The Oil-Price-Shock Contagion-Transmission Pathway

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The Oil-Price-Shock Contagion-Transmission Pathway (ZeroHedge, Dec 14, 2014):

As we noted previously, counterparty risk concerns (and thus financial system fragility) are starting to rear their ugly heads. In the mid 2000s, it was massive one-way levered bets on “house prices will never go down again.” When the cracks started to appear, the mark-to-market losses in derivatives led to forced liquidations and snowballed systemically. In the mid 2010s, it is massively levered one-way asymmetric bets on “commodity prices [oil] will never go down again.” Meet WTI-structured-notes: the convenient transmission mechanism for oil-price-shocks blowing up the financial system.

 

1 thought on “The Oil-Price-Shock Contagion-Transmission Pathway

  1. I checked the financial channels before logging on here, then did a quick scan of all cable news channels. You know things are bad when all stations are covering a stupid situation in Sydney, Australia where a guy is holding 20 people hostage……..not one word on the international markets. No other news is allowed, not even weather.

    Looks like Monday will be another long overdue blood bath.

    Anyone who listened to the greedy guts, or thought they could ride the gravy train forever deserves whatever they get. I have no pity for any of them, the silent so-called investors who were too lazy to pay mind to what was happening to the dollar and US political status in the world, or the ones who listened to FOX and thought this would go on forever…….. for them, I have no sympathy.

    Evidently, even in the rigging of the markets……the ropes are losing their flexibility.

    The position of the dollar, the US and their criminal international behavior, all of these factors have been ignored by the fools watching US media, and the others who didn’t bother with any news at all. I forget who said the silent are a dictator’s best subjects…..but the US is full of them. Nothing lives in a vacuum…..

    It has gotten increasingly difficult to find real news even on the web. It is being scrubbed more every month. If one goes to Google, and types in Sucre, there are two sentences about it. Nothing about the story I have followed since Summer of 2010, the beginning and the end of the US dollar.

    The elimination of any need for a world reserve currency has dealt the US a death blow. The US has abused its status for years. Had they kept the markets clean, or cleaned them up after the 2007 crash, the US would be in a far better position because they would have retained their long held credibility. But, the sociopaths in power no longer cared, and once it became apparent nothing would be done to punish those who destroyed the world economy, or fix the system that caused it, development of another method of trade was inevitable. Now, it is here, it is called B.R.I.C.S., and over 70% of the world now trades within it…….that number will grow to 90% very soon.

    OPEC can afford $40 oil for a while. The US, now the #1 oil producer, cannot. And, that is why OPEC is playing their cards this way. Unlike the US, they kept the money they earned, they are not swimming in debt, and much of the world likes doing business with them. Their money is as good as gold…………just as the US dollar once was.

    I don’t know what this will do to Social Security, and many of the other systems Americans have grown to rely upon……this will hurt everyone.

    Thanks for all you do. Your site is one of the few that covers real news.

    Now, it is upon us. OPEC’s willingness to hurt their own bottom line to slam the US (not Russia as US media claims, Russia is one of their key allies and trade partners) dollar and kicking the petrodollar to the curb is a mortal blow to the US greedy guts. Not to mention the FED who has bled the US dry while using low interest rates……suddenly, they are no longer in charge of global rates, and one need only look at mortgage rates to see the reality. They tripled in 2014, food prices went up 3:1, energy prices went up while 100 million working age Americans are still unemployed.

    The time has finally come. Hang on to your hats.

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