Charting Energy Prices versus Economic and Market Impacts
Once winter is over... I'd be surprised if you don't see them doubling down on stupid as far as energy policy... while claiming credit for their policies driving prices down...
But, also could look at it as... the run up in energy prices into 2018... is what CAUSED the subsequent lows... and, also, what helped to cause the crash in 2020... because energy prices act like "higher interest rates" do in slowing the economy... only energy prices work FASTER in slowing things down...
See that as true... also means expecting that "the Fed" is angling to cause another 2020 "soon"... ? Even the stock market bulls acknowledge that the market is in a massive bubble... and those bullishly predicting new highs soon.... pair that expectation with... "and then the abyss"... ?
Then, the other obvious difference between 2018-2019 and 2021-2022... is only that the "spike" this time... is BIGGER...
Chart that out... and it says gas heading down to $1... not because "it should"... but, because... "it will"... if they succeed in putting us into an even deeper depression than the one we're already in ?
What's different now vs 2018-2019-2020... is INFLATION... but, that's also why the Fed is threatening (whether they mean it or not... the market "sorta" believes them at this point) to implode the market, again... to "control inflation"...
But, the reality of "the Fed's" choices at this point... is one that has them playing Russian roulette... and threatening us that they're going to pull the trigger...
For now... the higher energy prices aren't "the driver" of inflation ? They are the interest rate proxy that allows "them" to use the petro-dollars price driver instead of rates ? They use energy prices... to throttle the markets... So, they expect the energy price inflation... will work to stop the rest of the inflation... without the Fed owning the blame for doing it... ? But, that's not going to work this time...
I'd say is as... "the market" is built on the pairing of low interest rates and low energy prices... Generalize it to "suppressed commodity prices artificially support the market and the dollar" if you like ? Oil, though, is an odd man out... having carved an partial exception to the "bankers control the price of everything" reality. You see that play out every cycle... OPEC always (appears to be) fighting to keep prices elevated... and often succeed. But, every cycle... there's a point at which prices suddenly start to run out way ahead of what OPEC wants... because "Wall Street speculators" run the price up ? LOL !!! Note who it is that's been telling us "oil is going to $200" since last year ? It's not "speculators" ? [Maybe... factulators? ]
Or, "the market" is built on the shoulders of low energy prices... with ~3X leverage...
That fact allows raising or lowering either interest rates, or energy prices... or both... and it is the combination that determines the total influence on the economy... and the market. Interest rates LAG in impact by 6 months to two or three years ? Energy prices are comparatively almost an immediate impact... 30 days to "work", 60 days for it to matter, 90 days for it to have its full impact fully transmitting through the economy... So, if they're "going to raise rates"... but can't... they raise energy prices first... then, when the economy falters... they drop the energy prices and call off the rising rates and lower them instead ? Higher oil prices are the proxy cost of the Fed NOT doing its job... ?
In 2008, the GFC... Note the sequences... First, oil prices rise, then the VIX spikes, then the market crashes, and then KOLD soars... on an almost perfect 4 year metronome tied to the election cycle. Except... no crash in 2016 (trying to prevent Trump) and, without it seeming to make sense re rates and oil prices, a big crash + a big steaming pile of bat shit crazy in 2020 (trying to get rid of Trump... and "maintain control").
"Be careful what you ask for, because you might get it"...
In 2011 - 2012...the engineered spike in gold and silver... running them WAY out ahead of M2... in order to have the banks use the manipulation to "trade" back into solvency under Basel III... But, with gold going ballistic and then crashing... you hardly noted that "the market" had a couple of off days, too ?
In 2015-2016... taper tantrum... They tried to raise rates, but it didn't "take"... and, along with "intervention"... it was only having pre-set the ultra-low oil prices... and then dropping them more... that kept the market from crashing... or declining into a long running bear market... KOLD holders did better than gold holders... as the metals made a bottom off the 2011 peak.
In 2016 - 2018, the oil guys got their $ back with higher prices... but, another taper tantrum ensued when they tried to raise rates, again, in 2017 - 2018. The market crash of 2018 was averted, at first, by (intervention and) a plunge in oil prices followed by declining rates... but, it was too little and too late... Having held both oil and rates too high caused the crash in 2020... Dramatically lowering rates in 2020 (and "printing money" through both QE and stimulus) then spawned an even more massive stock market bubble... in large part because QE, by design, diverts "inflation" into "asset price inflation"... where it is "wealth effect"... only if you already have the wealth that gets inflated.
Because QE stifles inflation and throttles "Velocity"... but diverts the impulse into pumping asset prices... "the Fed" now has a complex problem. They've carried QE so far {"free stuff" for bankers] that the forced lack of Velocity is about to crash the system for lack of liquidity.... while ending it and raising rates... slows Velocity even more. There WILL be an economic catastrophe... which can be avoided only by forcing inflation higher. The existing QE on banks balance sheets "stifles" inflation... but we already have accelerating inflation anyway. (Can't MOPE that.) But, the inflation isn't driving faster economic growth... as they'd hope. The QE excesses have created something new we've not seen before... Hyper-Stagflation.
The economy is weak... has not recovered... and cannot recover from 2020... less while they are still doing all they can to screw it up... as part of "maintaining control". (LOL!!!) "Build Back Better" and "Great Reset"... both telling you "they" are intending to burn it all down to the water line... and don't plan to "waste" the crisis they intend to create by doing that ?
So, now, intentionally or not... where "they" used to have a choice of generating impacts as "raise rates ,or raise oil prices"... today, the menu includes "QE or end QE, accelerate or reverse the prior QE flows ["wealth effect" and "reverse wealth effect"], print money (one way, with no reverse), raise or lower rates, or raise or lower oil prices". They can't reasonably do more than one of those at a time without the wheels coming off the economy (higher oil prices, first, test the thresholds)... but, right now... with oil soaring... and rates already rising... they're also threatening to throw in the other two as well... with the (delayed ?) impacts of those including ending the "stifling" of inflation by QE, and reversing accumulated impacts of its prior "stifling". And, if / whenthe market crashes... "some" of that "stored inflation" that has been shunted into the stock market by QE... will evaporate with the elevated stock prices... along with banks balance sheets. But, not all of it will... [t is not at all a coincidence that inflation has ramped up MORE... AS stock prices have begun declining ?] Some of that "QE effect" has been "leaking" out of the "containment" on banks balance sheets and the stock market... into the real market place already... as stocks are being sold, now, at inflated prices. A crash will likely drive a massive acceleration in selling... and another huge spike in inflation in result... as the bubble liquidates. The slower the decline... the higher inflation will be. The faster the decline... "smoking hole".
A bright spot or two... that mining shares already appear to be moving against the trend... Many are making "bottom" charts now... So, more upside from here, as a gradual decline allows... and pushes inflation higher... and with the clocks ticking louder on the end of the Basel III suppression trade (March/April) the trends are due to reverse. Or, great... if not so bright... the wheels finally come off... metals and miners crater with the markets... but, as the market fails, the currency fails... the banks fail (or "are failed")... the Fed is remanded to history along with "them" and "they", Soros,. globalists and the WEF... we get our freedom and Constitution back... New Nuremberg trials commence... and the metals are the only thing left intact as "value certain" when the smoke clears...
Switching to weekly charts... Note that the impact of "cherry picking" chart dates... matters... but, perhaps it isn't only impacting our perception of history ? So, two different views of "now"... with different chart start dates... might add perspective rather than only make a point about "something changed" between the two ?
Here's the view from a base selected just before the 2020 crash, which suggests one thing about these relationships.... Note the "stack"... volatility, market, oil, rates...
And, here's the view from a base selected just after the 2020 crash, which suggests another thing or two about the relationships between, energy prices, interest rates, and markets... as "real" interest rates attempt to climb back out of the negative rate hole they are in now...
Note the stack here: oil, rates, market, volatility...
Fundamentally, if rates rise on government debt... with the economy delivering less than $1 in growth for each dollar printed? Then, the only way they can pay the debt... is by printing more money... And, the only "trick" they know to make the economy grow more... is to borrow and spend more government $... and that's not working ? Using debt as money... only works as long as anyone believes it will be paid back at par ?
Inflation will continue growing... until the market crashes. And, then... it will accelerate dramatically.
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