Black Friday hit world stock markets causing almost three trillion dollars in losses. As I predicted, this summer’s crash initiated a far larger crash cycle that is now returning with a fury. The Chinese contagion that was said to be “contained” by our leaders is anything but contained. It is now clear China’s economic crash wasn’t averted; it was just temporarily masked and delayed. Further, oil prices continue their steep decline and now are under 30 dollars a barrel. Also, 2015’s economic numbers are in and 2015 was the year global economies fell back into chaos. With compounding bad economic news in all markets globally, what can we expect going forward?
I have for years told advocates of energy independence that it isn’t $200 dollars a barrel for oil that I fear, but rather $20 a barrel. Most “experts” thought that by reducing our reliance on Middle Eastern oil supplies, we would somehow achieve greater stability. I correctly warned that if you want to see real chaos, drop the oil prices to $37 or below. Well, today, oil prices broke below the key technical floor of $30 per barrel and barring any intervention by Saudi Arabia to reduce oil production, we are going to soon test the $20 mark. Even before hitting the $37 mark, it was clear stability in the Middle East had gone from really bad to near worst case scenario. At the $20 per barrel mark something must break. Whether Saudi Arabia takes and knee and gives into OPEC pressure to cut production or a war breaks out, no oil producing country can continue to endure this price point much longer. This downward spiral in the oil market will only add to the vast problems in the Middle East and before the region rebalances, it is very likely more countries will collapse. With near certainty, the old geographic boundaries of the Middle East will be completely redrawn and it is increasingly likely we are seeing the first waves of what will eventually turn into a major collapse of Saudi Arabia.
Russia, as I have written about lately, is probably being hurt the most by this artificial depression in oil prices. Russia has a near infinite ability to endure hardship, but Prime Minister Putin will only tolerate Saudi Arabia’s economic warfare for a short time longer before changing the game to just warfare. To this end, Putin and the Emir of Qatar have announced a surprise meeting, which is the first time these leaders have met and suggests political options are soon to be exhausted. When Qatar breaks from Saudi Arabia and no doubt approaches Russia about how to stimulate a rise in oil prices, we are very close to the tipping point. Russia, as I have pointed out, not just stands to gain from a big spike in oil prices, but requires a spike in oil prices. At the same time, China, Russia’s ally is getting economically punished and will need a major distraction for its people very soon or China will be dealing with major social unrest. In the meantime, the European markets are in very bad shape, Norway is about to realize their welfare state is no longer financially sustainable due to dropping oil revenue, and the entire continent is getting overrun by radical Muslims. None of this suggests a near term improvement in anything.
Meanwhile, US markets are collapsing. Massive bond and derivative markets are also showing stresses and could blow up at any time. What is so dangerous about derivatives in particular is that no one really knows how far the contagion will spread once the collapse begins. What is certain though is that when bonds and derivatives go, you will be watching the final unwinding of the globalists’ fiat utopia. Further, if Russia acts to break OPEC away from Saudi Arabia politically or militarily, we will also be witnessing the death of the Petro-Dollar, which will be the biggest financial disaster in American history. The elite in the US are well aware that maintaining the Petro-Dollar is absolutely vital to our national security so will stop at nothing to prop it up. As our government has proven time and again, the support of the Petro-Dollar comes even at the cost of wading into a full scale war in the Middle East.
If you are reading and thinking that none of this sounds good and is almost apocalyptic, you are getting the point. I want to say that things are going to turn around and everything will be fixed, but when you look deeper at the fundamentals and what must happen for prosperity and stability to return, things must first get far worse. We are beyond the point of no return and the only question is how long the collapse and be postponed and how bad it will be when it finally hits. If the unwind that began this summer is not checked by the end of next week’s trading on global markets, no one knows where the bottom will be. Economically we will be heading quickly for the abyss. Once that drop begins, even if the market losses are halted firmly in correction territory and turned positive by value investing in stocks, the massive financial losses will not be something we will be able to recover from and will move the world to a global economic collapse.
By Guiles Hendrik
January 15, 2016
