A decade best shunned & forgotten.
By Chris Martenson of Peak Prosperity.
This is my last report from the good old “twenty-teens”.
In some respects, they didn’t turn out at all like I thought they would. But in many others, exactly as predicted.
I badly underestimated the system’s ability to perpetuate obvious frauds and swindles without causing a social rebellion. And worse, to watch so many otherwise intelligent people participate with glee.
Negative Interest Rates
Back in 2008 when The Crash Course first came out, you would have never convinced me that we’d be sitting here at the cusp of 2020 with $11 trillion of “negative yielding debt.”
I have to place that phrase in quotation marks, because, although I can write those words, I haven’t a clue what they actually mean in a world where money is supposed to be a store of value. How can money in the future be worth less than money today?
Perhaps Pablo Escobar could help us here, as he reputedly factored in a 10% loss on all his buried cash due to rats, water damage, mold, or forgetting where he placed it.
Thee twenty-teens saw the extinguishment of bond vigilantes leaving nobody to seriously push back on the abomination of negative rates. Only speculators are left these days, perfectly happy to place the bet that they’ll be able to sell their negative yielding bonds to a greater fool at a higher price.
There’s no such thing as a bond vigilante anymore, only speculators perfectly happy to pull on a slot machine lever in the hopes of selling their negative yielding bonds to some other punter later on at a higher price.
Paying any government to lend it money is a swindle. Buying Greek national debt with a lower rate of return than US Treasury debt is a swindle.
These and a thousand others completely obvious swindles, and yet here we are with the vast machinery of state and corporate journalism aligned to tell you how good and right they all are.
I also underestimated the longevity of the recent shale oil “boom”.
I studied it intently early on, concluded it was a money-losing enterprise, and then patiently waited for investors to wake up to that reality.
This realization has been slow to dawn on them, but it’s finally becoming understood. Slowly, grudgingly. However, that’s after 10 years of massive losses for hapless investors in the shale oil space.
Shale company bond and equity holders have been slaughtered, though those vast losses are yet to be recognized.
While the capital raised from bond sales and equity offerings has already been spent, so are the wells that were drilled with that money. They’re played out.
Raising new capital merely obscures that any money that has not already been returned to investors can’t be and won’t be because of this dynamic:
What does the above chart tell us? Only that the very best shale operator in the world operating in the very best shale play in the world sees an 82% decline rate in average well output in the first year.
Which means that if that well has not entirely paid itself back within that first year, it probably won’t generate *any* returns for bond or shareholders to enjoy. Ever…