Rig Plunge

BALTIMORE – Is there really a “War on Cash”? No. There’s a war on you. We’ll come back to that in a minute… First, a quick roundup of last week’s action. Friday brought more bad news for U.S. shale oil producers. (More on this below in today’s Market Insight.) Reports Bloomberg:

 

“The number of rigs drilling for oil and gas in the U.S. is plunging toward the lowest level in more than 75 years of records… culminating in the collapse of almost 75 percent of the rig count.”

 

1-rigusoBaker Hughes US rotary rig count – click to enlarge.

 

The fracking boom towns are now turning into ghost towns. The billions of dollars of investment (the industry has never been cash positive) have stopped flowing into the U.S. shale producers. Revenues (such as they are) have slowed to trickle on a cold day.

And in the tech sector, Yahoo is paying the price for its buying spree. It’s one of the 11 companies that, according to USA TODAY, “lost obscene sums” of money last year:

 

“There are 11 companies in the broad Russell 3000 index, including a whole host of energy companies like Apache but also industrial conglomerate General Electric and struggling online portal Yahoo, that have reported staggering net losses in the just-completed calendar year…

Each of these companies reported net losses of $4 billion or more last year – dwarfing even the impressive $1 billion net loss reported Thursday by struggling retailer Sears.”

 

2-YHOOYahoo, monthly. The stock was a darling of the late 90s internet bubble and remains about 75% below its year 2000 peak (although it is up nearly 500% from its 2002/3 low, and more than 200% from its 2012 low) – click to enlarge.

 

Pile of Manure

But let us return to the War on Cash. It is far more sinister than you might realize. Several countries – such as Denmark, Sweden, and Norway – are already almost totally cashless.

Others, such as France, have banned cash transactions over certain amounts. There are even plans at the highest levels of the Indian government – right now one of the most cash dependent societies in the world – to “disincentivize” using cash.

Meanwhile, establishment economists and commentators – most notably Harvard economists Larry Summers and Kenneth Rogoff, Citibank chief economist Willem Buiter, Andy Haldane at the Bank of England, and Martin Wolf at the Financial Times – have come out in favor of a cashless society.

As we recently reported, Summers tells us it’s “time to kill the $100 bill.” And according to the New York Times, “Getting Rid of Big Currency Notes Could Help Fight Crime.”

Today, we dig a little deeper into this pile of manure to try to find out what it hides. And what a surprise! There is the Deep State – malodorous, malevolent, and malignant.

Bien PensantsSummers, Rogoff, Buiter, Haldane and Wolf – a truly insufferable collection of statist bien pensants

 

Banning Ben Franklins

First, let us dispose – as we would a dirty diaper with an outstretched arm – of the notion that getting rid of Ben Franklins and other large denomination bills would somehow “fight crime.”

If you want to do a $100,000 cash deal now, you need a stack of $100 bills a little more than four inches high. Now suppose the $100 bill is no longer available. Does the drug dealer say to his client, “Whoa, I guess we can’t do business. I can’t be bothered to carry big wads of cash.”?

 

Teenagers passing drugs“Sorry buddy, this is the last time….when there are no more Benjamins, it’s over…I just can’t take all that small cash…” (one of the many imaginary conversations currently playing in Larry Summers’ head).

Photo credit: Corbis

 

Does the crony defense contractor meet a member of the House Armed Services Committee in the parking garage and tell him, “I’m sorry, I just can’t get you the money. It won’t fit in the envelope.”? Does the prostitute tell her pimp: “I don’t work for 20s.”?

Don’t worry about the criminals. In Argentina, the backbone of the economy is the 100-peso note – worth only about $6. We have a place in Argentina. We’ve seen how it works. People use 100-peso notes for everything – from buying the morning paper to selling $1 million apartments.

They carry it around in paper bags (so as not to attract attention of thieves.) They stash it in safes. Stacks of it bulge from their pants pockets and sit on the counters of the black market money changers. A nuisance? Yes. A crime stopper? Are you kidding?

Drug sellers, prostitutes, hit men, terrorists, money launderers. They’re already hunted like criminals… and threatened with fines, jail, or death. Is the inconvenience of small denomination bills going to stop them?

Forget it. They’ll switch to smaller bills, foreign currencies, Bitcoin, gold, or something else. Block the use of convenient currency… and they’ll innovate.

 

A Savings “Tax”

How about the idea that banning cash will help the economy? With cash harder to come by, it will be easier for central bankers to impose a negative interest rate on your bank deposits. Without the option of holding your savings in physical currency, you’ll have no choice but to keep your money on deposit in the bank… and pay to save.

But a negative interest rate is just another tax… one that is imposed by employees of the banking industry cartel and that needs no vote in Congress. At a negative rate of 1%, you lose $10 for every $1,000 of savings. This is the same as a 1% “savings tax.”

 

nirpThe black hole of NIRP – ultimately, it’s just another tax

Image by dreamstime.com

 

But hold on… Raising taxes does not normally cause people to spend money. It causes them to zip up their purses, not open them. Taking away your money leaves you with less of it. (Duh!) You have to cut back. And if you are saving for your retirement, a tax on your savings means you will have to save more (and spend less) of what you earn.

There is no evidence anywhere in the historical record of an economy helped by taking money away from people. The idea is so absurd it could only come from a PhD economist… or a scoundrel. But to fully understand it… we need to go back hundreds of years.

Stay tuned…

 

Charts by: Baker Hughes/WTRG Economics, StockCharts

 

Chart and image captions by PT

 

The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

One Response to “The Deep State Is Coming for Your Savings…”

  • Kafka:

    Bill
    The criminals in the financial/banking community are the only ones beating the drum to eliminate cash. More crime is committed by the click of a mouse than having $100 bills in circulation. And these criminals certainly don’t want a vote on the question where they would lose 99 to 1. This is just one more step to push the middle class entirely into slavery.
    As to drilling rigs, there is such a difference between the most modern rigs and most of the older ones, in terms of productivity, that rig count doesn’t have the same meaning as before. And when oil prices were high, costs were high. Much of the cost structure is way down so what used to be the cost per barrel has fallen dramatically.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • How to Buy Low When Everyone Else is Buying High
      When to Sell? The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to...
  • What Kind of Stock Market Purge Is This?
      Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We'd rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.   Memorable moments from...
  • US Stocks - Minor Dip With Potential, Much Consternation
      It's Just a Flesh Wound – But a Sad Day for Vol Sellers On January 31 we wrote about the unprecedented levels - for a stock market index that is - the weekly and monthly RSI of the DJIA had reached (see: “Too Much Bubble Love, Likely to Bring Regret” for the astonishing details – provided you still have some capacity for stock market-related astonishment). We will take the opportunity to toot our horn by reminding readers that we highlighted VIX calls of all things as a worthwhile...
  • When Budget Deficits Will Really Go Vertical
      Mnuchin Gets It United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.   Master of the Mint and economy wizard Steven Mnuchin and...
  • Why I Own Gold and Gold Mining Companies – An Interview With Jayant Bandari
      Opportunities in the Junior Mining Sector Maurice Jackson of Proven and Probable has recently interviewed Jayant Bandari, the publisher of Capitalism and Morality and a frequent contributor to this site. The topics discussed include currencies, bitcoin, gold and above all junior gold stocks (i.e., small producers and explorers). Jayant shares some of his best ideas in the segment, including arbitrage opportunities currently offered by pending takeovers – which is an area that generally...
  • “Strong Dollar”, “Weak Dollar” - What About a Gold-Backed Dollar?
      Contradictory Palaver The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.   A modern-day...
  • The Future of Copper – Incrementum Advisory Board Meeting Q1 2018
      Copper vs. Oil The Q1 2018 meeting of the Incrementum Fund's Advisory Board took place on January 24, about one week before the recent market turmoil began. In a way it is funny that this group of contrarians who are well known for their skeptical stance on the risk asset bubble, didn't really discuss the stock market much on this occasion. Of course there was little to add to what was already talked about extensively at previous meetings. Moreover, the main focus was on the topic...
  • Seasonality of Individual Stocks – an Update
      Well Known Seasonal Trends Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the...
  • Strange Economic Data
      Economic Activity Seems Brisk, But... Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) - but even then, we always stressed that no clear recession signal was in sight yet.   US gross output (GO) growth year-on-year, and industrial production (IP) – note that GO...
  • US Equities – Retracement Levels and Market Psychology
      Fibonacci Retracements   Following the recent market swoon, we were interested to see how far the rebound would go. Fibonacci retracement levels are a tried and true technical tool for estimating likely targets – and they can actually provide information beyond that as well. Here is the S&P 500 Index with the most important Fibonacci retracement levels of the recent decline shown:   So far, the SPX has made it back to the 61.8% retracement level intraday, and has weakened...
  • Update on the Modified Davis Method
      Whipsawed Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method).   The Nasdaq pillar...   As it turns out, the system was whipsawed,...
  • Market Efficiency? The Euro is Looking Forward to the Weekend!
      Peculiar Behavior As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index).   The quest for profitable foresight...[PT]   Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home to...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist