[Peace-discuss] US Risks Economic Crash In Oil War With Russia

Thu Dec 18 08:08:01 EST 2014

In conjunction with this development is the sudden announced ending of the
embargo against Cuba.

It makes sense if you look at what it appears their new priorities are in
regards to encircling Russia and destabilizing Putin. The U.S. elites dont
want a Russian ally so close to the U.S.

US Risks Economic Crash In Oil War With Russia

Description: Putin

 <https://www.popularresistance.org/category/educate/> Educate!
<https://www.popularresistance.org/tag/economy/> Finance and the Economy,
<https://www.popularresistance.org/tag/oil-gas/> Oil & Gas,
<https://www.popularresistance.org/tag/russia/> Russia,
<https://www.popularresistance.org/tag/syria/> Syria,
<https://www.popularresistance.org/tag/usa/> usa 
By Mike Whitney,  <http://www.counterpunch.org/2014/12/16/the-oil-coup/>
www.counterpunch.org
December 17th, 2014

John Kerry, the US Secretary of State, allegedly struck a deal with King
Abdullah in September under which the Saudis would sell crude at below the
prevailing market price. That would help explain why the price has been
falling at a time when, given the turmoil in Iraq and Syria caused by
Islamic State, it would normally have been rising. (
<http://www.theguardian.com/business/economics-blog/2014/nov/09/us-iran-russ
ia-oil-prices-shale> Stakes are high as US plays the oil card against Iran
and Russia, Larry Eliot, Guardian)

U.S. powerbrokers have put the country at risk of another financial crisis
to intensify their economic war on Moscow and to move ahead with their plan
to pivot to Asia.

Heres whats happening: Washington has persuaded the Saudis to flood the
market with oil to push down prices, decimate Russias economy, and reduce
Moscows resistance to further NATO encirclement and the spreading of US
military bases across Central Asia. The US-Saudi scheme has slashed oil
prices by nearly a half since they hit their peak in June. The sharp decline
in prices has burst the bubble in high-yield debt which has increased the
turbulence in the credit markets while pushing global equities into a
tailspin. Even so, the roiled markets and spreading contagion have not
deterred Washington from pursuing its reckless plan, a plan which uses
Riyadhs stooge-regime to prosecute Washingtons global resource war. Heres
a brief summary from an article by F. William Engdahl titled The Secret
Stupid Saudi-US Deal on Syria:

The details are emerging of a new secret and quite stupid Saudi-US deal on
Syria and the so-called IS. It involves oil and gas control of the entire
region and the weakening of Russia and Iran by Saudi Arabian flooding the
world market with cheap oil. Details were concluded in the September meeting
by US Secretary of State John Kerry and the Saudi King

..the kingdom of Saudi Arabia, has been flooding the market with deep
discounted oil, triggering a price war within OPEC
 The Saudis are targeting
sales to Asia for the discounts and in particular, its major Asian customer,
China where it is reportedly offering its crude for a mere $50 to $60 a
barrel rather than the earlier price of around $100. That Saudi financial
discounting operation in turn is by all appearance being coordinated with a
US Treasury financial warfare operation, via its Office of Terrorism and
Financial Intelligence, in cooperation with a handful of inside players on
Wall Street who control oil derivatives trading. The result is a market
panic that is gaining momentum daily. China is quite happy to buy the cheap
oil, but her close allies, Russia and Iran, are being hit severely

According to Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil
Policies and Strategic Expectations Center, the dramatic price collapse is
being deliberately caused by the Saudis, OPECs largest producer. The public
reason claimed is to gain new markets in a global market of weakening oil
demand. The real reason, according to Abanmy, is to put pressure on Iran on
her nuclear program, and on Russia to end her support for Bashar al-Assad in
Syria
.More than 50% of Russian state revenue comes from its export sales of
oil and gas. The US-Saudi oil price manipulation is aimed at destabilizing
several strong opponents of US globalist policies. Targets include Iran and
Syria, both allies of Russia in opposing a US sole Superpower. The principal
target, however, is Putins Russia, the single greatest threat today to that
Superpower hegemony. (
<http://www.boilingfrogspost.com/2014/10/24/the-secret-stupid-saudi-us-deal-
on-syria/> The Secret Stupid Saudi-US Deal on Syria, F. William Engdahl,
BFP)

The US must achieve its objectives in Central Asia or forfeit its top-spot
as the worlds only superpower. This is why US policymakers have embarked on
such a risky venture. Theres simply no other way to sustain the status quo
which allows the US to impose its own coercive dollar system on the world, a
system in which the US exchanges paper currency produced-at-will by the
Central Bank for valuable raw materials, manufactured products and hard
labor. Washington is prepared to defend this extortionist petrodollar
recycling system to the end, even if it means nuclear war.

How Flooding the Market Adds to Instability

The destructive and destabilizing knock-on effects of this lunatic plan are
visible everywhere. Plummeting oil prices are making it harder for energy
companies to get the funding they need to roll over their debt or maintain
current operations. Companies borrow based on the size of their reserves,
but when prices tumble by nearly 50 percentas they have in the last six
months the value of those reserves falls sharply which cuts off access to
the market leaving CEOs with the dismal prospect of either selling assets
at firesale prices or facing default. If the problem could be contained
within the sector, thered be no reason for concern. But what worries Wall
Street is that a surge in energy company failures could ripple through the
financial system and wallop the banks. Despite six years of zero rates and
monetary easing, the nations biggest banks are still perilously
undercapitalized, which means that a wave of unexpected bankruptcies could
be all it takes to collapse the weaker institutions and tip the system back
into crisis. Heres an excerpt from a post at Automatic Earth titled Will
Oil Kill the Zombies?:

If prices fall any further, it would seem that most of the entire shale
edifice must of necessity crumble to the ground. And that will cause an
absolute earthquake in the financial world, because someone supplied the
loans the whole thing leans on. An enormous amount of investors have been
chasing high yield, including many institutional investors, and theyre
about to get burned something bad
.. if oil keeps going the way it has
lately, the Fed may instead have to think about bailing out the big Wall
Street banks once again. (
<http://www.theautomaticearth.com/will-oil-kill-the-zombies/> Will Oil Kill
the Zombies?, Raúl Ilargi Meijer, Automatic Earth)

The problem with falling oil prices is not just mounting deflation or droopy
profits; its the fact that every part of the industryexploration,
development and production  is propped atop a mountain of red ink (junk
bonds). When that debt can no longer be serviced or increased, then the
primary lenders (counterparties and financial institutions) sustain heavy
losses which domino through the entire system. Take a look at this from
Marketwatch:

Theres no question that for energy companies with a riskier debt profile
the high-yield debt market is essentially shut down at this stage, and
there are signs that further pain could hit the sector,  senior
fixed-income strategist at U.S. Bank Wealth Management, Dan Heckman told
Marketwatch. We are getting to the point that it is becoming very
concerning. (
<http://www.marketwatch.com/story/junk-bond-contagion-fears-rise-as-oil-exte
nds-drop-2014-12-11> Marketwatch)

When energy companies lose access to the market and are unable to borrow at
low rates, its only a matter of time before they trundle off to extinction.

On Friday, the International Energy Agency (IEA) renewed pressure on prices
by lowering its estimate for global demand for oil in 2015. The announcement
immediately sent stocks into a nosedive. The Dow Jones Industrial Average
(DJIA) lost 315 points by the end of the day, while, according to Bloomberg,
more than $1 trillion was erased from the value of global equities in the
week.

The world is awash in cheap petroleum which is wreaking havoc on domestic
shale producers that need prices of roughly $70 per barrel to break-even.
With West Texas Intermediate (WTI) presently headed south of 60 bucksand no
bottom in sightthese smaller producers are sure to get clobbered. Pension
funds, private equity, banks, and other investors who gambled on these dodgy
energy-related junk bonds are going to get their heads handed to them in the
months ahead.

The troubles in the oil patch are mainly attributable to the Feds easy
money policies. By dropping rates to zero and flooding the markets with
liquidity, the Fed made it possible for every Tom, Dick and Harry to borrow
in the bond market regardless of the quality of the debt. No one figured
that the bottom would drop out leaving an entire sector high and dry.
Everyone thought the all-powerful Fed could print its way out of any mess.
After last weeks bloodbath, however, theyre not nearly as confident.
Heres how Bloomberg sums it up:

The danger of stimulus-induced bubbles is starting to play out in the
market for energy-company debt
.Since early 2010, energy producers have
raised $550 billion of new bonds and loans as the Federal Reserve held
borrowing costs near zero, according to Deutsche Bank AG. With oil prices
plunging, investors are questioning the ability of some issuers to meet
their debt obligations

The Feds decision to keep benchmark interest rates at record lows for six
years has encouraged investors to funnel cash into speculative-grade
securities to generate returns, raising concern that risks were being
overlooked. A report from Moodys Investors Service this week found that
investor protections in corporate debt are at an all-time low, while average
yields on junk bonds were recently lower than what investment-grade
companies were paying before the credit crisis. (
<http://www.bloomberg.com/news/2014-12-11/fed-bubble-bursts-in-550-billion-o
f-energy-debt-credit-markets.html> Fed Bubble Bursts in $550 Billion of
Energy Debt: Credit Markets, Bloomberg)

The Feds role in this debacle couldnt be clearer. Investors piled into
these dodgy debt-instruments because they thought Bernanke had their back
and would intervene at the first sign of trouble. Now that the bubble has
burst and the losses are piling up, the Fed is nowhere to be seen.

In the last week, falling oil prices have started to impact the credit
markets where investors are ditching debt on anything that looks at all
shaky. The signs of contagion are already apparent and likely to get worse.
Investors fear that if they dont hit the sell button now, they wont be
able to find a buyer later. In other words, liquidity is drying up fast
which is accelerating the rate of decline. Naturally, this has affected US
Treasuries which are still seen as risk free. As investors increasingly
load up on USTs, long-term yields have been pounded into the ground like a
tentpeg. As of Friday, the benchmark 10-year Treasury checked in at a
miniscule 2.08 percent, the kind of reading one would expect in the middle
of a Depression.

The Saudi-led insurgency has reversed the direction of the market, put
global stocks into a nosedive and triggered a panic in the credit markets.
And while the financial system edges closer to a full-blown crisis every
day, policymakers in Washington have remained resolutely silent on the
issue, never uttering as much as a peep of protest for a Saudi policy that
can only be described as a deliberate act of financial terrorism.

Why is that? Why have Obama and Co. kept their mouths shut while oil prices
have plunged, domestic industries have been demolished, and stocks have gone
off a cliff? Could it be that theyre actually in cahoots with the Saudis
and that its all a big game designed to annihilate enemies of the glorious
New World Order?

It certainly looks that way.

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