Today (October 3, 2024), MMTed releases Episode 6 in the Second Season of our Manga series – The Smith Family and their Adventures with Money. Have a bit of fun with it while learning Modern Monetary Theory (MMT) and circulate it to those who you think will benefit. Episode 6 was delayed by two weeks…William Mitchell — Modern Monetary Theory
Episode 6 of the Smith Family Manga (Season 2) is now available
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
11 comments:
Who is Jim Rogers ?
https://m.youtube.com/watch?v=OqbDbc1RCfg&t=597s&pp=ygURdGhlIGR1cmFuIGNoYW5uZWw%3D
Bow-tie guy.
hahahaha!!
,
What is often missed is the real purpose of the Shanghai Exchange.
Which has precisely nothing to do with the Death of The Dollar gold bug meme and everything to do with China's determined attempt to wrest oil market pricing from the sell-side, with Asian buyers (and probably the EU - who are also short oil) cheering them on.
Shanghai crude oil futures are priced by traders - like all oil - in $ with a forward FX conversion into Yuan settlement. The clearing house guarantee comes in handy for dealing with flaky teapot refinery credit, which may be collateralised with gold or other acceptable collateral.
The importance of the Shanghai contract is not the currency - that is a red herring promulgated mainly by gold bugs and dollar bears who don't understand the difference between a currency and a unit of account - it is the fact that it is a buy-side pricing mechanism (as was the LME when it began) in a market dominated by the sell-side.
Note that China is now the biggest global oil buyer, has been courting regional Asian buyers.
China alone is currently paying $bn's per month more than they were when oil started its ascent when Trump's 'Energy Dominance' doctrine kicked in, and their neighbours are also paying a small fortune in pure economic rent gouged from them by sell-side market power on the ICE & CME platforms.
What the US is probably studying right now.
Why an attack against Iran refineries would make more sense than against Export facilities.
Iran produces 3.9mbpd of crude and condenstae and refines 2.6mbpd according to the Energy Institue Statistiacal Review of World Energy. So Iran exports 1.3mbpd of crude oil and condensate and its biggest weakness is that it has only one real buyer and that is China. Even India does not touch it.
So if Israel attacked Kharg island it would remove 1.3mbpd from the market China buys from. However, China has been importing 1.11mbpd that has gone directly to inventories in 2024. That is just excess buying. Losing Chinese crude oil and condensate would just mean China's inventories would be flat.
But it would mean the market sending prices much higher and who would suffer? Well Israel. they would have to pay more for the oil and products they import. So both would be affected by the attack.
Now if Israel went after the refineries and knocked them out for a period of time. Iran would have to export the crude oil it cannot process in the refineries adding 2.6mbpd to the market in which it has one buyer.
Russia was fortunate because it had more than one buyer thus limiting the downside for their oil. iran does not have that luxury.
So Iran would lose significant amounts of money that way.Further, the lack of oil products would send prices up sharply in iran, killing demand or forcing the Tehran regime to massively subsidise prices thus losing even more money.
Iran would have to buy products from the open market which would have to be at market price or higher. Meaning losing money compared to what they receive for their crude oil.
It would also mean hurting massively the Iranian economy by shutting down factories etc because of the lack of oil products. this would have an effect on the people living there.
Selling to Oil to the one buyer, China, is easy as China is willing to defy sanctions. But buying products would be much more difficult in the quantities it consumes because many refiners would refuse to deal with Iran because of the sanctions.
Russia was different after Ukraine attacks because it eventually had multiple buyers for its crude but also it exported much of its products as well.
Now that the $ is linked to oil via tripartite prepay.
OPEC can no longer reduce the price to hurt the shale guys like they used to. They themselves like higher prices.
Now they all want Higher prices.
What is going on in this central bank of oil – and we’re talking about not just SPR (Strategic Petroleum Reserve) here, we’re talking about Texas and all the oil in it is essentially potentially monetisable. And that is what is going on. The market price needs to be supported,in order for that to be viable.
The US needs a high price in order to keep this reserve liquid, if you like. So they have an interest in high oil prices. Despite what Trump is saying.The other side of the market is not keen at all on this level of prices and thus the forming of a buyers club and also using the Shanghai Exchange.
China aims to take over from Singapore as regional energy hub.
Note here that increasing teapot quotas does not necessarily mean increased China demand for product use (probably the reverse) since refineries can and do export products and teapots are more flexible.
Teapots are the global buyer of last resort. They really don't give a s..t what the US thinks or does, and indeed they have a vested interest in US sanctions on the likes of Russia and Iran.
Reality is that China has been stockpiling at an alarming rate. China continues to act as buyer of last resort, although the Saudis have been reluctant to sell at rubbish Chinese teapot prices and are now selling to Japan.
The West via pre pay. Have been manipulating the price of Brent. By manipulating Brent higher and the spread between Brent and WTI increases. That increases US exports as it makes them more attractive to the refineries and their bottom line.
US Exports aren't determining anything now that the $ is On an oil stabdard. They are manipulating Brent in order for the US to export more.
Thus, have now become a net exporter.
I didn't realize that trading is more important to you than anything else. Not even war. Just another opportunity to play the markets. You're like those Americans whose only concern is the price of gasoline at the pump.
Most never trumpers are oil people… bush Cheney tillerson etc…
Stick with the bond trade Mike.
Just a few weeks of pain left then it reverses up until the new year.
https://seekingalpha.com/instablog/910351-robert-p-balan/6056223-move-was-called-misguided-offloaded-tmfs-and-loaded-up-on-tmvs-short-term-why
I've taken my profits on the FX trades and never had so much profits. Well over a 1000 pips which is insane. I have learned so much from the experience.
The reason I am getting out is because I want to watch what happens when the 10 year changes course over the next few weeks. Then I will have the complete picture. It is a great opportunity to learn even more.
Is the $ yield curve driving the oil price or is it the other way around. I need to find out.
When you chart crude against the 10 year. Look at the yearly chart it shouts that crude is driving the 10 year yield.
I want to find out if that is a true picture or not. I want to see if oil keeps pushing higher here if the 10 year changes course in a few weeks or not.
Robert Balan has never been wrong in predicting the direction of the 10 year. Will the oil price continue to rise and the 10 year yield fall.
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