trump has nothing to do with it. He's doing what he should be doing, trying to avoid promoting panic. The press is doing what it always does, "If it bleeds, it leads." They've just decided to put a political spin on the outbreak and push it hard.

The outbreak already had markets jittery, Putin's stunt at OPEC came down like a hammer blow. Gutted the oil market and the rest followed. This was an opportunity made in heaven (or hell) for him to put the ball in play. The Saudi's immediately reacted by opening the taps but a longer term response is required.

Yes, this has hurt China greatly, but it's only short term and the Chinese know that. This covid virus too will pass. There's only been some 4200 deaths in China total to date. And they will certainly benefit from buying oil at a 50% discount from their neighbor. Hell, at that discount rate we may end up buying Russian oil too.

The down side domestically is that it will shut down our Shale Oil production. Yes, I know that many will celebrate that. Shell, Exxon, etc. will buy up the leases and cap the wells. What was beginning to be a competitive market will once more be in the hands of the few.

Then there's the question of whether Putin can back up his play? Russia has plentiful oil reserves but it's deep oil not cheap oil. How much can he really sell at $25/bbl before he's selling at a loss?

Our shale, LNG needs european markets. Getting Germany on board is critical to both NATO security and stabilizing our shale industry while really hurting the Russians. I believe Putin is desperately trying to get out in front of our LNG markets.

 

[bellisarius]

Our shale, LNG needs european markets. Getting Germany on board is critical to both NATO security and stabilizing our shale industry while really hurting the Russians. I believe Putin is desperately trying to get out in front of our LNG markets.

That's his short term economic goal, long term is to push the BRICS agenda and that is to tank the dollar.

 

[SpeareChucker]

"China took the top spot among foreign creditors at $1.123 trillion, followed by Japan, at $1.042 trillion, as of December 2018.

Japan and China own about 5.1% and 4.7% of the U.S. debt, respectively. Japanese-owned debt doesn't receive nearly as much negative attention as Chinese-owned debt, ostensibly because Japan is seen as a friendlier nation and the Japanese economy hasn't been growing at a 7% clip year after year."

Given the amount of debt owned by China ( think of them as a bank and the US of A owes them 1.123 Trillion plus interest) why would China be trying to devalue the US dollar?

Seem counterproductive.

https://www.investopedia.com/articles/investing/080615/china-owns-us-debt-how-much.asp

China is a mirage...

 

[ishtat]

The German, British, French and Italian European economies are all individually bigger than the Russian economy. If you go outside of Europe, China, and Japan are also much bigger and so are India Brazil and Canada. Then there is the USA way out front with 24% of the worlds GDP compared with Russia's tiddly little 1.9% in eleventh spot. And the South Koreans and Australians are catching up with the Russians.

It's more than a little risible to suggest that the ruble might displace the US$. The Chinese are the only ones remotely close and they need another 25 years minimum to even get parity. The Oil trade will continue to be priced in US$ for the foreseeable future.

Putins oil play will likely produce some rationalisation of the US shale producers but not much else in the long run. He is also desperate for the new Baltic gas line to work as Russia has already dropped behind Qatar and Australia in LNG exports.

China is the USA's rival for the next couple of generations. They will almost certainly challenge Russia's right to territory in the far North East at some stage and it's going to be very hard to prevent them dominating the very rapidly growing economies in SE Asia. China might give Putin limited support but ultimately they will be enemies and the Chinese will do nothing to promote Russian delusions in the longer term.

Putin is the big boss of a very small mob. If he makes a big enough nuisance of himself one of his dissident minority groups might be encouraged to 'retire' him.

The USA administration has got to recognize the fundamental and relative unimportance of nations like Russia, North Korea, Iran etc and let them know clearly that there is only one, possibly two bullies in the International economic and political playground.

'Speak softly and carry a big stick.'

 

[trysail]

Since 2008, U.S. production of petroleum has more than doubled (from less than 5MM BOPD to more than 12MM BOPD).

https://www.eia.gov/todayinenergy/detail.php?id=43015


In fact, it can correctly be said that it is the U.S. that has created this oversupply.


The U.S. is the world's (high cost) marginal producer.


Putin's gambit will succeed in substantially reducing U.S. domestic CAPEX (certainly in the short run, probably in the intermediate term as well).


​

 

[trysail]

...Then there is the USA way out front with 24% of the worlds GDP compared with Russia's tiddly little 1.9% in eleventh spot...

But a lot of U.S. GDP is worthless fluff (e.g., the manufacture of noise).​

...Putins oil play will likely produce some rationalisation of the US shale producers...

Period. Full stop.​

...He [Putin] is also desperate for the new Baltic gas line to work as Russia has already dropped behind Qatar and Australia in LNG exports...

Nordstream II is 95% finished. Unless Europe (Germany) continues to commit economic seppuku, they're going to need natural gas. Putin has called Europe's insane belief in pinwheels and sunshine exactly what it is— a joke.​

...China is the USA's rival for the next couple of generations. They will almost certainly challenge Russia's right to territory in the far North East at some stage and it's going to be very hard to prevent them dominating the very rapidly growing economies in SE Asia. China might give Putin limited support but ultimately they will be enemies and the Chinese will do nothing to promote Russian delusions in the longer term.

Putin is the big boss of a very small mob. If he makes a big enough nuisance of himself one of his dissident minority groups might be encouraged to 'retire' him...

China needs natural gas or coal. Domestic sources aren't sufficient. Russia has just placed a big, long natural gas pipeline to northeast China into service. Russia has virtually inexhaustible reserves of natural gas.​

...The USA administration has got to recognize the fundamental and relative unimportance of nations like Russia, North Korea, Iran etc and let them know clearly that there is only one, possibly two bullies in the International economic and political playground.

'Speak softly and carry a big stick.'

How do you propose to do that? At least two of 'em have nukes.


​

 

[icanhelp1]

That's his short term economic goal, long term is to push the BRICS agenda and that is to tank the dollar.

There is like a $200 billion drag on US BANKS attributed to the shale industry, I understand that, but to replace the dollar may be Putin's long term strategy but I can't see how that could possibly happen. China would have to have complete cooperation with Brazil Russia and india. That's a tall order since China and Russia have a genuine dislike and distrust for each other. Britain needs to get it's head out of its ass and partner with the US on 5G and establish a robust trade agreement with the US.. Someone needs to pull Salman Al Saud aside and boot him right in the ass and give him a class on world economics. He could bring his world crashing down on himself. I do agree with you perspective, I think once we get some good news on the corona-virus front and markets get back to a more normal routine, we'll have learned a big lesson on relying on single source suppliers. For the last 30 years our politicians lacked vision, this will be a wake up call. Europe still wants to put all their eggs in the chinese markets.

 

[icanhelp1]

The German, British, French and Italian European economies are all individually bigger than the Russian economy. If you go outside of Europe, China, and Japan are also much bigger and so are India Brazil and Canada. Then there is the USA way out front with 24% of the worlds GDP compared with Russia's tiddly little 1.9% in eleventh spot. And the South Koreans and Australians are catching up with the Russians.

It's more than a little risible to suggest that the ruble might displace the US$. The Chinese are the only ones remotely close and they need another 25 years minimum to even get parity. The Oil trade will continue to be priced in US$ for the foreseeable future.

Putins oil play will likely produce some rationalisation of the US shale producers but not much else in the long run. He is also desperate for the new Baltic gas line to work as Russia has already dropped behind Qatar and Australia in LNG exports.

China is the USA's rival for the next couple of generations. They will almost certainly challenge Russia's right to territory in the far North East at some stage and it's going to be very hard to prevent them dominating the very rapidly growing economies in SE Asia. China might give Putin limited support but ultimately they will be enemies and the Chinese will do nothing to promote Russian delusions in the longer term.

Putin is the big boss of a very small mob. If he makes a big enough nuisance of himself one of his dissident minority groups might be encouraged to 'retire' him.

The USA administration has got to recognize the fundamental and relative unimportance of nations like Russia, North Korea, Iran etc and let them know clearly that there is only one, possibly two bullies in the International economic and political playground.

'Speak softly and carry a big stick.'

Agreed!

 

[trysail]

2 December, 2019


Russia Begins Sending Natural Gas To China Through New Pipeline

by Bill Chappell
NPR

"(NPR)... Russian President Vladimir Putin and Chinese President Xi Jinping launched a new China-Russia natural gas pipeline on Monday, connecting a Siberian gas field to a city in northeastern China...

...When it's fully completed, the pipeline will span more than 5,000 miles, joining a 3,000-kilometer (1,864 miles) section in Russia with a 5,111-km (3,176 miles) stretch in China, eventually terminating in Shanghai...

...For Russia, the pipeline to China is one of three high-profile energy projects Gazprom is carrying out. The other two plans reflect Russian partnerships with Germany and Turkey — U.S. allies and fellow NATO members.

Despite repeated objections from the Trump administration and Republicans in Congress, Russia is building the controversial Nord Stream 2 pipeline through the Baltic Sea — a project that would allow Russia to sharply increase its gas exports to Germany, with a maximum annual capacity of 55 billion cubic meters.

The Nord Stream 2 pipeline is expected to open within months..."


(lots) more...


​

​

 

[trysail]

The Unsocial Reality of Socialism

by Willis Eschenbach
(emphasis supplied)

"...Wealth is the stuff that we use in our lives. Food. Vehicles. Steel. Clothing. Tools. Computers. Musical instruments. Houses. Gasoline. Lumber. And strange as it may seem, there are three, and only three, ways to produce wealth.

You can extract wealth from the natural world—dig a mine, catch a fish, fell a tree.

Or you can grow wealth—have a backyard garden, grow fields of corn “high as an elephant’s eye”, plant a tree farm, grow row vegetables.

Finally, you can manufacture wealth—construct a jungle gym for the kids, start a car factory, make a balalaika, sew dresses in your home, build a boat.

That’s it. All the rest is services. Many of these are essential services, perhaps life-and-death services to be sure … but services nonetheless..."


source...


​

​

 

[icanhelp1]

2 December, 2019


Russia Begins Sending Natural Gas To China Through New Pipeline

by Bill Chappell
NPR

"(NPR)... Russian President Vladimir Putin and Chinese President Xi Jinping launched a new China-Russia natural gas pipeline on Monday, connecting a Siberian gas field to a city in northeastern China...

...When it's fully completed, the pipeline will span more than 5,000 miles, joining a 3,000-kilometer (1,864 miles) section in Russia with a 5,111-km (3,176 miles) stretch in China, eventually terminating in Shanghai...

...For Russia, the pipeline to China is one of three high-profile energy projects Gazprom is carrying out. The other two plans reflect Russian partnerships with Germany and Turkey — U.S. allies and fellow NATO members.

Despite repeated objections from the Trump administration and Republicans in Congress, Russia is building the controversial Nord Stream 2 pipeline through the Baltic Sea — a project that would allow Russia to sharply increase its gas exports to Germany, with a maximum annual capacity of 55 billion cubic meters.

The Nord Stream 2 pipeline is expected to open within months..."


(lots) more...


​

​

That is happening now which would put China in the same spot we were 5 years ago and 'that's depending on foreign energy sources' and on top of that, from the Russians?

 

[bellisarius]

There is like a $200 billion drag on US BANKS attributed to the shale industry, I understand that, but to replace the dollar may be Putin's long term strategy but I can't see how that could possibly happen. China would have to have complete cooperation with Brazil Russia and india. That's a tall order since China and Russia have a genuine dislike and distrust for each other. Britain needs to get it's head out of its ass and partner with the US on 5G and establish a robust trade agreement with the US.. Someone needs to pull Salman Al Saud aside and boot him right in the ass and give him a class on world economics. He could bring his world crashing down on himself. I do agree with you perspective, I think once we get some good news on the corona-virus front and markets get back to a more normal routine, we'll have learned a big lesson on relying on single source suppliers. For the last 30 years our politicians lacked vision, this will be a wake up call. Europe still wants to put all their eggs in the chinese markets.

I didn't say it would be easy, but all Putin has to do is have the markets reach a consensus that the US Dollar is unstable. I don't think that time has come but the ground work is being laid.