They Can’t See the Bubble for the Pin — It’s Not the Virus (or the Oil), It’s the Debt

The coronavirus/oil market is just the blasting cap detonating the credit bubble implosion

“To get out of that recession, we made a deal with the devil, the devil being the Fed. They helped postpone the pain. Now the markets are coming to collect for the devil”

Government officials and central bankers are in full-blown panic mode.

Stocks crashed again Monday. The Dow Jones was down over 2,000 points, a 7.8% drop. It was the 11th biggest percentage drop in history. The S&P 500 and Nasdaq were also down over 7%.

This time oil was the apparent catalyst for the selloff as Saudi Arabia and Russia launched a full-blown price war. But as always, the apparent cause and the underlying cause are two different things.

The powers that be are throwing everything at the economy but the kitchen sink in an attempt to keep the air in the bubble. The Federal Reserve cut interest rates by 50 basis points last week to inject a massive dose of monetary stimulus into the economy. Now President Trump is promising a massive dose of fiscal stimulus.

Trump said he would take “major steps” to support the economy in the light of coronavirus and plunging oil prices. Specifically, the president floated payroll tax relief. “We are to be meeting with House Republicans, Mitch McConnell, and discussing a possible payroll tax cut or relief, substantial relief, very substantial relief,” Trump said at a press conference.

Last Friday, the president signed an $8.3 billion spending package to fund coronavirus research and support states battling the illness.

As expected, the mere hope of stimulus buoyed the markets. Stock futures were pointing to a big rise in the market Tuesday morning and the price of gold dropped.

The question is will it be enough to keep the air in the stock market bubble. Because make no mistake; that’s what this is is all about.

As you would expect, US oil company stocks were hit particularly hard by the plunge in oil prices and the ensuing stock market rout on Monday. The huge losses across the broader market are a little more difficult to wrap your head around. Falling oil prices aren’t bad for everybody, as Peter Schiff pointed out in his podcast. A lot of companies benefit from lower oil prices. Oil importing nations benefit as well. But those markets got hammered too:

All the world stock markets went down, so it’s not about oil prices coming down. That is part of the symptom. It is the debt bubble.”

Peter said when it comes to the mainstream coverage of what’s going on, most of the so-called experts can’t see the bubble for the pin:

All they’re doing is focusing on the coronavirus. It’s immaterial. It means nothing at this point.”

Peter is not saying the health aspects of the virus don’t matter. He’s talking about the financial aspect and the economy:

At this point, it doesn’t matter what happens to that pin. The bubble has been pricked. If it wasn’t the coronavirus, it would have been something else.”

American oil companies are loaded up with debt, but they aren’t alone. Everybody is levered up, thanks to the Fed. Business debt skyrocketed to a record $16 trillion in 2019. That represents a 5.1% year-on-year, much faster than economic growth. As a result, debt levels have also reached historic highs in terms of percentage of GDP. According to a Federal Reserve report, debt growth has outpaced economic output “through most of the current expansion.” In fact, the Fed has warned that the high levels of business debt could become problematic in an economic recession. Peter reiterated this point:

Because we have so much leverage, we can’t survive an economic downturn when you have a disruption of your cash flow.”

This is why the crash in oil prices is so concerning for the US energy sector. Cheap money has allowed the US shale oil industry to prosper even though its production costs are higher. That has allowed the US to undercut OPEC and Russia’s market share.

So, because of the credit bubble, Americans have been able to drill for oil and grab market share. But if they hadn’t been able to borrow all that money on the cheap, they never would have been able to finance all this drilling.”

Is it any surprise that the Russians and Saudis are taking an opportunity to drive a stake in the American shale oil industry? The bottom line is if the price of oil remains depressed, American companies will go bankrupt. They can’t pay their debts.

This is a microcosm of the bubble economy. Easy money and piles of debt have created a house of cards that is in danger of coming down.

Peter said this is just like 2008.

It’s getting started the way 2008 got started. This is a credit bubble that is popping. In 2008, it started with subprime, but it didn’t end with subprime. But if you remember, at the beginning, everybody said it was contained. They just thought it was all about subprime. They didn’t see the bigger credit bubble. Now it’s the coronavirus. The coronavirus is subprime. Or maybe the oil market and the oil debt is subprime. Whatever it is, the pin has pricked this bubble. But what is very similar between the environment today and the environment in 2008 is everybody is minimizing the effects. And nobody can see how bad this is going to be.”

Anybody who thinks the recession is going to be mild and short-lived is missing the big picture. This economy was doomed from the beginning and the next recession was destined to be worse than 2008.

That’s because to get out of that recession, we made a deal with the devil, the devil being the Fed. They helped postpone the pain. Well, now the markets are basically coming to collect for the devil. Because we just delayed the day of reckoning and now we’re going to have to deal with it.

Source: Schiff Gold

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XRGRSF
XRGRSF
4 months ago

I saw an American financial guru tell the truth on MSM today. “America doesn’t make much of anything. The American economy is service based with the vast majority of that being the medical industry, the financial industry, and the entertainment industry.” I really love the way she used the word, “Industry”.

bob
bob
4 months ago

Yeah whatever

We’d better all go move to Putinland apparently its brilliant there

No debt, but authoritarian government,but who cares

And Peter is playing the oldest game on Wall street,throwing the petrol of fear on top of propaganda to drive business towards himself because only Peter knows how to safeguard your wealth!

Natural_Texan
Natural_Texan
4 months ago
Reply to  bob

Yes, Pete is a gold-bug and is always shilling for his gold investments. But there’s little doubt that gold is a safer investment than printed money or decimals in a computer somewhere. Neither gold or currency will save you in a real catastrophe.. they aren’t edible. Best investment is a few acres of productive soil with access to water.

About Russia having an authoritarian government? Maybe they do.. but that’s up to the people of Russia to sort out. We should look to our own government here in America and see how rapidly our rights and freedoms and constitutional protections are being eroded. As an example with only four days to go both parties in Congress sneaked through a indefinite extension of the unconstitutional surveillance State.. Don’t think for a second any rights you think you have now in Free America aren’t threatened by the bipartisan stasi thugs and goons in the US Congress!

Oh! and Trump will sign that Bill in to Law! Guaranteed.

bob
bob
4 months ago
Reply to  Natural_Texan

Texan you’re absolutely bang on the money about the land thing,and its exactly what ive been doing for the last twenty years

itchyvet
itchyvet
4 months ago
Reply to  bob

Sorry people to burst your bubble. That land your raving on about won’t be worth Two Bob. (I’m refering to English currency here.) It is quiet clear to me, and a few other nations, that the U.S. is not the mighty powerful nation it claims to be, it continually denigrates other nations, interferes in their affairs, ILLEGALLY implements sanctions, installs terrorists to undermine foreign governments and kill/murder their populations, assists those terrorists by providing them with airial assets to bomb people into the dark ages, and threatens nations with nuclear attack, via their cute new mini nuclear bombs. All the while, believe the World will simply stand by and do nothing. The U.S. military is incapable of waging a full blown war, the facts and figures support this very clearly, so they have only one option open to them. That is nuclear, for that purpose they built their cute mini nukes, believing folks will be so devastated once they drop one or two on them with their first strike, they’ll be paralized unable to respond, thus won their war.
Unfortunatley, they never consider that their victims have a brain, can think for themselves and implemented policy and procedures for their survival WHEN that happens. Russia has stated, clearly and categoricly, if their soil is attacked in such a manner, they will respond full spectrum. That means the end of the World, (including the U.S.) as we know it. The contamination released from such an event will last years and the radioactive cloud in the atmosphere will destroy all food production for many years,. All water on the planet will also be highly contaminated and unfit for human and animal consumption. YOU, stashed away on your 20 acres or so, will most certainly not be immune to any of this, and despite any preparation you may have carried out for this event, it won’t be enough. There is such a thing as a Jet stream in the atmosphere, one for the Northern half of the globe and one for the Southern half, both will become contaminated and spread destruction all over the planet. No one will be spared. No one.

Natural_Texan
Natural_Texan
4 months ago
Reply to  bob

Uncle Bob is right.

itchyvet
itchyvet
4 months ago
Reply to  Natural_Texan

NO ! Uncle Bob is seriously WRONG.

Natural_Texan
Natural_Texan
4 months ago
Reply to  itchyvet

Thanks!

Ricky Miller
Ricky Miller
4 months ago
Reply to  bob

It’s not an authoritarian government. There are elections. Vladimir Putin wins them because he delivers for Russia, period. Most Russians either remember the way that the U.S. and others tried to badger and steal from them in the 1990’s, or they’ve learned about it in school. They see the malign U.S. behavior, and support Putin because he’s made Russia strong again. It would be authoritarian if he governed without consent but the Russian electorate gives consent, overwhelmingly. The most brilliant part of it is that Russia practices their own form of state capitalism now, combined with Main street economic capitalism like from America’s past. This model prioritizes living within your means and saving for a rainy day. Brilliance, or sense? I say just plain old sense.

Robert Bruce
Robert Bruce
4 months ago
Reply to  Ricky Miller

Damn straight Ricky. I did a study abroad back in spring/summer 1997 in Russia and Poland. Russia was raped economically!!!!!! Great time for an American to visit though. I was a multimillionaire, probably for the only time in my life. It was sad seeing all of those old ladies in their 80’s begging for $ as they all lost their pensions. So much for Gaidar’s “shock therapy”. May all the folks responsible for that rot in hell!!!Q

bob
bob
4 months ago
Reply to  Ricky Miller

dictatorship, no sense,same old mistake of past,russia is doomed

Ricky Miller
Ricky Miller
4 months ago
Reply to  bob

Delusional, MSM demented thinking. Russia values and has law and order. Russia has an educated population and an agricultural sector that can feed her people and still be the world’s leading grain exporter. Russia has the largest reserves of natural resources in the world, including soil, biomass, water, timber, sand, metallic ores, land space. Yep, they’re doomed. Oh wait, that’s the West, Bob. Runaway clepto capitalism, wokeness and cancel culture “free speech” climate change denial and unpreparedness, chemical company unregulated pollution and a breakdown in law and order and societal courtesy abound, as well as mass migration that is altering the very fabric of culture and normality. What mistakes of the past is Russia repeating? Unlike the USSR the government has lowered defense spending to 5% of GDP and the Kremlin holds it there, no matter the demands of the military. The USSR had a problem telling the truth, yet the current Russian government engages with the public and tells it like it is quite openly, brazenly even. Austerity? No where in sight in Russia whose government says that raising living standards of the country is priority #1, and has dedicated roubles worth $100 billion between now and 2023 in public infrastructure projects and small business microloans.

The Globalist
The Globalist
4 months ago
Reply to  Ricky Miller

Thanks for the calm, pretty accurate response.

We will see whose economy collapses in the next 5 years. I don’t think it will be Russia’s. The US has accumulated so much debt because interest rates were kept so low, that a downturn will have some serious consequences.

bob
bob
4 months ago
Reply to  Ricky Miller

Oh, whatever there’s no point,just don’t be shocked in about a decade from now when its all gone wrong

Ricky Miller
Ricky Miller
4 months ago
Reply to  bob

It’s all gone wrong now, right here in the West, Bob. Income disparity, youth unemployment, corporate debt, the steady poisoning of people related to chemical agriculture and weed control, politicians unable to solve problems and a Western capitalist system addicted to debt in mass quantities and unable to function properly without it. Even with it there is mass unemployment in places and underemployment and sagging wages everywhere. It’s all going wrong now with seemingly no one to elect who has any idea how to fix it or make it work. At least Putin’s system has worked, increasing the average incomes and economic security of average Russians by four times over since 1999.

bob
bob
1 year ago
Reply to  Ricky Miller

No it hasn’t worked

Putins Russia is one one of the most unequal countries in the world

The criminal oligarchy in Russia own about 80% of all the wealth

30% of the population are in poverty

The economy is riddled with bent rent seeking state enterprises,mostly in oil and gas,the state security sector have their fingers in everything

There’s no entrepreneurial culture, because theres no law and security service can and do fit you up and steal your assets, no wonder the biggest employer is the state, thus no wonder people support Putin because he is the state they’re basically voting to keep their jobs

How can such a system continue?

It can’t, and won’t

Hegemann
Hegemann
4 months ago
Reply to  bob

Poor old Bob, doesn’t know, doesn’t see; just wishful thinking Bob.

Séamus Ó Néill
Séamus Ó Néill
4 months ago
Reply to  bob

Don’t overdo it…you obviously don’t have too many spare brain cells !

bob
bob
4 months ago

I just watch the daft Russian regime and shake my head in amazement

They don’t learn, so it must be them lacking in brain cells

The Globalist
The Globalist
4 months ago
Reply to  bob

I urge you to do a personal count, Bob.

Melquiades
Melquiades
4 months ago
Reply to  Ricky Miller

Wise words Ricky. But very little use in discussing with brainwashed hicks like bob.

cechas vodobenikov
cechas vodobenikov
4 months ago

many have been writing the same—quantitative easing combined w imperialismis the rotten scaffolding that supports the US economy—the amerikans produce very little today beyond weapons and some agriculture—an over valued economy—like the people that live in a bubble, so does their debt ridden economy…this is expected in an empire near collapse

Anti-Empire