"Trump may have just saved global financial markets, the U.S. energy industry — and the U.S. economy."

In the Hill, Merrill Matthews reports,

In the midst of a pandemic, President Donald Trump pulled off an energy coup: He was able to convince the second and third largest crude oil producing countries to set their bickering aside and voluntarily cut production, at least for a couple of months. In so doing, Trump may have saved global financial markets, the U.S. energy industry — and the U.S. economy.

Since Monday morning, U.S. oil prices have dropped significantly, in large part because of decreased demand and storage issues. But that doesn’t change the larger point: President Trump's oil deal may have bought the industry a little time — and only time will tell if it's enough.

Even the New York Times, no a friend of Trump or fossil fuels, conceded that the president “prodded” the oil nations to “reach a deal.”

Here’s why.

Since the early 1970s the Organization of the Petroleum Exporting Countries (OPEC), which is dominated by Saudi Arabia, has been the prime mover in world oil markets.

Russia, which for years was the second largest crude oil producer after the Saudis, has never been a formal member of OPEC. It’s played more of an observer role, but usually went along with OPEC actions. Usually, but not always.

This recent disagreement was a big one. The Saudis pushed for production cuts, but the Russians refused. In response, the Saudis said they would ramp up their production by some 3 million barrels per day, an action that tanked already depressed oil prices.

Since both countries depend heavily on oil revenue, the wounds were self-inflicted. But there has also been collateral damage: The United States.

Fifteen years ago, U.S. consumers might have cheered the rift — and the low gasoline prices. No more.

The United States has become the world’s largest crude oil and natural gas producer. Thanks to the fracking boom, oil production increased from about 5 million barrels a day in the mid-2000s to more than 13 million barrels a day last January.

Oil and natural gas production are major drivers of the U.S. economy. Without the fracking boom, the Great Recession that began in 2007 would have been longer and deeper. The energy industry was one of the few industries that thrived, putting the country back on its feet.

But U.S. oil and gas production come from private energy companies, not the government. If the companies get soaked, we all get wet.

For example, the energy industry supports more than 10 million U.S. jobs, including lots of highly paid, blue-collar workers. The coronavirus pandemic could reduce demand for oil by 50 percent, and many of those workers are being furloughed or terminated.

Those job loses will hit the energy-producing states especially hard.

In addition, many energy companies borrow money to finance their production efforts — just like companies in most other industries. If they can’t repay their loans, that will squeeze the banks and other lenders.

Plus lots of investors and pensions own energy company stocks. When the stock price sinks, those investors may get margin calls, forcing them to sell other assets — perhaps at rock bottom prices.

In other words, there are lots of downstream ripple effects from a global oil-price implosion.

Which is why it was important for Trump to get the Saudis and Russians back to the table. We don’t know all of the details, but the man who has long touted his deal-making ability pulled it off.

And here’s another important result: The deal relaxes some of the pressure on states and the federal government to take action.

Some have been calling on states to arbitrarily cap how much private sector oil companies can produce. While the intentions may have been good, pushing the government down this road is a terrible idea.

If states were to impose such legislation or executive orders, that could set a bad precedent — especially in blue states that want to curtail or eliminate fossil fuel production. They might set a production cap so low that energy companies would feel compelled to abandon their operations in that state.

The last thing we need is for politicians to get their foot in the oil industry’s C-Suite doors, determining how much a company can or cannot produce.

Yes, the COVID-19 pandemic will likely shutter many oil and gas producing companies — especially smaller and over-leveraged ones. That’s bad news, but their assets will likely be bought by financially stronger companies.

As states begin a phased-in process of heading back to work, people will need gasoline. Excess supplies could be used up fairly soon, allowing the energy companies to begin ramping up production once again.

The U.S. energy industry won’t recover overnight, but the Saudi-Russian deal, brokered by Trump, may mean we will still have an energy industry to revive.

Who canceled the recession?

That is the question asked by Sundance in the Conservative Treehouse as new economic numbers were announced today.

Remember when the financial media and democrats were assuring everyone the U.S. economy was g.u.a.r.a.n.t.e.e.d to enter a recessionary phase? Well, apparently MAGA Trump canceled it… with the help of millions of U.S. middle-class workers who are spending their wage increases, bigly.

The Bureau of Economic Analysis releases the third quarter (Q3) GDP growth estimate today, and the overall Q3 GDP growth is +1.9 percent. However, behind the economic growth stats the scale of U.S. Main Street strength is the real story.

Main Street consumer spending was up $64 billion on goods and $36 billion on services. As those who follow MAGAnomics closely will remember, the Main Street economy is founded upon middle-class spending. Strong jobs, wage growth, low taxes, low inflation, and low energy costs, means more disposable income. Disposable income grew 4.5% in the third quarter.

The U.S. economy is strong because approximately 80% of everything produced inside our economy is consumed inside our economy. As long as the underlying jobs market stays strong, consumer spending leads to self-fulfilling economic expansion. Main Street is doing very well.

The weakness is Wall Street investment into expanded production of goods in the U.S.

For 30+ years Wall Street has been investing overseas for production of goods; and with that process U.S. jobs were lost. President Trump has positioned the best return on production investment as the U.S. Tariffs on China and the EU bolster that approach.

For 30+ years Wall Street has been investing overseas for production of goods; and with that process U.S. jobs were lost. President Trump has positioned the best return on production investment as the U.S. Tariffs on China and the EU bolster that approach.

The key to reignite domestic investment is to pass the USMCA trade agreement which will provide certainty and allow corporate CFO’s to calculate Total Cost of Production (TCP). Once TCP can be calculated within the 5-year and 10-year rolling business plans, manufacturers will be able to determine specifics of U.S. investment; and/or retraction from Asian investment.

Unfortunately, Nancy Pelosi knows the USMCA ratification is the key corporate investors are looking toward. As a result, and with the intent to keep the Trump economy as favorable as possible for her 2020 ambitions, Pelosi is stalling the passage of USMCA.

China and the EU continue to struggle as the U.S. economy remains strong. China and the EU devaluing their currency is driving up the value of the dollar, and dropping the import cost of goods. As a result, despite the tariffs, the U.S. continues to import deflation (lower prices of imports). Domestic production is healthy and inventories are turning.

Read more here.

"The financial media would have you believe that customers lined-up around the building to purchase your products means your business is about to close because of a lack of customers."

In the Conservative Treehouse, Sundance observes that it has been a Stunning Day of Economic Gaslighting – Despite All Positive Data, Corporate Media Cheering For Recession…

A “negative yield curve“; a pending “economic recession“. These are the obtuse and ridiculous proclamations of the Mainstream Corporate Media today. So let’s take a moment to discuss how stunningly -intentionally- disconnected they are.

Always remember, there are trillions of dollars at stake; and these media entities have a vested interest in maintaining the Wall Street position, adverse to Main Street USA.

First the “negative yield curve” aspect; where long-term bond rates (returns on investment) are lower than short-term rates (returns). As Reuters proclaims:

“A key bond market metric turned negative for the first time since 2007 on Wednesday, sending stocks tumbling”…

I must admit, I actually started laughing out loud when I first read that proclamation. Allow me to introduce a radical concept in economics: “supply and demand” !


The long-term borrowing rate for return on investment dropped momentarily lower than the short-term borrowing rate of return on investment because massive numbers of foreign investors were rushing to buy long-term U.S. bonds. Wait… what? Yes, a ‘negative yield curve’ is what happens when everyone wants to buy bonds in your long-term economy.

There weren’t enough long-term bonds to fill the demand of those who wanted to purchase them. Ergo, the return rate of interest dropped because there was no need to have an incentive to sell them…. everyone wants them.

So the yield drops, because the U.S. doesn’t need to incentivize the sale… because everyone is lined up to buy them. See how that works?

Do lines of people wrapping all around the world trying to get to the U.S.A Bank and buy U.S. treasury bonds sound like the USA economy (underlying the bond) is weak or in trouble?

It’s OK to laugh out loud.

No, really, it’s ok.

Yes, Alice, it’s true. The financial media would have you believe that customers lined-up around the building to purchase your products means your business is about to close because of a lack of customers. THAT my friends is the stupidity of it.

The U.S.A economy is so strong, so healthy, and forecast to remain so with such intensity, that everyone wants to purchase dollars because it is the world’s highest predicted rate of return for investment….. And somehow the media can spin that into a bad thing.

No, really. That’s the narrative of today.

Now let’s look at the second stupid “A looming recession“

First, a “recession” is two consecutive quarters of negative GDP growth. That’s how you define a recession. So to start a recession you need need one quarter of negative GDP growth right? Well, duh, it hasn’t happened, and there is not a single economist who is predicting a negative Third Quarter growth rate (July, Aug, Sept., ’19).

First Quarter GDP growth was 3.1%. [Beating all expectations] Second Quarter GDP growth was 2.1%. [Again, beating all expectations]… and somehow the Third Quarter is suddenly going to be negative growth? It’s OK to laugh again.

So how does CNN et al “warn of a looming recession” when there’s not a single economist forecasting a negative GDP for the third quarter? Well, they make shit up that’s how.

Think about it…. if the economy was contracting, people would not be getting hired right? Employers would be laying people off right? Businesses would be selling off assets right? Wages would be dropping right?

Do you see any of these things happening?

No? Why not?

Because it ain’t happening, that’s what !!!

The U.S. economy is not shrinking. Main Street is strong, and getting stronger.

Go back to point #1, would the world be rushing to buy dollars if the U.S. economy was on the precipice of collapse? Think about it.

Now, that said, there are some economies that are shrinking; and they all have something in common. The manufacturing export dependent nations are in trouble because President Trump is starting to limit their access to their most desired customers, the USA. And President Trump is telling companies that operate in those export nations that it would be in their best interests to come to the United States to make their goods.

Germany, the economic engine for the EU, is a manufacturing export dependent nation, and it is contracting. China is a manufacturing export dependent nation and their manufacturing is contracting. But the U.S. is strong, because we are not dependent on exports. In fact the U.S. consumes more than 80 percent of what we produce; we are a self-sustaining economy.

Our U.S. economic strength is why Asian and European investors are rushing to buy dollars (US Bonds); and why the U.S. treasury doesn’t need to provide high yield rates as incentives to buy them (hence the negative yield curve).

Stop me when any of the U.S. economic data has even the slightest implication of a slowdown, or “looming recession”.

Our last jobs report showed 164,000 new jobs created in July (yeah, like two weeks ago). In addition 363,000 people moved from part-time to full-time employment… does that sound like a weak economic outcome? Current blue-collar wage growth is in excess of 3.4%, and current overall U.S. worker income is growing at a rate exceeding 5.4%.

Does any of that sound like what you see just before a “looming recession”?

Read more here.