The rebels in Libya are in the middle of a life or death civil war and Moammar Gadhafi is still in power and yet somehow the Libyan rebels have had enough time to establish a new Central Bank of Libya and form a new national oil company. Perhaps when this conflict is over those rebels can become time management consultants. They sure do get a lot done. What a skilled bunch of rebels – they can fight a war during the day and draw up a new central bank and a new national oil company at night without any outside help whatsoever. If only the rest of us were so versatile! But isn’t forming a central bank something that could be done after the civil war is over? According to Bloomberg, the Transitional National Council has “designated the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and the appointment of a governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.” Apparently someone felt that it was very important to get pesky matters such as control of the banks and control of the money supply out of the way even before a new government is formed.
Of course it is probably safe to assume that the new Central Bank of Libya will be 100% owned and 100% controlled by the newly liberated people of Libya, isn’t it?
Most people don’t realize that the previous Central Bank of Libya was 100% state owned. The following is an excerpt from Wikipedia’s article on the former Central Bank of Libya….
The Central Bank of Libya (CBL) is 100% state owned and represents the monetary authority in The Great Socialist People’s Libyan Arab Jamahiriya and enjoys the status of autonomous corporate body. The law establishing the CBL stipulates that the objectives of the central bank shall be to maintain monetary stability in Libya , and to promote the sustained growth of the economy in accordance with the general economic policy of the state.
Since the old Central Bank of Libya was state owned, it was essentially under the control of Moammar Gadhafi.
But now that Libya is going to be “free”, the new Central Bank of Libya will be run by Libyans and solely for the benefit of Libyans, right?
Of course it is probably safe to assume that will be the case with the new national oil company as well, isn’t it?
Over the past couple of years, Moammar Gadhafi had threatened to nationalize the oil industry in Libya and kick western oil companies out of the country, but now that Libya will be “free” the people of Libya will be able to work hand in hand with “big oil” and this will create a better Libya for everyone.
Right?
Of course oil had absolutely nothing to do with why the U.S. “inva—” (scratch that) “initiated a kinetic humanitarian liberty action” in Libya.
When Barack Obama looked straight into the camera and told the American people that the war in Libya is in the “strategic interest” of the United States, surely he was not referring to oil.
After all, war for oil was a “Bush thing”, right? The Democrats voted for Obama to end wars like this, right? Surely no prominent Democrats will publicly support this war in Libya, right?
Surely Barack Obama will end the bombing of Libya if the international community begins to object, right?
Obama won a Nobel Peace Prize. He wouldn’t deeply upset the other major powers on the globe and bring us closer to World War III, would he?
Russian Foreign Minister Sergei Lavrov has loudly denounced “coalition strikes on columns of Gaddafi’s forces” and he believes that the U.S. has badly violated the terms of the UN Security Council resolution….
“We consider that intervention by the coalition in what is essentially an internal civil war is not sanctioned by the U.N. Security Council resolution.”
So to cool off rising tensions with the rest of the world, Obama is going to call off the air strikes, right?
Well, considering the fact that Obama has such vast foreign policy experience we should all be able to rest easy knowing that Obama will understand exactly what to do.
Meanwhile, the rebels seem to be getting the hang of international trade already.
They have even signed an oil deal with Qatar!
Rebel “spokesman” Ali Tarhouni has announced that oil exports to Qatar will begin in “less than a week“.
Who knew that the rag tag group of rebels in Libya were also masters of banking and international trade?
We sure do live in a strange world.
Tonight, Barack Obama told the American people the following….
“Some nations may be able to turn a blind eye to atrocities in other countries. The United States of America is different.”
So now we are going to police all of the atrocities in all of the other countries around the globe?
The last time I checked, the government was gunning down protesters in Syria.
Is it time to start warming up the Tomahawks?
Or do we reserve “humanitarian interventions” only for those nations that have a lot of oil?
In fact, atrocities are currently being committed all over Africa and in about a dozen different nations in the Middle East.
Should we institute a draft so that we will have enough young men and women to police the world with?
We all have to be ready to serve our country, right?
The world is becoming a smaller place every day, and you never know where U.S. “strategic interests” are going to be threatened next.
The rest of the world understands that we know best, right?
Of course the rest of the world can surely see our good intentions in Libya, can’t they?
Tensions with Russia, China and the rest of the Arab world are certainly going to subside after they all see how selfless our “humanitarian intervention” has been in Libya, don’t you think?
In all seriousness, we now live in a world where nothing is stable anymore. Wars and revolutions are breaking out all over the globe, unprecedented natural disasters are happening with alarming frequency and the global economy is on the verge of total collapse.
By interfering in Libya, we are just making things worse. Gadhafi is certainly a horrible dictator, but this was a fight for the Libyan people to sort out.
We promised the rest of the world that we were only going to be setting up a “no fly zone”. By violating the terms of the UN Security Council resolution, we have shown other nations that we cannot be trusted and by our actions we have increased tensions all over the globe.
So what do all of you think about what is going on in Libya? Please feel free to leave a comment with your opinion below….
2011 has already been the most memorable year in ages and we haven’t even reached April yet. Revolutions have swept the Middle East, an unprecedented earthquake and tsunami have hit Japan, civil war has erupted in Libya, the price of oil has been soaring and the entire globe is teetering on the brink of economic collapse. It seems like almost everything that can be shaken is being shaken. Unfortunately, it does not appear that things are going to settle down any time soon. The Japanese economy has been dealt a critical blow, the European sovereign debt crisis could flare up again at any moment and the U.S. economy could potentially plunge into another recession by the end of the year. The global economy and world financial markets were really struggling to recover even when things were relatively stable. If all of this global instability gets even worse it could literally rip world financial markets apart.
Yes, things really are that bad. The mainstream media has been really busy downplaying the economic impact of the disaster in Japan and the chaos in the Middle East, but the truth is that these events have huge implications for the global economy. Today our world is more interconnected than ever, so economic pain in one area of the planet is going to have a significant effect on other areas of the globe.
The following are 10 economic disasters which could potentially rip world financial markets to shreds….
#1 War In Libya
Do you think that the “international community” would be intervening in Libya if they did not have a lot of oil? If you actually believe that, you might want to review the last few decades of African history. Millions upon millions of Africans have been slaughtered by incredibly repressive regimes and the “international community” did next to nothing about it.
But Libya is different.
Libya is the largest producer of oil in Africa.
Apparently the revolution in Libya was not going the way it was supposed to, so the U.S. and Europe are stepping in.
Moammar Gadhafi is vowing that this will be a “long war”, but the truth is that his forces don’t stand a chance against NATO.
Initially we were told that NATO would just be setting up a “no fly zone”, but there have already been reports of Libyan tank columns being assaulted and there has even been an air strike on Moammar Gadhafi’s personal compound in Tripoli.
So since when did a “no fly zone” include an attempt to kill a foreign head of state?
Let there be no mistake – the moment that the first Tomahawk cruise missiles were launched the United States declared war on Libya.
Already the Arab League, India, China and Russia have all objected to how this operation is being carried out and they are alarmed about the reports of civilian casualties.
Tensions around the globe are rising once again, and that is not a good thing for the world economy.
On a side note, does anyone recall anyone in the Obama administration even stopping for a moment to consider whether or not they should consult the U.S. Congress before starting another war?
The U.S. Constitution specifically requires the approval of the Congress before we go to war.
But very few people seem to care too much about what the U.S. Constitution says these days.
In any event, the flow of oil out of Libya is likely to be reduced for an extended period of time now, and that is not going to be good for a deeply struggling global economy.
#2 Revolutions In The Middle East
Protests just seem to keep spreading to more countries in the Middle East. On Friday, five Syrian protesters were killed by government forces in the city of Daraa. Subsequently, over the weekend thousands of protesters reportedly stormed government buildings in that city and set them on fire.
Things in the region just seem to get wilder and wilder.
Even in countries where the revolutions are supposed to be “over” there is still a lot of chaos.
Have you seen what has been going on in Egypt lately?
The truth is that all of North Africa and nearly the entire Middle East is aflame with revolutionary fervor.
About the only place where revolution has not broken out is in Saudi Arabia. Of course it probably helps that the United States and Europe don’t really want a revolution in Saudi Arabia and the Saudis have a brutally effective secret police force.
In any event, as long as the chaos in the Middle East continues the price of oil is likely to remain very high, and that is not good news for the world economy.
#3 The Japanese Earthquake And Tsunami
Japan is the third largest economy in the world. When a major disaster happens in that nation it has global implications.
The tsunami that just hit Japan was absolutely unprecedented. Vast stretches of Japan have been more thoroughly destroyed than if they had been bombed by a foreign military power. It really was a nation changing event.
The Japanese economy is going to be crippled for an extended period of time. But it is not just Japan’s economy that has been deeply affected by this tragedy.
A shortage of Japanese-built electronic parts will force GM to close a plant in Zaragoza, Spain, on Monday and cancel shifts at a factory in Eisenach, Germany, on Monday and Tuesday, the company said Friday.
Not only that, GM has also suspended all “nonessential” spending globally as it evaluates the impact of this crisis.
The truth is that there are a whole host of industries that rely on parts from Japan. Supply chains all over the world are going to have to be changed as a result of this crisis. There are going to be some shortages of certain classes of products.
Japan is a nation that imports and exports tremendous quantities of goods. At least for a while both imports and exports will be significantly down, and that is not good news for a world economy that was already having a really hard time recovering from the recent economic downturn.
#4 The Japan Nuclear Crisis
Even if the worst case scenario does not play out, the reality is that the crisis at the Fukushima Dai-ichi nuclear plant is going to have a long lasting impact on the global economy.
Already, nuclear power projects all over the world are being rethought. The nuclear power industry was really starting to gain some momentum in many areas of the globe, but now that has totally changed.
But of much greater concern is the potential effect that all of this radiation will have on the Japanese people. Radiation from the disaster at the Fukushima Dai-ichi nuclear plant is now showing up in food and tap water in Japan as an article on the website of USA Today recently described….
The government halted shipments of spinach from one area and raw milk from another near the nuclear plant after tests found iodine exceeded safety limits. But the contamination spread to spinach in three other prefectures and to more vegetables — canola and chrysanthemum greens. Tokyo’s tap water, where iodine turned up Friday, now has cesium.
Hopefully the authorities in Japan will be able to get this situation under control before Tokyo is affected too much. The truth is that Tokyo is one of the most economically important cities on the planet.
But right now there is a lot of uncertainty surrounding Tokyo. For example, one very large German real estate fund says that their holdings in Tokyo are now “impossible to value” and they have suspended all customer withdrawals from the fund.
Once again, let us hope that a worst case scenario does not happen. But if we do get to the point where most of the population had to be evacuated from Tokyo for an extended period of time it would be absolutely devastating for the global economy.
#5 The Price Of Oil
Most people believe that the U.S. dollar is the currency of the world, but really it is oil. Without oil, the global economy that we have constructed simply could not function.
That is why it was so alarming when the price of oil went above $100 a barrel earlier this year for the first time since 2008. Virtually everyone agrees that if the price of oil stays high for an extended period of time it will have a highly negative impact on the world economy.
In particular, the U.S. economy is highly, highly dependent on cheap oil. This country is really spread out and we transport goods and services over vast distances. That is why the following facts are so alarming….
*The average price of a gallon of gasoline in the United States is now 75 cents higher than it was a year ago.
*In San Francisco, California, the average price of a gallon of gasoline is now $3.97.
*According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier.
*According to the U.S. Energy Department, the average U.S. household will spend approximately $700 more on gasoline in 2011 than it did during 2010.
#6 Food Inflation
Many people believe that the rapidly rising price of food has been a major factor in sparking the revolutions that we have seen in Africa and the Middle East. When people cannot feed themselves or their families they tend to lose it.
According to the United Nations, the global price of food hit a new all-time high earlier this year, and the UN is expecting the price of food to continue to go up throughout the rest of this year. Food supplies were already tight around the globe and this is certainly not going to help things.
The price of food has also been going up rapidly inside the United States. Last month the price of food in the United States rose at the fastest rate in 36 years.
American families are really starting to feel their budgets stretched. According to the U.S. Labor Department, the cost of living in the United States hit a brand new all-time record high in the month of February.
What this means is that U.S. families are going to have less discretionary income to spend at the stores and that is bad news for the world economy.
#7 The European Sovereign Debt Crisis
Several European governments have had their debt downgraded in the past several months. Portugal, Spain, Greece and Ireland are all in big time trouble. Several other European nations are not far behind them.
Right now Germany seems content to bail the “weak sisters” in Europe out, but if that changes at some point it is going to be an absolute nightmare for world financial markets.
#8 The Dying U.S. Dollar
Right now there is a lot of anxiety about the U.S. dollar. Prior to the tsunami, Japan was one of the primary purchasers of U.S. government debt. In fact, Japan was the second-largest foreign buyer of U.S. Treasuries last year.
But now as Japan rebuilds from this nightmare it is not going to have capital to invest overseas. Someone else is going to have to step in and buy up all of the debt that the Japanese were buying.
So if Japan is not buying U.S. Treasuries and bond funds such as PIMCO are not buying U.S. Treasuries, then who is going to be buying them?
The U.S. government needs to borrow trillions of dollars this year alone to roll over existing debt and to finance new debt. All of that borrowing has got to come from somewhere.
#9 The U.S. Housing Market
The U.S. housing market could potentially be on the verge of another major crisis. Just consider the following facts….
*In February, U.S. housing starts experienced their largest decline in 27 years.
*Deutsche Bank is projecting that 48 percent of all U.S. mortgages could have negative equity by the end of 2011.
*Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months. Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.
*In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure. Today that number has risen to 48 percent.
#10 The Derivatives Bubble
Most Americans do not even understand what derivatives are, but the truth is that they are one of the biggest threats to our financial system. Some experts estimate that the worldwide derivatives bubble is somewhere in the neighborhood of a quadrillion dollars. This bubble could burst at any time. Right now we are watching the greatest financial casino in the history of the globe spin around and around and around and everyone is hoping that at some point it doesn’t stop. Today, most money on Wall Street is not made by investing in good business ideas. Rather, most money on Wall Street is now made by making shrewd bets. Unfortunately, at some point the casino is going to come crashing down and the game will be over.
Most people simply do not realize how fragile the global economy is at this point.
The financial crash of 2008 was a devastating blow. The next wave of the economic crisis could be even worse.
So what will the rest of 2011 bring?
Well, nobody knows for sure, but a lot of experts are not optimistic.
“A sharp slowing in global GDP in the second half of the year cannot be ruled out.”
Let us hope that the world economy can hold together and that we can get through the rest of 2011 okay. The last thing we need is a repeat of 2008. The world could use some peace and some time to recover.
But unfortunately, we live in a world that is becoming increasingly unstable. With the way that the world has been lately, perhaps we should all just start to expect the unexpected.
But world financial markets do not respond well to instability and unpredictability. In fact, investors tend to start fleeing to safety at the first signs of danger these days.
Most Americans simply have no idea how vulnerable the world financial system is at this point. Nothing really got “fixed” after 2008. If anything, global financial markets are even more fragile than they were back then.
So what do all of you think about the state of the global economy? Please feel free to leave a comment with your opinion below….
The price of oil is shaping up to be the number one economic story of 2011, and right now the eyes of the investing world are closely watching the developing situation in Saudi Arabia. All of the other recent Middle East revolutions have been organized on the Internet, and now all over Facebook and Twitter there are calls for a “Day of Rage” in Saudi Arabia on March 11. The Saudi monarchy is attempting to head off any protests by promising to give $37 billion in “benefits” to the people and by publicly proclaiming that all political demonstrations are specifically banned. In addition, the Saudi government is stationing thousands of security forces at various potential “hot spots” around the country. So far similar measures have not done much to quell unrest in other nations in the Middle East, but Saudi Arabia will be a true test of the revolutionary fervor that is sweeping the region. The Saudis have a long history of brutally repressing their own people. They simply do not mess around. So a revolution in Saudi Arabia will not be nearly as “easy” as it was in Tunisia, Egypt or Libya. However, if a revolution does sweep across Saudi Arabia, it is going to send the price of oil into unprecedented territory. Saudi Arabia is the number one exporter of oil in the world, and if their oil fields get shut down even for a little while it is going to have a dramatic effect on the global economy. With the world already on the verge of a major sovereign debt crisis, the last thing it needs is for the price of oil to start soaring into the stratosphere.
Right now the investing world is not sure what to think about all of this, and financial markets do not like uncertainty. One piece of really bad news could send markets all over the globe crashing down.
Speculation in oil futures is absolutely rampant. A recent report on CNN noted the following….
The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it.
In particular, the number of investors that are betting that a revolution in Saudi Arabia is going to send the price of oil up to $200 a barrel has exploded in recent days.
$200 a barrel?
Are people actually betting that is going to happen?
The all-time record is only $147 a barrel. Just a few months ago it was absolutely unthinkable to most economists that we could potentially see $200 oil in 2011.
But it would be a mistake to assume that a full-blown revolution is guaranteed to break out in Saudi Arabia. Remember, this is a nation that has a very, very long history of denying even the most basic freedoms to the people.
For example, in Saudi Arabia the practice of any religion other than Islam is strictly forbidden. By law, citizens of Saudi Arabia are not permitted to change religion. Even foreign visitors are forbidden to openly practice any other religion. It is a whole different world. You cannot go to the store and buy a Bible in Saudi Arabia. In fact, if you try to pass out Bibles in Saudi Arabia you will be thrown into prison.
So if you plan of being a revolutionary in Saudi Arabia you had better put your big boy pants on, because the Saudis play hardball.
Much of the rest of the globe is desperately hoping that a revolution does not happen in Saudi Arabia because the global economic situation is precarious at best.
In Europe, if the price of oil causes a significant economic slowdown right now it could have global implications. Moody’s Investors Service just slashed Greece’s debt rating three levels all the way down to B1. But Greece is far from alone. Several European governments are finding it much more expensive to finance their debts these days. We are right on the edge of a major European sovereign debt crisis and the chaos in the Middle East could potentially be just the thing to spark a panic.
The United States could feel a rise in the price of oil even more than Europe because the U.S. economy is so spread out and it is so dependent on products from overseas.
Did you know that in 1960 only 8 percent of the things Americans bought were made overseas but that today 60 percent of the things Americans buy are made overseas?
It’s true.
So what would happen if the cost of transporting all of those products suddenly doubled? All of the products we buy must be transported somehow, and a rise in transportation costs will be passed on to U.S. consumers.
But the truth is that the pain is already here. Already, millions of American families are starting to feel some very real financial pain from the chaos in the Middle East.
From February 18th to March 4th, the average price of gasoline in the United States rose 33 cents. That was the biggest two week increase ever recorded.
Ouch.
The rise in the price of oil has some broader economic implications as well.
The more the price of oil goes up the bigger our trade deficit is going become. As the trade deficit gets bigger, that means that more money is going out of the country and less money is going to support American businesses and American workers. When American workers lose jobs, that means that they aren’t producing wealth anymore and they aren’t paying taxes anymore. Instead, they become a drain on the system as they start receiving government handouts.
When millions of Americans go from being productive, taxpaying workers to unemployed welfare cases it causes our federal budget deficit to become even larger.
Most Americans do not understand how connected our trade deficit and our federal budget deficit really are. One feeds right into the other.
Unfortunately, the Federal Reserve seems to think that the solution to any economic problem these days is to print more money.
One of the reasons why the price of oil and other commodities has been going up over the last six months is because of all of this reckless money printing.
Now Lockhart is saying that because of the oil price increases they may have to do more money printing?
How bizarre is that?
Unfortunately, several other top Fed officials have dropped hints about a possible “QE3” lately. It just seems like the insanity never stops.
Let us hope that the Fed does not go there because the U.S. dollar is falling apart fast enough already.
In any event, the rest of 2011 is certainly going to be very interesting to watch.
Even if a revolution does not happen in Saudi Arabia, the price of oil will most likely continue to slowly move higher just as it has been doing for months.
But if a full-blown revolution does happen in Saudi Arabia, it could literally change the global economy almost overnight. The entire world financial system would be thrown into a state of chaos.
Oil is the lifeblood of the world economy. Without a continuous supply of very inexpensive oil, life as we know it would dramatically change. Most of us just assumed that we would always live in a world where we would always have an endless supply of very cheap oil.
Well, the times they are a changing.
You had better buckle up because it is going to be a bumpy ride.
It is not just the United States that is headed for an economic collapse. The truth is that the entire world is heading for a massive economic meltdown and the people of earth need to be warned about the coming economic disaster that is going to sweep the globe. The current world financial system is based on debt, and there are alarming signs that the gigantic global debt bubble is getting ready to burst. In addition, global prices for the key resources that the major economies of the planet depend on are rising very rapidly. Despite all of our advanced technology, the truth is that human civilization simply cannot function without oil and food. But now the price of oil and the price of food are both increasing dramatically. So how is the current global economy supposed to keep functioning properly if it soon costs much more to ship products between continents? How are the billions of people that are just barely surviving today supposed to feed themselves if the price of food goes up another 30 or 40 percent? For decades, most of the major economies around the globe have been able to take for granted that massive amounts of cheap oil and massive amounts of cheap food will always be there. So what happens when that paradigm changes?
At last check, the price of U.S. crude was over 104 dollars a barrel and the price of Brent crude was over 115 dollars a barrel. Many analysts fear that if the crisis in Libya escalates or if the chaos in the Middle East spreads that we could see the all-time record of 147 dollars a barrel broken by the end of the year. That would be absolutely disastrous for the global economy.
But it isn’t just the chaos in the Middle East that is driving oil prices. The truth is that oil prices have been moving upwards for months. The recent revolutions in the Middle East have only accelerated the trend.
Let’s just hope that the “day of rage” being called for in Saudi Arabia later this month does not turn into a full-blown revolution like we have seen in other Middle Eastern countries. The Saudis keep a pretty tight grip on their people, but at this point anything is possible. A true revolution in Saudi Arabia would send oil prices into unprecedented territory very quickly.
But even without all of the trouble in the Middle East the world was already heading for an oil crunch. The global demand for oil is rising at a very vigorous pace. For example, last year Chinese demand for oil increased by almost 1 million barrels per day. That is absolutely staggering. The Chinese are now buying more new cars every year than Americans are, and so Chinese demand for oil is only going to continue to increase.
Much could be done to increase the global supply of oil, but so far our politicians and the major oil company executives are sitting on their hands. They seem to like the increasing oil prices.
So for now it looks like oil prices will continue to rise and this is going to result in much higher prices at the gas pump.
Already, ABC News is reporting that regular unleaded gasoline is going for $5.29 a gallon at one gas station in Orlando, Florida.
The U.S. economy in particular is vulnerable to rising oil prices because our entire economic system is designed around cheap gasoline. If the price of gas goes up to 5 or 6 dollars a gallon and it stays there it is going to have a catastrophic effect on the U.S. economy.
Just remember what happened back in 2008. The price of oil hit an all-time high of $147 a barrel and then a few months later the entire financial system had a major meltdown.
Well, as the price of oil rises it is going to create a whole lot of imbalances in the global financial system once again.
This is definitely a situation that we should all be watching.
But it is not just the price of oil that could cause a global economic disaster.
The global price of food could potentially be even more concerning. As you read this, there are about 3 billion people around the globe that live on the equivalent of 2 dollars a day or less. Those people cannot afford for food prices to go up much.
But global food prices are rising. According to the United Nations, the global price of food has risen for 8 consecutive months. Last month, the global price of food set a brand new all-time record high. Many are starting to fear that we could actually be in the early stages of a major global food crisis.
The price of just about every major agricultural commodity has been absolutely soaring during the past year….
*The price of corn has doubled over the last six months.
*The commodity price of orange juice has doubled since 2009.
*The price of sugar is the highest it has been in 30 years.
Unfortunately, the production of food in most countries around the world is very highly dependent on oil, so as oil goes up in price this is going to make the food crisis even worse.
Hold on to your hats folks.
Also, as I have written about previously, the world is facing some very serious problems when it comes to water. Due to the greed of the global elite, there is not nearly enough fresh water to go around. The following are some very disturbing facts about the global water situation….
*According to USAID, one-third of all humans will face severe or chronic water shortages by the year 2025.
*Of the 60 million people added to the world’s cities every year, the vast majority of them live in impoverished slums and shanty-towns with no sanitation facilities whatsoever.
*In northern China, the water table is dropping one meter per year due to overpumping.
These days, one of the trendy things to do is to call water “the oil of the 21st century”, but unfortunately that is not a completely inaccurate statement. Fresh, clean water is something that we all need, but right now world supplies are getting tight.
Our politicians and the global elite could be doing something about this if they really wanted to, but right now they seem perfectly fine with what is happening.
On top of everything else, the sovereign debt crisis is worse than it has ever been before.
All of the major global central banks have been feverishly printing money in an attempt to “paper over” this crisis, but it is not going to work.
Most Americans don’t realize it, but right now the continent of Europe is a financial basket case. Greece and Ireland would have imploded already if they had not been bailed out, and now Portugal is on the verge of collapse. The interest rate on Portugal’s 10-year notes has now been above 7% for about 3 weeks, and most analysts believe that it is only a matter of time before they are forced to accept a bailout.
Sadly, if the entire global economy experiences a slowdown because of rising oil prices, we could see half a dozen European nations default on their debts if they are not bailed out.
For now the Germans seem fine with bailing out the weak sisters that are all around them, but that isn’t going to last forever.
A day or reckoning is coming for Europe, and when it arrives the reverberations are going to be felt all across the face of the earth. The euro is on very shaky ground already, and whether or not it can survive the coming crisis is an open question.
Of course there are some very serious concerns about Asia as well. The national debt of Japan is now well over 200% of GDP and nobody seems to have a solution for their problems. Up to this point, Japan has been able to borrow massive amounts of money at extremely low interest rates from their own people, but that isn’t going to last forever either.
As I have written about so many times before, the biggest debt problem of all is the United States. Barack Obama is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars. It is expected that the total U.S. national debt will surpass the 15 trillion dollar mark by the end of the fiscal year.
Shouldn’t we have some sort of celebration when that happens?
15 trillion dollars is quite an achievement.
Most Americans cannot even conceive of a debt that large. If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.
But the United States is not alone. The truth is that wherever you look, there is a sea of red ink covering the planet.
The current global financial system is entirely based on debt. If the total amount of debt does not continually expand, the system will crash. If somehow a way was found to keep this system going perpetually (which is impossible), the size of global debt would keep on increasing infinitely.
Now the World Economic Forum says that we need to grow the total amount of debt by another 100 trillion dollars over the next ten years to “support” the anticipated amount of “economic growth” around the world that they expect to see.
The entire global financial system is a gigantic Ponzi scheme. It is designed to keep everyone enslaved to perpetual debt. If at some point the debt spiral gets interrupted in some significant way, we are going to witness an economic disaster that is going to make what happened in 2008 look like a Sunday picnic.
The more research that one does on the current global economic situation, the more clear it becomes that we are absolutely doomed.
Did anyone out there anticipate that 2011 would be such a wild year? The year is barely over two months old and we have already seen multiple civil wars erupt, rumors of more wars all over the mainstream media (potentially even including the United States), riots and revolutions breaking out all over the globe, oil prices soaring into the stratosphere and chaos on global financial markets. So why is all of this happening? Is all of this one big coincidence or is there a reason why we are witnessing such global chaos right now? Is it just coincidence that revolutions have broken out in over a dozen countries in the Middle East all at the same time? Is it just a coincidence that global prices for oil, food and precious metals are all skyrocketing? Is it just a coincidence that world financial markets suddenly seem more vulnerable than at any time since 2008? Looking at what is going on in the world right now, it is very tempting to use the phrase “a perfect storm” to describe it. Unfortunately, this “perfect storm” is very likely to plunge the global economy into yet another financial collapse if it continues to get even worse.
After decades of relative stability, the Middle East has erupted in chaos in 2011. In the post-World War 2 era, we have never seen a time when there have been so many major internal revolutions all at once. All of these simultaneous revolutions are driving the price of oil rapidly upwards.
The price of West Texas crude is now over $102 a barrel and the price of Brent crude is now over $116 a barrel and if the chaos in the Middle East continues those numbers are likely to go a lot higher.
Meanwhile, gold has set a new all-time record this week and the price of silver is absolutely exploding.
In fact, just about every kind of “hard asset” that you can possibly name is going up in price. Investors don’t like all of this instability and they are looking for safe places to put their money.
Unfortunately, the global situation looks like it may become even more heated.
The calls for military action against Libya are rapidly reaching a crescendo.
The U.S. Senate has unanimously passed a resolution calling for the UN Security Council to impose a no-fly zone over Libya, and many members of Congress are openly declaring that the U.S. and NATO should take unilateral action no matter what the UN ultimately decides.
But implementing a no-fly zone is not a simple thing. It is not just a matter of telling Libya not to fly their planes. Rather, imposing a no-fly zone over Libya would constitute a major military operation.
“Let’s just call a spade a spade. A no-fly zone begins with an attack on Libya to destroy the air defenses … and then you can fly planes around the country and not worry about our guys being shot down.”
You would have to remove the air defense capability in order to establish the no-fly zone so it – no illusions here, it would be a military operation.
Essentially, imposing a no-fly zone over Libya would be an act of war.
Most of our representatives in Washington D.C. seem to be quite ready to go to war in Libya, but it is another story entirely when it comes to the American people. A recent Rasmussen poll found that a whopping 67 percent of Americans do not want the U.S. to get more involved in the unrest going on in Arab countries and only 17 percent of Americans do want the U.S. to get more directly involved.
But the American people don’t get to decide whether we go to war or not. Our leaders in Washington D.C. do. The USS Enterprise and other major warships are on their way to Libya, and U.S. forces throughout the Mediterranean are on high alert.
So could the U.S. really get involved in another war in the Middle East?
Well, if the U.S. and NATO choose to get involved they will do it without the approval of the rest of the world.
On Wednesday, the Arab League issued a statement which specifically rejected “any foreign interference within Libya on behalf of the opposition”.
Not only that, but any military action by the UN will most likely be blocked by both China and Russia.
“If someone in Washington is seeking a blitzkrieg in Libya, it is a serious mistake because any use of military force outside the NATO responsibility zone will be considered a violation of international law.”
But Libya is far from the only crisis point in the Middle East.
In fact, a much larger problem may be brewing in Saudi Arabia.
On Facebook, a “Day of Rage” is being hyped for March 11th. Other dates being promoted for “revolution” in Saudi Arabia include March 20th and March 21st.
But if Saudi Arabia sees the same kind of chaos that we have seen in other countries in the Middle East there is no telling how high the price of oil could go.
Could we see $125 oil?
Could we see $150 oil?
Could we see $200 oil?
Saudi Arabia exports more oil than anyone else in the world, so if their oil production gets interrupted it is going to have a dramatic impact on the global economy.
For decades, the entire globe has been blessed with very cheap oil and this has resulted in a massive economic boom.
But times are changing.
The economic situation over in Europe is already deteriorating and any additional bad news could plunge that entire continent into a major crisis. A recently released report from Ernst & Young is warning that if oil goes up to 150 dollars a barrel and it stays there, “at least” one eurozone country will default and the entire eurozone will be plunged back into recession.
A much higher price for oil would obviously not be good for the U.S. economy either. Do you remember what happened back in 2008? The price of oil hit a record high in June and then the entire financial system came unglued just a few months later.
But if we see a repeat of 2008 it may be a lot worse this time because the global financial system is now more unstable than ever.
The truth is that the entire world is still trying to recover from the last financial crisis. The Federal Reserve is pumping massive quantities of dollars into the U.S. economy in an attempt to stimulate it back to life, but so far it is not working too well.
The rest of the world does not appreciate all of this “money printing” and the inflation that this is causing is beginning to create massive imbalances on global financial markets.
The world is starting to lose faith in the U.S. dollar. Right now, approximately 85% of all foreign-exchange transactions in the world involve the U.S. dollar. Not only that, 60% of all the currency reserves in the world are in U.S. dollars. With the U.S. dollar rapidly becoming less stable, many are now wondering if it should continue to be used as the reserve currency of the world.
The truth is that if the U.S. dollar falls, it is going to create a tremendous amount of financial chaos in almost every nation on the globe.
Unfortunately, as I have written about so many times previously, the U.S. economy is dying. The U.S. government is absolutely drowning in debt, and leaders all over the planet are calling for the establishment of a new global reserve currency.
The days of the United States being the “economic engine of the planet” are rapidly coming to an end.
The U.S. economy is not ever going to fully “recover”. In fact, the U.S. economy is basically “running on empty” at this point as Gerald Celente recently noted during an interview on RT television….
The entire U.S. economy was designed to operate on massive amounts of very cheap oil. Americans do more driving than anyone else in the world. Many of us are so lazy that we won’t even walk to a store if it is on the other side of the parking lot.
If oil hits record levels in 2011, it is going to be a massive shock to the U.S. economic system. Any hopes for an “economic recovery” will be completely dashed.
In fact, if one wanted to “take down” the U.S. economy, driving up the price of oil would be a perfect way to do it.
And if one wanted to drive up the price of oil, a perfect way to do that would be to create all kinds of chaos in the Middle East.
So is all of this craziness that we are seeing in 2011 just a big coincidence or is there a reason why all of this is happening?
Please feel free to leave a comment with your opinion on the matter below….
Despite what Federal Reserve Chairman Ben Bernanke says, rampant inflation is officially here. The federal government is constantly monkeying with the numbers to keep the “official” rate of inflation below 2 percent, but it is becoming very difficult to deny that the cost of almost everything is really going up these days. The American people are not stupid. They notice the difference when they go to the grocery store or stop at the gas station. The dollar is losing value rapidly now. The price of gold set another new all-time record today and is currently hovering just above $1430 an ounce. The price of West Texas crude has moved above 100 dollars several times recently and the price of Brent crude is currently above 116 dollars. These higher oil prices are really starting to be felt in the United States. The average price for a gallon of gasoline in the United States has now reached $3.38. There are some gas stations in the U.S. where the price of a gallon of gas is already over 4 dollars. But it is not just the American people that are feeling the pain. The global price of food recently hit a new record high and almost every major agricultural commodity has absolutely skyrocketed in price over the past 12 months. Meanwhile, Ben Bernanke just told the Senate Banking Committee that he really isn’t concerned about inflation at all.
When it comes to inflation, the key is not to look at the official U.S. government numbers (they are highly manipulated) or how the U.S. dollar is performing against other major currencies (because they are all being devalued as well). Instead, you can get a truer sense of what is really happening to inflation by looking at what the U.S. dollar is doing against precious metals, commodities and other hard assets.
So are we experiencing rampant inflation right now? Well, just open up your eyes and look at these 5 charts….
1 – The price of oil is racing back up to record levels. The chart below from the Federal Reserve is a couple weeks out of date. As noted above, the current price of West Texas crude is about $100 a barrel….
2 – The price of a gallon of gasoline in the United States seems destined to hit a brand new all-time record at some point this year. Was it really just a few short years ago when the average price of gas in this country was about a dollar a gallon?….
3 – The value of most precious metals is very consistent over time. So when you see precious metals go up dramatically in price, it means that the dollar is being devalued. The price of gold just set another new all-time high and it seems destined to keep going even higher….
4 – The chart below from the Federal Reserve is a measure of the price of all commodities. These price increases are inevitably going to be passed along to consumers in the United States….
5 – After a couple of years of stable food price, the price of food is starting to take off yet again….
In fact, many analysts are warning that we could experience a major food crisis over the next couple of years. The global demand for food continues to grow at a very brisk pace, but all of the crazy weather we have been having around the world has caused some very bad harvests.
Unfortunately, the global price of food has gone up substantially in recent months and it is likely to keep going up very rapidly. Just consider the following five facts….
#1 The United Nations says that the global price of food hit another new all-time high during the month of January.
#2 The price of corn has doubled in the past six months.
Yes, there is, but before we cover it, it is important to keep in mind that in an inflationary environment almost all economic numbers go up.
For example, during the recent hyperinflation in Zimbabwe stocks went up like crazy and “economic growth” statistics were very impressive.
Why?
Because those numbers were measured in currency units that were being devalued at a blinding pace.
So please keep that in mind when you hear “good economic statistics” on the evening news.
The truth is that in an inflationary environment such as we have now entered into almost all economic numbers should be going up.
So what is the good news?
Well, last month all three major U.S. car companies reported strong sales gains. Sales of GM vehicles were up 49%, sales of Chrysler vehicles were up 13%, and sales of Ford vehicles were up 10%.
But just because a few pieces of good economic news come floating our way does not mean that we should forget all of the horrific long-term economic trends that are tearing this country apart.
The truth is that we are still a nation that is absolutely drowning in debt.
For example, it was just announced that China now owns 1.16 trillion dollars of U.S. government debt.
The borrower is the servant of the lender. We should never forget that.
Also, the U.S. economy is slowly but surely becoming of less importance on the global stage.
In 1985, America’s share of global GDP was 33%. Today, it is just 24%.
Our nation is rapidly being deindustrialized and we are becoming deeply dependent on industrial production from other nations.
That says a lot about where we are at as a country.
We have allowed so much of our industrial infrastructure to be exported to China where workers slave away in almost unbelievable conditions.
A reader named Rish recently described what things are like over there….
As a product developer I went to china and saw the way the factory workers lived and worked in person. 50$ a month is about right, but if you are a skilled quality control expert you might make as much as 150$. at least this was true about 2 years ago the last time I went. The barracks were pretty meager, bunk beds with just plywood, no mattresses, if you wanted you could go to a store just outside the factory gate and buy a thick comforter that they sell as a “mattress” .
It will be interesting to see how the next few years changes the face of the USA. Who knows? if the unemployment rate and lack of jobs keeps going and enough people become homeless, we might become the next Bangladesh, and people will be lining up of the 30 cents an hour corporate factory jobs, and living in barracks just like those…
The only way the U.S. has been able to “thrive” during this deindustrialization is by borrowing gigantic amounts of money. But all of this borrowing is slowly but surely destroying the U.S. dollar, and we are getting closer to the point of absolute catastrophe.
Peter Schiff recently shook folks up when he talked about these issues during a recent interview on CNBC….
But it is not just the United States that is printing tons and tons of money. All of the major industrialized nations have been firing out gobs of currency. That is a huge reason why so many investors have been racing to get into hard assets recently.
Now Ben Bernanke and other top Federal Reserve officials have been dropping hints that more quantitative easing may be necessary.
Unfortunately, just like with any other addiction, once you give in a few times it becomes easier and easier to engage in destructive behavior. Now that the Fed has gotten a taste for quantitative easing it is going to be really hard to stop.
Nor can the Fed stop at this point. If they did it would be disastrous for the U.S. economy. But if the Fed continues on this reckless course it will make the eventual collapse of our economy even worse.
Under our current debt-based system there is no way out. The Federal Reserve can attempt to put off the inevitable for a while by pumping up the debt bubble even more, but at some point it is going to burst.
When that happens we are going to be facing a financial crisis which will blow what happened in 2008 completely out of the water.
So enjoy these good economic times while you still can. This is about as good as things are going to get from here on out.
Are you ready for an economy that has high inflation and high unemployment at the same time? Well, welcome to “Stagflation 2011″. Stagflation exists when inflation and unemployment are both at high levels at the same time. Of course we all know about the high unemployment situation already. Gallup’s daily tracking poll says that the U.S. unemployment rate has been hovering around 10 percent all year so far. But now thanks to rapidly rising food prices and the exploding price of oil, rampant inflation is being added to the equation. Normally inflation is a sign of increased economic activity, but when the basic commodities that we depend on to run our economy (such as oil) go up in price it actually causes a slowdown in economy activity. When the price of oil goes up high enough, it fundamentally changes the behavior of individuals and businesses. Suddenly certain types of economic activities that were feasible when oil was very cheap are not profitable any longer. When the price of oil rises to a new level and it stays there, essentially what is happening is that more “blood” is being drained out of our economy. Our economy will continue to function when there are higher oil prices, it will just be a lot more sluggish.
In some way, shape or form the price of oil factors into the production of most of our goods and services and it also factors into the transportation of most of our goods and services. A significant rise in the price of oil changes the economic equation for almost every business in the United States.
Today, the price of WTI crude soared past 100 dollars a barrel before closing at $98.10. The price of Brent crude increased 5.3 percent to $111.25. The protests in Libya are certainly causing a lot of the price activity that we have seen over the past few days, but the truth is that oil has been going up for a number of months. Right now we are only seeing an acceleration of the long-term trend.
Things are likely to get far worse if the “day of rage” planned for Saudi Arabia next month turns into a full-blown revolution. Up to this point, the revolutions that have been sweeping the Middle East have been organized largely on Facebook, and now there are calls all over Facebook for the “Saudi revolution” to start on March 20th.
That date is less than 4 weeks away. If Saudi Arabia plunges into chaos, the price of oil is going to go through the roof.
A rapidly rising price for oil is really bad news for the U.S. economy, because it is going to mean lots of inflation. Unfortunately, this also comes at a time when the economy is also feeling the inflationary effects of more quantitative easing by the Federal Reserve.
So if rising oil prices are going to cause more inflation and if rising oil prices are also going to cause our economy to become even more sluggish, what does all of that add up to?
It adds up to stagflation.
Wikipedia defines stagflation in the following manner….
In economics, stagflation is the situation when both the inflation rate and the unemployment rate are persistently high.
This is going to rapidly become the “new normal” for America. High oil prices are going to cause the cost of just about everything to go up, and high oil prices are also going to cause the economy to slow down thus making the unemployment numbers even worse.
It is going to be just like the 1970s all over again.
Only worse.
Economists differ as to how much rising oil prices affect U.S. GDP, but almost all of them agree that rising oil prices do cause a decline in U.S. GDP at least to some extent.
If American families have to spend $10 or $20 more each time they visit a gas station, that means that they are going to have less discretionary income. They won’t be able to spend as much at the stores.
Not only that, but since the price of oil affects the price of almost everything else, Americans will find that their dollars have reduced purchasing power.
An oil crisis would force American families to stretch their already overburdened budgets even farther.
So where is the price of gasoline going from here? Well, the average price of gasoline in the United States is rapidly sneaking up on the $3.20 a gallon mark. Almost everyone believes that it is going to be going significantly higher.
Tom Kloza, the chief analyst for the Oil Price Information Service, was recently quoted in USA Today as saying that he believes that the average price for gasoline in the United States will reach somewhere between $3.50 and $3.75 a gallon by April.
As I wrote about yesterday, there are other analysts that believe that we are going to see $4.00 gasoline in the United States by the end of the year, and there are some that believe that we could see $5.00 gasoline if revolution sweeps Saudi Arabia.
If gasoline becomes that expensive and it stays there for a while, it is going to seriously start affecting the behavior of American businesses and American consumers.
Just remember what happened back in 2008. Andrew Busch of BMO Capital Markets recently told CNBC the following….
“Remember when oil was last at $140 (a barrel), Americans reacted and cut the amount of miles they drove.”
Can you imagine what it would do to the economy if millions of Americans start sitting in their homes instead of doing their normal amounts of driving and flying?
In addition, one of the biggest problems with a higher price for oil is that it would cause our trade deficit to explode. According to the U.S. government, more than half of the oil that we use is imported. So every month we send the rest of the world billions and billions of our dollars and they send us massive amounts of oil. We rapidly consume all of the oil they send us and we continually need more. So we keep sending larger and larger amounts of money overseas and they keep sending us larger amounts of oil. In the process, our national wealth is being drained at an astounding rate. It is one of the greatest transfers of wealth the world has ever seen.
When the price of oil rises substantially, the transfer of wealth accelerates. This is a very bad thing for the U.S. economy. For example, when oil prices were above $100 a barrel back in 2008 our trade deficit for the year was almost 700 billion dollars.
It would be great if the Middle East would settle down and oil prices would start declining because that would really help out the U.S. economy. Unfortunately, it does not look like that is going to happen. Instead, it appears that we are steamrolling directly towards stagflation. Anyone that lived through the stagflation of the 1970s knows that it is not a lot of fun.
The cold, hard reality of the matter is that without cheap oil our lifestyles are going to change. Our economy was not set up to run on expensive oil. If oil moves well above $100 a barrel and it stays there it is going to bring about significant societal changes.
For the rest of 2011, the price of oil will be the number one economic indicator to watch. If it gets too high it is going to be an absolute disaster for the U.S. economy.
One of the quickest ways to bring down the U.S. economy would be to dramatically increase the price of oil. Oil is the lifeblood of our economic system. Without it, our entire economy would come to a grinding halt. Almost every type of economic activity in this country depends on oil, and even a small rise in the price of oil can have a dramatic impact on economic growth. That is why so many economists are incredibly alarmed about what is happening in the Middle East right now. The revolution in Libya caused the price of WTI crude to soar more than 7 dollars on Tuesday alone. It closed at $93.57 on Tuesday and Brent crude actually hit $108.57 a barrel before settling back to $105.78 at the end of the day. Some analysts are warning that we could even see 5 dollar gas in the United States by the end of the year if rioting spreads to other oil producing nations such as Saudi Arabia. With the Middle East in such a state of chaos right now it is hard to know exactly what is going to happen, but almost everyone agrees that if oil prices continue to rise at a rapid pace over the next several months it is going to have a devastating impact on economic growth all over the globe.
Right now the eyes of the world are on Libya. Libya is the 17th largest oil producer on the globe and it has the biggest proven oil reserves on the continent of Africa.
Libya only produces 2 percent of the oil in the world, but with global supplies so tight at the moment even a minor production disruption can have a dramatic impact on the price of oil.
Before this crisis, Libya was producing approximately 1.6 million barrels of oil per day. Now the rest of the world is wondering what may happen if revolution spreads to other major oil producing nations such as Kuwait (2.5 million barrels of oil per day) or Saudi Arabia.
Saudi Arabia produces 8.4 million barrels of oil a day. It produces more oil than anyone else in OPEC.
If revolution strikes in Saudi Arabia and a major production disruption happens it could be catastrophic for the global economy.
David Rosenberg, the chief economist at Gluskin Sheff & Associates, is warning that if there is major civil unrest in Saudi Arabia we could end up seeing oil go up to $200 a barrel….
“If Libya can spark a $10-a-barrel response, imagine what a similar uprising in Saudi Arabia could unleash. Do the math: we’d be talking about $200 oil.”
200 dollar oil?
Don’t laugh – it could happen.
In fact, if it does happen the global economy would probably go into cardiac arrest.
The truth is that if the flow of oil from Saudi Arabia gets disrupted there is not enough spare capacity from the rest of the globe to make up for it.
Paul Horsnell, the head of oil research at Barclays Capital, recently said that the world does not currently have enough spare capacity to be able to guarantee that an oil “price shock” will not happen….
“The world has only 4.5m barrels-per-day (bpd) of spare capacity, which is not comfortable.”
Horsnell also said that even in the midst of potential supply problems, the global demand for oil continues to grow at a very robust pace….
“In just two years, the world has grown so fast as to consume additional volume equal to the output of Iraq and Kuwait combined.”
For now, Saudi officials are saying all the right things. They say that there will be no revolution in Saudi Arabia and that there are not going to be any supply problems.
For example, Saudi Arabian Oil Minister Ali al-Naimi recently announced that the rest of the world should not worry because his country is definitely going to be able to make up for any shortage in the global supply of oil….
“What I would like you to convey to the market: right now there is absolutely no shortage of supply.”
But what happens if revolution comes to Saudi Arabia?
Suddenly the whole game would change.
But even with a peaceful Saudi Arabia the price of gasoline in the United States is already rising to alarming levels.
The average price of gasoline in the United States reached $3.14 a gallon last week. This closely mirrors what happened back in 2008. Three years ago at this time the average price of gasoline was right around $3.13 a gallon.
Let’s certainly hope that we don’t see a repeat of what happened to oil prices back in mid-2008. The price of oil reached an all-time record of $147 a barrel and gas prices in the United States absolutely skyrocketed.
So how high will the price of gas in the U.S. go in 2011?
We haven’t even come close to 4 dollar gas yet, but a large number of analysts believe that it is coming this summer.
Is there even a possibility that we could see 5 dollar gas in America at some point in the next couple of years?
Well, there are some in the oil industry that are convinced that it could actually happen. Just consider the following quotes….
Darin Newsom, senior analyst at energy tracker DTN….
“If this thing escalates and there’s a good chance that there’d be a shift in supplies, $5 gas isn’t out of the question.”
Peter Beutel, president of energy adviser Cameron Hanover….
“If you are looking at the disruption of movement and production in countries such as Saudi Arabia and the UAE, you’re easily talking $5 gas.”
John Hofmeister, the former president of Shell Oil, on his belief that we could see 5 dollar gas by 2012….
“I’m predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices.”
So why is everyone so concerned about gas prices?
Well, because it affects the price of almost everything else in the economy.
David Wyss, the chief economist at Standard & Poor’s, says that every extra dollar that is spent on gasoline is a dollar that will not be spent somewhere else….
“The money that you spend filling up your car is money you don’t have to spend at the shopping mall.”
Not only that, but when gasoline costs more it has a negative effect on economic growth. Almost all economic activities involve the use of oil in one form or another. When the price of oil starts getting really high it motivates people to start cutting back on many of those activities.
The truth is that our whole economic system is based on the ability to use massive amounts of very cheap oil. Now that the price of oil is rapidly rising again, many economists are becoming very alarmed.
Nobuo Tanaka, the Executive Director of the International Energy Agency, recently told CNBC that his organization is extremely concerned about what high oil prices could do to the global economy….
“That is our concern, regardless of the margins of disruption, if the $100 per barrel of oil is continued in 2011, the burden of oil to the global economy is as bad as 2008.”
So what was so bad about 2008? Well, the price of oil soared to $147 a barrel in mid-2008 and this was a huge factor in the financial collapse that happened a few months later. Now oil prices are returning to levels that we have not seen since 2008….
So if the price of oil breaks the all-time record this year will we see another global financial crisis?
It is hard to say. But what almost everyone agrees on is that it will not be good for the global economy at all.
In addition, a higher price for oil will also have a huge impact on the trade deficit. Because oil prices were at such a high level back in 2008, oil imports actually made up almost 50 percent of the U.S. trade deficit that year.
In 2010, the U.S. trade deficit was just a whisker under $500 billion. If the price of oil gets up to 140 or 150 dollars a barrel we could easily see the U.S. trade deficit explode to 700 or 800 billion dollars in 2011.
That would be really, really bad for the U.S. economy.
So where are oil prices going next?
Well, if you could predict that with 100 percent certainty you could make a whole lot of money. Nobody knows for sure.
But almost everyone believes that the price of oil is going to go up. In fact, a lot number of investors have been making some very large bets that the price of oil is going to go up very significantly this year.
Recently, large numbers of investors have been betting that the price of oil will rise to $125 a barrel by May. Shockingly, some investors have even been betting that the price of oil will rise to $250 a barrel by next December.
Let us hope that the price of oil does not rise that rapidly, but as the past couple of months have demonstrated, the world is becoming a very unstable place. Just about anything is possible at this point.
If the price of oil rises significantly above $100 a barrel and it stays there for an extended period of time, it is going to be absolutely devastating for the U.S. economy.
So what do you all think is going to happen to the price of oil in 2011? Please feel free to leave a comment with your thoughts below….
Everywhere you look today the mainstream news is talking about shortages. Authorities all over the globe are boldly proclaiming that the world is rapidly running out of food, water and oil. So are these doomsayers right? Well, it must be noted that some of the most famous “prophets of doom” of the past several decades have seen their predictions fail spectacularly. For example, in his infamous 1968 book entitled “The Population Bomb“, Paul Ehrlich made the following statement: “I don’t see how India could possibly feed two hundred million more people by 1980.” Well, India is now feeding well over twice the number of people than they had when Ehrlich originally wrote his book. But that doesn’t mean that major shortages won’t happen in the future. It just means that we should be careful not to look incredibly ridiculous like Ehrlich did. The truth is that there are good reasons why we should be watching global supplies of food, water and oil very closely. Life as we know it would cease to exist if we had severe shortages of any of them.
So will we actually be facing serious shortages of food, water or oil in the coming years?
Well, let’s take a look at oil first.
Oil Shortage?
Right now oil is absolutely essential to almost everything that we do. We require oil to drive our cars, we require oil to produce our food, a large percentage of our homes use energy that is derived from oil and most of what we buy at the stores comes in packaging that is made up at least partly of oil.
So if we run out of oil that is going to be a really huge deal.
So are we going to run out of oil?
Well, right now advocates of the “peak oil” hypothesis are getting a lot of attention in the mainstream media.
Basically the idea behind “peak oil” is that the world has reached (or almost reached) the maximum amount of oil that it can produce and that from here on out the amount of oil that will be produced will begin to decline. Meanwhile, the demand for oil is only going to continue to increase.
So is there evidence that this is actually happening?
Well, it depends on who you ask. But what is undeniable is that there are some very powerful interests that are doing their best to hype a coming oil shortage.
In recently released report entitled “Signals & Signposts“, Shell Oil warns that global demand for energy is going to be three times as large in 2050 as it was in 2000.
So where will all of that extra energy come from?
Can the world possibly produce two or three times as much oil as it does today?
The Shell Oil report forecasts that the global supply of oil will continue to rise but that the rise in supply will not be fast enough to keep up with the rise in demand. According to Shell, this is going to cause rapidly rising oil prices which will cause the gross domestic products of all nations to fall.
So just how high could oil prices go?
Well, the truth is that the price of oil is very highly manipulated. The market for oil is not exactly what you would call a “free market”.
However, it is alarming that almost everyone is forecasting much higher oil prices at this point.
For example, Weeden & Co. oil analyst Charles Maxwell recently stated that he believes that the price of oil will eventually hit $300 a barrel by the end of this decade.
If that were to happen, it would be absolutely disastrous for the global economy. Yeah, those in the oil industry would make a killing, but for the rest of the world it would be a complete and utter nightmare.
Unfortunately, what most Americans don’t understand is that there are lots of alternative energy technologies out there that have been repressed by the big oil companies and by the big oil producing nations because they threaten hundreds of billions of dollars in profits.
For example, did you know that it is possible to run a car entirely on water? One Japanese company hopes to start mass marketing them….
But I wouldn’t count on seeing water-powered cars sold on every street corner any time soon.
Why?
Because of greed.
Our entire system of energy is based on making as much money as possible for those who have all the oil.
So if the world has a shortage of energy in the coming years, it is not because that is how it inevitably had to be.
Rather, it will be all about pure, unadulterated greed.
There are plenty of alternative energy technologies out there that are incredibly promising, but those that are getting incredibly wealthy off of our oil-based society are not going to quietly step aside for the good of mankind.
Food Shortage?
So what about food?
Is the world running out of food?
Well, as we have seen so many times in the past, the earth can support far more people than most of the “experts” ever imagined.
In fact, if weather patterns were perfectly stable and we removed human greed out of the picture, the earth could most likely support a whole lot more people.
Unfortunately, weather patterns are becoming increasingly bizarre and human greed is always a problem.
In particular, this year extreme weather all over the globe is causing many to be concerned that we may soon see some very serious food shortages. In Australia and Brazil, flooding of Biblical proportions has absolutely devastated crops. Some of China’s most important agricultural areas are experiencing the worst droughts that they have seen in 200 years. Authorities are warning that two-thirds of China’s wheat crop could be in danger. A recent cold snap that hit northern Mexico wiped out entire harvests and has sent prices for many fresh produce items in the United States soaring.
But these bizarre weather patterns will hopefully settle down eventually.
What is of even greater concern is that we have been seeing a long-term trend of rapidly rising food prices over the last couple of years that is putting an extreme amount of strain on the 3 billion people in the world that are trying to survive on the equivalent of 2 dollars or less per day.
Most Americans can still handle rising food prices, but for millions upon millions of poor people all over the world a significant increase in the cost of food can mean the difference between life and death.
That is why the sudden rise in price of so many agricultural commodities is so disturbing. Just consider some of the shocking price increases that we have seen over the past year or two….
*The commodity price of orange juice has doubled since 2009.
*The price of sugar is the highest it has been in 30 years.
If prices continue to go up like this we are going to see a lot more food riots all over the globe.
But perhaps that is what those in positions of power actually want. The truth is that the global elite don’t always have the best interests of the rest of us at heart.
Water Shortage?
So what about water?
Is the world running out of water?
Well, yes, many areas of the world are rapidly running out of fresh water and this is perhaps one of the biggest problems we are facing.
Without oil, most of us could survive for quite some time.
Without food, most of us could survive for a number of weeks.
Without water, most of us would die within a matter of days.
Fortunately North America still has a decent supply of fresh water, but as I have written about previously, in many areas of the globe the situation is quickly becoming absolutely dire….
*According to USAID, one-third of all humans will face severe or chronic water shortages by the year 2025.
*Of the 60 million people added to the world’s cities every year, the vast majority of them live in impoverished slums and shanty-towns with no sanitation facilities whatsoever.
*In northern China, the water table is dropping one meter per year due to overpumping.
*But there are few places where the water shortage is as severe as it is in the Middle East. Saudi Arabia had been producing enough wheat to be self-sufficient for most of the past 30 years, but in 2008 authorities there realized that the non-replenishable aquifer they had been pumping for irrigation purposes was nearly depleted. So in response Saudi Arabia made the decision to reduce their wheat harvest by one-eighth every year thereafter. Wheat production in Saudi Arabia is scheduled to cease entirely in 2016.
In some of the most populated areas of the planet the water situation can only be described as catastrophic.
For example, did you know that a new desert the size of Rhode Island is created in China because of drought every single year?
Did you know that in China 80% of the major rivers are so polluted that they don’t support aquatic life at all?
Did you know that the women of South Africa collectively walk the equivalent distance to the moon and back 16 times a day for water?
Thankfully the water situation in the United States has not gotten that bad yet, but the truth is that even we could be facing serious water shortages in the years ahead.
According to a recent report released by the Natural Resources Defense Council, more than one-third of all counties in the lower 48 states will likely be facing very serious water shortages by the year 2050.
So, yes, there are some really good reasons to be concerned about earth’s dwindling resources.
If the global elite were not so incredibly greedy and if we managed our planet better we would not have problems to this degree.
But here we are.
So what is the solution?
Well, it would be really great if the global elite would just share some of their wealth. A study by the World Institute for Development Economics Research discovered that the bottom half of the world population owns approximately 1 percent of all global wealth.
But the global elite aren’t about to change the rules of the global economy. After all, they spent a whole lot of time and effort rigging the game so that virtually all wealth eventually gets funneled into their hands.
After all, they argue, if there are half as many people around then we will only be using half as many resources, right?
Well, as alluring as that may sound, the truth is that the world has always had a huge problem with poverty. Even when the global population was down around 100 million people there was rampant poverty.
The number of people is not the problem.
The problem is the insatiable greed of the elite.
The global elite have systematically exploited the poor all over the planet, they have gobbled up the resources of the world wherever they have found them and now they are hoarding their wealth as millions upon millions suffer desperately.
Well, in the end the global elite will have to answer to a higher power. In the book of James it talks about those who hoard wealth on this earth….
Now listen, you rich people, weep and wail because of the misery that is coming on you. Your wealth has rotted, and moths have eaten your clothes. Your gold and silver are corroded. Their corrosion will testify against you and eat your flesh like fire. You have hoarded wealth in the last days. Look! The wages you failed to pay the workers who mowed your fields are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty.
According to the most recent “Global Wealth Report” by Credit Suisse, the wealthiest 0.5% control over 35% of the wealth of the world.
That qualifies as hoarding wealth.
Other estimates put the concentration of wealth at the very top of the food chain much higher than that.
But sadly, the problem of greed is not going to be solved any time soon.
Global supplies of food and fresh water are going to continue to diminish.
The world economy is going to continue to become increasingly unstable.
If it was always your desire to live in “interesting times”, then you are about to get your wish. Things are about to get extremely “interesting” on this planet.
So what do you think? Do you believe that the world will be facing shortages of food, water and oil in the years ahead? Feel free to leave a comment with your opinion below….
2011 has already been the most memorable year in ages and we haven’t even reached April yet. Revolutions have swept the Middle East, an unprecedented earthquake and tsunami have hit Japan, civil war has erupted in Libya, the price of oil has been soaring and the entire globe is teetering on the brink of economic collapse. It seems like almost everything that can be shaken is being shaken. Unfortunately, it does not appear that things are going to settle down any time soon. The Japanese economy has been dealt a critical blow, the European sovereign debt crisis could flare up again at any moment and the U.S. economy could potentially plunge into another recession by the end of the year. The global economy and world financial markets were really struggling to recover even when things were relatively stable. If all of this global instability gets even worse it could literally rip world financial markets apart.
Wow That Was Fast! Libyan Rebels Have Already Established A New Central Bank Of Libya
Of course it is probably safe to assume that the new Central Bank of Libya will be 100% owned and 100% controlled by the newly liberated people of Libya, isn’t it?
Most people don’t realize that the previous Central Bank of Libya was 100% state owned. The following is an excerpt from Wikipedia’s article on the former Central Bank of Libya….
Since the old Central Bank of Libya was state owned, it was essentially under the control of Moammar Gadhafi.
But now that Libya is going to be “free”, the new Central Bank of Libya will be run by Libyans and solely for the benefit of Libyans, right?
Of course it is probably safe to assume that will be the case with the new national oil company as well, isn’t it?
Over the past couple of years, Moammar Gadhafi had threatened to nationalize the oil industry in Libya and kick western oil companies out of the country, but now that Libya will be “free” the people of Libya will be able to work hand in hand with “big oil” and this will create a better Libya for everyone.
Right?
Of course oil had absolutely nothing to do with why the U.S. “inva—” (scratch that) “initiated a kinetic humanitarian liberty action” in Libya.
When Barack Obama looked straight into the camera and told the American people that the war in Libya is in the “strategic interest” of the United States, surely he was not referring to oil.
After all, war for oil was a “Bush thing”, right? The Democrats voted for Obama to end wars like this, right? Surely no prominent Democrats will publicly support this war in Libya, right?
Surely Barack Obama will end the bombing of Libya if the international community begins to object, right?
Obama won a Nobel Peace Prize. He wouldn’t deeply upset the other major powers on the globe and bring us closer to World War III, would he?
Russian Foreign Minister Sergei Lavrov has loudly denounced “coalition strikes on columns of Gaddafi’s forces” and he believes that the U.S. has badly violated the terms of the UN Security Council resolution….
So to cool off rising tensions with the rest of the world, Obama is going to call off the air strikes, right?
Well, considering the fact that Obama has such vast foreign policy experience we should all be able to rest easy knowing that Obama will understand exactly what to do.
Meanwhile, the rebels seem to be getting the hang of international trade already.
They have even signed an oil deal with Qatar!
Rebel “spokesman” Ali Tarhouni has announced that oil exports to Qatar will begin in “less than a week“.
Who knew that the rag tag group of rebels in Libya were also masters of banking and international trade?
We sure do live in a strange world.
Tonight, Barack Obama told the American people the following….
So now we are going to police all of the atrocities in all of the other countries around the globe?
The last time I checked, the government was gunning down protesters in Syria.
Is it time to start warming up the Tomahawks?
Or do we reserve “humanitarian interventions” only for those nations that have a lot of oil?
In fact, atrocities are currently being committed all over Africa and in about a dozen different nations in the Middle East.
Should we institute a draft so that we will have enough young men and women to police the world with?
We all have to be ready to serve our country, right?
The world is becoming a smaller place every day, and you never know where U.S. “strategic interests” are going to be threatened next.
The rest of the world understands that we know best, right?
Of course the rest of the world can surely see our good intentions in Libya, can’t they?
Tensions with Russia, China and the rest of the Arab world are certainly going to subside after they all see how selfless our “humanitarian intervention” has been in Libya, don’t you think?
In all seriousness, we now live in a world where nothing is stable anymore. Wars and revolutions are breaking out all over the globe, unprecedented natural disasters are happening with alarming frequency and the global economy is on the verge of total collapse.
By interfering in Libya, we are just making things worse. Gadhafi is certainly a horrible dictator, but this was a fight for the Libyan people to sort out.
We promised the rest of the world that we were only going to be setting up a “no fly zone”. By violating the terms of the UN Security Council resolution, we have shown other nations that we cannot be trusted and by our actions we have increased tensions all over the globe.
So what do all of you think about what is going on in Libya? Please feel free to leave a comment with your opinion below….