Macroeconomic Update – 1 Month Later

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Exactly one month ago I wrote the article analyzing the oil crash. Now one month later let’s go over some updates and take a broader look at what’s happening.

First off, the price stayed close to my prediction range, if you give me the benefit of the doubt that I was calculating WTI prices. We saw a few dollars over $50 (I guessed between $40-$50 oil for February 2015). Though mostly just for fun, it would be interesting to see my predictions turn true.

World Events

There have been some new developments in the coming global collapse. The deadline for a deal between the EU and Greece has been postponed another 4 months. I guess world financial markets can’t implode if we’re in an infinite loop of deadline delays.

Russia just saw their opposition politician murdered in the middle of Moscow. For any of you out there who think Russia and China are trying to form the honest good guys brigade against the evil Western bankers and United States, you need to read The Colder War by Marin Katusa. Politics are politics and every major country has to play them to keep the leg up. Unfortunately, honest is rarely the best tactic to gain power and improve your country’s standing. Though the Russian media channel Russia Today does produce a ton of true news stories on the United States and world affairs, because it definitely suits their agenda.

US Shale

The oil price is still dramatically down from a year ago. However, it will take 8 to 12 months to play out the destruction of the mostly inefficient shale oil companies. Checkout volume 2 of the Oil Wars for Future Money Trends’ explanation. Continental Resources (Jim Cramers favorite mention) has recovered 42% from its December low. It is still about 44% down from it’s 2014 high though.

United States

Speaking of delays in important deals, here in the US the shutdown of the Department of Homeland Security was delayed by just another week. The shutdown would only mean the furlough of 10% of the department; though the rest would see a delay in their paychecks which could cause some chaos with government workers, especially in a department with over twice the usual employee turnover amid endless morale problems. With the government ever approaching the point where drastic measures need to be taken to even stay alive, because of the unbearable debt and lack of will to cut spending, these type of impending shutdowns and short term funding deals will turn commonplace. Perhaps the lapdog credit rating agencies will even bring the US rating closer to a real life measurement. I highly doubt the President’s projections of shrinking deficits. Each year of a deficit anyway just means more national debt accumulation and higher interest payments. The Federal Reserve cannot raise rates, that would be catastrophic. We’re past the point of no return. There needs to be a new currency issued or a new way of creating money; not from debt. Whether we see a new US currency or a push for global currency will determine the level of fear felt inside conspiracy theorists heads.

The US Dollar index has reached about a 12 year high. This means the US is losing the currency war race to devalue. With oil down and growth so low, it wouldn’t be a surprise to see the FED reverse its position and call for more printing rather than raising rates, but we’re sort of in uncharted territory. Most solutions are short term and just kicking the can down the road. The real solution like I said earlier will be drastic and cause a lot of pain for whole groups of people.

The general US Stock market is up to near record highs again; totally divergent from the real economy. Why are stocks up when: Growth forecasts are down, retail sale are down and for the first time in 35 years, more businesses are closing than new businesses are starting up for six years in a row! And the government just wants to guarantee free community college so more people go to school than start businesses. Things are just backwards in today’s world.

Check in next month I want to do an article on the whole Net Neutrality debate and the FCC’s power grab.

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