How An Economy Collapses

As The IEA-OPEC Nash Equilibrium Collapses, Is A 1973-Style OPEC Embargo Next? 

Submitted by Tyler Durden on 06/26/2011 11:13 -0400
Last week's dramatic decision by the US administration to strongarm the IEA into releasing strategic petroleum reserves (of which the US would account for 30 million barrels, or half of the total), is nothing but yet another example of the hobbled and incredibly short-sighted thinking that permeates every corner of the Obama administration. Because as the WSJ reports, "the move by the U.S. and its allies to release strategic reserves of oil could provide a much-needed shot in the arm for the U.S. economy, but risks inflicting lasting damage on the already tense relationship between oil producers and consumers." The move comes on the heels of the dramatic collapse in OPEC talks in Vienna two weeks ago when Saudi Arabia was effectively kicked out of the cartel, further confirmed by reports that the IEA consulted with Saudi (and China and India) in advance of its decision (more later). Additionally, "OPEC and the European Union are due to hold an energy summit in Vienna Monday that will be the first official meeting of producers and consumers since the IEA's move, and will provide a platform for OPEC members to express their disquiet over the stocks' release. However, OPEC's biggest player, Saudi Arabia, won't be present." Make that former player, in an organization now headed by the previously #2 producer, Iran (which just happens is not all that pro-US). The biggest threat, however, is that in direct retaliation against the IEA's cartel-like decision, which comes at the expense of the remaining OPEC countries, is that as Zero Hedge suspected, the next step will be a more than proportionate cut in crude production by OPEC: "Some analysts speculated that OPEC could respond to the IEA release by cutting output to offset the increased supply." What happens next is complete Nash equilibrium collapse.

 

 

Le Figaro Reports French Banks Propose "Voluntary" 30 Year Debt Rollover, However With DOAing 30%-50% Implied Haircut 

The latest episode in the "we'll make it up as we go along" rescue of the Euro comes from France where as Le Figaro reports, a working group of French banks led by BNP Paribas has proposed, and been agreed to by the French Treasury, that maturing debt would be rolled over into a a 30 year maturity piece, accounting for 50% of the total existing debt, and another 20% would go into a "zero coupon" fund focused on high quality stocks. Also according to Le Figaro, borrowings under the proposed scheme would pay an interest equivalent to what Greek "public" interest is plus a variable interest rate "likely to be linked to an economic Greek indicator such as GDP" (which being negative for years will likely means lower interest than prevailing).

Coffee Drinkers Watch Out

posted by Eric De Groot at Eric De Groot - 2 hours ago

A diffusion index (DI) reading above 80 represents concentrated accumulation in coffee. Coffee's last round of concentrated accumulation occurred in late 2008 around 112-115/lb. This bullish setup cluster ...

Guest Post: Infinite Hedge: On a Long Enough Timeline, the Survival Rate for Everyone Rises to Infinity 

Submitted by Tyler Durden on 06/25/2011 22:43 -0400

If man leaves scarcity behind, and thus the need for money, what about our earlier assertion that “Money…is essential to any society that we would call civil”? If society leaves money behind, won’t it thereby render society uncivil? Of course not. For when society succeeds in evolving beyond money, it will merely be doing what it did when it evolved beyond barter, only vastly more so. That is, society will increase its co-operative powers by orders of magnitude and thereby vastly increase its ability to civilize itself. No more “Getting and spending,” in other words, that “lay waste our powers.” Instead, we will be empowered to not only boldly go where no man has gone before but to become what no man has ever been before...When will this singular event take place and “cascading technological progress” begin? It will begin when the computing power of a typical laptop today surpasses that of “One Human Brain” – roughly 2030 which, ironically, is precisely when Keynes (getting virtually everything else wrong) predicted that “the economic problem” will be solved.

Greeks Turn Savings to Gold and Perth Mint Silver Coin Sales Surge to Record on Haven Demand  




Flat line: Fed Leaves Rates Unchanged, Offers Dim View of Economy






Moody's: Commercial Real Estate Prices declined 3.7% in April, Prices at new Post-Bubble Low.

Jim Rogers:  Obama Should Resign Before Inflation Sparks Unrest



US Warned Again That it is About to Lose Top Credit Rating



Large US Hedge Funds Fear Worse is Yet to Come



New Jersey Lawmakers Approve Benefits Rollback for Workforce



Swiss Renew Push for Bomb Shelters.
Did You know... that the Swiss have 300,000 nuclear shelters with capacity for 8.6 million people (more than their population), and the government stockpiles 4.5 months’ of fuel and food for the entire country.