Things aren’t Looking Good
Holy smokes, 2016 is intense! The world economy is literally seizing up, and vaporizing vast amounts of wealth from investors. In just 2 weeks, over $3 trillion in wealth has been wiped out. I’ve been watching markets tank all over the entire world, and it’s starting to smell like August/September of last year again.
Anyone remember Black Monday just 4 short months ago? Seems like an eternity ago now. Yet, I warned back then that the carnage felt across the global equity markets was just a warm up. I said that shortly we’d be revisiting that action, and that what was to come would make it seem like a blip. Well, as you can see on this chart, we’ve finally gotten a crucial breakdown that I’ve been anticipating for some time now.
My friends, they say a picture is worth a thousand words, well folks, that chart spells absolute disaster! Brent Crude crashed through the all-important $30 level.
West Texas Intermediate and Brent Crude have both literally caved in to levels not seen since 2004! This is unreal! Not even during the previous financial crisis did oil prices print such disastrously low numbers.
This has staggering implications for countries, populaces, and investors the world over.
“Watchman, so oil’s lower! Who cares? What on earth does the price of oil have to do with the state of global health?”
It has everything to do with it.
Oil Contracts and Sovereign Nations
We live in a world that is run on oil. Oil is not only the lubricant of the global economy, it is quite virtually the engine of all major economic activity. Without infinite, cheap credit, and a healthy oil price, global activity grinds to a halt.
Major superpowers in our world are heavily(too heavily) dependent upon a reasonably high oil price, in order to pay their bills, and sustain their economies and trade.
Countries like Canada, the US, Saudi Arabia, and Russia are just a short list of such powers.
The problem for all of them, is that the Fed, with their recent interest rate hike, has just ensured that the cheap credit they’ve depended on, is now drying up around the world. This has put these countries’ energy revenue streams in deep, deep trouble.
For instance, take Canada! With its vast Athabasca Oil Sands, it has the third largest known oil reserves on the planet, and is actually an energy exporter. For years, it has been known as a country with a strong credit rating, a strong currency, and a surplus of commodity wealth.
However, the latest Fed rate hike, coupled with crashing commodity and oil prices have absolutely pulled the rug out from under the Canadian currency, and thrown it into a tailspin!
Just look at the havoc that’s being wrought upon the [Canadian] Loonie!
They’ve gone from over parity with the US Dollar, to just 69 cents in just 3 years!
That is a bloodbath. Again, not during the last financial crisis in 2008/2009 did the Loonie fall anywhere near this level.
This means that not only do the Canadians have to worry about a tightening credit market, a falling stock market, and a collapsing commodity/energy sector, they’re unfortunately experiencing the painful results of a faltering currency nosedive.
Just look at these sky-rocketing prices (via Zerohedge)!
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