Monday, March 9, 2020

That Is Everything You Need To Know.

And it is in the announcement of Russia's Central Bank: 
Russia’s sovereign wealth fund has enough reserves to cover budget deficit for years, even if oil prices stay between $25 and $30 per barrel, the Finance Ministry announced amid a dramatic oil market crash.Despite Monday being a public holiday in Russia, both the Ministry of Finance and the Central Bank were quick to react to the overnight drop in oil prices of nearly 30 percent. The former said that the Russian National Wealth Fund has $150 billion (more than 10 trillion rubles) worth of liquid assets from additional oil and gas revenues, which is enough to offset a possible shortfall from falling crude prices for 6-10 years.
So, if anyone thinks that this whole FUBAR with "markets" (quotation marks are deliberate) is about Saudi Arabia and Russia feuding, they better check the reality. It is way more than that. KSA in this situation is just one of the players and not the biggest ones at that. But most important are these conclusions which must be made and which, most likely, will not be made in the West but we will try:

1. This crisis shows what a house of cards this whole "global economy" is, because markets, as a place where REAL price on commodity is fixed, are a figment of imagination of all kinds of white board "analysts" who still believe in a false gospel of laissez-faire. Modern "markets" are speculation and political pressure machines which have zero in common with actual economic reality on the ground and as such cannot exist anymore in present form. In other words: system of trade imposed by the United States is pretty much done and we see it disintegrating in a front of our eyes;

2. It also shows what a Potemkin Village whole modern US economy is, when economic development is assessed in terms of the stock price and capitalization most of which are driven by stock buybacks and credit infusion. So much for Trump's "achievements" in economy. 

3. We are yet to establish the algorithm of Coronavirus panic being spread globally--it will take some time to figure out the REAL drivers behind this, most likely, grossly exaggerated danger--but it is already clear that the so called US economic sputtering was ongoing long time before any Coronavirus was ever discovered. 

In other words, the crisis is systemic and it cannot be fixed by monetary or any other present so called "market" means precisely because those markets as imagined by theorists do not exist. In general, we are at the precipice of a gigantic geopolitical shift which, indeed, will remove Petrodollar as a viable financial instrument through, first, completely defanging OPEC and then, or, rather, simultaneously deflating the bubble of the US speculative economy. This is my off the calf take on all that. Enjoy the spectacle. Expect more violence.

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