Forbes: “Shale Oil Boom Goes Bust”

This happy fracker -- a Halliburton employee at a site in North Dakota’s Bakken play -- obviously hasn’t got the memo yet. It’s over. (Wikipedia photo)

This happy fracker — a Halliburton employee at a site in North Dakota’s Bakken play — obviously hasn’t got the memo yet. It’s over. (Wikipedia photo)

Yes, Forbes, the magazine of the Masters of the Universe has uncharacteristically published some discouraging words about the only good news the American economy has had to celebrate in many decades.

Oil output from the most productive U.S. shale fields is expected to drop off next month by 57 million [sic — they mean thousand] barrels of crude daily from April to May, the U.S. Energy Information Administration said Monday. That would represent the first monthly decline in more than four years, according to Reuters.

And then there’s Bloomberg Business, a more objective reporter of what’s going on in American industry, with the headline: “Shale Oil Boom could End in May After Price Collapse.”

Output from the prolific tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May, the Energy Information Administration said Monday. It’s the first time the agency has forecast a drop in output since it began issuing a monthly drilling productivity report in 2013.

Yet even after admitting that it’s over in the shale patch, the Pollyannas insist that it’s only for a while, until reduced supply brings prices back up and everybody starts doing exactly what they were doing before. How shall we put this? Continue reading

US Repeals Laws of Mathematics

mathematics.jpg

“And so this proves that, for purposes of the U.S. economy, one plus one no longer equals two, but a seasonally adjusted, annualized integer to be announced and subsequently revised.” (Photo by Ed Brambley/Flickr)

It’s official: As we do not believe in climate change, because to do so would expose us to unacceptably harsh expectations, so we have ceased to believe in arithmetic, for the same reason. This mindset (can we call it that, since the “mind” part seems to be absent?), once the province of right wingnuts, has been adopted by the government of the United States so that, unfettered by the iron logic of numbers and their former, simplistic relationships (you know, addition, subtraction, that sort of thing), the government can proclaim its own brand of creationism — job creation, wealth creation, money creation and above all creation of the myth of the robust and immortal recovery. Continue reading

The Crash of 2015: Reckoning Day

You have a perfect plan. Then things begin to go south and before you know it, a day of reckoning. (Photo by motorkid.com/google images)

You have a perfect plan. Then things begin to go south and before you know it, a day of reckoning. (Photo by motorkid.com/google images)

 

The next phase of the Crash of 2015 begins today. The first quarter of the year is now complete, and that means two things for the debt-logged companies trying to stay alive in the U.S. oil fracking patch: it’s time to report the value of their assets to the issuers of their lines of credit; and it’s time to repay or roll over a bunch of the debt with which they are logged.

That first one is the killer. These companies, virtually every one of which has had negative cash flow from the beginning of the so-called “oil revolution, have sustained themselves first with stock issues, then with junk-bond issues, then with subprime loans. As slack as the underwriting of those loans has been, they do actually require the existence of assets whose value at least approaches the amount of the loan. Continue reading

The Crash of 2015: The End of the Beginning

Coming soon to an economy near you: a two-train wreck.

Coming soon to an economy near you: a two-train wreck.

The setup continues of the double train wreck that will decimate the U.S. economy this year; the switches have been thrown to prevent either train from leaving the track, and the engines are accelerating. It doesn’t take much perspective, now, to see both trains, closing fast.

[Note: The Crash of 2015 is not expected to be the collapse of the global industrial economy, which will take a little longer.  Just another lurch downward of the shattered Titanic, further unsettling those passengers who do not believe in icebergs.] Continue reading

Holding Accountants Accountable

If I had known that was the name of my accountant's firm, I don't think I would have turned over my life's savings....  (Photo by Indi Samarajia/Flickr)

If I had known that was the name of my accountant’s firm, I don’t think I would have turned over my life’s savings…. (Photo by Indi Samarajia/Flickr)

It’s on account of accountants that we can’t count anymore, and someone should hold them accountable. We call them bean counters not to disparage them — honestly, I mean no disrespect — but to remind us and them of their purpose: to tell us how many beans are in the jar. When instead they tell us how many beans were in the jar last year; or how many beans would be in the jar if we had only put more in; or exactly how many beans are in a jar we don’t have and can’t get, they are not just failing to do their job, they are doing a great deal of harm to the people and companies and system they serve. Continue reading

The Crash of 2015, Day 49: Hell to Pay

You have this perfectly good structure, and then you kick out a few of the supporting pillars, and the next thin you know the SEC is on the phone.

What do you mean, Uncle Clarence didn’t believe they were going to do it, and stayed in his room?

I know, it’s old news. If I stop by on Monday and tell Oscar Oblivious that his house appears to be on fire, he is of course concerned. But when I stop by on Wednesday to say it’s still burning, has consumed most of the structure, and collapse appears to be imminent, he demands to know why I am bothering him with old news. The Crash of 2015, the burn and crash of the economies of much of the world into — at least — serious recession for a very long time, is well under way. It is of course no news at all for the mainstream media, transfixed as they are with simpler stories of happier, imaginary times. But for you who come here from time to time, it’s old news. How is it then that you are still in the burning house? Continue reading

The Crash of 2015: Day 29 [UPDATE Day 30]

You have this perfectly good structure, and then you kick out a few of the supporting pillars, and the next thin you know the SEC is on the phone.

Maybe we could still live in the top floor? If we could just slow it down a little?

A couple of things to keep firmly in mind as we watch the Crash of 2015 unfold, pretty much on the schedule I’ve been writing about here for six months. First, the drop in oil prices is not the cause of this disaster, merely an accelerant. The fracking industry is succumbing to its inherent high expense, toxicity, rapid depletion rates and over-reliance on junk financing. Similarly, the stock market crash we expect to follow the fracking collapse would have come anyway because of its inherent instability, and indeed may yet occur before the chain reaction in the fracking fields has run its course. And finally, what is happening to fracking is also happening to the legacy oil business, only slower. Continue reading

The Consumer Economy Becomes Consumptive

The Randall Park Mall in Ohio was once the world’s largest, with two million square feet. It has ben rotting down since 2009. (Photo by Nicholas Eckhart/Flickr)

The Randall Park Mall in Ohio was once the world’s largest, with two million square feet. It has ben rotting down since 2009. (Photo by Nicholas Eckhart/Flickr)

The Masters of the Universe like to talk about our “consumer economy,” as if we have discovered the equivalent of the perpetual motion machine: an economy that can prosper while consuming, without having to produce anything except fast food and loan documents. Such an economy has the future of a snake that has swallowed its own tail — that full feeling is not going to last. Such an economy is not a “consumer” economy — that is almost an oxymoron — but a consumptive economy, which is to say one suffering from a wasting disease.

People trapped in a burning building don’t spend much time worrying about whether they have a wasting disease. So it’s understandable that with the American oil revolution imploding and the stock market reeling drunkenly along the edge of a cliff, not much attention is being paid to the spreading dry rot of ordinary American retail business. Still, it’s there. Continue reading

The Crash of 2015: Day 21 [Update: Day 22]

Hold on a second, we’ve changed our minds. Can you just hold it right there, please? We’ve decided we like it the way it is…..

The economy of the United States and the world is on fire, and with the flames and smoke visible in any direction one cared to look, the President of the United States declared last night that the worst is over, “the shadow of crisis has passed,” and happy days are here again. In reality (a state that presidents and candidates for president never seem to visit) 2015 is shaping up to be one of the worst any of us have ever seen.

It’s a potent mix of flammable situations, from an unhinged stock market to a drought-ravaged West to the fiscal convulsions of China, Russia and Europe. But for us in America, the collapse of the bogus New American Oil Revolution is the fire that’s burning hottest and spreading fastest. This is how it’s likely to go: Continue reading

Living the Dream. No, Really, You’re Dreaming. Wake Up.

If American consumers would just consume more, the American economy would be all right. Whether you think they are, or are not, doing their part depends on who you read. Amd whether you’re awake or dreaming. (Wikipedia Photo)

If American consumers would just consume more, the American economy would be all right. Whether you think they are, or are not, doing their part depends on who you read. Amd whether you’re awake or dreaming. (Wikipedia Photo)

Fortune Magazine, the journal of the Masters of the Universe, posted the following headline at 11:33 yesterday morning: “U.S. shoppers finally shed funk: Retailers post strong holiday season gains.” At the same time the experts at NASDAQ.com. writing for the same audience of one-percenters, headlined: “Retail Sales Drop .9% as Consumers Pull Back.” Wait, what? Did we Americans shed our funk, as Fortune insisted (“retail sales for November and December rose 4%…the industry’s best showing in three years.”) or pull back, as NASDAQ saw it (“Sales at retailers and restaurants decreased a seasonally adjusted 0.9% in December from a month earlier…the largest monthly decline since January 2014.”)

So to summarize: It was the best of times, it was the worst of times… Continue reading