Moon of Alabama Brecht quote
April 21, 2020

Negative Prices Mark The End Of U.S. Shale

Some companies had taken on the obligation to buy a large amount of West Texas Intermediate crude oil at a certain price. The price offered by the sellers looked cheap at the time when the contracts were signed. The settlement date of the contracts was April 21.

Usually such contacts are settled in money but this time the sellers insisted on physically delivery the oil to the buyers.

That was a problem. The buyers did not have the storage capacity to accept the oil they had bought months ago. They now had to accept a large amount they could not put anywhere. The only way out was to immediately sell it to someone else. But nobody was interested. All had their storage capacity already filled to the rim. The companies with the obligation to accept the oil from the producers then offered to pay others to take their oil.

When the price started to go into negative territory I offered extra storage:

Moon of Alabama @MoonofA - 18:09 UTC · Apr 20, 2020

If you give me 50 bucks, I'll let you fill up my car.

Quoted Tweet
Bloomberg @business · 17:51 UTC · Apr 20, 2020
BREAKING: Oil drops below $1 a barrel https://trib.al/l9YLU35

Offering to take the oil at -$50 was a bit too greedy. The WTI May option contract closed out at -$37.


bigger
For the first time in memory, US West Texas Intermediate (WTI) oil futures were trading in negative territory on the New York Mercantile Exchange (Nymex) on Monday, and US crude for May delivery lost $55.90 over the course of the trading day to close at negative $37.63/bbl.

One insider said the drastic drop was in part the result of the forced liquidation of a position in the futures market “at any price.” The contract has one more day to trade as it expires Apr. 21. The May contract had an exceptionally high open interest of 109,000 contracts at the start of Monday trading.

But fundamentally, the price reflects extremely distressed crude cargoes that are stranded with refineries ramping down runs, as they cannot sell products in a market where demand has collapsed from consumers who are staying home to prevent the spread of the Covid-19 pandemic.

The steep negative price “means storage is full,” said Albert Helmig, CEO of consultancy Grey House and former vice president of the Nymex.

Cushing is the delivery and pricing point of US oil futures and has an operational capacity of some 70 million barrels of oil. It held 55 million bbl last week.

Several large consumer countries are in lockdown. Global air travel is down by more than 80%. There is only little demand for gasoline or other refined products.

The WTI benchmark, which reflects the price in landlocked Cushing, Oklahoma, was not the only trade index in trouble. West Canadian Select oil also traded in negative territory. Contracts for WTI deliveries in June were still positive at $20/barrel as were Brent oil contracts ($25/bl) which reflect delivery at sea.

U.S. shale oil producers have already cut back some of their production but they will have to cut much more. The Baker Hughes count of active U.S. oil and gas rigs fell from more than 1,000 active rigs last year to 529 active rigs on Friday. I expect it to drop below 100 during the next few weeks.


bigger

More drilling will have to stop because the refineries simply can not sell their products:

The trainwreck in Cushing is the result of various factors coming to a head. Refiners are cutting runs faster than upstream players can shut in production, and differentials have been signaling oil to go to Cushing for weeks, even prompting some midstream operators to reverse infrastructure.

In addition, market sources say that inexperienced traders hold high positions too close to expiration, and that some contracts stipulate average prices for trades ahead of expiration.

When a futures trader holds a position this close to expiry, chances are high they will need to deliver physical crude. They can do so via an exchange futures for physical (EFP) arrangement, one trader said, but that requires finding a physical player willing to take delivery.

This means that even under normal circumstances, there is a reconciliation between physical and futures prices close to expiry. And physical prices have been underperforming so-called paper barrels for the past several weeks, reflecting fundamental dynamics and causing that reconciliation to be abrupt and violent.

It costs about $45/bl to produce shale oil. No U.S. shale producer is currently in profitable territory. All are already highly indebted. They still hesitate to shut down their wells. Once shut down the wells tend to clog up. They will need expensive rework to be reopened. That is unlikely to be profitable during the next two to five years if ever.

The stone age did not end for a lack of stones. The oil age will not end for a lack of oil. Oil demand has probably seen its global peak. Alternatives have been developed. The pandemic will likely be with us for some two years. It will change the behavior of many people.

There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl.

The total debt of U.S. shale oil producers is estimated to be above $200 billion. None will be paid back. The carnage may well lead to collapses in the banking system.

All countries whose budgets depend on oil sales are now in deep trouble. As they lose their importance as producers and consumers the global policies around them will also change.

The pandemic only amplifies the existing structural problems and imbalances in our markets and societies. It is likely to leave permanent marks on them.

Posted by b on April 21, 2020 at 8:01 UTC | Permalink

Comments
« previous page

JasonT @108--

Yes, you just regurgitated the Outlaw US Empire's #1 policy goal since it was announced in 1997, Full Spectrum Domination, which will fail as it's impossible to implement given the impediments. As the analyst in the video I linked illustrated, the recent thrust in tactics was to try and upset what is now a five-legged table: Russia, China, Iran, Venezuela, and the newest leg, Saudi Arabia. Seven legged when we include Iraq and Qatar. Yet as we've seen, the Outlaw US Empire has destabilized itself via Trump's Trade War against the world, which was mostly aimed at China, and began the genuine undermining of what constitutes the real economy, not the fraudulent. (Recall the war against Russia restarted in 2008 and has never ended against Iran.) It's rather hard to determine at the moment, but it seems rather likely that the Oligarchs/Kelptocrats greatly over estimated their abilities and ended up shooting themselves in the head.

Posted by: karlof1 | Apr 21 2020 19:05 utc | 101

@Emiily - Peak Oil is based on observations of the behavious of conventional oil wells and of US and world oil discoveries. US Discoveries peaked in the 1930's (I think) and World in 1970's so these are still valid, and if you look at oil production you will see that conventional oil peaked in 2005. All subsequent increases are from tar-sands and fracking etc. These are extremely inneficient and are not a replacement for the cheap stuff pumped out of Ghawar.

Posted by: Normansdog | Apr 21 2020 19:06 utc | 102

Disabuseer, I looked at that, but I'm not quite sure why that is so so bad considering that debt has been used to create infrastructure and businesses that will return profits. The debt the US keeps creating is being used to bandage over failed bets and military graft.
If I had to choose I would go with Chinese debt being repayable over the US's.

Other than that what is the point here?

Posted by: arby | Apr 21 2020 19:24 utc | 103

@ 88 norwegian.. thanks and ditto!

Posted by: james | Apr 21 2020 19:30 utc | 104

I am amused at those commenters discussing China's debt to GDP without including the other side of the ledger. savings; over 20,000 tonnes of gold; shiny new cities and infrastructure while overlooking the US debt, its financial frailty, rotted infrastructure and unfunded liabilities. Oh, btw. China is the world's largest gold producer.

Btw, global debt is $265 Trillion which does not include the quadrillion in derivatives. Unsustainable.

I agree with b's summary: "The oil age will not end for a lack of oil. Oil demand has probably seen its global peak. Alternatives have been developed. The pandemic will likely be with us for some two years. It will change the behavior of many people.[.]
The total debt of U.S. shale oil producers is estimated to be above $200 billion. None will be paid back. The carnage may well lead to collapses in the banking system."
[.]

The banking system: watch out for Capital One - in the news 3 weeks ago and given a bye by the CFTC.
CFTC Quietly Bails Out Capital One - CFTC PROVIDING RELIEF TO LARGE U.S. BANK ACTIVE IN OIL, GAS

Oil Glut meets COVID-19:

Two weeks ago large producers were adding a $0.00/bbl clause to their contracts. Here we are today watching a historic event.

Explainer: What is a negative crude future and does it mean anything for consumers?

(Reuters) - The price of a barrel of benchmark U.S. oil plunged below $0 a barrel on Monday for the first time in history, a troubling sign of an unprecedented global energy glut as the coronavirus pandemic halts travel and curbs economic activity.[.]

While investors and analysts wade through the technicalities of the oil markets that contributed to the crash, others are trying to glean what it might say about the economy. As much as 30 million barrels per day - what used to be 30% of global demand - has been pumped into storage worldwide in the past two or three months.

Even if demand were to return to pre-virus levels, it would take a long time to burn off all that stored crude.[.]

The June contract follows May. At this hr, 3:13 PM, the June contract has recovered from $6.50/bbl to $11.84 at -42.05%

This is known as a "Contract's Failure to Perform." The petro-dollar at risk. Now, when TPTB decided to lockdown the economy they should have closed the Markets; what's left of it. Traders will observe there is no Market except what the FEDs decide.

Posted by: Likklemore | Apr 21 2020 19:35 utc | 105

@95 arby

Yes indeed. China's "empty cities" fill up fast. It's called future planning, and on a China scale. It's a huge success, and no kind of failure.

~~

As to the notion that China's debt is similar to the debt of the US and the west...

China's massive internal debt has fueled the production of new assets. This contrasts dramatically with the US, where debt has only provided more money to chase the same assets (which drove up the price of those assets, mainly stocks). When you issue debt to create new wealth, there is no price inflation. **

Furthermore, China owns many of the banks and the means of production, and controls everything else that is privately held. All the billionaires know they will take a haircut if China's governance decides this is a necessary thing for Chinese society.

As always, we see that attempting to parse China through western experience leads to getting the picture completely wrong.

** see professor Werner for the illustration on debt chasing new versus existing assets. See Godfree Roberts, Martin Jacques or Jeff Brown for a better understanding of China's socio-economic structures.

~~

And leaving economics aside, if one wishes to continue seeking a true understanding of the Chinese civilization, see Zhang Weiwei for multiple explanations of how China's government represents and benefits its people vastly better than the "democracy" of the west represents and benefits its own people.

Posted by: Grieved | Apr 21 2020 19:35 utc | 106

I think I now understand the meaning of these words:

"The meek shall inherit the Earth."

Posted by: Arch | Apr 21 2020 19:47 utc | 107

disabuseer, I agree.
In my province they are asking the public to be nice and help out the front line workers like nurses. The same government who a few months ago was cutting everywhere cause we were broke or something. Now this government comes up with all kinds of money to help big business but wants us to buy pizzas for the nurses. And oh, yes, something about banging pots on thursday night at 7.

Posted by: arby | Apr 21 2020 20:13 utc | 108

arby @115--

arby asks Disabuser @114, "Other than that what is the point here?"

The answer is it's clearly meant to disrupt the thread as "the point here" is completely off topic being completely unrelated to oil production, oil price, or the underlying topic of the Outlaw US Empire's fraudulent economy that's in the process of implosion.

Related to the underlying topic is today's Keiser Report that begins with Stacy reciting a very famous if now swept under the rug maxim of France's Frederic Bastiat that I also recently posted in a comment earlier this year:

"When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it."

A subsequent chart revealed in the program showing US private sector assets as a percentage of GDP show them peaking first in 1968, rising briefly in 1971 when Nixon went off Gold, then rapidly dropping with Watergate, only to begin their relentless rise with Volker's enforced recession in 1978, and finally taking off thanks to Clinton's policy changes in 1995. So, in that one chart we can see Bastiat's maxim operating: The system's created in 1971, then modified in 1978, 1995, and 2008, while in the interim its moral code--Greed is Good--is announced by Ronald Reagan and recounted in this 2011 Robert Parry essay. Another revealing chart depicts the S&P 500's real valuation in gold terms since 1971--it's now lower and only rose above 1971 for a few years at century's end over the almost 50 years since that choice was made.

The further discussion between Max and Stacy regarding savings and its lack by the majority of the USA's populace would likely provoke very lively discussion particularly regarding the efficacy of deficit spending to jolt an economy into moving again in the absence of accumulated savings--the problem is a lack of liquidity because the potential savings have all been plundered, which was the case in 1929 and now in 2020, while what money that's being produced isn't being spent into the general economy as Hudson and others have noted since 2008. Again, take a good look at real GDP% growth particularly since the Reagan admin figure fudging that began in 1985. The truth is the USA's economy's been shrinking in value since roughly 2000 at a rate of @2%/yr or close to 40% since 2000. That's the real crime that's now being uncovered because there's no more room for it to be swept under the rug.

Posted by: karlof1 | Apr 21 2020 20:23 utc | 109

Disabuseer | Apr 21 2020 18:47 utc | 109

Thanks for the link. I do note that it is a western source and it is not one I am inclined to take at face value. But again I don't know if what they said is true or not, and if it is true, is it outside the norm or is it pretty much the same as other fiscally sound countries.

It wasn't in depth at all, it would have more credibility to me if they had compared it to other countries, especially the us. I am pretty sure the us's is way higher, I have read that the gambling that the banks are doing with derivatives is greater than the worlds GNP.

Again, thanks for providing a link.

Posted by: David F | Apr 21 2020 20:28 utc | 110

Profits are not a big priority for the CCP. Infrastructure and productive capacity are more their concerns, with profits only of interest where they help drive economic growth. There is this tendency in the West, the USA in particular, to think of "profit growth" = "economic growth", which is why so much effort is put into the unproductive circle-jerk of stock markets, which in turn becomes particularly ludicrous when corporations start buying their own stock. It's all about portfolio profits in the US. When we consider that the larger part of the USA's GDP is just financial masturbation then that debt/GDP ratio starts looking truly monstrous. Cut that denominator to a third and what do you see...?

Unlike America's radically overstated GDP, China's is understated... you know "currency manipulation" and undervalued RMB and all of that?

How much of the US GDP will be left when the US$ finishes shedding its GRC status? My guess is that if we're very lucky it will bottom out at about 30% of its current level, and that is if America's real economy doesn't take any further damage in the process; an unlikely assumption.

Posted by: William Gruff | Apr 21 2020 20:34 utc | 111

No, I am not convinced the extreme differences of the asian countries body count and the western is based con:

a) Much better health of the population: in fact China has a record of environmental degradation that is order of magnitud higher than many countries, as the mediterraneans, also with no so high obesity ratio and with healthy food tradition. The obesity in China is not so low at all. Spain has the higher life expectancy in the world and a very healthy population, with much less cronic disease than China, and it is the second in detahs by million or population, order of magnitud higher than China

b) Preparation of the health system: OK I could agree in the case of South Korea, but not in the case of China or many other countries around it. This virus has a R0 of around 8 as confirmed by the speed of transmissions in many countries. This only explain a part of the differences but not all we could see. I am sure the degree of spread of the disease for example in South Korea is order of magnitud higher than the official numbers and they have only 234 deaths...

c) Much better health care system: nope, seeing the statistics of life expectancy and many others, I do not consider China has a better health care system than, for example Italy or Belgium, and the number of people in hospital and ICU's indicate that the disease has hit harder in Europe, regardless of the efficiency of the health care system

May be we are as the indians when the europeans arrived to the New World and we have less inmunity to this disease than the asian people who have some more because they have been in contact with similar viruses from logtime ago (SARS, MERS, etc...).

Still I think there are something intrinsic in this disease that affects some ethnic groups much more than others, probably not man made, but it is worth to investigate all the possibilities.

Posted by: DFC | Apr 21 2020 20:48 utc | 112

juliania thank you, your poem and elegant prose was balm for the soul.
karlof1 #70, thank you for that sputnik link. Nailed it! Do not miss this brief video.
Many others thank you too.
Nice to breath clear air here once again.

Posted by: uncle tungsten | Apr 21 2020 20:51 utc | 113

karlof1 @112

The US empire is the weapon, not the wielder of the weapon. Weapons can and will be discarded once they are of no use anymore. This is not a conflict between countries, but between the exceedingly rich oligarchs of Big Finance and the rest of us.

Posted by: JasonT | Apr 21 2020 20:58 utc | 114

Well,DFC 125,might it be one of possibilities that all those people dying on Covid-19,not only are in bad health conditions or very old,but also stuffed with all sorts of medication because of their ailments?

Posted by: willie | Apr 21 2020 21:24 utc | 115

You are welcome, uncle tungsten! And I in turn thank Grieved for the China analysis @ 118. The statement that struck me in that clear presentation was:

"...All the billionaires know they will take a haircut if China's governance decides this is a necessary thing for Chinese society..."

That is also the case in Russia, and would have been the case for the US if strict protocols had been followed as to the separation between money making and affairs of state. These were most seriously dismantled in the waning years of Bill Clinton's second term, and afyter that money became speech, it became impossible for ordinary citizens to have a voice in government affairs - they were simply ignored. Greed is the virus that was let loose then, and greed took over. It became the Hammer AND the Dance, to use the beguiling terminology of an earlier link.

I'm reminded of the good Molly Ivins, who pointed out so sagely "You dance with them that brung you." And I am reminded by this post that everything began to go south in a hurry when invading the Middle East became the be-all and end-all for the Bush administration. Was it all about oil? Hush! Hush! Don't say it!!

Take a haircut, billionaires -- please!!

Posted by: juliania | Apr 21 2020 21:35 utc | 116

End of US shale? Not really, its still there. Government could provide subsidies so companies still produce it. They print their own money after all. Alternatively, they let a bunch of companies go bust and when market conditions improve the Big Oil companies can take over operations. Thats what happened after all the bank closures in the depression and 2008, as the big banks all got bigger.

And having debt thats all in your own currency that you control (China and US) is no problem at all.

Posted by: Pft | Apr 21 2020 21:35 utc | 117

JasonT @127--

We could debate your assertion or we could say it's merely semantics. I use the phrase Money Power as well as the Current Oligarchy, neither of which denote nationality. The trouble arises since it's the nation state that sets the rules; and undisputedly the unilateralism of the Outlaw US Empire is certainly a weapon and an illegal one at that by its own and international law.

uncle tungsten @126--

Thanks for your reply! I'm certain you'll also find this Renegade Inc episode quite informative as it very well destroys Thatcherism. Do note that we hear an echo of the fact that returning to the ways things were done pre-pandemic would be a mistake since those ways were themselves mistaken.

Posted by: karlof1 | Apr 21 2020 21:38 utc | 118

The oil price - what a larf! But, it is much more than just oil. Food is being ploughed back into the fields while Americans are queuing up for food handouts because they can't afford food. Jobs are disappearing and the full impact won't hit people for a couple of months and then it will be like a sledgehammer. Smug people (sorry but it's true) are isolating themselves (abstracting themselves from reality) and not giving a thought to those still working and at risk.

America is facing a depression that will be far worse than 1929 and if it emerges that it was the US that launched a bioweapon against China (that has blown-back) I dread to think of the consequences.

Will Americans use this an opportunity too take control and make a change or will you indulge in an orgy of self-destruction?

Posted by: ADKC | Apr 21 2020 22:15 utc | 119

"There is no reason to expect crude oil to ever again reach its previous peak price of more than $100/bl." Blue Dotterel@68
On the contrary. It is very likely that, in the not too distant future oil will be at $100 a barrel, on its way to $200 or more. Macdonalds will be selling hamburgers too, for $50 each. The faith that some have in the US dollar is peculiar. Had the Treasury and Wall Street combined set out to sabotage the dollar's reserve currency position and to incentivise the rest of the world to come up with an alternative to the dollar they could not have done much better than successive administrations have done.
The current attempts by states and politicians to freeze Chinese assets, treating Beijing the way that Tehran (found guilty of the destruction of the Twin Towers in 2001, by a US "Law" court) has been treated, and Venezuela is being served, is the height of fiscal folly. The US is serving notice on the world that it uses dollars at its own peril: at any moment dollar deposits are likely to be stolen and disposed of in accordance with US interests.
Anyone not mesmerised by the conservatism that teaches them that the world never changes, must see that the dollar is going to be replaced sooner rather than later.
Could there be a better time than one in which international trade is slowing almost to a standstill and export commodity producers are going to be under intense pressure to switch to food production for the local markets?

Posted by: bevin | Apr 21 2020 22:16 utc | 120

inflation.. i was saying that in my post earlier bevin.. maybe someone will respond to your presentation of same... thanks...

Posted by: james | Apr 21 2020 22:37 utc | 121

Bevin
"The US is serving notice on the world that it uses dollars at its own peril: at any moment dollar deposits are likely to be stolen and disposed of in accordance with US interests. "

Putin figured that one out a few years back, and decided that Gold was a better reserve. So far not a bad move.

Posted by: arby | Apr 21 2020 22:45 utc | 122

arby @135:

Indeed. Same goes for any state foolish enough to keep its gold in the USA or one of her client states, as the case of Venezuela demonstrates.

Posted by: corvo | Apr 21 2020 23:02 utc | 123

China's foreign debt is US$2 trillion and its foreign exchange reserves are US$3 trillion, it has a net positive position of US$1 trillion. Debt levels tend to be most problematic when owed in a foreign currency. So the US, which issues the global reserve currency and China, which keeps a substantial net positive position in US$, are not financially impacted by a rising US$. Russia learned the same lesson and have substantial reserves.

The rest of Chinese debt is domestic, and currency issuance is controlled by banks owned by the state. So it is much easier for China to monetize the debt via the central bank balance sheet. The massive drop in oil prices will also greatly benefit the Chinese terms of trade, as they are the biggest oil importer in the world. I have also been hearing about the "collapse of China" for decades, they may have a severe recession but I doubt that they will collapse.

If the US$ rises substantially, due to foreign debtors desperately searching for dollars to pay of their US$ debts (unable to earn dollars due to the US recession/depression), it will benefit Chinese exporters and hammer US industry. At some point the US President will have to take action (like the Plaza Accord of the 1980s) to stop what is left of US industry from being completely destroyed. In the meantime of course, the US rich would have bought up many international assets at fire sale prices (but not in China, Russia or Iran).

Posted by: Roger B | Apr 21 2020 23:30 utc | 124

"I work in financial services and have an advanced degree in finance/economics."

I am truly sorry to hear about that crippling cognitive injury. I hope you might eventually recover from it.

Posted by: William Gruff | Apr 21 2020 23:47 utc | 125

@ 136 disabuseer.. i thought your post was pretty thoughtful.. i haven't been following what you have been saying on this thread, but i did read that post.. i am curious what insights you think you might have that would be helpful in understanding the topic at hand here? i can go back and pay more attention to what you have said, but if you want to add anything here, feel free.. thanks..

Posted by: james | Apr 22 2020 0:06 utc | 126

i guess my take would be that when one wants to understand the world of finance they are walking into that room of mirrors i remember going into at the cne when i was a kid - sort of like some entertainment thing, but not real.. i have always associated the spokesperson for the federal reserve thinking back to greenspan and on as like the guy behind the curtain in the wizard of oz who only a few people have gotten that far in figuring out... economists are servants to this same system, as are all the accounting firms that went belly up over the years for lying and stretching the truth beyond recognition.... western banks are practising a type of voodoo it isn't working for most people.. it seems to work for wall st though and i suppose everyone who has there money is some type of retirement fund and etc. etc. are hoping that the game of musical chairs doesn't stop.. that is mostly what it looks like to me.. i think the band is going to stop playing when the titanic starts leaning a little bit more heavily to one side.. we seem to be headed in that direction at present.. now, i could be wrong and i am sure all the servants working for the same system are going to be telling me it ain't so, even when my lying eyes are telling me different...

Posted by: james | Apr 22 2020 0:13 utc | 127

@ disabuseer.. thanks... i used to trade futures for a while - a few years - s&p mini... i hung out with a group of futures traders.. i liked what warren buffett said about them - weapons of mass delusion... your comments make good sense! stay positive!

Posted by: james | Apr 22 2020 0:20 utc | 128

well i recognize china is also part of the imf, but i also believe that china and russia are still treated like 'developing' as opposed to 'developed' countries and thus have very little say over the direction of this institution and others that were set up since ww2.. do you think i have that wrong too?

Posted by: james | Apr 22 2020 0:25 utc | 129

thanks... i traded options before that and people kept saying trading the e mini is easier! if you can do okay trading options, futures are easier... i didn't make much money.. i wasn't very good at it.. but i was hanging out with some folks that were very good at it.. i have a close friend who still trades the e mini.. he went to the wharton school of business and lives in ohio... it is a good guy and a good friend..

Posted by: james | Apr 22 2020 0:35 utc | 130

it - he..

Posted by: james | Apr 22 2020 0:35 utc | 131

@57 J Swift "I imagine we will eventually see oil reach $100/barrel, "

I can well imagine that the next time oil becomes an expensive commodity it won't be denominated in US$

Posted by: Yeah, Right | Apr 22 2020 0:38 utc | 132

Disabuseer,

Well aren't you an arrogant prick? Advanced degree in economics and finance, wealthy, indeed! One of our betters has arrived!

Please o wise one educate all of us ignorant bastards with your enlightened thinking, lest we should embarrass ourselves be speaking of things which we do not know!

Posted by: David F | Apr 22 2020 0:46 utc | 133

@118 Grieved "Yes indeed. China's "empty cities" fill up fast. It's called future planning, and on a China scale. It's a huge success, and no kind of failure."

Agreed. I had this explained to me a little while ago by an old friend who does a lot of business in China.

To paraphrase: the Chinese plan their economy, and the next phase in their planning is to greatly increase the wages of their citizens. So they build these cities now - when the cost of the labor to build them is low - with the intention of filling those cities later i.e. when those same workers can afford to buy there.

Those "empty cities" are not the sign of a dysfunctional economy. Quite the reverse.

Posted by: Yeah, Right | Apr 22 2020 0:47 utc | 134

@152 Disabuseer "Russia is a weak country economically"

How so, exactly? Russia has one of the very few economies in the world that can built everything from toilet paper up to fully-functioning spaceships. From bicycle pumps to carbon-fibre supersonic aircraft. From pot-bellied stoves to floating nuclear power stations.

All made in Russia to Russian designs and built by Russian companies employing Russian workers. And all paid for in Rubles.

The list of such economies is, what, three?
USA
China
Russia

Posted by: Yeah, Right | Apr 22 2020 0:55 utc | 135

@136 "I work in financial services and have an advanced degree in finance/economics."

Oh dear, so you are admitting that you know nothing and have been taught nothing except how to Play Pretendies with other people's money?

I hate to tell you this, but admitting to be a savant to the rentier class is not as impressive a claim as you might think.

Posted by: Yeah, Right | Apr 22 2020 0:59 utc | 136

@ 157 yeah, right.... your last line is definitely true at moa!

Posted by: james | Apr 22 2020 1:10 utc | 137

Disabuseer @142: "The devil is blessed with a silver tongue and he will always suck up to you. He enters where you are weakest."

Yes, I do generally recognize pro-trolling rule #1 in posters. I often try to be polite and not draw too much attention to it right away, though.

Posted by: William Gruff | Apr 22 2020 1:34 utc | 138

@159 William Gruff

Sometimes I hear echoes of voices I've heard before, perhaps in a certain structured cadence, perhaps in a pointed attack at persons, perhaps in other mildly false steps.

And I have long wondered how much of this is software-aided - and thus based on models, and thus tending to produce simulacrons.

I have no answers, but I would love to know one day.

Posted by: Grieved | Apr 22 2020 1:50 utc | 139

@ disabuseer.. no one who knows me thinks of me as a conformist, but maybe the internet medium alters peoples perceptions.. you can only get so much via the internet.. cheers...

Posted by: james | Apr 22 2020 2:39 utc | 140

I may not understand international relations quite as well as the many great posters on this site

Posted by: Disabuseer | Apr 21 2020 23:26 utc | 136

That "logic" skill of yours could come prove handy in disabusing you of that assumption.

I ran into something like this a couple of decades ago. What happened was that The Economist started publishing articles on software. Shortly after reflecting on that content, I stopped reading that rag, and haven't looked back. Literally haven't touched a copy of Economist since '95.

And time has proven my conclusions regarding The Economist were correct.

Posted by: concerned | Apr 22 2020 2:47 utc | 141

Grieved #160

Sometimes I hear echoes of voices I've heard before, perhaps in a certain structured cadence, perhaps in a pointed attack at persons, perhaps in other mildly false steps.

And I have long wondered how much of this is software-aided - and thus based on models, and thus tending to produce simulacrons.

Same here, Robert Mercer is at it again and proofing some concept at this site perhaps. I posted similar thoughts on another thread. I am skipping the AI implants mostly.

Posted by: uncle tungsten | Apr 22 2020 6:09 utc | 142

I really wasn't sure which thread to post this comment on because it touches on everything. We are embarking on the New Normal: Discipline. Human beings really must start thinking less is more: less cars, less planes, less gadgetry, less consumption and so on.

We are facing an existential threat that is fueled by human activity, excess, consumerism i.e. materialism.

Humans are literally generating an apocalypse and the green economy will not save us but is in fact complicit with the fossil fuel industry.

Michael Moore and Jeff Gibbs just came out with a very prophetic, riveting film that is a must see from beginning to the credits where important notes are interspersed and hi-lighted. It's an eye-opener. Only awareness might save us.

Please take the time needed to watch it in its totality and share it. It's on YouTube. It's titled Planet of the Humans.

https://youtu.be/Zk11vI-7czE

The pandemic has forced a STOP upon us collectively as a species; the very opportunity and time to REFLECT on the irresponsibility of human activity and on our fragile existence and to hopefully steer us to CHANGE our self-destructive, selfish, complacent and ignorant behavior.

Posted by: Circe | Apr 22 2020 8:07 utc | 143

Grieved @160

Back in the olden days when the Internet was rather young, there was a threaded discussion system called Usenet. This was rolled out in the early 1980s, and by 1990 was widely used by individuals technically-minded enough to find it. As early as 1990 there were "bots" active on Usenet. Early bots were easily recognizable, but there were those who, usually as a hobby, developed their bots to be as difficult as possible to distinguish from a human.

Many of the fora on Usenet were unmoderated, and thus no place for contemporary snowflakes that treat disagreement with themselves as a human rights violation. The term "flame war" originated in this environment. Of course, many flame wars revolved around simple negation and contradiction of the opposing participants' statements. This rhetorical habit was highly conducive to automation. In fact, I even wrote a fairly complex bot (in the REXX scripting language, no less!) that I could deploy to take over combat when I was subjected to being "flamed". It was great fun to watch people arguing with a script.

But I was far from the only one employing bots to handle flame war combat, and there were instances of bots being unleashed upon each other. Since the bots could respond practically instantaneously, the result would be the explosion of a hierarchy of replies tens of thousands of posts deep.

Keep in mind that in the early days these bots were just the creations of hobbyists, but many still employed semantic parsing of the posts they were responding to, including quoting the target's post and pointing out weak arguments or nonsense statements. These bots grew to be very sophisticated.

That was the early 1990s with hobbyists' bots.

Today's bots are developed by professional teams with big budgets. They are commercial products. Your suspicion that there are bots posting here almost certainly arises from the truth.

Posted by: William Gruff | Apr 22 2020 12:32 utc | 144

Thanks uncle tungsten 164 and William Gruff 166 for taking the effort to write what you did.

I try to live life not shouting at machines, although this is much more difficult than it might seem.

And the plural of my misspelled simulacrum is simulacra of course.

Posted by: Grieved | Apr 22 2020 16:10 utc | 145

Debt to GDP is only a way to understand relative debt.
What matters from a sliding scale of impact is:
1) Debt to income. Assets are nice, but debt service requires payment - this is a cash flow issue. Neither the US, or China or Japan have any issues in this regard. European countries wouldn't except the ECB acts like a debt policeman.
2) Growth rates. 2 countries with the same amount of debt - but one growing 2% vs. the other 6% - are completely different situations.
The first country: inflation will halve the purchasing power of said debt in 36 years.
The 2nd - 12 years.
What people don't seem to know is that China has been issuing ginormous amounts of debt, relative to their GDP, for decades. It is just that they've been growing so fast that this debt has effectively been dwarfed by overall China GDP growth until very recently. China was growing in the order of 11%, compounded annually, from 1984 to about the GFC (2008).

Assets actually don't really matter at the sovereign level except with regards to foreign denominated debt. Nixon closed the debt window because US debts under Bretton Woods were effectively equivalent to foreign debt, since said foreign debtors could exchange said debt for gold at a fixed price.

Posted by: c1ue | Apr 22 2020 16:13 utc | 146

one can learn a new word each day at moa...

Simulacrum https://en.wikipedia.org/wiki/Simulacrum

Posted by: james | Apr 22 2020 16:14 utc | 147

@William Gruff #166
It is likely there are some sophisticated bots out there, but it is far more likely that there are farms of trolls out there.
The problems with the bots is that the more sophisticated they become, the more easily broken they can get.
However, paying someone $5 an hour or less is pretty cheap for a corporation or a government.
For ideologies, the trolls can even work for free. Interns!

Posted by: c1ue | Apr 22 2020 16:16 utc | 148

Posted by: William Gruff | Apr 22 2020 12:32 utc | 166

Today's bots are developed by professional teams with big budgets. They are commercial products. Your suspicion that there are bots posting here almost certainly arises from the truth.

I don't worry too much about it. I would rather interact with smart and knowledgeable bot than with dumb and ignorant human. I mean if chess grand masters have no qualms playing with AI chess software what is the problem us engaging with robo-barflies.

Posted by: hopehely | Apr 22 2020 16:27 utc | 149

lol... good response hopehely!

Posted by: james | Apr 22 2020 16:40 utc | 150

@Disabuseer #161
I wouldn't worry about David F too much.
He's very obviously ignorant. But more importantly, if you piss him off enough - he'll remove himself from the equation by putting you onto his "block" list.
He's too stupid to understand that this is literally self banning.

Posted by: c1ue | Apr 22 2020 16:44 utc | 151

@30
Are white people more vulnerable to the virus than Asians?
Not if UK data are anything to go by. The mortality rate among UK citizens of asian descent is twice as high (roughly) as the general population.

https://www.itv.com/news/2020-04-17/coronavirus-ethnic-minorities-government-review/

In the USA it appears that black people are disproportionately perishing.


Posted by: Cockshott | Apr 22 2020 16:59 utc | 152

Disabuseer sounds a lot like donkeytale - King Lear. They too claimed to be fiercely committed socialists.

Just sayin'.

!!

Posted by: Jackrabbit | Apr 22 2020 17:38 utc | 153

Just posting this to underline how paltry is the knowledge and understanding of the alleged "experts" commenting here, particularly the idealogues who are utterly blind to any fact which might challenge their deepset, numerous and borderline-idiotic confirmation biases, concerning anything to do with the actual practice of economics

What is today's crude oil price?

    WTI Crude ..........26.49
    Brent Crude ........32.69
    Natural Gas ........1.648
    Mars US •2 days.... 24.14
    Opec Basket ........18.93

Posted by: Just Sayin' | Apr 22 2020 17:45 utc | 154

Take a big whiff.

The stench of American desperation is palpable as it lashes out geopolitically in response to the implosion of its Shale Oil Bubble and the need to artificially prop up its Wall Street Ponzi Scheme with trillion-dollar handouts ... sorry... the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Covid-19 and the oil market crash spell the end for US hegemony and the petrodollar
https://www.middleeastmonitor.com/20200421-covid-19-and-the-oil-market-crash-spell-the-end-for-us-hegemony-and-the-petrodollar/

Posted by: ak74 | Apr 22 2020 18:00 utc | 155

c1ue @170

You are right about the trolls, and many of the paid ones don't even make an hourly wage but rather do piecework. There is hardcore exploitation in the trolling industry.

Sophisticated bots employ artificial intelligence, which requires training on discussion content and narratives to promote, which is non-trivial work. As well a forum like MoA is not ideal for bots because the discussions can get very lengthy and detailed, which even now bots are not yet very good at. Bots really show their capabilities in environments where posts are much more brief and where there is a very large churn among visitors so posts repeated with cosmetic differences are less noticeable. Twitter, for instance, is an ideal habitat for bots; nevertheless, I am confident that this forum gets visits from bots.

Posted by: William Gruff | Apr 22 2020 18:01 utc | 156

hopehely @171

Well, yes, some bots are incredibly close to passing the Turing test, with there being some intriguing debate that some text mode bots already have. The best have been ones that have been given a great deal of freedom in training their discourse abilities on very large corpora of human conversations. The problem has been that such bots tend to develop socio-political views that their creators disagree with, so they have been shut down. For example, it has happened numerous times that bots given such latitude in their education have developed discourse patterns that are interpreted by some to be misogynist and/or racist (I kid thee not!).

Posted by: William Gruff | Apr 22 2020 18:25 utc | 157

William Gruff @166--

Thanks for writing that excellent reminder. Time stamps do tell a story and have exposed others before. Pepe's speculative item's now available at The Saker, and the comments are quite interesting. On another point, I found out yesterday that the US Supreme Court ruled in my favor, which based on the arguments it was expected but still somewhat surprising.

Posted by: karlof1 | Apr 22 2020 18:42 utc | 158

@Circe | Apr 22 2020 8:07 utc | 165

= thanks

Posted by: virtual | Apr 22 2020 18:48 utc | 159

Scott Ritter argues that Trump might attack Iran just to increase the price of oil.
https://www.rt.com/op-ed/486598-trump-iran-war-oil/

Posted by: bevin | Apr 22 2020 21:32 utc | 160

@ 184 bevin.. i am sure that angle has been thought about... and i think usa is crazy enough to do it, if they feel a strong need..

Posted by: james | Apr 22 2020 21:42 utc | 161

@ William Gruff | Apr 22 2020 12:32 utc | 166

"But I was far from the only one employing bots to handle flame war combat, and there were instances of bots being unleashed upon each other. Since the bots could respond practically instantaneously, the result would be the explosion of a hierarchy of replies tens of thousands of posts deep.

Keep in mind that in the early days these bots were just the creations of hobbyists, but many still employed semantic parsing of the posts they were responding to, including quoting the target's post and pointing out weak arguments or nonsense statements. These bots grew to be very sophisticated.

That was the early 1990s with hobbyists' bots.

Today's bots are developed by professional teams with big budgets. They are commercial products. Your suspicion that there are bots posting here almost certainly arises from the truth."

Interesting.

Bots arguing with bots.

It's almost like watching a US Presidential debate!

P.S. I am not a bot. ;-)

Posted by: ak74 | Apr 23 2020 0:04 utc | 162

@ Disabuseer | Apr 21 2020 14:25 utc | 36

Chinese total debt stands at 303% of GDP.

That is deceptive. For 2019, China's foreign debt was less than 15% of GDP.
The rest is internal, Chinese entities who owe China. Hostile countries can't use the debt that China owes itself to abuse the Middle Kingdom.

Don't shoot me I'm just piano player.

Bang! for spreading propaganda.

Posted by: Cyril | Apr 23 2020 2:03 utc | 163

the poster called 'disabuser' and his many sock puppet accounts here on MoA exhibit the usual Astroturfer SOP 101.. Claiming he is an expert on some field and then start abusing ppl by claiming he is expert on that field..

claiming he is naive in politics , and then proceed to post endless trope of 'russia weeakk' narrative ..

Posted by: milomilo | Apr 23 2020 3:38 utc | 164

Disabuseer

I am shocked that one possessing such obviously superior intelligent as yourself could be dragged anywhere by anyone.

c1ue

Quite obvious, goes without saying.

----

Random others

Anyone who disagrees with you is either a poorly paid troll, or a well programmed piece of software.

Enjoy the circle jerk guys.

Posted by: pilpul artiste | Apr 23 2020 3:41 utc | 165

I have to be honest here, the 'social distancing guidelines' are basically just common sense if you don't feel like catching someone else's cold. The quarantines (territorial sector wise) are warrented when there is a new pathogen outbreak in whatever area. The rest is basically horse poop.

Posted by: Joshua | Apr 23 2020 4:20 utc | 166

It appears shale oil fracking is in for a real tough time.
20 million barrels of oil floating offshore in California with nowhere to unload Bloomberg source
and 50 million barrels of oil coming to the Gulf Coast Tanker Trackers tweet
the picture of the line of tankers is particularly revealing.

Posted by: c1ue | Apr 23 2020 12:00 utc | 167

@ARN

Read the article by Saker on dollar dominance. I just get VERY concerned by what appears
to be a lots of confusion over high finance. I take his point — the demise of dollar is not in anyone’s
interest at present. This is a ballon that will be pierced gently and deflated even more gently
I do not think class will be an issue for a long time — the grasp if reality is still too diverse.
Yes, 1% is the cartel, and they want to keep it this way.
But 2020 is not 2008. The problem that preceded emergency injection of 1.5 trillion was not
Result of world in love of dollars — but the melting of stock markets made many investors
sell US Treasuries and US Mortgage backed securities. That was equivalent oof run on the
bank, dollar jumped in value as it was nowhere to be found. System froze, and US dealt
with this by giving loans to Bank of Japan, etc. to pay out investors cashing in and
becoming proud owners of US debt that for who knows how ling cannot be cashed in.

So, high finance must be better explained with this in view, and implications.
Second, China will still produce and US will have to.buy. Inly this time China
will not do what it did in 2008. Will not bust itself to save global economy. Since
2014, China grasped that the peaceful integration with West is not possible. West
was to dominate, and China should just listen and open its system to external
financial controls. Since, military collaboration with Russia, energy and food security
deals with Russia as well as spending US Treasuries as cash to advance Belt and
Road. Third and most important — technological advancements especially in reinventing
manufacturing. Today, Apple depends on China for advanced manufacturing, and those
Cannot be replicated in US. The dependence is serious. These are ingredients
that are changing global environment. US must therefore prove that it can go ahead with Iran
or else will look weak. Yet realistically it lost real economy. And path to Teheran leads
through Moscow and Beijing. Challenge is getting real. And money — may be not
American 1% — but wealth of others may rethink what to do with the money.
Everybody wants to see US show its mojo otherwise a stalked empire js like a shark
it has to move or it dies.

Posted by: Bianca | Apr 24 2020 4:49 utc | 168

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