Wednesday, April 13, 2011

A Financial Crisis in 2012 is Inevitable! Here’s Why

2012 is shaping up to be the blockbuster main event of the ongoing financial crisis. Massive amounts of new debt, vast quantities of additional digital dollars and the spark of higher interest rates will set off version 2.0 of the credit-driven financial implosion. Let me explain.

So says Arnold Bock ( in an article which Lorimer Wilson, editor, has edited for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Bock goes on to say:

Why Was Financial Crisis 1.0 Only a First World Crisis?

The original 1.0 version had its origins in the collapse of the US subprime mortgage derivative deck of cards in 2007 before morphing into a broad-based financial crisis in the fall of 2008. It gradually spread to most other first-world advanced economies, but did not wreck havoc on emerging markets and second and third world nations. Most such economies were insulated from the folly of first-world finance – credit, borrowing, overwhelming debt and onerous interest payments – simply because they did not qualify for the intoxicating elixir of credit.

Can the US Government Prevent Another Financial Crisis?

A plethora of fact and opinion has been offered to explain what went wrong – Wall Street greed, crony capitalism, deficient and inadequately administered regulations, a credit and debt engorged consumer-driven economy, imprudent lending standards, negative real interest rates and nonexistent savings. Invariably, all reasons rest on the overwhelming availability and excessive abundance of cheap and easy credit and cash.

The meagre measures that have been designed and implemented since the onset of the Great Recession to mitigate financial risk, such as the Dodd Frank Financial Reform legislation, have merely institutionalized the shortcomings of the regulatory framework. Moreover, the ‘too big to fail’ private financial institutions which qualify for unlimited taxpayer bailouts are even fewer and larger today. Indeed, the supposed solutions to the problem exemplify what the problem really is – government!

Deficits are exploding rapidly leading inexorably to massive debt at all levels of government from federal, to state and into local governments. US sovereign/federal debt is now over $14 Trillion and is expanding in the current fiscal year at over $1.65 Trillion – over three times greater than just three years ago. Currently 37 percent of all federal spending comes from borrowing, which means much more debt…and a veritable fairyland of more magic money created by the FED to service the ballooning beast.

To this cauldron of crud one must add all the unfunded and underfunded obligations of the social safety net represented by Social Security, Medicare and Medicaid, all conveniently excluded from the federal government’s annual operating budget. Depending on what assumptions are made for such factors as future inflation, eligibility criteria, program utilization and related issues, further unfunded liabilities of between $60 Trillion and $110 Trillion must be added to the US federal government’s debt tab.

State and local governments contribute a further $3.87 Trillion in unfunded liabilities attributable to their employee pensions and health insurance benefits. Recent state and municipal employee demonstrations militating for retention of the unsustainable status quo have profiled what clearly are bloated pension and health benefits.

Respected economists Carmen Reinhart and Kenneth Rogoff, in their recent book entitled “This Time is Different” outlined how a debt to GDP ratio of 90 percent is a nation’s tipping point. Their conclusions are based on an analysis several hundred years of economic history. The USA, United Kingdom, Japan and others are lined up to join Greece, Ireland, Portugal among others staring at the looming financial abyss.

Fundamentals are therefore in place for another financial collapse. This time governments will join private financial institutions heading toward the financial debt wall. Government won’t be able to perform its previous role of bailing out ailing financial giants since government itself is now in need of rescuing.

Indeed, the most challenging questions today are how and who will bail out our failing governments? European nations in the EU and those who share the Euro currency can’t help since many of them occupy an equally perilous perch on the financial precipice. It seems all advanced nations not supported by a strong natural resources sector (Canada, Australia) or high productivity manufacturing (Germany) are facing financial catastrophe.

What Will Trigger Financial Crisis 2.0?

Rising interest rates are all that is necessary to trigger the round two collapse of the ongoing financial crisis. It doesn’t take Mensa level intelligence to notice that current interest rates are lower than they have been since the early 1950’s. Real interest rates are also perilously close to being negative, if not already. With rapidly growing price inflation, interest rates will be forced northward.

Until this year foreign purchasers have been the largest buyers of US Treasury debt, with China and Japan in the lead. Japan now has other priorities following its recent highly destructive tsunami. China has already substantially reduced its purchases citing lack of confidence in the declining value of the United States dollar. They have also found that spending their inventory of surplus US dollars by ensuring future supplies of minerals and energy to be much more beneficial to the Chinese economy. Moreover, bond purchasers find sixty year low interest rates on US Treasury bonds, less than the rate of inflation, a very risky and unattractive investment.

In the absence of enough foreign or private sector purchasers, the US central bank, the Federal Reserve Board, has been ‘monetizing’ federal government debt through its purchases of Treasury bonds. The process dubbed Quantitative Easing, by which the FED creates money out of thin air, allows the FED to become the purchaser of last resort of government debt. At the present rate it is expected that the FED will purchase a full 50 percent of all new and maturing Treasury bonds in the current fiscal year. This is necessary simply because there are not enough foreign or domestic, private sector or government buyers to be found at current rates of interest and levels of risk.

The most telling and perhaps scary portent occurred recently when PIMCO, the largest private bond fund, sold its entire US Treasury bond holdings, thereby demonstrating its concern about federal government debt. Reasons cited for the sale by PIMCO head Bill Gross are risks associated with near negative interest rates and the declining value of the US dollar stemming from excessive money creation.

Knowing that institutional money managers representing pension funds and insurance company investment pools frequently follow industry leaders, we can confidently predict that many more Billions and Trillions of Treasury bonds will soon be dumped into the sickly bond market. When this process plays out, FED money creation and debt monetization will go into overdrive, since price inflation will take off as the dollar devalues.

Why America’s Political Process Virtually Guarantees Financial Crisis 2.0?

How can we be so certain that another and more serious financial crisis is on the horizon? Salient factors include:

  1. the magnitude and momentum of expanding government deficits, debt and unfunded liabilities,
  2. the monetization of Treasury debt by the Federal Reserve Board using manufactured money acquired through the somewhat mystical process labelled ‘Quantitative Easing’,
  3. the strong prospect of higher interest rates necessitated by an inflating and devaluing currency followed inevitably by increasing price inflation.

The political process virtually guarantees that no tough, but essential, measures of consequence will be undertaken by political decision makers to stabilize the financial system. Witness the recent embarrassing public tussle between the two parties in Congress over a mere $33 Billion of pocket change in budget reductions when the total shortfall is $1.65 Trillion.

To suggest that strong leadership at this time of looming financial crisis is needed is to state the obvious. However, politicians are like most other people in that they are ambitious careerists who worked hard to secure the jobs they so treasure. Ditto for government bureaucrats who want to preserve their careers and the associated benefits, including the cushiness of defined benefit and inflation protected pensions as well as gilded health insurance. Preservation of the status quo is understandably their top priority.

Voters expect their elected representatives to be active and to ‘do something’ when a crisis strikes them between their eyes. However, there is absolutely no incentive to scan the horizon and to implement tough measures designed to head off a mounting crisis.

Politicians of across the partisan spectrum and range of ideologies have learned, indeed they have thoroughly inculcated, the reality that the voting public does not want to hear about emerging or imminent problems. They want reassurance, not anxiety, but when a crisis blindsides them, they want immediate action from their government.

Until the crisis arrives, politicians who assume leadership roles as educators and disseminators of serious policy options are frequently branded as bad news bears and messengers of mayhem for calling for belt tightening and sacrifice. Instead, voters reflexively point to government waste and to the ‘rich people’ for austerity and additional revenue.

Politicians of vision are invariably chastised by losing their jobs at the next election. Candidates who ignore the storm clouds and who promise good times ahead are most frequently rewarded with the endorsement of a vote. Political will wilts in this kind of hostile electoral environment. Is it any wonder the voting public hears what it wants and gets what it deserves?

Presidential election years are traditionally awash with positive investment environments. Politicians in power know that the public can be bribed with their own money…actually borrowed money. Voters enjoy their apparent prosperity and the general feeling of financial wellbeing. Incumbent Presidents, legislators all, do well in such circumstances.

We will see this scenario play out again in 2012…but only if the persons in power can engineer it yet again. But can they? Will record low interest rates continue? Will the large institutional Treasury bond purchasers such as pension funds and insurance companies follow PIMCO’S Bill Gross out of the Treasuries market? Will the dollar plummet with the excess of FED money printing? Will emerging price inflation in food and energy make for a grouchy voter? Can the government keep the lid on or will the financial pressure cooker explode?

Conclusion: 2012 Will Be the Year of the Perfect Financial Storm…

Buying time by creating ever more magic money, which inevitably results in price inflation, overheated stock and commodities markets and which devalues the currency – will work until it doesn’t.

This analyst sees the perfect storm of converging criteria almost perfectly timed and aligned with the 2012 election cycle. When the moment arrives, the financial earthquake will rapidly demolish the existing highly precarious financial system. Government will stand by helpless, unable to shield itself, much less its vulnerable citizens or private financial institutions from the tsunami of debt and currency destruction.

If starting tomorrow morning our politicians were to act like adults, willing to lead in a pragmatic and focused fashion, free from the concerns of partisan advantage, rancour and rigid ideology, financial collapse could be delayed…perhaps avoided. Unfortunately the challenge seems insurmountable and the political will too feeble.

Get ready for Financial Crisis 2.0 in 2012 – It’s inevitable!

US deficit up 15.7% in first half of fiscal 2011

The US budget deficit shot up 15.7 percent in the first six months of fiscal 2011, the Treasury Department said Wednesday as political knives were being sharpened for a new budget battle.

The Treasury reported a deficit of $829 billion for the October-March period, compared with $717 billion a year earlier, as revenue rose a sluggish 6.9 percent as the economic recovery slowly gained pace.

The Treasury argued that the pace of increase in the deficit was deceptive because of large one-off reductions in expenditures made during the first half of fiscal 2010, compared with previous and subsequent periods.

Those included a $115 billion reduction in funds spent on the Troubled Asset Relief Program (TARP) -- the financial institution bailout program -- in March 2010.

But 2011 so far has also seen significant increases in spending on defense, Social Security, health and debt service, while receipts have not grown as fast.

"The jump in outlays mostly owed to a smaller estimated reduction in TARP outlays this year versus 2010," said Theresa Chen at Barclays Capital Research.

However, she said, the trend shows that taxable income is rising at a 6.9 percent annual pace, and individual incomes taxes are up 20.6 percent, "consistent with general economic improvement."

The figures came amid a sharp, politically partisan battle in Washington over cutting spending and raising taxes, with President Barack Obama preparing Wednesday to release his plan for reducing the long-term deficit.

He also faces a looming battle over increasing the country's official debt ceiling, so that the government can continue to borrow to finance the deficit.

Dennis Gartman: Suddenly, This Looks Like An "Ominous Top"

Suddenly, the market is looking ugly, notes Dennis Gartman in his morning note:

THE S&P FUTURE: An Ominous Top?: It’s been a bull market of incredible magnitude for several months, but now the market is showing signs of internal weakness as the RSI makes several lower highs and as the index itself seems to have stalled well below its previous top. Be careful if bullish; be very, very careful.


Goldman : Lowers 2011 Copper Price Target From $11,000 To $9,800/mt; Gold, Silver Next?

Following two consecutive commodity downgrades which killed crude and all commodities, which led many to wonder just how many pictures of Lloyd Blankfein at Scores does Bill Dudley have locked up in his office, the bank, whose primary M.O. is to push inflation, has just released one more deflationary report, this time cutting the last man, er doctor, standing: copper. From Goldman: "We are pushing out our $11,000/mt target to 2Q2012 and lowering our 2011 year-end copper price target to $9,800/mt from $11,000/mt. Accordingly, we recently closed our long December 2011 copper trade recommendation – first opened on October 4, 2010 – for a gain of $1,872/mt. We are also raising our 3-month forecast to $9,300/mt, and 6-month forecast to $9,600/mt." And with this we can now scratch Scores, and move on to The Bunny Ranch. Incidentally, this means gold and silver are next. You have been warned.

From Goldman's Joshua Crumb:

We have updated our copper balance and price forecasts for 2011 and 2012. We now believe that prices will likely remain rangebound in 2011 and that risk has become more symmetric given our view that inventories are unlikely to draw down to critically low levels before 2012. However, we believe that a price spike has been deferred, not avoided, and maintain our 12-month forecast of $11,000/mt.

Draw in inventories to critically low levels has likely been deferred

Copper prices rallied sharply in the past week, heading back toward the top of the recent trading range between $9,300/mt - $10,000/mt that has held for much of the year. While we had expected prices to move decisively out of this range to the upside heading into late 2011, we now believe that prices will most likely remain rangebound and that copper price risk has become more symmetric as opposed to skewed to the upside. Underpinning this shift is our view that modestly slower-than-expected copper demand growth owing largely to Chinese consumer destocking, tighter inventory management and the negative supply shock resulting from the earthquake in Japan will likely delay the drawdown in copper exchange inventories to critically low levels. However, as we expect demand to continue to outpace supply, we now forecast a drawdown to critically low levels during 2Q2012.

Price spikes likely no longer needed to balance the market in 2011

The avoidance of stockout suggests that price spikes will no longer be required to ration demand and balance the market this year. However, we maintain that Chinese end-use demand remains healthy, that consumers have been eager to step into the market on price dips and that the market will most likely remain in a meaningful deficit over the course of the year – all suggesting that prices are unlikely to fall significantly below the recent range on any sustainable basis.

Price spike likely deferred, but not avoided

We are pushing out our $11,000/mt target to 2Q2012 and lowering our 2011 year-end copper price target to $9,800/mt from $11,000/mt. Accordingly, we recently closed our long December 2011 copper trade recommendation – first opened on October 4, 2010 – for a gain of $1,872/mt (see Commodities Update: Target in sight, closing CCCP trade, April 11). We are also raising our 3-month forecast to $9,300/mt, and 6-month forecast to $9,600/mt.

Full report


Oil slumps on Goldman warning, demand fears

Oil fell more than $3 on Tuesday as Goldman Sachs warned again of a price reversal and key forecasters said expensive crude could erode demand.

Oil extended its retreat from 32-month peaks reached early on Monday, with U.S. crude's 5.8 percent drop from Friday the biggest two-day percentage loss since May 2010, when the Greek and wider euro zonedebt crises pressured commodities.

Oil led a broad commodities slump that also reacted to an upgrade in the severity of Japan's nuclear crisis, which rattled risk appetite and boosted U.S. Treasuries.

Brent crude for May fell $3.06 to settle at $120.92 a barrel. The May Brent contract expires on Thursday.

U.S. May crude fell $3.67 to settle at $106.25.

"Fear of demand destruction is killing this market. There is a feeling that the recent rally lifted oil prices to unsustainable levels," said Phil Flynn, analyst at PFGBest Research in Chicago.

Sentiment was also diminished after two Saudi Arabia-based sources told Reuters that a lack of customer demand caused the kingdom to lower production after an increase in March to offset lost Libyan crude.

U.S. oil prices rallied above $113 on Monday, having jumped from an $83.85 low on February 15 in the wake of the ouster of Egypt's government and with unrest just beginning to spread in the region before engulfing Libya in a civil war.

In its second report in as many days, Goldman Sachs (GS.N) urged investors to book profits, and traders said many did.

Goldman expects Brent to fall toward $105 in coming months, the bank said in a note emailed to clients, after recommending on Monday that they close its trade on a basket of commodities that included U.S. crude.


U.S. crude oil stocks rose 1.2 million barrels last week, the American Petroleum Institute industry group said late on Tuesday.

Crude prices were little changed in post-settlement trading after the API report.

Gasoline stocks fell 4.6 million barrels and distillate stocks dropped by 3.7 million barrels, as refinery use slumped 5.1 percentage points to 78.9 percent of capacity, the API said.

A Reuters survey of analysts had forecast crude stocks to be up 1.0 million barrels, but projected distillate stocks to be up slightly and gasoline stocks to be down only 900,000 barrels.

Is the Dow Forming a Huge Head and Shoulders Pattern?

"In all my years of investing, I have never seen an asset hit record highs, as gold has done recently, with less fanfare. There were no front page stories in the Wall StreetJournal or Financial Times, heralding the new milestones." Fred Hickey, editor of theHigh-Tech Strategist and a member of Barron's Roundtable.

A leading analyst writes to tell me that we're seeing "the formation of the greatest top in stock market history." The "top" he's referring to is seen on the chart below. And sure enough, on the chart we can see the outline of a monster, multi-year head-and-shoulders pattern, with the head at the 2007 high and what appears to be a right shoulder now in the process of formation.

industrial average

I've got to admit that this looks like a very formidable pattern. But I have a serious objection to its classification as a head-and-shoulder pattern. Normally, head-and-shoulder patterns are patterns of distribution, and they tend to be confined to periods of a year or less. The formation we see on the chart has formed over a period of 13 years or more. Spanning a period of a decade, the economic situation, whatever it started out to be, changes, and depending on what the situation was back in 1998, it is different today. Thus, after a number of years, the rationale for a head-and-shoulder top pattern changes. Therefore, the situation which existed in 1998 is probably no longer a factor today. By the way, in the classic book (Technical Analysis of Stock Trends) by Edwards and McGee they note that distribution patterns that extend over many years, lose their rationale. I agree.

But suppose we accept the costly decline of 2007 to 2009 as a deceptive secondary reaction. Then the rise since 2009 becomes merely an upward correction. If the Dow now turns down and violates its 2009 low, and if confirmed by the Transports, this would surely be classified as a turn in the tide and the signal for a primary bear market.

Conclusion — A primary bull market is in progress. If the Industrials and Transports turn down and violate their respective February 2009 lows, a bear market will have been signaled.

Note — The last consolidation-correction can be seen on the Industrials at around the 10000 level. A decline from here should find support at around 10000. Anything below 10000 would be cause for concern. Action to take at this point -- watchful waiting on the stock market.

Is the US Housing Market Making a Comeback?

Buenos Aires is beautiful. We have been blessed with good weather.

The city is booming, too. Strong agricultural prices have done what they always do in Argentina – they’ve set off a boom.

“Property prices are up about 30% over the last 3 years,” says our BA-based colleague, Rob Marstrand. “But this is such a funny place. I love living here, because you see everything. If not in the present, certainly in the past…or the future. Booms, busts, corruption, inflation – everything.

“Only about 6% of properties are sold with mortgages. So this is a real boom – where people are paying cash. But, where does this cash come from? Much of it comes from the bull market in farm products. Argentina is one of the world’s top producers of cereals, for example. But there is probably a lot of money coming from the government too. The inflation rate is about 25%.

“Now, you’d think that a country with a 25% inflation rate would have a currency that is falling through the floorboards. But no. The authorities have been supporting the peso; it actually went up 4% against the dollar. Put the dollar’s drop and Argentine inflation together, and you get a loss of dollar purchasing power of 30%.

“People want to protect themselves. And here, they do it by buying real estate.

“Americans might want to think about it too.”

Prices are down 30% nationwide in the US. In Florida, Nevada, and most of California, they’re half off. Even if they might go down a bit more, there are some very good deals available now. A friend of ours is able to buy apartment buildings for little more than 5 times rent income. If upkeep and taxes take half of that, that still gives him a 10% return. But it could be much better. Suppose he takes out a 30-year, fixed rate mortgage. Now, suppose inflation goes up. Every percentage point that consumer prices rise is another percentage point of yield for a fully-mortgaged investor.

Rob also is in charge of our Family Office investments.

“I don’t see any way that they can unwind all this debt and spending without causing even more problems,” he says. Investors might get some protection from real estate or stocks. But the best protection is gold.

“But we’re still in a correction,” Rob continued. “It wouldn’t be surprising to see gold fall when this round of quantitative easing ends. Take away the money-printing and gold could sell off along with everything else. But people are now catching on. When the economy worsens, they expect the feds to add more stimulus…or lower rates…or more QE. So, they know that over the long run, the effect will probably be to undermine the dollar. I wouldn’t be at all surprised to see gold down 15% in the next sell-off.

“But when the feds step in with more spending, gold will be the clear winner. We already own a lot of gold. I feel like I want to buy more of it…”


Bill Bonner,
for The Daily Reckoning

Brother, Can You Spare A Trillion?: Government Gone Wild!

Technical Snapshot: The Shanghai Flag

In last night's email I found a note from my friend and market technician Chris Kimble with a trio of China charts. He points out that the Shanghai Composite is up against the top of the flag pattern at the same time the China ETF (FXI) and Hang Seng index are likewise bumping into falling resistance. If long, Chris suggests, you might consider harvesting gains and waiting for these markets to prove themselves.

"End Of The World" Inflation: 47% In Six Months

Back in October, Zero Hedge discussed a Costco offer for Shelf-Reliance THRIVE's one year's supply of dehydrated, freeze dried food, better known as "apocalypse rations." Six months ago a one year's supply of food for one person which included 5,011 total servings (84 #10 cans) could be purchased for $799.99 (the link for the offering is here, or rather was, here). A series of events made us encounter a comparable THRIVE offering at Costco. To our amazement in six months, the real price inflation in apocalypse rations, when factoring proportioning, is almost 50%! While the original set that was presented back in October is no longer available, what Costco does offer is a Shelf Reliance THRIVE 6 month supply supply for the price of $579.99: this represents the pinnacle of that ultimate in inflation disguising techniques: cutting the price by X while cutting the amount offered by Y>>>X. Indeed, to last a person a full year, one would need to be two of the 6 month supplies for a price of $579.99 or $1,159.98. And even that has to be indexed: the current set has 2,470 total servings, whereas the previous offer had 5,011, or 203% more. In other words, to index for the proper serving ratio the final price is actually $1,176.65. We can only hope that there are those who purchased this product when we first presented it (and don't worry, with a 25 year shelf life, it lasts a looooong time) and saved themselves the 47% inflation in 6 months! And then there are non THRIVE product offerings, such as the one below for 2 people for 3 months for $999.99 (and includes its own 55 gallon water storage set), which represents price inflation well over 100% for those who need a little extra caloric kick (and, naturally, post-apocalypse social status with the neighbors). Something tells us in another 6 months, the Costco price today will be just as lamented as the price from 6 months ago currently is.

Then (link):

And now:

And for those for whom greeting apocalypse in style means price is no object...

A description of the "cost-effective" apocalypse ration:

Shelf Reliance is known for providing unsurpassed quality in all of its products, and their line of food storage is no different. THRIVE Food Storage is a premium name you can trust. Every THRIVE product has been carefully selected based on taste and quality, and we are confident that you will look forward to using THRIVE in your everyday meal planning and emergency food storage.

This THRIVE Package was built to provide a 6 month supply of food for 1 person. This package offers a variety of grains, vegetables, and protein-rich foods, along with comforting goodies like chocolate milk, fudge brownies, and strawberries. Adding this package of 54 cans to your long-term storage will provide extra flavor, nutrition, and energy when you need it most.

For questions or additional information please email Please include your the item number and description that corresponds with your question.

  • Shipment arrives in 9 separate boxes
  • 2,470 total servings
  • Freeze-dried products have up to 25 year shelf life if unopened
  • Dehydrated products have up to 20 year shelf life if unopened
  • TVP products have up to a 10 year shelf life if unopened
  • Shelf life varies per can/product (see individual cans for optimum shelf life suggestions)
  • All items are suitable for vegetarian diets
  • Wheat can be easily milled into flour, and non-milled kernels can be cooked to make a variety of recipes
  • Easy rehydration instructions, useful tips, and recipes on each can

This THRIVE 6 Month Food Supply contains 54 #10 (gallon size) cans. See below for specific package contents.

  • 2 cans of Instant White Rice (48 servings per can)
  • 6 cans of Hard White Winter Wheat (44 servings per can)
  • 2 cans of Elbow Macaroni (25 servings per can)
  • 2 cans of 6 Grain Pancake Mix (46 servings per can)
  • 2 cans of Cornmeal (46 servings per can)
  • 4 cans of Freeze Dried Potato Dices (41 servings per can)
  • 2 cans of Freeze Dried Sweet Corn (46 servings per can)
  • 2 cans of Freeze Dried Green Peas (41 servings per can)
  • 2 cans of Freeze Dried Green Beans (50 servings per can)
  • 2 cans of Freeze Dried Broccoli (52 servings per can)
  • 2 cans of Freeze Dried Mushroom Pieces (47 servings per can)
  • 1 can of Freeze Dried Spinach (41 servings per can)
  • 3 cans of Freeze Dried Strawberries (45 servings per can)
  • 1 can of Carrot Dices (49 servings per can)
  • 1 can of Mixed Bell Peppers (42 servings per can)
  • 3 cans of Non-fat Powdered Milk (43 servings per can)
  • 2 cans of Chocolate Drink Mix (48 servings per can)
  • 2 cans of Bacon TVP (47 servings per can)
  • 2 cans of Beef TVP (44 servings per can)
  • 2 cans of Chicken TVP (45 servings per can)
  • 2 cans of Taco TVP (42 servings per can)
  • 1 can of Pinto Beans (49 servings per can)
  • 1 can of Lentils (51 servings per can)
  • 1 can of Black Beans (49 servings per can)
  • 1 can of Kidney Beans (44 servings per can)
  • 1 can of Lima Beans (49 servings per can)
  • 2 cans of Fudge Brownies (75 servings per can)

Jay Taylor: Turning Hard Times Into Good Times

Pathological Government Lies & Protection There From

click here for audio Hour #1 Hour #2 Hour#3

Nigerian elections may spur next oil supply shock

Elections in Nigeria, Africa’s largest oil producer, may be the source of the next oil shock, adding to concerns over global supplies stoked by fighting in Libya and the Middle East.

The country’s first round of government elections Saturday was marred by violence, with a fatal bombing at the election commission’s office in Suleja a day before. A presidential election is scheduled for April 16, and gubernatorial elections have been set for April 26.

Dissatisfaction with the election process could lead to sabotaged oil pipelines and attacks on production, a reprise of Nigeria’s experiences over much of the past decade. A hit to Nigeria’s output would add more support to oil prices that recently topped $126 a barrel in European markets and touched $113 in New York Monday before Tuesday’s sharp retreat. See Futures Movers report on crude’s retreat and full story on an analyst calling for a 17% pullback in Brent crude futures.

The March turmoil in Libya demonstrated how “daily oil production at the margin, even if only 2% of global market demand, can spike the price of oil,” said Mark Williams, a risk-management expert who teaches finance at Boston University.

It was an oilfield fire last week in Libya that contributed to a more than 2% jump in oil futures Friday to their highest level in over 30 months.

Nigeria has a similar market share of world oil production to Libya’s, putting it in a position to jolt global oil markets if output there is curtailed. Nigeria produced slightly more than 2.2 million barrels a day in 2009, according to the U.S. Energy Information Administration’s latest data on the country. That output level made Nigeria the biggest oil producer in Africa — and 14th among the world’s top oil producers.

For U.S. oil buyers, Nigeria is even more important than Libya. Nigeria, a member of the Organization of the Petroleum Exporting Countries, is the fourth-biggest supplier of crude-oil imports into the U.S., after Canada, Mexico and Saudi Arabia.

In domestic affairs, oil plays an outsized role, as Nigeria’s largest export and its main source of foreign currency. Against this backdrop and a history of corruption — Transparency International ranks Nigeria as one of the 50 most corrupt countries — the energy complex there is particularly vulnerable if parties protest the election as unfair.

“The upcoming [presidential and gubernatorial] elections can produce greater uncertainty and political unrest,” BU’s Williams said.

Militants have been frustrated by the lack of benefits from oil production in the oil-rich nation. While Nigeria’s oil production is owned by the federal government, an estimated 80% of oil revenue goes to 1% of the population.

A big ‘if’’

Nigeria’s current president, Goodluck Jonathan, is widely expected to win re-election, but his People’s Democratic Party is under pressure to stave off a cut in its majority in the National Assembly.

“The elections in Nigeria, if they result in reform of corruption and a distribution of oil profits to the general populace — either through direct payments or through infrastructure projects which create local jobs, could slow the attacks on oil facilities in the Niger Delta region,” said James Williams, an economist at WTRG Economics.

“However,” WTRG’s Williams said, “it’s a big ‘if.’ ”