This is what a crash looks like

Submitted by gjohnsit on Mon, 03/09/2020 - 6:58pm

Before we look at the why, let's examine the what.

U.S. stocks plunged more than 7.5% in the worst day on Wall Street since the financial crisis, as a full-blown oil price war rattled financial markets already on edge over the spreading coronavirus. Treasury yields plummeted, crude sank 20% and credit markets buckled.
The S&P 500 sank the most since December 2008, the Dow Jones Industrial Average tumbled 2,000 points and small caps lost more than 9%...

The rout began at the open, with losses reaching 7% four minutes in, triggering NYSE circuit breakers that halted trading for 15 minutes. The markets will close if losses reach 20%. The measure is down almost 19% from its Feb. 19 all-time high, threatening to end the record-long bull market that began 11 years ago to the day.

Just three weeks ago the cost of insuring against the default of corporate borrowers had dropped to its lowest levels since 2007 (i.e. credit default swaps).
Today the cost is at 7-year highs.
It isn't just Wall Street. Europe is getting killed too.

I'll have to do the why in another post.

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Comments

Submitted by Raggedy Ann on Mon, 03/09/2020 - 7:05pm

I love it that

Russia is punishing us in the oil markets because of the Nord Stream 2 sanctions. Be careful who you fuck with - it might come back to bite you in the ass.

—

"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

Submitted by gjohnsit on Mon, 03/09/2020 - 7:36pm

Actually Russia is going after our frackers

@Raggedy Ann
and that's a big why the market is crashing.

Submitted by Raggedy Ann on Mon, 03/09/2020 - 7:48pm

That’s the other part of it.

@gjohnsit
We’re both correct.

—

"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

Submitted by CB on Mon, 03/09/2020 - 9:16pm

Russia is sending the

@Raggedy Ann
AKADEMIK CHERSKIY pipe layer to the Baltic to finish Nordstream 2. It is currently resting just off Sri Lanka in the Indian Ocean. They are probably taking this time to do some necessary upgrades on the vessel in preparation for the pipe-laying. This was a planned stopover - they are scheduled to enter the Suez Mar 25, 2020. Due to current coronavirus situation, they may take more time and wait things out.

Putin is a very patient and focused man. He never acts rashly. The Trumpeter shoots from the hip and invariably ends up hitting himself in the foot. It's Looney Toons with Putin as the Roadrunner and Trump as Wile E. Coyote.

Submitted by tle on Tue, 03/10/2020 - 8:38am

And I find that terrifying.

@CB It's rank insanity to have one pipeline running along the ocean floor, to add another is positively demented.

Submitted by CB on Tue, 03/10/2020 - 10:12pm

Actually there is going to be four individual pipes

@tle
Nordstream 1 has TWO 48" cement coated pipes each carrying 27.5 billion M^3. Each line is separated into 3 sections and extensive pressure testing will be done on each. After testing each line is flushed with nitrogen (to remove any O2) and filled with natural gas. There are extensive safety valves if leaks should be detected during operation. Any leakage of gas will dissipate through the water into the atmosphere very rapidly. The route has very weak seismic activity. Top engineers from all over Europe and Russia spent years studying the design before construction started. Here's pdf on commissioning procedures: www.wermac.org/pdf/nordstream1.pdf

When Nordstream 2 is finished they will supply 110 billion M^3 to Europe. Still less than will be required in the near future. Coal and nuclear plants are to be shut down when this gas comes on line. This energy source is required to backup green energy supplies like wind/solar to ensure electric grid is maintained at all times.

There are hundreds of high pressure gas pipelines of various sizes installed underwater all around the world - many of them in the US, UK and Europe.

Submitted by gjohnsit on Mon, 03/09/2020 - 10:55pm

That's what they are saying

@Raggedy Ann
But the real story is complicated

Submitted by mimi on Tue, 03/10/2020 - 12:21am

the business of confusion news reporting is the new thing

@gjohnsit
ghost flight, ghost football games in Europe, brothers showing their killer instincts, kings that try to get away with 'mistakes' ... who the heck can follow that ... ah, just waiting for more confusion news reports ... makes my day.

Pftt. Sigh. Going back to sleep. May be when I wake up, everything will be clear.
Thanks gjohnsit.

—

https://www.euronews.com/live

Submitted by CB on Tue, 03/10/2020 - 12:34am

In the video they show US troops illegally

@gjohnsit
patrolling Syria's oil fields while the announcer reports:

"At the end of the day the losers could be us. US shale oil producers could get hit hard compared to traditional fossil fuel extraction methods"

That's one way to reduce costs - move into another country and steal the oil. The one bright spot is with "I like oil, we're keeping the oil" at $30 bbl, it isn't worth the military cost to get it out of the country.

Syria's shattered economy will appreciate the cheap Russian oil at this time.

Submitted by snoopydawg on Tue, 03/10/2020 - 8:35pm

Lindsay Graham is telling Assad to quit attacking

@CB

Turkey's troops. He basically told them to behave. Silly hit forgets it's Syria's country not ours.

BTW did you hear Putin might be able to be president for another 8 years? He says he's playing with western minds..but if the people of Russia go along with it....USA heads will explode. RT has the story.

—

There were problems with running a campaign of Joy while committing a genocide? Who could have guessed?

Harris is unburdened of speaking going forward.

Submitted by crbngville on Tue, 03/10/2020 - 5:33am

Thanks for covering this.

@gjohnsit
Looking forward to your post of the why.

Submitted by tle on Tue, 03/10/2020 - 8:41am

I hadn't considered that.

@gjohnsit Maybe Russia's actions will fully expose the Ponzi scheme of fracking. Too bad that the American people will be the ones who end up at the tail end of the scheme.

Submitted by CB on Mon, 03/09/2020 - 7:52pm

Russia says it can go as low as $30 bbl and still be AOK

@Raggedy Ann
This is gonna cause the ~~fuckers~~ frackers in the US one hell of a butt hurt. They need $50 to 60 just to break even on most of their plays. WTI and BRENT now stand at $33 and $36. For every barrel they produce, their bank accounts shrink instead of expand.

Putin has allowed the ruble to float and due to 4 years of heavy sanctions by the US on the country, Russia's economy is well insulated from global price increases due to prudent financial decisions they made. They make almost everything they need, some in excess. In any event, Russians can take financial pain that would bring an American to his knees in a New York minute.

It's payback time. Two different views of Putin's actions are expressed in the following link. I'm going with the first. Putin is a judoka master. He patiently waits until he sees an advantage and then quickly takes his opponent to the mat. We have seen this time and again in the last 20 years that Putin has been President of Russia.

Putin Targets U.S. Fracking With Oil Price War, in New Threat to Trump's Election-Year Economy
...
"The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2," Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank, told Bloomberg.

Putin told a meeting of finance and energy ministers on Sunday that "we need to be prepared for different scenarios," RT reported. He said that it was unclear how long the situation would continue, but expressed confidence that the Russian economy could deal with any fall out.
...

Submitted by Raggedy Ann on Mon, 03/09/2020 - 9:00pm

Yup! That’s the article

@CB
I read, too. Don’t underestimate the Rooskie!

—

"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

Submitted by earthling1 on Mon, 03/09/2020 - 9:04pm

All quite true

@CB @CB
Putin is making his move.
Russia has rid itself of US Treasuries, has very little debt, and has been stockpiling gold.
All it took to move him to spring was a worldwide crisis. And here it is. COVID 19
Coupled with the US being run out of the middle east and every country buying Russian arms, the oil debacle is just what Dr. Putin ordered.
It's looking like total Empire Collapse.
Putin: Checkmate mofo.

—

Neither Russia nor China is our enemy.
Neither Iran nor Venezuela are threatening America.
Cuba is a dead horse, stop beating it.

Submitted by snoopydawg on Mon, 03/09/2020 - 9:53pm

OT except for Russia

@CB

Imagine anyone saying this about Bibi and Israel instead of Vlad and Russia.

If she had said any other name but #Putin in this sentence, not only would she not on 60 Minutes, she’d be being referred to sychiatric care. Sheer insanity. #Russophobia https://t.co/O1EuO2xSpv

— OffGuardian (@OffGuardian0) March 10, 2020

Russiaphobia is exactly the word for what has infected so many people. The 'left' has made this lady a heroine.

—

There were problems with running a campaign of Joy while committing a genocide? Who could have guessed?

Harris is unburdened of speaking going forward.

Submitted by gjohnsit on Mon, 03/09/2020 - 11:09pm

How bad will it get for frackers

@CB

f*cked

At a stroke, Saudi Arabia and Russia and their battle for market share have made almost all U.S. shale drilling unprofitable. Only five companies in two areas of the country have breakeven costs lower than the current oil price, according to data compiled by Rystad Energy, an Oslo-based consultancy.

Submitted by Azazello on Tue, 03/10/2020 - 12:47am

It's all about the debt.

@gjohnsit @gjohnsit
Debts will come due.
When you lose your job, the credit card bill still comes.
So it is with corporations.
Frackers will be among the first, their business model has never made sense, 2 dollars in for every dollar in sales, but most corporations are carrying debt.
The debt will come due, defaults will follow.
What about airlines ?
No revenue = no debt payments.
Aircraft manufacturers come next.
Look at Boeing, in trouble already, acres of unsalable airplanes sitting in Seattle.
Bankrupt airlines don't buy planes.
It's a cascade. Eventually, swaps will come into play and banks will be revealed to be insolvent. Again.

—

We wanted decent healthcare, a living wage and free college.
The Democrats gave us Biden and war instead.

Submitted by jim p on Tue, 03/10/2020 - 12:35am

Heh.

@Azazello You could have written "and banks will be revealed to be insolvent. Again."
I wonder how TPTB will try to hide that this time. All they've done before hadn't changed the reality, but it did hide it. But hide it this time?!

—

Orwell: Where's the omelette?

Submitted by Azazello on Tue, 03/10/2020 - 12:47am

Comment edited.

@jim p

—

We wanted decent healthcare, a living wage and free college.
The Democrats gave us Biden and war instead.

Submitted by mimi on Tue, 03/10/2020 - 12:55am

so what does that mean to auntie mimi?

@Azazello @Azazello @Azazello (edit spelling, added thoughts, napping over the labtop)
be happy to not have to pay mortgage monthly bills?
be happy to not have to pay for oil or gas or electricity at the place you live in?
with what do i heat my hut?
do I have to hamster buy wood?
can I grow my trees as fast as I need their wood on my property?
whose property do I live on when I rent?
Uuh, and what about my cash savings, when the banks close down and don't let me get it out?
ahh, why didn't I hamster buy gold and dig it somewhere in the groud of my garden?
Eeeh, what would that help, would the banks give me cash back, when I tried to sell my gold nuggets to them?

Going back to sleep. I know I have a moment of blissfull inspirational ideas that will answer all my questions ... when I wake up...

PS,besides staying in bed and sleep is the most effective self-imposed quarantaine. So, covad virus, you can starve somewhere but not feed on my blood ... damn blood sucker. And tomorrow I am going to trade my peanuts against some green peas at my local grocery store, the grocery owner understands that all I are peanuts and no cash.

—

https://www.euronews.com/live

Submitted by enhydra lutris on Tue, 03/10/2020 - 3:28pm

The banks have been running scared of another Penn Central

@Azazello
style meltdown. Much of the fracking debt is overdue, but the banks are carrying them because who wants to foreclose on that hopeless shit.

—

That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power. -- Franklin D. Roosevelt --

Submitted by ggersh on Mon, 03/09/2020 - 7:15pm

Why you ask

cuz markits built on twiits have no foundation.

That the Dow/SP/Nas were all just at record highs
was all smoke and mirrors

—

I never knew that the term "Never Again" only pertained to
those born Jewish

"Antisemite used to be someone who didn't like Jews
now it's someone who Jews don't like"

Heard from Margaret Kimberley

Submitted by earthling1 on Mon, 03/09/2020 - 9:07pm

Such a crackup

@ggersh
The market crashes and the morons are clapping like crazy at the closing bell.
Simply amazing.

—

Neither Russia nor China is our enemy.
Neither Iran nor Venezuela are threatening America.
Cuba is a dead horse, stop beating it.

Submitted by QMS on Mon, 03/09/2020 - 7:16pm

not even the fed pumping trillions

into monetary memory loss
is able to keep this sinking ship afloat

drive her hard onto the beach
save the billionaires first

Submitted by snoopydawg on Mon, 03/09/2020 - 7:49pm

But wasn't that why Trump cut taxes on businesses?

Yeah right. They bought their own stock while laying off thousands of people. Att just bought another $4 billion in stocks while screwing their employees. I'm sure that the rich will be just fine if they tank the economy again. Don't forget that they got congress to let them keep our money once they screw everything up again. Watch your money folks.

—

There were problems with running a campaign of Joy while committing a genocide? Who could have guessed?

Harris is unburdened of speaking going forward.

Submitted by boriscleto on Mon, 03/09/2020 - 9:12pm

Trump is floating a payroll tax cut

The market will be up tomorrow.

—

" In the beginning, the universe was created. This has made a lot of people very angry, and is generally considered to have been a bad move. -- Douglas Adams, The Hitch Hiker's Guide to the Galaxy "

Submitted by gjohnsit on Mon, 03/09/2020 - 10:36pm

It'll probably bounce

@boriscleto
One thing mostly overlooked is that the dollar dumped today.

We already have a $1 trillion deficit.
What will happen to the dollar with another tax cut?

Submitted by ggersh on Tue, 03/10/2020 - 7:27am

Yes it will but in a real world Gold, PM's should be flying

@gjohnsit The FED/DC tax cuts have been propping the markit since 08, maybe longer.

And the real problem is tRump/mnuckin/kudlow believe that the markit reflects reality when in fact reality is the last thing the pricing of the DOW/SP/NAS represent.

—

I never knew that the term "Never Again" only pertained to
those born Jewish

"Antisemite used to be someone who didn't like Jews
now it's someone who Jews don't like"

Heard from Margaret Kimberley

Submitted by CB on Mon, 03/09/2020 - 10:59pm

The proverbial shit is going to hit the fan

It is imperative the US acts IMMEDIATELY. It may even be too late.

Is The Coronavirus Really More Dangerous Than The Flu?

Today the financial markets finally recognized the economic damage the novel Coronavirus will cause.

The price war in the crude oil markets which Russia initiated did not cause today's stock market fall but it also did not help. While cheap oil is supposed to be good for the economy the drop will also cause significant damage in the U.S. financial markets as the whole fracking industry in the United States is laden with debt and is now destined to be wiped out. Expect crude prices to sink to $20 per barrel as frantic overproduction and a drop in demand due to the virus coincide. Russia is well positioned to win this price war. Others are not.

It is the virus pandemic that causes the downturn in stock markets. But what makes the Sars-CoV-2 virus, as the novel Coronavirus is now officially known, so dangerous? The Covid-19 disease the virus causes is basically a flu though its seems to be one of the more severe kinds.

But it is a totally NEW kind of flu and that makes all the difference.
...

Submitted by snoopydawg on Tue, 03/10/2020 - 12:39am

I will admit that this virus is scary

But why aren't people talking about how many veterans kill themselves every day in this country? 24/day at last count. How many days will it take for people to die from the virus to get to the number of vets who die in just one year? Or how about the numbers of people who die because they don't have health insurance or if they do they still can't afford to use it because of their copays. Or the number of people who are dying because they can't afford health insurance, their medication or for whatever other reason?

How was the SARS epidemic treated by the media as opposed to this one? I don't remember if people panicked back then cuz I wasn't paying attention to the news. But if it was bad wouldn't I have known about it? I think we are being manipulated by the media on this. The economy was going to crash for years before this epidemic hit the news, but it's now being 'caused by the virus'? Trucking companies were laying off people for months before the epidemic hit and lots of jobs were being lost before this happened. Banks, the retail apocalyptic and other industries have been laying off thousands of people, but we weren't hearing about it in the main stream media. The news articles I read today have totally let people think it's because of the virus with no mention of what the Russians and Saudis are doing. This is manipulated reporting and it's intent is to scare people.

Sorry...

......

—

There were problems with running a campaign of Joy while committing a genocide? Who could have guessed?

Harris is unburdened of speaking going forward.

Submitted by mimi on Tue, 03/10/2020 - 1:06am

and I have a hard time ending to read you ... :-)

@snoopydawg
cute doggie.

—

https://www.euronews.com/live

Submitted by Lookout on Tue, 03/10/2020 - 10:47am

Max does a good job explaining...

[video:https://www.youtube.com/watch?v=kD5yKB8HyHc]
9 min

—

“Until justice rolls down like water and righteousness like a mighty stream.”

Submitted by wendy davis on Tue, 03/10/2020 - 11:28am

oh, my;

@Lookout

thank you for embedding the video; i hadn't even watched or checked it for length, remembering that max and stacy's show was always around 25 minutes.

"Who will be hit hardest, max? saudi arabia?"

Max: "Er...no; the US will be." (as he'd explained)

Submitted by Lookout on Tue, 03/10/2020 - 4:17pm

the big take away for me...

@wendy davis

Corporate debt is based on the value of the corporation (well duh), and as the market falls so does corporate value... to the point where some must default as debt becomes greater than value. I suspect this is just the start of the bubble popping.

I'm no economist, but it makes sense how this can cascade.

—

“Until justice rolls down like water and righteousness like a mighty stream.”

Submitted by CB on Tue, 03/10/2020 - 10:19pm

The other shoe drops......

@Lookout

Submitted by wendy davis on Tue, 03/10/2020 - 11:10am

as it seems commenters are answering the 'whys'

as well, i'll add a few things:

First, both self-explanator: ‘Oil price war will expedite the end of petrodollar & rise of Chinese-Russian currency– RT’s Max Keiser’, RT.com,9 Mar, 2020

We are also witnessing a “part two” of the 2008 crisis with the credit bubble blowing up again – something that was only waiting to happen, per Keiser. “If you just give the same bad guys a bigger credit line to do the same bad things, that’ll result in the same bad outcome.”
......................
The era of the US holding the world's reserve currency is "finished," Keiser said, adding that the hyper-inflated US stock market should also gear up for a shock. Dow could trade down to as low as 8,000 when the earnings emerge to reflect the actual performance of the companies.

The US, on the contrary, is in “really bad position” in this high-stakes game, with American shale oil stocks already taking a hit, and Keiser predicting this "will be a complete evisceration of the American shale industry. It’s going to need a massive bail-out, a massive money printing."

(i'd read fracked gas has to sell for $60 a gallon to break even, but fuck me: the millions of gallons of water pumped into each well!

Second, some excerpts of a very long history of the Fed, credit rates, etc.:
Why the Coming Economic Collapse Will NOT be Caused by Corona Virus
by Matthew J. L. Ehret / March 1st, 2020, dissident voice

With Monday’s 1000 point stock market plunge the internet has been set ablaze with discussion of a new crash looming on the horizon. The fact that such a chain reaction collapse was only kept at bay due to massive liquidity injections by the Federal Reserve’s overnight repo loans should not be ignored. These injections which began in September 2019, have grown to over $100 billion per night… all that to support the largest financial bubble in human history with global derivatives estimated at $1.2 quadrillion (20 times the global GDP!).
.................
The Derivative Time Bomb is Set
In September 1987, the 20 year foray into speculation resulted in a 23% collapse of the Dow Jones on October 19, 1987. Within hours of this crash, international emergency meetings had been convened with former JP Morgan tool Alan Greenspan introducing a “solution” which would have the future echoes of hyperinflation and fascism written all over it.
“Creative financial instruments” was the Orwellian name given to the new financial asset popularized by Greenspan, but otherwise known as “derivatives”. New supercomputing technologies were increasingly used in this new venture, not as the support for higher nation building practices, and space exploration programs as their NASA origins intended, but would rather become perverted to accommodate the creation of new complex formulas which could associate values to price differentials on securities and insured debts that could then be “hedged” on those very spot and future markets made possible via the destruction of the Bretton Woods system in 1971. So while an exponentially self-generating monster was created that could end nowhere but in a meltdown, “market confidence” rallied back in force with the new flux of easy money. The physical potential to sustain human life continued to plummet.
...............................
By 1999 a politically castrated Bill Clinton found himself signing into law a treaty authored by then Treasury Secretary Larry Summers known as the Gramm-Leach-Bliley Act, which would be the final nail in the coffin for the Glass-Steagall separation of commercial and investment banking in the United States. The new age of unregulated trading and creation of over-the-counter derivatives caused these strange financial instruments to grow from $60 trillion in 2000 to $600 trillion by 2008.
..............................
The 2000-2008 Frenzy

The stunning “success” of securitizing housing debts immediately induced a wave of sovereign wealth funds to come into prominence applying the same model that had been used in the case of mortgage-backed securities (MBS) and collateralized debt obligations (CDO) to the debts of entire nations. The securitizing of bundled packages of sovereign debts that could then be infinitely leveraged on the de-regulated world markets would no longer be considered an act of national treason, but the key to easy money.
..........................
It should be no surprise that in the midst of this despair, a creative alliance was consolidated in defense of the interests of sovereign nation states and humanity at large led by the leadership of Russia and China.

This leadership took the form of the China-led Belt and Road Initiative which has grown to embrace over 130 countries today and looking more and more like an Asian-led version of the New Deal of the 1930s. Indeed, China’s capacity to unleash long term credit for thousands of international long term infrastructure projects was made possible by the fact that it was the only country on the globe which had not given up the principles of bank separation which were destroyed in every other nation. Very few western figures stood up to this self-induced destruction over the decades, but one notable exception here worth mentioning is the figure of the late American economist Lyndon LaRouche (1922-2019) who not only resisted this process for over four decades, but fought alongside the Schiller Institute to promote New Silk Road as early as 1996.

third, from nick beams at wsws.org march 10: Markets plunge in worst fall since 2008 crisis
(a few excerpts)

Yesterday, after falls across the Asia-Pacific, where the Tokyo and Sydney markets dropped by around 7 percent and similar sell-offs in Europe, Wall Street plunged on opening. The fall was so large that it triggered a circuit breaker that suspended trading for 15 minutes in order to try to halt panic selling.
.................
The downturn, initiated by the economic impact of the coronavirus, entered a new stage over the weekend with Saudi Arabia launching an oil price war. It boosted production and offered discount prices, following the breakdown of an agreement with Russia to limit supply and maintain prices.

The decision sent oil prices tumbling by between 25 and 30 percent when markets opened this week.

While the collapse in oil prices triggered the share sell-off, the underlying cause lies in the complete divorce of share market valuations—boosted by the continuing supply of cheap money from the US Federal Reserve and other central banks—from the underlying real economy.

Last week, the Fed responded to the sharp fall in the markets in the way it has done in the past, by announcing an emergency rate cut of 0.5 percent and indicating that more was to come. But the move failed to give any boost to share prices. As a former vice chairman of the Fed, Alan Blinder commented: “The markets were happy about that for about 15 minutes and then gave it a Bronx cheer.”
...............
The market sell-off is being exacerbated by the dysfunctional, one could say insane, response of US President Trump.

After dismissing the threats posed by the spread of the coronavirus, he claimed the drop in the oil price would be good for the US economy.

“Saudi Arabia and Russia are arguing over the price and flow of oil. That, and the Fake News, is the reason for the market drop!” he tweeted, adding “Good for the consumer, gasoline prices coming down!”
....................
Another clear indicator of future trends is the precipitous fall in the yield on 10-year and 30-year US Treasury bonds as investors, searching for a safe haven, push up their price.

At one point yesterday, the yield on the 10-year bond fell to a low of 0.3 percent before rising to 0.5 percent. The yield on the 30-year bond fell below 1 percent for the first time ever, meaning that the yield is below 1 percent across the market.

The fall in the bond market makes it virtually certain that the Fed will again cut interest rates, probably by 0.5 percentage points when it next meets on March 17-18, or possibly even before. It is likely to cut again in April.
.........................
The crash of the stock market in October 1987 saw the implementation of a policy in which the Fed responded to every significant fall in shares by opening the financial spigots to enable further speculation.

This process was accelerated after 2008 through interest rate reductions and so-called quantitative easing. Trillions of dollars were supplied to the financial markets to enable the continued siphoning up of wealth to the upper echelons of society.

At the same time the working class was made to pay through austerity cuts to basic social services—health, education and other facilities—along with stagnant or falling real wages and the replacement of full-time jobs with part-time or contract work, much of it in the so-called gig economy.

The endless provision of cheap money has now created the conditions for another financial crisis, even more serious than that of a decade ago, which, as the historical record shows, will bring even deeper attacks on the working class.

One of the most significant developments in the financial system has been the accumulation of corporate debt, much of it of low quality. Corporations have taken advantage of ultra-cheap money to finance ever riskier operations as well as mergers and takeovers and share buy backs.

The result is that around 70 percent of corporate bonds, estimated to be as much as $10 trillion in the US, are either below investment grade, so-called junk status, or have a BBB rating, one notch above junk, and are susceptible to a write down to junk status in the event of a recession or a financial crisis.

The use of high-risk junk bonds has been particularly prevalent in the US shale oil industry, which is dependent on the maintenance of higher oil prices and the generation of revenue to make interest payments.

The rise of this industry—financed by risky debt but hailed by Trump as providing economic independence of the US from the global oil market—is now becoming one of the transmission mechanisms for a financial meltdown.

Submitted by enhydra lutris on Tue, 03/10/2020 - 3:43pm

Some reputation rehab here:

@wendy davis

By 1999 a politically castrated Bill Clinton found himself signing into law a treaty authored by then Treasury Secretary Larry Summers known as the Gramm-Leach-Bliley Act,

Clinton wanted that law, he more or less campaigned on it he and Hillary both were on board with the DLC drive to de-regulate the financial sector.

as well, i'll add a few things:

First, both self-explanator: ‘Oil price war will expedite the end of petrodollar & rise of Chinese-Russian currency– RT’s Max Keiser’, RT.com,9 Mar, 2020

We are also witnessing a “part two” of the 2008 crisis with the credit bubble blowing up again – something that was only waiting to happen, per Keiser. “If you just give the same bad guys a bigger credit line to do the same bad things, that’ll result in the same bad outcome.”
......................
The era of the US holding the world's reserve currency is "finished," Keiser said, adding that the hyper-inflated US stock market should also gear up for a shock. Dow could trade down to as low as 8,000 when the earnings emerge to reflect the actual performance of the companies.

The US, on the contrary, is in “really bad position” in this high-stakes game, with American shale oil stocks already taking a hit, and Keiser predicting this "will be a complete evisceration of the American shale industry. It’s going to need a massive bail-out, a massive money printing."

(i'd read fracked gas has to sell for $60 a gallon to break even, but fuck me: the millions of gallons of water pumped into each well!

Second, some excerpts of a very long history of the Fed, credit rates, etc.:
Why the Coming Economic Collapse Will NOT be Caused by Corona Virus
by Matthew J. L. Ehret / March 1st, 2020, dissident voice

With Monday’s 1000 point stock market plunge the internet has been set ablaze with discussion of a new crash looming on the horizon. The fact that such a chain reaction collapse was only kept at bay due to massive liquidity injections by the Federal Reserve’s overnight repo loans should not be ignored. These injections which began in September 2019, have grown to over $100 billion per night… all that to support the largest financial bubble in human history with global derivatives estimated at $1.2 quadrillion (20 times the global GDP!).
.................
The Derivative Time Bomb is Set
In September 1987, the 20 year foray into speculation resulted in a 23% collapse of the Dow Jones on October 19, 1987. Within hours of this crash, international emergency meetings had been convened with former JP Morgan tool Alan Greenspan introducing a “solution” which would have the future echoes of hyperinflation and fascism written all over it.
“Creative financial instruments” was the Orwellian name given to the new financial asset popularized by Greenspan, but otherwise known as “derivatives”. New supercomputing technologies were increasingly used in this new venture, not as the support for higher nation building practices, and space exploration programs as their NASA origins intended, but would rather become perverted to accommodate the creation of new complex formulas which could associate values to price differentials on securities and insured debts that could then be “hedged” on those very spot and future markets made possible via the destruction of the Bretton Woods system in 1971. So while an exponentially self-generating monster was created that could end nowhere but in a meltdown, “market confidence” rallied back in force with the new flux of easy money. The physical potential to sustain human life continued to plummet.
...............................
By 1999 a politically castrated Bill Clinton found himself signing into law a treaty authored by then Treasury Secretary Larry Summers known as the Gramm-Leach-Bliley Act, which would be the final nail in the coffin for the Glass-Steagall separation of commercial and investment banking in the United States. The new age of unregulated trading and creation of over-the-counter derivatives caused these strange financial instruments to grow from $60 trillion in 2000 to $600 trillion by 2008.
..............................
The 2000-2008 Frenzy

The stunning “success” of securitizing housing debts immediately induced a wave of sovereign wealth funds to come into prominence applying the same model that had been used in the case of mortgage-backed securities (MBS) and collateralized debt obligations (CDO) to the debts of entire nations. The securitizing of bundled packages of sovereign debts that could then be infinitely leveraged on the de-regulated world markets would no longer be considered an act of national treason, but the key to easy money.
..........................
It should be no surprise that in the midst of this despair, a creative alliance was consolidated in defense of the interests of sovereign nation states and humanity at large led by the leadership of Russia and China.

This leadership took the form of the China-led Belt and Road Initiative which has grown to embrace over 130 countries today and looking more and more like an Asian-led version of the New Deal of the 1930s. Indeed, China’s capacity to unleash long term credit for thousands of international long term infrastructure projects was made possible by the fact that it was the only country on the globe which had not given up the principles of bank separation which were destroyed in every other nation. Very few western figures stood up to this self-induced destruction over the decades, but one notable exception here worth mentioning is the figure of the late American economist Lyndon LaRouche (1922-2019) who not only resisted this process for over four decades, but fought alongside the Schiller Institute to promote New Silk Road as early as 1996.

third, from nick beams at wsws.org march 10: Markets plunge in worst fall since 2008 crisis
(a few excerpts)

Yesterday, after falls across the Asia-Pacific, where the Tokyo and Sydney markets dropped by around 7 percent and similar sell-offs in Europe, Wall Street plunged on opening. The fall was so large that it triggered a circuit breaker that suspended trading for 15 minutes in order to try to halt panic selling.
.................
The downturn, initiated by the economic impact of the coronavirus, entered a new stage over the weekend with Saudi Arabia launching an oil price war. It boosted production and offered discount prices, following the breakdown of an agreement with Russia to limit supply and maintain prices.

The decision sent oil prices tumbling by between 25 and 30 percent when markets opened this week.

While the collapse in oil prices triggered the share sell-off, the underlying cause lies in the complete divorce of share market valuations—boosted by the continuing supply of cheap money from the US Federal Reserve and other central banks—from the underlying real economy.

Last week, the Fed responded to the sharp fall in the markets in the way it has done in the past, by announcing an emergency rate cut of 0.5 percent and indicating that more was to come. But the move failed to give any boost to share prices. As a former vice chairman of the Fed, Alan Blinder commented: “The markets were happy about that for about 15 minutes and then gave it a Bronx cheer.”
...............
The market sell-off is being exacerbated by the dysfunctional, one could say insane, response of US President Trump.

After dismissing the threats posed by the spread of the coronavirus, he claimed the drop in the oil price would be good for the US economy.

“Saudi Arabia and Russia are arguing over the price and flow of oil. That, and the Fake News, is the reason for the market drop!” he tweeted, adding “Good for the consumer, gasoline prices coming down!”
....................
Another clear indicator of future trends is the precipitous fall in the yield on 10-year and 30-year US Treasury bonds as investors, searching for a safe haven, push up their price.

At one point yesterday, the yield on the 10-year bond fell to a low of 0.3 percent before rising to 0.5 percent. The yield on the 30-year bond fell below 1 percent for the first time ever, meaning that the yield is below 1 percent across the market.

The fall in the bond market makes it virtually certain that the Fed will again cut interest rates, probably by 0.5 percentage points when it next meets on March 17-18, or possibly even before. It is likely to cut again in April.
.........................
The crash of the stock market in October 1987 saw the implementation of a policy in which the Fed responded to every significant fall in shares by opening the financial spigots to enable further speculation.

This process was accelerated after 2008 through interest rate reductions and so-called quantitative easing. Trillions of dollars were supplied to the financial markets to enable the continued siphoning up of wealth to the upper echelons of society.

At the same time the working class was made to pay through austerity cuts to basic social services—health, education and other facilities—along with stagnant or falling real wages and the replacement of full-time jobs with part-time or contract work, much of it in the so-called gig economy.

The endless provision of cheap money has now created the conditions for another financial crisis, even more serious than that of a decade ago, which, as the historical record shows, will bring even deeper attacks on the working class.

One of the most significant developments in the financial system has been the accumulation of corporate debt, much of it of low quality. Corporations have taken advantage of ultra-cheap money to finance ever riskier operations as well as mergers and takeovers and share buy backs.

The result is that around 70 percent of corporate bonds, estimated to be as much as $10 trillion in the US, are either below investment grade, so-called junk status, or have a BBB rating, one notch above junk, and are susceptible to a write down to junk status in the event of a recession or a financial crisis.

The use of high-risk junk bonds has been particularly prevalent in the US shale oil industry, which is dependent on the maintenance of higher oil prices and the generation of revenue to make interest payments.

The rise of this industry—financed by risky debt but hailed by Trump as providing economic independence of the US from the global oil market—is now becoming one of the transmission mechanisms for a financial meltdown.

—

That, in its essence, is fascism--ownership of government by an individual, by a group, or by any other controlling private power. -- Franklin D. Roosevelt --

Submitted by wendy davis on Tue, 03/10/2020 - 4:36pm

thanks for remembering that,

@enhydra lutris

and challenging the author's weaselly wording. what pissed me off even more somehow was that clinton had also signed into law the CFMA in 2000. from the wiki:

"The Commodity Futures Modernization Act of 2000 (CFMA) is United States federal legislation that ensured financial products known as over-the-counter (OTC) derivatives unregulated, accelerating the collapses of major financial companies. [1] It was signed into law on December 21, 2000 by President Bill Clinton. It clarified the law so most OTC derivative transactions between "sophisticated parties" would not be regulated as "futures" under the Commodity Exchange Act of 1936 (CEA) or as "securities" under the federal securities laws.

Instead, the major dealers of those products (banks and securities firms) would continue to have their dealings in OTC derivatives supervised by their federal regulators under general "safety and soundness" standards. The Commodity Futures Trading Commission's (CFTC) desire to have "functional regulation" of the market was also rejected. Instead, the CFTC would continue to do "entity-based supervision of OTC derivatives dealers."[2] These derivatives, including the credit default swap, are a few of the many causes of the financial crisis of 2008 and the subsequent 2008–2012 global recession."

Bill Clinton

In June 2013, film producer Charles Ferguson interviewed Bill Clinton who said he and Larry Summers couldn't change Alan Greenspan's mind and Congress then passed the Act with a veto-proof supermajority. Ferguson revealed that this was inaccurate and, he said, a lie, while commenting that he thought Clinton was "a really good actor". In fact, Ferguson wrote, the Clinton Administration and Larry Summers lobbied for the Act and joined Robert Rubin in both privately and publicly attacking advocates of regulation.[

grrrrrrr.

Submitted by Raggedy Ann on Tue, 03/10/2020 - 11:17am

I thought the market was crashing

because of Bernie winning. As soon as he lost Super Tuesday, the markets bounced back with health care stocks gaining the most momentum. What happened, media? Joementia is still leading - why is the market still struggling, huh? What's that you say? It wasn't really about Bernie after all? Oh, well, damage done. Give yourself another notch on your bedpost, msm.

—

"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

Submitted by Cassiodorus on Tue, 03/10/2020 - 7:03pm

Trump promises a subsidy for his shale oil buddies

and the market goes back up again.

—

“When there's no fight over programme, the election becomes a casting exercise. Trump's win is the unstoppable consequence of this situation.” - Jean-Luc Melanchon

Submitted by Linda Wood on Tue, 03/10/2020 - 10:34pm

Socialism to the rescue

@Cassiodorus

again.

Submitted by Linda Wood on Tue, 03/10/2020 - 11:14pm

Biden was the point man

and promoter of U.S. subsidized fracking in Ukraine. Here is a list of articles exploring the problems inherent in our subsidization as well as in fracking itself:

https://www.desmogblog.com/finances-fracking-shale-industry-drills-more-...

DESMOG
CLEARING THE PR POLLUTION THAT CLOUDS CLIMATE SCIENCE

Finances of Fracking: Shale Industry Drills More Debt Than Profit

Since 2007, the oil and gas industry has lost $280 billion betting on the shale boom, which has been made possible by hydraulic fracturing (fracking) and Wall Street financing, and these companies are still borrowing heavily. But even as the industry struggles to recoup costs — much less profits — by continuing to borrow and drill, the great promise of the shale revolution is also threatened by another specter: declining production at each well.

In this series, DeSmog’s Justin Mikulka and Sharon Kelly investigate the finances of the fracking industry and how falling fossil fuel output and questionable lending practices reminiscent of the mid-2000s housing bubble may be setting up another bubble, one with a bill that may ultimately be paid by American taxpayers and the planet.

IN THIS SERIES

Is the U.S. Fracking Boom Based on Fraud?
In a 2016 interview with Fraud Magazine, former Enron CFO Andrew Fastow explained what he thought...
By Justin Mikulka, 5 Mar, 2020

To Many's Dismay, Permian Produces More Gas and Condensate Instead of Oil and Profits
As oil prices plummet, oil bankruptcies mount, and investors shun the shale industry, America’s top...
By Justin Mikulka, 21 Feb, 2020

Peak Permian Oil Production May Arrive Much Sooner Than Expected
In mid-January, Adam Waterous, who operates the private equity firm Waterous Energy Fund, made a...
By Justin Mikulka, 3 Feb, 2020

This Problem With Fracked Oil and Gas Wells Is Occurring 'at an Alarming Rate'
On February 15, 2018, a fracked natural gas well owned by ExxonMobil's XTO Energy and located in...
By Justin Mikulka, 23 Jan, 2020

As Fracking Companies Face Bankruptcy, US Regulators Enable Firms to Duck Cleanup Costs
In over their heads with debt, U.S. shale oil and gas firms are now moving from a boom in fracking...
By Justin Mikulka, 20 Dec, 2019

Energy Analysts Deliver More Bad News for US Fracking Industry's Business Model
This month, the energy consulting firm Wood MacKenzie gave an online presentation that basically...
By Justin Mikulka, 17 Dec, 2019

Chesapeake Energy’s Stock Falls Below $1 But Driller Plans to Spend Over $1 Billion on More Fracking
The company that for the past decade has been emblematic of the rise and pitfalls of shale drilling...
By Sharon Kelly, 6 Nov, 2019

Fossil Fuel Investments Cost California and Colorado Pension Funds Over $19 Billion, Report Finds
California and Colorado’s public pension funds together lost out on over $19 billion over the past...
By Sharon Kelly, 5 Nov, 2019

Will the Fracking Revolution Peak Before Ever Making Money?
This week, the Wall Street Journal highlighted that the U.S. oil and gas shale industry, already...
By Justin Mikulka, 3 Oct, 2019

Is Natural Gas the New Coal?
At a recent natural gas industry conference in Houston, Woodside Petroleum CEO Peter Coleman warned...
By Justin Mikulka, 27 Sep, 2019

Bleak Financial Outlook for US Fracking Industry
In early 2018 when major financial publications like the Wall Street Journal were predicting a...
By Justin Mikulka, 8 Aug, 2019

As Risky Finances Alienate Investors, Fracking Companies Look to Retirement Funds for Cash
A year ago, Chesapeake Energy, at one time the nation’s largest natural gas producer, announced it...
By Sharon Kelly, 25 Jul, 2019

CEO of Major Shale Oil Company 'Has Second Thoughts' on Fracking Rush, Wall Street Journal Reports
On Monday, the Wall Street Journal featured a profile of Scott Sheffield, CEO of Pioneer Natural...
By Sharon Kelly, 24 Jun, 2019

Former Shale Gas CEO Says Fracking Revolution Has Been 'A Disaster' For Drillers, Investors
Steve Schlotterbeck, who led drilling company EQT as it expanded to become the nation’s largest...
By Sharon Kelly, 23 Jun, 2019

Warren Buffett, Fear, and Greed in Fracked Oil Fields
Warren Buffett, CEO of investment holding company Berkshire Hathaway, is considered one of the top...
By Justin Mikulka, 14 May, 2019

Chevron and Exxon Say They Can Turn Around the Failed Finances of Fracking Industry
After a decade of the American fracking industry burning through hundreds of billions of dollars...
By Justin Mikulka, 18 Apr, 2019

Fracking 2.0 Was a Financial Disaster, Will Fracking 3.0 Be Different?
Two years ago, the U.S. fracking industry was trying to recover from the crash in the price of oil...
By Justin Mikulka, 12 Mar, 2019

The Inevitable Death of Natural Gas as a ‘Bridge Fuel’
Los Angeles Mayor Eric Garcetti recently announced the city is scrapping plans for a multi-billion-...
By Justin Mikulka, 22 Feb, 2019

Are Investors Finally Waking up to North America’s Fracked Gas Crisis?
The fracked gas industry's long borrowing binge may finally be hitting a hard reality: paying back ...
By Justin Mikulka, 7 Feb, 2019

Fracked Shale Oil Wells Drying Up Faster than Predicted, Wall Street Journal Finds
In 2015, Pioneer Natural Resources filed a report with the federal Securities and Exchange...
By Sharon Kelly, 10 Jan, 2019

Fracking in 2018: Another Year of Pretending to Make Money
2018 was the year the oil and gas industry promised that its darling, the shale fracking revolution...
By Justin Mikulka, 18 Dec, 2018

Peak Shale: Is the US Fracking Industry Already in Decline?
In 2016, lower oil prices led to an overall drop in production for shale companies, which use...
By Justin Mikulka, 30 Oct, 2018

The Fracking Industry’s Water Nightmare
The U.S. Environmental Protection Agency (EPA) has clearly documented the multiple risks — despite...
By Justin Mikulka, 18 Sep, 2018

The Fracking Industry Is Cannibalizing Its Own Production, Increasing Spill Risks
In the climactic final scene in There Will Be Blood — arguably the greatest movie about the oil...
By Justin Mikulka, 10 Aug, 2018

Oil Industry Plans to Keep Workers Safe—by Firing Them and Having Robots Do Their Jobs
The oil and gas industry is finally acknowledging how dangerous employment can be for its workers...
By Justin Mikulka, 19 Jul, 2018

Rise of the Machines: Fracking Execs Plan Profits by Using Automation to Shrink Workforce
At a recent industry conference, Terry Spencer, head of natural gas infrastructure company ONEOK,...
By Justin Mikulka, 29 Jun, 2018

Why It Matters If Fracking Companies Are Overestimating Their ‘Proved’ Oil and Gas Reserves
Back in 2011, The New York Times first raised concerns about the reliability of America's proved...
By Sharon Kelly, 14 Jun, 2018

Flip This Well: How Fracking Company CEOs Get Rich While Losing Billions
Last year the fracking company Halcón Resources announced a new strategy that was sold as the path...
By Justin Mikulka, 29 May, 2018

This Fed Policy Enabled the Fracking Industry’s $280 Billion Loss
Most people probably aren’t familiar with the acronym ZIRP. It stands for zero interest rate policy...
By Justin Mikulka, 11 May, 2018

As Rest of World Moves Towards Renewables, US Keeps Offering Exclusive Tax Breaks for Fossil Fuels
About a half decade ago, as the shale drilling rush was sweeping across the U.S., drillers needed...
By Sharon Kelly, 6 May, 2018

How Wall Street Enabled the Fracking 'Revolution' That's Losing Billions
The U.S. shale oil industry hailed as a “revolution” has burned through a quarter trillion dollars...
By Justin Mikulka, 4 May, 2018

GOP Tax Law Bails Out Fracking Companies Buried in Debt
EOG Resources is one of the top companies in the fracking industry, and thanks to the new tax bill...
By Justin Mikulka, 26 Apr, 2018

Low Octane: The Surprising Reason Shale Oil Makes a Poor Fuel for High-Tech Cars and Trucks
Shale oil, which the Energy Information Administration projects will represent a rising proportion...
By Sharon Kelly, 24 Apr, 2018

Despite Disappointing Returns, Oil Driller Pushes Ahead with Fracking Near Rare Texas Wildlands
If you ask the CEO of Apache Corp., his company made in 2016 the kind of once-in-a-lifetime find...
By Sharon Kelly, 19 Apr, 2018

The Secret of the Great American Fracking Bubble
In 2008, Aubrey McClendon was the highest paid Fortune 500 CEO in America, a title he earned taking...
By Justin Mikulka, 18 Apr, 2018

Submitted by Linda Wood on Tue, 03/10/2020 - 11:31pm

Trump potential fracking bailout

criticized here:

https://www.alternet.org/2020/03/trump-slammed-after-news-breaks-of-a-po...

Trump slammed after news breaks of a potential fracking bailout

Written by Eoin Higgins / Common Dreams March 10, 2020

Critics are denouncing as ‘corporate socialism’ the Trump administration’s reported consideration to offer oil and gas companies in the U.S. fracking industry a massive bailout amid a drop in prices that comes amid the global coronavirus outbreak.

“Corporate socialists seek welfare from Trump administration,” tweeted journalist David Cay Johnson, in response to reporting by the Washington Post on Tuesday...

Alex Doukas, lead analyst for Oil Change International, predicted Monday that such a move was likely on the horizon.

“With oil prices in free fall, expect oil companies to turn to their age-old tactic of bullying governments for even more subsidies on top of the hundreds of billions they benefit from annually,” said Doukas. “Instead of more handouts to polluters, governments should make big investments in high-quality green jobs that will put people to work and ultimately end our dependence on the volatile fossil fuels that create climate chaos.”

Progressives pushed back on the administration’s rationale, pointing out that the fracking industry has been in trouble for years and that executives are now exploiting the coronavirus outbreak as an excuse to get a government bailout.

“This is insane—shale companies have been struggling for years because their product never made economic sense in the first place, never mind environmental sense,” tweeted journalist Amy Westervelt. “Now we’re gonna use coronavirus as an excuse to bail them out? Unbelievable.”

In a statement, Food & Water Watch executive director Wenonah Hauter called the administration’s proposal “a desperate move to protect corporations and billionaires.”

“The fracking industry has been on the financial ropes for years because their business model is to flood supply and then push for artificial demand,” said Hauter. “Using a worldwide public health crisis to bail out the fracking industry now would be a disgraceful waste of taxpayer dollars, and would spell further climate calamity.”

“We shouldn’t be shocked that Trump puts his billionaire friends ahead of workers and the climate, but everyone should be outraged,” Hauter added...

Trump and advisers have been taking calls since Monday from concerned energy sector allies, who have voiced concern and at times exasperation not only about oil prices, but also privately warning against the administration supporting any sweeping paid sick leave policy, according to a major GOP donor and a White House official familiar with the discussions...

Progressive advocacy group Swing Left, on Twitter, called for a change in government priorities.

“Help sick people,” the group tweeted, “not sick companies.”