In a recent report on global debt by the IMF in 2018 the world is drowning in debt. Their finding totals $188 Trillion. I used a capital "T" to focus your eyes. They went on to breakdown each industrialized share of this poisonous pie.
The US debt to GDP was over 100% at 108%.
France was at 97% debt to GDP.
Italy is scary at 131% debt to GDP.
The average for almost all the economies was 267% debt to GDP.
The report signaled out Germany for its low debt ratio to GDP at 60%. This does not embolden the fiat outlook as all nations are spending more than they take in.
By the way Germany just reported that its manufacturing segment of its economy is in retraction at 43 with 50 being breakeven. The government says that it is ready to help with a $55 billion stimulus package. The debt ratio will keep rising which is why the outlook for interest rates is still negative.
10-Year US Note
It had a huge move in January. It went from 1.91 to 1.51 in just one month. We, at Evolution predicted that the 10-year would test its all-time low of 1.31 and the trend is indicating it is on the horizon. We also said that negative rates are a siren call to us all that central banks and fiat money should be retired. They are failures! These idiots keep devaluing the purchasing power of our dollars. I remind you of a report in 2014 by USA Today where it concluded to be middle-class in America the benchmark income needed to be $130,000 and the medium income for that year was $65,000. This is another snapshot of the wealth gap and how inflation helps to kill the living standard of the poor and middle-class.
Oil Industry
This cheap money by the Federal Reserve is also killing one of our most important industries: Oil.
When oil spiked in 2007, oil firms rushed to borrow cheap money for exploration and dig for oil. The shale industry was the worse as they piled on debt to find natural gas. They envision LNG would grow exponentially. It did, but too much gas was discovered. The laws of economics took effect. Too much supply and prices decrease. This is the present situation.
Now, these low prices with low revenues are effecting the outlook for the industry. Companies are cutting back on exploration. They are ending their buybacks of their stock. By the way, this will effect the stock market as buybacks account for 25% of trading. Some firms are cutting their dividend or ending it. This is a slow process. It takes time to have an effect. Anyway, this change in outlook for the industry will lower future oil production. The IEA says we will get 900,000 barrels per day from shale. However, the cutbacks by the fracking industry will decrease some 200,000 barrels of oil from the IEA estimate. This will eventually get the attention of Wall Street.
It has already got the attention of bankers. In many situations, bankers force their shale clients to continue to sell into the market even with prices so low that they are losing money. The banks won't offer more money until they see a stabilization of prices. Dear Reader, it takes six months in steady prices for the banks to feel confident about lending more money. This means the oil firms must suffer another half year to begin a new strategy. Then, it will take another 9-months to put new money into production. Keep in mind that experts and bankers are usually wrong. Back in 2013 the experts said $100 dollar oil. They were wrong. Goldman Sacks said $90 dollar oil in 2015. Oil went to $54. Then, no one saw oil hit $27 per barrel.
Bottom line: higher prices will come in 2021. This could help some down-and-out firms like RIG. Of course, they have to survive this year first.
