That we saw over the last few years but now were seeing the almost everything bail out and this is the way when you find out whether the person where no shorts at the poker table or when the tide went out one man who had that in a metaphor if i ever heard one i think people understand you will understand i i combine 2 of Warren Buffetts famous sayings but they imus says half the world has asked for a bailout remember 100 percent of the world cant get a bailout half of it has to pay for half of that have to be the suckers at the poker table so half the world has now asked for a bailout the i. M. F. Is saying that 100 countries have asked for some form of bailout from them about 10 percent has been given out to 10 countries anyway and they expect half the other countries to get some within the next few weeks the i. M. F. Is ready to use its full tool box and one trillion dollar fire power of lending you know i have a question for you so going back to 2008 and remember the i. M. F. Came in as part of the troika that the whole greece meltdown in ireland the down at that time you know are leading up to that crisis the i. M. F. Was rumored to be bankrupt or i met was going to go out of business because there was no need for the i. M. F. And there was a lot of speculation at the time that you know the i. M. F. Was kind of greasing the skids for yet another metaphor. To cause the greek meltdown remember there was a lot of shenanigans going on Goldman Sachs cooked the books for greece that they could get into the euro under the master trading they they obliterated all the rules and regulations they got them in then greece quickly went into the garbage dump became a flaming dumpster and the i. M. F. Suddenly had a role to play it something was relevant to the yen and now here we are in 2020 and the i. M. F. Is like bailing out half the world over there i made a good job themselves of it because theyve become somebody in this world you know the i. M. F. From from being almost completely marginalized and worthless well back about 100 years ago we had this notion of communism and socialism and the workers would gain all the power and the workers would gain all the wealth but now weve discovered that nobody actually has to work theres no work anymore and we find out when everybodys quarantined because nothings being made right there is and still like the economy the stock markets are floating up higher and higher and everything seems ok right now but now everybody has discovered the magic of the Printing Press and this is the danger of here its like well they could just print out money like what was all that stuff about with greece why were they forcing austerity on them when apparently they have a trillion dollars like how does the i. M. F. Which cant produce wealth right they dont have any land mass they dont have any workers how do they produce wealth how do they get a trillion dollars fire power well allegedly largest percent about 1718 percent is from the United States which has busy like printing trillions for bankers why did they put the greece through austerity if we know we knew then and we certainly know now that they can print up trillions and trillions of dollars on a whim you know why did they forests ireland to restructure their economy in the way that they did. Why dont they allow 4 countries a lot america and mexico in brazil to have a more free flowing. Experience with their economy another so in other words theyre using money i think the answer is theyre using money as a political weapon and also the moral hazard because remember in 1908 the fed and the treasury worked together to bail out one Hedge Fund Long Term Capital Management and the you know 6 or 7 banks that they owed a lot of money to if they went under and then of course when the dot com crash happened they were incentivized to intervene more but that was Silicon Valley they dont care so much about all the people in Silicon Valley and the normal job at the donuts participated in that huge dotcom boom and they didnt care that they lost all their money but then 2008 came and all the banks were going to collapse because of all their dodgy fraudulent derivatives that they wrote up because they knew that they would get bailed out because theyve seen it already with Long Term Capital Management that your derivatives bets go bad the fed will bell you out and sure enough they did but here now well see this the scale is now like everybodys joined in that are outside this bank the private equity hedge funds because 2020 is not 2008 Central Bank Interventions to stop the Capital Market crisis are far larger than those to meet the banking crisis of 2008 here you can see 2020 versus 2000 a looks very different we were broadcasting in 2008 and during that period and what we said was i mean to have to go for the cigarette. Barack obama was the president and his team which included dollars and other guys. They couldve belt out the debtors that would be the mortgage holders and the credit card holders but they chose to bail out the creditors the banks. And with that bella which they said was going to be roughly 3 quarters of a trillion dollars which became 16 or 17 trillion more expensive than that then had they bailed out if they. Paid out every mortgage in america and every credit card in america and he said look the problem here is that all youre doing is youre expanding the credit line of these corrupt bankers to do the exact same thing but 10 times worse and probably within 1011 or 12 years theyre going to blow up again and that was in 20089 we set ok so here we are 2020 and what were saying is that people are really remarking that 2020 is a mirror image of 2008 its the exact same problem banks over levered blew themselves up and are now demanding a bailout at the point of a gun from the fed and other such will banks and except this time the dislocation in the economy combined with the coronavirus is so great that weve tripped over into medieval ism thats so messed up this is where its neo feudalism thats all screwed up this is exactly but you know this constant more hazard the fed bailing out people and theyve become obvious like the wizard of oz the curtain has been pulled back and everybody could see that they could just print money for whoever they want so there is a sort of sense like this whole notion of ever returning to normal is like can you make the people forget that they know you could just print up as much money as you want if you have the will and the desire to help that particular group the u. S. Government is crafting a plan to pay shale drillers to keep oil in the ground to support prices and jobs a lot of long held concepts are getting turned on their heads east days the latest the idea that low oil prices are a net good friend for the u. S. She was referring to a tweet that u. S. Ways Oil Output Cut by paying drillers not to produce of course this bailing out the actual drillers and the factory doods out in the fields of north dakota and texas and oklahoma but its also bailing out in particular wall street and all those c. L. O. As a squatter. Loan obligations and the whole junk bond market that is the fracking industry yes so sad if you look at countries like japan they have an industrial policy the government subsidizes manufacturing and they become world beating manufacturers and they send over their electronic stuff and their stoneys and their cars and they their economy grew right then have china theyve got a an industrial policy that the government subsidizes manufacturing and they make sure that their currency doesnt get too high so that they can keep exporting their way to become the biggest economy in the world ok now we come to america to they havent policy no they have a kleptocracy based on banking and the tragedy is that instead of subsidizing fracking which we as weve pointed out now for 10 years its a cash negative business from day one and never ever ever ever makes money its a loser from day 1. 00 they couldve had an industrial policy and they could have said you know were going to subsidize alternative energy solar wind in hydro to become Energy Independent in the world and that why now thats what have been the state of affair and by the way creates 5101520 1000000 high paying jobs but you know america is run by the worst possible people you can imagine its a caca stock r. C. Well i just dont think you can have an industrial policy and Monetary Policy and i feel system like this because theyre at odds that we have a financial i system and. You know what does private equity do they target companies with any cash on the Balance Sheet and any pensions on the Balance Sheet because they will attack it wipe it out and eat it just like a locust thats their model they dont go after like in debt. Companies they go after companies that are robust because thats the only you know if youre a predator you dont want to scrawny little malnourished thing you want something thats right for it just like tearing apart and eating it and then lets look at our Agricultural Policy again this headline really puts you back into this sort of Great Depression days a says something we havent seen that since the Great Depression dont milk smashed eggs and plowed vegetables coronavirus pandemic leaves staggering amounts of food waste 3700000 gallons of milk each day are being dumped a single chicken processor smashing 750000. 00 unhatched eggs every week and go into the supermarket and finding eggs for example you cant but because 3 months later we still are not for all the talk we cant like we cant rejigger the entire supply chain we dont have the ability partly because of all the regulations but we just apparently because we cant make the things like new egg carton so the eggs are being dumped because these these actual distributors manufacturers there are distributing to hotels and restaurants and stuff like that big consumers so dont have like a 12. Egg package so to get make this 12 packages theyre probably a soup presumably made in china so to get them all i change an imported and bring that it is a case impossible to do so and so were just dumping it in the meantime you see thousands and thousands and thousands of people lining up in cars all over the United States for you know food pantries we dont have a policy we have a faberge a policy. I mean the problem with having like david geffen on is 3100000000. 00 yacht floating around inquired and taking selfies of him so for those drone and having a flotilla of choppers come in and out its not that hes a rich guy and its the problem is that he got his wealth through this money printing system right he hasnt been productive in 1015 years theres just been money printing and hes willing to pay 50000. 00 for a dozen eggs and it doesnt mean anything to him theyre all faberge eggs to david geffen but on the supply china all that means that if you can get a youre going to be paying quadruple what you were last year and a lot of people wont get any eggs at all its called inflation stagflation coming right so. Oh well i guess the sign take a break and when we come back were going to crack some more eggs and open your mind. Is youll be via reflection of reality. In a world transformed. What will make you feel safe. Isolation or community. Are you going the right way or are you being led to. Direct. What is true whats his face. In a world corrupted you need to descend. To join us in the depths. Of the shallowness. Welcome back to the kaiser report imax guys are time i have to go to someone who can help make sense of the oil sector for us jasc ramis the cofounder of gold money admin day 2 companies in which we are invested theres also a former Goldman Sachs commodities economist josh welcome back i know x. And stacy good to be good to be back all righty joshua last year we saw a negative Interest Rates thats a positive that time had no value this year we saved negative prices on some Oil Contracts and so does i mean energy and matter have no value anymore just certainly Interesting Times so i think the most the thing thats important to understand about an Oil Oil Price or any commodity price the differentiates it quite quite a bit from say a stock price or even up on price is that the price of a commodity is actually a curve because you need to produce and consume or produce a transport and store commodity before you can consume it typically people buy a contract in the future for delivery so when we see the headline price as being negative for you know specifically types of crude products its because the very near you know the very near dated future the most the nearest delivery is actually negative be because we have no place to store the commodity so it doesnt mean that we have free your cheap oil because in fact your gasoline prices in some ways could end up going up because of whats happening in supply chain so we can brit we can dive into all of that but its important to understand 1st and foremost that a commodity price is very different than a than a price of stocks and bonds futures trading i think it dates back a few 100 years to japan for rice farmers you know they get figured out this way that they could lock in a price for their rice in the future. By selling off the potential appreciation to a speculator today and thats carried forward all the way its its today and it relates to commodities and commodity savate definite cost weve got a fine and weve got a growing youve got to transport them its not like a stock or a financial future the way can just add zeros indefinitely as the Federal Reserve bank is doing now what about the Federal Reserve bank and their kind of quantitative easing and this idea that they can buy every asset under the sun to prop up markets is that going to extend to the energy do you think if Energy Prices got down low enough that you could say Central Banks start to hoard oil as a way to to prop up that sector josh yeah you know its a great question and its actually why weve got here indirectly so what that again but the whole futures curve the price of oil going up in the future is now not necessarily free right because people still have to have to produce oil in the future big to be able to get it you know good to us in time so whats happening is the price is collapsing in the near term because its the price signal is telling us we have to shut in Oil Production we have to stop producing it because we cant consume anywhere while demand has fallen anywhere between 20 and 30 percent globally for short term short or more oil so the problem is when you have Central Banks getting involved d in these markets and typically they get in via the credit markets is they artificially try to lower the price of of debt or credit for the economy to try to some stimulate demand so while they did this for almost a decade coming out of the last financial crisis do you particularly the us who had shale drillers just going crazy with with tippit taking cheap debt to taking cheap capital and over producing and over and over drilling in oil and gas. So this is actually a revenge of what Central Banks had done previously because we need to actually break and bankrupt this economy this oil economy to try to stop trying to slow down the supply and so this is the problem is alternately in the physical Economy Economic gravity always comes back come back comes back into play you cant you cant just you know print new Storage Capacity for oil so be very very difficult for central bankers try to correct their previous mistakes through their monetary policies so what youre describing there sounds like oil vigilante and what i mean by this is ways to have a thing called the bond vigilantes and we heard about it during the clinton years and if the banks are printing so much money it with. Signal inflation and the bond market with sell off dramatically but send Central Banks then started buying bonds through quantitative easing we no longer have that markets it gave them Carte Blanche to print trillions and throw price signals out of whack all over the market even down to the level of the commodity market in the oil market and theyve got negative rates on oil futures at the moment which is clearly a distortion of the market brought to you by era sponsible central banking and what youre saying there is that there is a wall that will be hit with that kind of market manipulation and am i correct in saying that this is the revenge you could characterize it as oil vigilantes just you know i like that i hadnt heard the term youre very good at coining these these new terms for the market and thats exactly whats right it really thats exactly whats happening is is that you know Market Participants are shorting or oil spreads the difference between the made in the june contract is because people know that the expiring may contract nobody wants it nobody wants to take that oil and store it somewhere so that will root vigilantes are shorting not spread there are so in main theyre buying their buy in june right and so and so yes that this would be very similar to a bond vigilante commodities as you point out its very different than financial flows aysha Financial Products because there is a brick wall called Reality Earth only has so much on the ground there is. The thing called physics that has to be encountered and taken into consideration and lot is commodities trade in relation to each other so we know that for years people have looked at oil and gold and theyve said you know what. Oil and gold usually theres like 20 or 30 barrels of oil so an ounce of gold i just looked at the numbers recently its something amazing like 100. 00 barrels of oil actually more because the price of oil is dropping around the single digits. Approaching even a dollar they could say its over a 1000 you know barrels of oil so an ounce of gold what does this tell us if anything josh this is actually incredibly important signal im glad you brought that up ive been trying to tweet about this and talk about this a lot because Central Banks of have got in and distorted the market so significantly right now right now in equity markets you have basically year over year prices and equities are flat which is absolutely incredible as were approaching 20 percent unemployment again probably 2030 percent drop in in india man for things like oil and yet equities are flat year over year and of course we were increasingly have more and more currency volatility as well so its important to actually use something that in the real economy has as a signal so if i look at the gold to oil ratio particular not front month price again not a whole oil curve but the but the near stated futures contract we can actually look at that oil to gold ratio going back you know hundreds of years and so even if and basically that you know regardless of the monetary regime regardless of the political regime weve seen that essentially oil prices have traded between usually between 10 and 20. Barrels per ounce for it and that was true in the 1920 s. It was true in the 1930 s. During the Great Depression where you actually saw that ratio move up to Something Like 30 and even an extreme to recessions you see maybe as high as 40 but what were actually seeing now is over a 100 so again this this speaks to the dislocation on both sides you know we talked about the supply glut of oil because i hold so much knowledge vestment from from cheap credit but the other side of it is is of course the price of gold which is signaling monetary debate debasement right so the denominator of gold is is a story. The numerator of gold is going up and the denominator of oil is going down so youve seen all you know this is this is an all time dislocation in our price no way way beyond what happened even in the Great Depression brawl certainly during the history of the modern oil industry which i think dates back maybe 120 years or so but let me ask you about the petrodollar so starting in 1971 we had the petro dollar and that was as you point out the price signal for a Global Markets it was no longer gold it was the petro dollar and this was the relationship between saudi Arabia America and Going Forward this was the basis for a huge rise in credit at the Banking System because of course Oil Extraction is hugely capital intensive and it demanded huge loans and credit to be constructed by the major banks around the world and now weve got a situation geopolitically or it appears as though sadie arabia is trying to bust the petro dollar system possibly to do business with china versus america as their primary buyer add russia into the mix that you know with the fact that they are drilling costs are in roubles and theyre selling in dollars theyre just it cost us not far above saudi arabia so theyve actually got a good hand in this good jill political poker game are we at the end of the petrodollar system josh even before before the virus and the shut in of the economy i actually think we were already seeing signals of this is in q 4 in the madness and the you know not q we were already seeing some really troubling things happening in the in the u. S. Treasury markets and the overnight lending market so and and so we actually already saw and that was because essentially your whole ringback risk free yield curve in the in the market is headed toward 0 not if the whole price of the treasury career moves to 0 thats actually very different than say you know the yen you know going negative interest. Rates or the euro because ultimately global trade in particular Global Energy trades on the u. S. Dollar so so its very i would make the big distinction that the that the dollar going negative really is an end game an end game for this this current set up of the monetary regime you know back to the back to the oil market specifically yes i mean this this is this is sort of the same same dynamic and in play at play in that you had a centrally real goods coming into the u. S. And packaged up credit to buy those real goods moving across the Global Economy so people could fund you know basically have how the u. S. Dollar reserve globally so we saw that in the in the offshoring of manufacturing jobs to china and specifically oil over a number of decades as a same part of that dynamic but you also saw of course you know more and more Energy Imports from the u. S. Census since the 1970 s. However whats happened is what the shale revolution and the u. S. You know temporarily became you know wasnt quite as dependent on on the saudis and therefore the way that russian oil ended up and in european markets and so you have this big change in the dynamics of the Energy Market however again going back to this problem is now that were actually bankrupting the north American Energy producers you know including canada and say almost more specifically canada were going to have some really interesting geopolitical shocks coming out of this as alternately the world will still need energy and so now were going to have a lot of market power going to saudi arabia and russia Going Forward jass crown thanks so much for being on the kaiser apart thanks max and thats going to do it for this edition of the kaiser report with me max hazare and stacey however i want to thank our guests jastrow if you want to reach out. On twitter its kaiser report and so like bio. You shouldnt somebody. You. Can just live see i guess. I was on the floor somethings in my basket and you know trying praying. Theres time well as the without words i was having children fever i didnt have any sense of c. Source now. Most young. Girls would you. Push to push you know sometimes you just used to. Simon is on the grounds of the research. Didnt. Push myself a couple of judicial me in the face im going to. Seem wrong but almost just dont call. Me. Yet to shape out these days to come out ahead and indeed try to equal betrayal. When so many find themselves worlds apart when you choose to look for common ground. When you put yourself in the shoes of the patient and the patient. And all of a sudden this potential. Gone to subpoena
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